Second

"We're going to be deferring other expenditures to build a pot of money to replace what Bank of America took away."

Hah. Bank of America never took away anything. This guy's only belatedly realizing that the willingness of someone to lend you money is not an asset.

Follow the link and read some of the comments; very interesting.

I'm think of selling stock to go to Tuscany this fall. Anybody want to invest?

CR says: "Some of the consumer related anecdotes I'm hearing for March are pretty ugly."

My favorite overheard quote this week: "Buy clothes at Goodwill? They're too expensive."

"Anybody know what $75k in landscaping gets you these days? Must be nice. Should be able to buy a lot of flowers."

I don't know how much my neighbor paid the landscaping firm to design her yard, but she pays them $350/month to maintain it. And it's not that large. Pretty as hell, lots of exotic plants -- bird of paradise to die for. But... $350/month?

Some of the consumer related anecdotes I'm hearing for March are pretty ugly.

I got through this weekend with twelve 89 cent tacos from Taco Bell and half a can of Maxwell House.

I got through this weekend with twelve 89 cent tacos from Taco Bell and half a can of Maxwell House.

If this was half taco from Taco Bell and twelve cans of Maxwell House I would totally get it. Crisis is coming.

Hah. Bank of America never took away anything. This guy's only belatedly realizing that the willingness of someone to lend you money _is not an asset._

Now try 'splaining that to BOA... [wrt to the magic window at the fed].

You have to read this article
What a hoot. Cosmetic surgery business sags as purse strings tighten

What did I tell you couple posts earlier about "she wants it"?

"lot of hot trophy wives getting divorced soon."

The most depreciated asset of all...

"I just don't get people. Doesn't anyone want to get out of debt?"

Oh, they will...they will...[Yoda voice]

You know if you just pretend you're back in college, recessions aren't that bad.

If I get laid as much as I did in college I'm all for it...

I don't drink or do drugs now and I'm married to an old gal that is tight as bark on a tree so what would I do with the money?
Anonymous | 04.06.08 - 10:14 pm | #

Looks like anony beat me too that one - shocking that somebody else would think that way.

Yes.

All the Prophets have Spoken. I shall return in hundred years to see the change. I hope you donated. I did not.

Sounds as though this guy doesn't yet know how all the rules of the rich people's game. A friend who works for a landscaping/garden supplies business on the North Shore of LI, said-(& she said it in 2006--at the height of the bubble), that what the rich do is let the landscaper work for a few months, rack up a big bill & then say, well, I don't want to pay all of that, I'll pay you X dollars (considerably less than the bill) & because often the landscaper needs to pay/his her workers, he/she accepts a lower but immediate payment.

I should've asked if that meant the landscaper subsequently raised his/her rates for everyone but I didn't think of it.

Years ago, I saw a bit of that kind of behavior while I was working at boarding, show/sale stables--some of the wealthier clients were the slowest paying, often the middle class people (paying their kid's boarding/training/show bill) were the best payers. Not always, but fairly often.

Now I'm on the OR coast and it looks as though some of the allegedly wealthy people who have had 2nd/3rd/4th/investment custom homes built are pulling the same crap. You want me to pay what? I didn't approve that work or I don't like the work you did, I want you to knock off $350,000 off the bill. Sure, builders can place liens, but it can take awhile to get a judgment, etc. The guy I'm thinking of tried to negotiate with the owner first.

Years ago, I saw a bit of that kind of behavior while I was working at boarding, show/sale stables--some of the wealthier clients were the slowest paying, often the middle class people (paying their kid's boarding/training/show bill) were the best payers. Not always, but fairly often.

They don't hold cash - they never have cash. I have friends worth about a half billion - they never have any money... they own whole companies, stocks & bonds galore, farms, estates & vacation homes but they never have money. You want to get paid you find out who their property managers are make their life miserable - they have immediate access to the money & don't want their time wasted - they got better things to do than play those games. They are wage slaves like the rest of us... oh and if they are any good they'll know how to hide the fact you got paid from the boss... that might mean stiffing some other SOB but that's life.

I wouldn't work for them if you have a choice.

Can you play drums though?

I wish.

They were never rich to begin with.
Trainwreck | 04.06.08 - 10:38 pm | #

Exactly - prosperous maybe, not really 'rich'.

He was originally paying with HELOC money. He is appealing to BAC to reinstate his HELOC. What is he trying to say? That using a HELOC is the same as selling stock? I don't get it.
Simian | 04.06.08 - 10:37 pm | #

Probably doesn't want to realize a capital gain on selling stock (even though at lower rate) and would much rather take more interest expense (if a real home 'improvement' is allowed).

He's a high income (high tax bracket) wage slave.

Why not sell stock to pay off the mortgage and use the monthly house payment money to pay off the landscaping? Then, being out of debt, they could resume buying stocks.

So less than 200 on a Sunday night? So no LEH going down tomorrow?

Follow the link and read some of the comments; very interesting.
Bob Dobbs | Homepage |
U R right. Great comments!

other Jim writes:
He's a high income (high tax bracket) wage slave.

oh, silly me.
other Jim | 04.06.08 - 11:00 pm | #

Sorry for the pile on - didn't see the post until I hit PUBLISH...

I've seen these contractor types just sit around and do nothing rather than take less for a job. It's really an amazing thing to see.
A. Zarkov | 04.06.08 - 11:02 pm | #

I might too IF I didn't also 'own' one of those million dollar plus shacks. If those landscapers eat their own cooking they'll be busting ass like crazy through this crunch chasing every nickel they can find until they too get tossed out by the bank. Then maybe they go camp out in the Headlands or something until the good money comes back.

"lot of hot trophy wives getting divorced soon."

The most depreciated asset of all...

Anyone know how the craigslist lady who complained that $250,000 wouldn't get her into Central Park West is doing?

$75K for a yard project?

Hell, we contacted a fence company to come and remove some fencing since I'm getting too damn decrepit to smash concrete footers. Good company, but the guy showed up yesterday alone since his crewmate called in sick.

Wound up working w/a 24 y/o crew chief and my eldest son to take those things out.

Good news, I'm getting a nice discount on the quote.

Better news, restored a bit of my faith in the typical working dude. Crew chief was a classy kid.

Best news, son hung in with us the entire way and did a decent job too.

dryfly,

If we see quotes like this becoming common wisdom, you might have to eat your words:

"We are seeing signs of a major sea change taking place," Rosenberg wrote. "Debt is now being viewed as a four-letter word at best, a ball and chain at worst."

I recall you saying a number of times that we'd have to pry the American's credit cards from their cold, dead hands.

This is SO good it bears repeating:

"...everybody is going to be so badly burned by this real estate mess that there's going to be a mountain of pessimism in the way of even legitimately good investment ideas.

If we see quotes like this becoming common wisdom, you might have to eat your words:

I would LOVE to eat my words... I just don't see it happening. In the story CR linked to the guy was bitching because his HELOC was taken away... not bragging that he was proud to be a saver.

That's sort of like a drunk being stuck on a desert island saying he's now sober... tell me about it when he get's back to civilization AND he's walking past a 2 for 1 drink special at his old favorite bar...

Big difference.

I think in a way both perspectives may be right -- Americans may be starting to hate debt precisely because nobody will give them any more to roll over their existing debt.

Exactly - and the questions following after that are: (1) how long will that last and (2) will it really change people's long term behavior.

I'd like to think it would - I doubt that it will.

In other words, debt is a four letter word for Americans because their credit cards are being taken away from them and cut up (not because "debt" has four letters in it).

To continue the four letter word analogy - its like being sent to a convent against your will not volunteering to join one.

I'll sign up for the people are making the change meme when I see a lot of people - and I mean A LOT - start getting fitted for financial chastity belts. Right now its more a lot of sour grapes 'cause they ain't gettin' any.

umber2son,

Yours illustrates another aspect of the pain coming to the economy. Actually, it will only be pain for the contractors who were making a mint (off of homeowners who were feeling rich and feeling the need to live that way). I couldn't believe the bids I was getting on remodeling my home. It was one of the reasons I sold it and am sitting on the sidelines.

The contractors and construction workers who do not lose their jobs will be making a lot less money going forward.

Kinda goes against the inflation argument, don't ya think? (sorry I'll try to stay away from that Can O Worms)...

Exactly - and the questions following after that are: (1) how long will that last and (2) will it really change people's long term behavior.

I'd like to think it would - I doubt that it will.

I will say, though, I think once people get burned they're going to be a lot more cautions. I still saw a lot of caution towards housing in Texas not so long ago, and I think that definitely helped keep a lid on prices there during the bubble.

Likewise my father, aunts, and uncles who are well into their 80s (which probably makes me sound a lot older than I really am) just don't buy stocks. In their minds it's financial suicide.

I could say the dot.com bust had a similar affect on me. I used to laugh at my father's backward ways and fear of stocks, but his financial situation is rock solid despite the fact that he never owned anything but government bonds.

I think the reason these credit cycles and depression like events seem to repeat every 50-80 years is because people really only learn certain things through experience. And then once that caution passes out of living memory the cycle can repeat...

I know you probably don't watch the Hispanic network news. It's a little different than the mainstream.

There was a piece on tonight about a young family with five kids under the age of 8, all American citizens (including mother), living in the U.S. and at least surviving several years. But the father is illegal, has been rounded up, and is facing deportment.

So, the whole family has no support and is facing eviction and whatever. Tearful kids on TV talking about fear of having to live in their car.

Wait a minute. Why doesn't somebody tell this family about all the fabulous government services they could get for free -- from state social services support to child protective services to Medicaid and homeless shelters to food stamps?

The anti-immigrant/deportment issue is becoming an economic nightmare for the U.S. There's always been a kind of hidden economic desperation at its core on the part of middle-class and lower-middle class Americans who fear being displaced by immigrant labor. This desperation is one of the best indicators of how bad and worsening the U.S. economy really is.

But it's also an example of economic fear begetting negative economic impact on the social infrastructure. As I keep saying, it's mostly state/local govt. that bears the cost of the social services infrastructure, especially involving children.

Wow, your neighbor is getting screwed. But I live in semi-rural PA.
homedad43 | 04.07.08 - 12:08 am | #

N, S, E or W PA? I ask 'cause I do work with folks in NW PA... and none of them would want fences - couldn't shoot the deer that might walk by.

Anybody know what $75k in landscaping gets you these days?

on a hillside in a suburb of Birmingham Alabama, the wife and I have maybe $60k (paid as we sent over 7 years) in our backyard and we have to show for it an expanded deck, hottub, in ground pool and retaining wall, greenhouse, raised veggie garden and more.

I think the reason these credit cycles and depression like events seem to repeat every 50-80 years is because people really only learn certain things through experience. And then once that caution passes out of living memory the cycle can repeat...

Yup. We might be in one of those again - we'll see.

Ziggurat:

That's another rural PA specialty.

Worked on construction crew after HS and had pot been legal, some of the crew could have been county Ag extension agents.

One guy was nicknamed "Hank Kimball".

Sorry for all the posts tonight....feeling talkative from too much wine.

Going into silent mode now.

SteelCurtain writes:
dryfly
How close to Franklin, Oil City area do you get. Do any work with JOYG?
SteelCurtain | Homepage | 04.07.08 - 12:18 am | #

Not Joy (know Joy) but I am in that area - a little farther west (St. Mary's PA area).

Yeah, that's a huge culture around here. My dad's former company, now CNH, would actually close one of its N PA plants during the first days of deer season.

I've called on CNH out here - 'Case' plants not 'New Holland' so much. They aren't doing as well as Deere or Cat. Kind of the ugly sister in that biz...

tj,

This is when I'm most interested...when the Bulls are running strong.

I'm hoping we get a little more irrational exhuberanpidity.

So many forclosures to deal with, lenders have stopped evicting.

Lenders Swamped By Foreclosures Let Homeowners Stay (Update1) - Bloomberg.com

From what my father was hearing, the only reason the New Holland plant even remained open was so that they could continue to use the name cachet. If CNH is now the ugly sister, things have gotten pretty bad.
homedad43 | 04.07.08 - 12:38 am | #

I hate to feed the rumor mill but I talked to one of their suppliers two weeks ago & compared to Deere CNH is pretty weak (kind understatement). In fact they thought it looked to them like CNH was preparing to sell off units or maybe the whole firm. They are dressing the ugly sister for the dance.

Complete disclosure - these folks don't know squat, nor do I - just their wild eyed opinion. Also I do NOT hold any positions, long or short, in CNH - I'd rather dig my eyes out first.

Have we mentioned that student loan auctions are failing? 

Oil climbs toward $107
SINGAPORE (Reuters) - Oil prices rose half a dollar to a one-week high near $107 a barrel on Monday, extending last week's late rebound after the dollar fell and a fire hit a U.S. refinery.

U.S. light, sweet crude for May delivery rose 52 cents or 0.5 percent to $106.75 a barrel by 0006 GMT after having leapt $2.40 a barrel on Friday, recouping all of the week's earlier losses as investors sought shelter from the falling U.S. dollar.

oh, silly me.
other Jim | 04.06.08 - 11:00 pm | #

Sorry for the pile on - didn't see the post until I hit PUBLISH..

not to worry, I saw your tax situation explanation after I asked my naive question. My income level does not give me the opportunity to learn such tax considerations.

While I don't practice what I wish (ran up credit cards to twice national average during the Master's degree fiasco) I would rather have little debt and no tax deduction.

Oh what times we live in! Not even safe for Roger the shrubber.

WaMu's market capitalization on Friday was just under $9 billion

Man, you just don't want to be a bank with $9 billion. Let's see, Fremont and Corus,...no, that's not good group to be in.

Rereading "The Curernt U.S. Recession and the Risks of a Systemic Financial Crisis" by Nouriel Roubini.

Banks are going to have a large number of non-productive assets (foreclosed houses) on their books...unless they are growing cash crops, these properties are leeches on the balance sheet...they are going to have raise capital every month to off-set the lose of managing non-productive assets...at the same time, consumers/investors are not going to want to part with their capital...

the only upside at this point of owning a home is being able to chop it up into pieces for fire, for cooking, for warmth, and the land to grow subsistence crops...

...systemic failure is coming...

there will be central bank operations to keep the euro @ $1.60 for a floor.

Could Soros break the buck like he did sterling?

Alec writes:
there will be central bank operations to keep the euro @ $1.60 for a floor.

Alec, ECB has been making noises about upholding Dollar for months, (at least since Nov. when they announced helping Airbus' $1.35EUR business plan.) It (the Euro) was at +/- $1.43 then.

It appears occasionally that they've been trying to hold the line, but we can see that hasn't been altogether successful.

The reality is that Europeans have been saving money, have social safety nets, and are less obsessed with plasma tv's and cheeseburgers. European economies will suffer, but they are better equipped to deal with it.

And America just can't stand that!

A strong currency without the productivity gains to go with it is like meth. Makes you feel invincible, but it burns you up.

Factories will flee overseas to be replaced with service and retail jobs and nobody will notice because the economy is so good. European companies will leverage themselves up buying up (cheaper) foreign production to survive.

Credit will burst forth out of every crack in the ground like an artesian spring. Some will have the sense not to drink, but most will come to consider it as gods gift.

Your largest industrial companies will start playing arbitrage games to offset declining income from production. Eventually, they will become finance companies wrapped with an industrial.

And Europe is already a half a decade along the path already. How long it can go on will depend entirely on how willing its consumers are to go out on a limb. Many of them are already as, or more, leveraged than the US is on a debt-to-income basis.

http://www.finfacts.com/irelandbusinessnews/uploads/fitch2july302007.jpg

Good luck getting the Germans to go from a nation of savers to spenders to keep the party going.

Bosch,

Twice the euro has brushed $1.60 and hasn't broken through. Barring another cut by the Fed, that's the line in the sand.

Why would I see something from a portfolio that is generating 8 to 10% to pay for something I can borrow at 4.75% and pay back in the course of a year?

I've always wondered why Fidelity and others haven't jumped on this idea.

Introducing the Home HELOC Margin Account ® featuring:

• A low introductory rate of prime minus one!
• Expanded tax deductibility of margin interest!
• A credit line of up to 125% of the value of your home. Depending on appraiser.
• No minimum margin requirements! Even on the most volatile stocks or even options!
• Severability! Margin debt can be discharged in bankruptcy while keeping securities in qualified accounts (401K, IRA's, etc)
• Reduced margin calls! Zero margin calls as long as you remain employed and don't need to relocate.

If they would have had this option in '29 there probably wouldn't have been a crash.

Well Russia seems to have plenty of money and they seem quite happy to buy luxury European goods...as does China...as does India...as does the 5/6ths? of the economic world that is not the USA. So the US goes down 10%.....how much of a big deal is it?

Russian Consumer Credit '05:

Savelyev is just one of millions of Russians who have recently discovered consumer credit. According to the Russian Central Bank, retail lending to private citizens hit $15 billion by mid-2004, a 50% increase in six months, and up from just $1 billion since the start of 2000.

More Russians Are Saying "Charge It"

Russian Consumer Credit '05:

The real growth sector, on the other hand, is consumer credit. Just about anyone can now walk into a Russian electronics store, show a passport and walk away with a refrigerator. As we noted previously, we are still awed by the fact that a young Russian friend of ours was able to buy herself a nice new French car – on credit – this despite the fact that she was single, had a three-month-old driving license, no declared income, no credit history, no guarantors – indeed, hardly even a fixed abode!

PRISTAV Debt Collection Agency - Russian Consumer Lending — a meltdown in the making?

Russian Consumer Credit '07:

MOSCOW (Reuters) - Russia's top consumer lender, Russian Standard Bank, has temporarily halted issuing cash loans as a result of the global credit crunch, the Financial Times reported on Saturday.

Russian consumer lender halts some loans: report
| Reuters

Completely agree, Alec.

"Line in the mist" might be even more appropriate.

The "old" magic number was $1.50, busted around about 2/26/08. Once it blew past that, it hit 1.5903 on 3/17/08 less than a month later, before hovering in the high 50s since. Given that it can move 300pips ($0.03) on any good/bad news event, $1.60 is but sneeze away. And I'm beginning to believe that any erstwhile "psychological barriers" (as $1.50 was thought of) are a thing of the past. Just too much turmoil to assimilate.

I'm thinking the Willow Financial comment deserves a movie-of-the-week...

Attack of the Rogue Bean Counters!

Yikes!

IPodius, there are websites that cover that for credit card carries.

True story. I paid off the last 48K on my mortgage using 3 different 0% offers for 6-10 months. On the one hand, it put a bit of a crimp on my cash flow, but it felt good avoiding the mortgage interest, and even better removing the secured interest in my home.

I would not recommend this to anyone who has not practiced gaming the debt systems for awhile, and please don't blame me if you do and lose.

All of this said, the 0% offers are falling off the cliff the last few months, as are the amounts that any lender will give you as a line.