Are they missing something? Or am I? If it's really a solvency crisis, if the "crisis" over if everybody knows the Fed will accept the bad paper? Is that the fix here?
Where do we stand on MEW for 1q and 2q? It would be really useful to get an idea after the Freddie cash-out data (for 1q), and given that the decline in MEW should offset part or all of the year over year gain in consumption from the stimulus checks.
don't forget that Krugman was one of Bernankes colleagues at Princeton. he'll never be too harsh. Krugmans most enlightening point is that the pressures are building for an even greater collapse.
A bill that would expand refinancings of risky mortgages by requiring voluntary lender write-downs is the industry's last chance to improve their market without more drastic regulation, U.S. House Financial Committee Chairman Barney Frank said on Monday.
Thanks for solving the credit crisis, now we can get back to gambling hell and Wall Street has all the tools it needs to suck the last bit of creme filling out of the US consumer.
Anonymous writes:
A bill that would expand refinancings of risky mortgages by requiring voluntary lender write-downs is the industry's last chance to improve their market without more drastic regulation, U.S. House Financial Committee Chairman Barney Frank said on Monday.
Seems like Krugman is suggesting that sometimes it takes major crises to bust up complacency and get real reform:
The bad news is that as markets stabilize, chances for fundamental financial reform may be slipping away. As a result, the next crisis will probably be worse than this one.
LetÂ’s look at the story so far.
After the financial crisis that ushered in the Great Depression, New Deal reformers regulated the banking system, with the goal of protecting the economy from future crises. The new system worked well for half a century.
Maybe one day we'll look back and say that in the long run the Great Depression was the best thing that ever happened to the US middle class. Plus we got John Dillinger and Bonnie and Clyde.
Why would GMAC ask for so little?
Will this be another TAF, with a few hundred million to start, for GMAC, and then a few billion, and then the US taxpayer will then eat the entire GMAC garbage portfolio?
What the hell is a high crime against the people of the USA if dilution of the store of value symbolized by the USD isn't it?
No worries Ben will expand the TAF to include private equity fund companies. Again this will not be a bailout, just a temporary liquidity measure within a booming economic story.
Anyone not long equities here needs to get their head examined.
Hyam Solomon must be rolling in his grave, laughing at the fact that the US Govt continues to screw savers who entrust their funds to it by buying its bonds.
Hyam, you showed 'em, your patriotism, your hopes. The leadership is doing it again, this time to Joe6Pack and every citizen and government in the world who entrusted the US Treasury with their (store of value) money, too.
Bob Dobbs writes:
The credit crisis is over! Buffet has declared it. Krugman is signing on with the idea, at least for now....Are they missing something?
mock turtle guesses:
Bob, maybe, just maybe, Krugman and Buffett got a glimpse into pandora's box like big ben did last march 19...and now their fear level has enlisted them into the royal order of tinkerbelle economists...
I thought Glass-Steagall went away during a Democratic administration, when Clinton signed the Gramm-Leach-Bliley Act.
So, Princeton, -Tell me where I'm wrong!
i live in a smaller coastal Calif town. i drove over to one of our satellite communities and saw gas prices at $4.59 for premium which is what i use. i think $4.39 for regular. even i almost sh*t my pants.
I thought Glass-Steagall went away during a Democratic administration, when Clinton signed the Gramm-Leach-Bliley Act.
threetorches | 05.05.08 - 1:05 pm |
mock back
you are right, but the honest history of glass steagall was that going back to the reagn administration bits and pieces of the act had been ignored and nibbled away at thru executive action...or inaction.
Clinton deserves a good part of the blame for this, but not all.
PM's already launched above $1000, grabbed the Chinese newbies in the Shanghai market, and those who were ensnared by the $1000 round number moon launch, is now drowning them in losses, and will soon enough meet their inflation adjusted price goals. That's about $2100 gold and whatever 50/1 silver will be.
o one here really ever talks about the long term solutions to our current problems. IMO its about getting back to a sound currency. i really think that involves going back on the gold std as controversial as that may sound to the growth crowd. we could tie the current money supply to the current gold supply and start from there.
Hovnanian Triples Its Cash-Flow Forecast: Shares Rise (Update1)
By Bob Ivry and Andrew Blackman
May 5 (Bloomberg) -- Hovnanian Enterprises Inc., New Jersey's biggest homebuilder, tripled its forecast for positive cash flow in fiscal 2008 as it cut prices on homes to stimulate sales. Shares rose as much as 5.7 percent.
The Red Bank, New Jersey-based company raised its cash flow forecast to more than $300 million for the year from an earlier target of more than $100 million, it said in a statement today.
That is a significant improvement, and should be enough to relieve some of the liquidity concerns,'' Vicki Bryan, senior high-yielding bond analyst for Gimme Credit LLC, wrote in a report today. She rates Hovnanianoutperform.''
The builder has been forced to cut prices to raise cash as new-home sales have fallen to the lowest level since 1991. Homebuilders are struggling to avoid what economists Michelle Meyer and Ethan Harris of Lehman Brothers Holdings Inc. call ``an adverse feedback loop,'' where increasing unemployment, stricter mortgage lending terms and rising home foreclosures cause prices to plunge.
Hovnanian said it reduced net debt by $30 million. Net contracts for the three months ended April 30 fell 29 percent from a year earlier to 2,226 homes, Hovnanian said. The company said it will report additional costs of as much as $275 million for the fiscal second quarter related to the decreasing value of land.
``Continued deterioration in sales pace, pricing and gross margin'' contributed to the increase in costs, according to the statement.
Shares Rise
Hovnanian rose 55 cents to $12.22 in New York Stock Exchange composite trading at 12:22 a.m. after gaining as much 5.7 percent. Hovnanian shares have gained 63 percent from the beginning of the year through Friday.
The homebuilder, which is scheduled to report fiscal second- quarter earnings on May 30, said home deliveries dropped 21 percent to 2,494, excluding joint ventures, in the three months ended April 30.
Home prices will fall up to another 20 percent nationally, hitting bottom at the end of 2009, according to a May 1 report by Lehman economists Meyer and Harris.
``We expect homes sales to find a trough midyear at very depressed levels,'' Meyer and Harris wrote.
U.S. foreclosure filings more than doubled in the first three months of the year, Irvine, California-based RealtyTrac Inc. reported last week. Mortgage lenders will issue 16 percent fewer home loans this year compared with last, the Mortgage Bankers Association said. Higher mortgage payments and falling home prices prevented some property owners from selling or refinancing without losing money.
Hovnanian is projected to report a net loss of $1.56 a share for the second quarter, according to the average estimate of analysts in a Bloomberg survey.
"President" Reagan is the father to the S&L travesty. Like the monkey administration in power, he too wanted no new levels of government. He favored stripped down, unsupervised free markets.
"President" Reagan also stood watch while the store of value of the USD, from the date he took office, to the date he became officially mentally incapacitated, dropped by 50%.
That man's administration stole half the wealth from the USGovt bondholders, just like this chimp is doing now.
Anyone who holds US Bonds, except as a speculative bet, imo is a total fool.
Ask Hyam Solomon. Ask my parents. Ask the millions who right now have witnessed economic erosion worse than that of a beach during a winter storm.
And this time, half is not good enough.
Weimar took place "over there"; the destruction of the Continental took place over here. So did the Reagan game; and so is the Bernanke game.
BB said he would do everything possible to stop deflationary depression. He's a man of his word. Anyone holding USD-fiat-valued paper is about to experience the exquisite pleasure of hot steel slipping through the eyeballs into the brain. For those so situated, enjoy.
I think the "credit crisis is over" refers to the systemic threat. ResCap going under is no big deal to anybody but their owners. The Fed seems to have found a way to prevent catastrophe through the TAF. The expected losses of 1 trillion are about equal to the Fed's assets so it can simply float endangered institutions as long as necessary to unwind them carefully.
If inflation continues to rise shouldn't we also see an increase in home values inflation adjusted. I realize prices must come down but maybe at higher levels? Could the pressure on US consumers from higher prices simply just push down the value of all US assets ie Real estate, apple stock, cadillac's etc. How did it play in the 70's, I wasn't around.
In the 1970s, American workers were much more unionized and were much more able to secure wage increases.
Today, the middle class will be really be hurt by inflation as they have little bargaining power. I see no way inflation will reach the levels of the late 1970s - but that is just my best guess.
Gramm-Leach-Bliley Act, also known as the Gramm-Leach-Bliley Financial Services Modernization Act, ... is an Act of the United States Congress which repealed the Glass-Steagall Act, opening up competition among banks, securities companies and insurance companies.
The Glass-Steagall Act prohibited a bank from offering investment, commercial banking, and insurance services.
snip
Senator Phil Gramm (republican) led the Senate Banking Committee which sponsored the Act; he later joined UBS Warburg, at the time the investment banking arm of the largest Swiss bank.
snip
Prior to the Act, most financial services companies were doing this anyway. On the retail/consumer side, a bank called Norwest led the charge in offering all types of financial services products in 1986.
RE writes:
IMF gold sales are subject to the Washington agreement, i.e. they likely won't impact the gold price significantly.
RE | 05.05.08 - 1:26 pm | #
mock asks
so are you saying that CB or IMF sales will not affect price?
I don't think the crisis is over in the least bit. The lynchpin of the crisis, falling global real estate values has just begun. Rather the crisis has been deferred to a later date. The FED's balance sheet cannot save all of the mortgage backed paper nor back up the related derivatives. Fannie and Freddie have trillions of mortgage that is guaranteed by the US gov't. The FEDS cannot do much without starting a dollar and global financial market crisis. Housing started this crisis and Housing will end this crisis
The gold sales will be phased to avoid the risk of disrupting markets. So we won't see the full effect immediately, but we estimate that 3 or 4 years from now, we should be back in the black.
As for the modalities of the gold sales, we will either sell to a central bank that is willing to buy gold, or sell in conjunction with the already established official gold sales program - the Central Bank Gold Agreement.
We will coordinate with other official holders of gold to sell in such a way that we do not increase the overall amount of official gold sales into the market.
Bob, maybe, just maybe, Krugman and Buffett got a glimpse into pandora's box like big ben did last march 19...and now their fear level has enlisted them into the royal order of tinkerbelle economists...
In an interview a couple of weeks ago, Buffett said he understood the Bear Stearns total counter-party amount at risk of default was around $17 trillion, and that bailing them out was a good call. I didn't have any idea how much leveraged money was actually involved before reading that, and I haven't seen it widely reported otherwise.
Pandora's box indeed... that really would have destroyed the entire financial industry. I can see how the Fed got very afraid.
Good point about the wage increases. I do remember reading that wages were increasing in the 70's. Good thing that Vocker broke the back of the American worker, oh I mean inflation. Europe seems to be taking a Vocker like aporach to this crisis and I think will be all the better for it in the long run. So does this mean housing could fall under the rate of inflation adjusted norms.
But economic conservatives should take heart. McCain's chief economic adviser - and perhaps his closest political friend - is the ultimate pure play in free market faith, former Texas Senator Phil Gramm. (republican who helped craft repeal of glass steagall
(AP) Sen. John McCain's ethics entanglement with a wealthy banker ultimately convicted of swindling investors was such a disturbing, formative experience in his political career...linclon savings,...keating
by the way just to be fair there were several democrats including cranston...and oh yes a soon to be chair of the fed greenspan involved in "speaking up" for keating, the head guy at lincoln savings that swindled depositors and the taxpayers.
Everyone talks about a dual mandate of the FED. The Fed has one mandate keep rates high enough to prevent wage increases of the American worker and thus keep business costs low while Corporate America reaps the profits. I feel like we will see lower rates until wages pickup which I don't see happening anytime soon despite higher prices as businesses are "constrained". The great american race to the bottom.
This is the same FED that gave us ARM's. Since when has the FED cared about the people? Business are moving their sales and operations offshore to decrease their dependency on the American consumer.
"i'll think about what you said, but must confess i am skeptical
This really means that it is highly unlikely that the total sales of gold into the market place would be larger than they have been over the past 9 years.
Sales would only be larger IF another central bank purchases the IMF gold which in turn can only help pro gold sentiment, i.e. China or Russia buy in quantity. I'd consider that a VERY positive development.
There are limits. I'm hearing more & more people (Buffett this weekend) calling for the fed to stop cutting rates. That was unthinkable several months ago.
Inflation uncertainty is a bitch for businesses. It totally disrupts the the supply demand balance.
Angry Saver writes:
I'm all for globalization & free trade, but if real wages are falling, its seems just plain stupid for the fed to continue a policy of inflation.
me too IF the laws regarding human rights, the environment, fraud etc are similar.
why dont we fear free trade between the 50 states...level playing field pretty much
plus shared currency.
think about it...not that i'm a fan of one world gov one world currency necessarily...
but as jobs are off-shored and trade is imbalanced, tremendous arbitrage opportunities for profit exist for those who can trade 100,000 blocks of currency in the forex market
tremendous opportunities for loss exist for the middle class that banks on pensions, savings and dollar denominated equities.
As a bit of counterpoint, apparently bond deals are going off like crazy right now. All that liquidity being pumped in by the Fed is apparently having an effect somewhere at least.
I disagree. I like gold even better now because it is increasingly becoming FREE trading gold. Gold has never behaved more like a currency than since 1971.
The less government manipulation the more investable it becomes. Simple really!
Angry Saver writes:
I don't see how you can hide out in gold. You can't pay your taxes or monthly bills with precious metals. You can't even buy food with gold.
purchase coins (currency) when gold is at 3 or 4 hundred dollars per ounce, and interest rates are near 1 or 2 percent.
slowly accumulate many
ride the wave and sell into the crest... one coin occasionally...don't be afraid to take profits...don't worry so much about trying to call the top.
or if you fear financial armageddon...hold PMs like an insurance policy...never intending to make a killing, just protecting your family.
AC says: "Maybe one day we'll look back and say that in the long run the Great Depression was the best thing that ever happened to the US middle class."
I'll bet it was the only time an American worker got a "real" wage increase. Of course you needed a job.
Just to illustrate my point. Have you ever looked at an inflation adjusted chart for gold vs. the dollar? Did you notice that before 1971, gold increased only during FDR. Something he had to do to finally adjust it for inflation.
Notice that the official price remained the same until 1971 despite much higher inflation.
Now tell me what you prefer, gold at $35 revalued every 20 to 30 years or gold as a currency that went from $35 in 1971 to $873 today. I know what I like!
Somedays I share your POV on gold. But gold at $1000/oz certainly does not offer the same protection as gold at $400/oz.
I distinctly recall family members making the same point regarding $400 gold not offering the same protection as at $250. I believe $1000 gold will look very cheap at some point.
Mock Turtle could you please explain these two sentences to the (meaning me) not so knowledgeable.....
purchase coins (currency) when gold is at 3 or 4 hundred dollars per ounce, and interest rates are near 1 or 2 percent. (where does one purchase gold coins and how would one sell them once acquired)
hold PMs like an insurance (could you please explain what a PM is)
yeah i understand that 1000 / oz is daunting...i'm not buying, but i'm a chicken.
Michelle
PMs precious metals...coins can be bought and sold at a coin shop, yellow pages...there is a spread that makes them significant but small profit either way... in a margin
go to kitco web page and look at the gold eagle and other buy sell spreads
I bought gold at 450 and again in the 600s, largely for financial armageddon insurance as someone mentioned above.
I could go in again now in the 800s, but I am wary. The problem with armageddons is, their coming arrival may be deduced, but their exact nature is less predictable.
Tried to mail the following to CR, but couldn't get the e-mail link to work. Maybe someone could pass it along:
Daily Real Estate News | May 5, 2008
Buffett Does His Part to Keep Rates Stable
Berkshire Hathaway, the insurance and investment company chaired by Warren Buffett, the world's wealthiest man, has bought portfolios of subprime mortgages and frozen their rates.
Buffett, who spoke at Berkshire Hathaway's annual meeting Sunday, said Clayton Homes, a unit of Berkshire that makes and provides financing on manufactured homes, purchased the subprime mortgages. Clayton sent letters to all the borrowers involved telling them the interest rates wouldn't reset higher.
"We're not in the business of resetting mortgages higher," Buffett said.
Source: Dow Jones Business News, Alistair Barr (05/04/2008)
"Say armageddon comes. What good is the gold. Bullets would seem more useful."
Angry:
Armageddon and financial armageddon are not the same things. The Great Depression was financial armageddon; it wasn't about the breakdown of civil order, though there was some of that; it was about the breakdown of trust that made the financial system work.
And the economy nearly ground to a halt while a trustworthy means of running financial markets was found again. But it was found.
Preparing for financial armageddon means finding ways to preserve assets in worst-case financial scenarios, so that you can care for yourself during the process and still have something on the other side.
The road warrior scenario is quite unlikely in the U.S. Populism is more likely.
Doesn't anybody here own treasuries and/or investment grade bonds?
It's not that complicated. Avoid the get rich quick.
I admit, owning some PM or precious stones IS a good financial insurance policy. I wouldn't go crazy with it though. L.T. treasuries are up 100% over the last decade - similar to the return on gold.
"Say armageddon comes. What good is the gold. Bullets would seem more useful."
And good strong rope.
"I'm all for globalization & free trade, but if real wages are falling, its seems just plain stupid for the fed to continue a policy of inflation. Asset values are largely fiction. Monthly household expenses are not."
The ruling class won't bat an eye at seeing the serfs move in to shanty towns and pick through garbage dumps. It is a non-issue for them worldwide, and won't be one in the former 1st world.
Come on! If you want Walk Away to win the 2008 Phrase Awards you need to say that ResCap May Walk Away From Debt Obligations.
And at which point does negative liquidity equal negative equity? Does that require an integral over time? de/dt = liquidity? I guess by Warsh's Law, it follows that de/dt = confidence. Everytime I try to integrate that in Mathematica it gives me error code BS. And anytime I put in less than 400 Billion for the TAF variable my Monte Carlo simulation crashes. What's up with that?
Maybe one day we'll look back and say that in the long run the Great Depression was the best thing that ever happened to the US middle class. Plus we got John Dillinger and Bonnie and Clyde.
And don't forget World War II, and all the great books and movies and songs that came out of that. Don't you just love "South Pacific?"
Convention traffic is down 20%.
The nightclub business remains steady.
The rest of the cab traffic is down yet again, among the 80% convention attendees.
What's the impact? For every Vegas biz that's high overhead, BK, and soon!
How's that for another gift from the free marketeer, trickle down, piss in your face, you voted for the monkey Bush Administration!
Everyone's a winner in Vegas. Vote Red, eat Red.
Let's just say the USD will do its own Vegas magic trick and collapse. That's a helluva trick. Good goin Paraguay Cowboy; your n'er do well moniker fits you well, now.
If one is not thinking Weimar via commodities, one's imo a fool.
they'll meet 'em
Will the Fed let 'em go down?
I'm alarmed by these recent developments in the mortgage business.
BTW, I think "significant risk" now means "we cannot without a bailout."
Ben will buy em.
They should save this and change the name to Chrysler in a few months...that will save a few bucks
They = Cerberus
What are the odds CALPERS doesn't have a big stake in Cerberus & other private equity turds?
What are the odds CALPERS doesn't have a big stake in Cerberus & other private equity turds?
Angry Saver
7
There is a reason Cerberus guards the gates of hell.
. . . otherwise known as "our portfolio".
Hey guys,
What have you heard regarding CALPERS and Cerebrus? Anyone know cerebrus debt rating?
The credit crisis is over! Buffet has declared it. Krugman is signing on with the idea, at least for now....
OP-ED COLUMNIST; The Resentment Strategy - NY Times
Are they missing something? Or am I? If it's really a solvency crisis, if the "crisis" over if everybody knows the Fed will accept the bad paper? Is that the fix here?
And will it last?
ResCap.... das goode righhhhhhte???
CR,
OT:
Where do we stand on MEW for 1q and 2q? It would be really useful to get an idea after the Freddie cash-out data (for 1q), and given that the decline in MEW should offset part or all of the year over year gain in consumption from the stimulus checks.
Any thoughts/projections would be appreciated.
They will find the cash, it will just cost them 12%-14%. It's gonna hurt.
don't forget that Krugman was one of Bernankes colleagues at Princeton. he'll never be too harsh. Krugmans most enlightening point is that the pressures are building for an even greater collapse.
Paging Ben Bernanke
Ben Bernanke to the Fed's White Courtesy Telephone.........
Curbside is for loading and unloading of your multiletter borrowing acryonm only
Meeting debt obligations is such a quaint, old-fashioned idea.
It was gross neglect on Krugman's part not to mention his associations with BB.
Oil > $119.50/bbl.
No worries though. It won't have ANY effect on core inflation.
A bill that would expand refinancings of risky mortgages by requiring voluntary lender write-downs is the industry's last chance to improve their market without more drastic regulation, U.S. House Financial Committee Chairman Barney Frank said on Monday.
Bonds News | Reuters.com
Barney the time to have done that was 2000 you corrupt little bastard.
Thanks for solving the credit crisis, now we can get back to gambling hell and Wall Street has all the tools it needs to suck the last bit of creme filling out of the US consumer.
Oil futures climb past $120 to a fresh record
Anonymous writes:
A bill that would expand refinancings of risky mortgages by requiring voluntary lender write-downs is the industry's last chance to improve their market without more drastic regulation, U.S. House Financial Committee Chairman Barney Frank said on Monday.
How does one require a voluntary write-down?
Seems like Krugman is suggesting that sometimes it takes major crises to bust up complacency and get real reform:
The bad news is that as markets stabilize, chances for fundamental financial reform may be slipping away. As a result, the next crisis will probably be worse than this one.
LetÂ’s look at the story so far.
After the financial crisis that ushered in the Great Depression, New Deal reformers regulated the banking system, with the goal of protecting the economy from future crises. The new system worked well for half a century.
Maybe one day we'll look back and say that in the long run the Great Depression was the best thing that ever happened to the US middle class. Plus we got John Dillinger and Bonnie and Clyde.
How does one require a voluntary write-down?
WTF. Don't we have accounting rules in this country or something like that?
It is voluntary. It's only mandatory if you don't want to do it.
The honesty and transparency of US accounting rules is vastly overrated.
Why would GMAC ask for so little?
Will this be another TAF, with a few hundred million to start, for GMAC, and then a few billion, and then the US taxpayer will then eat the entire GMAC garbage portfolio?
What the hell is a high crime against the people of the USA if dilution of the store of value symbolized by the USD isn't it?
Not worth a Continental. We've been here before.
No worries Ben will expand the TAF to include private equity fund companies. Again this will not be a bailout, just a temporary liquidity measure within a booming economic story.
Anyone not long equities here needs to get their head examined.
Hyam Solomon must be rolling in his grave, laughing at the fact that the US Govt continues to screw savers who entrust their funds to it by buying its bonds.
Hyam, you showed 'em, your patriotism, your hopes. The leadership is doing it again, this time to Joe6Pack and every citizen and government in the world who entrusted the US Treasury with their (store of value) money, too.
$120/bbl oil. $3.60/gal gasoline.
Yeah, that last rate cut was really meant to help main street.
Bob Dobbs writes:
The credit crisis is over! Buffet has declared it. Krugman is signing on with the idea, at least for now....Are they missing something?
mock turtle guesses:
Bob, maybe, just maybe, Krugman and Buffett got a glimpse into pandora's box like big ben did last march 19...and now their fear level has enlisted them into the royal order of tinkerbelle economists...
whistling thru the graveyard
anyway buffett and krugman saying the major risk of credit or financial meltdown has past...
only means that now we are still left with another threat...the damage to the real economy
Question for Krug, Hardball-style:
I thought Glass-Steagall went away during a Democratic administration, when Clinton signed the Gramm-Leach-Bliley Act.
So, Princeton, -Tell me where I'm wrong!
i live in a smaller coastal Calif town. i drove over to one of our satellite communities and saw gas prices at $4.59 for premium which is what i use. i think $4.39 for regular. even i almost sh*t my pants.
and isn't it interesting that even with IMF good to go on billions of dollars in gold sales (ie us gold sales since we pledge the lion's share)...
G7 approves IMF gold sales - Italy econ minister
| Business News
| Reuters
none the less gold hangs on above 850
if (IF) gold survives the first pause and then an up tick in the discount rate, the rocket for PM prices will launch.
PM's will launch.
threetorches writes:
I thought Glass-Steagall went away during a Democratic administration, when Clinton signed the Gramm-Leach-Bliley Act.
threetorches | 05.05.08 - 1:05 pm |
mock back
you are right, but the honest history of glass steagall was that going back to the reagn administration bits and pieces of the act had been ignored and nibbled away at thru executive action...or inaction.
Clinton deserves a good part of the blame for this, but not all.
excuse me
President Reagan...no disrespect intended
PM's already launched above $1000, grabbed the Chinese newbies in the Shanghai market, and those who were ensnared by the $1000 round number moon launch, is now drowning them in losses, and will soon enough meet their inflation adjusted price goals. That's about $2100 gold and whatever 50/1 silver will be.
Then, at that price, the PM's will launch.
o one here really ever talks about the long term solutions to our current problems. IMO its about getting back to a sound currency. i really think that involves going back on the gold std as controversial as that may sound to the growth crowd. we could tie the current money supply to the current gold supply and start from there.
of course, a gold std is the antithesis of existence for the banking/financier crowd.
Some "good" news as well...
Hovnanian Triples Its Cash-Flow Forecast: Shares Rise (Update1)
By Bob Ivry and Andrew Blackman
May 5 (Bloomberg) -- Hovnanian Enterprises Inc., New Jersey's biggest homebuilder, tripled its forecast for positive cash flow in fiscal 2008 as it cut prices on homes to stimulate sales. Shares rose as much as 5.7 percent.
The Red Bank, New Jersey-based company raised its cash flow forecast to more than $300 million for the year from an earlier target of more than $100 million, it said in a statement today.
That is a significant improvement, and should be enough to relieve some of the liquidity concerns,'' Vicki Bryan, senior high-yielding bond analyst for Gimme Credit LLC, wrote in a report today. She rates Hovnanianoutperform.''
The builder has been forced to cut prices to raise cash as new-home sales have fallen to the lowest level since 1991. Homebuilders are struggling to avoid what economists Michelle Meyer and Ethan Harris of Lehman Brothers Holdings Inc. call ``an adverse feedback loop,'' where increasing unemployment, stricter mortgage lending terms and rising home foreclosures cause prices to plunge.
Hovnanian said it reduced net debt by $30 million. Net contracts for the three months ended April 30 fell 29 percent from a year earlier to 2,226 homes, Hovnanian said. The company said it will report additional costs of as much as $275 million for the fiscal second quarter related to the decreasing value of land.
``Continued deterioration in sales pace, pricing and gross margin'' contributed to the increase in costs, according to the statement.
Shares Rise
Hovnanian rose 55 cents to $12.22 in New York Stock Exchange composite trading at 12:22 a.m. after gaining as much 5.7 percent. Hovnanian shares have gained 63 percent from the beginning of the year through Friday.
The homebuilder, which is scheduled to report fiscal second- quarter earnings on May 30, said home deliveries dropped 21 percent to 2,494, excluding joint ventures, in the three months ended April 30.
Home prices will fall up to another 20 percent nationally, hitting bottom at the end of 2009, according to a May 1 report by Lehman economists Meyer and Harris.
``We expect homes sales to find a trough midyear at very depressed levels,'' Meyer and Harris wrote.
U.S. foreclosure filings more than doubled in the first three months of the year, Irvine, California-based RealtyTrac Inc. reported last week. Mortgage lenders will issue 16 percent fewer home loans this year compared with last, the Mortgage Bankers Association said. Higher mortgage payments and falling home prices prevented some property owners from selling or refinancing without losing money.
Hovnanian is projected to report a net loss of $1.56 a share for the second quarter, according to the average estimate of analysts in a Bloomberg survey.
krugman says change is needed, but what change?
looking for the timeline of the demise of glass-steagall? here it is:
frontline: the wall street fix: mr. weill goes to washington: the long demise of glass-steagall | PBS
"President" Reagan is the father to the S&L travesty. Like the monkey administration in power, he too wanted no new levels of government. He favored stripped down, unsupervised free markets.
"President" Reagan also stood watch while the store of value of the USD, from the date he took office, to the date he became officially mentally incapacitated, dropped by 50%.
That man's administration stole half the wealth from the USGovt bondholders, just like this chimp is doing now.
Anyone who holds US Bonds, except as a speculative bet, imo is a total fool.
Ask Hyam Solomon. Ask my parents. Ask the millions who right now have witnessed economic erosion worse than that of a beach during a winter storm.
And this time, half is not good enough.
Weimar took place "over there"; the destruction of the Continental took place over here. So did the Reagan game; and so is the Bernanke game.
BB said he would do everything possible to stop deflationary depression. He's a man of his word. Anyone holding USD-fiat-valued paper is about to experience the exquisite pleasure of hot steel slipping through the eyeballs into the brain. For those so situated, enjoy.
I think the "credit crisis is over" refers to the systemic threat. ResCap going under is no big deal to anybody but their owners. The Fed seems to have found a way to prevent catastrophe through the TAF. The expected losses of 1 trillion are about equal to the Fed's assets so it can simply float endangered institutions as long as necessary to unwind them carefully.
If inflation continues to rise shouldn't we also see an increase in home values inflation adjusted. I realize prices must come down but maybe at higher levels? Could the pressure on US consumers from higher prices simply just push down the value of all US assets ie Real estate, apple stock, cadillac's etc. How did it play in the 70's, I wasn't around.
Anyone holding USD-fiat-valued paper is about to experience the exquisite pleasure of hot steel slipping through the eyeballs into the brain.
wow. that is quite the picture. i happen to agree.
IMF gold sales are subject to the Washington agreement, i.e. they likely won't impact the gold price significantly.
Tim,
In the 1970s, American workers were much more unionized and were much more able to secure wage increases.
Today, the middle class will be really be hurt by inflation as they have little bargaining power. I see no way inflation will reach the levels of the late 1970s - but that is just my best guess.
snips from wiki
Gramm-Leach-Bliley Act, also known as the Gramm-Leach-Bliley Financial Services Modernization Act, ... is an Act of the United States Congress which repealed the Glass-Steagall Act, opening up competition among banks, securities companies and insurance companies.
The Glass-Steagall Act prohibited a bank from offering investment, commercial banking, and insurance services.
snip
Senator Phil Gramm (republican) led the Senate Banking Committee which sponsored the Act; he later joined UBS Warburg, at the time the investment banking arm of the largest Swiss bank.
snip
Prior to the Act, most financial services companies were doing this anyway. On the retail/consumer side, a bank called Norwest led the charge in offering all types of financial services products in 1986.
RE writes:
IMF gold sales are subject to the Washington agreement, i.e. they likely won't impact the gold price significantly.
RE | 05.05.08 - 1:26 pm | #
mock asks
so are you saying that CB or IMF sales will not affect price?
thats assuming the IMF actually goes ahead with the sale. IMO i think they're jawboning.
I don't think the crisis is over in the least bit. The lynchpin of the crisis, falling global real estate values has just begun. Rather the crisis has been deferred to a later date. The FED's balance sheet cannot save all of the mortgage backed paper nor back up the related derivatives. Fannie and Freddie have trillions of mortgage that is guaranteed by the US gov't. The FEDS cannot do much without starting a dollar and global financial market crisis. Housing started this crisis and Housing will end this crisis
Gold tethers credit to actual work. Fiat tethers credit only to promises, not necessarily work.
Under a gold standard, private equity, hedge funds & high yield would all but disappear.
"... so are you saying that CB or IMF sales will not affect price? ..."
That is correct. Here are the key points:
The I.M.F. Gold Sales Will be Very Good for the Gold Price
Bob, maybe, just maybe, Krugman and Buffett got a glimpse into pandora's box like big ben did last march 19...and now their fear level has enlisted them into the royal order of tinkerbelle economists...
In an interview a couple of weeks ago, Buffett said he understood the Bear Stearns total counter-party amount at risk of default was around $17 trillion, and that bailing them out was a good call. I didn't have any idea how much leveraged money was actually involved before reading that, and I haven't seen it widely reported otherwise.
Pandora's box indeed... that really would have destroyed the entire financial industry. I can see how the Fed got very afraid.
Angry Saver,
Good point about the wage increases. I do remember reading that wages were increasing in the 70's. Good thing that Vocker broke the back of the American worker, oh I mean inflation. Europe seems to be taking a Vocker like aporach to this crisis and I think will be all the better for it in the long run. So does this mean housing could fall under the rate of inflation adjusted norms.
But economic conservatives should take heart. McCain's chief economic adviser - and perhaps his closest political friend - is the ultimate pure play in free market faith, former Texas Senator Phil Gramm. (republican who helped craft repeal of glass steagall
McCain's econ brain is Phil Gramm - Feb. 19, 2008
(AP) Sen. John McCain's ethics entanglement with a wealthy banker ultimately convicted of swindling investors was such a disturbing, formative experience in his political career...linclon savings,...keating
Keating Scandal Still Haunts McCain - CBS News
by the way just to be fair there were several democrats including cranston...and oh yes a soon to be chair of the fed greenspan involved in "speaking up" for keating, the head guy at lincoln savings that swindled depositors and the taxpayers.
RE
thanks for the link and the quotes...sales paced and targeted to minimize market impact...hummm
maybe i'm wrong
i'll think about what you said, but must confess i am skeptical
Everyone talks about a dual mandate of the FED. The Fed has one mandate keep rates high enough to prevent wage increases of the American worker and thus keep business costs low while Corporate America reaps the profits. I feel like we will see lower rates until wages pickup which I don't see happening anytime soon despite higher prices as businesses are "constrained". The great american race to the bottom.
by the way sentences above the links regarding gramm, mccain and banking were quotes from the news services linked...not my words
Tim,
I just don't see how the fed can sponsor inflation in the face of declining real wages.
Extrapolate the trend forward (as the fed is intent on doing) and it's mass household insolvency. All for the benefit of the top 5% of wealth holders.
If something can't continue for ever, IT WON'T.
I'm all for globalization & free trade, but if real wages are falling, its seems just plain stupid for the fed to continue a policy of inflation.
Asset values are largely fiction. Monthly household expenses are not.
Angry Saver,
This is the same FED that gave us ARM's. Since when has the FED cared about the people? Business are moving their sales and operations offshore to decrease their dependency on the American consumer.
"i'll think about what you said, but must confess i am skeptical
This really means that it is highly unlikely that the total sales of gold into the market place would be larger than they have been over the past 9 years.
Sales would only be larger IF another central bank purchases the IMF gold which in turn can only help pro gold sentiment, i.e. China or Russia buy in quantity. I'd consider that a VERY positive development.
TIM,
There are limits. I'm hearing more & more people (Buffett this weekend) calling for the fed to stop cutting rates. That was unthinkable several months ago.
Inflation uncertainty is a bitch for businesses. It totally disrupts the the supply demand balance.
Angry Saver writes:
I'm all for globalization & free trade, but if real wages are falling, its seems just plain stupid for the fed to continue a policy of inflation.
me too IF the laws regarding human rights, the environment, fraud etc are similar.
why dont we fear free trade between the 50 states...level playing field pretty much
plus shared currency.
think about it...not that i'm a fan of one world gov one world currency necessarily...
but as jobs are off-shored and trade is imbalanced, tremendous arbitrage opportunities for profit exist for those who can trade 100,000 blocks of currency in the forex market
tremendous opportunities for loss exist for the middle class that banks on pensions, savings and dollar denominated equities.
this is not an accident
we are being robbed
As a bit of counterpoint, apparently bond deals are going off like crazy right now. All that liquidity being pumped in by the Fed is apparently having an effect somewhere at least.
emii.com: U.S. Bond Market Bakes In Heat
I don't see how you can hide out in gold. You can't pay your taxes or monthly bills with precious metals. You can't even buy food with gold.
FDR & Nixon, ruined the effectiveness of gold's protection.
FWIW, I do buy gold, but only as jewelry/gifts. Kills two birds with one stone.
Mock Turtle,
Valid points. But we really don't have free trade. By example, just look at how huge economies like China and Japan manage their currencies.
What a disgrace.
I disagree. I like gold even better now because it is increasingly becoming FREE trading gold. Gold has never behaved more like a currency than since 1971.
The less government manipulation the more investable it becomes. Simple really!
Angry Saver writes:
I don't see how you can hide out in gold. You can't pay your taxes or monthly bills with precious metals. You can't even buy food with gold.
purchase coins (currency) when gold is at 3 or 4 hundred dollars per ounce, and interest rates are near 1 or 2 percent.
slowly accumulate many
ride the wave and sell into the crest... one coin occasionally...don't be afraid to take profits...don't worry so much about trying to call the top.
or if you fear financial armageddon...hold PMs like an insurance policy...never intending to make a killing, just protecting your family.
Angry Saver
you are right
i mean heck...how many pages long are the nafta and gatt agreements
doesnt take 1000 pages to say hey we are gonna trade free.
even the free trade mantra , so far, is a sham
there are real winners and real losers...those closer to the central circle are beating the middle class pants of us.
AC says: "Maybe one day we'll look back and say that in the long run the Great Depression was the best thing that ever happened to the US middle class."
I'll bet it was the only time an American worker got a "real" wage increase. Of course you needed a job.
Just to illustrate my point. Have you ever looked at an inflation adjusted chart for gold vs. the dollar? Did you notice that before 1971, gold increased only during FDR. Something he had to do to finally adjust it for inflation.
Notice that the official price remained the same until 1971 despite much higher inflation.
Now tell me what you prefer, gold at $35 revalued every 20 to 30 years or gold as a currency that went from $35 in 1971 to $873 today. I know what I like!
RE,
Somedays I share your POV on gold. But gold at $1000/oz certainly does not offer the same protection as gold at $400/oz.
Reminds me of "GAAP" growth at any price during the tech boom.
Eventually, the price of the insurance exceeds its value.
Somedays I share your POV on gold. But gold at $1000/oz certainly does not offer the same protection as gold at $400/oz.
I distinctly recall family members making the same point regarding $400 gold not offering the same protection as at $250. I believe $1000 gold will look very cheap at some point.
Mock Turtle could you please explain these two sentences to the (meaning me) not so knowledgeable.....
purchase coins (currency) when gold is at 3 or 4 hundred dollars per ounce, and interest rates are near 1 or 2 percent. (where does one purchase gold coins and how would one sell them once acquired)
hold PMs like an insurance (could you please explain what a PM is)
Thank you very much!
Fasten your seatbelt.
PM = Precious Metal i.e. gold, silver, etc.
Thank you s0mebody
RE
no argument there...
but lets remember that the amount of physical gold does not change rapidly
today the total amount of gold held by everyone is a cube roughly 30 meters on a side.
so how does price fluctuate??
heck same for stocks.
for every seller there is a buyer and on any given day the total shares of common stock for most corporations remains the same.
so what causes the shift in the supply and demand curves left and right to effect price???
my sense is that even if IMF sells to central banks or institutional investors...their volume is displacing someone else's and price must fluctuate.
as for getting back to normal in 9 years... one can make or loose a small fortune in that time.
ot sebastian
yeah i understand that 1000 / oz is daunting...i'm not buying, but i'm a chicken.
Michelle
PMs precious metals...coins can be bought and sold at a coin shop, yellow pages...there is a spread that makes them significant but small profit either way... in a margin
go to kitco web page and look at the gold eagle and other buy sell spreads
good luck
I bought gold at 450 and again in the 600s, largely for financial armageddon insurance as someone mentioned above.
I could go in again now in the 800s, but I am wary. The problem with armageddons is, their coming arrival may be deduced, but their exact nature is less predictable.
Tried to mail the following to CR, but couldn't get the e-mail link to work. Maybe someone could pass it along:
Daily Real Estate News | May 5, 2008
Buffett Does His Part to Keep Rates Stable
Berkshire Hathaway, the insurance and investment company chaired by Warren Buffett, the world's wealthiest man, has bought portfolios of subprime mortgages and frozen their rates.
Buffett, who spoke at Berkshire Hathaway's annual meeting Sunday, said Clayton Homes, a unit of Berkshire that makes and provides financing on manufactured homes, purchased the subprime mortgages. Clayton sent letters to all the borrowers involved telling them the interest rates wouldn't reset higher.
"We're not in the business of resetting mortgages higher," Buffett said.
Source: Dow Jones Business News, Alistair Barr (05/04/2008)
Bobb Dobbs,
Say armageddon comes. What good is the gold. Bullets would seem more useful.
"Say armageddon comes. What good is the gold. Bullets would seem more useful."
Angry:
Armageddon and financial armageddon are not the same things. The Great Depression was financial armageddon; it wasn't about the breakdown of civil order, though there was some of that; it was about the breakdown of trust that made the financial system work.
And the economy nearly ground to a halt while a trustworthy means of running financial markets was found again. But it was found.
Preparing for financial armageddon means finding ways to preserve assets in worst-case financial scenarios, so that you can care for yourself during the process and still have something on the other side.
The road warrior scenario is quite unlikely in the U.S. Populism is more likely.
Doesn't anybody here own treasuries and/or investment grade bonds?
It's not that complicated. Avoid the get rich quick.
I admit, owning some PM or precious stones IS a good financial insurance policy. I wouldn't go crazy with it though. L.T. treasuries are up 100% over the last decade - similar to the return on gold.
"Say armageddon comes. What good is the gold. Bullets would seem more useful."
And good strong rope.
"I'm all for globalization & free trade, but if real wages are falling, its seems just plain stupid for the fed to continue a policy of inflation. Asset values are largely fiction. Monthly household expenses are not."
The ruling class won't bat an eye at seeing the serfs move in to shanty towns and pick through garbage dumps. It is a non-issue for them worldwide, and won't be one in the former 1st world.
Scratchy wrote
"The ruling class won't bat an eye at seeing the serfs move in to shanty towns and pick through garbage dumps."
but Scratchy, i'm sure at least they will at least let us eat cake?
besides, i much prefer the guillotine to rope
Come on! If you want Walk Away to win the 2008 Phrase Awards you need to say that ResCap May Walk Away From Debt Obligations.
And at which point does negative liquidity equal negative equity? Does that require an integral over time? de/dt = liquidity? I guess by Warsh's Law, it follows that de/dt = confidence. Everytime I try to integrate that in Mathematica it gives me error code BS. And anytime I put in less than 400 Billion for the TAF variable my Monte Carlo simulation crashes. What's up with that?
Angry Saver | 05.05.08 - 3:12 pm
!0 years ago, the spot gold price was $300. Today, it's $870 (down from its recent high of $1,030). Considerably more than a 100% increase.
Scratchy: The ruling class won't bat an eye at seeing the serfs move in to shanty towns and pick through garbage dumps.
That's why I don't drink from straws while in India!
Maybe one day we'll look back and say that in the long run the Great Depression was the best thing that ever happened to the US middle class. Plus we got John Dillinger and Bonnie and Clyde.
And don't forget World War II, and all the great books and movies and songs that came out of that. Don't you just love "South Pacific?"
The man in the pinstripe suit walks away.
Here's the coup d'grace on Vegas.
Convention traffic is down 20%.
The nightclub business remains steady.
The rest of the cab traffic is down yet again, among the 80% convention attendees.
What's the impact? For every Vegas biz that's high overhead, BK, and soon!
How's that for another gift from the free marketeer, trickle down, piss in your face, you voted for the monkey Bush Administration!
Everyone's a winner in Vegas. Vote Red, eat Red.
Let's just say the USD will do its own Vegas magic trick and collapse. That's a helluva trick. Good goin Paraguay Cowboy; your n'er do well moniker fits you well, now.
If one is not thinking Weimar via commodities, one's imo a fool.