Of course they are temporary. And the new TSLF auctions mature in 28 days at which time the borrowers will pay back their loans and take back their collateral.
These are not permanent. That is ridiculous. That is like saying the bases in Iraq are permanent. We all know they are just "enduring". Now, doesn't that feel better?
from the article on the demonstration at BSC building:
"My interest rate is 12 percent and I can't refinance," Gail explained.
Gail is joining a dozen other homeowners from Connecticut who are protesting the federal bail out of Bear Strearns. The company went belly up and has added to the ongoing mortgage crisis.
"They need to help people out too, not just companies," said Gail.
looks like they are not averse to Fed-assisted purchase of their house!
I dont know about the demonstrations, just be sure to have your camera if sh*t hits the fan... That would be a great YouTube video....
Till then:
The top lawmakers on the Senate Finance Committee said they are reviewing the terms of the taxpayer-backed sale of Bear Stearns Cos. to JPMorgan Chase & Co.
The Zimbabwe dollar is pegged at 30,000 per U.S. dollar, while the more commonly used black-market rate collapsed to 55 million per dollar on March 19, from about 7,200 a year ago. The currency's slump has driven inflation to 100,580 percent in January, the highest in the world.
BARCLAYS is bankrolling President Robert Mugabe's corrupt regime in Zimbabwe by providing substantial loans to cronies given land seized from white farmers.
The British bank lent £750m to the country's new landowning elite in the first half of this year, mostly through a government scheme to boost farm productivity.
This is a little OT as it relates to the previous NHS topic:
Sings of life are appearing in the housing market. The question is not, "have we bottomed," but rather "what does equilibrium look like in the housing market?"
One stab at equilibrium uses mean-regression in either home-price- to-income ratios or rental yields. By both measures we are far from equilibrium.
But even using mean-regressing variables doesn't produce a satisfying answer. We know where the mean has been historically, but how far will we overshoot that mean? For how long?
The answer depends on non-linear "feedback loop" effects. If lower house prices reduce housing demand, then we overshoot until some dynamic kicks in with opposite effects. In the past, this dynamic has been the cash flow yield from rentals, which at certain levels guarantees sufficient returns to absorb large amounts of price risk. A rental yield of 8% sounds juicy enough to stop house price declines in their tracks.
Okay, so 8% yields provide a floor on house prices. We are at around 4% now. How long do we spend below the mean? What's the balance of house price declines and rent increases that gets us there?
That question, I believe, is almost impossible to answer given the level of government intervention. And for this reason, any positive signs of life in the housing market are most likely insignificant data points on the uncertain path to equilibrium.
CNBC showing protestors (outside the BS building) against BSC bailout!
But, these people are in denial of their political impotence. We would need riots in many large cities and thousands of deaths before our economic masters would even listen to ordinary Americans. Otherwise, they ignore without any consequences. They feel safe!
Kings of Jodhpur would actually grant audiences and listen to peoples grievances often. It is hard for born-and-bred American dopes to believe but people of Jodhpur area genuinely loved their kings. British rule, lasting for only 60 years, was very mild (tax collector and military advisors; rest was left local and traditional). We were very fortunate compared to most Indians during the Muslim and British rule.
America will fully discredit democracy within the next 23 years (before the end of 2030). It is a fraud anyway with de facto rule of the moneybags.
OT: Tanta - how come no post on your pal Bill Poole's new job? He is going to get more Rand-ie over at the Cato Institute, and being replaced by Dullard.
As long as we all understand that the word "temporary" is being used here in the geological sense, there is nothing misleading about saying this is temporary.
The problem is that no one seems to realize that Pangaea was temporary too.
I think there's a mis-match in rental markets that could produce rent increases.
There is an oversupply of single family housing, but this is typically not sustainable rental inventory. Sure, owners may want to rent for a year until things improve, but ultimately they rent on negative cashflows, and that does not pay the bills. Once they realize this, most would-be SFR landlords will have to sell rather than rent.
In contrast, there is likely excess demand for multifamily rentals (coming from delayed FTB's and the foreclosed-upon). Much rental stock was converted to condo's in the past few years, and again, reconversion to apartments requires higher cash yields than we see today.
IMO, multifamily rentals are capable of capturing rent increases, and they are the bulk of the rental market.
cd, not as much. That is actually my home area and El Dorado County is a little stickier on the downside for some reason.
When I first started renting in p-ville a couple of years ago, you would be hard pressed to find any decent house for less than $1600. Now they seems to be in the $1300 range, so a step in the right direction but not as dramatic as Sac.
Tanta, I want to know how the dim bulb in charge at OFHEO, James Lockhart, continues to get a free pass.
Prior to this, his agency's most recent stroke of genius was to relax the liquidity constraints on Fannie and Freddie -- agencies that Jim Grant acidly and left-handledly characterized as "exmplars of financial rectitude and transparency".
Lockhart, like his master in the White House, is an incompetent dunce.
The good thing about a democracy is that about every 12 years or so there is a good presidential candidate. The bad thing about a democracy is that about every 12 years or so there is a good presidential candidate.
I think hopes for a bailout of the big boys may be a tad displaced. As the Bear protest shows, while the insiders almost always win, we have some serious conflicts now that could stumble a rescue scheme. The Hamptons crowd is now competing against failing homeowners and neighborhoods, at a time when Fed action will be increasingly hamstrung.
Look at this from that Bloomberg article quoted above:
Senate Finance Committee Chairman Max Baucus, a Montana Democrat, and Charles Grassley of Iowa, the committee's ranking Republican, gave Fed officials and JPMorgan executives a March 28 deadline to describe the assets involved in the transaction.
Americans are being asked to back a brand-new kind of transaction, to the tune of tens of billions of dollars,'' Baucus said in a statement today.It's the Finance Committee's responsibility to pin down just how the government decided to front $30 billion in taxpayer dollars for the Bear Stearns deal, and to monitor the changing terms of the sale.''
The Delaware company will liquidate the assets over 10 years, with JPMorgan absorbing the first $1 billion in losses, with the Fed bearing any that remain. Any such losses would hurt the Fed's balance sheet, and ultimately the taxpayer, because they would reduce the stipend the Fed pays to the Treasury from earnings on its portfolio. The dividend was $29 billion in 2006.
There's more in that article about the GSEs, and rumblings on both sides of the aisle about allowing them to binge on toxic waste.
--
"I bet for every King of Jodhpur there were 10 dope Kings who chopped protesters fingers."
REBear,
India is as big and as diverse as Europe, including languages. Please remember that next time.
The region that used to be called Rajputana, now mostly state of Rajasthan, was governed by very competent people whom Moguls and the British reselected greatly. They took pride in their job!!!!!!!!!!!
They were sort of aristocracy that evolved along a different path due to somewhat remoteness (partly big desert of Thar). As I said, I was born in a lucky part of India and in the best governed kingdom within that. Hey, you can't beat being born lucky! American system now a days, rule of the Crooks, sucks. Americans were lucky (there were checks and balances on the Crooks) for a very long time and now their luck is running out, as the checks and balances have run out.
If there was any thought to the $30 B backstop, the FED should have issues a statement to the effect that this money was to go directly to distressed homeowners via the MBS securities which are failing.
Of course, but the time that $30B makes it through the maze of CDO and MBS traches maybe 5 families could be saved.
Homes in my zip 75230 in the $417,000 range. The home on Briarmeadow at $409,000 is on my street and started at $519,000 over one year ago. This is its second listing with a new realtor. The first realtor's lowest price listing on this property was $399,000 when it was taken off the market for a few weeks and relisted at a HIGHER price. This is Preston Hollow where George Bush lived before going to the Texas governor's mansion and you know the sick story from there. 75230 real estate & 75230 homes for sale | Single family homes,Condos,Townhomes,Co-ops - REALTOR.com®
"Don't get J6P mad! Taking away his home is a very bad idea."
His home that he put no money down, took out $200k of MEW, and used the money to lease Range Rovers and to buy luxury vacations all while paying the minimum payment on an option ARM (that he stopped paying 9 months ago and still likes in the house). Care to reconsider whose home it is?
Let's see,
I can't decide if this period in the stock market is like 1995, where a new leg in the bull market starts after a lackluster 1994.
Or, if it's like the fall of 1998 after the LTCM fiasco, and new leg of the bull market starts.
Jeez, so many bullish scenarios for this outcome.
More realistically, the economic data coming in year-to-date has been worse than expected or as bad as expected. I think this will be more like 1933 without FDR at the helm. Right now this economic ship is being steered by the crew of the Exxon Valdez on a drinking binge while navigating through a Cat 5 hurricane. A good outcome will require a miracle rather than another hat trick.
Sorry, off-topic, but the interview on Bloomberg with James Grant is a must-watch:
Grant Calls Fed's Balance Sheet an `Economist Nightmare': Video March 25 (Bloomberg) -- James Grant, editor of Grant's Interest Rate Observer, talks with Bloomberg's Pimm Fox in New York about the Federal Reserve's intervention in the credit market crisis and its impact on the value of the U.S. dollar.
Your arguments make a lot of sense. What I find difficult to understand though, is how there can be any rent increases when people can't afford them. In other words, wages have been stagnant for years, offset by the house ATM machine.
Now that the HATM is broken, gas and food are through the roof, and layoffs are starting to take a bite out, where does the money come from to support higher rents? The landlords may wish this, but they may be surprised when the perceived additional demand from condo-conversions and the like evaporates with falling free cash-flow.
Think of a crack-spread for housing. Valero would love to raise gas prices but every time they do it is met with falling demand and so they lose money. People can always move in with the folks or other family members or friends if they can't afford the rent increase. Then we'll get to see what the REAL demand is.
Why raise the caps if this is the BS we are going to get?
To me, those rates really don't look high at all. Maybe I'm operating over longer time horizons than people who can't remember the last time risk was priced reasonably.
Back when Winston Churchill was a young subaltern in India, he had to borrow from a local lender to finance his string of polo ponies. The rate was 2%/month. He complained, but he paid. Moral: He who doesn't have cash pays the going rate.
Let the good times roll, again.
giacutter | 03.26.08 - 2:33 pm
No...35% down at the low, low rate of 9.58%! Get it while it last! Remember no bank statements...and shhhh! Don't worry about those pesky W-2's, just use a little computer magic and write in the income you want!!!!
"Regarding the economy, it's hard not to notice this stark contrast: The "real economy" of spending, production and jobs -- though weakening -- is hardly in a state of collapse, but much of today's semi-hysterical commentary suggests that it is."
I've tried to make this point several times in the last couple of months to no avail. I'm sure the economy looks terrible from the perspective of someone in foreclosure, but this is a personal situation of their own making (though not necessarily their fault).
My point is the spread between Fannie and Freddie Jumbos vs conforming. It appeared when they were going to raise the cap cap that the rates would be uniform.
LJ writes:
I found someone still doing subprime..what a joke
Purchase or Refinance - Full Doc ONLY - NO BANK STATEMENTS
LJ - might just be advertising but that doesn't mean the loans actually go through. In a downturn most firms ratchet up advertising so as to pump more chum into the mouth of the funnel hoping some make it through and come out the back as done deals.
If you needed 10 closed transactions a week to make the number... and fallout was 50% that means you have to 'catch' 20 in the funnel. But if the fallout falls to only 10% making it through then you had better catch 100 in the funnel to make your number - assuming the distribution is uniform. In large pools of suckers, er I mean clients the assumption of uniformity is pretty sound so advertise like hell & try as best you can to manage the cattle call.
NY Post - Brokers Get JPM Carrot To Stick With Bear (More Crooks JJ!)
"March 26, 2008 -- JPMorgan Chase will pay brokers at Bear Stearns a maximum bonus of 100 percent of the annual revenue they generated to keep them from leaving as the two companies combine." PageNotFound
JPMorgan Chase will pay brokers at Bear Stearns a maximum bonus of 100 percent of the annual revenue they generated to keep them from leaving as the two companies combine.
In a just world, they, and every other Wall Street broker, would be receiving these bonus payments in the form of fractional interests in subprime MBS's and CDO^2's.
We'd quickly find out what they're really worth ... when they start hocking 'em on eBay to meet the payments on their Ferraris.
How many Americans know the detailed history of 1930s? What saved FDR was the rising threat in Europe and then the WW II. Otherwise, he would have gone down as a failed President, because most of the New Deal effects were temporary and things were back to where they were by 1938-39. The self-regeneration was absent due to adversity between the govt and the capitalists. Capitalists of America LOVED both world wars. Some even financed the Russian Revolution!
No one benefited more from the two worlds wars than Americas capitalists. being at the right place at the right time helps.
First, I am not advertising. I am trying to contribute here on CR by giving insight into my industry.
Now fallout is getting near 90%. I don't do sub-prime but once in a while I get rate sheets from lenders I have never heard of. This is one of the first sub-prime rate sheets I have received in a long time and thought it might be interesting for others to look at.
I just had two full doc loans, conforming with credit scores of 790+ that almost didn't make it. I put them with Indy Mac and they tried everything in their arsenal to keep from closing them.
It seems as if no one wants to lend money anymore.
The "real economy" of spending, production and jobs -- though weakening -- is hardly in a state of collapse, but much of today's semi-hysterical commentary suggests that it is.
Maybe our hysterical tone is clouding your understanding of the words behind the tone?
About the worst-case scenario that we hysterics dare to predict is that US GDB may decline by say 20%. This means 8 out of 10 companies are still working, 8 out of 10 people still employed, you can still afford Ford Taurus (although you may be used to driving a Hammer), you can still go to the movies (although you may be used to having your own home theater).
20% reduction in the lifestyle quality is not such a big deal once you realize that you have previously spent 20% of your income on unnecessary stuff.
Like they say 'Great Depression was not bad at all, if you had a job'.
I've tried to make this point several times in the last couple of months to no avail. I'm sure the economy looks terrible from the perspective of someone in foreclosure, but this is a personal situation of their own making (though not necessarily their fault).
I find this hysteria to be quite a curiosity.
Your link doesn't work.
Is this the same guy who was saying that all the concern about a housing bubble wasn't warranted a couple of years back?
LJ - I'm not ripping you for spamming - believe me, I'm thankful for insider input, I try to do the same thing for mfg here... I don't solicit either but report what I'm seeing. Sum of all anecdotal goes to data as numbers of reports gets large.
My point was the rates sheets you see & the pitches your principals feed you could all be teasers to motivate you to fill the funnel - so SOMETHING gets through. If they leveled with you as to how tough the selection was going to be you might just tell them to 'f' it & go fishing. Tell them to call you when they get serious again - if ever.
I see a lot of that myself - increased selling expense even though it is much harder to close... why do it? They know that and don't tell us. They aren't stooopid.
Walk past the wall across from the tapestry with trolls on it on the seventh floor corridor three times, thinking "we need a place to talk", and one will appear.
Allow republic elected officials to collaborate in creating a bank monopoly for a nation's currency creation. The officials protect with force, the monopoly for currency creation.
Allow that bank to run on a fractional reserve system - no reserves, but recognition of either government or private "debt" as assets - pick a nice ratio - 40:1 will do.
Natural fear and greed in a populace seeking freebies and "security", then fit all too nicely with elected officials seeking power.
With fiat currency capability (and encouraged by the private banks earning profit off fiat currency creation), the elected officials no longer fear being booted from office or revolt over taxes, which would normally be required to finance the freebies and "security".
Instead, inflate, inflate, inflate, devaluing the currency and stealing the value from the masses.
The government debt, combined with private debt, both create ever greater "assets" for the bank monopoly, with ever decreasing currency value, ever greater taxes, and ever greater depression.
Worked for the fall of Rome, fall of 17th c Spain, 18th c France, 1970's Mexico, 1990's Argentina, and banana republics on and on.
Purchase or Refinance - Full Doc ONLY - NO BANK STATEMENTS
Since not everyone is a mortgage insider, what this means is "real live full documentation of income, not that nonsense where we use your bank statement deposits to calculate "income" with."
You still have to submit bank statements (or verifications of deposit from the bank) to verify funds to close. You just can't claim that "recent cash flow" is "stable monthly income."
Darth Toll said: "...What I find difficult to understand though, is how there can be any rent increases when people can't afford them. In other words, wages have been stagnant for years, offset by the house ATM machine...."
then: "...Now that the HATM is broken, gas and food are through the roof, and layoffs are starting to take a bite out, where does the money come from to support higher rents?..."
Go with that line of thought and see where it leads.
JMO, the people who can afford the things that are more expensive will drive up or support the price, even though people with less money become more hard-pressed.
Example: A person who lost his house because of a mortgage reset he couldn't afford, but still has his job, will support rents, since he both needs and can afford housing. The person who lost his house because he lost his job won't be able to afford rent, either.
This is why, until there's serious job-loss, the real trouble is a ways off.
I see a lot of that myself - increased selling expense even though it is much harder to close... why do it? They know that and don't tell us. They aren't stooopid.
dryfly | 03.26.08 - 2:54 pm
I am basically self employed so I don't have any principals pitching me. I think I misread your comment and I apologize.
"If they leveled with you as to how tough the selection was going to be you might just tell them to 'f' it & go fishing."
I'm so naive, I'm still shocked by the max DTI that the agency loans allow especially when they consider just the back end ratio and not the front end.
I realize it's all modeled, blah blah, etc. It just seems dangerous.
Paul said: "...I find this hysteria to be quite a curiosity."
I don't find it as curious as disappointing, since we just had another one 6 years ago at the last stock market bottom and another one 2 years before that at the stock market top.
Maybe our hysterical tone is clouding your understanding of the words behind the tone?
Just think if some of those DC homebuyers listened to the hysterics coming from sites like this a couple of years ago they might not be staring down the barrel of six figure losses or outright bankruptcy today.
LJ said: "They were giving 2.00 YSP on a 5/1 ARM at 5.125% and I was trying to do a no closing costs refinance. No other lender was even close on the YSP."
I am basically self employed so I don't have any principals pitching me. - LJ
Me too - the companies I sell for are called my 'principals' & they pitch me like crazy in an effort to get me out selling harder for them. But they are the ones who make the final decision to close the business (acceptance terms & price) & that is the deal maker or breaker... very frustrating at times.
So I'm contemplating doing a whole lot more fishing this summer too.
Go McCain, Go Bush, more death, more cost!! Bring honor to America!!!
The passing of the 4,000th service member in Iraq is a tragic milestone and a testament to the cost of this war, but for those of us who live and fight in Iraq, we measure that cost in smaller, but much more personal numbers. For me those numbers are 8, the number of friends and classmates killed in Iraq and Afghanistan, and 3, the number of soldiers from my unit killed in this deployment. I'm 25, yet I've received more notifications for funerals than invitations to weddings.
"20% reduction in the lifestyle quality is not such a big deal once you realize that you have previously spent 20% of your income on unnecessary stuff."
If it's only 20%, I agree completely. Starbucks might hate it, but we'd get through OK. We as individuals would cut back; some industries would learn to take less profit and/or become more efficient.
But if it were 30-40% -- and I've heard such suggestions, though only from the European media -- and we're talking about a fairly major restructuring in the way life is lived in these United States.
This makes no sense - Max DTI of 55% would be max debt to income of 55% - I think they forget to inidicate the max LTV - probably much higher than 55% ...............
Sebastian -- it's a good site though, and I think the price/rent ratio is quite useful.
It appears no one else here at the moment is intersted in knowing the current breakeven price/rent ratio for buyers, so I'll happily keep it to myself.
I'd modify #5 3. Use fed tax itemized decution for real estate taxes and mortage interest deduction in 25% bracket.
The way I think about it, the only benefit I get from these deductions is the incremental amount above the $10,700 I'd get for taking the standard deduction. (That's for Married filing jointly / $5,350 if you're single)
yeah, but Paul was extrapolating our hysterics to mean that we all should be starving to death about now, already.
I clarified it for him that all we meant was that some 10-20% of people will become very very unhappy for a few very very short years.
Well I suspect the most widespread casualty will be peoples' expectations of the future and their retirement plans.
I know a lot of people who had retirement "in the bag" because their house was appreciating at 15% YoY. That was their plan.
Now that's been flipped upside down and suddenly retirement looks nowhere in sight. I'm starting to see a real psychological impact on people who have good jobs and look to have very good lives.
But in a lot of ways to them they're dealing with "the end of the world"... or at least the end of the world they thought they were living in a year ago.
People are highly resiliant and they'll get over it, but in the short term a lot of them are seeing this dream of theirs collapse, and that can be very traumatic (been there; done that).
ac writes: Is this the same guy who was saying that all the concern about a housing bubble wasn't warranted a couple of years back?
No that was not me. The link is to todays washington post column by Robert Samuelson. Go to the opinions page and the title is "Hold the Hysteria". The quote about hysteria was from Samuelson, not me. Sorry for the confusion.
thats not funny at all. there are many people out ther holding on by their fingertips and I am one of them. Never thought I would find myself in the position I am in, but here I am with a six figure income gone, no job prospects and a family to feed and send to school. I was the last to think it could happen to my family. It can happen to you.
query_tool writes:
....
The way I think about it, the only benefit I get from these deductions is the incremental amount above the $10,700 I'd get for taking the standard deduction. (That's for Married filing jointly / $5,350 if you're single)
yeah, I was just thinking of that a minute ago. Say usually a married couple, so 10,700 standard deduction, and perhaps there non-real estate deductions would be about ....??? $4000 maybe.
In that case the renting couple has a $6700 offset vs the itemized real estate deductions of the homeonwer couple.
No that was not me. The link is to todays washington post column by Robert Samuelson. Go to the opinions page and the title is "Hold the Hysteria". The quote about hysteria was from Samuelson, not me. Sorry for the confusion.
Is he an economist by any chance?
Keep in mind that the governing principle behind contemporary economics is to convince everybody that there's nothing wrong with the economy when in fact there really is.
15.A) Custodian/Sub-custodian: BARCLAYS BANK OF ZIMBABWE LTD.
B) Is this a Custodian or Sub-custodian? (C/S): S
C) City: ZIMBABWE State: Zip Code: Zip Ext.:
D) Foreign Country: ZIMBABWE Foreign Postal Code:
E) Mark ONE of the following with an 'X':
TYPE OF CUSTODY
Member Nat'l Foreign Insurance Co.
Bank Sec. Exchg. Self Custodian Sponsor
Sec.17(f)(1) Rule 17f-1 Rule 17f-2 Rule 17f-5 Rule 26a-2 Other
Eveyone knows the words "meltdown" and "collapse" are used quite frequently in this forum. I am merely suggesting they are not precise descriptions of the issues confronting us.
A recession is when you lose your job. A severe recession is when I lose mine. Indeed, perspective is everything.
There are always "losers" in an economy like ours. There are more now with the bubble bursting, but it is others, not I, who are extrapolating the bursting bubble to "meltdown" and "collapse".
I absolutely agree that this is a bad, terrible, etc situation for many people.
Speaking of Depression era nostalgia
{In the nine years since Congress buried Glass-Steagall, the Depression-era act that separated investment banking from commercial banking, we've seen most large investment banking/brokerage firms gobbled up by commercial banks: Salomon Smith Barney by Citigroup. PaineWebber by UBS, Prudential/A.G. Edwards by Wachovia and First Boston and Donaldson Lufkin Jenrette by Credit Suisse - just to name a few.
... ....
....Should big securities firms should be regulated as banks?
I have one answer: Duh!
What we think of as Wall Street is already a business line of commercial banks.
In the nine years since Congress buried Glass-Steagall, the Depression-era act that separated investment banking from commercial banking, we've seen most large investment banking/brokerage firms gobbled up by commercial banks: Salomon Smith Barney by Citigroup. PaineWebber by UBS, Prudential/A.G. Edwards by Wachovia and First Boston and Donaldson Lufkin Jenrette by Credit Suisse - just to name a few.
Even securities stalwart Pershing Advisor Solutions is now part of Bank of New York Mellon.
Except for Goldman Sachs, Merrill Lynch, Morgan Stanley and Lehman Brothers, there really is no independent securities industry anymore. The only activity separating these giants from a commercial bank is the ability to take deposits, which is a low-profit business line that none of the remaining investment banks wants anyway.
Wall Street as we knew it is gone. The Fed's opening of the discount window to non-banks, therefore, is de facto recognition of the integration of securities and banking. We now have a U.S. banking system that is akin to the universal system in Europe, where giant commercial banks do everything.
The U.S. regulatory system eventually will reflect this reality. The Fed will take over regulation of the remaining large securities firms - or probably regulate them jointly with the SEC, thus creating a handful of monolithic banks that are too big to fail.
Which will lead to a whole new set of problems.
Evan Cooper is the senior managing editor and online editorial director of InvestmentNews.}
The current practice has been to adjust the conforming loan limit upward for year-to-year changes in average house prices (I won't get into the exact index, but it's pretty bogus), except that it doesn't ever go down and the adjustment is based solely on what happened between October of last year and October of this year (maybe it's September, I forget). The new policy is more conservative because it "remembers" past price declines.
anon- Best of luck to you and your family! Can you relocate for another job, kids in hs? Simple sells right now..Peanut butter and honey sandwichs rock.
Did your profession give you consulting skills where you can make it happen as business?
Best of luck
A quicker correction would make this better right now..Fessing up brings your out of the abyss-So banks? what say here
There is a possibility that ZIMBABWE symbolizes nationalized subprime-like packaging, pools, trusts and derivatization, which may be diultive to future earnings. See also, covered bonds, e.g, Irish Covered Bonds, etc...
Pimco Strategic Global Government Fund Inc · NSAR-A · For 7/31/07
The first is upsetting (rising gas prices, falling home prices, fewer jobs) but reflects the normal reverses of a $14 trillion economy. The second ("panic," "financial meltdown") suggests the onset of something catastrophic and totally outside the experience of ordinary people.
Eveyone knows the words "meltdown" and "collapse" are used quite frequently in this forum. I am merely suggesting they are not precise descriptions of the issues confronting us.
I agree that are more articulate ways of describing the apocalypse in the the credit markets.
HALBHH - I'm not sure how you get to $4,000 of other deductions if you've got a standard job working for a company.
Maybe I'm not deducting things I should..... but I gave $1,500 to charities, maybe $150 for the deductible portion of vehicle licensing fees, $40 for turbo tax (tax prep fees). That's it. What other non-housing itemized deductions would you be taking?
What if house prices never return to historic income multiples?
One of the things driving them higher in the last few years has been consumers playing bond trader, financing long-term obligations with short term rates and using the difference for more house rather than lower payment. Obviously this can't continue in the face of rising rates/risk premiums.
But there's no law saying consumers have to spend only x% on housing, or have to pay it off within 30 years. Obviously many of these clowns have been doing backdoor extensions with cash-outs, like that idiot woman today who, after 20 years in the same house, can't afford to pay off the remaining principal at 12%. For young buyers who stretch, it's called being "house poor" and it's assumed they grow out of it.
I don't watch many TV dramas or comedies. One thing that strikes me when I do is the lifestyle depicted. In addition to my old favorite, the police detective who wears a $1,200 suit, my new one is the depicted shelter.
Last decade there were several popular NYC based sitcoms. The shelter depicted, although expensive if you knew NYC real estate prices, looked adequate and utilitarian if you were from elsewhere. This decade, the focus has been on suburbia. All the homes are McMansions and the set decoration is high-end and flawless, even though the characters have fewer visible sources of income than their predecessors. These people aren't depicted as rich, rather as the new normal.
I think the generation that grew up on this TV are going to spend whatever it takes to get as close as it takes to this depiction, just as you probably learned what normal is from the TV you watched in your formative years. I have no idea how they're going to afford it, but I imagines amortizations will get longer and discretionary spending will decrease. Both of these are bad for the economy and one is bad for retirement savings.
What do you think? Will there be a great lowering of expectations for the generation about to embark on household formation? Will antidepressant sales rocket up from already high levels to ease the disconnect? Or will they pay even more interest for even longer to get what they see on TV? Or maybe shudder they'll get the Judge Judy distopia of being shouted at for missing car payments, over and over.
who are extrapolating the bursting bubble to "meltdown" and "collapse".
We did have a meltdown of monetary policy, and a total collapse of ABS markets.
Then there was an Armageddon in the municipal auction rate bond market, and a panic in the treasury market.
Those are not exaggerations.
But most of the people don't even need to understand what these markets are. For majority, it is still a land far, far away.
It's just that the minority of affected people seems to be growing larger and larger.
When 20% of WaMu's ALT-A loans are delinquent, I would say the word 'meltdown' is fairly appropriate for a market which traditionally was fairly stable.
query tool-telephone bills, rent (if not a owner) utility bills etc certain % of that based off sq ftg used for business.. of course mileage if not paid by employer
The first is upsetting (rising gas prices, falling home prices, fewer jobs) but reflects the normal reverses of a $14 trillion economy. The second ("panic," "financial meltdown") suggests the onset of something catastrophic and totally outside the experience of ordinary people.
I'll be honest paul -- the thing that troubles me the most is that I was very bearish on housing.
For a while back in 2005-2006 I was really starting to think maybe I was a little bit crazy for worrying that housing would be such a major threat.
The problem is that things appear to be turning out worse than I expected.
It makes it harder for me to dismiss somebody like Jas.
I used to think of someone like Gary Shilling as being a dire pessimist repeatedly warning of a major recession.
Now he almost sounds a bit worried when he writes about the credit markets: "This could be much worse than we originally thought. This doesn't look like a typical recession." (paraphrase)
I'm reminded of that old saying: "The bears are always too early, and too optimistic."
Please accept our condolences for loss of your comrades. Not much fun looking at your war from this side of the pond either.
Meanwhile, those of us who are veterans always remember the induction oath where you swear to
uphold and defend the Constitution,
not whoever is in political office at the moment.
It is a wonder there are not more Armed Froces mutinies, for Constitutional protection reasons, while we are witnessing today the door busters at Bear Stearns.
I could say mor but there is no need to -- come home safe.
heavyweight foreign mining companies would press ahead with operations in Zimbabwe despite a nationalisation law that analysts warned could deepen an economic crisis ravaging the country.
The world's largest platinum miner, Anglo Platinum and Rio Tinto have said they would continue mining after President Robert Mugabe signed into law on Sunday a bill giving locals the right to take majority control of foreign companies, including mines and banks.
Nationalisation has not discourged Rio Tinto, which has diamond interests in Zimbabwe.
"Rio Tinto is supportive of the move towards indigenisation provided that it is done at the right pace and in a way that does not discourage much needed overseas investment in the Zimbabwe mining industry," it said in a statement.
Zimbabwe is already suffering from foreign investor flight, the world's highest inflation rate of over 100 000 percent and severe food, fuel and foreign currency shortages.
query_tool writes:
HALBHH - I'm not sure how you get to $4,000 of other deductions if you've got a standard job working for a company.
Maybe I'm not deducting things I should..... but I gave $1,500 to charities, maybe $150 for the deductible portion of vehicle licensing fees, $40 for turbo tax (tax prep fees). That's it. What other non-housing itemized deductions would you be taking?
qt, you may be right, as self-employeed I'm thinking of health insurance payments, but self-employeed people are a minority. Perhaps $2500 is a better number. Probably there are averages on-line somewhere, but for this $1000 difference would not affect the final number much anyway. So just $3000 perhaps is a good enough number. Your thought?
But there's no law saying consumers have to spend only x% on housing, or have to pay it off within 30 years. Obviously many of these clowns have been doing backdoor extensions with cash-outs, like that idiot woman today who, after 20 years in the same house, can't afford to pay off the remaining principal at 12%. For young buyers who stretch, it's called being "house poor" and it's assumed they grow out of it.
No natural law says price/income ratios will revert HOWEVER there are logical reasons why they might and probably will revert to historic ranges with the biggest being that economic fluctuations (recessions) tend to put a higher bound on how far these ratios can get out of whack.
During long periods of expansion & rising salaries housing prices climb... but once there is a serious recession - lotsa folks lose jobs & foreclosures & weak salaries push down prices (or in stagflation - at least flatten).
Result is you don't see median price to median income outside the 2:1 to 4:1 'trading range' very often of for long. I doubt that will change this time.
anonymous writes: For me those numbers are 8, the number of friends and classmates killed in Iraq and Afghanistan, and 3, the number of soldiers from my unit killed in this deployment. I'm 25, yet I've received more notifications for funerals than invitations to weddings.
I'm so very sorry for your losses. Thank you so much for your willingness to serve. (despite vehement disagreement with the premises of those asking you to serve)
Of course the limit cannot decrease - housing only goes up! Lending standards, however, can only go down!
Come on already - let's just cut to the chase with the taxpayer-funded lair-loans for all. Gotta keep housing unaffordable - the alternative is "unthinkable" since Wall Street pigs won't benefit from the refinancing game anymore.
Paul writes:
Eveyone knows the words "meltdown" and "collapse" are used quite frequently in this forum. I am merely suggesting they are not precise descriptions of the issues confronting us.
"Neutron Economy" doesn't have the cachet it had in the 70s.
"Auger in" implies no survivors.
"A sinking ship" presumes there is a rescue vehicle nearby.
IMO our responses to date have been directed towards a combination of 90s Japan with 70s US economy in a desperate attempt to avoid 30s America. It isn't that the Fed is running out of bullets, it is that this isn't a problem that can be solved with bullets. Insolvency cannot be cured with liquidity and I know of no way to inject solvency into the lenders or borrowers. If "meltdown" doesn't work for you how about "dominoes?" "Death spiral?" My favorite; "undamped asymmetrical heterodyned response" but I already said that with "auger in." Unfortunately the answer is for things to break before trying to fix them. If you try to fix them too early you end up with negative value Bear Stearns holding the US taxpayer hostage for $10 and firstborns to named later (when the market for firstborns improves).
Anyone see any issues with the economics of war and honor. No need to get into politics, just look at how a war can crash an economy and obviously, recall pre-WWII Germany! This is sick, because you can almost substitute America's systemic corruption/collusion to that of Zimbabwe! Meanwhile, Paulson and his fellow tribe members will help themselves to more of the resources from the vault...
The government of Zimbabwe faces a wide variety of difficult economic problems as it struggles with an unsustainable fiscal deficit, an overvalued official exchange rate, hyperinflation, and bare store shelves. Its 1998-2002 involvement in the war in the Democratic Republic of the Congo drained hundreds of millions of dollars from the economy. The government's land reform program, characterized by chaos and violence, has badly damaged the commercial farming sector, the traditional source of exports and foreign exchange and the provider of 400,000 jobs, turning Zimbabwe into a net importer of food products. Badly needed support from the IMF has been suspended because of the government's arrears on past loans and the government's unwillingness to enact reforms that would stabilize the economy. The Reserve Bank of Zimbabwe routinely prints money to fund the budget deficit, causing the official annual inflation rate to rise from 32% in 1998, to 133% in 2004, 585% in 2005, passed 1000% in 2006, and 26000% in November 2007. Private sector estimates of inflation in 2007 are well above 100,000%. Meanwhile, the official exchange rate fell from approximately 1 (revalued) Zimbabwean dollar per US dollar in 2003 to 30,000 per US dollar in 2007.
"I find this hysteria to be quite a curiosity.
Paul "
Yes Paul. I agree 100%. It's all just hysteria. I think the Fed ought to crank FF rates back up to 5% and abandon all those silly auctions where they give money away to banks. Let's just get straight back to business as usual for our eternal Goldilocks economy that you rightly recognize doesn't need any handouts.
Result is you don't see median price to median income outside the 2:1 to 4:1 'trading range' very often of for long. I doubt that will change this time.
Oh, I agree. 5:1 or 6:1 permanently is unsustainable. But even a slight shift, say from 3:1 to 3.5:1, is hundreds of dollars per month per household, the equivalent of one less car in the driveway or some other big hole in the economy, unless the bondholders are spending the surplus here and now.
"Meanwhile, those of us who are veterans always remember the induction oath where you swear to
uphold and defend the Constitution,
not whoever is in political office at the moment.
It is a wonder there are not more Armed Froces mutinies, for Constitutional protection reasons, while we are witnessing today the door busters at Bear Stearns."
Am I correctly reading this as incitement to mutiny? Wow - that would probably be a new low for us here.
i find it quite significant that despite the increased margin requirements at the commodities exchanges which was a blatant attempt by the PPT to dump the prices of oil and gold, that they are once again soaring back to previous levels. it says that true investors don't give a hoot about having to put up serious cash to get into the commodity complex. very bad for stocks.
Oh, I agree. 5:1 or 6:1 permanently is unsustainable. But even a slight shift, say from 3:1 to 3.5:1, is hundreds of dollars per month per household, the equivalent of one less car in the driveway or some other big hole in the economy, unless the bondholders are spending the surplus here and now.
Ralph Cramdown | 03.26.08 - 4:11 pm | #
Yup - people make those choices all the time... to be cash rich or house poor. But the economy can handle that - it can't easily handle a reset from 6:1 back to 3:1 (or maybe 10:1 back to 4:1 in bubble zones like the Bay Area) without heartache.
But sometimes there is no cure for heartache except time.
NY Post - Brokers Get JPM Carrot To Stick With Bear (More Crooks JJ!)
"March 26, 2008 -- JPMorgan Chase will pay brokers at Bear Stearns a maximum bonus of 100 percent of the annual revenue they generated to keep them from leaving as the two companies combine."
So that means the BSC brokers will owe JPM money, right?
Otherwise, he would have gone down as a failed President, because most of the New Deal effects were temporary and things were back to where they were by 1938-39.
Your comments rarely merit rebuttal, let alone a full reading, but this is a myth itself and should not pass unchallenged. Ask anyone who lived through those times if they think the New Deal was a failure. For that matter, ask anyone who currently benefits from it. That would include anyone receiving Social Security benefits or has received an FHA loan, to name just two examples.
Am I correctly reading this as incitement to mutiny? Wow - that would probably be a new low for us here.
OriginalFrank | 03.26.08 - 4:11 pm | #
So do you believe we serve the Constitution or the current political leadership?
We did indeed elect this leadership constitutionally (sort of). So if the leadership starts to betray the Constitution, are we still honor bound to do their bidding since they were constitutionally elected? These are questions that can lead to some very strong differences of opinion.
I have to agree, the Fed is running around with its freaking hair on fire rolling out new alphabet soup programs on a damn near daily basis, invoking actions under codes not used in umpty ump years, bond yields not seen in 50+ years and what else...and some of the slackwits are doing their best Kevin Bacon imitation from "Animal House."
Those my friends, are 'rouge economists', as they are putting lipstick on a pig and telling you to pucker up and pony up, it's really 'Kristen' and she is a bargain at $5K/hour - and I call bullsh!t!
So do you believe we serve the Constitution or the current political leadership?
You know i have no idea but I'm sure there are many places to debate such issues other than a housing/economics blog.
Some of you people need a life if this is what you spend your days worring about. Or maybe you all just need an appointment arranged by the Emperor's Club. Just saying...
Oh, I agree. 5:1 or 6:1 permanently is unsustainable. But even a slight shift, say from 3:1 to 3.5:1, is hundreds of dollars per month per household, the equivalent of one less car in the driveway or some other big hole in the economy, unless the bondholders are spending the surplus here and now.
Ralph Cramdown | 03.26.08 - 4:11 pm | #
Good point. Another relevant piece is in the book "The Two Income Trap" where families using both incomes to pay the mortage are at a lot of risk of default.
March 26 (Bloomberg) -- FGIC Corp. said it's walking away from an agreement to provide $1.9 billion in guarantees on mortgage-linked securities because Credit Agricole SA and IKB Deutsche Industriebank didn't live up to their side of the deal.
FGIC has no further obligation'' because certain responsibilities weren't met and IKB, the German bank that had to be bailed out four times in the past year, misrepresented its condition, FGIC said in a statement today. FGIC, IKB and Credit Agricole are fighting the matter in court. If FGIC wins, the benefitcould be material,'' the New York-based company said.
Bond insurers are seeking ways to relieve themselves of guarantees on collateralized debt obligations to temper their losses amid rising mortgage defaults. Security Capital Assurance Ltd.'s XL Capital Assurance Inc. last week was sued by Merrill Lynch & Co. after XL voided obligations on $3.1 billion of CDOs because of what it called a breach in agreements over rights to influence matters such as whether the CDOs should be liquidated.
``These guys should have a new motto: Heads we win, tails we rescind,'' said Julian Mann, the vice president for fixed income at First Pacific Advisors LLC, which manages $3.4 billion of bonds. Mann doesn't oversee positions in bond insurers, he said.
Good point. Another relevant piece is in the book "The Two Income Trap" where families using both incomes to pay the mortage are at a lot of risk of default.
halbhh | 03.26.08 - 4:26 pm | #
I actually had that as a homework assignment back in a mfg grad school statistics class. In short if the couple has fixed costs (including mtg) greater than the after tax income of the LOWEST earner alone - the probability of default is greater than if they had one income and lived up to the fixed cost limit of that one income alone.
The reason people upscale with two incomes is obvious: they can live larger on the two incomes than the one alone & just take the risk. The prof wasn't preaching - just wanted people to look at the situation and make the numbers talk back.
BTW - we had to model all sorts of scenarios - there are ways to 'mediate' the risk but all require living smaller and applying the dreaded 'S' word - saving.
Some of you people need a life if this is what you spend your days worring about. Or maybe you all just need an appointment arranged by the Emperor's Club. Just saying...
ipodius | 03.26.08 - 4:22 pm | #
Pretty rich coming from someone commenting on a housing, finance, and economics blog.
I know people in the military who take these questions quite seriously.
Okay okay. I know wars and poor leadership have no relevance to the economy.
dryfly -- interesting. I'm 1/2 thru that book. I'll keep your rule of thumb in mind. The author(s) (one a Harvard prof) were also pointing out the disadvantageous subprime lending way back in 2003(!).
thats not funny at all. there are many people out ther holding on by their fingertips and I am one of them. ...but here I am with a six figure income gone, no job prospects and a family to feed and send to school. I was the last to think it could happen to my family. It can happen to you.
anon | 03.26.08 - 3:30 pm |
I think you misunderstood my post. I was only talking about the fact that her mortgage was at 12%. You have to get creative to do that.
I bought 2 years ago. My timing totally sucked, I was completely naive about the housing bubble. HOWEVER: My mortgage is at 6% fixed. I'm OK. I agree I'd be in a world of hurt if I lost my job and I have sympathy for people in that situation due to no fault of their own.
Pretty rich coming from someone commenting on a housing, finance, and economics blog.
Yes, but I try to comment on housing and economics and usually avoid the political theory because, after all, it's just theory.
Furthermore, if any of you really believe that either political party has some influence on business and wall street you really need to get a grip. In all the time I've been in business, I've never heard anyone say "oh the x party is in office so we'll cut back spending" or "since y won the election we'll increase the number of loans we make". These economic ebbs and flows work in timeframes well beyond the tenue of a president or the ebb and flow of which party has the upper hand in congress.
People here point to the repeal of banking regualation, but those were eroded consistently by both political parites and over a period of years. Furthermore what's happening now is really quite outside of the realm of traditional banking, hence the problem. We'll regulate something now, and a few years from now something else will come up. You can either learn how to ride the waves or get tossed about by the surf.
It makes it harder for me to dismiss somebody like Jas.
For cryin' out loud, ac. Let's say we have a deep recesssion that exceeds our expectations. Will you then view everyone as either CROOKS or DOPES, and that we should scrap democracy in favor of some beneficent King of America? King Jas? At least the economy can recover in time - Jas will always be a wingnut.
qt, businesstime -- I think the approximation of 5% error is ok, since under 5% difference other factors on whether to buy or rent should be far more important, like market direction, location preference, expectation/probablilty of moving timeframe, moving costs....
A $2000 difference in the deduction assumptions for example in the 25% bracket, you get $500 or about $40/month vs say roughly a $1400 payment or rent, or about 3% error.
Since anything within say 5-8% of breakeven means other factors will be much more important, this assumption is good enough. I'll use non-homeowner-type deductions = $3000 for the calc.
If you think of more improvement let me know and I'll plug it in later, but this is going to be close enough I think.
ipodius, I beg to differ, at the first regional bank I worked for anyone in an officer position was heavily encouraged to donate to the PAC . . . and the money went overwhelmingly GOP.
Of course back then, in my foolish twenties, I was an independent (mostly voting Republican) myself.
However, the conforming loan limit will not increase until cumulative increases in house prices exceed cumulative decreases since the $417,000 limit was first reached.
As I read this the CLL will never be raised again.
ipodius writes:
Pretty rich coming from someone commenting on a housing, finance, and economics blog.
Yes, but I try to comment on housing and economics and usually avoid the political theory because, after all, it's just theory.
I hear you ipodius. From what I have gathered finance and economics is also "just theory." Still worth discussing. I think with %#$&ups this big it is going to be hard to separate discussions of economics, finance, regulation etc. from politics and political leadership.
I predict much political uglyness in the near future, the catalyst of which will be housing and economics.
Not "incitement to mutiny" intended,
just an observation.
Interesting to be called a troll for the comment I made while above in this same thread there was a call for those demonstrating at Bear Stearns to bring/take their torches and pitchforks.
As much as the war has been botched, I don't think it has been the economic catastrophe some of you believe.
According to my calculator, a gasoline tax of seventy-five cents to a dollar per gallon would finance this war on a cash basis. Mr. "I hit the trifecta" could've mandated a yellow ribbon on every gas pump and made people feel patriotic every time they paid. The economy could absorb the hit, and it would have been good policy. You may say the money could more profitably have been spent on something else, but war's just as stimulative as anything else, and that's a policy choice. Putting it on credit while cutting taxes, reducing tax enforcement and begging "his base" to find loopholes and tax havens was a more serious mistake, but double bubble Greenspan's policies were more harmful than either, making Americans feel they were in one vast casino and had only to move from the Nasdaq table to the housing table with periodic trips to the ATM.
Here be Ralph's two maxims for running a country: 1) Long term financing for long term assets only, current expenses to be paid through current taxation. 2) Majors, Colonels and Generals to remain at war for the duration, none of this rotating home after a year crap.
This is funny because there's a house listing @ $500K that I'm planning to offer $417K for later this year.
Kinda an aggressive lowball, but it came on the market in August and I think the owners want to move out of the area (through the county recorder's website and google I was able to find quite a lot about the present owners).
Asking is better then telling or demanding since they have these $ things they're waiting to unload?
So politics come into play again?
Now whats funny is the politicians are the citizens backstop here?
What are they going to do? Laws, oversight and justice needs to be dished out with fiscal prudence doled out on the other.
This is more about we and me, this is about a lot of young people getting a $40000 maxed out credit card at 9% interest permanently attached to them. Some will not have the opportunities to rise above it, more not.
tattoo's will be unhip when you can get the new govt stamp that changes numbers as you pay your inherited debt down..
Thought you might be interested in yet another "walk-away"
He didn't walk away, he got the boot. As much as the FC counselors and specialists usually give bad advice, I'm amazed at the bad things people do all on their own throwing good money after bad. This guy probably would've been better off selling OR declaring BK (I assume, not familiar with NH specifics) but he's managed to maximize his losses all on his own.
They have to have the basic science completed BEFORE they start the nursing sequence...
Students with a baccalaureate degree in another field who have successfully completed prerequisite courses in nutrition, chemistry, statistics, anatomy and physiology, microbiology, and developmental psychology can enter the College of Nursing, and complete the Bachelor of Science degree program in 15 months of full time study. Students are admitted to the College as undergraduates with the following advanced standing credits: 44 in the liberal arts based on having a bachelors degree and 20 credits in the science and prerequisite requirements that are completed prior to matriculation to the College of Nursing.
Looks reasonable to me... and I'm not a complete moron, was pre-med prior to engineering & worked at the U of Mn Hospitals doing research (worked for the head of the Med School admission committee). Didn't like hospitals so stayed chem engineering w/ biochem emphasis.
cd
thanks for the kind words. Lets just say I am royally screwed and am holding on for dear life. I was in high tech that is gone now. Hard to move when nobody at all is buying. One child a senior making it equally dificult to move. Everywhere I turn I hit a wall. Nightmare doesnt even describe my reality. I need relief. Havent had it for 8 months now. The well is almost dry.
New Supply Bearing Down as Treasury Finances Collapse- WSE Pro Fed Report
by Lee Adler, Wednesday, March 26, 2008, in Money and The Fed, Professional Edition | Permalink |Comments (
US Government finances are falling apart. In another mind bending shock today, the Treasury announced yet another surprise CMB auction. This one will raise $26 billion in new cash tomorrow in an action completely unforeseen by the Treasury Borrowing Advisory Committee. That makes $56 billion in new Treasury borrowing this week that the experts did not foresee less than two months ago. Total new supply will be $78 billion, which will drain cash from the market at issuance on Thursday and Monday. If the Fed does not act aggressively to offset this cash drain, the markets could crack.
what am i missing? the statute is absolutely clear that adjustments are made to the extent of any increase over the priori year.
i think ofheo is snail slime and lockhart an embarrassment but i know how to read a statute and it is as described; it would be equally plausible to say it only goes up or stays the same as it would be to say, as they have, that if it goes down thats carried forward and netted until it goes up
frankly the better view is that it only goes up not down
TAKE IT UP WITH CONGRESS OFHEO IS NOT THE BAD GUY HERE
This is actually my first pass calculation, not yet checked, and I and others can run through the numbers again to catch any mistake.
I'll
Re my above calculation in prior posts, I put the non-homeowner deductions back to $4000 as an average representative number, since they also include state income tax or sales tax as deductible. The renting couple will almost always use the standard deduction of $10700. The homeowner couple will get a benefit from the itemized decution to the extent of mortgage interest as their total deductions rise above $10700. This means the mortgage interest deduction is much more signficant for higher priced houses than for average houses and mortgages. So to reach a rough representative conclusion we need to pick the median home sales price to use, and then the result will be good enough for most people not buying far above or below that median. We use $200K house, 20% down, and thus $160K mortgage (for the new purchase). We use a 15% tax bracket, for something not too far from a median home buying family income type presumption. (after standard deduction and exemption the couple is in the 15% bracket usually. for a couple even at $66K ($15K over the median) is still in the 15% marginal bracket).
First, before the tax deductions, the carrying costs of the home owner are interest cost on the full purchase price (see above posts) at 6%, 2.2% local taxes and 0.8% maintenance, or simply straightforward roughly 9% of the market price. (We use the previous assumptions in prior post re no rent inflation or house price change for our 5 year horizon.)
For the $200K house, $1500/month.
Next taxes: Our renting couple takes the standard deduction of $10700. Our homeowners itemize deductions: $4000 (as above)+ $9600 mortgage interest + $4400 local home taxes (we'll ignore the first year mortage closing costs deductions, but don't forget them if you buy). So very roughly our median couple has about $7000 above the standard deduction, so in the 15% bracket they save $1100/yr over a standard deduction or roughly $100/month.
For a $300K house, in the 25% income tax bracket, the calculation yields homeowner extra tax savings of $3600/yr or $300/month vs the standard deduction.
For the $200K homebuying couple, the breakeven price rent is $1400, so the ratio price/rent is roughly 140 (we don't have 3 significant digits of accuracy here). (note landlords need a profit margin, and also have higher maintenance costs, so they need a lower ratio, well below this 140 level).
For the $300K homebuying couple, breakeven rent is $1950/month, and the ratio is then about 150.
Now in many markets, not just CA and FL, ratios are well north of this, and market direction down, so those places are obvious.
It gets interesting when prices are closer to this level, but still general expectations are prices in most places are going down a bit at least I think.
Now, one more factor is if you are going to rent because it's cheaper and/or houseprices in your area are likely to get down more, yet you also expect to buy in the future in only a few years, then 1 tangible cost of renting is of course moving costs.
Those can vary a lot, so I hestitate to pin down any number. But for instance if you used a number like $2000 (could be less though!), and expected to rent 2 years, that would add an effective extra cost to the rent of $2000/24 per month. Clearly if you only rent 1 year, the cost per month is more for instance.
Nonetheless this is only really important money wise when the expected house market price declines are rather modest.
Doug Noland in Asia Times on recent Lockhart interview
I have fully expected the GSEs, at some point, to be taken over by the federal government. It may have been orchestrated subtly, but I can only presume that such a historic endeavor was accepted last week as the only means of averting financial dislocation. And for their regulator to suggest that the GSEs today have any handle whatsoever over their unfolding "risk management" challenge is wishful thinking - at best.
As far as Im concerned, much of the US mortgage market was this week essentially nationalized. Ill take the dramatic narrowing in agency debt and MBS (mortgage-backed securities) spreads as support for this view. Additional support arrived from comments from Mr Lockhart, US Treasury Secretary Henry Paulson, and actions by the Federal Reserve. Having lived contently for years with the markets interpretation of the (grey-area) "implied" government backing of the GSEs, our policymakers are surely today satisfied with the inferred market acceptance of mortgage industry nationalization. To be sure, the Feds splashy "Sunday Night Special" bailout of Bear Stearns is rather trivial in both its implications and consequences when compared to Thursdays quiet coup.
The people have a choice! They can vote for the puppet on the right hand or the can vote for the puppet on the left hand...
Kicker | 03.26.08 - 5:53 pm | #
*** Or my favorite Russion joke (which seems particularly relevant these days):
The difference between between Communism and Capitalism?
Under Capitalism, man exploits man. While under Communism, it is the reverse.
Did anyone really think this was temporary?
Of course they are temporary. And the new TSLF auctions mature in 28 days at which time the borrowers will pay back their loans and take back their collateral.
I work not far from Bear Sterns building and I see some kind of demonstration going on there.
Nothing in the news yet.
Anyone know who is picketing and why?
Well that's all the news from Lake OFHEO where the market is strong, the houses are good looking and all the loans are above average.
These are not permanent. That is ridiculous. That is like saying the bases in Iraq are permanent. We all know they are just "enduring". Now, doesn't that feel better?
--
OT, but an Economist (Kasriel) worth reading:
Greenspans Legacy of Debt
http://web-xp2a-pws.ntrs.com/content//media/attachment/data/econ_research/0803/document/ec032508.pdf
I have been warning about this for years.
GREENSPAN IS AN EVILDOER AND AN AGENT OF THE NYC BANKING AND FINANCE CROOKS. BERNANKE HAD TO FOLLOW IN HIS FOOT STEPS TO GET THE JOB.
That is what happens when Crooks take control of the whole economic system a system of the Crooks
Jas
ok the people protesting at Bear Stearns building are angry homeowners:
Access Denied
--
"Did anyone really think this was temporary?"
Crispy,
That is how Americans' crooked system works.
Politically impotent American People can't do a damn thing about it, no?
Jas
from the article on the demonstration at BSC building:
"My interest rate is 12 percent and I can't refinance," Gail explained.
Gail is joining a dozen other homeowners from Connecticut who are protesting the federal bail out of Bear Strearns. The company went belly up and has added to the ongoing mortgage crisis.
"They need to help people out too, not just companies," said Gail.
looks like they are not averse to Fed-assisted purchase of their house!
angry homeowners:
Isn't that redundant?
"Nothing is so permanent as a temporary government program." -- Dr. Milton Friedman
"The Neighborhood Assistance Corporation of America (NACA) believe the government isn't doing what it should to help at-risk homeowners."
Sure they are, you can walkaway now then buy at half price a few years from now.
Whatever the reasons for the protest I hope they bring torches and pitchforks.
That is the only way it will get play in the MSM..otherwise.....just another day in paradise..
Ciao
MS
Missed,
I dont know about the demonstrations, just be sure to have your camera if sh*t hits the fan... That would be a great YouTube video....
Till then:
The top lawmakers on the Senate Finance Committee said they are reviewing the terms of the taxpayer-backed sale of Bear Stearns Cos. to JPMorgan Chase & Co.
Bear Stearns Sale to JPMorgan to Be Probed by Senate (Update1) - Bloomberg.com
I think I just found where JPM is investing:
The Zimbabwe dollar is pegged at 30,000 per U.S. dollar, while the more commonly used black-market rate collapsed to 55 million per dollar on March 19, from about 7,200 a year ago. The currency's slump has driven inflation to 100,580 percent in January, the highest in the world.
Rating agencies anyone?
CR:
Thanks for the translation from bureaucratese. I read it several times and wasn't sure what I read.
I also didn't do well in word problems in elementary school.
This limit is not temporary. However, it should not be a cause for concern because significant inflation is part of the Fed solution.
Time for DD:
Old news:
BARCLAYS is bankrolling President Robert Mugabe's corrupt regime in Zimbabwe by providing substantial loans to cronies given land seized from white farmers.
The British bank lent £750m to the country's new landowning elite in the first half of this year, mostly through a government scheme to boost farm productivity.
Hard times stories in the MSM-
America's Money: In their own words - Jeff Morin: Enjoying quality time (1) - CNNMoney.com
This is going to be a long unwind.
Well, I hope that my own story isn't added to the pantheon of folks just crabbin by.
Just hopin' to muddle through now.
Someday this war's gonna end...
This is a little OT as it relates to the previous NHS topic:
Sings of life are appearing in the housing market. The question is not, "have we bottomed," but rather "what does equilibrium look like in the housing market?"
One stab at equilibrium uses mean-regression in either home-price- to-income ratios or rental yields. By both measures we are far from equilibrium.
But even using mean-regressing variables doesn't produce a satisfying answer. We know where the mean has been historically, but how far will we overshoot that mean? For how long?
The answer depends on non-linear "feedback loop" effects. If lower house prices reduce housing demand, then we overshoot until some dynamic kicks in with opposite effects. In the past, this dynamic has been the cash flow yield from rentals, which at certain levels guarantees sufficient returns to absorb large amounts of price risk. A rental yield of 8% sounds juicy enough to stop house price declines in their tracks.
Okay, so 8% yields provide a floor on house prices. We are at around 4% now. How long do we spend below the mean? What's the balance of house price declines and rent increases that gets us there?
That question, I believe, is almost impossible to answer given the level of government intervention. And for this reason, any positive signs of life in the housing market are most likely insignificant data points on the uncertain path to equilibrium.
OT (sorry)
but on CNBC they just had footage of a protest against the Bear Stearns Bailout.
the protestors got INTO Bear Stearns (there must be at least 100 in there I'd guess)
They're not affiliated with Bear. It looks like they might be regular taxpayers and/or people who lost their homes to foreclosure?
ROFL
we need more of this.
Temporary is a good word economic optimism.
Of course it's temporary, people. Get real.
By next year it'll be at 190% of area median, not 125%.
WAAAHHHHOOOOOO ! ! ! ! !
Y2L great story....
Any link?
I love pandemonium...
..........
To infinity, and beyond!
limit will vary by MSA (Metropolitan Statistical Area).
Well, to be precise, it may vary by county or MSA.
David Pearson,
Do you actually expect to see rent increases in the current environment? I've been seeing lower rents in my area (Sacramento) not higher.
Darth-Is Shingle springs-Placerville area taking same kind of hit as city?
Looking to buy up there next year.
--
Not kidding...
CNBC showing protestors (outside the BS building) against BSC bailout!
But, these people are in denial of their political impotence. We would need riots in many large cities and thousands of deaths before our economic masters would even listen to ordinary Americans. Otherwise, they ignore without any consequences. They feel safe!
Kings of Jodhpur would actually grant audiences and listen to peoples grievances often. It is hard for born-and-bred American dopes to believe but people of Jodhpur area genuinely loved their kings. British rule, lasting for only 60 years, was very mild (tax collector and military advisors; rest was left local and traditional). We were very fortunate compared to most Indians during the Muslim and British rule.
America will fully discredit democracy within the next 23 years (before the end of 2030). It is a fraud anyway with de facto rule of the moneybags.
Jas
I guess Warsh ain't getting his hardhat from the Shnapster after all. It's up to $305.
they should be a the Fed's doorstep not BSC or any other broker dealer. The fed needs to be the center of this protest.
They are the ones who are backstopping the market with our money.
Ciao
MS
America will fully discredit democracy within the next 23 years
Yeah isn't it funny?
After Soviet empire fell, everyone was singing: this finally proves once and for all: communism does not work!
In 20 years we may hear, US proved once and for all: democracy does not work!
USA-induced world crisis may end up being an order of magnitude larger than USSR-induced one.
does anyone have a link for intraday libor?
CR, Tanta:
sorry for veering wide off-topic, but what you have on your hands now is a community, not just a blog.
we need a place to talk.
I bet for every King of Jodhpur there were 10 dope Kings who chopped protesters fingers.
I just received a a new $5 dollar bill as change...talk about play money...what a joke.
OT: Tanta - how come no post on your pal Bill Poole's new job? He is going to get more Rand-ie over at the Cato Institute, and being replaced by Dullard.
I mean, Bullard.
well, well, well. dollar down, yen up, stocks down, bonds down, but commodities up? oh my.
As long as we all understand that the word "temporary" is being used here in the geological sense, there is nothing misleading about saying this is temporary.
The problem is that no one seems to realize that Pangaea was temporary too.
--
"USA-induced world crisis may end up being an order of magnitude larger than USSR-induced one."
MI,
Believe it or not, you are just paraphrasing what I said several years ago. Thanks. It makes sense.
Jas
Darth,
I think there's a mis-match in rental markets that could produce rent increases.
There is an oversupply of single family housing, but this is typically not sustainable rental inventory. Sure, owners may want to rent for a year until things improve, but ultimately they rent on negative cashflows, and that does not pay the bills. Once they realize this, most would-be SFR landlords will have to sell rather than rent.
In contrast, there is likely excess demand for multifamily rentals (coming from delayed FTB's and the foreclosed-upon). Much rental stock was converted to condo's in the past few years, and again, reconversion to apartments requires higher cash yields than we see today.
IMO, multifamily rentals are capable of capturing rent increases, and they are the bulk of the rental market.
reading the money.com stories that AllenM posted...one America is already in Depression.
cd, not as much. That is actually my home area and El Dorado County is a little stickier on the downside for some reason.
When I first started renting in p-ville a couple of years ago, you would be hard pressed to find any decent house for less than $1600. Now they seems to be in the $1300 range, so a step in the right direction but not as dramatic as Sac.
Mountain Democrat - Your Local News
Tanta, I want to know how the dim bulb in charge at OFHEO, James Lockhart, continues to get a free pass.
Prior to this, his agency's most recent stroke of genius was to relax the liquidity constraints on Fannie and Freddie -- agencies that Jim Grant acidly and left-handledly characterized as "exmplars of financial rectitude and transparency".
Lockhart, like his master in the White House, is an incompetent dunce.
The good thing about a democracy is that about every 12 years or so there is a good presidential candidate. The bad thing about a democracy is that about every 12 years or so there is a good presidential candidate.
idoc wrote: does anyone have a link for intraday libor?
It isn't very volatile. do your research.
I think hopes for a bailout of the big boys may be a tad displaced. As the Bear protest shows, while the insiders almost always win, we have some serious conflicts now that could stumble a rescue scheme. The Hamptons crowd is now competing against failing homeowners and neighborhoods, at a time when Fed action will be increasingly hamstrung.
Look at this from that Bloomberg article quoted above:
Senate Finance Committee Chairman Max Baucus, a Montana Democrat, and Charles Grassley of Iowa, the committee's ranking Republican, gave Fed officials and JPMorgan executives a March 28 deadline to describe the assets involved in the transaction.
Americans are being asked to back a brand-new kind of transaction, to the tune of tens of billions of dollars,'' Baucus said in a statement today.It's the Finance Committee's responsibility to pin down just how the government decided to front $30 billion in taxpayer dollars for the Bear Stearns deal, and to monitor the changing terms of the sale.''
The Delaware company will liquidate the assets over 10 years, with JPMorgan absorbing the first $1 billion in losses, with the Fed bearing any that remain. Any such losses would hurt the Fed's balance sheet, and ultimately the taxpayer, because they would reduce the stipend the Fed pays to the Treasury from earnings on its portfolio. The dividend was $29 billion in 2006.
There's more in that article about the GSEs, and rumblings on both sides of the aisle about allowing them to binge on toxic waste.
Whatever the reasons for the protest I hope they bring torches and pitchforks.
A little tar-and-feathering wouldn't hurt either.
Don't get J6P mad! Taking away his home is a very bad idea.
--
"I bet for every King of Jodhpur there were 10 dope Kings who chopped protesters fingers."
REBear,
India is as big and as diverse as Europe, including languages. Please remember that next time.
The region that used to be called Rajputana, now mostly state of Rajasthan, was governed by very competent people whom Moguls and the British reselected greatly. They took pride in their job!!!!!!!!!!!
They were sort of aristocracy that evolved along a different path due to somewhat remoteness (partly big desert of Thar). As I said, I was born in a lucky part of India and in the best governed kingdom within that. Hey, you can't beat being born lucky! American system now a days, rule of the Crooks, sucks. Americans were lucky (there were checks and balances on the Crooks) for a very long time and now their luck is running out, as the checks and balances have run out.
Jas
These limits mean jack sh*t. Has anyone seen what the rates are on Fannie and Freddie Jumbos? They are awful...
enjoy!
30yr Fixed Agency Jumbo
6.625% (.166)YSP
7.25% (1.61) YSP
30yr Fixed Conforming
5.875% (.923) YSP
Why raise the caps if this is the BS we are going to get?
If there was any thought to the $30 B backstop, the FED should have issues a statement to the effect that this money was to go directly to distressed homeowners via the MBS securities which are failing.
Of course, but the time that $30B makes it through the maze of CDO and MBS traches maybe 5 families could be saved.
But it's the thought that counts no ?
Homes in my zip 75230 in the $417,000 range. The home on Briarmeadow at $409,000 is on my street and started at $519,000 over one year ago. This is its second listing with a new realtor. The first realtor's lowest price listing on this property was $399,000 when it was taken off the market for a few weeks and relisted at a HIGHER price. This is Preston Hollow where George Bush lived before going to the Texas governor's mansion and you know the sick story from there.
75230 real estate & 75230 homes for sale | Single family homes,Condos,Townhomes,Co-ops - REALTOR.com®
"Don't get J6P mad! Taking away his home is a very bad idea."
His home that he put no money down, took out $200k of MEW, and used the money to lease Range Rovers and to buy luxury vacations all while paying the minimum payment on an option ARM (that he stopped paying 9 months ago and still likes in the house). Care to reconsider whose home it is?
Let's see,
I can't decide if this period in the stock market is like 1995, where a new leg in the bull market starts after a lackluster 1994.
Or, if it's like the fall of 1998 after the LTCM fiasco, and new leg of the bull market starts.
Jeez, so many bullish scenarios for this outcome.
More realistically, the economic data coming in year-to-date has been worse than expected or as bad as expected. I think this will be more like 1933 without FDR at the helm. Right now this economic ship is being steered by the crew of the Exxon Valdez on a drinking binge while navigating through a Cat 5 hurricane. A good outcome will require a miracle rather than another hat trick.
Thanks Darth-I really like that area-even jackson/sutter creek area is in my sights.
Plus I can make some money with my sluice box and pick nearby!!!!
LJ said: "Why raise the caps if this is the BS we are going to get?"
I guess people should be careful what they ask for....
I don't know why 'temporary' is wrong. They intend to move it again, just up. It will be there in 15 years. 15 years is temporary, no?
Sorry, off-topic, but the interview on Bloomberg with James Grant is a must-watch:
Grant Calls Fed's Balance Sheet an `Economist Nightmare': Video March 25 (Bloomberg) -- James Grant, editor of Grant's Interest Rate Observer, talks with Bloomberg's Pimm Fox in New York about the Federal Reserve's intervention in the credit market crisis and its impact on the value of the U.S. dollar.
Bloomberg.com
David Pearson,
Your arguments make a lot of sense. What I find difficult to understand though, is how there can be any rent increases when people can't afford them. In other words, wages have been stagnant for years, offset by the house ATM machine.
Now that the HATM is broken, gas and food are through the roof, and layoffs are starting to take a bite out, where does the money come from to support higher rents? The landlords may wish this, but they may be surprised when the perceived additional demand from condo-conversions and the like evaporates with falling free cash-flow.
Think of a crack-spread for housing. Valero would love to raise gas prices but every time they do it is met with falling demand and so they lose money. People can always move in with the folks or other family members or friends if they can't afford the rent increase. Then we'll get to see what the REAL demand is.
I found someone still doing subprime..what a joke
Purchase or Refinance - Full Doc ONLY - NO BANK STATEMENTS
1st Lien Rates
*No Seasoning Required to use Appraised Value!
590-619 FICO
Max DTI 55% LTV
I guess people should be careful what they ask for....
Terry | 03.26.08 - 2:26 pm |
I guess your right. I was under the impression it would be some sort of panacea. The joke was on me.
A full-doc with 45% down payment?
Let the good times roll, again.
Has anyone seen what the rates are on Fannie and Freddie Jumbos? They are awful...
30yr Fixed Agency Jumbo
6.625% (.166)YSP
7.25% (1.61) YSP
30yr Fixed Conforming
5.875% (.923) YSP
Why raise the caps if this is the BS we are going to get?
To me, those rates really don't look high at all. Maybe I'm operating over longer time horizons than people who can't remember the last time risk was priced reasonably.
Back when Winston Churchill was a young subaltern in India, he had to borrow from a local lender to finance his string of polo ponies. The rate was 2%/month. He complained, but he paid. Moral: He who doesn't have cash pays the going rate.
you do have that %45 down payment...
Hello...anyone there....
They hung up..
Ciao
MS
I think this will be more like 1933 without FDR at the helm.
You mean same FDR that order cattle to be slaughtered in order to prevent food price deflation?
Or same FDR that confiscated gold from people at half price?
I guest it's temporary.
Limit will vary by MSA (Metropolitan Statistical Area). To be precise, it may vary by county or MSA.
http://home-loan-rate.blogspot.com
A full-doc with 45% down payment?
Let the good times roll, again.
giacutter | 03.26.08 - 2:33 pm
No...35% down at the low, low rate of 9.58%! Get it while it last! Remember no bank statements...and shhhh! Don't worry about those pesky W-2's, just use a little computer magic and write in the income you want!!!!
Pathetic.
Washington Post article on our "recession".
washingtonpost.com - nation, world, technology and Washington area news and headlines
wp...id=opinionsbox1
I guess he's been reading this blog.
"Regarding the economy, it's hard not to notice this stark contrast: The "real economy" of spending, production and jobs -- though weakening -- is hardly in a state of collapse, but much of today's semi-hysterical commentary suggests that it is."
I've tried to make this point several times in the last couple of months to no avail. I'm sure the economy looks terrible from the perspective of someone in foreclosure, but this is a personal situation of their own making (though not necessarily their fault).
I find this hysteria to be quite a curiosity.
Ralph Cramdown | 03.26.08 - 2:33 pm
My point is the spread between Fannie and Freddie Jumbos vs conforming. It appeared when they were going to raise the cap cap that the rates would be uniform.
LJ writes:
I found someone still doing subprime..what a joke
Purchase or Refinance - Full Doc ONLY - NO BANK STATEMENTS
LJ - might just be advertising but that doesn't mean the loans actually go through. In a downturn most firms ratchet up advertising so as to pump more chum into the mouth of the funnel hoping some make it through and come out the back as done deals.
If you needed 10 closed transactions a week to make the number... and fallout was 50% that means you have to 'catch' 20 in the funnel. But if the fallout falls to only 10% making it through then you had better catch 100 in the funnel to make your number - assuming the distribution is uniform. In large pools of suckers, er I mean clients the assumption of uniformity is pretty sound so advertise like hell & try as best you can to manage the cattle call.
NY Post - Brokers Get JPM Carrot To Stick With Bear (More Crooks JJ!)
"March 26, 2008 -- JPMorgan Chase will pay brokers at Bear Stearns a maximum bonus of 100 percent of the annual revenue they generated to keep them from leaving as the two companies combine."
PageNotFound
JPMorgan Chase will pay brokers at Bear Stearns a maximum bonus of 100 percent of the annual revenue they generated to keep them from leaving as the two companies combine.
In a just world, they, and every other Wall Street broker, would be receiving these bonus payments in the form of fractional interests in subprime MBS's and CDO^2's.
We'd quickly find out what they're really worth ... when they start hocking 'em on eBay to meet the payments on their Ferraris.
--
MI,
How many Americans know the detailed history of 1930s? What saved FDR was the rising threat in Europe and then the WW II. Otherwise, he would have gone down as a failed President, because most of the New Deal effects were temporary and things were back to where they were by 1938-39. The self-regeneration was absent due to adversity between the govt and the capitalists. Capitalists of America LOVED both world wars. Some even financed the Russian Revolution!
No one benefited more from the two worlds wars than Americas capitalists. being at the right place at the right time helps.
Jas
I'm getting interested to compare my own calculation of the current breakeven point for cost to buy vs cost to rent.
Since we can compare this to the price/rent table on this site: (note their mortage/rent ratio is not useful as formulated):
HousingTracker.net: Affordabilty Measures
I'd like feedback/improvements.
Here's my paramaters so far:
1a. Include value of time-cost (interst that could have been earned) on the downpayment.
(6&7 remove appreciation and rent inflation, which won't be especially bad I'd guess for many areas).
Ok, any corrections/improvements, folks?
If I get feedback, I'll eventually post my breakeven price/rent ratio for current buyers.
dryfly | 03.26.08 - 2:39 pm |
First, I am not advertising. I am trying to contribute here on CR by giving insight into my industry.
Now fallout is getting near 90%. I don't do sub-prime but once in a while I get rate sheets from lenders I have never heard of. This is one of the first sub-prime rate sheets I have received in a long time and thought it might be interesting for others to look at.
I just had two full doc loans, conforming with credit scores of 790+ that almost didn't make it. I put them with Indy Mac and they tried everything in their arsenal to keep from closing them.
It seems as if no one wants to lend money anymore.
The "real economy" of spending, production and jobs -- though weakening -- is hardly in a state of collapse, but much of today's semi-hysterical commentary suggests that it is.
Maybe our hysterical tone is clouding your understanding of the words behind the tone?
About the worst-case scenario that we hysterics dare to predict is that US GDB may decline by say 20%. This means 8 out of 10 companies are still working, 8 out of 10 people still employed, you can still afford Ford Taurus (although you may be used to driving a Hammer), you can still go to the movies (although you may be used to having your own home theater).
20% reduction in the lifestyle quality is not such a big deal once you realize that you have previously spent 20% of your income on unnecessary stuff.
Like they say 'Great Depression was not bad at all, if you had a job'.
Jas Jain - Doesn't "Negative Equity Certificates" seem a lot like the "War Bonds" ?
We'd quickly find out what they're really worth ... when they start hocking 'em on eBay to meet the payments on their Ferraris.
You'd find stacks of them left at the Emperor's Club...
I've tried to make this point several times in the last couple of months to no avail. I'm sure the economy looks terrible from the perspective of someone in foreclosure, but this is a personal situation of their own making (though not necessarily their fault).
I find this hysteria to be quite a curiosity.
Your link doesn't work.
Is this the same guy who was saying that all the concern about a housing bubble wasn't warranted a couple of years back?
LJ - I'm not ripping you for spamming - believe me, I'm thankful for insider input, I try to do the same thing for mfg here... I don't solicit either but report what I'm seeing. Sum of all anecdotal goes to data as numbers of reports gets large.
My point was the rates sheets you see & the pitches your principals feed you could all be teasers to motivate you to fill the funnel - so SOMETHING gets through. If they leveled with you as to how tough the selection was going to be you might just tell them to 'f' it & go fishing. Tell them to call you when they get serious again - if ever.
I see a lot of that myself - increased selling expense even though it is much harder to close... why do it? They know that and don't tell us. They aren't stooopid.
we need a place to talk
Walk past the wall across from the tapestry with trolls on it on the seventh floor corridor three times, thinking "we need a place to talk", and one will appear.
So - here's a toxic mix:
Allow republic elected officials to collaborate in creating a bank monopoly for a nation's currency creation. The officials protect with force, the monopoly for currency creation.
Allow that bank to run on a fractional reserve system - no reserves, but recognition of either government or private "debt" as assets - pick a nice ratio - 40:1 will do.
Natural fear and greed in a populace seeking freebies and "security", then fit all too nicely with elected officials seeking power.
With fiat currency capability (and encouraged by the private banks earning profit off fiat currency creation), the elected officials no longer fear being booted from office or revolt over taxes, which would normally be required to finance the freebies and "security".
Instead, inflate, inflate, inflate, devaluing the currency and stealing the value from the masses.
The government debt, combined with private debt, both create ever greater "assets" for the bank monopoly, with ever decreasing currency value, ever greater taxes, and ever greater depression.
Worked for the fall of Rome, fall of 17th c Spain, 18th c France, 1970's Mexico, 1990's Argentina, and banana republics on and on.
It's working great for the US today too.
Paul = AOTC ?
Tanta,
your secret is safe with me.
Purchase or Refinance - Full Doc ONLY - NO BANK STATEMENTS
Since not everyone is a mortgage insider, what this means is "real live full documentation of income, not that nonsense where we use your bank statement deposits to calculate "income" with."
You still have to submit bank statements (or verifications of deposit from the bank) to verify funds to close. You just can't claim that "recent cash flow" is "stable monthly income."
Darth Toll said: "...What I find difficult to understand though, is how there can be any rent increases when people can't afford them. In other words, wages have been stagnant for years, offset by the house ATM machine...."
then: "...Now that the HATM is broken, gas and food are through the roof, and layoffs are starting to take a bite out, where does the money come from to support higher rents?..."
Go with that line of thought and see where it leads.
JMO, the people who can afford the things that are more expensive will drive up or support the price, even though people with less money become more hard-pressed.
Example: A person who lost his house because of a mortgage reset he couldn't afford, but still has his job, will support rents, since he both needs and can afford housing. The person who lost his house because he lost his job won't be able to afford rent, either.
This is why, until there's serious job-loss, the real trouble is a ways off.
FWIW.
Sebastian, Rogue Economist
LJ said: "I put them with Indy Mac"
Why did you choose them?
I see a lot of that myself - increased selling expense even though it is much harder to close... why do it? They know that and don't tell us. They aren't stooopid.
dryfly | 03.26.08 - 2:54 pm
I am basically self employed so I don't have any principals pitching me. I think I misread your comment and I apologize.
"If they leveled with you as to how tough the selection was going to be you might just tell them to 'f' it & go fishing."
I have been fishing a lot lately.
I'm so naive, I'm still shocked by the max DTI that the agency loans allow especially when they consider just the back end ratio and not the front end.
I realize it's all modeled, blah blah, etc. It just seems dangerous.
Like I said, I'm naive.
Paul said: "...I find this hysteria to be quite a curiosity."
I don't find it as curious as disappointing, since we just had another one 6 years ago at the last stock market bottom and another one 2 years before that at the stock market top.
S.
Help.
Am I including everything?
Two more parameters (the first 7 above):
9.Set maintainance to be like,hmmm....0.8%/yr
This calculation is actually looking quite easy. Anyone could do it with a little patience and the right simplifications for a limited time period.
More congratulations for Ben and the excellent job he's doing:
Crude closes up $4.68, or 4.6%, at $105.9 a barrel
OT-Did ppt team just step in?
Yes, they did.
It's only temporary, and next year we're all going to the metrics system....
LJ said: "I put them with Indy Mac"
Why did you choose them?
Terry | 03.26.08 - 3:04 pm
They were giving 2.00 YSP on a 5/1 ARM at 5.125% and I was trying to do a no closing costs refinance. No other lender was even close on the YSP.
I regret it as Indy Mac proved to be a nightmare....dragged their feet in underwriting to make me get a lock extension for a .25 hit to YSP.
I have this dictionary - under the listing Rogue, it says "hack."
Sebastian -- did you notice in that great link youg gave that the mortgage/rent ratio as they formulate it is useless (misleading)?
Maybe our hysterical tone is clouding your understanding of the words behind the tone?
Just think if some of those DC homebuyers listened to the hysterics coming from sites like this a couple of years ago they might not be staring down the barrel of six figure losses or outright bankruptcy today.
Sometimes results matter.
LOL
I just noticed the pump.
re: ac
yeah, but Paul was extrapolating our hysterics to mean that we all should be starving to death about now, already.
I clarified it for him that all we meant was that some 10-20% of people will become very very unhappy for a few very very short years.
So all is well, really.
LJ said: "They were giving 2.00 YSP on a 5/1 ARM at 5.125% and I was trying to do a no closing costs refinance. No other lender was even close on the YSP."
I understand.
Tell it acDC!
halbhh said: "Sebastian -- did you notice in that great link youg gave that the mortgage/rent ratio as they formulate it is useless (misleading)?"
Have you been reading my posts about CR's charts? Why don't you give him a hard time, too, while you're at it?
S.
we will end in the red. cant make it too obvious
The dow will end in the red.
I am basically self employed so I don't have any principals pitching me. - LJ
Me too - the companies I sell for are called my 'principals' & they pitch me like crazy in an effort to get me out selling harder for them. But they are the ones who make the final decision to close the business (acceptance terms & price) & that is the deal maker or breaker... very frustrating at times.
So I'm contemplating doing a whole lot more fishing this summer too.
I can't wait to see this on TV.
Wrestling matches between people who lost their homes and Bear Stearns employees who lost their life savings.
anon,
We already had one red day this week.
jas:
did you have your morning intake today...so glum and all.
BTW, swetamber or digamber??
Go McCain, Go Bush, more death, more cost!! Bring honor to America!!!
The passing of the 4,000th service member in Iraq is a tragic milestone and a testament to the cost of this war, but for those of us who live and fight in Iraq, we measure that cost in smaller, but much more personal numbers. For me those numbers are 8, the number of friends and classmates killed in Iraq and Afghanistan, and 3, the number of soldiers from my unit killed in this deployment. I'm 25, yet I've received more notifications for funerals than invitations to weddings.
"20% reduction in the lifestyle quality is not such a big deal once you realize that you have previously spent 20% of your income on unnecessary stuff."
If it's only 20%, I agree completely. Starbucks might hate it, but we'd get through OK. We as individuals would cut back; some industries would learn to take less profit and/or become more efficient.
But if it were 30-40% -- and I've heard such suggestions, though only from the European media -- and we're talking about a fairly major restructuring in the way life is lived in these United States.
Just saying.
I guess the "PPT" had an afternoon golf game with the second gunman.
If the market closes green today please pass me the bongwater! Any drink will quench my thirst for reality then!
Max DTI 55% LTV
This makes no sense - Max DTI of 55% would be max debt to income of 55% - I think they forget to inidicate the max LTV - probably much higher than 55% ...............
Sebastian -- it's a good site though, and I think the price/rent ratio is quite useful.
It appears no one else here at the moment is intersted in knowing the current breakeven price/rent ratio for buyers, so I'll happily keep it to myself.
Ouch on FGIC
Eschaton
"My interest rate is 12 percent and I can't refinance," Gail explained.
12 percent! Amazing.
Too bad high-rate mortgages aren't fatal - we'd have a Darwin Award winner here!
watch the video...she says it's 12.63%
halbhh --
I'd modify #5
3. Use fed tax itemized decution for real estate taxes and mortage interest deduction in 25% bracket.
The way I think about it, the only benefit I get from these deductions is the incremental amount above the $10,700 I'd get for taking the standard deduction. (That's for Married filing jointly / $5,350 if you're single)
FGIC rueters link
- NY Times
OT:
Jumbo rates 7.23%, soon to 8%.
yeah, but Paul was extrapolating our hysterics to mean that we all should be starving to death about now, already.
I clarified it for him that all we meant was that some 10-20% of people will become very very unhappy for a few very very short years.
Well I suspect the most widespread casualty will be peoples' expectations of the future and their retirement plans.
I know a lot of people who had retirement "in the bag" because their house was appreciating at 15% YoY. That was their plan.
Now that's been flipped upside down and suddenly retirement looks nowhere in sight. I'm starting to see a real psychological impact on people who have good jobs and look to have very good lives.
But in a lot of ways to them they're dealing with "the end of the world"... or at least the end of the world they thought they were living in a year ago.
People are highly resiliant and they'll get over it, but in the short term a lot of them are seeing this dream of theirs collapse, and that can be very traumatic (been there; done that).
ac writes:
Is this the same guy who was saying that all the concern about a housing bubble wasn't warranted a couple of years back?
No that was not me. The link is to todays washington post column by Robert Samuelson. Go to the opinions page and the title is "Hold the Hysteria". The quote about hysteria was from Samuelson, not me. Sorry for the confusion.
bobn
thats not funny at all. there are many people out ther holding on by their fingertips and I am one of them. Never thought I would find myself in the position I am in, but here I am with a six figure income gone, no job prospects and a family to feed and send to school. I was the last to think it could happen to my family. It can happen to you.
query_tool writes:
....
The way I think about it, the only benefit I get from these deductions is the incremental amount above the $10,700 I'd get for taking the standard deduction. (That's for Married filing jointly / $5,350 if you're single)
yeah, I was just thinking of that a minute ago. Say usually a married couple, so 10,700 standard deduction, and perhaps there non-real estate deductions would be about ....??? $4000 maybe.
In that case the renting couple has a $6700 offset vs the itemized real estate deductions of the homeonwer couple.
Your thought? Is $4000 reasonable?
No that was not me. The link is to todays washington post column by Robert Samuelson. Go to the opinions page and the title is "Hold the Hysteria". The quote about hysteria was from Samuelson, not me. Sorry for the confusion.
Is he an economist by any chance?
Keep in mind that the governing principle behind contemporary economics is to convince everybody that there's nothing wrong with the economy when in fact there really is.
All part of this "Age of Incompetence".
OT: Hunting down ZIMBABWE debt:
Pimco Commercial Mortgage Securities Trust Inc · NSAR-B · For 12/31/04 · EX-99.Q3
15.A) Custodian/Sub-custodian: BARCLAYS BANK OF ZIMBABWE LTD.
B) Is this a Custodian or Sub-custodian? (C/S): S
C) City: ZIMBABWE State: Zip Code: Zip Ext.:
D) Foreign Country: ZIMBABWE Foreign Postal Code:
E) Mark ONE of the following with an 'X':
TYPE OF CUSTODY
Member Nat'l Foreign Insurance Co.
Bank Sec. Exchg. Self Custodian Sponsor
Sec.17(f)(1) Rule 17f-1 Rule 17f-2 Rule 17f-5 Rule 26a-2 Other
Eveyone knows the words "meltdown" and "collapse" are used quite frequently in this forum. I am merely suggesting they are not precise descriptions of the issues confronting us.
A recession is when you lose your job. A severe recession is when I lose mine. Indeed, perspective is everything.
There are always "losers" in an economy like ours. There are more now with the bubble bursting, but it is others, not I, who are extrapolating the bursting bubble to "meltdown" and "collapse".
I absolutely agree that this is a bad, terrible, etc situation for many people.
Speaking of Depression era nostalgia
{In the nine years since Congress buried Glass-Steagall, the Depression-era act that separated investment banking from commercial banking, we've seen most large investment banking/brokerage firms gobbled up by commercial banks: Salomon Smith Barney by Citigroup. PaineWebber by UBS, Prudential/A.G. Edwards by Wachovia and First Boston and Donaldson Lufkin Jenrette by Credit Suisse - just to name a few.
... ....
....Should big securities firms should be regulated as banks?
I have one answer: Duh!
What we think of as Wall Street is already a business line of commercial banks.
In the nine years since Congress buried Glass-Steagall, the Depression-era act that separated investment banking from commercial banking, we've seen most large investment banking/brokerage firms gobbled up by commercial banks: Salomon Smith Barney by Citigroup. PaineWebber by UBS, Prudential/A.G. Edwards by Wachovia and First Boston and Donaldson Lufkin Jenrette by Credit Suisse - just to name a few.
Even securities stalwart Pershing Advisor Solutions is now part of Bank of New York Mellon.
Except for Goldman Sachs, Merrill Lynch, Morgan Stanley and Lehman Brothers, there really is no independent securities industry anymore. The only activity separating these giants from a commercial bank is the ability to take deposits, which is a low-profit business line that none of the remaining investment banks wants anyway.
Wall Street as we knew it is gone. The Fed's opening of the discount window to non-banks, therefore, is de facto recognition of the integration of securities and banking. We now have a U.S. banking system that is akin to the universal system in Europe, where giant commercial banks do everything.
The U.S. regulatory system eventually will reflect this reality. The Fed will take over regulation of the remaining large securities firms - or probably regulate them jointly with the SEC, thus creating a handful of monolithic banks that are too big to fail.
Which will lead to a whole new set of problems.
Evan Cooper is the senior managing editor and online editorial director of InvestmentNews.}
The end of Wall Street as we know it - Investment News
The current practice has been to adjust the conforming loan limit upward for year-to-year changes in average house prices (I won't get into the exact index, but it's pretty bogus), except that it doesn't ever go down and the adjustment is based solely on what happened between October of last year and October of this year (maybe it's September, I forget). The new policy is more conservative because it "remembers" past price declines.
anon- Best of luck to you and your family! Can you relocate for another job, kids in hs? Simple sells right now..Peanut butter and honey sandwichs rock.
Did your profession give you consulting skills where you can make it happen as business?
Best of luck
A quicker correction would make this better right now..Fessing up brings your out of the abyss-So banks? what say here
Robert J. Samuelson is a weekly columnist for The Post, writing on political, economic and social issues. His column appears on Wednesdays.
Yah,
There is a possibility that ZIMBABWE symbolizes nationalized subprime-like packaging, pools, trusts and derivatization, which may be diultive to future earnings. See also, covered bonds, e.g, Irish Covered Bonds, etc...
Pimco Strategic Global Government Fund Inc · NSAR-A · For 7/31/07
The first is upsetting (rising gas prices, falling home prices, fewer jobs) but reflects the normal reverses of a $14 trillion economy. The second ("panic," "financial meltdown") suggests the onset of something catastrophic and totally outside the experience of ordinary people.
Eveyone knows the words "meltdown" and "collapse" are used quite frequently in this forum. I am merely suggesting they are not precise descriptions of the issues confronting us.
I agree that are more articulate ways of describing the apocalypse in the the credit markets.
HALBHH - I'm not sure how you get to $4,000 of other deductions if you've got a standard job working for a company.
Maybe I'm not deducting things I should..... but I gave $1,500 to charities, maybe $150 for the deductible portion of vehicle licensing fees, $40 for turbo tax (tax prep fees). That's it. What other non-housing itemized deductions would you be taking?
Senator Dodd invites Treasury's Paulson to testify in Senate
Bear deal raises serious questions about Fed policy:Dodd
What if house prices never return to historic income multiples?
One of the things driving them higher in the last few years has been consumers playing bond trader, financing long-term obligations with short term rates and using the difference for more house rather than lower payment. Obviously this can't continue in the face of rising rates/risk premiums.
But there's no law saying consumers have to spend only x% on housing, or have to pay it off within 30 years. Obviously many of these clowns have been doing backdoor extensions with cash-outs, like that idiot woman today who, after 20 years in the same house, can't afford to pay off the remaining principal at 12%. For young buyers who stretch, it's called being "house poor" and it's assumed they grow out of it.
I don't watch many TV dramas or comedies. One thing that strikes me when I do is the lifestyle depicted. In addition to my old favorite, the police detective who wears a $1,200 suit, my new one is the depicted shelter.
Last decade there were several popular NYC based sitcoms. The shelter depicted, although expensive if you knew NYC real estate prices, looked adequate and utilitarian if you were from elsewhere. This decade, the focus has been on suburbia. All the homes are McMansions and the set decoration is high-end and flawless, even though the characters have fewer visible sources of income than their predecessors. These people aren't depicted as rich, rather as the new normal.
I think the generation that grew up on this TV are going to spend whatever it takes to get as close as it takes to this depiction, just as you probably learned what normal is from the TV you watched in your formative years. I have no idea how they're going to afford it, but I imagines amortizations will get longer and discretionary spending will decrease. Both of these are bad for the economy and one is bad for retirement savings.
What do you think? Will there be a great lowering of expectations for the generation about to embark on household formation? Will antidepressant sales rocket up from already high levels to ease the disconnect? Or will they pay even more interest for even longer to get what they see on TV? Or maybe shudder they'll get the Judge Judy distopia of being shouted at for missing car payments, over and over.
who are extrapolating the bursting bubble to "meltdown" and "collapse".
We did have a meltdown of monetary policy, and a total collapse of ABS markets.
Then there was an Armageddon in the municipal auction rate bond market, and a panic in the treasury market.
Those are not exaggerations.
But most of the people don't even need to understand what these markets are. For majority, it is still a land far, far away.
It's just that the minority of affected people seems to be growing larger and larger.
When 20% of WaMu's ALT-A loans are delinquent, I would say the word 'meltdown' is fairly appropriate for a market which traditionally was fairly stable.
query tool-telephone bills, rent (if not a owner) utility bills etc certain % of that based off sq ftg used for business.. of course mileage if not paid by employer
"..totally outside the experience of ordinary people"
Hello? This is exactly what the Fed is doing.
Senator Dodd invites Treasury's Paulson to testify in Senate
Bear deal raises serious questions about Fed policy:Dodd
REBear | 03.26.08 - 3:46 pm | #
Geee, I wonder if a few of Dodd's contributers got burned, ya think?
When 20% of WaMu's ALT-A loans are delinquent
MI,
Is that true?
The first is upsetting (rising gas prices, falling home prices, fewer jobs) but reflects the normal reverses of a $14 trillion economy. The second ("panic," "financial meltdown") suggests the onset of something catastrophic and totally outside the experience of ordinary people.
I'll be honest paul -- the thing that troubles me the most is that I was very bearish on housing.
For a while back in 2005-2006 I was really starting to think maybe I was a little bit crazy for worrying that housing would be such a major threat.
The problem is that things appear to be turning out worse than I expected.
It makes it harder for me to dismiss somebody like Jas.
I used to think of someone like Gary Shilling as being a dire pessimist repeatedly warning of a major recession.
Now he almost sounds a bit worried when he writes about the credit markets: "This could be much worse than we originally thought. This doesn't look like a typical recession." (paraphrase)
I'm reminded of that old saying: "The bears are always too early, and too optimistic."
I agree we have to be very very careful about using words like meltdown and collapse.
We need to save words for the future deterioration of the situation.
let's see
armageddon, maelstrom, conflagration, . . .
"..totally outside the experience of ordinary people"
Hello? This is exactly what the Fed is doing.
Excellent point.
Why is the Fed engaging in absolutely unprecedented intervention in the markets?
Whatever their words may be, their actions say "we're worried the economy might collapse".
Anon at 3:18
Please accept our condolences for loss of your comrades. Not much fun looking at your war from this side of the pond either.
Meanwhile, those of us who are veterans always remember the induction oath where you swear to
uphold and defend the Constitution,
not whoever is in political office at the moment.
It is a wonder there are not more Armed Froces mutinies, for Constitutional protection reasons, while we are witnessing today the door busters at Bear Stearns.
I could say mor but there is no need to -- come home safe.
re: REBear
22.69% now and quickly climbing.
Mish's Global Economic Trend Analysis: WaMu Alt-A Pool Revisited
OT/Trouble brewing for Pimco and State Street?
heavyweight foreign mining companies would press ahead with operations in Zimbabwe despite a nationalisation law that analysts warned could deepen an economic crisis ravaging the country.
The world's largest platinum miner, Anglo Platinum and Rio Tinto have said they would continue mining after President Robert Mugabe signed into law on Sunday a bill giving locals the right to take majority control of foreign companies, including mines and banks.
Nationalisation has not discourged Rio Tinto, which has diamond interests in Zimbabwe.
"Rio Tinto is supportive of the move towards indigenisation provided that it is done at the right pace and in a way that does not discourage much needed overseas investment in the Zimbabwe mining industry," it said in a statement.
Zimbabwe is already suffering from foreign investor flight, the world's highest inflation rate of over 100 000 percent and severe food, fuel and foreign currency shortages.
query_tool writes:
HALBHH - I'm not sure how you get to $4,000 of other deductions if you've got a standard job working for a company.
Maybe I'm not deducting things I should..... but I gave $1,500 to charities, maybe $150 for the deductible portion of vehicle licensing fees, $40 for turbo tax (tax prep fees). That's it. What other non-housing itemized deductions would you be taking?
qt, you may be right, as self-employeed I'm thinking of health insurance payments, but self-employeed people are a minority. Perhaps $2500 is a better number. Probably there are averages on-line somewhere, but for this $1000 difference would not affect the final number much anyway. So just $3000 perhaps is a good enough number. Your thought?
But there's no law saying consumers have to spend only x% on housing, or have to pay it off within 30 years. Obviously many of these clowns have been doing backdoor extensions with cash-outs, like that idiot woman today who, after 20 years in the same house, can't afford to pay off the remaining principal at 12%. For young buyers who stretch, it's called being "house poor" and it's assumed they grow out of it.
No natural law says price/income ratios will revert HOWEVER there are logical reasons why they might and probably will revert to historic ranges with the biggest being that economic fluctuations (recessions) tend to put a higher bound on how far these ratios can get out of whack.
During long periods of expansion & rising salaries housing prices climb... but once there is a serious recession - lotsa folks lose jobs & foreclosures & weak salaries push down prices (or in stagflation - at least flatten).
Result is you don't see median price to median income outside the 2:1 to 4:1 'trading range' very often of for long. I doubt that will change this time.
anonymous writes: For me those numbers are 8, the number of friends and classmates killed in Iraq and Afghanistan, and 3, the number of soldiers from my unit killed in this deployment. I'm 25, yet I've received more notifications for funerals than invitations to weddings.
I'm so very sorry for your losses. Thank you so much for your willingness to serve. (despite vehement disagreement with the premises of those asking you to serve)
Of course the limit cannot decrease - housing only goes up! Lending standards, however, can only go down!
Come on already - let's just cut to the chase with the taxpayer-funded lair-loans for all. Gotta keep housing unaffordable - the alternative is "unthinkable" since Wall Street pigs won't benefit from the refinancing game anymore.
Re: Senator Dodd invites Treasury's Paulson to testify in Senate
Those bastards work for us, i.e, Americans that want justice. Inviting Paulson? Paulson needs to be under investigation, as does The Fed Board!
What other non-housing itemized deductions would you be taking?
State & Local Income & Property Taxes
https://www.cia.gov/library/publications/the-world-factbook/rankorder/2187rank.html
Rank Order - Current account balance
100
\tZimbabwe \t$ -538,000,000 \t2005 est.
164
\tUnited States \t$ -747,100,000,000 \t2007 est.
Paul writes:
Eveyone knows the words "meltdown" and "collapse" are used quite frequently in this forum. I am merely suggesting they are not precise descriptions of the issues confronting us.
"Neutron Economy" doesn't have the cachet it had in the 70s.
"Auger in" implies no survivors.
"A sinking ship" presumes there is a rescue vehicle nearby.
IMO our responses to date have been directed towards a combination of 90s Japan with 70s US economy in a desperate attempt to avoid 30s America. It isn't that the Fed is running out of bullets, it is that this isn't a problem that can be solved with bullets. Insolvency cannot be cured with liquidity and I know of no way to inject solvency into the lenders or borrowers. If "meltdown" doesn't work for you how about "dominoes?" "Death spiral?" My favorite; "undamped asymmetrical heterodyned response" but I already said that with "auger in." Unfortunately the answer is for things to break before trying to fix them. If you try to fix them too early you end up with negative value Bear Stearns holding the US taxpayer hostage for $10 and firstborns to named later (when the market for firstborns improves).
Zimbabwe despite a nationalisation law that analysts warned could deepen an economic crisis ravaging the country.
Wait... I thought inflation was the solution to all our economic problems. How can this be?
Ben?
keep the line at 1340 sir! we got .93 left in reserve sir! Great job boys!
War
Anyone see any issues with the economics of war and honor. No need to get into politics, just look at how a war can crash an economy and obviously, recall pre-WWII Germany! This is sick, because you can almost substitute America's systemic corruption/collusion to that of Zimbabwe! Meanwhile, Paulson and his fellow tribe members will help themselves to more of the resources from the vault...
The government of Zimbabwe faces a wide variety of difficult economic problems as it struggles with an unsustainable fiscal deficit, an overvalued official exchange rate, hyperinflation, and bare store shelves. Its 1998-2002 involvement in the war in the Democratic Republic of the Congo drained hundreds of millions of dollars from the economy. The government's land reform program, characterized by chaos and violence, has badly damaged the commercial farming sector, the traditional source of exports and foreign exchange and the provider of 400,000 jobs, turning Zimbabwe into a net importer of food products. Badly needed support from the IMF has been suspended because of the government's arrears on past loans and the government's unwillingness to enact reforms that would stabilize the economy. The Reserve Bank of Zimbabwe routinely prints money to fund the budget deficit, causing the official annual inflation rate to rise from 32% in 1998, to 133% in 2004, 585% in 2005, passed 1000% in 2006, and 26000% in November 2007. Private sector estimates of inflation in 2007 are well above 100,000%. Meanwhile, the official exchange rate fell from approximately 1 (revalued) Zimbabwean dollar per US dollar in 2003 to 30,000 per US dollar in 2007.
"I find this hysteria to be quite a curiosity.
Paul "
Yes Paul. I agree 100%. It's all just hysteria. I think the Fed ought to crank FF rates back up to 5% and abandon all those silly auctions where they give money away to banks. Let's just get straight back to business as usual for our eternal Goldilocks economy that you rightly recognize doesn't need any handouts.
Result is you don't see median price to median income outside the 2:1 to 4:1 'trading range' very often of for long. I doubt that will change this time.
Oh, I agree. 5:1 or 6:1 permanently is unsustainable. But even a slight shift, say from 3:1 to 3.5:1, is hundreds of dollars per month per household, the equivalent of one less car in the driveway or some other big hole in the economy, unless the bondholders are spending the surplus here and now.
"Meanwhile, those of us who are veterans always remember the induction oath where you swear to
uphold and defend the Constitution,
not whoever is in political office at the moment.
It is a wonder there are not more Armed Froces mutinies, for Constitutional protection reasons, while we are witnessing today the door busters at Bear Stearns."
Am I correctly reading this as incitement to mutiny? Wow - that would probably be a new low for us here.
o OF, just plenty of trolls around today mucking up the threads.
i find it quite significant that despite the increased margin requirements at the commodities exchanges which was a blatant attempt by the PPT to dump the prices of oil and gold, that they are once again soaring back to previous levels. it says that true investors don't give a hoot about having to put up serious cash to get into the commodity complex. very bad for stocks.
Oh, I agree. 5:1 or 6:1 permanently is unsustainable. But even a slight shift, say from 3:1 to 3.5:1, is hundreds of dollars per month per household, the equivalent of one less car in the driveway or some other big hole in the economy, unless the bondholders are spending the surplus here and now.
Ralph Cramdown | 03.26.08 - 4:11 pm | #
Yup - people make those choices all the time... to be cash rich or house poor. But the economy can handle that - it can't easily handle a reset from 6:1 back to 3:1 (or maybe 10:1 back to 4:1 in bubble zones like the Bay Area) without heartache.
But sometimes there is no cure for heartache except time.
NY Post - Brokers Get JPM Carrot To Stick With Bear (More Crooks JJ!)
"March 26, 2008 -- JPMorgan Chase will pay brokers at Bear Stearns a maximum bonus of 100 percent of the annual revenue they generated to keep them from leaving as the two companies combine."
So that means the BSC brokers will owe JPM money, right?
Otherwise, he would have gone down as a failed President, because most of the New Deal effects were temporary and things were back to where they were by 1938-39.
Your comments rarely merit rebuttal, let alone a full reading, but this is a myth itself and should not pass unchallenged. Ask anyone who lived through those times if they think the New Deal was a failure. For that matter, ask anyone who currently benefits from it. That would include anyone receiving Social Security benefits or has received an FHA loan, to name just two examples.
Am I correctly reading this as incitement to mutiny? Wow - that would probably be a new low for us here.
OriginalFrank | 03.26.08 - 4:11 pm | #
So do you believe we serve the Constitution or the current political leadership?
We did indeed elect this leadership constitutionally (sort of). So if the leadership starts to betray the Constitution, are we still honor bound to do their bidding since they were constitutionally elected? These are questions that can lead to some very strong differences of opinion.
barely, et al:
I have to agree, the Fed is running around with its freaking hair on fire rolling out new alphabet soup programs on a damn near daily basis, invoking actions under codes not used in umpty ump years, bond yields not seen in 50+ years and what else...and some of the slackwits are doing their best Kevin Bacon imitation from "Animal House."
Those my friends, are 'rouge economists', as they are putting lipstick on a pig and telling you to pucker up and pony up, it's really 'Kristen' and she is a bargain at $5K/hour - and I call bullsh!t!
[/rant]
So do you believe we serve the Constitution or the current political leadership?
You know i have no idea but I'm sure there are many places to debate such issues other than a housing/economics blog.
Some of you people need a life if this is what you spend your days worring about. Or maybe you all just need an appointment arranged by the Emperor's Club. Just saying...
Oh, I agree. 5:1 or 6:1 permanently is unsustainable. But even a slight shift, say from 3:1 to 3.5:1, is hundreds of dollars per month per household, the equivalent of one less car in the driveway or some other big hole in the economy, unless the bondholders are spending the surplus here and now.
Ralph Cramdown | 03.26.08 - 4:11 pm | #
Good point. Another relevant piece is in the book "The Two Income Trap" where families using both incomes to pay the mortage are at a lot of risk of default.
You know i have no idea but I'm sure there are many places to debate such issues other than a housing/economics blog.
Some people, like Mish, would tell you that there would be no housing crisis if not for the unconstitutional Fed
So it is suited for housing blog
It seems ironic that a Wall Streeter is b!tching about getting the same deal that thay they are offering the American taxpayer...
FGIC Sees No Need to Honor Agreement With IKB, Calyon (Update3)
By Jody Shenn
March 26 (Bloomberg) -- FGIC Corp. said it's walking away from an agreement to provide $1.9 billion in guarantees on mortgage-linked securities because Credit Agricole SA and IKB Deutsche Industriebank didn't live up to their side of the deal.
FGIC has no further obligation'' because certain responsibilities weren't met and IKB, the German bank that had to be bailed out four times in the past year, misrepresented its condition, FGIC said in a statement today. FGIC, IKB and Credit Agricole are fighting the matter in court. If FGIC wins, the benefitcould be material,'' the New York-based company said.
Bond insurers are seeking ways to relieve themselves of guarantees on collateralized debt obligations to temper their losses amid rising mortgage defaults. Security Capital Assurance Ltd.'s XL Capital Assurance Inc. last week was sued by Merrill Lynch & Co. after XL voided obligations on $3.1 billion of CDOs because of what it called a breach in agreements over rights to influence matters such as whether the CDOs should be liquidated.
``These guys should have a new motto: Heads we win, tails we rescind,'' said Julian Mann, the vice president for fixed income at First Pacific Advisors LLC, which manages $3.4 billion of bonds. Mann doesn't oversee positions in bond insurers, he said.
[snip]
Good point. Another relevant piece is in the book "The Two Income Trap" where families using both incomes to pay the mortage are at a lot of risk of default.
halbhh | 03.26.08 - 4:26 pm | #
I actually had that as a homework assignment back in a mfg grad school statistics class. In short if the couple has fixed costs (including mtg) greater than the after tax income of the LOWEST earner alone - the probability of default is greater than if they had one income and lived up to the fixed cost limit of that one income alone.
The reason people upscale with two incomes is obvious: they can live larger on the two incomes than the one alone & just take the risk. The prof wasn't preaching - just wanted people to look at the situation and make the numbers talk back.
BTW - we had to model all sorts of scenarios - there are ways to 'mediate' the risk but all require living smaller and applying the dreaded 'S' word - saving.
Some of you people need a life if this is what you spend your days worring about. Or maybe you all just need an appointment arranged by the Emperor's Club. Just saying...
ipodius | 03.26.08 - 4:22 pm | #
Pretty rich coming from someone commenting on a housing, finance, and economics blog.
I know people in the military who take these questions quite seriously.
Okay okay. I know wars and poor leadership have no relevance to the economy.
OK halbhh-- C'mon, show your work!
dryfly -- interesting. I'm 1/2 thru that book. I'll keep your rule of thumb in mind. The author(s) (one a Harvard prof) were also pointing out the disadvantageous subprime lending way back in 2003(!).
Bear deal raises serious questions about Fed policy:Dodd
Maybe Sen. Dodd could pick Paulson's brain a little about the PPT while he's at it.
Shine a little sunshine into how the Fed loans money to dealers to pump up U.S. equity index futures at certain times of the day.
Tanta, can you please confirm that I'm in the right place?
All I see is a vanishing cabinet and a bunch of ponies.
BusinessTime -- juggling a few things here. And I'll want to review it too. So check back in thread with a ctrl-f search to find it later when I post.
anon writes:
bobn
thats not funny at all. there are many people out ther holding on by their fingertips and I am one of them. ...but here I am with a six figure income gone, no job prospects and a family to feed and send to school. I was the last to think it could happen to my family. It can happen to you.
anon | 03.26.08 - 3:30 pm |
I think you misunderstood my post. I was only talking about the fact that her mortgage was at 12%. You have to get creative to do that.
I bought 2 years ago. My timing totally sucked, I was completely naive about the housing bubble. HOWEVER: My mortgage is at 6% fixed. I'm OK. I agree I'd be in a world of hurt if I lost my job and I have sympathy for people in that situation due to no fault of their own.
Pretty rich coming from someone commenting on a housing, finance, and economics blog.
Yes, but I try to comment on housing and economics and usually avoid the political theory because, after all, it's just theory.
Furthermore, if any of you really believe that either political party has some influence on business and wall street you really need to get a grip. In all the time I've been in business, I've never heard anyone say "oh the x party is in office so we'll cut back spending" or "since y won the election we'll increase the number of loans we make". These economic ebbs and flows work in timeframes well beyond the tenue of a president or the ebb and flow of which party has the upper hand in congress.
People here point to the repeal of banking regualation, but those were eroded consistently by both political parites and over a period of years. Furthermore what's happening now is really quite outside of the realm of traditional banking, hence the problem. We'll regulate something now, and a few years from now something else will come up. You can either learn how to ride the waves or get tossed about by the surf.
It makes it harder for me to dismiss somebody like Jas.
For cryin' out loud, ac. Let's say we have a deep recesssion that exceeds our expectations. Will you then view everyone as either CROOKS or DOPES, and that we should scrap democracy in favor of some beneficent King of America? King Jas? At least the economy can recover in time - Jas will always be a wingnut.
since no one else seems to have mentioned it, I'll just point out that Robert Samuelson is a GOP shill, and a complete douchebag to boot.
Always consider the source. He IS an economist. Just not one you should ever listen to.
qt, businesstime -- I think the approximation of 5% error is ok, since under 5% difference other factors on whether to buy or rent should be far more important, like market direction, location preference, expectation/probablilty of moving timeframe, moving costs....
A $2000 difference in the deduction assumptions for example in the 25% bracket, you get $500 or about $40/month vs say roughly a $1400 payment or rent, or about 3% error.
Since anything within say 5-8% of breakeven means other factors will be much more important, this assumption is good enough. I'll use non-homeowner-type deductions = $3000 for the calc.
If you think of more improvement let me know and I'll plug it in later, but this is going to be close enough I think.
ipodius, I beg to differ, at the first regional bank I worked for anyone in an officer position was heavily encouraged to donate to the PAC . . . and the money went overwhelmingly GOP.
Of course back then, in my foolish twenties, I was an independent (mostly voting Republican) myself.
However, the conforming loan limit will not increase until cumulative increases in house prices exceed cumulative decreases since the $417,000 limit was first reached.
As I read this the CLL will never be raised again.
ipodius writes:
Pretty rich coming from someone commenting on a housing, finance, and economics blog.
Yes, but I try to comment on housing and economics and usually avoid the political theory because, after all, it's just theory.
I hear you ipodius. From what I have gathered finance and economics is also "just theory." Still worth discussing. I think with %#$&ups this big it is going to be hard to separate discussions of economics, finance, regulation etc. from politics and political leadership.
I predict much political uglyness in the near future, the catalyst of which will be housing and economics.
Unavoidable.
Red Pill,
That's about as safe a prediction as you can make!
Not "incitement to mutiny" intended,
just an observation.
Interesting to be called a troll for the comment I made while above in this same thread there was a call for those demonstrating at Bear Stearns to bring/take their torches and pitchforks.
Fitch updates subprime loss estimates:
http://fitchratings.com/corporate/reports/report_frame.cfm?rpt_id=379726§or_flag=3&marketsector=2&detail=
C Mack, good thing with all this hot rhetoric that torches and pitchforks are uncommon these days!
Phew. safe.
As much as the war has been botched, I don't think it has been the economic catastrophe some of you believe.
According to my calculator, a gasoline tax of seventy-five cents to a dollar per gallon would finance this war on a cash basis. Mr. "I hit the trifecta" could've mandated a yellow ribbon on every gas pump and made people feel patriotic every time they paid. The economy could absorb the hit, and it would have been good policy. You may say the money could more profitably have been spent on something else, but war's just as stimulative as anything else, and that's a policy choice. Putting it on credit while cutting taxes, reducing tax enforcement and begging "his base" to find loopholes and tax havens was a more serious mistake, but double bubble Greenspan's policies were more harmful than either, making Americans feel they were in one vast casino and had only to move from the Nasdaq table to the housing table with periodic trips to the ATM.
Here be Ralph's two maxims for running a country: 1) Long term financing for long term assets only, current expenses to be paid through current taxation. 2) Majors, Colonels and Generals to remain at war for the duration, none of this rotating home after a year crap.
Tanta, Are you still here?
Thought you might be interested in yet another "walk-away":
Derry Man Protests Auction Of Home - Money News Story - WMUR Manchester
Tar, Feathers, Pitchforks the next bubble? Torches should be pretty much DYI, but I may be overestimating.
DIY, IDY, YID, can I insist on spelling being all theory too???
Fitch cuts Security Capital Assurance to 'B-' from 'BBB'
As I read this the CLL will never be raised again
This is funny because there's a house listing @ $500K that I'm planning to offer $417K for later this year.
Kinda an aggressive lowball, but it came on the market in August and I think the owners want to move out of the area (through the county recorder's website and google I was able to find quite a lot about the present owners).
People here point to the repeal of banking regualation, but those were eroded consistently by both political parites and over a period of years.
There are two political parties? Whocoodanode?
OT- Bush Asks China to Talk to Dalai Lama Aides on Tibet - why is the A in caps also?
Bush Asks China to Talk to Dalai Lama Aides on Tibet (Update2) - Bloomberg.com
Asking is better then telling or demanding since they have these $ things they're waiting to unload?
So politics come into play again?
Now whats funny is the politicians are the citizens backstop here?
What are they going to do? Laws, oversight and justice needs to be dished out with fiscal prudence doled out on the other.
This is more about we and me, this is about a lot of young people getting a $40000 maxed out credit card at 9% interest permanently attached to them. Some will not have the opportunities to rise above it, more not.
tattoo's will be unhip when you can get the new govt stamp that changes numbers as you pay your inherited debt down..
Thought you might be interested in yet another "walk-away"
He didn't walk away, he got the boot. As much as the FC counselors and specialists usually give bad advice, I'm amazed at the bad things people do all on their own throwing good money after bad. This guy probably would've been better off selling OR declaring BK (I assume, not familiar with NH specifics) but he's managed to maximize his losses all on his own.
CM-sorry to call you a troll, I was defending you...'tis worse to be the new low. But, you can have it your way.
There are two political parties? Whocoodanode?
Reminds me of an old communist joke..
The people have a choice! They can vote for the puppet on the right hand or the can vote for the puppet on the left hand...
Just to be fair... here's the link to the program page:
NYU 15 Month Program
They have to have the basic science completed BEFORE they start the nursing sequence...
Students with a baccalaureate degree in another field who have successfully completed prerequisite courses in nutrition, chemistry, statistics, anatomy and physiology, microbiology, and developmental psychology can enter the College of Nursing, and complete the Bachelor of Science degree program in 15 months of full time study. Students are admitted to the College as undergraduates with the following advanced standing credits: 44 in the liberal arts based on having a bachelors degree and 20 credits in the science and prerequisite requirements that are completed prior to matriculation to the College of Nursing.
Looks reasonable to me... and I'm not a complete moron, was pre-med prior to engineering & worked at the U of Mn Hospitals doing research (worked for the head of the Med School admission committee). Didn't like hospitals so stayed chem engineering w/ biochem emphasis.
whoops wrong thread - ignore teh above... tee hee [exit]>br>
cd
thanks for the kind words. Lets just say I am royally screwed and am holding on for dear life. I was in high tech that is gone now. Hard to move when nobody at all is buying. One child a senior making it equally dificult to move. Everywhere I turn I hit a wall. Nightmare doesnt even describe my reality. I need relief. Havent had it for 8 months now. The well is almost dry.
have you heard about the protest today at bear stearns?
Video - CNBC.com
What's going on here:
New Supply Bearing Down as Treasury Finances Collapse- WSE Pro Fed Report
by Lee Adler, Wednesday, March 26, 2008, in Money and The Fed, Professional Edition | Permalink |Comments (
US Government finances are falling apart. In another mind bending shock today, the Treasury announced yet another surprise CMB auction. This one will raise $26 billion in new cash tomorrow in an action completely unforeseen by the Treasury Borrowing Advisory Committee. That makes $56 billion in new Treasury borrowing this week that the experts did not foresee less than two months ago. Total new supply will be $78 billion, which will drain cash from the market at issuance on Thursday and Monday. If the Fed does not act aggressively to offset this cash drain, the markets could crack.
what am i missing? the statute is absolutely clear that adjustments are made to the extent of any increase over the priori year.
i think ofheo is snail slime and lockhart an embarrassment but i know how to read a statute and it is as described; it would be equally plausible to say it only goes up or stays the same as it would be to say, as they have, that if it goes down thats carried forward and netted until it goes up
frankly the better view is that it only goes up not down
TAKE IT UP WITH CONGRESS OFHEO IS NOT THE BAD GUY HERE
He didn't walk away, he got the boot.
Sarcasm, sorry. Shoulda [/sarcasm]'d it.
This is actually my first pass calculation, not yet checked, and I and others can run through the numbers again to catch any mistake.
I'll
Re my above calculation in prior posts, I put the non-homeowner deductions back to $4000 as an average representative number, since they also include state income tax or sales tax as deductible. The renting couple will almost always use the standard deduction of $10700. The homeowner couple will get a benefit from the itemized decution to the extent of mortgage interest as their total deductions rise above $10700. This means the mortgage interest deduction is much more signficant for higher priced houses than for average houses and mortgages. So to reach a rough representative conclusion we need to pick the median home sales price to use, and then the result will be good enough for most people not buying far above or below that median. We use $200K house, 20% down, and thus $160K mortgage (for the new purchase). We use a 15% tax bracket, for something not too far from a median home buying family income type presumption. (after standard deduction and exemption the couple is in the 15% bracket usually. for a couple even at $66K ($15K over the median) is still in the 15% marginal bracket).
First, before the tax deductions, the carrying costs of the home owner are interest cost on the full purchase price (see above posts) at 6%, 2.2% local taxes and 0.8% maintenance, or simply straightforward roughly 9% of the market price. (We use the previous assumptions in prior post re no rent inflation or house price change for our 5 year horizon.)
For the $200K house, $1500/month.
Next taxes: Our renting couple takes the standard deduction of $10700. Our homeowners itemize deductions: $4000 (as above)+ $9600 mortgage interest + $4400 local home taxes (we'll ignore the first year mortage closing costs deductions, but don't forget them if you buy). So very roughly our median couple has about $7000 above the standard deduction, so in the 15% bracket they save $1100/yr over a standard deduction or roughly $100/month.
For a $300K house, in the 25% income tax bracket, the calculation yields homeowner extra tax savings of $3600/yr or $300/month vs the standard deduction.
For the $200K homebuying couple, the breakeven price rent is $1400, so the ratio price/rent is roughly 140 (we don't have 3 significant digits of accuracy here). (note landlords need a profit margin, and also have higher maintenance costs, so they need a lower ratio, well below this 140 level).
For the $300K homebuying couple, breakeven rent is $1950/month, and the ratio is then about 150.
Now in many markets, not just CA and FL, ratios are well north of this, and market direction down, so those places are obvious.
It gets interesting when prices are closer to this level, but still general expectations are prices in most places are going down a bit at least I think.
HousingTracker.net: Affordabilty Measures
Corrections or comments?
For the $200K homebuying couple, the breakeven price rent is $1400
Are you calculating in home repair and maintenance costs for the homeowner?
and 0.8% maintenance
Oops. Never mind.
Now, one more factor is if you are going to rent because it's cheaper and/or houseprices in your area are likely to get down more, yet you also expect to buy in the future in only a few years, then 1 tangible cost of renting is of course moving costs.
Those can vary a lot, so I hestitate to pin down any number. But for instance if you used a number like $2000 (could be less though!), and expected to rent 2 years, that would add an effective extra cost to the rent of $2000/24 per month. Clearly if you only rent 1 year, the cost per month is more for instance.
Nonetheless this is only really important money wise when the expected house market price declines are rather modest.
Doug Noland in Asia Times on recent Lockhart interview
I have fully expected the GSEs, at some point, to be taken over by the federal government. It may have been orchestrated subtly, but I can only presume that such a historic endeavor was accepted last week as the only means of averting financial dislocation. And for their regulator to suggest that the GSEs today have any handle whatsoever over their unfolding "risk management" challenge is wishful thinking - at best.
As far as Im concerned, much of the US mortgage market was this week essentially nationalized. Ill take the dramatic narrowing in agency debt and MBS (mortgage-backed securities) spreads as support for this view. Additional support arrived from comments from Mr Lockhart, US Treasury Secretary Henry Paulson, and actions by the Federal Reserve. Having lived contently for years with the markets interpretation of the (grey-area) "implied" government backing of the GSEs, our policymakers are surely today satisfied with the inferred market acceptance of mortgage industry nationalization. To be sure, the Feds splashy "Sunday Night Special" bailout of Bear Stearns is rather trivial in both its implications and consequences when compared to Thursdays quiet coup.
The people have a choice! They can vote for the puppet on the right hand or the can vote for the puppet on the left hand...
Kicker | 03.26.08 - 5:53 pm | #
*** Or my favorite Russion joke (which seems particularly relevant these days):
The difference between between Communism and Capitalism?
Under Capitalism, man exploits man. While under Communism, it is the reverse.