KB Home's Broad: Nowhere Near Bottom in Housing
Submitted by
CalculatedRisk on Mon, 04/28/2008 - 12:19pm (247 comments)
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What are those stages of accepting a truth?
I think we are getting to the "accepted as self evident" stage.
duh
Another 20%? OK that's a start. Once we're half way to the 20% mark, we'll get an update.
Hey CR, did you see this over at WSJ?
Ex-Fed Official Declares Bear Deal Worst Mistake in a Generation
By GREG IP
April 28, 2008 4:32 p.m.
The Federal Reserve's moves to prop up Bear Stearns Cos. will come to be seen as "the worst policy mistake in a generation," the Fed's past head of monetary affairs said.
The action is comparable to "the great contraction" of the 1930s and "the great inflation" of the 1970s, said Vincent Reinhart, a scholar at the American Enterprise Institute, who retired from the Fed last fall.
Mr. Reinhart's assessment, delivered at a panel discussion at the institute Monday, is one of the harshest appraisals yet by a high-profile observer of the Fed's decision in mid-March to lend money to Bear both as temporary funding to make a merger possible and then to finance $29 billion of Bear's assets to make its takeover by J.P. Morgan Chase & Co. possible.
The Fed's actions "eliminated forever the possibility the Fed could serve as an honest broker," he said...
I'm not sure that the Bear Deal was the Fed's worst mistake in a generation.
I mean, slashing interest rates over 3% in under a year while (a) not reducing real world consumer rates (ARMs, 30 yr fixed, never mind jumbo) and (b) causing staggering inflation in commodities (oil, grains) is pretty tough to top.
ac I was wondering how long it was going to take before someone cited that. I was looking for some indication as to why, and some explanation, but this reads as opinion. What I want is some cogent analysis. If I wanted to read something like this piece, I could just stick around a thread here on the Fed for a while.
The Federal Reserve's moves to prop up Bear Stearns Cos. will come to be seen as "the worst policy mistake in a generation," the Fed's past head of monetary affairs said.
More fed optimism... I'd think they'd call it the worst mistake the fed made EVER.
We're now paying a price for that. - Eli Broad 04/28/08
What I really want to say would get me banned from Calculated Risk for life. This is a man who has dedicated his life to to stripping the vitality and special qualities of the suburbs and is now spending those ill gotten gains by erecting a downtown Los Angeles hyperblock dedicated to urbanism. The man is rich in the big sense. That he has the audacity to use the collective 'we' in describing the suffering is beyond the pale.
iceman, if they drop again tomorrow, i'm going to rethink my "cut them some slack" stance. It should be pretty clear by now that they need to hold.
If I wanted to read something like this piece, I could just stick around a thread here on the Fed for a while.
I think what's significant is that somebody who played an important role at the Fed in the past is joining others like Volcker in attacking them.
Doesn't bode well for their street cred.
All, too bad Broad wasn't on the panel this morning! He is definitely more negative than most of the speakers.
ac, I hadn't seen that yet. I'll check it out.
Best Wishes
DR Horten sez: "It's not a buyer's market if you don't buy"
Usually the American Enterprise Institute has video posted the day after or so, so we should be able to view the panel soon.
I was looking for some indication as to why, and some explanation, but this reads as opinion. What I want is some cogent analysis.
Simple: moral hazard. If they had to 'save the system' - fine, I'm for that - but then completely and publicly wipe out the whole company & equity & distribute the remaining assets to the others. Make a public example of them to all forever.
Like Carthage - no stone on top of another & salt the earth where Bear Stearns stood.
Do that & there wouldn't be a line up looking for bail outs.
"Doesn't bode well for their street cred."
It speaks volumes about their "street (WS) cred".
The problem is that the Fed hasn't figured out how to help Main Street without hurting their friends and handlers on Wall Street. Sad. Letting Bear, no, PUSHING Bear would have sent the correct message.
In the spirit of "all real estate is local"...
Yesterday I looked at Redfin data for a hard-hit RE area CA; Pittsburg. For homes currently on the market I plotted percentage change between previous selling price and the current asking price against the date of the previous sale.
Hoped to find a "change from the peak" but instead found:
- 90% of the homes for sale are either REO or short sales
- 90% of those had been sold during 2004 or later
- A fair number (about one-fourth) of the "previous sale" was the bank paying the balance-due price at auction during the last 6 months.
As a result, didn't get the data I was looking for BUT found that the ASKING price is 33% below the prior sale price, relatively independent of when the prior sale was made.
This indicates that in this type of market there is a very long way to go before there is a "bottom."
OT
History Hints a Recession Would Hit City (NYC) Hard
....
Still, predicting downturns is risky work. Every recession has its own personality, and the citys sprawling economy has reacted differently to each one. More dependent on Wall Street and more closely linked to the global economy than the rest of America, the city has been battered harder by recessions that started in the financial markets than by those that began in manufacturing.
Looking to history for clues about how New York might fare in a new recession, economists note that the city suffered more and for a longer period than the nation as a whole during the last two downturns at the start of the 1990s and in the early years of this decade.
sbarrkum
How will they make money selling new homes if the prices keep dropping like this? These national HB's own thouands of acres in my area that they paid $100k to $150k per acre, that is now worth $30-$50k. now.
The FED has painted themselves into a corner:
They reduce rates & don't talk tough on inflation the $ takes another leg down & commodities make another move up.
They either reduce (or don't) and talk tough on inflation the $ starts a climb higher. Thereby knocking the only leg left on the stool that was supporting corporate earnings--weak $ sales.
Either way the end result is not going to be pretty for the equity markets.
After the Bears Stearns Bailout, the panic rate cuts & new alphabet soup lending facilities, I don't know how anybody can deny that a fed put existed.
The question is, will the fed put exist going forward?
"What I really want to say would get me banned from Calculated Risk for life. This is a man who has dedicated his life to to stripping the vitality and special qualities of the suburbs and is now spending those ill gotten gains by erecting a downtown Los Angeles hyperblock dedicated to urbanism. "
When I was a young man, Kaufman and Broad was the low-end cheap player in subdivision housing in Northern California. If you knew what was good for you, you stayed away. My aunt's in a 35-year-old K&B home she bought new; it's in crappy shape, and it's had upkeep.
That they morphed into KB Homes, a glossy pillar of the nationwide homebuilding industry says a lot -- about the homebuilding industry.
I think Reinhart hasn't thought through the real world implications of letting Bear fail. The reason the Fed felt it had no choice was the credit default swap market. The Fed must have believed (and I think with good reason) that letting a major CDS player default would have led to a chain reaction of counterparty defaults. And I think the Fed thought the systemic riak was unacceptable.
Angry Saver writes:
After the Bears Stearns Bailout, the panic rate cuts & new alphabet soup lending facilities, I don't know how anybody can deny that a fed put existed.
The question is, will the fed put exist going forward?
If you don't know the answer to this question, one simply hasn't been watching what BB does.
The real question is, will the Fed's actions work? The unintended consequences of their actions have, to this point, mitigated a great degree (some would say all) of what they want.
Meritage Homes lays an egg:
Merck shares drop; Visa shares in the red after results - MarketWatch
I wonder if the price of gold is simply undergoing another correction below $1,000, waiting for THE FEDERAL RESERVE to inject more "liquidity" into the system.
If this is the case...OH OH....big time.
Has anybody ever seen a major boom without a major bust?
iceman,
I think the fed put still exists. I also think the systemic risk arguement is scare-mongering to justify a massive wallstreet bailout at public expense.
Systemic risk to over-leveraged speculators sure, but not to the prudent. It reminds me of the Iraq WMD intelligence. Trust us. Yeah right.
Hasn't Ip been the Fed's "de facto" way of getting news out to the mainstream that they didn't want to publically stamp as an official missive?
So.. either he's killed the golden goose, or this is more spin designed to obfuscate the real usage of the Bear bailout. Which is more plausible?
Taxpayers got a 59B lump o' coal in our collective Christmas stockings.. seems like Ip can write a few articles pointing hands in a wild number of directives for a very small chunk of that.
directions = directives. Good thing it's Monday morning.
dryfly,
I do blame the upcoming famine on the Fed. I know you disagreed with that a few days ago. But the choice is stark. A few million people or a few banks, the the Bernanke dilemma - I am still sticking to it. Interests rates are currently WAY, WAY under true inflation. Not the bullshit that's presented to us.
By the way - I am trying to join a farm here in my area that will provide me with my weekly needs of produce for 300 dollars a season. Quite a deal me thinks. After all its only dollars. The could have asked for Euros and it still would have been a deal.
"if they drop again tomorrow, i'm going to rethink my 'cut them some slack' stance."
against them holding FFR steady this week.
ipodius | 04.28.08 - 4:45 pm
Odds are over 2 to 1
Maybe in this downward cycle of interest rate cuts, after we hit the bottom, we will see "The Deadcat Bounce".
"Either way the end result is not going to be pretty for the equity markets."
I think this is why the market still seems unsure. But I think we could see one more moonshot after the fed meeting.
Simple: moral hazard. If they had to 'save the system' - fine, I'm for that - but then completely and publicly wipe out the whole company & equity & distribute the remaining assets to the others. Make a public example of them to all forever.
I think there's something inherently wrong with the "too big to fail" idea too.
It seems to me as soon as you embrace that notion then you open the door to the economy being overrun by failed institutions that are being artificially propped up.
How can we compete in a global economy that way?
AC
We did not need any former Fed official to tell us plebeians that the Fed has been making progressively worse decisions for the past 20 years.
We dumb common folk know that the Fed wants even more regulatory power so they can sit on it and do nothing when bubbles and risk are exploding. And then they want to come in and rescue Wall Street shareholders and bondholders at our expense. Of course now they have effectively nationalized risk by loading their balance sheet with all the smoke&mirrors paper that Wall Street created and booked all the profits on. And those "profits" have likely all been safely ensconced overseas in numbered accounts of our Wall Street titans.
Being a backstop for the systemic risk and making an example of Bear were not mutually exclusive choices. The fact the Fed didn't wipe out (and I mean 100%) Bear's equity holders is inexcusable. And they could have given a haircut to the bondholders and CDS holders too, without utterly blowing up the system methinks.
Broad must be a CR reader... I'd say not a long time one to boot...
CR any CalculatedRisk groupies at the conference?
Cheers!
Where is the bottom of the housing market?
When an investor can buy a property, rent that property and break-even.
That will be, in my view, the bottom of the housing market.
Gab, The structure supporting the transactions could have been maintained without providing funding to the entity through outside the Fed's charter. It's the confounding of the Fed's mission that's at issue.
I am sure The Fed will be worried about "Inflationary Expectations".
Look, can't we print money without u guys all buying commodities?
By the way - I am trying to join a farm here in my area that will provide me with my weekly needs of produce for 300 dollars a season. Quite a deal me thinks. After all its only dollars. The could have asked for Euros and it still would have been a deal.
Noble | Homepage | 04.28.08 - 5:12 pm | #
Depends on what you get for it - check the 'prospectus' carefully.
The bit about the Fed & famine - your scapegoating... Fed has NOTHING to do with food around the world. Its money supply period.
In fact the stronger their currency gets (weaker the dollar is) the more food they should be able to buy (we would be the ones going hungry with weak dollars).
We don't even export that much, never did. We are moving grain from cattle to ethanol and neither has a 'positive' effect on world hunger.
But then I wouldn't expect most Americans to know - they've never heard of a wet mill or a CAFO and wouldn't know the social benefit/costs of either.
World's food problems were baked in the cake of population growth AND their own respective central banks desires to 'globalize' via currency manipulated industrialization. I mean where did they think the food was going to come from to feed all those ex-farmers turned factory workers? China was sending something like 30million people from farms to factories every year... hello?
Fed didn't order that last I knew. You're reaching if you think they did. Think about it a little harder and with less 'emotion' - Fed screwed up but that wasn't their boggie.
At first, I thought the tax rebate check was a stupid idea. Then after having a couple of beer I started thinking...hey this is a great idea.
100 bucks for rent catchup
200 for my credit card
225 for truck payment
125 for gas
still short 50 bucks
The MSM keeps stating that fed rate cuts work with a lag. This is true.
Here's something else to consider. High oil & commodity prices work with a lag too. And inflation is a job destroyer. Inflation has exceeded TIPS expectations for five years running. A lot of people have been wrong about a lot of things.
The asset inflation game is ending.
Ip's article contains this quote from John Malkin of Caxton, a hedge fund:
"Counterparties in investment banks are roughly analogous to the depositors in commercial banks."
I think that about sums up everything that's wrong with the current regulatory philosophy. It's time for guys like Malkin to be flushed out of the economy.
"When an investor can buy a property, rent that property and break-even."
Assuming what percent down on the purchase?
Broad is a shameless shill. Shilling for a rate cut, and blaming the home ATM.
What about:
buying back shares at the peak ?
buying overpriced land ?
massive overbuilding ?
not taking substantial deposits ?
...
PoS.
OT-
Treasury paying less than announced..
hmmmm...
Treasury to paydown $35 bln in Q3, much lower than prev. est - MarketWatch
Once again just stating the obvious and the reason 75% of HBs will go BK or cease to exist over the next few years.
The break-even level doesn't depend on down payment*. It is the return on the housing equity that matters. It needs to match or exceed alternative arrangements, such as investing in something else and paying rent.
[* Actually the down payment does matter as it affects your borrowing rate and hence the cost of capital of the RE investment.]
I think Eli Broad's honesty is refreshing. He's certainly not talking his book. If he likes art, who's to say he can't buy art his whole life. If he wants people to see it, good for him. If he's trying to get something happening in LA, more power to him.
dryfly,
Yes as China and India get more prosperous, they will demand more food, more protein, more energy.
But this process has been ongoing for several years now - why is a crisis only now? What was the tipping point? Think about it. I had laid out my entire argument earlier - I dont feel like repeating it.
PS - I will check the prospectus carefully and ask. My initial review is that its all organic, all grown right here and they feed their own family year round with the same produce that I will get.
Now if only I can convince someone (to break the law) and to sell me unpasteurized milk (at my risk) I'll be all set.
"PS - I will check the prospectus carefully and ask. My initial review is that its all organic, all grown right here and they feed their own family year round with the same produce that I will get."
Noble: I've blathered about such things on here recently; the buzz acronym is CSA, or community-supported agriculture.
You might look on this gov't site of CSA directories, see if they show up and if there's any word on them. Nothing against them if they're not there, of course:
Community Supported Agriculture
It can be a good deal. My local university (which I also work for) supports an organic-food CSA as a model project. I've subscribed for a couple of years, and been pleased by the quantity, quality, and variety.
Noble.
I agree and I agree (I rarely disagree with dryfly)
I joined a CSA (community sponsored agriculture) this year... but mine is $535/season... so you're getting a good deal!
as for the Fed/starvation:
I'm not sure that I'd say the Fed CAUSED all this, but they certainly didn't help it.
I believe that rapidly dropping Fed Funds Rate helped to cause dollar devaluation (every time they do it, gold goes to the moon and the dollar index plunges).
In my opinion, people thus started trying to speculate on commodities because of this.
this speculation helped to exacerbate an already bad situation.
(there were already riots in MX 1-2 years ago due to corn prices, so this is nothing new... but Fed actions don't help)
I personally believe (but will never find out) that commodity prices, oil prices, and gold prices would collapse if the Fed RAISED rates 25-50bps next meeting.
but they won't/can't do it.
also:
the Fed's actions I believe are starting people to LOSE FAITH in the system.
not good.
we've talked about people hoarding.
I went to costco yesterday. no rice. why? they're all out.
FWIW: this is in Minneapolis (actually, St. Louis Park, the costco that serves Mpls).
so what will I do? the next time I see rice, I'll get 2 bags. (I eat rice every day, being from the Bay Area).
"core" cpi only works for so long...
But this process has been ongoing for several years now - why is a crisis only now? What was the tipping point?
Why does any tipping point hit? Coincidence or causation... who knows.
There have been terrible years in much of the world (drought) plus neglect of their own farming community in pursuit of industrialization - I've been saying that was a disaster waiting to happen for a decade... especially since it was obvious that their dollar surpluses should have been reinvested into their own sustainable infrastructure - water, food, electricity. It was opportunity squandered.
Now they have Ug99 racing across the Eurasian wheat belt - not good. Who knows how that will play out. Well maybe it will result in less opium poppies being grown (as wheat prices finally generate a profit for these central Asian farmers - assuming the rust doesn't lay them low before hand).
Our policy makers had a hand to play in this charade - especially Greenspan & Rubin w/ the double whammy of strong dollar & low interest rates - the lure of our export market distorted their economies as much as ours. Both suffered. But their policy makers & central bankers played an even BIGGER role in the problems - they didn't have to push their economies from growing rice & local consumption to making toxic toys for us (funded by buying our crappy financial products)... but they did.
I agree with dryfly, the fed has very little to do with the food situation.
Central banks are certainly causing distortions which may affect food prices in the short term.
Medium to long term it's all about supply and demand.
Demand is almost entirely dictated by rising population, and is quite inelastic until people begin to starve.
Supply is mainly about energy prices, weather, farming practices, and water availability. So far weather has been cyclical and I think it's too soon to tell when and how much of an effect global warming will be.
Farming practices that rely on cheap fertilizer and diesel will cause rising costs, and eventually falling supply due to both falling energy production and soil degradation. More local, sustainable farming practices are on the rise, and will continue to grow, but will not be able to replace the supply eventually lost by falling energy production.
I haven't really studied the water situtation too much, but I'm pretty sure it only threatens to the downside.
To summarize, demand is growing because of population, supply can only grow as energy production is shifted from other parts of the economy to farming, and will eventually decline due to falling energy production, degrading crop land, limited water supplies, and weather change.
I would guess we have 10 years maximum before shortages hit very hard. On the other hand, geopolitics, energy prices, and weather patterns could mean widespread starvation starting next year.
"I agree with dryfly, the fed has very little to do with the food situation"
Not me. The Fed is only partially responsible. Ethanol and increased Asian demand are partly responsible. But, the crashing dollar and raging oil enabled by the Fed's cheap credit are at least equally to blame.
But, the crashing dollar and raging oil enabled by the Fed's cheap credit are at least equally to blame.
Explain how? I've lived my whole life in farm country and I can tell you I've never seen a fed gov drive a tractor.
I mean folks want to whip the fed for money supply - go for it I on board - but it's pretty hard for me to take all this 'deflation talk' we get around here and then see grain shortages and blame the Fed. That's just scapegoating. Fed is root of a lot of economic problems but NOT ALL.
A 1% decline in the value of the USD = a $4.00 increase in a barrel of oil.
Oil is going to $134.00 (USD)and then bounce around.
The UK saw gas at $10.00/per/gallon. This icrease is in part related to refining issues.
Imagine what $10.00 for gallon of gas would do to the US economy?
"Well maybe it will result in less opium poppies being grown (as wheat prices finally generate a profit for these central Asian farmers - assuming the rust doesn't lay them low before hand)."
May already be starting to happen, though the evidence is anecdotal:
Reuters.com
dry, Is it not possible that international consumers might be putting more demand on US agricultural products since US currency makes them much less dear than 1 yr ago?
Of course increased oil costs drive grain prices higher fertilizer, machinery... and transport costs.
Fed has a role here.
World grain stockpiles have been declining for years now, that is one of the largest factors affecting the spike in grain prices.
The crashing dollar may be to blame for rising oil prices(USD$), but the real cost increases(which have obviously been much tamer) are due to supply and demand.
Via ml-implode. Wells Fargo added 3 points to every loan today.(pdf) Also of interest:
Non-Conforming Policy Changes Effective 5/2/08
-Minimum loan score of 700 is required unless specific product/program guidelines are more restrictive.
-Investment properties are not allowed.
Real Estate Owned Financing Eligibility Expanded Effective 5/5/08
REO properties are acceptable for financing when the following requirements are met:
- The purchase contract for the property has no restrictions of any kind.
- There is no below market rate.
- A standard full appraisal from RELS Valuation or a Collateral Consultation Review (CCR) performed by RELS is required.
Updated Form 4506-T Requirements
The screws are getting tighter.
Bob Dobbs - thanks for the link... I see CSA as spreading like wildfire via word of mouth. Already 3 of my friends are interested..
Well lookee here... you know things are about to get interesting when Wall Street types start tell the Fed.. No more, no more!!! I love the last quote in the article... hehehehehe
Bernanke May Have to Follow Volcker to Avoid Being Tagged Burns - Bloomberg.com
Yes as China and India get more prosperous, they will demand more food, more protein, more energy.
But this process has been ongoing for several years now - why is a crisis only now? What was the tipping point? Think about it. I had laid out my entire argument earlier - I dont feel like repeating it.
Well, this process accelerated abruptly by a factor of 5 in the week leading up to August 17, 2007.
Moreover, global investors found out about this phenomenon precisely on August 17, 2007 and correctly began pricing this phenomenon into commodity prices as per Efficient Market Theory.
Adding fuel to the fire, every day investors get scads of new data that nobody could have possibly imagined even a few short weeks ago and these new data points are accurately priced into commodities leading to the sort of parabolic increases usually seen only in asset bubbles.
ac,
You may well be right. I recall having a conversation late summer with my broker watching the incredible summer stock market volumes (3B plus traded daily in the summer!) - traders canceling vacations... thinking .. this is going to change everything...
Bob Dobbs - thanks for the link... I see CSA as spreading like wildfire via word of mouth. Already 3 of my friends are interested..
Also - just get to know farmers, if they know you're a reliable 'outlet' they'll keep coming back & trying to 'supply' you... believe me they'll call YOU. For example we had friends in 4H and for as long as they had kids at home we had a source of fresh pork, eggs, beef & lamb - completely hormone & antibiotic free, 'free range' - fantastic stuff. They'd call us every couple months and ask - what ya want?
I've thought about hunting down some 4H kids again to contract with them for a whole hog & maybe some lamb (but right now I have a local meat locker doing if for me so I don't have to)... Not everyone everywhere can do that but if you can - go for it.
Veggies here in the frozen north is a bit trickier - only about a four month window for that - but I stop at the farmers market every day all summer long (ours is every day - some aren't). Get to know these guys - they don't bite, they need us & we need them.
Hike rates 50bpts and I'll bet you'll see those shortages vanish, and quick. They'll go back to eating twigs and grubs in the 3rd world.
From the front lines - sources in the auto world in So Cal tell me the high end market (Mb, Bmw, Lex) is hurting bad this month. Sales down 20-30% yoy at some stores...
The rebate check is like your son giving you $600 for your birthday that he got from an advance on YOUR credit card.
"The screws are getting tighter.
Max"
Did I miss something here? Dont they have to lend to make money?
dryfly writes
"Also - just get to know farmers, if they know you're a reliable 'outlet'"
Very true - many of your local farmers will have co-ops for food sales (Farmers Markets) you can find this on-line. Five years ago I found a wonderfull local farming family - and they always call me when stuff is ready. This year I struck up a deal w/ them to spend 3 days planting and/or harvesting and in return I get some darn fresh organic produce, or eggs, or cow...what ever I want. I bartered $200.00 of food and get physical exercise to boot. (plus a day in the country air - lunch provided!
"Hike rates 50bpts and I'll bet you'll see those shortages vanish, and quick. They'll go back to eating twigs and grubs in the 3rd world."
I couldn't agree more. You'll also see gold at 700 (backup the truck), mortgage rates dropping, and the Dow down a couple thousand points. Everything right in the world.
Wow, that "worst policy mistake in a generation" comment is really getting some play. It is showing up in everything I read, from the WSJ blog to the WSJ proper (subscription only) to Barry Ritholtz to Greg Mankiw...
Hike rates 50bpts and I'll bet you'll see those shortages vanish, and quick. They'll go back to eating twigs and grubs in the 3rd world.
barely | 04.28.08 - 7:12 pm | #
LOL. See your point - I thought you were gonna say how a fed rate increase can 'feed the world'... and pump oil too.
Wonder how many stimulus payments will go straight to HR Block.
Did I miss something here? Dont they have to lend to make money?
Sorry, my pockets are too full as it is. Take your "free money" elsewhere.
Money quote (no pun intended) from the WSJ piece:
"Counterparties in investment banks are roughly analogous to the depositors in commercial banks," said Mr. Makin.
Oh, really? So individual retail depositors with their $100,000 savings accounts are "roughly analogous" to multi-billion-dollar hedge funds making speculative derivative bets?
I must admit, that analogy would never have occurred to me. I guess I just lack the qualifications for any kind of job in finance...
sorry, coming in late to the food debate.
of course Fed rate cuts have contributed to rise in food prices like all other commodities. when you can borrow at negative real interest rates and buy hedge protection against a falling dollar and stock mkt, you'll buy food futures. i know i've bought a bunch of DBA:
Wall Street Grain Hoarding Brings Farmers, Consumers Near Ruin - Bloomberg.com
US grain export data:
Export Sales Data Query
of course Fed rate cuts have contributed to rise in food prices like all other commodities.
Here - in dollars. Not over THERE in their currency. Its silly to think the fed 'weakening the dollar' makes it harder for Chinese to buy pork in THEIR currency or Thais to buy rice in THEIRS. Their currencies are STRONGER if the dollar is weaker - so why the problem?
Maybe something else non-fed going on? This isn't the fed's bitch.
OT: Saw this on another site
Word of the year - shenaniganizatio
Their currencies are STRONGER if the dollar is weaker - so why the problem?
How about this:
"Hey, my currency is STRONGER, I can have rice twice a week now and cut down on the twigs and grubs."
Meanwhile, in the U.S., someone is saying, "Hey, I'm going to cut down on Starbucks and steak and eat more rice and beans."
Just a thought.
dryfly
oh boy. here we go again with that debate we had 6 mo or so ago.
i submit we are exporting our inflation worldwide esp. to those countries who PEG to us. of course as our dollars flood their economies, they have to print THEIR currencies to sterilize our dollars to keep the peg thus causing widespread inflation in their purchases of all commodities esp. food now.
Justifying the Bear Sterns bailout with the invocation of "avoiding systemic risk" in the CDS market is laughable... it's exactly that market that needs to be shown to be fraudulent. It's at the CORE of the problem.
Players like BS were writing lots of CDS contracts (essentially long-shot "insurance" policies) without having what a true insurance company would require in backup capital. These promises to pay are empty. Moving them to another "to-big-to-fail" bank just puts off the day of reckoning, when their true value will have to be accounted for.
Since the taxpayers are likely going to have to clean up this mess when the ponzi scheme collapses, the $30B should have been a down-payment on the cleanup cost, not a maintainance payment dedicated to shoring up a phony perpetual-motion machine on its way to grinding to its pre-ordained halt, no-matter what any hucksters claim.
I.m inclined to agree with Rogers, that Bernanke is an idiot. When Bernanke said in testimony to the banking commitee that "Weak dollar only counts if you are travelling to Europe" I think he meant it. Just like his view that inflation will moderate on its own.
Bonehead, and getting abused like a rented mule by the Wall St IB & hedge fund sharks.
DCRogers-well said
barely-"Weak dollar only counts if you are travelling to Europe". that is an assinine comment huh? problem is, all that fricking inflation is now coming back at us via higher import prices.
Here's an interesting article
about speculation in the agricultural markets.
The problem is not the FFR so much as the PDCF and the TSLF. IMO.
i'm sure if the CDS mkt were allowed to unwind we'd certainly have a crisis on our hands. however, no one has bothered to quantify the crisis of continuing business as is with the pigmen of Wall St continuing to pick our pockets and drive inflation higher. personally, i'd rather see it all unwind and be rid of the IB's and HF's.
Errr, nice find, idoc.
submit we are exporting our inflation worldwide esp. to those countries who PEG to us. of course as our dollars flood their economies, they have to print THEIR currencies to sterilize our dollars to keep the peg thus causing widespread inflation in their purchases of all commodities esp. food now.
idoc | 04.28.08 - 7:45 pm | #
They sterilize by buying our securities/assets or it isn't sterilization. You can argue they aren't sterilizing (and thus allowing excessive money supply growth) but then their currency should be getting weaker... few currencies are getting weaker vis-a-vis the dollar.
PLUS they don't have to peg - eh? The fed didn't MAKE THEM peg. Their weak currency can go away over night & they can buy rice galore then - cut the peg.
This food shortage story is NOT a fed caused problem no matter how much fed-haters want to paint it that way. There are lotsa things wrong with the fed - poor agricultural policy isn't one of them.
INO Equities Stocks Indexes - CONTINUOUS COMMODITY INDEX (NYBOT:CI) Price Chart and Quote
Now when was it the FED started cutting rates? nough said.
barely-"Weak dollar only counts if you are travelling to Europe". that is an assinine comment huh? problem is, all that fricking inflation is now coming back at us via higher import prices
Import prices HERE should be getting higher when you run half to trillion dollar current account deficit every year for a generation. That is unless the foreigners are happy eating dollars & MBS instead of rice.
CR,
do you know why they're all predicting recession started in December? Because they read it on CR
"I.m inclined to agree with Rogers, that Bernanke is an idiot."
Does anyone here besides Ipodius think that Bernanke is not an idiot?
You don't have to know much about economics to tell.
1) He accepted the job near the top of the largest credit bubble in history.
2) He is a fumbling, stumbling, bumbling sweaty little girl every time he goes in front of congress.
dry - "Import prices HERE should be getting higher when you run half to trillion dollar current account deficit every year for a generation. That is unless the foreigners are happy eating dollars & MBS instead of rice."
Of course there is some truth to that argument. It's been a long time in the making too. However, it didn't seem to matter much UNTIL AFTER THE FED STARTED CUTTING RATES TO SHREDS. You could say rates cuts were the straw that broke the dollah's back but it's hard to know until you back out the rate cuts and see what happens. My sense is a strong dollah would restore some order.
Anony 7:59 - since when do Indian housewives buy rice in DOLLARS? That is a domestic DOLLAR event... not a yen, rupee or yuan event.
The shortages in Asia are NOT due to dollars - there are real shortages not dollar surpluses.
You can argue chasing our import mfg market has pulled resources away from their domestic food production but that is a completely different argument - one that a weak dollar helps correct (sends workers back to the farm).
Sterilization
I don't think he's an idiot. I think he's a short on relevant experience, and has f@$#ed up, but he's not an idiot.
An idiot would be a guy who said no to the job when it means revolving door opportunities galore.
As for sweating in front of congress, he's far from the first. How do you think you'd do?
Hogwash here,
The bottom is in now and the smart money is buying before the crowd-o-rubes panic buy in 3 years -- chasing yield, in a never ending game of which retard can be slower on the draw.....pathetic to see such pumping, trying to influence the outcome by suggesting everyone stay away, while these con-artists set up the next pea and shell game!
dry - "Import prices HERE should be getting higher when you run half to trillion dollar current account deficit every year for a generation. That is unless the foreigners are happy eating dollars & MBS instead of rice."
i think you just supported my point.
Bernanke is an idiot or a liar. Can't be both. If he lies during testimony in front of congress, he's also committing perjury and should be prosecuted.
idoc writes: i'm sure if the CDS mkt were allowed to unwind we'd certainly have a crisis on our hands.
I am not arguing that that would not be the case: the unwind would be very ugly. But the pernicious effects of these nearly-unregulated securities is widespread, and the Fed should be attacking the system, not assisting it.
Just one example: under Basel II, large players can use their own, internal, value-at-risk models to judge capital adequacy levels. But risks can be offset by buying these phony CDS "insurance" policies against risk areas from other major players, who can then reciprocate by buying such policies for their own risks from you. The result: everyone's risk levels go down, everyone's capital levels go down, and no-one is out any money. Small, by-the-book, players, who can't play the game, can't compete and get squashed. Nice, eh?
My sense is a strong dollah would restore some order.
How? Think it through. A strong dollar draws more people out of rural Asia into their cities & factories and produces LESS rice.
That is why imbalances are so disastrous - we make too little mfg goods here but have huge surpluses of food they really don't want (corn). They on the other hand make cheap as hell mfg crap we really don't want & ends up in our landfills by way of Walmart & your garage.
The connecting link is a managed currency exchange by world CBs where the dollar has been way too high & their currencies way too low for way too long. Pushing us to consume more than we produce & them to produce more than they consume - but in both cases its not what the countries consumers really want.
It is heavily distorted.
One thing for sure - these high rice prices are going to get some of those Asian farmers back into the fields next year growing rice, beats the hell out of factory work there - but that next crop is a year away. Just like our higher mfg import prices are getting people back into the factories. Be a while before we see that make a dent at Walmart too.
Price signals work. Currencies were broken. The fed is following not leading.
They on the other hand make cheap as hell mfg crap we really don't want
You obviously have not met my five year old.
dryfly, I like your analysis. I have heard rumors there are those at the Fed that would be quite pleased if one of the "unintended" consequences of the rate actions were to force the Asian central banks to break their links with the dollar. Short term pain, but it would give them a lot more control over the currency in the longer term.
I like these analysts who now say oil could hit 120, 125 or even 140 dollars a barrel. Geez.
I mean if the Fed really cranks out the grease.....how about $250.00?
dry - "How? Think it through"
If our dollah stiffens up it doesn't mean our debt levels all of a sudden correct and we're back on a massive spending spree. Our consumers are going to retrench no matter what, so demand from Asia isn't about to rocket ahead if the dolar strengthens. Don't lose a lot of sleep over that.
I think Reinhart hasn't thought through the real world implications of letting Bear fail. The reason the Fed felt it had no choice was the credit default swap market. The Fed must have believed (and I think with good reason) that letting a major CDS player default would have led to a chain reaction of counterparty defaults. And I think the Fed thought the systemic riak was unacceptable.
Maybe having a horrifically over-leveraged CDS market is an unacceptable systemic risk.
Cheers,
prat
Let me try to get this straight. A strong dollar produces less rice?
Hmmm. Seems to be the other way around there, buddy.
You work for The Fed?
Somewhat back to the original topic...
Given the outlook for housing, evidenced by the latest stats and even statements by the HBs themselves, why shouldn't HB stock prices go back to their 2000-2003 levels (half or less than what they are now)???
In fact, given the medium-term outlook, why shouldn't they over-correct below that?
I'm seriously looking for a reasonable answer.
Anon said:
I like these analysts who now say oil could hit 120, 125 or even 140 dollars a barrel. Geez.
I mean if the Fed really cranks out the grease.....how about $250.00?
That's exactly what this post by Martin Hutchinson (on Prudent Bear) is all about:
404 - Error: 404
Dryfly,
One thing that scares me with your analysis is that it confirms my inflationary fears. Basically, money was created that was not supported by true underlying demand.
New money not supported by output or demand is crazy inflationary. This is why Bernanke keeps getting surprised by CPI inflation. Just as with houses he is way wrong.
The Fed needs to be doing something about the derivative tangle, but letting a key player go down - with literally unknowable consequences for the market - is not the method. God only knows what would have happened if Bear's derivative obligations landed in bankruptcy court, and the Fed would have been irresponsible in the extreme to let it happen and find out. Now it's certainly true the Fed needs to be regulating the derivative markets so it can let institutions go belly-up like banks can but until it's done so intervention is required.
In addition - I've pointed this out before - there's the problem of CDS-driven bear raids. When you can have CDS's several times the value of an entity's debt, it can be worthwhile to manipulate up the price of a CDS, causing a failure, making your manipulated CDS' worth more than what you drove them to. Bear's collapse certainly looked like that, because the precipitating event was soaring prices for Bear CDSs. IMO the reason the deal had to be done before the market opened was that the Fed needed to catch the raiders before they could close out their CDS positions. Had it just been a default cascade I think the Feds could have waited a day or two. It was very important to stick the raiders with a monster loss as their high-value Bear CDSs were morphed into low-value JPM CDSs. Otherwise similar tactics could, and probably would, have been used to knock over every investment bank on Wall Street.
ShortCourage
my answer to that is that i added to my short position on PHM. i think they're headed down from here.
The CFTC had a forum on the agricultural markets last week, ostensibly to address the disruption in the grain markets. The link is below. There was no proof that commodity index investors are causing the disruption in the ag markets. What was not mentioned, however, was the $5.5 billion invested in Schroders new agriculture fund in January and February, and over $1.5 billion in the Deutsche Bank Agriculture ETF (DBA) over the same period. The Schroders fund is closed to new investments, and there has been little growth in outstanging shares in DBA. The grain markets have since dropped appreciably.
Rice has doubled or tripled over the past year, and there is very little index money in those futures.
If you look at the presentation materials on the link, you can see that certain grains have stock/use ratios that haven't been as low as they are now since the '70s.
There's always more to the story.
Agricultural Forum Presentations
Yeah idoc, I suspect that there is no reasonable answer for why the HBs should be priced where they are...other than the main upward driver of stock prices these days -- the expectation of a bailout.
"the expectation of a bailout" That's why I stepped aside on the builders. I am convinced that even with a bailout 40% of them vanish but it might be a long time and a bunch of gut wrenching squeezes along the way.
Fair Economist
who and how would manipulators up the value of Bear CDS? rumors?
barely,
I hope it's before January of 2010...
If our dollah stiffens up it doesn't mean our debt levels all of a sudden correct and we're back on a massive spending spree. Our consumers are going to retrench no matter what, so demand from Asia isn't about to rocket ahead if the dolar strengthens. Don't lose a lot of sleep over that.
We're still running big deficits - even with the weak dollar. That tells me - over all - it has to get weaker still.
Hell if the dollar got stronger all that will mean is MORE crap from Asia, more oil from Arabia and more US domestic consumption and less rice grown in Asia - it would signal them to send more crap to Walmart!
It shocks the hell out of me that people who claim to be 'market savvy' & are generally 'savers' can't see how a strong dollar powers the US consumption driven deficits & lack of domestic saving.
I think the dollar is probably too weak against the euro right now but still has a ways to go against the 'pegged' currencies of Asia & Persian Gulf. The poor folks in the eurozone will be experiencing the same hollowing out we experienced if they don't see some re-balancing vis-a-vis Asia too.
One thing that scares me with your analysis is that it confirms my inflationary fears. Basically, money was created that was not supported by true underlying demand. - angry saver
I fully agree 110%. The central bankers thought they were pretty clever to 'sterilize' it all but looks like maybe they were too clever by half.
"I think it's too soon to tell when and how much of an effect global warming will be."
SHK, climate change is having a disastrous impact on forests and forestry in the western US and Canada, via the pine beetle. A combination of drought and unprecedentedly warm winters have allowed the beetles to survive at elevations that previously would have been inhospitable.
In British Columbia, a total of 12 per cent of all of B.C.'s saleable timber, or 40 per cent of B.C.'s current stock of pine trees, has been wiped out by the beetle. The beetles are expected to continue to spread until a predicted 78% of BC's pine is dead by 2015.
According to a Rocky Mountain News article in January, every large, mature lodgepole pine forest in Colorado and southern Wyoming will be dead within three to five years, killed in an infestation unprecedented in the state. The negative consequences for water runoff and soil erosion are severe.
It's unlikely that the negative aspects of climate change affecting forestry will not affect agriculture as well. It's not just global warming that's a problem; rapid and extensive climate change affects rainfall patterns in particular, and there's nothing that affects farming more directly than the reliable availability of water.
Dryfly, I somewhat disagree with your views re: the Fed and food prices.
While I think the main issue is supply/demand, nearly all of the developing countries have their currencies either directly or indirectly pegged to the dollar.
Moreover, the huge disparity in power between our country and the rest of the world seems to be breaking what models would predict...namely we get very good rates compared to much of the rest of the world due to the massive quantities we consume. When it's cheaper to send food over here, buy it at Costco and send it back to Asia then to buy it where it's grown, it shows that there are huge pricing disparities.
I also think that a lot of the world has extreme malinvestment in the bubbles that have formed in a few countries and some of that is coming home to roost.
gab had the reason why the Fed didn't allow BS to slide into default and bankruptcy, credit default swaps.
No doubt Bear is contra party to hundreds of these OTC deals and their failure would have most likely cascaded into other parties defaulting.
Not that the foregoing isn't a reason NOT to allow Bear to default.
The real problem is the premiums paid for the coverage no where equals the default risk in the current environment.
Basically most of the big names and their customers are short lots and lots of out-of-the-money puts priced at a teeny and the market has crashed.
The Fed is trying to provide coverage so that nobody gets exercised.
"Otherwise similar tactics could, and probably would, have been used to knock over every investment bank on Wall Street."
That is exactly what needed to happen to all those greedy bastards.
"the expectation of a bailout" That's why I stepped aside on the builders. I am convinced that even with a bailout 40% of them vanish but it might be a long time and a bunch of gut wrenching squeezes along the way.
Look at how long the last rebound lasted. Nothing unusual going on with the builders right now. Markets rarely go straight down.
XHB
When it's cheaper to send food over here, buy it at Costco and send it back to Asia then to buy it where it's grown, it shows that there are huge pricing disparities.
That is currency distortion in action - it is THEIR central bankers via currency manipulation causing that NOT the Fed. And it has nothing to do with the 'buying power' of Cosco - its the buying power of the dollar - when you can buy rice imported from say Thailand at Cosco and send it home to family in Thailand CHEAPER than they can buy it there - the dollar is still too strong!
The fed is allowing the dollar to get weaker - those countries should take advantage of that & let their currency appreciate... result would be their price for rice would decline - for us it would go higher - but both would have some supply. The magic of prices in a floating currency world!
Uh-oh. Karl Denninger writes:
"The NY Times has published a bombshell that should, if markets are rational, cause both a huge selloff . . . and, if the allegations true, indictments. . ."
" 'And the banks pay only if Moodys delivers the desired rating. Tom McGuire, the Jesuit theologian who ran Moodys through the mid-'90s, says this arrangement is unhealthy. If Moodys and a client bank dont see eye to eye, the bank can either tweak the numbers or try its luck with a competitor like S.&P., a process known as 'ratings shopping.' "
"Read that a couple of times. They don't pay if they don't get the desired rating? This isn't from some observer or random commentator - its from the former head of the firm! . . ."
"If this isn't a near-textbook definition of fraud I don't know what is."
Spiv -"exercised"
i think you mean exorcised.
El Cliffo writes:
Uh-oh. Karl Denninger writes:
Denninger is finally catching up? Good for him, that story was all over the internets last weekend (came out Saturday night w/ the early ed. - I believe CR had a bit on it then too).
And somebody should send Karl a memo - markets aren't rational, at best they are a mix of the rational, the emotional and the completely uninformed.
El Cliffo
unfortunately this is not new news. Moody's made it very clear last summer that as a result of their downgrades, they were being shunned for new business by the IB's. it was then that i shorted them at 72.
"Markets rarely go straight down."
I will get on in late May if there isn't a bailout on deck. That should be enough time for the current batch of investors to get frustrated and be ready to bail. Like last spring's crop of knife catchers.
OK dryfly point taken. I just assume that all central bankers are working in concert so my "the Fed" was imprecise short hand for global monetary policy. I don't think that assumption is too crazy considering how much pushback there has been against Congress threatening to go after China about their currency.
Do you disagree that the Fed would be very much against the $ floating to its "proper" valuation at this point? It would completely crash (well so would the Euro at some point, but that's a different topic). In that aspect, I do think a lot of the situation is their fault.
we are at an interesting crossroads. we are at an ending diagonal and the intersection of the horizontal tops of the last 2 mo and the decending trendline from the Oct and Dec tops not to mention 1400 on SP and 13000 Dow. this weeks FOMC should declare which way we go. my bet is we roll over but the way the last 2 months have gone i must admit its been painful.
Well, it seems to me that it's one thing not to be approached for new business, but quite another not to be paid even after you are hired but don't deliver the desired rating.
if we do roll over i think the HB's will get smashed hard.
quite true Cliffo but its been amazing to me how our regulators have turned their collective backs on widespread fraud.
"If this isn't a near-textbook definition of fraud I don't know what is."
El Cliffo,
There's probably several thousand institutional investors in the U.S. that have very conservative mandates to manage large amounts of money, more than $5-10 billion. They have written Investment Policy Statements (IPS) that say: "We are not by policy allowed to invest in bonds unless they are rated X or of comparabale quality."
X is usually either investment grade, single A or double A.
If you recommend a bond for these investors that isn't X, you can be held liable for civil suits, recision, and/or fraud. It has happened time and again.
What you are describing means that most of these instiututions were defrauded by the ratings agencies.
Because it means the ratings agencies did not publish evidence that would have blown the cover-up of hidden risk. There will be huge lawsuits against the ratings agencies, like with Arthur Andersen and Enron.
Without honest ratings, none of the IPS documents mean anything, and fiduciaries of these institutional accounts are wide open to liability claims.
What all these accounts have in common is that they are not supposed to lose principal. And what they all now have in common is that they've been defrauded.
here's a great tinfoil hat theory:
Russia supports dollar while simultaneously accumulating glod at firesale prices. Russia then proceeds to dump dollars:
The page cannot be found
Winter (Economic and Market) Watch » Tin Cups and Ponzi Boyz
idoc writes: here's a great tinfoil hat theory...
Time to go long on tin.
Until USA real estate assumes the 1997 or 1998 price position ( thank you sir may I have another ) its economy will remain mired in uncertainly and muck.
Another 20% drop will generally get us to about 1999 or 2000.
"mikkel writes:
OK dryfly point taken. I just assume that all central bankers are working in concert so my "the Fed" was imprecise short hand for global monetary policy...
Do you disagree that the Fed would be very much against the $ floating to its "proper" valuation at this point? It would completely crash (well so would the Euro at some point, but that's a different topic). In that aspect, I do think a lot of the situation is their fault."
The biggest policy mistake (in currency space) was made by the Chinese (and other Asian) policymakers. The inflation in commodities was the constraint that was inevitably going to blow the "Bretton Woods II" system out of the water.
The U.S. benefitted from "Bretton Woods II", but the Fed had largely no choice about it. The only way to break the system was to slap trade restrictions on China - not the Fed's mandate.
The Fed could care less what the Chinese do about their currency, as
the Chinese have few palatable options, and the impact of many on the U.S. may be far smaller than for China. For example, if they revalue by 50% to try to cap oil prices, the Chinese banks will be seeing lots of "mega jingle mail" - factory owners mailing in the keys to their factories.
As for the euro and other G7 currencies, their exporters are already getting smoked by U.S. firms. The euro zone will have a hard time dealing with the EUR above $1.60.
Do you disagree that the Fed would be very much against the $ floating to its "proper" valuation at this point? It would completely crash (well so would the Euro at some point, but that's a different topic). In that aspect, I do think a lot of the situation is their fault.
I don't think the dollar would completely crash UNLESS the Asians give up on exporting to us... as long as they plan to sell in this market they have to make an effort to keep their currencies somewhat competitive (keep dollar somewhat strong)... But it could happen.
idoc,
Lots of people looking for a rollover in the next week or so. Somewhere out there a bond crisis is lurking, too. If that should hit, watch out below.
If Eli Broad expects another 20% at today's rates, what happens if mortgages jump another 2 to 4% overnight???
What bond guy | 04.28.08 - 10:09 pm | # said...
dryfly, idoc, ac, et al...
The Great Food Debate.
On of the big problems is the road the US headed down in the 70's with corn subsidies. We make livestock feed out of corn. Cows don't naturally eat corn. We make sweetener out of corn...not exactly healthy or efficient. We make FRIGGIN fuel out of corn...
Corn sells for less than it costs to produce sans subsidies. The distortion here is abysmal. Such huge distortions affect global food production.
How? Other grain markets, and the sugar market get highly distorted. And all countries, particularly the G-7 play this game with a favored ag product. The banksters have contributed to this, but ag policies are the main contributer. IMHO we are now to reap the whirlwind of ag subsidies. It's likely NOT to be pretty.
Cheers,
dryfly,
Ever read Winter Watch? Russ has been very good at chronicling the commodities "CUB" (i.e., crack up boom) worldwide. Regardless of what CB you want to pin the blame on, monetary policy is a primary factor.
BTW, isn't CR risking his anonymity posting live from the Milken Conference?
idoc,
"here's a great tinfoil hat theory:
Russia supports dollar while simultaneously accumulating glod at firesale prices. Russia then proceeds to dump dollars:"
My kinda thinkin'.
Cheers,
Russia supports dollar while simultaneously accumulating glod at firesale prices. Russia then proceeds to dump dollars:
I've wondered why OUR gov't doesn't print dollars to buy glod... talk about your mother of all 'deflation killers'... virtually flood the world with unsterilized dollars. Ugly, ugly...
If they see REAL deflation - I wouldn't put it past them (them = treasury &/or fed)
Regardless of what CB you want to pin the blame on, monetary policy is a primary factor.
I agree with that though think the fed is the big slow boy in class - everyone notices him but he's not the instigator, just the kid who gets caught.
If they see REAL deflation - I wouldn't put it past them (them = treasury &/or fed)
Bank on it.
I've wondered why OUR gov't doesn't print dollars to buy glod... talk about your mother of all 'deflation killers'
It'd be Weimar all over again -- you couldn't get it from the printers fast enough to beat the price increases.
dryfly,
"monetary policy is a primary factor.
I agree with that though think the fed is the big slow boy in class - everyone notices him but he's not the instigator, just the kid who gets caught."
I think it's gov't ag policy. To the extent CB's fund such deficit spending, OK, but the primary cause is paying farmers to plant more X then the market would profitably pay for.
Cheers,
"Ever read Winter Watch? Russ has been very good at chronicling the commodities "CUB" (i.e., crack up boom) worldwide. Regardless of what CB you want to pin the blame on, monetary policy is a primary factor."
Not sure what central banks can do about idiots piling into the commodity markets. They've ramped futures prices up above cash market levels, and the hedgers who sold forward have been blown out of their positions.
This sort of activity is normal in the financial markets, but the underlying markets are big, and the hedgers can keep the speculators in line. The commodity markets aren't deep enough, as the futures are not tightly linked to the cash markets.
Regulators would have to have to take on a lot of financial market participants to regulate this thing.
All the Fed could do is crush the economy flat. Pretty similar to using a nuke to deal with a rat infestation.
tj,
"I've wondered why OUR gov't doesn't print dollars to buy glod... talk about your mother of all 'deflation killers'
It'd be Weimar all over again -- you couldn't get it from the printers fast enough to beat the price increases."
Yep. All the FED's horses and all the FED's men, couldn't put that mess together again.
Cheers,
Damn, it's good to be a banker!
Fed board to discuss paying interest on reserves
| Reuters
Corn sells for less than it costs to produce sans subsidies. The distortion here is abysmal. Such huge distortions affect global food production.
Not exactly true - that's a conservative urban myth.
There have been many periods where IT was true (80s for example)... and it could be true IF you consider land values as 'capitalized subsidies'... but that applies to all assets (including glod - ever been to a glod mine? I have, no shortage of 'Georgian rent capture' let me tell you).
But in general - pull out artificial cost of land and corn is MASSIVELY profitable to grow most of the time. That's why it has conquered the world.
Sugar is by far the ugliest of the US subsidies though - it even kicks over to support corn via sweeteners... If we were to end that one it would do a lot to unraveling our own mess.
BTW - I've worked in corn sweetener & ethanol plants - I know what goes on behind the curtain. It isn't gonna save us from 'the future' that much I know.
bond guy,
"The commodity markets aren't deep enough,"
That has to be one of the most insightful posts I've seen in a while. That the markets for REAL stuff aren't deep enough to absorb such speculation...It's obvious...
As the money bleeds out of the "financial markets" it hits a wall in "real stuff".
This has been lurking around in the back chambers of my, admittedly, fanciful brain for a while now. Thanks for the focus.
Cheers,
"Think it through. A strong dollar draws more people out of rural Asia into their cities & factories and produces LESS rice."
Can this be right? In this country farm production increased when the children of farmers moved to the cities... to start making tractors and other farm implements.
dryfly,
"Corn sells for less than it costs to produce sans subsidies. The distortion here is abysmal. Such huge distortions affect global food production.
Not exactly true - that's a conservative urban myth."
I am not going to argue against you here, but a link or two would be nice.
"Sugar is by far the ugliest of the US subsidies though"
Following that market is one of my hobbies. It likely biases my study. However, you have to throw ethanol in there as well.
Cheers,
Misean,
BTW, you read about that company using silver for a diesel catalytic converter?
I think it's gov't ag policy. To the extent CB's fund such deficit spending, OK, but the primary cause is paying farmers to plant more X then the market would profitably pay for.
Also urban myth - except for a few years under 'freedom to farm' where they got paid to grow. Usually what they get is free price insurance... if the price stays high they get nothing. If the price falls below the deficiency cap they then get a payment proportional to how far below. There has been very little paid out recently due to high prices (in the 80s it was awful - half their revenue was 'deficiency').
Now there is conservation set-aside... they get paid to NOT grow on some land but that is to keep the morons from planting fence row to fence row Rockies to Appalachians.
Personally my feeling is if some of that land is so valuable as a 'conservation entity' like watershed protection or wildlife habitat - gov't should buy it & turn it into Buffalo Commons & be done with it. Expecting farmers to be 'land stewards' is a bit much.
I think you meant Trout Stream commons, didn't you?
Dryfly == Dances With Brookies.
dryfly,
"Also urban myth - except for a few years under 'freedom to farm' where they got paid to grow. Usually what they get is free price insurance... if the price stays high they get nothing. If the price falls below the deficiency cap they then get a payment proportional to how far below. There has been very little paid out recently due to high prices (in the 80s it was awful - half their revenue was 'deficiency')."
Not disagreeing, but I need to dig through some data. I can't entirely agree with that. Unless you're talking ONLY US...and I have to go through that stuff too...
Further price floors will work whether invoked or not to distort production.
However, I trust your knowledge of farming far better than I do my own...
Cheers,
tj,
"BTW, you read about that company using silver for a diesel catalytic converter?"
No...hadn't. You have linkage?
Cheers,
Expecting farmers to be 'land stewards' is a bit much.
'nuff said there. Throw enough dollars their way and they'll toss it in.
OT - Local county has led the country in farmland preservation and one of the big proponents of it p.o.'d a lot of folks by proposing to turn a chunk of his land into over-55 housing.
"I am not going to argue against you here, but a link or two would be nice."
Misean,
As far as I know,when I asked my uncle in Jan. he said no subsidies he knew of for this year. His break even on corn is between .80 and 1.00 bushel. Even with current costs.
Now ethanol subsidies is a different story.
We got out of the sugar beet business 25 years ago...
Chris
homedad43,
"nuff said there. Throw enough dollars their way and they'll toss it in.
OT - Local county has led the country in farmland preservation and one of the big proponents of it p.o.'d a lot of folks by proposing to turn a chunk of his land into over-55 housing."
Who's tossing the dollars? Farmers will steward their land...that's my point. Subsidies distort that incentive. You don't ruin your properties income potential by not maximizing the profit earnable from it.
Cheers,
Cobradriver, dryfly,
My data must be Urban Myth stuff that dryfly mentions.
I've been wrong before...no reason it shouldn't continue...
Cheers,
Misean,
Mitsui Mining new autocatalyst uses silver, not platinum
| Reuters
Check it out.
IF as Jamie DImon and the rest of the all clearing crowd are correct - and they are in a position to know - the notional CDS is irrelevant. The at risk component is 2% per many estimates. Substantial, but not life threatening. Or so we are told. Since they know best and have repeatedly towed this mantra, it more or less kills the BS CDS story. Then again, maybe they are just lying which makes you wonder what else lurks. That anyone would buy the brokers tells you just what a casino it has become.
Cheers,
Misean | 04.28.08 - 10:52 pm | #
Misean,
Now ask me about the asshole I know who is worth about 20M and yet gets a check from the .gov for a grass runway on his property...That whole conservation thing dryfly talked about. That pisses me off.
Chris
Could somebody explain this to me. I don't quite understand......
Fed board to discuss paying interest on reserves
| Reuters
This story is worthwhile spending a little time on.
Bill Moyers Journal . Watch & Listen | PBS
I nosed around up on Capitol Hill and found a guy, a member of the staff, who said, "You ought go down and look at a rice production area near Houston. People are being paid down there, they're getting checks from the government covering 500,000 acres of rice. But guess what? There's only less than 200,000 acres being grown now and yet, and yet they're still receiving these payments."
Who's tossing the dollars? Farmers will steward their land...that's my point. Subsidies distort that incentive. You don't ruin your properties income potential by not maximizing the profit earnable from it.
Misean:
Around here for the past umpteen years, the money has been tossed by developers. County has finally started getting smart and started to press for high-density development so that the ag areas aren't totally paved under. We still have a lot of ag here, but nothing like when I was a kid here 35 - 40 years ago.
I am not going to argue against you here, but a link or two would be nice.
I don't have a link but have talked to farmers - as recently as two weeks ago Sunday Brunch...
Here is what I learned about recent cost inputs...
He said current cost is about $600/acre but that includes EVERYTHING... land, equipment, fuel, seed corn. So if the farmer does 200 bu/acre at $3/acre - he breaks even. 200 bu an acre is tough nut to hit even around here - 160 is pretty easy though.
I asked for more of a 'break down' and it got messy fast. What I learned was that land & equipment were BY FAR the two biggest costs. If your land cost $3000/acre (half of what it is selling for now)... at 6% the interest alone is about $180... throw in somewhere between a half and a million dollars in equipment (and I've seen WAY more if they store grain, irrigate or raise livestock)... and you have somewhere between half & 2/3s of the cost as land & capital. Machinery depreciates very fast so it really is an out of pocket cost...
As we know corn is way north of $3/bu. (like $5.50) and many of these farmers own their land w/out debt & run their equipment into the ground. If so they should make GOOD money even with out hitting the deficiency cap payments.
Corn in the corn belt is usually profitable UNLESS prices get 'capitalized' into unrealistically high land cost. That was the root cause of the farm crisis in the 80s. A decade of run up in land prices levered to the eyeballs then the corn prices crashed. Whocoodanode.
This food shortage story is NOT a fed caused problem no matter how much fed-haters want to paint it that way.
I'd disagree...
As card carrying member of the tin-foil hat crowd I've been following the food situation for a couple of year now.
The rise in wheat and soybeans was initially been mostly driven by the ethanol boom (farmers shifting to corn), drought, biofuels, and UG99.
But, rice is pretty much trading based on monetary policies instead of supply and demand.
What I mean by that is that the worlds supply of rice hasn't really taken any hits. And they aren't turning huge portions of the rice crop into ethanol. Supply and demand remain pretty constant.
The problem is that China chose to ban exports of rice in an attempt to reign in domestic inflation. By removing a large source of demand (the export market) the price of rice is kept artificially low. Low rice prices take some of the "heat" out of Chinese CPI which is running very hot.
That put upward demand on the crops of the remaining exporters and one by one they restricted exports.
Since only 7% of rice trades on the international market those actions had a dramatic increase on the price of rice.
Now, I think there is a pretty clear line between the Federal Reserves "tolerance" of higher inflation and the current Chinese crack-up boom.
homedad43,
If every road in the US were laid out in a grid 2 lanes in each
direction and spaced a half mile appart then the entire US road
system would cover a square 560 mile on a side. That at the truly
idiotic spacing of only every half mile and only 2 lanes and no
other roads whatsoever.
This counterexample is generous in it's
scope and scale. The square 560x560 includes all the roads in the
US including unpaved, logging and fire roads. The intent is to
show that the claim of a "dense network of roads and highways" was
silly since in my counterexample has half mile spacing. If you like
I can redo this using only paved roads, true average lane widths and
typical road spacing and a circlar footprint instead of square.
Rough guess is a single metro area 200 miles across of a "dense
network of roads and highways."
The urban myth of the Paving of America won't die apparently.
"and many of these farmers own their land w/out debt & run their equipment into the ground."
dryfly,
Hey,I think you know my uncle! Seriously,if you can do without the latest and greatest equipment you will do o.k..
Here is one...
Two brothers. Both college grads. One starts at the local small town bank after school. Buys said bank when owner retires. Dad dies. Sons split 5k acres. Banker sells his land to brother 20% under market. Farmer builds new house and all the latest and greatest equipment,every year.
As of today the banker has 6 small branches. Lives comfortably. Brother had to sell all at a auction after 2 bad years and 2 o.k. years.
Yes,I know them both...
Chris
Now, I think there is a pretty clear line between the Federal Reserves "tolerance" of higher inflation and the current Chinese crack-up boom.
Kicker | 04.28.08 - 11:11 pm | #
I don't see how the fed actions force the Chinese to 'lock down' rice... it is after all THEIR surplus to us they defend with currency manipulation, no?
I am not saying there isn't money supply issues (inflation) involved in the pricing of rice here or abroad - I'm saying that particular phenomenon isn't OUR feds fault. They peg, they manipulate to export to us, they have to sort out their own crap that results from that distortion. We got issues of our own - like a generation long record of half to trillion dollar deficits & resulting bad paper.
If we were running surpluses instead then I think we could take a little heat for 'protectionism'. Got a way to go before we can brag about that one.
As of today the banker has 6 small branches. Lives comfortably. Brother had to sell all at a auction after 2 bad years and 2 o.k. years.
Chris - we are heading for another farm crisis - too much debt & land/equipment prices too high. They won't have $5 corn and $11 beans forever (I hope).
i think the point on the quote earlier was missed. counter parties are like depositors in that the solvency of the counter party and the likelihood of repayment became the capital base on which to lend to other people, with an impact on the money supply.
dunno why that quote seemed to make so much sense to me but only brought out derision and anger from the (pea)nuts.
wrt to food: i always said hunger was a distribution problem and not a lack of food. well in this case its a lack of information distribution through the price mechanism, just like Obi-wan-dryfly so astutely pointed out.
boob writes: IF as Jamie DImon and the rest of the all clearing crowd are correct - and they are in a position to know - the notional CDS is irrelevant. The at risk component is 2% per many estimates. Substantial, but not life threatening.
Then you can't use the "cascading cross-default CDS" argument as the reason why the Fed had to bail out Bear. He's talking out both sides of his mouth.
No problem for JPM now, at least.
Rob:
By paving, I don't mean the road net, but instead just the removal of the ag land for use as commercial/industrial/residential.
Example? Commercial developers trying to get a local township to approve plans for a large (65 acre?) plot of shopping center just down the highway from a large regional mall. Walmart trying to get tracts of ag land for placement of two more stores (one supercenter) on west and south sides of the county seat.
Oy.
The urban myth of the Paving of America won't die apparently.
Rob Dawg | Homepage | 04.28.08 - 11:18 pm | #
You mean there are places you can go in the Everglades that don't have roads???
I had a hard time convincing a couple of "city guys" at work to not go wandering around in the glades without some type of serious weapon...They both thought gators and wild hogs would just ignore them. Not to mention the civic duty of killing non native snakes(BIG!).
Chris
Not to mention the civic duty of killing non native snakes(BIG!).
And folks don't get upset that all God's creatures got a right to share the planet?
Another reason I still love the south.
Hey, Mr Dryfly, you would occasionally comment over at the Brad Delong blog, but I never see your name there.
What gives?
I had a hard time convincing a couple of "city guys" at work to not go wandering around in the glades without some type of serious weapon...They both thought gators and wild hogs would just ignore them.
Big Boars are bad news - have you seen any down there Chris? I've hiked in the Southern Appalachians and that is my one fear - hogs - they spook me way more than even Grizzlies out west.
dryfly | 04.28.08 - 11:25 pm | #
And that is how a guy who farmed 400 acres is now farming 1.5K acres. He didn't have the debt but everybody else did. Like you said,the 80's crisis was about insane leverage.
Luckily my old man got out in 73,at a cost of only 25k(He took a loan out). Lots of rough years paying that back along with the farm payment.
Can you say home made clothes???
Chris
Hey, Mr Dryfly, you would occasionally comment over at the Brad Delong blog, but I never see your name there.
What gives?
I used to comment over at DeLong's - it just got way too partisan.
Similar situation with Setser's blog - I read it too but the Dave Chaing vs the world thing got old so I just read Setser now & move on. Setser is a good read almost every time.
CR & Tanta do a better job of making us behave. They shame us if we step out of line too far...
Are farmers the next home builders ?
I don't see how the fed actions force the Chinese to 'lock down' rice...
I can buy that...
But, I get a little irritated when people start talking about "shortages" of foods as if globally we're down to boiling the saddles and eating wallpaper paste.
Aside from the political and monetary games being played there's plenty of calories to go around.
Are farmers the next home builders ?
I think so - not the old timer's like Chris's uncle - but the 'next generation'... they are really levering up based on high commodity prices. We'll be bailing them out too in a few years. Damn.
Aside from the political and monetary games being played there's plenty of calories to go around.
Kicker | 04.28.08 - 11:46 pm | #
No argument here.
It was strange how many people read the Fed's bailout of Bear Stearns as a bottom. Common sense tells you that the factors behind Bear's failure were systematic, not eccentric. Also, common sense tells you that it won't be big failures (big enough to bailout) that will ultimately damage credit markets and the economy. It will be events like the homebuilder that imploded in Iowa this week, or the land syndicate that fell apart in California last week. The ripples from those failures can spread pretty wide, pretty fast.
The disaster in the Fed's Bear bailout may have been in playing too many of its cards, too fast. Now, Fed bailouts are on everybody's radar, and there's widespread fear that the Fed is favoring Wall St. over Main Street. Bernanke doesn't seem very competent, but he doesn't seem like a confrontataional type. I can't see him pushing the Fed to the Wall to save Wall Street and damn the rest of the world.
What I'm saying is...what can the Fed to for an encore as a lot of little blow-ups start cascading through the system? Nothing. Less now than before.
Noble, the milk is for your favorite pet's consumption - not yours...
Cobra, you seeing any big lizards down there besides those walking wallets yet? I've been hearing rumors of 6-8' Nile monitors and things taking over - although even they aren't going to argue (and win) with a 25' anaconda or big burm....
dryfly | 04.28.08 - 11:39 pm |
You will laugh at this. In the median at about mile marker 178 on I75. Biggest damn boar I have ever seen. Probably 500 lbs. Couple of sows and 20 or 30 piglets.
I have started tracking in the undeveloped area on the other side of I75. Got a couple of good areas just haven't had a lot of time to stake it out yet. Literally,there is no shortage of them around. They are like the deer from up north. But they don't generally commit suicide by car though...I want to find a nice 180-220/lb sow. If I don't like the gamey taste there are plenty of charities local to donate(Also if I get more than one/no limit).
homedad43 | 04.28.08 - 11:36 pm | #
And kiddies our lesson for today is "Burmese Python". The scourge of the south. These fuckers will eat everything when let loose in the wild. I am not a big fan of just killin for fun but a non native snake that gets that big ??? I'll pull the trigger till it goes "Click".
Chris
Bernacke is doing a good job. He has a tough job and he's making mistakes. But he's doing a good job. The great Volcker wasn't real popular when he dropped the I-bomb. Anybody remember that? Breaking syndicate and all that?
"what can the Fed to for an encore as a lot of little blow-ups start cascading through the system"
You've already witnessed it. If enough blowups occur to crater the sp500 the PPT springs into action and buys futures like mad, flushing out the $$$ on the sidelines and fuel up a short covering rally. This PPT game can outlast the most patient buy&hold short. It's a trader's market. No doubt we are in a bear market that has a lot to give, but it won't be easy, for sure.
I've been hearing rumors of 6-8' Nile monitors and things taking over - although even they aren't going to argue (and win) with a 25' anaconda or big burm....
Mike Dillon | Homepage | 04.28.08 - 11:54 pm | #
Mike,
I am trying to remember where I saw the article. A guy talked about pulling 100 Iguanas from a local island and not even putting a dent in the population. Nile monitors,wouldn't suprise me. I haven't seen a 25' but the fish and game picked one up that was about 14'/shudder/loud bang(gun)/...
Non natives are huge problem.
Chris
And kiddies our lesson for today is "Burmese Python". The scourge of the south. These fuckers will eat everything when let loose in the wild. I am not a big fan of just killin for fun but a non native snake that gets that big ??? I'll pull the trigger till it goes "Click".
They are both non-native scourges - hogs & pythons - they really need to be hunted to 'extinction' here.
I'm not surprised at all that hogs don't get hit by cars - they are pretty smart, too smart really - that is what makes them so dangerous. Far more dangerous than bears. I've hiked & canoed bear country all my life ran into many - not a huge deal. But I'd soil myself if I ran into a big hog & wasn't armed. They are smart, aggressive, fast and with those big tusks would filet you in no time.
I don't think people realize how many are out there and how dangerous they are.
Completely Off Topic:
http://en.wikipedia.org/wiki/Image:Gator_and_Python.jpg
who and how would manipulators up the value of Bear CDS? rumors?
Buy lots of CDS insurance on Bear. There's enormous leverage - you could buy a lot of CDS for relatively little money. With all the monolines against the wall it should be relatively easy to overwhelm the market in CDS for any company.
My final contribution for the night...
Ray Wylie Hubbard - Snake Farm...
i'm with gab at 503 pm..
the fed had little choice but to save bear to prevent systemic financial failure due to credit default swaps exposure.
to reinhart, whos much smarter than i it must be said, humbly, you are wrong, wrong, wrong...
...no matter how much i detest that the pigmen got saved.
a new administration and tax policy ( and maybe some prosecutions) might begin to set things right
I think the only way that igs are going to be eradicated from FL at this point is if they're featured on Iron Chef. All it takes is one gravid female to lay 30-60 eggs on average (I've heard a record 120 once) and the party's over.
I used to run a reptile rescue - I've wrestled a sick, PO'd 15' Burm before just to get meds into it. It was weak and it STILL was a tad scary.
I know there was a story somewhere down there a few years ago of neighborhood pets disappearing. Fire dept. pulled a 20' Burm out from under a house.
Don't you need something of fairly serious caliber just shy of laser guidance to take down a hog?
Reptile rescue?!? Wow, and I thought volunteering for a shepherd rescue was interesting.
Mike, a Ruger Backhawk loaded with 260 grain lasercast bullets at 1200 fps does just fine.Here in CA our pigs run smaller (80-250 lbs) but we also have Dog Packs,and they have no fear of humans.I spent an unpleasant few hours in a tree in Marin county once,and no longer take unarmed walks in the woods.
i always said hunger was a distribution problem and not a lack of food.
Aside from the political and monetary games being played there's plenty of calories to go around.
Both correct, but maybe a tad askew of the mark due to current context.
Hunger anywhere in the world for the past couple decades is almost entirely due to politics.
Whoo! I am suddenly appreciating the relative safety of the woods of Eastern Pa.
T-S-, I KNEW you were a tree-hugger (ha, ha)!
Good idea, on carrying a sidearm while on walks in the woods; I had not thought of dog packs.
Sharks with lasers on their heads?
Re: the $152-billion stimulus plan could create 500,000 jobs
Bullshit!
Although the crisis did have some effect on the Japanese economy, it is not the cause of Japans current economic malaise. Japans economic downturn began in the early to mid 1990s after the 1980s "bubble" economy burst. Between 1996 and 1998, Japans recession grew worse; the yen lost about 16% of its value; and unemployment rose. However, 1999s first and second quarter growth rate figures were positive. This is largely due to huge stimulus spending by the government. Despite early signs of recovery, it will be some time before the unemployment rate -- which hit a record high of 4.9% in June -- begins to decline. The government has vowed to fight unemployment and is undertaking a variety of job-creation measures. Growth will be hindered, however, by Japans staggering amount of bad loans.
Is anyone using a rebate check to buy CR & Tanta lunch?
The Internal Revenue Service is using the last two digits of your Social Security number to set itself a deadline for sending your share of a tax rebate designed to help buoy the economy. On joint returns, the timing is based on the first Social Security number listed.
But the timing is not out of your control. Taxpayers set up to receive money electronically come out ahead of those who don't. However, if you don't file your taxes by April 15, you'll wait longer.
The House- and Senate-passed budgets would raise taxes on every American taxpayer by an average of $3,000 per household. But dont expect Congress to share in the sacrifice: The budget would hike discretionary spending by 8 percent, and not cut a single government program.
First, the tax increase. The largest four-year revenue surge in 40 years has pushed tax revenues to 18.8 percent of GDP -- well above the historical average. Yet the House-passed budget tied itself to a revenue baseline that assumes the 2001 and 2003 tax cuts will expire, and that the Alternative Minimum Tax (AMT) will catch another 20 million Americans. That baseline also assumes the child tax credit would be halved, the marriage penalty reimposed, and the 10 percent tax bracket raised to 15 percent. Investment taxes would likely rise, and the 55 percent death tax would be reinstated as well. (The Senate budget would prevent some of the lower-income tax hikes.)
Congress’ $3,000 per Household Tax Increase - HUMAN EVENTS
Tom, In your neck of the woods that firearm could also be of good use if you stumble into a mexican cartel pot farm while hiking!
Don't forget the cougars up there. Down in Paso Robles they have some big russian boars. 41 Ruger will work but like a bear they may go 1/2 mile before they go down..
I think the only way that igs are going to be eradicated from FL at this point is if they're featured on Iron Chef.
"Chicken of the Jungle"
Wow. Wild boar and big Burmese,... Chris, you're not from the Florida Board of Tourism are you? I had to deal with a healthy 11 foot Burmese (about 100 pounds), one goddamn long muscle. If it decided to do something, there wasn't much I could do to stop it, other than make small suggestions by re-directing the head.
I hope CR emerges from the RE-Fest alright. He seems resilient enough
dc1000, on why CDS are supposedly like deposits: ``dunno why that quote seemed to make so much sense to me but only brought out derision and anger from the (pea)nuts.''
Deposit insurance is provided by statute. The HF's want regulation by analogy. In their world, a speculative unregulated insurance agreement is just as entitled to government protection as a deposit protected by actual law. In fact, protected without limit, unlike deposit insurance. And, uh, exactly how do you think CDS provide a capital base'' forlending'', and how do they ``impact the money supply''? Peanuts want to know.
NAHB: Log In Now
Presentation and handout materials for NAHB's Spring 2008 Construction Forecast Conference
Some interesting PDF's in there.
Down the Japanese rabbit hole
Allow massive property bubble threw lax lending, lack of regulation, and fraud due to government and central bank policies.
Bubble collapses under own wight as pool of greater fools dry up. Defaults rise.
Central bank cuts rates to contain bubble and prop up insolvent banks.
Currency falls like a rock causing commodity prices to rise decimating spending of poor, overly indebted middle class and non bubble participants as price of needs rise parabolic and return on assets fall. Credit tightens, Defaults rise. Capital flight seeking higher returns.
Price of wants fall, central bank cuts more seeing deflation in price of wants, currency falls, price of needs rise more.
Small business fail as operating cost rise, credit tightens, and sales fall leading to high unemployment, and stagnate wages. Defaults rise.
Manufacturing and exports ramp up due to falling currency, profits rise.
Domestic oriented corporations fail. Accounting fraud increases, defaults rise.
Wage increase contained due to high unemployment and workers who have to accept them to survive high cost of needs. Price of want fall. Central bank cuts rates more.
Government spending increases, cement river bottoms, currency fall more as budget deficit rises.
Protectionist measures are put in place to protect manufacturing and restrict foreign ownership. Currency falls more. Price of needs rise, price of wants fall, central bank cuts, currency falls, defaults rise.
Down and down she goes, where she stops nobody knows.
BTW, you read about that company using silver for a diesel catalytic converter?
Scientific American, March 2007 page 80 has a good overview of clean diesel technology. (online not free except to subscribers, I think)
Countrywide reported a huge loss
Countrywide Financial Corp. CFC 5.83, -0.01, -0.2%) swung to a first-quarter loss of $893.1 million, or $1.60 a share, from a year-earlier profit of $434 million, or 72 cents a share, amid soaring loan losses and rising net charge-offs. The Calabasas, Calif., mortgage lender said revenue sank to $678.9 million from $2.41 billion. The troubled company's provision for loan losses soared to $1.5 billion from $152 million a year ago. Charge-offs climbed to $606 million from $39 million. Despite the quarterly losses, Countrywide's board declared a dividend of 15 cents a share on the company's common stock. The dividend is payable June 2 to shareholders of record on May 14. The board also declared a dividend, payable May 15, of $1,812.50 per share of Series B preferred stock.
So, people who were told that they were wealthy because they had "investment grade" assets acted like they were wealthy.
And now, it's black friday, and they're jumping out their windows with their HDTVs strapped to their backs.
How can we be surprised?
Foreclosures continue to skyrocket.
OT:
CNN reports that George Bush will stimulate the economy at 10:30 this morning.
May God have mercy on your soul.
NEW YORK (CNNMoney.com) -- Foreclosure filings in the first three months of 2008 rose more than 112% over last year, according to a study released Tuesday. Real estate information firm RealtyTrac reported that nearly 650,000 foreclosure filings - which include notices of default, auction sales and bank repossessions - were issued in the first quarter. That represents 1 of every 194 households and marks a 23% increase from the last quarter of 2007..."
Foreclosures spike 112%, with no end in sight - Apr. 29, 2008
BREAKING NEWS...Home prices fall to record lows in the largest U.S. markets with little hope for improvement soon, Case/Shiller survey.
Haven't seen any details yet.
I don't believe there are significant food shortgages. There was commodity speculation when money fled... which is why only CERTAIN foods went up in price... as well as several other commodities. The price rises led to hoarding and there we are. It is not complicated.
The Fed's role is that it did not kill the bubble mentality, it threw a lifeline to the bubble crew... which has floated from high tech to oil to CDOs to oil and commodities. The party continues.
If you think there is a rice shortage you have to explain convincingly to me why the rice eating habits of Minneapolis, MN, suddenly increased.
Countrywide Financial Corp. CFC 5.83, -0.01, -0.2%) swung to a first-quarter loss of $893.1 million
Foreclosure filings in the first three months of 2008 rose more than 112% over last year
Well that just proves we're at the bottom! Rally on!
Found it (from Marketwatch)...
Home prices fall record 12.7% in past year, Case-Shiller say
WASHINGTON (MarketWatch) - The decline in U.S. home prices quickened in February, with prices down a record 12.7% in the past year for 20 key cities, according to the Case-Shiller home price index released Tuesday by Standard & Poor's. "There is no sign of a bottom in the numbers," said David M. Blitzer, chairman of the index committee at Standard & Poor's. Prices in 19 of the 20 cities have fallen over the past year, with prices in all 20 cities falling month-to-month for six straight months. The biggest declines were in Las Vegas and Miami, with declines of more than 20% in the past year. Prices in Charlotte, N.C., are up 1.5%
RE Countrywide, anyone up for a pool on the exact date BoA pulls the plug on their buyout of this ongoing train wreck?
I'll start: May 23rd.
OT:
Somehow I dont think the gas/oil is going to be paid in dollars.
Iran, Pakistan 'in pipeline deal'
Anonymous writes:
RE Countrywide, anyone up for a pool on the exact date BoA pulls the plug on their buyout of this ongoing train wreck?
I'll start: May 23rd.
Anonymous | 04.29.08 - 9:26 am | #
Monday, July 21st, 2008
CNN reports that George Bush will stimulate the economy at 10:30 this morning.
So sexy! God, stop it, you're making me hot!!
Anybody hear CNBC this morning? They were talking about the credit crises and problems in past tense. "Now that we "KNOW" the worst is over...."
I'm glad they know. Mission accomplished!!!!!
WASHINGTON (MarketWatch) - The decline in U.S. home prices quickened in February, with prices down a record 12.7% in the past year for 20 key cities, according to the Case-Shiller home price index released Tuesday by Standard & Poor's.
Worth noting - and they did, if only in passing - is that the declines are not only continuing, they're accelerating.
LA, PHX, MIA - all had significantly larger drops this month than last on a month over month basis, as did the Composite-10 and -20 as a whole.
(Oddly, everyone's favorite canary in the coal mine, Vegas, actually showed a slowing rate of deceleration this month.)
"wally writes:
If you think there is a rice shortage you have to explain convincingly to me why the rice eating habits of Minneapolis, MN, suddenly increased."
Large and growing Hmong and Vietnamese population. Demographics, my friend.
Anonymous writes:
RE Countrywide, anyone up for a pool on the exact date BoA pulls the plug on their buyout of this ongoing train wreck? I'll start: May 23rd.
Hmmm,I'd say maybe after the close on an options expiry Friday. I'm going to go with Friday the 13th of June.
"doom writes:
Anybody hear CNBC this morning? They were talking about the credit crises and problems in past tense. 'Now that we "KNOW" the worst is over....'"
...And knowing is half the battle.
CNN reports that George Bush will stimulate the economy at 10:30 this morning.
The best stimulus he could give to the economy is to announce his resignatio
``People were using their home equity as really an ATM machine,'' Broad said, referring to an automatic teller machine.
This reporter obviously felt that he was talking to a VERY sophisticated audience.
steve,
counter parties to derivatives are really like deposits in that the counter party makes the contract an asset. with assets you can lend and make new assets.
thus more assets
seems pretty straight forward to me, what am I missing?
Anybody hear CNBC this morning? They were talking about the credit crises and problems in past tense. "Now that we "KNOW" the worst is over...."
I'm glad they know. Mission accomplished!!!!!
Yup. All we need is a "surge" and I'm willing to call the bottom floor. Of course, we've got a lot of sub-level parking to stop at on this skyscraper's elevator, and some kid has pushed every button.
he is giving the most honest opinion. From now on, i only listen to elderly philanthropist with no vested money.