I know we're in a recession by the numbers, but it sure doesn't feel like one. (Yet.) In parts of the country where the pain hasn't hit home it still feels like 1999.
As with Iraq Bush will claim all developments on the economic front are "good news" regardless of whether impartial and informed observers disagree. Even in the face of contrary empirical evidence he'll go down swinging, hoping to forestall blame and foist it all on his successor. Being Republican means you never admit you're wrong. Ever.
If you haven't seen this graph I made from the most recent Federal Flow of Funds report, you should! I think it summarizes this decade's economic activity most succinctly.
I calculated that the amount of net mortgage debt added 2004-2007 is greater than all the debts listed for 1976-2003!
Plus let's not forget the general fund debt, which was $3.3T at the end of FY01, and is now . . . $5.3T.
Bad news for all those loading up on "undervalued" financial stocks. For what it's worth, the interbank cash and currency swap markets are still trading at what one can only describe as distress levels.
US CEO confidence index drops to record low-survey
An index of chief executives' confidence in the U.S. economy plunged to a record low last month, reflecting deeper concerns about the U.S. credit crisis and prospects for hiring.
Most CEOs expect a drop in U.S. employment levels over the next four to five months, according to a monthly survey by Chief Executive magazine released on Thursday.
The monthly confidence index stood at 84.1 in March -- 25.3 points lower than February and down by half since July, shortly before the subprime mortgage crisis hit. The figures compare with a base number of 100 when the index began in October 2002 and a peak of 182.4 in January 2006.
Of all the people I know that I wonder "how they do it" and have been anticipating them "hitting the wall soon", the ones that haven't hit the wall have done so because they have been able, one way or another, to borrow more.
None of them have done so by increasing their income or actually paying off debt.
Think about those in your lives around you.
How many have become more solvent through increased income vs increased or refinanced debt.
How solid is our economy and financial ship if fannie & freddie are broke? In essence, almost all banks would be insolvent if fannie & freddie were not backed by the U.S. gov. We really are a house of cards.
The financial shenanigans we have experienced over the past decade are only possible under a cartel.
``Absent a forceful policy response, the consequences would be (1) lower incomes for working families, (2) higher borrowing costs for housing, education, and the expenses of everyday life, (3) lower value of retirement savings, and (4) rising unemployment'' said Geithner.
Been watching the 30 day comercial paper spread - back up to 106 bps today and the five day MA is also 106 bps - well above the August wave, well below the year end dash for cash but doesn't appear to be easing noticeably...
Massive taxpayer handout to be debated today in the Senate to builders and corrupt lenders. The NAHB has been playing hardball DC style.
[Earlier this year, the National Association of Home Builders was so dissatisfied by lawmakers' actions -- notably not including the tax provision in the economic stimulus bill-- that it snapped shut its political purse. NAHB said it would stop making contributions to congressional candidates "until further notice."]
"Consumers fell behind on car, credit-card and home-equity loans at the highest level in 15 years... -- from the post
This on the other hand (unlike the "350,000" claims level, which during 1995 would give a false signal), does indeed strike me as indicating a probable recession.
Bernanke did not foresee 4.1% inflation in 2007. Why should we trust his forecasts for future inflation?
He couldn't even recognize one of the biggest bubbles in history. The fed is either incompetent or complicit in a scheme to enrich a few at the expense of many.
The $29 billion credit extension is supported by assets that were valued at $30 billion by Bear Stearns, which valued the assets at market value on March 14.
If $30 billion was the "market value" on March 14, why didn't they simply sell the assets to the market instead of to the Fed?
"You keep using that term 'market value'. I do not think it means what you think it means."
Is muni next (they have to pay more but with less income coming in -- sounds like homedebtors: less income but higher "resets")?
Muni Losses May Put Taxpayers on Hook for $7 Billion
Muni Losses May Put Taxpayers on Hook for $7 Billion (Update2) - Bloomberg.com Minooka needed $55 million to build two schools and renovate two others in the town 50 miles (80 kilometers) southwest of Chicago, he said. Two months later, the district sold 10-year tax-exempt bonds at a 4.16 percent yield, 0.8 percentage point more than Treasuries of similar maturity. It's the first time the district sold bonds yielding more than the taxable benchmark Treasury, data compiled by Bloomberg show.
and State and local borrowers across the U.S. may pay about $7.2 billion more in interest over 10 years after municipal bonds lost 0.82 percent on average last quarter, their worst start since 1996, as a drop in debt prices pushed yields higher, according to a Merrill Lynch & Co. index.
Does anyone see a way to have wage inflation? Without it, we're all going to get crushed with food and energy prices...even if they're not really part of our cost of living.
I can't see wage inflation.
I can't see a stronger dollar by much.
I remember 1992. I was graduating from college with my fancy ivy league degree that I'd borrowed a bunch of money to get and there were NO jobs. I ended up taking a job that i could've gotten right out of highschool (real estate appraiser) just to pay the bills.
I did get one interview. the told me I was one of 10 people they interviewed out of 300 who applied.
Good luck class of 2008. Oh the places you will go.
Thanks for the link. I don't know the answer. I just believe the current system is being abused and is not working. I think we need to at least have an open debate on the issue of the nature of money & credit. The process of debate alone would educate many and might lead to accountability and prudence.
Also, nobody has ever explained how excessive leverage creates prosperity.
It seems to me, excessive leverage benefits so few at the expense of so many.
Also, nobody has ever explained how excessive leverage creates prosperity.
It seems to me, excessive leverage benefits so few at the expense of so many.
Angry Saver
Bingo. Exactly why all my debts are paid off.
Ya it was painful, but in no way am I promising future work and quality of life for depreciating assets - ever again.
Oh, we'll be forced onto the gold standard within a few years.
Over the next few years we will see plummeting tax receipts, falling value of the dollar, cratering consumption, debt defaults left and right, and a financial system holocaust.
No way will folks or countries trust each other for anything other than goods, gold, or something gold-backed.
This seems to me to be a race for time between the Central Banks trying to pump liquidity in to prevent a disorderly meltdown, and the realization of the reality of capital inadequacy in many institutions.
So far the CB's have put out a safety net for the Money Center Banks, the major IB's. The FHLB's have funded Countrywide and WaMu, and probably others. An explicit guarantee of all the GSE's seems inevitable.
I'll admit to being hazy on the actual increase in Federal deficit (borrowing) caused by all this but, I doubt its 0. At what point do the markets' revulsion at the risks inherent in long-term US treasuries make the increased costs at the long end outweigh the lower costs (returns to savers) on the short end?
It feels like the 70's when I was in college and it was hard to find a job. It took my daughter months to get a part time minimum wage job as a cashier. She was the only hire for her store. I hope she and I both can keep our jobs throughout the next few years.
It's not a foreclosure crisis, Dodd. Foreclosures are a symptom, not a cause.
I believe we have a "growth for the sake of growth" model that is not viable. A system that is based on consumer spending without a growth in consumer incomes is doomed. The world can see this - just look at the value of our dollar. Forcing credit into a system without underlying demand is nuts.
How many have become more solvent through increased income vs increased or refinanced debt.
Average Joe | 04.03.08 - 11:21 am | #
Average Joe,
This is where it gets interesting. About six months ago I just said screw it and started asking family/friends/coworkers about the debt load they were carrying. Interesting answers to say the least. A large portion of the answers were little to none. Think of this as the 33% with paid for homes. And the people who are carrying debt?...They have a ton of it. I honestly do not see how some people are above water.
Heck,just about all the parents friends qualify for SS and yet half HAVE to work...The other half that saved during the 70's-90's...Retired comfortably.
Thats why we have to careful to say "Everybody is in trouble". Heck,I'm sitting on 4.5 years of cash just waiting for the right deals to come along...Along with a younger brother,a couple of cousins and a couple of aunts and uncles.
All the points of view around the Bear collapse reveal underlying beliefs. For instance, Bernanke has stated that hedge funds have remained remarkably stable during this financial crisis.
In my view, hedge funds pulled their money from Bear and caused the bank run. Hedge funds aren't waiting around to take a beating when the true price of the MBS are revealed. Unlike hedge funds, most pension money traditionally doesn't go short.
Why the hell is Hank not at the Banking hearing? He's pulling all the strings, commiting all the taxpayer capital and too special to face the softball scrutiny?
I just got back from a business trip to Vegas, wow, no recession there. Exhibithall at the Mandalay Bay conf. center, all the restrauants crowded, hotels sold out, took customers to "Blue Man Group" tues night, packed out. I know the housing sector is dropping there but people are seemingly still going there to drop $$$$'s (mabey ones they don't have?)
Why rely on the opinion of blackrock? Liquidate the portfolio and set some marks. 30 Billion of "liquid & investment grade" securities sold over a short period should be a lay up.
The truth is that fannie and freddie are broke. This secret has to be maintained. If the assets of fannie & freddie are devalued, most banks would be immediately insolvent.
Zero said: "I know we're in a recession by the numbers, but it sure doesn't feel like one..."
We're not in a recession by the numbers. The numbers have been this bad at other times when we weren't in a recession, also.
The most that can be said (although not by me) is that we might be in a recession. But we might also be at a trough of slower-but-still-comfortably-positive growth just before another growth spurt.
Dude, where's my HELOC? I've got credit card debt to roll and I want a new toy. I want, I want, I want...
Soon there will be lots full of repo'd Cadillac Escalades. Take your pick.
@barely - they said Hank wasn't there because of a "long-planned" trip to China. Hmmm ...
Anyone who has ever listened to them has been nothing but misled.
They are not there to tell the truth, but there to mislead.
Just as any crook I know who agrees to talk to me post-miranda is doing so not to relay the truth but to convince me of a lie. Just like a cheating husband who wants to "talk" with his wife only wants to once again misled, gain the false confidence and talk their way out of trouble.
They have been doing it their whole lives.
The panel should be full of people who called this from the beggining.
outside of oil the trade deficit is getting better. Finding alternative policy approaches to oil consumption is something the idiots in DC might find itself capable of addressing in the near future.
Given that it costs 10 USD for a cup of coffee in Europe now I think over the long term if we can reduce our exposure to OPEC we'll be doing better.
We do need to to figure out how to expand economic opportunity though. Too many communities in this nation only have the Walmart, the Army or street gangs as apparent career paths.
Interestingly, I saw a TV commercial for a major national health insurance company offering "affordable" health plans for the self-employed. I have never seen this company advertise on TV before. Think people are dropping their self-pay coverage like flies?
Best Buy also announced that it holds troubled auction-rate securities. These are AAA/Aaa-rated bonds collateralized by student loans guaranteed 95 percent to 100 percent by the U.S. government. Unfortunately, the market for these securities collapsed in recent times, which made them virtually impossible to sell on the open market without taking a substantial loss.
Normally, companies are required to write-down the value of these securities to this new value, but Best Buy reclassified the investments as non-core, which allowed them to forego that requirement.
Been watching the 30 day comercial paper spread - back up to 106 bps today and the five day MA is also 106 bps - well above the August wave, well below the year end dash for cash but doesn't appear to be easing noticeably...
That's bad news, because it means this spread is for real, and not just an end-of-quarter dash for cash. However, spreads were considerably higher in 81-83 - these are "mild recession" spreads.
Geithner is painfully answering pointed questions from Schumer. keeps devolving to the excuse that "these things can happen incredibly quickly" thus whocouldanode?
"The most that can be said (although not by me) is that we might be in a recession. But we might also be at a trough of slower-but-still-comfortably-positive growth just before another growth spurt."
Ah, love that smell of 'hedging' bets in the morning.
You may be right but no one will be better off for believing you.
Had the financial firms spent the last six months adding capital, shoring up their balance sheets, preparing for a serious slow-down, then there would have been no run on Bear Stearns.
But instead we get "subprime is contained", "the bottom to housing is in", as the DOW cracks 14000, as the Fed hold rates steady in the fall because "a recession is unlikely".
Can we really blame people for panic when reality proves those "in-the-know" really aren't.
It does nothing to gain peoples confidence to blindly be bullish in the face of evidence supporting otherwise.
When the same government encourages people to save money for rainy days, store food in case of emergency, change the batteries regularly on their smoke alarms, buy car insurance just in case, eat right, and on and on....but when the risk of financial pain seems near, instead we are reassured that all is well, that we will be fine, that while it may look like a recession, a recession is unlikely.
I can see overcaution in the face of good times, but should we really throw caution to the wind when it appears it may be warranted?
And good reason to not carry debt if you can help it. (Although if the end is nigh, there might just be some justification for saying "F it" and like party on, Garth.)
Like cobradriver, I'm debt free and savings glutted [sarcasm]. Makes for peace of mind.
IMO, the housing boom was the last tap-out of the American Consumer. Refis and HELOCs to roll over debt. Now no more house(ownership) to fall back on. Game over.
The most interesting question in my mind is where are the money boyz going to look to connive more fictional profits.
Rice, the staple food for about 3 billion people, rose 2.4 percent in Chicago trading today after doubling in the past year.
and
China, India and Vietnam have cut rice exports, and Indonesia has reduced import tariffs to protect food supplies and cool inflation. Rice in Chicago climbed 42 percent in the first quarter, more than all of last year's 33 percent gain. Record grain prices contributed to strikes in Argentina, riots in Ivory Coast and a crackdown on illicit exports in Pakistan.
Global food fight at hand? Somehow "Smoot-Hawley" comes to my mind....
Clueless, yes, it is the day of reckoning for US consumers. Whether it is for the financial sector depends whether or not foreign economies' decoupling from the US economy takes place.
We have been reading for several years that no growth in US household incomes had taken place, that consumption growth was being fueled entirely by borrowing. That seems to have stopped. And individual consumers' borrowing will not start up again in the climate of no income growth, inflation, and persistent high credit card rates.
Average Joe said: "...I can see overcaution in the face of good times, but should we really throw caution to the wind when it appears it may be warranted?"
Warranted by MSM headlines. Unwarranted by objectively comparing our current economic situation with previous ones when conditions were similar.
@Angry Saver - I count 7 furrows in Geithner's brow - you? Note that when Bernanke lies, there are no furrows. He must have practiced in front of the mirror.
--
Evidence That Bernanke Is a LIAR and An Evildoer
David Rosenberg: 04/03/08:
Famous last words -- On August 21st, at Jackson Hole, when moral hazard concerns dominated, Ben Bernanke had this to say: It is not the responsibility of the Federal Reserve nor would it be appropriate to protect lenders and investors from the consequences of their financial decisions. And here we have the Fed Chairman spending a good chunk of his testimony yesterday defending his actions in helping cobble together the JPM-BSC deal To prevent a disorderly failure of Bear Stearns and the unpredictable but likely severe consequences of such a failure for market functioning and the broader economy, the Federal Reserve, in close consultation with the Treasury Department, agreed to provide funding to Bear Stearns through JPMorgan Chase. Over the following weekend, JPMorgan Chase agreed to purchase Bear Stearns and assumed Bears financial obligations. Then again, we were also told this time last year that subprime was going to be contained and housing was going to level off; we were told in July and August that inflation was the greatest threat; then we were notified in October that the Fed had done enough after 75 bps of easing and the list goes on.
-x-x-x-x-x-x-x-x-x-
Born-and-bred American dopes cannot come to terms with the FACT that only evildoers can now be their top leaders. Greenspan, Bush and Bernanke engaged in the evil deed of Pushing Debt during 2002-07 on American households in order to keep their powers (by artificially boosting the economy ahead of the 2004 election and Greenspans reappointment). They ARE guilty of helping build Debt Concentration Camps for 30,000,000 America households. I said so years ago and now the world is witnessing its consequences.
There are no moral hazards in a legalistic and morally bankrupt society that America has been turned into by bankrupters and Fraudsters of New York City.
Only a born-and-bred dope can be made to believe that democracy, as it is practiced in the US, is the best political system. An American is bred with extreme intolerance of, or prejudice against, other political systems. Americans' idiotic attempts to "make the world safe for democracy" gave rise to the Nazis and the consequences thereof. And the worse is yet to come! Over the next 20-25 years Americans will pay the price of their leaders' evil deeds.
can someone tell me why we don't know who the owners of the privately held Fed are? if not, why the hell not? these chumps are slinging our money around with no hint of a conscience.
Just an OT comment on rice futures. CME-CBOT trades long grain rice the last time I checked. Asians generally don't like long grain rice. Consequently a lot of US poduction is consumed in brewing beer and making pet food. Go figure...
The time series I have at the moment is only very recent history, 1/1/2007 - what were those spreads then and what were they coming up from prior to the recession (where here we have an eight or nine fold increase from nine months ago)?
Credit cards and payday loans
can provide short-term convenience for some people, but consumers' shift
toward greater debt could have a long-term, negative impact on the U.S.
economy.
That's one point emphasized by research analyst Kristie M. Engemann and
economist Michael T. Owyang in the April issue of The Regional Economist,
the quarterly journal of business and economic issues published by the
Federal Reserve Bank of St. Louis. The publication is also available online
at: St. Louis Fed | Page Not Found
The 2004 Survey of Consumer Finances (SCF) showed that the percentage of families holding debt rose from more than 72 percent in 1989 to just over 76 percent in 2004. The median value of the debt more than doubled during that time, from $22,000 to more than $55,000.
You assume the economy will fall just like it has before, and I'll assume it will recover just like it has before, and we'll call it even.
Two wrongs don't make a right. Although it can seem as if the decision makers in middle management are pinheads with no sense of history, the market does have more of a memory than it sometimes appears. All bull markets resemble one another, but each bear market is unique [with apologies to Leo]. Risk management improves over time (no, really!), laws get passed to avoid the specific crisis that led to the current conflagration and some companies have one or two board members who remember the last few busts.
Take this "soft patch." I sure don't know about a previous one that was so widely discussed beforehand in the media. Effect of bloggers? Better economic forecasting? I don't know, but it seems different this time. As well, who can remember a downclimb where house prices downclimbed BEFORE the economy at large? Or where oil futures didn't start to fall with the perceived future fortunes of the world's biggest consumer?
Or take the previous recovery. Widely referred to as the "jobless" or even "job-loss" recovery, it was different in that companies used increased productivity, outsourcing and automation to increase production rather than hiring workers proportional to the increases. That was different. As well, just-in-time production and sophisticated inventory control (everywhere but at GM) have meant recent busts haven't had the massive inventory hangovers of previous ones.
can someone tell me why we don't know who the owners of the privately held Fed are? if not, why the hell not? these chumps are slinging our money around with no hint of a conscience.
idoc | 04.03.08 - 12:37 pm | #
my my... idoc. It's not YOUR money. It's their money. It's backed by the Federal Reserve, they can do what they want to it.
Didn't you follow the exercise above. Check that dollar bill again.
Using equal value (chained) dollars, the 100 at the start of your chart becomes 300.
As for the correction being unimportant over the the last ten years, I'll trade you ten dollars for every twelve you give me. You won't even notice the difference.
c&c
"Where were you clowns when people were treating homes like pokeman cards?"
well, they were creating the problem-
~systemic looting and dismantling.
~modifying personal bankruptcy laws as per credit card lobby.
~deregulating.
~increasing the ginni coefficient.
~transforming the red states to the serf states.
Credit Scores Unfaltering Amid Credit Crisis
"Reports of a worsening U.S. economy run rampant, yet consumer credit averages are unchanged.
The national credit score has remained the same for nearly a year, according to Experians National Score Index. The findings based on a sampling of two million consumer credit files reveal the national average has stagnated at 692 since last April. This number has increased one point versus the 691 average in March 2007.
This might come as a shock to many, especially during a so-called credit crisis." Sorry. Page not found.
WTF are you guys doing with tax payers money??? And how come you guys get to profit out of this?? This does not seem like a standard loan to me? And WTF was the SEC doing here??
outsourcing and automation to increase production rather than hiring workers proportional to the increases.
Ralph Cramdown | 04.03.08 - 12:56 pm | #
I tagged along with a couple of relatives to the Farm Progress show last year. Wait till you see the technology coming down the pipeline to replace manual farm labor. Automation/computers will do to hand picked crops what the steam engine did to grains.
They could almost blow through the entire hearing trying to get Geithner to give a straight answer about why he didn't think it was a good idea to open the window to Bear.
The senator following Menendez - unwittingly, perhaps, speaking revealing truths. "I'm sure Chairman Bernanke acted in the best interests of financial markets and I want to thank him." "It's my observation that ALL of these financial are so intertwined that ANY of them are too big to allow to fail.
In 1982, financial profits were approximately 10% of national income. By 2006, financial profits were approximately 40% of national income. Financials employees accounted for only 5% of the work force in 2006.
Everyone should tape the Hearing on Fed's Role in Bear Stearns Rescue, invite some friends over, and play a drinking game called Liability. One team is Liquidity and the other is Confidence, everytime their team name is said they have to take a drink. Everybody drinks when you hear Liability.
Who wouldn't seek a second opinion from a doctor who misdiagnosed the problem 6 months ago, but now claims to have the solution for the problem he didn't think you had?
Bernanke may or may not know what to do from here on out, but since confidence is so important in this market, and the fed is so important in this market, how can we move forward based upon their reassurance.
We need another opinion.
Volker has warned of these problems for a while and yet no one wants to seek or follow his advice or anyone else's who understood the problem enough to see it back when it mattered.
A drug addict will seek out the advice of anyone who has a solution other than withdrawls.
Look at the weightloss/diet industry. The answer to losing weight is the same now as it has been since the beginning of time: Eat less, move more. Any quick diet that promises to get around that will sell. No one will buy the real solution because it's free, it's obvious, and there are no shortcuts.
my question about who owns the Fed was rhetorical. the implications of private ownership, namely banks, is one of complete conflict of interest. why does America allow this to stand?
Actually this post is quite frightening. For a while we had consumers going deliquent on their mortgages, whilst keeping up on the CC.
Now they are letting both go unpaid. Complete financial exhaustion.
I wonder, does anyone have car loan deliquencies? I suspect that's the last shoe to drop. When all three have rising deliquencies that will be the over the cliff moment.
OT - you must check out this RE agent web page selling people on buying a new home and walking on thier old mortgage if the bank will not work with them: read the comments.
Misean,
My ceo's brother runs a secondary lender in auto space. They can't get money from the market anymore and Deliq are sharply higher. look to book is really bad.
Auto and Homes together make this recession longer than forecast.
Part of the problem is that the Senators are not economists, nor are they trained in economics.
I watched the entire hearing yesterday and it is surprising how little the committe understands about basic economics.
thus, they TRUST Bernanke because he is "the expert" (several senators said just as much). they have little to no economic acumen with which to challenge his assertions.
thus, whe he says "without bailout of Bear the entire system was at risk" they must only agree... and they can only argue whether or not the proposed bailout was the appropriate bailout. They cannot argue IF the bailout was appropriate, or the cause of WHY the bailout was appropriate.
Only one senator "got it" (Senator Kasey/Casey, sp?)
I would have asked (among other things):
1) so you feel this bailout was necessary for financial stability?
2) well then, how did we allow one firm to be necessary to financial stability?
3) what were other ways of dealing with this WITHOUT using taxpayer money?
4) was it appropriate to give all this function to ONE entity (JPMorgan) who is now also by definition too big to fail?
5) how many other organizations have the possibility to be Too big to fail?
6) did repeal of Glass-Steagal have anything to do with this
7) where was the oversight of these firms prior to the bailout
8) who valued this paper?
9) on what model was it valued?
10) why did you give JPmorgan what is in essence a non-recourse loan on poorly-valued assets?
and so on.
but the senators don't/can't think that way.
they ask:
"whew, thank you for saving us!"
then
"what can we as a senate do to help with this cause"
Actually this post is quite frightening. For a while we had consumers going deliquent on their mortgages, whilst keeping up on the CC.
Now they are letting both go unpaid. Complete financial exhaustion.
I wonder, does anyone have car loan deliquencies?
Consumers fell behind on car, credit card and home equity loans...
I have a suspicion that the reason consumers kept up with their cc debt for a while was because the monthly payment was a fraction of the monthly mortgage payment, so easier to handle.
If a 30 year mortgage represents some fraction of 30 years worth of labor, then you leverage that up 30 times you only need 900 years of labor from each homeowner to solve this mess. We are not devolving into communism but corporate feudalism.
A;
pulled this off that blog. Pay attention to point number 4 if you think lenders are now acting responsibly:
If you are considering purchasing another home then letting your present home go into foreclosure here are some tips that will save you trouble later down the line as well as help the transaction run smoothly.
1. You need an excellent lender who can structure your new loan properly; after all there will be questions by the new lender.
2. You need an excellent real estate agent (like me) who knows how to structure this deal. Your real estate agent also needs to know how to find the right home. This may seem strange but not all homes will help the transaction and some actually will hurt your chances of qualifying.
3. There are no longer 100% loans so you will need a down payment. If you dont have a down payment there are other alternatives but again your agent must be aware of these other options and how to implement them.
4. Once your real estate agent has located a likely home youll have to qualify for a new mortgage, so you cant have any mortgage lates and youll have to have sufficient income to qualify for your existing mortgage and the new one. This is where a savvy lender is most important.
If a 30 year mortgage represents some fraction of 30 years worth of labor, then you leverage that up 30 times you only need 900 years of labor from each homeowner to solve this mess.
Well, it's a good thing the average life span is increasing.
Thanks, I'm gonna see if I can research that at lunch time.
Angry,
Well thanks to the new BK law, that CC debt is an Albatross.
Outsider,
Well, yes, and as well, they needed to keep current because that's how they were making ends meet. Exhausted, they're just cutting everything, hoping to keep food on the table. To hell with the credit score.
That's why I'm curious about auto loans. Once they give up on that, how do they get to work?
Check, and the auto dealers are rolling the balance on the old car into the loan. Over and over. Those 8 and 9 year loans usually start out ~25% more than the value of the new car. (If I remember right).
Speaking of autos,
How long until Ford and GM are deemed "too big to fail" and they get governemnt (taxpayer) money to fund operations and pay union members $55 an hour to put wheels on cars? Soon methinks.
That's why I'm curious about auto loans. Once they give up on that, how do they get to work?
They take the bus? They buy a 20-year-old Chevy? You can buy a car sufficient for transportation to and from work for a couple of months of payments on that Lexus car note.
New cars are not a necessity. If there are a lot of jobs out there paying workers so little that they can't even afford a car that'll get them to work, we've got much more serious problems than bad car loans....
Yes, this is entirely correct, even if it doesn't seem so obvious. We want to think it's only something obvious like our debts and capital investment, or some reasonable such set of tangibles....but ultimately it's actually the combination of the productive talents with capital investment together that back the dollar and our wealth. It's very much an illusion to think that your overseas investments for instance are just guaranteed to pay off no matter what.
idoc writes:
did anyone ask the question why the 96h emergency to settle Bear deal before Asia mkts opened? why this emphasis on saving stocks?
No, but one answer is counterparty risk. Market makers in stocks, bonds and futures would cut back or stop trading if they thought that the counterparty on the other end of the trade might declare bankruptcy and not honor the trade. That might cause a chain reaction of bankruptcies at worst and/or severe market dislocations.
I wonder, does anyone have car loan deliquencies? I suspect that's the last shoe to drop. When all three have rising deliquencies that will be the over the cliff moment.
Cheers,
Misean | 04.03.08 - 1:34 pm | #
Misean,
I saw a article a couple of months ago that stated the average loan was for something along the lines of 5.8 years with a balance north of 38k.
Down here in Florida ALL the carlots,used and new,are packed fence to fence. The big auto auctions by Orlando are also full.
Last anecdote. My boss just bought a used F350 to tow with. He looked at around a dozen from private parties. Not a single person could beat the local dealer pricewise. Why? Everybody was upside down and had no money to bring to the table. Yikes.
our tax dollars will be funneled from Treasury to Fed to IB's to stocks/commodities. conclusion: buy stocks/commodities. piggyback onto our own money. how virtuous and eternal.
I don't get this. The stuff offloaded to the taxpayer from Bear Stearns is junk. But yet, the same Congress wants to find ways so taxpayers can continue to keep from having their homes foreclosed on. Isn't this exactly the same junk? If the property isn't worth that much when it's in Bear Stearns portfolio, then it isn't worth enough to bail out individual homeowners.
I know quite a few middle classers who don't have $500 to rub together.
A single missed payment on the note is enough to get something that will run. And if it isn't, there's a used car lot down the street from me that will (still) write a usurious zero-down loan for anyone with proof of employment. (probably best to buy the new junker before they repo the old car, if you go that way...)
One thing I think is going to happen in a hurry is that the middle class is going to rethink just what are the necessities of life. Shelter and transportation to/from work are necessities; owning a home and a fancy car are not.
ok Dimon, you jerk. if a catastrophe needed to be avoided, tell all your execs and shareholders to return all those profits to prop up the system you just raped.
Auto loans-Dealer lenders loaned at 125% of new car value thus embedding previous loan non payoff amount into loan. Car buyers will be and far between this year. They moved sales forward begining after sept 11.
Now the dealers, manufacturers and lenders are going to pay.
I know 2 dealers who just sold because they were starting to lose to much money.
they ask:
"whew, thank you for saving us!"
then
"what can we as a senate do to help with this cause"
Yearning to learn | 04.03.08 - 1:39 pm
Just gov't types-- inside people take care of people inside.
Back in the day when public service meant sacrificing personal gain it was kind of noble-- a kind of esprit de corps to be acknowledged from the elected to the appointed. But what we've got now is something very different since the top bureaucrats are hired on the basis of their buy-in, and the ostensible bona fides they can bring to the illusion of public service. and the elected are only concerned with the money that got them elected to begin with.
I bet a lot of these people on both the elected and appointed sides are plastered with cluelessness now. This fiasco is on their watch and while their desperate measures, let's stretch it big time, are well meaning, they spell the end of a lot of things that define the nation.
As a republic, we have lost a lot, but it's just the beginning. Pardon me for pointing out that the national identity is on the line, and I don't trust the motivations of either side.
I know 2 dealers who just sold because they were starting to lose to much money.
cd | 04.03.08 - 2:07 pm | #
Yes sir,the shakeout in the car area is just getting started. I worked for a small,family owned Yamaha dealer turning wrenches part time 1991-94. The biz was so slow in Socal during that time frame only parts and service kept the dealer alive. The over capacity is going to crush a lot of dealers...Who will benefit? Longtime dealers who did not overleverage/overspend during the good times. Yes,I know a couple sitting pretty right now(Yamaha shop is one).
gold standard is ridiculous for one simple reason:
Dollar is always backed only by the faith of the government, even when govt wants you to believe that dollar is backed by gold.
Government can always devalue gold-backed currency if they deem it necessary. There is no such thing as gold-backed currency, really.
what is important is not whether currency is backed by gold, but whether money supply is monitored and controlled in a transparent, simple and publicly reported manner.
These guys live in your neighborhood, pay property taxes that suppor your municipality, support the stores you shop in, eat in the same restaurants
Plus with ~20 total hrs of assembly labor they create a retail product worth $20-30,000+. In a just world they would get a significant chunk of the value-add from their labor.
Service is the only thing keeping dealers above ground. I work with both front and back ends re: DMS software. Bubble state dealers will be in trouble long time. Autonation heavily invested in CA-FL-AZ-NV, that's why thier ceo is always about rate cuts, thier hurting!
Imports and highlines holding up better-obviously..But thats changing too.
The only thing is, though, I spent a lot more in Q1 2008 than Q4 2007. We'll just have to wait and see if it was enough.
Unfortunately Seb, I cancelled you out by taking my bonus and my tax return cash and paying off any debt lying around and put the rest in savings/investments. I'm also going to refi my vacation place down and toss a few bucks at it on the refi. I'll start spending again in 2009, 2008 is on its own.
this is nothing more than a redistribution of wealth -- from the debtors to the creditors -- let's see what will happen to the middle class (shrinkage!?!?!)
Somebody had mentioned earlier that when people give up their car loans, how will they get to their job? My reply: in the coming collapse, they won't have a job, so there's nothing to worry about. See, it all balances out!
you don't own any IB. you own a bunch of credit crap.
You don't own that either.
You have a secured loan to JPM backed my a bunch of credit crap.
In fact, it's not really even a secured loan, exactly. You have provided a 30Bn loan to a bankruptcy remote SPV. Your only recourse is a bunch of credit crap, to which JPM has taken the first loss piece of 3%.
Now, Iridium-backed, that would be . . . interesting.
Dude, it can't be a material we desperately need for alternative energies. Ditto gold.
Hobbling manufacturing just because you can't regulate banks is silly. Our current problems are regulations and non-existent (I can't even call it "lax") oversight. Not lack of a base metal.
Cobradriver,
the debt question you pose is one answered for me yesterday by a friend who's a doctor at Bellevue in NYC. She told me she's tired of working for the mortgage and is looking for a cheap rental. Whether she's hoping to sell( which is what I assume) or walking is not clear. But in her email, she mentioned she's been talking to the other docs in her specialty, and "they all have debt they never plan to pay off". She's in her late thirties.
On the other hand, I'm a saver, no debt, my elderly parents the same. I'm sure there are a goodly number of folks who are in the same position, without being wealthy.
Plus with ~20 total hrs of assembly labor they create a retail product worth $20-30,000+. In a just world they would get a significant chunk of the value-add from their labor.
There is very little value-add from their labor when compared to that of the machines and energy. The latter two are what allows the effort to be 20hrs instead of 10,000.
The world is indeed not just, but this probably does not represent a good example.
First?
I know we're in a recession by the numbers, but it sure doesn't feel like one. (Yet.) In parts of the country where the pain hasn't hit home it still feels like 1999.
As with Iraq Bush will claim all developments on the economic front are "good news" regardless of whether impartial and informed observers disagree. Even in the face of contrary empirical evidence he'll go down swinging, hoping to forestall blame and foist it all on his successor. Being Republican means you never admit you're wrong. Ever.
A great way to reduce systemic risk is to allow failures.
If we can't accept failure, then we need to vastly reduce leverage.
straw...camel back...broken...first!
This is not the bottom.
If you haven't seen this graph I made from the most recent Federal Flow of Funds report, you should! I think it summarizes this decade's economic activity most succinctly.
I calculated that the amount of net mortgage debt added 2004-2007 is greater than all the debts listed for 1976-2003!
Plus let's not forget the general fund debt, which was $3.3T at the end of FY01, and is now . . . $5.3T.
DC delendo est
Bad news for all those loading up on "undervalued" financial stocks. For what it's worth, the interbank cash and currency swap markets are still trading at what one can only describe as distress levels.
I wonder when the "super size me" dude will let his credit go and see what happens on film.
US CEO confidence index drops to record low-survey
An index of chief executives' confidence in the U.S. economy plunged to a record low last month, reflecting deeper concerns about the U.S. credit crisis and prospects for hiring.
Most CEOs expect a drop in U.S. employment levels over the next four to five months, according to a monthly survey by Chief Executive magazine released on Thursday.
The monthly confidence index stood at 84.1 in March -- 25.3 points lower than February and down by half since July, shortly before the subprime mortgage crisis hit. The figures compare with a base number of 100 when the index began in October 2002 and a peak of 182.4 in January 2006.
UPDATE 1-US CEO confidence index drops to record low-survey
| Reuters
Better buy those stocks now or be priced out forever.
Of all the people I know that I wonder "how they do it" and have been anticipating them "hitting the wall soon", the ones that haven't hit the wall have done so because they have been able, one way or another, to borrow more.
None of them have done so by increasing their income or actually paying off debt.
Think about those in your lives around you.
How many have become more solvent through increased income vs increased or refinanced debt.
By opening up the discount window to broker dealers, the fed bailed out numerous IBs, imo.
At first, I was very against the stimulus package. But against all the other fed bailouts, it now seems puny.
Dude, where's my HELOC? I've got credit card debt to roll and I want a new toy. I want, I want, I want...
As we listen to the Fed testimony today the irony continues.
The more they try to reasure us that they were justified at averting disaster,
the more people will realize that we are close to disaster, that we're a fragile system dependant upon a rigorous Fed. Very reassuring.
Time to go long on the faith in the Fed.
If the Bear assets that the fed has assumed (29B) are indeed high quality, then liquidate them now.
This whole thing is a giant charade. AAA agencies are not AAA. Fannie & Freddie are broke. This is the secret the fed & treasury are protecting.
Another reason for a rally. To the moon this time.
Maybe this is why COF insiders are selling
How solid is our economy and financial ship if fannie & freddie are broke? In essence, almost all banks would be insolvent if fannie & freddie were not backed by the U.S. gov. We really are a house of cards.
The financial shenanigans we have experienced over the past decade are only possible under a cartel.
``Absent a forceful policy response, the consequences would be (1) lower incomes for working families, (2) higher borrowing costs for housing, education, and the expenses of everyday life, (3) lower value of retirement savings, and (4) rising unemployment'' said Geithner.
Geithner Says Markets Still `Impaired,' Urges Action (Update5) - Bloomberg.com
Since Geithner and his fellow schmucks/shysters/shylocks have failed at (1)-(4) already, can we please be rid of these screw-ups?
and I thought consumers default on their house payments but keep their CC paid.....
Been watching the 30 day comercial paper spread - back up to 106 bps today and the five day MA is also 106 bps - well above the August wave, well below the year end dash for cash but doesn't appear to be easing noticeably...
A run on Countrywide, a run on Bear.
Clearly, we need to at least debate whether or not the current system is worth saving at all.
I'm petitioning my congressmen to debate a fiat standard vs. a gold standard. I implore you all to do the same.
Massive taxpayer handout to be debated today in the Senate to builders and corrupt lenders. The NAHB has been playing hardball DC style.
[Earlier this year, the National Association of Home Builders was so dissatisfied by lawmakers' actions -- notably not including the tax provision in the economic stimulus bill-- that it snapped shut its political purse. NAHB said it would stop making contributions to congressional candidates "until further notice."]
Expired
JG,
I totally concur. Why should we assume things will improve? Why just tinker with a broken system? The system is failing the majority.
Money must = work. Not bogus promises that benefit the originators at the expense of the majority.
I told alla ya'll but ya'll don't listen too good in spite of I'm the Financiator-in-Chief. I done just what ah wanted with Arbusto.
Ah inaugerated the Owership Society an' alla ya'll are gonna owe more every day. Soon as mah boys can swing it, you're gonna $30B more any day now.
"Consumers fell behind on car, credit-card and home-equity loans at the highest level in 15 years... -- from the post
This on the other hand (unlike the "350,000" claims level, which during 1995 would give a false signal), does indeed strike me as indicating a probable recession.
Bernanke did not foresee 4.1% inflation in 2007. Why should we trust his forecasts for future inflation?
He couldn't even recognize one of the biggest bubbles in history. The fed is either incompetent or complicit in a scheme to enrich a few at the expense of many.
Re: Bear Stearns portfolio
The $29 billion credit extension is supported by assets that were valued at $30 billion by Bear Stearns, which valued the assets at market value on March 14.
If $30 billion was the "market value" on March 14, why didn't they simply sell the assets to the market instead of to the Fed?
"You keep using that term 'market value'. I do not think it means what you think it means."
Angry Saver - You know I side with you on a lot of issues. And I am a horder of gold.
But I don't think going to the gold standard is the best solution.
Currency has to represent something tangible -agreed.
Perhaps the strongest currency is a well blended basket of commodities and currencies which is implicitly inflation-protected...
There is a good post arguing that derrivatives is this next trading vehicle.... I don't know yet.
Unenumerated: Commodity derivatives: the new currencies
Check it out...
Is muni next (they have to pay more but with less income coming in -- sounds like homedebtors: less income but higher "resets")?
Muni Losses May Put Taxpayers on Hook for $7 Billion
Muni Losses May Put Taxpayers on Hook for $7 Billion (Update2) - Bloomberg.com
Minooka needed $55 million to build two schools and renovate two others in the town 50 miles (80 kilometers) southwest of Chicago, he said. Two months later, the district sold 10-year tax-exempt bonds at a 4.16 percent yield, 0.8 percentage point more than Treasuries of similar maturity. It's the first time the district sold bonds yielding more than the taxable benchmark Treasury, data compiled by Bloomberg show.
and
State and local borrowers across the U.S. may pay about $7.2 billion more in interest over 10 years after municipal bonds lost 0.82 percent on average last quarter, their worst start since 1996, as a drop in debt prices pushed yields higher, according to a Merrill Lynch & Co. index.
Does anyone see a way to have wage inflation? Without it, we're all going to get crushed with food and energy prices...even if they're not really part of our cost of living.
I can't see wage inflation.
I can't see a stronger dollar by much.
All I see is train lights.
I remember 1992. I was graduating from college with my fancy ivy league degree that I'd borrowed a bunch of money to get and there were NO jobs. I ended up taking a job that i could've gotten right out of highschool (real estate appraiser) just to pay the bills.
I did get one interview. the told me I was one of 10 people they interviewed out of 300 who applied.
Good luck class of 2008. Oh the places you will go.
In
Interesting Times,
Thanks for the link. I don't know the answer. I just believe the current system is being abused and is not working. I think we need to at least have an open debate on the issue of the nature of money & credit. The process of debate alone would educate many and might lead to accountability and prudence.
Also, nobody has ever explained how excessive leverage creates prosperity.
It seems to me, excessive leverage benefits so few at the expense of so many.
Also, nobody has ever explained how excessive leverage creates prosperity.
It seems to me, excessive leverage benefits so few at the expense of so many.
Angry Saver
Bingo. Exactly why all my debts are paid off.
Ya it was painful, but in no way am I promising future work and quality of life for depreciating assets - ever again.
Oh, we'll be forced onto the gold standard within a few years.
Over the next few years we will see plummeting tax receipts, falling value of the dollar, cratering consumption, debt defaults left and right, and a financial system holocaust.
No way will folks or countries trust each other for anything other than goods, gold, or something gold-backed.
I think we need to at least have an open debate on the issue of the nature of money & credit.
In order to have that debate, we first have to have people who understand what money and credit are. Good luck with that.
The fed is either incompetent or complicit in a scheme to enrich a few at the expense of many. [Angry Saver]
There's nothing new under the sun, as they say. Shocked, I'm not.
No way will folks or countries trust each other for anything other than goods, gold, or something gold-backed.
There's always gun-backed currency.
This seems to me to be a race for time between the Central Banks trying to pump liquidity in to prevent a disorderly meltdown, and the realization of the reality of capital inadequacy in many institutions.
So far the CB's have put out a safety net for the Money Center Banks, the major IB's. The FHLB's have funded Countrywide and WaMu, and probably others. An explicit guarantee of all the GSE's seems inevitable.
I'll admit to being hazy on the actual increase in Federal deficit (borrowing) caused by all this but, I doubt its 0. At what point do the markets' revulsion at the risks inherent in long-term US treasuries make the increased costs at the long end outweigh the lower costs (returns to savers) on the short end?
It feels like the 70's when I was in college and it was hard to find a job. It took my daughter months to get a part time minimum wage job as a cashier. She was the only hire for her store. I hope she and I both can keep our jobs throughout the next few years.
It's not a foreclosure crisis, Dodd. Foreclosures are a symptom, not a cause.
I believe we have a "growth for the sake of growth" model that is not viable. A system that is based on consumer spending without a growth in consumer incomes is doomed. The world can see this - just look at the value of our dollar. Forcing credit into a system without underlying demand is nuts.
I'm having so much fun watching the Fed and Ben B testify.
When Ben lies, his voice quavers, always has. His response to questions on inflation is chronically the same lie.
Rarely is the concept of "highly leveraged derivatives" even mentioned. Still waiting for the phrase "ponzi scheme" to be heard.
Shifting the blame and increasing the debt.
En'shallah we will borrow our way out of this problem!
Hey US people, please take a dollar out of your pocket and tell me what it says... what is backing that dollar?
The answer will surprise you.
Think about those in your lives around you.
How many have become more solvent through increased income vs increased or refinanced debt.
Average Joe | 04.03.08 - 11:21 am | #
Average Joe,
This is where it gets interesting. About six months ago I just said screw it and started asking family/friends/coworkers about the debt load they were carrying. Interesting answers to say the least. A large portion of the answers were little to none. Think of this as the 33% with paid for homes. And the people who are carrying debt?...They have a ton of it. I honestly do not see how some people are above water.
Heck,just about all the parents friends qualify for SS and yet half HAVE to work...The other half that saved during the 70's-90's...Retired comfortably.
Thats why we have to careful to say "Everybody is in trouble". Heck,I'm sitting on 4.5 years of cash just waiting for the right deals to come along...Along with a younger brother,a couple of cousins and a couple of aunts and uncles.
Chris
All the points of view around the Bear collapse reveal underlying beliefs. For instance, Bernanke has stated that hedge funds have remained remarkably stable during this financial crisis.
In my view, hedge funds pulled their money from Bear and caused the bank run. Hedge funds aren't waiting around to take a beating when the true price of the MBS are revealed. Unlike hedge funds, most pension money traditionally doesn't go short.
Some stability Ben. It's the leverage STUPID!
Watching the dollar roll over... That's the true tell on this whole mess. You can snow J6P but not the folks that play with the big money.
Got gold?
what is backing that dollar?
The productive talents of 300 million Americans.
Next question.
The productive talents of 300 million Americans.
Troy - lmao !
Those talents have a current account deficit of how many billion again?
Gold-backed is retarded given global production capabilities (Russia, Brazil, SA, etc).
Now, Iridium-backed, that would be . . . interesting.
"productive talents of 300 million Americans"
"Next question."
O.K. I'll bite, just what are the PRODUCTIVE talents of 300 million Americans?
For twenty plus years, I have been hearing "American consumers cannot go on like this forever."
Is this finally the day/year of reckoning?
Why the hell is Hank not at the Banking hearing? He's pulling all the strings, commiting all the taxpayer capital and too special to face the softball scrutiny?
pathetic.
I agree, Bugabe needs to put a straighter face when he lies. He will learn on the job.
I just got back from a business trip to Vegas, wow, no recession there. Exhibithall at the Mandalay Bay conf. center, all the restrauants crowded, hotels sold out, took customers to "Blue Man Group" tues night, packed out. I know the housing sector is dropping there but people are seemingly still going there to drop $$$$'s (mabey ones they don't have?)
Why the hell is Hank not at the Banking hearing?
Are these hearings under oath?
Why rely on the opinion of blackrock? Liquidate the portfolio and set some marks. 30 Billion of "liquid & investment grade" securities sold over a short period should be a lay up.
The truth is that fannie and freddie are broke. This secret has to be maintained. If the assets of fannie & freddie are devalued, most banks would be immediately insolvent.
Zero said: "I know we're in a recession by the numbers, but it sure doesn't feel like one..."
We're not in a recession by the numbers. The numbers have been this bad at other times when we weren't in a recession, also.
The most that can be said (although not by me) is that we might be in a recession. But we might also be at a trough of slower-but-still-comfortably-positive growth just before another growth spurt.
Sebastia
girlbear
Didn't the band on the Titanic play on until the end?
Dude, where's my HELOC? I've got credit card debt to roll and I want a new toy. I want, I want, I want...
Soon there will be lots full of repo'd Cadillac Escalades. Take your pick.
@barely - they said Hank wasn't there because of a "long-planned" trip to China. Hmmm ...
These hearings are a JOKE.
Why in the heck are they asking the FED anything.
Anyone who has ever listened to them has been nothing but misled.
They are not there to tell the truth, but there to mislead.
Just as any crook I know who agrees to talk to me post-miranda is doing so not to relay the truth but to convince me of a lie. Just like a cheating husband who wants to "talk" with his wife only wants to once again misled, gain the false confidence and talk their way out of trouble.
They have been doing it their whole lives.
The panel should be full of people who called this from the beggining.
Didn't the band on the Titanic play on until the end?
Anonymous Bosch | 04.03.08 - 12:11 pm | #
Supposedly; and really, why the hell not?
current account deficit of how many billion again
outside of oil the trade deficit is getting better. Finding alternative policy approaches to oil consumption is something the idiots in DC might find itself capable of addressing in the near future.
Given that it costs 10 USD for a cup of coffee in Europe now I think over the long term if we can reduce our exposure to OPEC we'll be doing better.
We do need to to figure out how to expand economic opportunity though. Too many communities in this nation only have the Walmart, the Army or street gangs as apparent career paths.
Troy - agreed. A currency equilibrium will have to eventually take place.
Right now Europe is getting bargain basement labour and property from the US...
Interestingly, I saw a TV commercial for a major national health insurance company offering "affordable" health plans for the self-employed. I have never seen this company advertise on TV before. Think people are dropping their self-pay coverage like flies?
Best Buy also announced that it holds troubled auction-rate securities. These are AAA/Aaa-rated bonds collateralized by student loans guaranteed 95 percent to 100 percent by the U.S. government. Unfortunately, the market for these securities collapsed in recent times, which made them virtually impossible to sell on the open market without taking a substantial loss.
Normally, companies are required to write-down the value of these securities to this new value, but Best Buy reclassified the investments as non-core, which allowed them to forego that requirement.
New model mark to maturity.
Are these hearings under oath?
d/n matter - it's a crime to lie to Congress.
Been watching the 30 day comercial paper spread - back up to 106 bps today and the five day MA is also 106 bps - well above the August wave, well below the year end dash for cash but doesn't appear to be easing noticeably...
That's bad news, because it means this spread is for real, and not just an end-of-quarter dash for cash. However, spreads were considerably higher in 81-83 - these are "mild recession" spreads.
Geithner is painfully answering pointed questions from Schumer. keeps devolving to the excuse that "these things can happen incredibly quickly" thus whocouldanode?
we did.
"The most that can be said (although not by me) is that we might be in a recession. But we might also be at a trough of slower-but-still-comfortably-positive growth just before another growth spurt."
Ah, love that smell of 'hedging' bets in the morning.
REITS are climbing a steep wall of worry. SRS seems to be a good buy here.
FRAGILE! That is the true nature of our financial house of cards.
Sebastion,
You may be right but no one will be better off for believing you.
Had the financial firms spent the last six months adding capital, shoring up their balance sheets, preparing for a serious slow-down, then there would have been no run on Bear Stearns.
But instead we get "subprime is contained", "the bottom to housing is in", as the DOW cracks 14000, as the Fed hold rates steady in the fall because "a recession is unlikely".
Can we really blame people for panic when reality proves those "in-the-know" really aren't.
It does nothing to gain peoples confidence to blindly be bullish in the face of evidence supporting otherwise.
When the same government encourages people to save money for rainy days, store food in case of emergency, change the batteries regularly on their smoke alarms, buy car insurance just in case, eat right, and on and on....but when the risk of financial pain seems near, instead we are reassured that all is well, that we will be fine, that while it may look like a recession, a recession is unlikely.
I can see overcaution in the face of good times, but should we really throw caution to the wind when it appears it may be warranted?
BayernLB (Bayerische Landesbank) reports record $6.7 billion (4.3 euros) in writedowns:
BayernLB Reports Record EU4.3 Billion in Writedowns (Update2) - Bloomberg.com
I guess these days, multi-billion dollars in writedowns by any bank is no longer news worthy here?
Fundamentally, you can't have a healthy economy with inflation increasing faster than the incomes of the majority.
What call money printing growth. We should focus more on output and less on money supply.
Good question, Red Pill.
And good reason to not carry debt if you can help it. (Although if the end is nigh, there might just be some justification for saying "F it" and like party on, Garth.)
Like cobradriver, I'm debt free and savings glutted [sarcasm]. Makes for peace of mind.
IMO, the housing boom was the last tap-out of the American Consumer. Refis and HELOCs to roll over debt. Now no more house(ownership) to fall back on. Game over.
The most interesting question in my mind is where are the money boyz going to look to connive more fictional profits.
Geithner's job is toast.
OT: rice hitting record high:
Rice Jumps to Record on Speculation Demand Will Outpace Supply - Bloomberg.com
Rice, the staple food for about 3 billion people, rose 2.4 percent in Chicago trading today after doubling in the past year.
and
China, India and Vietnam have cut rice exports, and Indonesia has reduced import tariffs to protect food supplies and cool inflation. Rice in Chicago climbed 42 percent in the first quarter, more than all of last year's 33 percent gain. Record grain prices contributed to strikes in Argentina, riots in Ivory Coast and a crackdown on illicit exports in Pakistan.
Global food fight at hand? Somehow "Smoot-Hawley" comes to my mind....
Clueless, yes, it is the day of reckoning for US consumers. Whether it is for the financial sector depends whether or not foreign economies' decoupling from the US economy takes place.
We have been reading for several years that no growth in US household incomes had taken place, that consumption growth was being fueled entirely by borrowing. That seems to have stopped. And individual consumers' borrowing will not start up again in the climate of no income growth, inflation, and persistent high credit card rates.
"I can see overcaution in the face of good times, but should we really throw caution to the wind when it appears it may be warranted?"
Sure, when the government that is in charge values ideology and political power over everything, including the truth.
Average Joe said: "...I can see overcaution in the face of good times, but should we really throw caution to the wind when it appears it may be warranted?"
Warranted by MSM headlines.
Unwarranted by objectively comparing our current economic situation with previous ones when conditions were similar.
Sebastia
The fed did not regulate the banks. Instead, they enabled bankers to abuse the system for their own gain.
"I can see overcaution in the face of good times, but should we really throw caution to the wind when it appears it may be warranted?""
To follow up on my own comment.
You know that we are in a fragile system when it relies so much on "confidence" that any hint to be cautious may actually lead to reason to be so.
@Angry Saver - I count 7 furrows in Geithner's brow - you? Note that when Bernanke lies, there are no furrows. He must have practiced in front of the mirror.
BB just admitted that Bear set the value of the collateral taken on by Fed.
Anonymous Bosch,
A bubble in food prices will be the next wall street money maker. Will it be good for America? Who cares, it's all about the Benjamins.
Prosperity baby, that's what I'm talking about.
"Consumers fell behind on car, credit-card and home-equity loans at the highest level in 15 years during the fourth quarter"
If you use chained dollars instead of nominal dollars, we've got another 25% to go.
Honesty is boring.
The slop is OK assuming we eventually do get to 1993 levels.
You assume the economy will fall just like it has before, and I'll assume it will recover just like it has before, and we'll call it even.
For the record:
Anyone who has talked to me over the last six months is surprised by NONE OF THIS.
Anyone who has talked with Sebastian over the last six months must be in a total state of shock.
--
Evidence That Bernanke Is a LIAR and An Evildoer
David Rosenberg: 04/03/08:
Famous last words -- On August 21st, at Jackson Hole, when moral hazard concerns dominated, Ben Bernanke had this to say: It is not the responsibility of the Federal Reserve nor would it be appropriate to protect lenders and investors from the consequences of their financial decisions. And here we have the Fed Chairman spending a good chunk of his testimony yesterday defending his actions in helping cobble together the JPM-BSC deal To prevent a disorderly failure of Bear Stearns and the unpredictable but likely severe consequences of such a failure for market functioning and the broader economy, the Federal Reserve, in close consultation with the Treasury Department, agreed to provide funding to Bear Stearns through JPMorgan Chase. Over the following weekend, JPMorgan Chase agreed to purchase Bear Stearns and assumed Bears financial obligations. Then again, we were also told this time last year that subprime was going to be contained and housing was going to level off; we were told in July and August that inflation was the greatest threat; then we were notified in October that the Fed had done enough after 75 bps of easing and the list goes on.
-x-x-x-x-x-x-x-x-x-
Born-and-bred American dopes cannot come to terms with the FACT that only evildoers can now be their top leaders. Greenspan, Bush and Bernanke engaged in the evil deed of Pushing Debt during 2002-07 on American households in order to keep their powers (by artificially boosting the economy ahead of the 2004 election and Greenspans reappointment). They ARE guilty of helping build Debt Concentration Camps for 30,000,000 America households. I said so years ago and now the world is witnessing its consequences.
There are no moral hazards in a legalistic and morally bankrupt society that America has been turned into by bankrupters and Fraudsters of New York City.
Only a born-and-bred dope can be made to believe that democracy, as it is practiced in the US, is the best political system. An American is bred with extreme intolerance of, or prejudice against, other political systems. Americans' idiotic attempts to "make the world safe for democracy" gave rise to the Nazis and the consequences thereof. And the worse is yet to come! Over the next 20-25 years Americans will pay the price of their leaders' evil deeds.
Jas
Troy,
Nice graph. Did you correct with chained dollars?
Did you scale per-capita?
can someone tell me why we don't know who the owners of the privately held Fed are? if not, why the hell not? these chumps are slinging our money around with no hint of a conscience.
Just an OT comment on rice futures. CME-CBOT trades long grain rice the last time I checked. Asians generally don't like long grain rice. Consequently a lot of US poduction is consumed in brewing beer and making pet food. Go figure...
Fair Economist,
The time series I have at the moment is only very recent history, 1/1/2007 - what were those spreads then and what were they coming up from prior to the recession (where here we have an eight or nine fold increase from nine months ago)?
TIA
Name: No, but for the past 10 years real vs. nominal is not that significant.
No amount of regulation is going to control greed and fraud in a fiat money system.
At a minimum, Congress needs to at least debate fiat vs. a hard money system.
This hearing is a complete waste of time.
Guys--
What are "chained dollars"?
Look where we are. The GSEs were supposed to ensure affordable housing. $700K jumbos? What a joke.
It just kills me that Bernanke and the congress are proposing unaffordability as a solution.
GRRRRR! Now I'm really angry.
Massive wealth destruction has occured. Substantial percentage of middle class have become debt slaves.
"we are working in real time" "we are doing this and that" - what a joke.
Where were you clowns when people were treating homes like pokeman cards?
The market is demanding credit restraint. The ding bats at the fed & congress just can't allow the market to work.
Does anybody know if/where there is a live webcast of congressional testimony today?
idoc,
Google this:
Federal Reserve Share Holders
First 5-6 entries should help you out.
Cheers,
Error
I sold a complete Pokemon Card set for $1000 at the peak. Now the same set is worth less than $200.
Still probably worth more than some of the BS assets that we now own.
as soon as it is nearly completion the markets "suddenly" get a boost from you know where.......
Disgusting.
Fed: "we bailed out the markets"
Market: " can I have more ponies???"
they will all have a special place in hell alongside the GOP for being "in charge" while "them thare voters" get screwed over on a daily basis.
This has got to stop but how??
MS
crispy&cole,
Pokemon cards...
LOL
Cheers,
sebastian - please get it through your THICK skull : conditions have never been similar.
C&C, thank you.
CR, thank you for a great blog!
Credit cards and payday loans
can provide short-term convenience for some people, but consumers' shift
toward greater debt could have a long-term, negative impact on the U.S.
economy.
That's one point emphasized by research analyst Kristie M. Engemann and
economist Michael T. Owyang in the April issue of The Regional Economist,
the quarterly journal of business and economic issues published by the
Federal Reserve Bank of St. Louis. The publication is also available online
at: St. Louis Fed | Page Not Found
The 2004 Survey of Consumer Finances (SCF) showed that the percentage of families holding debt rose from more than 72 percent in 1989 to just over 76 percent in 2004. The median value of the debt more than doubled during that time, from $22,000 to more than $55,000.
You assume the economy will fall just like it has before, and I'll assume it will recover just like it has before, and we'll call it even.
Two wrongs don't make a right. Although it can seem as if the decision makers in middle management are pinheads with no sense of history, the market does have more of a memory than it sometimes appears. All bull markets resemble one another, but each bear market is unique [with apologies to Leo]. Risk management improves over time (no, really!), laws get passed to avoid the specific crisis that led to the current conflagration and some companies have one or two board members who remember the last few busts.
Take this "soft patch." I sure don't know about a previous one that was so widely discussed beforehand in the media. Effect of bloggers? Better economic forecasting? I don't know, but it seems different this time. As well, who can remember a downclimb where house prices downclimbed BEFORE the economy at large? Or where oil futures didn't start to fall with the perceived future fortunes of the world's biggest consumer?
Or take the previous recovery. Widely referred to as the "jobless" or even "job-loss" recovery, it was different in that companies used increased productivity, outsourcing and automation to increase production rather than hiring workers proportional to the increases. That was different. As well, just-in-time production and sophisticated inventory control (everywhere but at GM) have meant recent busts haven't had the massive inventory hangovers of previous ones.
can someone tell me why we don't know who the owners of the privately held Fed are? if not, why the hell not? these chumps are slinging our money around with no hint of a conscience.
idoc | 04.03.08 - 12:37 pm | #
my my... idoc. It's not YOUR money. It's their money. It's backed by the Federal Reserve, they can do what they want to it.
Didn't you follow the exercise above. Check that dollar bill again.
Finally a ball buster! Bob Mendez is up
Please realize this is class warfare. the sheep have been shorn.
Troy,
Using equal value (chained) dollars, the 100 at the start of your chart becomes 300.
As for the correction being unimportant over the the last ten years, I'll trade you ten dollars for every twelve you give me. You won't even notice the difference.
Are they worth $29 billion?
Bernanke - "uh, uh, uh, per bear stearns they are.." "uh, uh.."
c&c
"Where were you clowns when people were treating homes like pokeman cards?"
well, they were creating the problem-
~systemic looting and dismantling.
~modifying personal bankruptcy laws as per credit card lobby.
~deregulating.
~increasing the ginni coefficient.
~transforming the red states to the serf states.
hard work.
Credit Scores Unfaltering Amid Credit Crisis
"Reports of a worsening U.S. economy run rampant, yet consumer credit averages are unchanged.
The national credit score has remained the same for nearly a year, according to Experians National Score Index. The findings based on a sampling of two million consumer credit files reveal the national average has stagnated at 692 since last April. This number has increased one point versus the 691 average in March 2007.
This might come as a shock to many, especially during a so-called credit crisis."
Sorry. Page not found.
Are the taxpayers going to lose any money?
BB - "uh, uh... I cant say.."
Ben's voice is shaking. "Highly rated securities" means? ...this should be funny.
Is Bernabe about to break down?
I love Menedez!!
BB- "uh, uh, Tim G. can you help me out here.."
The big joke underlying this is that there is no money. Just bogus promises to pay.
This Senator speaking now is awesome.
Senator Men end EZ deals it to b52:-)
Dear FFDIC
Do you trust those credit scores?
Regards,
Can someone paraphrase the current Q&A with Menendez and BB ?
TIA !
Who is this guy following Menedez? What BS!
"Who could have known?"
Hell...CR and others knew about three years ago!
Interesting times
Something like
WTF are you guys doing with tax payers money??? And how come you guys get to profit out of this?? This does not seem like a standard loan to me? And WTF was the SEC doing here??
outsourcing and automation to increase production rather than hiring workers proportional to the increases.
Ralph Cramdown | 04.03.08 - 12:56 pm | #
I tagged along with a couple of relatives to the Farm Progress show last year. Wait till you see the technology coming down the pipeline to replace manual farm labor. Automation/computers will do to hand picked crops what the steam engine did to grains.
Chris
Worried - Thanks ! lol... I wish I could watch.
They could almost blow through the entire hearing trying to get Geithner to give a straight answer about why he didn't think it was a good idea to open the window to Bear.
Confidence trick - Wikipedia, the free encyclopedia
Thought it was fitting.
"Do you trust those credit scores?"
Heck yeah! Just like putting your trust in those rating agencies. lol
The senator following Menendez - unwittingly, perhaps, speaking revealing truths. "I'm sure Chairman Bernanke acted in the best interests of financial markets and I want to thank him." "It's my observation that ALL of these financial are so intertwined that ANY of them are too big to allow to fail.
In 1982, financial profits were approximately 10% of national income. By 2006, financial profits were approximately 40% of national income. Financials employees accounted for only 5% of the work force in 2006.
Leverage baby. That's what I'm talking about.
as the market rises! a new series about how bad news is good
Dear Sue
I think the thing about that Senator following Menedez is that he is trying to re-write or spin this thing a certain way!
Regards,
Everyone should tape the Hearing on Fed's Role in Bear Stearns Rescue, invite some friends over, and play a drinking game called Liability. One team is Liquidity and the other is Confidence, everytime their team name is said they have to take a drink. Everybody drinks when you hear Liability.
Bilbo - no "insovency" ?
wow...
"Hey US people, please take a dollar out of your pocket and tell me what it says... what is backing that dollar?
The answer will surprise you."
Yawn.
My gosh, when did the new gold bugs start coming out of the closet again trying to "teach" us stuff we already all know?
FWIW:
almost everybody here knows and understands Fiat vs metal-backed currencies.
and many of us have (unfortunately) read "the creature from Jeckyll island" (that's a few days I'll never get back again).
that doesn't mean we believe the utopia of Gold-based currency either.
(there were many abuses of the Gold based currencies over time as well).
remember:
-all fiat eventually goes to zero
-and all gold currencies eventually go to fiat.
although both have their issues, reserve ratio lending is more important IMO than Fiat currency in this new era.
in fact, there were THOUSANDS of bank failures in the pre-Fed era... ON the Gold Standard. The reason: reserve lending.
in fact, we could still be in this exact same situation if we had a gold backed dollar today, through reserve lending.
we need to go to an asset backed currency AND change reserve requirements.
that's never gonna happen though.
so NEXT point.
can't spell - Insolvency!
Yearning to learn - FWIW - I'm not a gold bug... I just happen to own a chunk just in case.
Who wouldn't seek a second opinion from a doctor who misdiagnosed the problem 6 months ago, but now claims to have the solution for the problem he didn't think you had?
Bernanke may or may not know what to do from here on out, but since confidence is so important in this market, and the fed is so important in this market, how can we move forward based upon their reassurance.
We need another opinion.
Volker has warned of these problems for a while and yet no one wants to seek or follow his advice or anyone else's who understood the problem enough to see it back when it mattered.
A drug addict will seek out the advice of anyone who has a solution other than withdrawls.
Look at the weightloss/diet industry. The answer to losing weight is the same now as it has been since the beginning of time: Eat less, move more. Any quick diet that promises to get around that will sell. No one will buy the real solution because it's free, it's obvious, and there are no shortcuts.
idoc
who owns the Fed. perhaps....
Illuminati - Wikipedia, the free encyclopedia
my question about who owns the Fed was rhetorical. the implications of private ownership, namely banks, is one of complete conflict of interest. why does America allow this to stand?
Yearning to learn - FWIW - I'm not a gold bug... I just happen to own a chunk just in case.
My apologies.
I was worried that we were going to have a new crew of gold bugs to "enlighten" us about fiat currency.
I would guess 99% of the people here know all about the dangers/problems with fiat.
I too have substantial metals (gold, silver, copper, uranium) positions, so I am not anti-metals.
but this thread is about DEBT.
and IMO debt is more related to our flawed reserve lending system than fiat.
(linked, they become even more powerful, but they are separate entities)
both reserve lending and fiat should be restricted, but neither will be (until forced)
why does America allow this to stand?
Waiting for their free ponies too?
Does anyone know if Japan had hearings like this all throughout the 1990s?
and IMO debt is more related to our flawed reserve lending system than fiat.
Yearning to learn | 04.03.08 - 1:30 pm | #
Agreed. So back to why 1:32 ratios were allowed in the first place...
Any Senator asking that question ?
did anyone ask the question why the 96h emergency to settle Bear deal before Asia mkts opened? why this emphasis on saving stocks?
Actually this post is quite frightening. For a while we had consumers going deliquent on their mortgages, whilst keeping up on the CC.
Now they are letting both go unpaid. Complete financial exhaustion.
I wonder, does anyone have car loan deliquencies? I suspect that's the last shoe to drop. When all three have rising deliquencies that will be the over the cliff moment.
Cheers,
Regarding leverage. Fannie & Freddie are leveraged 200:1. GSE assets are one of the major underpinnings of our national bank assets.
Our affairs were (mis)managed so incredibly poorly for the benefit of so few. The biggest scam in history.
OT - you must check out this RE agent web page selling people on buying a new home and walking on thier old mortgage if the bank will not work with them: read the comments.
Who Knew?
idoc writes:
did anyone ask the question why the 96h emergency to settle Bear deal before Asia mkts opened? why this emphasis on saving stocks?
I am watching...the answer is no
Shorter Tim G. - "Blackrock helped us make up better numbers than we alone could make up."
Misean,
My ceo's brother runs a secondary lender in auto space. They can't get money from the market anymore and Deliq are sharply higher. look to book is really bad.
Auto and Homes together make this recession longer than forecast.
Part of the problem is that the Senators are not economists, nor are they trained in economics.
I watched the entire hearing yesterday and it is surprising how little the committe understands about basic economics.
thus, they TRUST Bernanke because he is "the expert" (several senators said just as much). they have little to no economic acumen with which to challenge his assertions.
thus, whe he says "without bailout of Bear the entire system was at risk" they must only agree... and they can only argue whether or not the proposed bailout was the appropriate bailout. They cannot argue IF the bailout was appropriate, or the cause of WHY the bailout was appropriate.
Only one senator "got it" (Senator Kasey/Casey, sp?)
I would have asked (among other things):
1) so you feel this bailout was necessary for financial stability?
2) well then, how did we allow one firm to be necessary to financial stability?
3) what were other ways of dealing with this WITHOUT using taxpayer money?
4) was it appropriate to give all this function to ONE entity (JPMorgan) who is now also by definition too big to fail?
5) how many other organizations have the possibility to be Too big to fail?
6) did repeal of Glass-Steagal have anything to do with this
7) where was the oversight of these firms prior to the bailout
8) who valued this paper?
9) on what model was it valued?
10) why did you give JPmorgan what is in essence a non-recourse loan on poorly-valued assets?
and so on.
but the senators don't/can't think that way.
they ask:
"whew, thank you for saving us!"
then
"what can we as a senate do to help with this cause"
Misean,
Your on to something. Many are finacially exhausted. They truly will be better served declaring bankrupcy and starting over.
After they cash in the stimulus money of course.
Actually this post is quite frightening. For a while we had consumers going deliquent on their mortgages, whilst keeping up on the CC.
Now they are letting both go unpaid. Complete financial exhaustion.
I wonder, does anyone have car loan deliquencies?
Consumers fell behind on car, credit card and home equity loans...
I have a suspicion that the reason consumers kept up with their cc debt for a while was because the monthly payment was a fraction of the monthly mortgage payment, so easier to handle.
As a taxpayer, who is now a "proud" owner of an investment bank, can I get a special place to stay in New York City?
If a 30 year mortgage represents some fraction of 30 years worth of labor, then you leverage that up 30 times you only need 900 years of labor from each homeowner to solve this mess. We are not devolving into communism but corporate feudalism.
as for car payments:
On CNBC about 3 weeks ago they had a special on car loans.
The AVERAGE car loan is now over 5 years. That is up from an average of something around 3.8 years just a few years ago.
even worse, more and more people are choosing 6, 7, and yes 8 year car loans.
and now there are emerging 9 year car loans.
not good.
A;
pulled this off that blog. Pay attention to point number 4 if you think lenders are now acting responsibly:
If you are considering purchasing another home then letting your present home go into foreclosure here are some tips that will save you trouble later down the line as well as help the transaction run smoothly.
1. You need an excellent lender who can structure your new loan properly; after all there will be questions by the new lender.
2. You need an excellent real estate agent (like me) who knows how to structure this deal. Your real estate agent also needs to know how to find the right home. This may seem strange but not all homes will help the transaction and some actually will hurt your chances of qualifying.
3. There are no longer 100% loans so you will need a down payment. If you dont have a down payment there are other alternatives but again your agent must be aware of these other options and how to implement them.
4. Once your real estate agent has located a likely home youll have to qualify for a new mortgage, so you cant have any mortgage lates and youll have to have sufficient income to qualify for your existing mortgage and the new one. This is where a savvy lender is most important.
If a 30 year mortgage represents some fraction of 30 years worth of labor, then you leverage that up 30 times you only need 900 years of labor from each homeowner to solve this mess.
Well, it's a good thing the average life span is increasing.
cd,
Thanks, I'm gonna see if I can research that at lunch time.
Angry,
Well thanks to the new BK law, that CC debt is an Albatross.
Outsider,
Well, yes, and as well, they needed to keep current because that's how they were making ends meet. Exhausted, they're just cutting everything, hoping to keep food on the table. To hell with the credit score.
That's why I'm curious about auto loans. Once they give up on that, how do they get to work?
Cheers,
YTL,
Check, and the auto dealers are rolling the balance on the old car into the loan. Over and over. Those 8 and 9 year loans usually start out ~25% more than the value of the new car. (If I remember right).
Cheers,
Speaking of autos,
How long until Ford and GM are deemed "too big to fail" and they get governemnt (taxpayer) money to fund operations and pay union members $55 an hour to put wheels on cars? Soon methinks.
misean,
Here ya go
SubPrime Auto Finance News
Misean writes:
That's why I'm curious about auto loans. Once they give up on that, how do they get to work?
They take the bus? They buy a 20-year-old Chevy? You can buy a car sufficient for transportation to and from work for a couple of months of payments on that Lexus car note.
New cars are not a necessity. If there are a lot of jobs out there paying workers so little that they can't even afford a car that'll get them to work, we've got much more serious problems than bad car loans....
Troy writes:
"what is backing that dollar?"
The productive talents of 300 million Americans.
Yes, this is entirely correct, even if it doesn't seem so obvious. We want to think it's only something obvious like our debts and capital investment, or some reasonable such set of tangibles....but ultimately it's actually the combination of the productive talents with capital investment together that back the dollar and our wealth. It's very much an illusion to think that your overseas investments for instance are just guaranteed to pay off no matter what.
Yalt,
Agree, but you assume they have $1500-$2000 in cash lying around. I know quite a few middle classers who don't have $500 to rub together.
cd,
Thanks for the linkage.
Got work to do. Thanks.
Cheers,
Yal,
i think M (not speaking for him) is trying to say we have a 4 pronged credit deliq problem that probably has never been experienced.
idoc writes:
did anyone ask the question why the 96h emergency to settle Bear deal before Asia mkts opened? why this emphasis on saving stocks?
No, but one answer is counterparty risk. Market makers in stocks, bonds and futures would cut back or stop trading if they thought that the counterparty on the other end of the trade might declare bankruptcy and not honor the trade. That might cause a chain reaction of bankruptcies at worst and/or severe market dislocations.
As a taxpayer, who is now a "proud" owner of an investment bank, can I get a special place to stay in New York City?
you don't own any IB. you own a bunch of credit crap.
idoc writes:
did anyone ask the question why the 96h emergency to settle Bear deal before Asia mkts opened? why this emphasis on saving stocks.
jamie Dimon just mentioned it.
I wonder, does anyone have car loan deliquencies? I suspect that's the last shoe to drop. When all three have rising deliquencies that will be the over the cliff moment.
Cheers,
Misean | 04.03.08 - 1:34 pm | #
Misean,
I saw a article a couple of months ago that stated the average loan was for something along the lines of 5.8 years with a balance north of 38k.
Down here in Florida ALL the carlots,used and new,are packed fence to fence. The big auto auctions by Orlando are also full.
Last anecdote. My boss just bought a used F350 to tow with. He looked at around a dozen from private parties. Not a single person could beat the local dealer pricewise. Why? Everybody was upside down and had no money to bring to the table. Yikes.
Chris
our tax dollars will be funneled from Treasury to Fed to IB's to stocks/commodities. conclusion: buy stocks/commodities. piggyback onto our own money. how virtuous and eternal.
I don't get this. The stuff offloaded to the taxpayer from Bear Stearns is junk. But yet, the same Congress wants to find ways so taxpayers can continue to keep from having their homes foreclosed on. Isn't this exactly the same junk? If the property isn't worth that much when it's in Bear Stearns portfolio, then it isn't worth enough to bail out individual homeowners.
I know quite a few middle classers who don't have $500 to rub together.
A single missed payment on the note is enough to get something that will run. And if it isn't, there's a used car lot down the street from me that will (still) write a usurious zero-down loan for anyone with proof of employment. (probably best to buy the new junker before they repo the old car, if you go that way...)
One thing I think is going to happen in a hurry is that the middle class is going to rethink just what are the necessities of life. Shelter and transportation to/from work are necessities; owning a home and a fancy car are not.
Sen Casey also asked the NY fed to provide the process used to value the assets in writing.
ok Dimon, you jerk. if a catastrophe needed to be avoided, tell all your execs and shareholders to return all those profits to prop up the system you just raped.
How unionized factory workers got demonized has to be the spin of the century.
So what if they get paid $55 bucks an hour (which I suspect is largely spin by the automakers).
These guys live in your neighborhood, pay property taxes that suppor your municipality, support the stores you shop in, eat in the same restaurants.
Money distributed in the form of wages is probably the most beneficial for a safe, safe, sane, civil society.
Chris,
Auto loans-Dealer lenders loaned at 125% of new car value thus embedding previous loan non payoff amount into loan. Car buyers will be and far between this year. They moved sales forward begining after sept 11.
Now the dealers, manufacturers and lenders are going to pay.
I know 2 dealers who just sold because they were starting to lose to much money.
OK, gig is up. I did it. All that credit card spending was me.
Do you know how much inflation there has been in ammo prices? Sheesh!
Do any states have homestead exemptions to allow you to keep your car through BK if it is your primary residence?
...but seriously, everyone has to remember that it now costs $1,000 to file for BK.
they ask:
"whew, thank you for saving us!"
then
"what can we as a senate do to help with this cause"
Yearning to learn | 04.03.08 - 1:39 pm
Just gov't types-- inside people take care of people inside.
Back in the day when public service meant sacrificing personal gain it was kind of noble-- a kind of esprit de corps to be acknowledged from the elected to the appointed. But what we've got now is something very different since the top bureaucrats are hired on the basis of their buy-in, and the ostensible bona fides they can bring to the illusion of public service. and the elected are only concerned with the money that got them elected to begin with.
I bet a lot of these people on both the elected and appointed sides are plastered with cluelessness now. This fiasco is on their watch and while their desperate measures, let's stretch it big time, are well meaning, they spell the end of a lot of things that define the nation.
As a republic, we have lost a lot, but it's just the beginning. Pardon me for pointing out that the national identity is on the line, and I don't trust the motivations of either side.
That's why I'm curious about auto loans. Once they give up on that, how do they get to work?
Well, fortunately unemployment is solving that problem.
I know 2 dealers who just sold because they were starting to lose to much money.
cd | 04.03.08 - 2:07 pm | #
Yes sir,the shakeout in the car area is just getting started. I worked for a small,family owned Yamaha dealer turning wrenches part time 1991-94. The biz was so slow in Socal during that time frame only parts and service kept the dealer alive. The over capacity is going to crush a lot of dealers...Who will benefit? Longtime dealers who did not overleverage/overspend during the good times. Yes,I know a couple sitting pretty right now(Yamaha shop is one).
Chris
add to which the Fed is not a public entity, so the farce is compl(eat).
gold standard is ridiculous for one simple reason:
Dollar is always backed only by the faith of the government, even when govt wants you to believe that dollar is backed by gold.
Government can always devalue gold-backed currency if they deem it necessary. There is no such thing as gold-backed currency, really.
what is important is not whether currency is backed by gold, but whether money supply is monitored and controlled in a transparent, simple and publicly reported manner.
Recently, it has not been.
These guys live in your neighborhood, pay property taxes that suppor your municipality, support the stores you shop in, eat in the same restaurants
Plus with ~20 total hrs of assembly labor they create a retail product worth $20-30,000+. In a just world they would get a significant chunk of the value-add from their labor.
Sounds like another reason for the market to go up!
I was thinking money should be backed by a quantity of potable water.
Makes more sense than gold (global warming woo hoo!), and water is life, and wealth (just ask the farmers of the California Irrigation Districts).
heh heh, Troy.
Perhaps the Fed will advance me the value of my older car, and as extra collateral, I can put in 1,000 gallons of potable water.
Chris,
Service is the only thing keeping dealers above ground. I work with both front and back ends re: DMS software. Bubble state dealers will be in trouble long time. Autonation heavily invested in CA-FL-AZ-NV, that's why thier ceo is always about rate cuts, thier hurting!
Imports and highlines holding up better-obviously..But thats changing too.
JP Morgan paid 1.25B(equity) + 25B (loan to Bear) for 300B worth of assets but the feds paid 29B for 29B worth of assets?
bobn said: "OK, [the] jig is up. I did it. All that credit card spending was me."
No, no, I am Spartacus.
The only thing is, though, I spent a lot more in Q1 2008 than Q4 2007. We'll just have to wait and see if it was enough.
S.
The only thing is, though, I spent a lot more in Q1 2008 than Q4 2007. We'll just have to wait and see if it was enough.
Unfortunately Seb, I cancelled you out by taking my bonus and my tax return cash and paying off any debt lying around and put the rest in savings/investments. I'm also going to refi my vacation place down and toss a few bucks at it on the refi. I'll start spending again in 2009, 2008 is on its own.
"No, no, I am Spartacus.:)"
I'm Brian and so is my wife.
this is nothing more than a redistribution of wealth -- from the debtors to the creditors -- let's see what will happen to the middle class (shrinkage!?!?!)
Somebody had mentioned earlier that when people give up their car loans, how will they get to their job? My reply: in the coming collapse, they won't have a job, so there's nothing to worry about. See, it all balances out!
Well, fortunately unemployment is solving that problem.
Outsider | 04.03.08 - 2:10 pm | #
Seriously dark humor.
CR- "If Chessen thought the economy was "rapidly slowing" in Q4, wait until the data is available for Q1 2008!"
Conjure Bag said in August '07, "Recession, Q1-08."
He wants his damned pony. The pink one.
you don't own any IB. you own a bunch of credit crap.
You don't own that either.
You have a secured loan to JPM backed my a bunch of credit crap.
In fact, it's not really even a secured loan, exactly. You have provided a 30Bn loan to a bankruptcy remote SPV. Your only recourse is a bunch of credit crap, to which JPM has taken the first loss piece of 3%.
Call it "Credit Crap Squared".
Or CC2, in structured parlance.
Now, Iridium-backed, that would be . . . interesting.
Dude, it can't be a material we desperately need for alternative energies. Ditto gold.
Hobbling manufacturing just because you can't regulate banks is silly. Our current problems are regulations and non-existent (I can't even call it "lax") oversight. Not lack of a base metal.
If your employees lose their cars, there is always creative problem solving:
Show Your Employees More Than the Money | bMighty.com: Blogs For Small Business and Mid-Sized Business
Cobradriver,
the debt question you pose is one answered for me yesterday by a friend who's a doctor at Bellevue in NYC. She told me she's tired of working for the mortgage and is looking for a cheap rental. Whether she's hoping to sell( which is what I assume) or walking is not clear. But in her email, she mentioned she's been talking to the other docs in her specialty, and "they all have debt they never plan to pay off". She's in her late thirties.
On the other hand, I'm a saver, no debt, my elderly parents the same. I'm sure there are a goodly number of folks who are in the same position, without being wealthy.
That little grocery money
YouTube
- Jan Crouch wants your grocery money
I wish Benny Hinn would suckerpunch that clowned-up old lady in the jiblets.
Plus with ~20 total hrs of assembly labor they create a retail product worth $20-30,000+. In a just world they would get a significant chunk of the value-add from their labor.
There is very little value-add from their labor when compared to that of the machines and energy. The latter two are what allows the effort to be 20hrs instead of 10,000.
The world is indeed not just, but this probably does not represent a good example.