Stress Test House Price Scenarios
Submitted by
CalculatedRisk on Wed, 02/25/2009 - 1:59pm (358 comments)
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I love how the scnarios all have things improving dramatically next year. Like this is a V-shaped recession we've seen before
Why do they even bother pretending the results are not preordained?
A quick trip to the reset graph
makes these 2010 scenarios seem pretty funny.
I am still reeling that the banks get to decide whether and when to convert the preferred into common.
No investor would ever invest on those terms.
No investor would ever invest on those terms.
Nemo | Homepage | 02.25.09 - 4:27 pm | #
Well, idiotic investors would. Really dumb ones with small brains.
Comrade Bear, re: LA
Check out the Case-Shiller condo index for the city. With 2000=100, they peaked in July 2006 at 287.12, recently December 2008 at 199.23.
A 60% fall from peak would bring them to 114.85, or a 42.3% fall from current prices. A price last seen in December 2000. When I said a 50-60% fall in house prices from peak is adequate for their stress test, it was at a national level. Which means that if LA fell less than that, then more homes would have to fall even further to balance it out
CR,
via Richard Bove, 1 in 7 homes across America are vacant at the moment
Hockey stick saves the day !
They both just "kink" in dec/jan. Wow, well at least they're thinking outside the box.
Nostrovia,
wouldnt one think that a stress test would involve an overshoot?
Good glod we are in trouble.
JP, be careful with that reset chart - most loans that reset are actually resetting at a lower rate! The problem is the recasts (those NegAm Option ARMs). That peaks next year I believe - so it's not as bad as that CS chart.
best wishes.
This stress test does not in any realistic way address what Ron Paul said to Ben today: "what if you are wrong?"
I am still reeling that the banks get to decide whether and when to convert the preferred into common.
Nemo | Homepage | 02.25.09 - 4:27 pm | #
Bernanke was really amazing yesterday, wasn't he?
The Stunner for me was when he said we don't know how to unwind a systemically important organization. Why the hell not? Why don't oyu have a crew of rocket scientists figuring it out - including all options, like a presidential edict ruling all CDS null and void, as of yesterday?
First, on the GDP for 2010, who believes that it will be positive?
Second, if you keep putting in more and more preferred at 9%, eventually you cause the BANKS to have a mortgage that they cannot service, making them insolvent.
Doesn't matter they aren't going to give out the results so why do it at all?
Although the projected price-rent ratios drop below the long-term average, they remain above the mid-'90s levels so a further drop is certainly very possible - almost certain, IMO. It might take more than two years.
I'm pretty sure that CS price index is nominal, not real. I think real price index will give a better representation, although that requires assumptions for 2009-2010 inflation rates. The price-rent ratio already corrects for inflation, so no problem there.
CS10 tends to overstate price changes because the biggest markets have generally had bigger price run-ups. For a national scale, CS20 is better.
CR - Aren't there clauses in the resets which require a re-valuation of current house market price ?
Looks like every buyer since '01 or '02 will be underwater if they did any MEW.
Why is their "Worst case scenario" almost double the index from 87? How does that make any god damned sense whatsoever?
"most loans that reset are actually resetting at a lower rate!"
At the fully amortized lower rate. Recast unnecessary for a payment shock there.
Nostrovia,
\tJP, be careful with that reset chart - most loans that reset are actually resetting at a lower rate! The problem is the recasts (those NegAm Option ARMs). That peaks next year I believe - so it's not as bad as that CS chart.
Calculated Risk | Homepage | 02.25.09 - 4:29 pm | #
Ug. Damn you for your accuracy. (actually, thank you for your accuracy.)
This was the updated one.
Facemeat makes me want to eat fingers
Well, idiotic investors would. Really dumb ones with small brains.
JP | Homepage | 02.25.09 - 4:28 pm | #
(moans):".........Brrraaaaiiiiiinnnnnnssssss................"
Real estate prices in Japan have fallen 90% from their peak.
That could never happen here. Especially since incomes will really start to rise as we out-compete billions of Asians.
I like the part about how banks that are found to be lacking will be given something like 6 months' grace to raise private capital before the government capital injection is to be forced on them.
What exactly does "Indispensable Tim" Geithner expect to happen to the share prices and funding costs of the banks that are pronounced deficient (or will the term be "not quite as well capitalized as the rest of the banks?")THE FIRST TRADING DAY AFTER THE NEWS COMES OUT? Is this the kind of capital market environment where lots of slack is cut to the most suspicious acting characters, or is it the kind of market environment where investors shoot first and ask questions later?
It sure seems to me that Treasury Secretary Geithner doesn't understand the way that capital markets work - or hell, maybe I don't.
Real estate prices in Japan have fallen 90% from their peak.
And they are the responsible ones !
"most loans that reset are actually resetting at a lower rate!"
This won't help if you don't have a job. My company started laying off today. Sorry no names.
jo6pac
Over the past year we went from 4.9% unemployment to 7.6%. Employment is a lagging indicator. Unless the economy turns around awfully fast, we are going to see unemployment well over 9%, if not 10%.
That will definitely adversely affect home prices. So the baseline is pretty rosy in my book.
Real estate prices in Japan have fallen 90% from their peak.
Be a real bummer to have one of those 100 year mortgages - taken out at the peak.
The Stunner for me was when he said we don't know how to unwind a systemically important organization.
Which we all know is total nonsense. We all figured it out for the mortgage insurers - restructure into a "good company-bad company" system with the bad (holding) company owning the good company. Then you can BK the bad company without systemic risk or provide low-seniority capital (eg preferred shares) to the good company without moral hazard. Bernanke knows this; he's lying for some reason.
So what factors would lead forcasters to belive that we will not overshoot the '92 - '98 levels in a rescessionary environment?
Surely it is nothing but wishful thinking?
On resets, it matters very much what base rate one resets to a premium over -- LIBOR, not so good, 11th district COFI not so good -- BUT 1 year constant maturity t-bills (like my mortgage) YIPPPEEEEE. You've won the lottery.
Ron Paul is incorrect when he says we have seen a dramatic increase in money supply and credit.
Despite what the Fed is doing credit is contracting faster than money supply is increasing... Mish discusses this in detail (often).
First, on the GDP for 2010, who believes that it will be positive?
Periwinkle | 02.25.09 - 4:30 pm | #
It might be positive, depending on how bad we do in 2009;-)
BTW, I presume you mean GDP growth. GDP will undoubtedly be a positive number.
All the banks are well capitalized. Some ore just less well capitalized than others.
Bernanke knows this; he's lying for some reason.
Fair Economist | Homepage | 02.25.09 - 4:35 pm | #
Three little letters: CDS.
Be a real bummer to have one of those 100 year mortgages - taken out at the peak.
Some families took on generation loans. The anti-inheritance!
But of course we as Americans would never ever allow the next generation to inherit our mistakes.
@ EvilHenryPaulson
EHP, she can tell horror stories much better than you !
LiveLeak.com - Adorable Little French Girl tells Tale Of Adventure
Enjoy and learn.
(Oh, and she has beautiful eyes too.)
In Soviet Amerika:
House prices stess YOU !
Добрый вечер,
Kilgore Trout
California's unemployment rate is currently 9.3% and rising. The national unemployment rate is current 7.6% and rising.
I say the national rate hits where CA is today by Q3, as CA once again leads the nation.
We have often conjectured how many small businesses in the U.S. are shutting their doors.
Here's the answer, straight from the SBA's mouth.
Small Business Administration: Office of Advocacy - Small business Economic indicators-- Quarterly indicators
Download the 4th quarter 2008 Small Business Indicators.
In August of 2008, there were 5.9 million self-employed incorporated businesses and 10.3 million self-employed unincorporated businesses.
In December, there were 5.8 million incorporated businesses and 9.6 million self-employed unincorporated businesses.
In four months, the U.S. economy lost 800,000 small businesses.
Needless to say, this has never happened before.
You think this should be in the stress test?
Why does their "Worst case scenario" not include guns and related accessories?
"I like the part about how banks that are found to be lacking will be given something like 6 months' grace to raise private capital before the government capital injection is to be forced on them."
Eh, that just seems more like window dressing so that it doesn't appear like the government is being mean to banks. I don't think a bank that needed the money would have any luck raising cash, regardless of how long they were given to do so.
This is like giving the banks incremental home improvment loans until the LTV is greater than 100.
Something like 92% of American Retailers that had been in business in 1929, were bankrupt by 1933.
Just to give you a glimpse of your past and present danger.
The Stunner for me was when he said we don't know how to unwind a systemically important organization.
Nonsense. The Lehman collapse was text book imo! No sarcasm this time.
Why are we pretending that the "worst" scenario is the worst possible?
Even if we rule out apocalyptic scenarios and other "acts of god/ idiot men" type events, It can get much worser than we seem to be prepared for.
Look.. I am in a 'hard' science and one thing I know about complex systems is that each complex systems has many dynamic equilibria (often hidden) and that correlated behaviour patterns change when you move to a new equilibiria.
Why are we pretending that we know.. when we have no f**king clue?
Denninger blowing his top again...can font size be a leading indicator? (I think he is at around 72 now.)
Robert Mugabe knows how to increase house prices!
Werner, oddly enough I have already seen la jeune fille de hippoptames
Three little letters: CDS.
MLM | Homepage | 02.25.09 - 4:37 pm
You mean those transactions done on Excel spreadsheets, emails and phone calls? Nothing to fear. It's just like any other underground market.
What exactly does "Indispensable Tim" Geithner expect to happen to the share prices and funding costs of the banks that are pronounced deficient (or will the term be "not quite as well capitalized as the rest of the banks?")THE FIRST TRADING DAY AFTER THE NEWS COMES OUT?
Anarchus | 02.25.09 - 4:34 pm | #
Good point. I believe the plan is to hold the results as confidential. The plan is that everyone will assume all the banks are trustworthy. In reality--given current confidence levels--people may run from all the banks.
Not sure why a worst-case scenario wouldn't include a return to long-term averages. If these securities are being "held to maturity" like the banks claim they are, a return to C-S 100 within 5-years wouldn't be out of the question. Of course, maybe these are TARP-fund adjusted models...
"I like the part about how banks that are found to be lacking will be given something like 6 months' grace to raise private capital before the government capital injection is to be forced on them."
daveNYC | 02.25.09 - 4:40 pm | #
And given that taxpayers are giving them a super sweet deal by backdating the pricing, why would they bother trying to raise private capital? Of course I'm presupposing that bank shares will fall over the next 6 months.
Reminds me of Br'er Rabbit: "Please don't throw me in the briar patch"
Interesting Times, it is probably time to republish Tanta's Reset vs. Recast post. Most resets (an interest rate change) are lower. The recasts are higher.
best wishes.
Cratering?
Tribune Tower pulled off the market
Tribune Co. has scrapped plans to put the Tribune Tower up for sale because of cratering real estate prices and the companys late-year bankruptcy protection filing.
Tribune Tower pulled off the market | Crain's Chicago Business
If 9 out of 10 retailers go bk this go round, where are you going to buy your necessities from?
Stock up now.
--
My scenario is Deflationary Depression scenario with depression beginning during 2009H2. Under that scenario the housing prices in various zip codes would decline between 50-90% from the peak.
Manhattan and Silly.con Valley high-priced zips are candidates for 80-90% dcline. What fraud giveth reality taketh away.
Jas
GDP 2009-2010 combined -0.1% worst case. 'Nuff said.
When this comes up for a taxpayer vote I know how I am voting.
You said..
"NOT Irving Fisher! writes:
Ron Paul is incorrect when he says we have seen a dramatic increase in money supply and credit.
Despite what the Fed is doing credit is contracting faster than money supply is increasing... Mish discusses this in detail (often)."
Actual both MISH and Ron Paul are correct, but each use a different definition of INFLATION. Also Ron Paul is correct that the Money supply from the fed has gone exponental recently. This could bite us down the road, after write-downs are done, with large inflation.
2001 prices as worst case? That blonde analyst babe Whitney has already pointed out that homeownership is already at 2002 levels with much farther to drop.
My best-case scenario is 1996 prices, and there's plenty of data to support that. You don't want to know my worst case.
Dawg, LOL!!! Get that voting finger ready.
The recasts have mashed down the problem, moving them up into late 2009 and 2010.
BusinessWeek
Same shit, just spread thicker.
While I am not your fan, I have to agree with you on this one.
PS- The 'depression' has already begun.
//My scenario is Deflationary Depression scenario with depression beginning during 2009H2. Under that scenario the housing prices in various zip codes would decline between 50-90% from the peak.Manhattan and Silly.con Valley high-priced zips are candidates for 80-90% dcline. What fraud giveth reality taketh away.
Jas
Jas Jain | Homepage | 02.25.09 - 4:44 pm | #//
Denninger blowing his top again...can font size be a leading indicator? (I think he is at around 72 now.)
Geoff (Scatman kicks bucket) | 02.25.09 - 4:41 pm | #
Why doesn't he stop dicking around and tell us what he really thinks
More Cratering...
Chicago-area home sales start the year down 25%
In the nine-county Chicago region, 2,965 single-family homes and condominiums were sold last month, a decline of 24.5% compared with 3,927 sales in January 2008, the association said in a release Wednesday.
In the city of Chicago, sales fell 23.5% in January, to 888 compared with 1,161 in January 2008.
The median price where half the homes sold for more and half sold for less plummeted almost 23% in the Chicago area and almost 29% in the city, the Realtors group said.
The Chicago-area median price in January was $185,000, compared with $239,500 in January 2008. The median price in the city was $206,250 in January, down from $290,000 in January 2008.
Chicago-area home sales start the year down 25% | Crain's Chicago Business
And just as you thought that Lewis could not outdo himself..
Lewis Says Merrill, Countrywide Are Stars This Year (Update1)
By Margaret Popper and David Mildenberg
Feb. 25 (Bloomberg) -- Bank of America Corp. Chief Executive Officer Kenneth Lewis said Merrill Lynch & Co. and Countrywide Financial Corp., the two acquisitions that some analysts say helped push down the banks share price, have been stars so far this year.
Lewis, speaking today in a Bloomberg Television interview from his Charlotte, North Carolina, headquarters, said Merrill will be a thing of beauty over the long term. Merrill, the New York-based securities firm, lost $15.8 billion in the fourth quarter.
from dead thread...
"What policies do you think he can realistically pursue...."
"Are you deaf? Lets start with nationalizing the bankrupt banks instead of using taxpayer money to bailout their creditors!"
And you think he can just say this, snap his fingers and people will comply.....wake the f up. I suggest you start reading now if you'd like to be at all mentally prepared for where this ship is going...
also: Pavel, left you a note there...
Comrade Bear (tj & the bear) and Angry Saver.
I am sitting here, and it has actually started sinking in how ugly this has the potential to be as far as home prices.
I think home prices are the real Dow for Americans. Not only would it be financially crushing, but it would be emotionally crushing if they roll back to the early 1990's.
Why doesn't he stop dicking around and tell us what he really thinks
Because nobody has a screen that big.
.
Where's the overshoot? I want my overshoot!
Why not..
Moelis to Hire Former UBS Credit Chief Ryan for Risk (Update2)
By Pierre Paulden and Caroline Salas
Feb. 25 (Bloomberg) -- Christopher Ryan, the former head of credit fixed income at UBS AG is close to joining Moelis & Co., according to two people familiar with the plan.
Ryan, 47, will advise clients, including companies, financial-services firms and banks on risk and balance-sheet issues, such as derivatives, the people said. Kate Pilcher, a Moelis spokeswoman in New York, and Ryan declined to comment. UBS said Ryan would leave the bank in a Jan. 21 memo to employees.
(OT) But hopefully interesting.
I just heard a story on the local public radio station about our new state (NC) "stimulus czar." (Not joking.) His job seems to be properly allocating the Federal stimulus coming our way.
Check out this, though: By law (so the reporter said) the stimulus must be spent by June.
Sebastia
Comrade Bear,
I think a 60% decline is a good baseline. There are a lot of homes in America that offset the greater declines of densest metropolises by declining less than that baseline. Beyond that there are many considerations that impact the economy, and regional variation of price
"What fraud giveth reality taketh away."
Good one. Karma is a
The Dukes of Moral Haphazard
--
Depression has already begun in CA but not yet in the US.
Jas
Ryan, 47, will advise clients, including companies, financial-services firms and banks on risk
Lucifer | 02.25.09 - 4:49 pm | #
The beat of love goes on.
I have a real problem with using Consensus Forecasts or Survey of Professional Forecasters, just based on recent track record...
EvilHenryPaulson writes:
...Werner, oddly enough I have already seen la jeune fille de hippoptames...
Hmm, you think you can compete with her ?
Dawg, LOL!!! Get that voting finger ready.
Anonymous | 02.25.09 - 4:45 pm | #
I'm seriously considering changing from middle finger to trigger finger.
And just as you thought that Lewis could not outdo himself..
Lucifer | 02.25.09 - 4:48 pm | #
He's channeling Bernanke.
One solution for housing overstock:
little gasoline sprinkled here and there, then poof, the cleansing power of the flame.
Owen Lamont (2003) Going down fighting: Short sellers vs firms, available from
http://www.haas.berkeley.edu/groups/finance/lamontpaper.pdf
I wonder what will keep vancouver from cratering over 80% from peak to trough.. 'pixie dust'? or maybe the main employers in vancouver are depression resistant.
I think a 60% decline is a good baseline. There are a lot of homes in America that offset the greater declines of densest metropolises by declining less than that baseline.
Hey, I haven't been on these threads for a while. Is the Sebastian who is posting the same stock market bull who posted here a couple of years back? Or is it someone else named Sebastian. There was a guys named Sebastian who used to get a lot of grief here. If this is him, why would he come back?
Am I missing something here? The baseline in the price-to-rent chart tries to keep the ratio above 1.0 while in the worst case it drops below 1.0.
In my mind, dropping below 1.0 is what's going to get me to buy a house. Why should I go out and buy a home if it's cheaper to rent, especially since it's easier to switch to a better job or nicer neighborhood while I'm renting?
According to that chart, when the price-to-rent ratio bottomed out housing started the climb to boomtown.
Sebastian --
My wife works in public health, and
she has heard that stimpak money going to the CDC must be spent within something like the next 90-120 days.
Depression has already begun in CA but not yet in the US.
Jas Jain | Homepage | 02.25.09 - 4:51 pm | #
It pains me to say it but I have to agree with Jas. I've never seen people in northern CA so freaked out.
Cubensis Forecasts allow you to glimpse the future as it develops.
re Sebastian, there comes a point you look at the charts and just feel sorry for the guy
The Dukes of Moral Haphazard
Timothy Leary of Geithner | 02.25.09 - 4:51 pm | #
This might make a great recurring skit on SNL
Trademark it!
Maybe we should ring-fence California.
Yes, texas, north dakota and wyoming are still ok.
//Depression has already begun in CA but not yet in the US.
Jas
//
It's obvious now that the fed will keep pumping free money into the big banks because they believe that nationalization will cause a catastrophic failure of the economic system. This is a direct result of allowing entities to become "to big to fail", counterparty risk, and unregulated credit default swaps. Moreover, you have an entrenched banking structure which will not willfully surrender control. So you need not only a comprehensive plan to unwind the mess, but also a surreptitious method to implement the plan without taking the financial system head on.
There was a guys named Sebastian who used to get a lot of grief here. If this is him, why would he come back?
Gavin S | 02.25.09 - 4:53 pm | #
Same guy, new opinion.
shhhhh!!!!
//In my mind, dropping below 1.0 is what's going to get me to buy a house. Why should I go out and buy a home if it's cheaper to rent, especially since it's easier to switch to a better job or nicer neighborhood while I'm renting?//
Piyush "Slumdog" Jindal
Worst Speaker ever
Go bama
Gavin S said: "...Is the Sebastian who is posting the same stock market bull who posted here a couple of years back? Or is it someone else named Sebastian. There was a guys named Sebastian who used to get a lot of grief here. If this is him, why would he come back?"
For good or ill, there's only one Sebastian.
I'm he, and I publicly admitted to my grievous errors in judgment back in October.
Sebastia
Maybe we should ring-fence California.
Angry Saver |
===
Let Mexico have it.
So you need not only a comprehensive plan to unwind the mess, but also a surreptitious method to implement the plan without taking the financial system head on.
Ned Turgent | 02.25.09 - 4:55 pm | #
You also need policymakers that are not entrenched in said financial system...
what a day ! fear _ rally _ fear & the double digit swing form most of the financials, ROFL
Price-to-income doesn't look so scary--until you start to analyze prospects for future income gains, to wit:
All three competing for wage gains in a deflationary world.
In short, many of us aren't just living beyond our means, but our means are beyond our means.
"It's obvious now that the fed will keep pumping free money into the big banks because they believe that nationalization will cause a catastrophic failure of the economic system. This is a direct result of allowing entities to become "to big to fail", counterparty risk, and unregulated credit default swaps. Moreover, you have an entrenched banking structure which will not willfully surrender control. So you need not only a comprehensive plan to unwind the mess, but also a surreptitious method to implement the plan without taking the financial system head on."
This is at least plausible.
I am sitting here, and it has actually started sinking in how ugly this has the potential to be as far as home prices.
nova | Homepage | 02.25.09 - 4:49 pm | #
That's the feeling of impending doom I got in 2005 when I realized that homeowner's equity had declined even as home values had doubled. Once the bubble burst, well, as they say... "Debt is real, wheres equity is a matter of opinion".
He is channeling geithner.. bernanke is delusional but nowhere as bad as geithner.
//He's channeling Bernanke.
bobn | Homepage | 02.25.09 - 4:52 pm | #//
It pains me to say it but I have to agree with Jas. I've never seen people in northern CA so freaked out.
9:45 to 10 | 02.25.09 - 4:53 pm | #
My peeps in SV assured me it was different there last week. Are my peeps more thick-headed than your peeps?
(God knows I feel thick-headed after the reset/recast/call it whatever posts above.)
Personal anecdote, somewhat OT:
My company's main customer is the DoD, and we just dismissed all the contracters in our development groups.
The cupboards are also empty these days -- no more free snacks! Times are tough!
Does anyone know when Geithner speaks? That should be...interesting...
A few serious questions.
What is nationalization?
What mandate would it take to accomplish?
Is it remotely possible?
I think a 60% decline is a good baseline.
EvilHenryPaulson | 02.25.09 - 4:50 pm | #
We'll just agree to disagree.
bernanke is delusional but nowhere as bad as geithner.
Lucifer | 02.25.09 - 4:58 pm | #
Maybe Bernanke is delusional, and Geithner's just lying?
The Stunner for me was when he said we don't know how to unwind a systemically important organization.
Too late anyway. The market pretty much unwound them already. All that's left are the lawsuits for the remaining bagholders.
This should help the price of housing in CA right?
Taxes, Spending Cuts Fund Health Plan - WSJ.com
It reduces itemized deduction rates... nice.
Forgive me if someone else has posted this, but msn money sez we rebounded to be down only 80.
Gotta go work on defending another foreclosure.
Wasn't TurboTax Timmy Geithner supposed to give us a plan for the insolvent banks today?
What happended?
"Depression has already begun in CA but not yet in the US.
Jas Jain | Homepage | 02.25.09 - 4:51 pm | #
"
yah, .. based on the number of new cars on the streets on LA, somehow I doubt that.
p.s. The number of out of state plates is HUGE, (never seen anything like that in 10+ years). I wonder what does drive those? Is it the fact that people switched their expensive australia / africa vacations for a trip to Sunny Ca?
A few serious questions.
What is nationalization?
What mandate would it take to accomplish?
Is it remotely possible?
askin | 02.25.09 - 4:59 pm | #
1) Depends on who you ask
2) Constitution out the window, so no one really knows
3) Yes
or are those (out of state car plates) RE investors / flippers ?
rofl
again, loose ends from last thread...
Myr, I think that nationalization should happen, I just don't think BO can broker the kinds of complex deals necessary...no one can...
I have no illusions, things are falling apart very quickly...an no one is going to change that...
bank nationalization solves nothing...
From the looks of Obamas 10 year health plan , I smell time for puts on managed care, Bax and their kind
I think that is the problem
We do not know if-
//
Maybe Bernanke is delusional, and Geithner's just lying?
xxxxx | 02.25.09 - 4:59 pm | #
//
\tMaybe we should ring-fence California.
Angry Saver | 02.25.09 - 4:54 pm | #
Peeelueeeze Mr. Brer Fox. Please don' thro' us in da briar patch!
"I have no illusions, things are falling apart very quickly...an no one is going to change that...
bank nationalization solves nothing..."
It brings trust back into the system and allows us to start rebuilding.
No bottom until we bring trust back into the financial system.
Without thinking about overshooting, it's interesting to consider real case-shiller, and then Jan 2002 prices are about where most of the bubble is erased. But then of course, there are still the more important factors -- the economy and inventories.
Anonymous writes:
This should help the price of housing in CA right?
WSJ Error Page - WSJ.com
SB...0127675581.html
It reduces itemized deduction rates... nice.
Thank god! Finally, we take away the incentive for wealthy folks to build Michael Jackson style mansions!
I applaud this one. Long overdue to eliminate that policy of encouraging bigger and bigger loans as tax writeoffs.
Oh Glod! Of course. They forgot to mention that the forecasts are rated AAA by Moody's, Fitch and S&P.
Now it makes more sense. Hope that takes care of any concerns.
Nostrovia,
Bet another move is bringing back the uptick rule.
Do all these figures have inflation factored in, or are they purely in nominal terms?
Guillotines and a database of financial types are a possibility.
//No bottom until we bring trust back into the financial system.
POIC | 02.25.09 - 5:04 pm | #//
Exactly Gayshire -politicians are buying the line that nationalizaton will cause the apocalypse.
Is it the fact that people switched their expensive australia / africa vacations for a trip to Sunny Ca?
Comrade de Chaos | 02.25.09 - 5:01 pm | #
same effect in Sunny Florida. It was a factor in my relatives doubting my doomsaying over the last year and a half.
.
.
I love it when people beat up on boomers.
In all actuality, they are the most screwed of all.
Only last year could the 1st boomer get at his or her social security money, after contributing most of their lives.
I see something coming like what happened with Russians in the early 1990's. They got their pensions alright, but 38 Roubles, which used to pay for all meager living expenses for the most part during the communist era, suddenly had no value, virtually.
CR, could you please pull out the data for Japanese RE declines in the mid 90's. I heard it went on for 5 -7 years. Is it true?
--
"yah, .. based on the number of new cars on the streets on LA, somehow I doubt that."
Comrade de Chaos,
In CA the home prices have declined more than 100% of the state GDP. Add the drop in the Scam Market and you don't need to be a genius as to where the economy is. Rogue economists at UCLA Andersen Forecast live in the ivory tower and it is a waste of time to listen to their forecast.
Jas
"Bet another move is bringing back the uptick rule."
Trader A needs to short stock ZZZ.
Trader A drops Trader B a note on his crackberry.
Trader B puts a buy order in for 1000 shares of stock ZZZ.
Trade A puts his million share short on.
random, Irving Fisher's timeline
I. (7) Mild Gloom and Shock to Confidence
(8) Slightly Reduced Velocity of Circulation
(1) Debt Liquidation
II. (9) Money Interest on Safe Loans Falls
(9) But Money Interest on Unsafe Loans Rises
III. (2) Distress Selling
(7) More Gloom
(3) Fall in Security Prices
(1) More Liquidation
(3) Fall in Commodity Prices
IV. (9) Real Interest Rises; REAL DEBTS INCREASE
(7) More Pessimism and Distrust
(1) More Liquidation
(2) More Distress Selling
(8) More Reduction in Velocity
V. (2) More Distress Selling
(2) Contraction of Deposit Currency
(3) Further Dollar Enlargement
VI. (4) Reduction in Net Worth
(4) Increase in Bankruptcies
(7) More Pessimism and Distrust
(8) More Slowing in Velocity
(1) More Liquidation
VII. (5) Decrease in Profits
(5) Increase in Losses
(7) Increase in Pessimism
(8) Slower Velocity
(1) More Liquidation
(6) Reduction in Volume of Stock Trading
VIII. (6) Decrease in Construction
(6) Reduction in Output
(6) Reduction in Trade
(6) Unemployment
(7) More Pessimism
IX. (8) Hoarding
X. (8) Runs on Banks
(8) Banks Curtailing Loans for Self-Protection
(8) Banks Selling Investments
(8) Bank Failures
(7) Distrust Grows
(8) More Hoarding
(1) More Liquidation
(2) More Distress Selling
(3) Further Dollar Enlargement
askin, the difference between FDIC liquidation (a al IndyMac) and nationalization is that the bank remains in business. Shareholders are wiped out and bondholders likely take a haircut.
Zombification, which is the Fed's current plan, is to keep the shareholders nominally in place. There's little practical difference other than perception, but that may be a big difference. If American businesses are driven by Rush, O'Reilly, Hanity and others to fear that they are next in line, the capital flight and contraction could be much more severe.
POIC:
"No bottom until we bring trust back into the financial system."
Trust in the financial system, and transferring trillions of dollars of debt onto an increasingly indebted and impoverished populace...these two things are odd bedfellows.
America doesn't exist in a vacuum...
Tourism down 2-3% in Brevard, space coast and 14-16% in Miami-Dade and Broward (Ft. Lauderdale).
All in all, it could be worse.
EvilHenryPaulson | 02.25.09 - 5:07 pm
If you have the link to that article, you should post it. I read it, after someone here posted it. It was truly a mind expander. I think it is on the St. Louis Fed website?
Maybe we should ring-fence California.
Angry Saver |
===
Let Mexico have it.
\t WACConomics | \t \t \t \t02.25.09 - 4:57 pm | #
How about we meet you half way and let you have southern CA?
"In CA the home prices have declined more than 100% of the state GDP. Add the drop in the Scam Market and you don't need to be a genius as to where the economy is. Rogue economists at UCLA Andersen Forecast live in the ivory tower and it is a waste of time to listen to their forecast."
I just came across an old email to my wife from May 2008 about the Zillow price on our old home.
Difference between May 2008 and present is 180,000 or 20k/month roughly.
The people who bought our house in 2004 are now 140k under-water.
That's got to hurt.
CR, could you please pull out the data for Japanese RE declines in the mid 90's. I heard it went on for 5 -7 years. Is it true?
Comrade de Chaos | 02.25.09 - 5:06 pm | #
CR -- I'll second that, asking that you put up charts comparing Japanese RRE & stock market declines then vs. those for the U.S. now.
We do not know if-
I don't see how any credibility is being established... seems the opposite is happening.
.
--
CA home prices are headed at least to the 1995 prices in nominal terms. The same may apply to the most other states.
Jas
Timothy Leary of Geithner:
I used to resent the boomers too, until realizing recently that they will be sharing in the apocalypse during one of the most vulnerable period of their lives. Additionally, they are the least capable of adjusting psychologically.
It's going to be brutal.
"In CA the home prices have declined more than 100% of the state GDP."
In japan declines were as high or higher, still while most of them were depressed, their economy has never reached that point.
Anyway, it is all about your reference point. Is your reference point the Great depression or just your average recession in the last 50 years?
Law L. Do you do Coral Springs vicinity
Oh Glod! Of course.
Comrade Misean is Dope | 02.25.09 - 5:04 pm | #
OT- would someone please explain Glod. Is is a mispelling of gold or God or what. See it all the time, but have no clue, which isn't necessarily out of place.
charles hugh smith-Weblog and Essays
middle class squeeze does not end well
compared to 01, we are in depression. COmpared to 31, we still have a long way to go.
Citi's price on Feb 9 is $3.95. We get a 10% discount to that for a price of $3.55. Today's closing price was $2.52. We are overpaying by $1.03 or 40.87%.
There's needs to be at least one or two sacrificial lambs if they want to sell this to the public successfully. If they are all well capitalized no one will believe them, look for the I didn't inhale equivalent.
glod
Glod - Wikipedia, the free encyclopedia
funny
I wonder how much inventory the manufacturers of 1929 kept on hand, compared to our just-in-time methodology?
His work was too basic to put into practice, but Hyman Minsky was definitely of the right mind to be a leader at a time like this
How about we meet you half way and let you have southern CA?
=====
them
I want nothing to do with it.
Actually, China may as well be the likely owner..
xxxxx | 02.25.09 - 5:11 pm | #
yes
I guess would should ask for debt forgiveness since we have to protect the entire world.
the more I think about it...
The stress test is beginning to feel like cover for a controlled demolition...
We are overpaying by $1.03 or 40.87%.
Relax, we'll make it up on volume.
First post here. I have been reading for quite a while. CR does an excellent job in my opinion.
For me the problem is the average-guy salary vs his expenses. For the last 25-30 years, average-guy has spend more than he earned. Also, because his assets were worth more, he was allowed to borrow more and more. This credit frenzy created a lot of profit for corporations and governements all around the globe.
Today his salary is coming down (less hours worked, unemployed, pay freeze or even salary reduction). Average-guy did not saved enough for retirement and did not pay enough taxes (gouvenement deficit). Average-guy have no choice left. He has to start saving big time and very soon he will be taxed more. That means that the GDP will come down substantially over a period of many years.
As soon as he will be able to spend, the prices of resources (oil in particular) will go up substantially keeping the economy from having high GDP growth. On top, like someonelse said, he will be competing with billions of asians.
policy of encouraging bigger and bigger loans as tax writeoffs
ShortCourage | 02.25.09 - 5:04 pm | #
Well that's your problem right there - bigger loans as tax writeoffs
never made sense to me
"CA home prices are headed at least to the 1995 prices in nominal terms."
well, if you assume 1995 prices were historically average, it is only natural for RE prices to head back, unless there was some huge change in consumer preferences took place. For example, if most of consumers would forsake their lifestyle for the sake of having ass kicking McMension, then prices could remain above average.
I haven't noticed much of the desire to change a life style (last 12 years not just 2), have yo?
http://en.wikipedia.org/wiki/Glod
Comrade Janosik | 02.25.09 - 5:13 pm | #
Thanks-
is glod elmo or kermit, knurd
--
"I don't see how any credibility is being established... seems the opposite is happening."
Broward Horne,
The most important tool in the propaganda kit is to keep people guessing and insecure. German Nazis knew it and our leaders know it too.
Jas
[The tax increase is a new proposal from Mr. Obama, and would limit deductions for filers in the 33% and 35% tax brackets]
Ahhh, so he's targeting people who don't have LLCs & S-Corps and actually pay taxes. Nice. He's going to screw me unless I can invent some new way to cheat, like soros, clinton, etc...
ooooops, guess that's closer to Jan 2000.....er....implications....
"I've never seen people in northern CA so freaked out."
Tale of two... uh... MSA's... Here in LA (city) everyone still thinks this is merely a fleshwound. IMHO they'll still be saying that when they've got no arms or legs too. It's crazy here. Really it is.
Jas. Try ... making ... a ... post ... without ... INVOKING THE NAZIS.
Hitler wore pants; therefore pants are bad.
See the logical fallacy?
As someone who has done a lot of financial structuring and simulations on billions of dollars worth of stuff, I have a suggestion for the Treasury and the Federal Reserve.
In addition, run the stress test backwards from how it is currently described. See what assumptions break the bank and require more capital.
If you are doing a simulation, put in some reasonable distributions around the GDP, unemployment, and home prices. Anything resembling reasonable will do for this purpose. See what combinations cause trouble.
When I do this type of analysis, I get results like "Bank A can tolerate a further 31% national drop in prices and a 10.5% unemployment rate without needing further capital. Bank B can tolerate a further 16% drop in home prices and 9% unemployment. Bank C can tolerate a further 4% drop in home prices and 8.5% unemployment."
Feel free to email me. The offer also stands for private sector analysts. some_investor_guy aaattt yahoo.
--
"well, if you assume 1995 prices were historically average"
No, I am assuming incomes and where the rents are likely to be (I have predicted a 30%+ drop in rents). My baseline assumption is 100 times the monthly rents.
Jas
"As soon as he will be able to spend, the prices of resources (oil in particular) will go up"
A key point many miss...
each will pay as much as he can possibly pay....try your saving magic now savers...
disclaimer: I am a saver...
cinco x,
Glod....
Many moons ago, a commenter, oh I think it was dryfly, could have been idoc, during a run up in the $ price of gold, wanted to post a snarky
"Oh My Gold!" as an intro to his post.
But it came out "Oh My Glod!" Much debate ensued about how one should worship Glod, when several discovered that indeed a diety named Glod did exist. And, the rest is history.
Nostrovia,
CA home prices are headed at least to the 1995 prices in nominal terms. The same may apply to the most other states.
No need to worry about people walking away from their mortgages though. We're now an "ownership" society.
Question for any Gold Bugs out there. Last year there was a shortage of American Eagle 1 Oz Gold Coins.
Bullion Direct has them back in stock again, for $1,013. Wondering whether that's a good price. Looks to be about $60 above spot price for Gold, but I see that it's only 91.6% pure gold. Is that standard, and does it mean you're really only getting 91.6% of an ounce in gold?
Aren't there prisons in tehachipi?
What if Jas was a convict?
"Feel free to email me. The offer also stands for private sector analysts. "
You do realize that Barney Frank does not even know how to use a computer, right?
Back in the 70's, many people were upside down on their houses, waited it out, and came out of it ok. What is the difference between now and then?
"Ahhh, so he's targeting people who don't have LLCs & S-Corps and actually pay taxes. Nice. He's going to screw me unless I can invent some new way to cheat, like soros, clinton, etc...
bearly | 02.25.09 - 5:18 pm | # "
Obama ain't gonna get the taxes from me. With my wife getting laid off next week there go the taxes.
Who's your daddy?
/snark off
Re: glod
Glod - Wikipedia, the free encyclopedia
now fixed.
"Average-guy have no choice left. He has to start saving big time and very soon he will be taxed more. That means that the GDP will come down substantially over a period of many years.
"
I disagree. While most of said is absolutely true, it does not mean the GDP will keep declining, it might however remain flat = which is rather bad. However there are always ways to fix the-at problem, for example rational investments in the supply efficiency (spending large share of GDP on better energy use, rather then American RE dream), might improve productivity and as the result GDP, etc.
Something like 92% of American Retailers that had been in business in 1929, were bankrupt by 1933.
Timothy Leary of Geithner | 02.25.09 - 4:40 pm | #
Do you have a link to that info? I'd like to do more reading on that aspect without googling the entire internets.
Back in the 70's, many people were upside down on their houses, waited it out, and came out of it ok. What is the difference between now and then?
Anonymous | 02.25.09 - 5:22 pm | #
The end of the World is coming-
--
"Jas. Try ... making ... a ... post ... without ... INVOKING THE NAZIS."
debtinator,
I don't know what country you live in but born-and-bred American dopes know more about German Nazis than about the American history and the nature of the American ruling elite.
One must give examples of what the readrs know, no?
Jas
MLM is glod....
we bow in reverence...
pardon my spelling, i am @ work (yeah still kicking it), laterz all
always pleasure.
MLM:
that is HILARIOUS.
clearly you wield the power of the internets, like Leeroy Jenkins.
Obama ain't gonna get the taxes from me. With my wife getting laid off next week there go the taxes.
Who's your daddy?
POIC | 02.25.09 - 5:22 pm | #
Ummmmm....congradulations?
I believe I the first time I saw it was one from our more educated/intellectual posters. It was a way to needle the illiterates (us goldbugs) with "by glod" "buy gold" but then it became a more polite way to speak about the subject. That is my take anyway
They aren't trying to sell this to the public at all. By the time the public has a response to this, it will be after the investment is made. This is back-door nationalization.
By having a "stress test," they put a price on an institution rather than having to put a price on an asset and dealing with that scrutiny.
Re 1996, 1995 prices, etc., if you say nominal, I have a phrase for you.
"Quantitative Easing" by a determined guy Meltzer says has ammunition.
I'd not stand in front of that cannon.
"Back in the 70's, many people were upside down on their houses, waited it out, and came out of it ok. What is the difference between now and then?
Anonymous | 02.25.09 - 5:22 pm | # "
How many of those people were under-water 20,30,40%?
They'll walk just like they did in Florida and Texas during previous localized busts.
Unemployment at 10% will also make the decision to walk easier.
"Question for any Gold Bugs out there. Last year there was a shortage of American Eagle 1 Oz Gold Coins.
Bullion Direct has them back in stock again, for $1,013. Wondering whether that's a good price. Looks to be about $60 above spot price for Gold, but I see that it's only 91.6% pure gold. Is that standard, and does it mean you're really only getting 91.6% of an ounce in gold?
Comrade Scared Shitless | 02.25.09 - 5:20 pm | # "
Eagles weigh 1.1 ounces. They're not pure gold, but at that weight you get one ounce of gold along with the other metals that stiffen up the coin a bit. Gold is soft.
Y'all will hate this link
not enough doom and gloom......
The most important tool in the propaganda kit is to keep people guessing and insecure
That just doesn't make any sense, Jas. All they're doing is destroying credibility and creating animosity.
.
Back in the 70's, many people were upside down on their houses, waited it out, and came out of it ok. What is the difference between now and then?
the difference is debt to income ratios, and the percentage of dual income households.
debt to income levels were much lower in the 70's compared to today. thus, people had a chance of paying their bills.
also: there were more single income families then. so if there was financial crisis the other partner could go to work increasing income.
now, families already have 2 worker bees... and still find themselves with high DTI ratios... and often one partner losing their job and the needed income
(like POIC's wife)
YTL
Bond Girl,
What do you think of the TALF being $1tn now, and incentivizing dealers of muni bonds
Joanna,
Forget where I read it, but it makes sense doesn't it?
The stock market fell by about that much, from 1929 to 1933, losing 89% of it's value.
Events like what's going on, tend to sink all ships.
And the world back then was barely connected.
Back in the 70's, many people were upside down on their houses, waited it out, and came out of it ok. What is the difference between now and then?
Anonymous | 02.25.09 - 5:22 pm | #
The 70's bubble is barely visible on a graph showing the bubble that just popped.
Demographic profile.
//Back in the 70's, many people were upside down on their houses, waited it out, and came out of it ok. What is the difference between now and then?
Anonymous | 02.25.09 - 5:22 pm | #//
"POIC writes:
"Back in the 70's, many people were upside down on their houses, waited it out, and came out of it ok. What is the difference between now and then?
Anonymous | 02.25.09 - 5:22 pm | # "
How many of those people were under-water 20,30,40%?
They'll walk just like they did in Florida and Texas during previous localized busts."
Back in the late '80s, near the end of the previous real estate boom, honest RE agents said, "Sure, buy now -- if you're going to be in the home at least five years." They were a little low, but if you bought in '89 or '90, you'd probably be above water by '96 or '97, at least in Northern Cal.
But how long would you have to stay in these days? Ten years? Fifteen? Assuming your don't lose your job, divorce, etc.
That just doesn't make any sense, Jas. All they're doing is destroying credibility and creating animosity.
Broward Horne | Homepage | 02.25.09 - 5:26 pm | #
It'll work better when they start censoring the internet. Then we won't even be able to define credibility.
prices need to go back to '97. So this forecast is wat rosy. MAybe there need to be a CR worst case
âWhen you look at the mistakes of the 1920s and 1930s,
they were clearly amateurish. It is hard to imagine that
happening againâwe understand the business cycle
much better."
(Greg Mankiw, Harvard economist and textbook author,
Wall Street Journal, February 1, 2000)
"The stock market fell by about that much, from 1929 to 1933, losing 89% of it's value.
Events like what's going on, tend to sink all ships.
And the world back then was barely connected."
What do Dow during the 30s, Nikkei during the 90s, house prices in Japan during the 90s and the Nasdaq in early 2000 and Shanghai in 2007/2008 all have in common?
They all dropped between 80%-90% and they were all based on fraud.
Doesn't bode well for our housing bottom or our stock market bottom this time around.
Yearning To Learn
Yearning To Learn | 02.25.09 - 5:26 pm | #
You are right on the money with that analysis. That's how Americans maintained standard of living despite offshoring...add a second income and increase debt.
--
"His work was too basic to put into practice, but Hyman Minsky was definitely of the right mind to be a leader at a time like this"
EvilHenryPaulson,
Minsky understood Financial Nazis and his analysis and warnings were suppressed and ignored. Financial Nazis employ a coterie of rogue economists to counter the truth.
If you understand the tactics of the German Nazis you can understand the tactics of Financial Nazis of America and their agents like Bernanke.
Jas
Comrade Scared Shitless,
I'm not a Glod bug, but I stayed in a Holiday Inn Express once...anyhoo...
"Bullion Direct has them back in stock again, for $1,013. Wondering whether that's a good price."
No, I can get them for $1008ish.
"Looks to be about $60 above spot price for Gold, "
Good enough. 955.5
"but I see that it's only 91.6% pure gold. "
Yes.
"Is that standard,"
For that coin, yes, krugs too.
"does it mean you're really only getting 91.6% of an ounce in gold?"
Umm...yes.
Nostrovia,
"No, I am assuming incomes and where the rents are likely to be (I have predicted a 30%+ drop in rents). My baseline assumption is 100 times the monthly rents.
Jas
"
it is simple, we used to spend let's say 30% of GDP/year on RE, now since RE prices and demand are going down, we will spend 20% of GDP/year. You confuse assets and revenues.
GDP are revenues;
production means, RE, financial securities are assets. While the drop in the assets might affect the revenue, real assets were not necessary destroyed, so the effect is much lesser then you assume.
Revenue (GDP) is down because RE activity and credit crunch affects economic activity and not necessary because values of those assets are down...
Wikipedia: glod, intentional misspelling of Gold by squirrel-eating denizens of Calculated Risk
LMAO!!!
Bob Dobbs
But how long would you have to stay in these days? Ten years? Fifteen? Assuming your don't lose your job, divorce, etc.
FOREVER you have to live these for the rest of your life !! It's not like anyone ( apart from Bankers ) can afford to retire anymore !
Seriously tho' if I were that upside down on my property I would walk. You know if you're talking about business decisions and smart biz cuts it's losses and moves on. People will need to do the same thing too.
"add a second income and increase debt."
add gov't stimulus and increase debt more....
now what?
the deleveraging spiral of death that's what
Should I apply for an entry level job at a firm that investigates mortgage fraud?
I could really use a job -- I'm a great researcher, analyst, creative thinker, quick reader, strong writing skills but no financial background other than reading this blog, Mish, Jesse, WSJ etc. They don't require a background in finance.
"does it mean you're really only getting 91.6% of an ounce in gold?"
Umm...yes.
Comrade Misean is Dope | 02.25.09 - 5:30 pm | #
Umm... no. You know better!
The 70's bubble is barely visible on a graph showing the bubble that just popped.
bobn | Homepage | 02.25.09 - 5:28 pm | #
Is that true if you put it on a log scale? The Great Depression is barely visible on a chart of stock prices if your vertical axis is linear. Just askin'.
As far as the public is concerned, everything will still be presented in the aggregate. "X bank has a portfolio that stands to lose Y in baseline and Z in worse case. Therefore, if their losses are Y we give them this much and if their losses are Z we give them that much." (Forget about private investment, that's just a joke.) Compare that to doing this asset-by-asset and having real losses revealed. Of course it will turn out that way once their balance sheets are our balance sheets.
( I tried ) whatever.
And the world back then was barely connected.
Timothy Leary of Geithner | 02.25.09 - 5:27 pm | #
That is a very common misconception...the world was very connected. The links weren't as fast as now, but they existed. The whole "globalization" meme is based on historical amnesia.
back-door nationalization
Bond Girl | Homepage | 02.25.09 - 5:24 pm | #
Yeah. back door back door....as in bend over.
Try to think of a world where nothing is made here anymore, nor in Asia, for about 10 years, the financial big sleep.
What sort of long term items have you stocked away in anticipation of need?
tj,
Oh My Gold!
Nostrovia,
Kung Fu Panda:
No way !! International trade wasn't invented until the freemarket in the 1980
You're right tho' it's simply the speed of commerce that has improved.
"Is that true if you put it on a log scale? The Great Depression is barely visible on a chart of stock prices if your vertical axis is linear. Just askin'."
We haven't had a nationwide drop in housing prices since the 30s. And I believe this one is already worse than the 30s. Looking at the drops percentage wise the 70s won't even show up.
Coral Springs is just a bit North of where I am. Yeah, I go to Broward County.
--
"That is a very common misconception...the world was very connected. The links weren't as fast as now, but they existed. The whole "globalization" meme is based on historical amnesia."
Kung Fu Panda,
Right you are. Born-and-bred American dopes are schooled in New Era and we are so much smarter now than in the past. What a bunch of egotistical dopes.
Jas
Bernanke isn't some malicious guy.
He's just like you or me.
After he spends and lot of time and public pronouncements on a point of view, then....
just like you or me or anyone, he'll then try whatever he can do to make it work like he said already.
tj,
That previous me was about the previous you regarding glod.
This is about the umm..yes comment.
I did preface with an umm...
Nostrovia,
The whole "globalization" meme is based on historical amnesia.
Yes, this is not new. The people who voted in Smoot-Hawley were hardly
"stupid", they had almost as much historical data as we do now.
.
Question for any Gold Bugs out there. Last year there was a shortage of American Eagle 1 Oz Gold Coins.
Bullion Direct has them back in stock again, for $1,013. Wondering whether that's a good price. Looks to be about $60 above spot price for Gold, but I see that it's only 91.6% pure gold. Is that standard, and does it mean you're really only getting 91.6% of an ounce in gold?
91.6% has been the historical standard for coins that are intended to be in circulation. They need the filler metals to avoid getting too nicked up. Keep in mind that Sterling Silver is 92.5% silver, I think also for the same reason.
You can get 99.99% coins - Canadian Maple Leafs and American Buffalos. The Maple Leafs usually sell at around the same price (or less) than the American Eagle or the Kruggerrand (also 91.6%).
As for price, um, who knows? If gold goes up you look pretty smart; if it goes down perhaps a little less so.
Bond Girl --
Back door nationalization by way of a secondary offering at inflated prices?
Back door nationalization that fully protects the creditors and even the existing preferred shareholders?
I'm starting to hate the back door.
Timothy Leary of Geithner
What sort of long term items have you stocked away in anticipation of need?
Bottled water, Ammo, spare parts for the instruments of self defense and lots 'n' lots 'n' lots of MREs.
I need to check if razor wire around the perimeter of my .89 acres be in violation of the Home-Owner rules.
back-door nationalization
Bond Girl | Homepage | 02.25.09 - 5:24 pm | #
Yeah. back door back door....as in bend over.
Joanna | Homepage | 02.25.09 - 5:34 pm | #
Okay ladies, pull it out of the gutter;-)
POIC writes:
"Bet another move is bringing back the uptick rule."
Trader A needs to short stock ZZZ.
Trader A drops Trader B a note on his crackberry.
Trader B puts a buy order in for 1000 shares of stock ZZZ.
Trade A puts his million share short on.
Maybe they will make it more than one tick.
Our 1929 counterparts were connected certainly.
Chat rooms like this were called party lines, and you needed the operator to connect you to whomever it was locally that you wanted to talk to.
Telegrams were quick, the text messaging of it's day, but quite expensive. There were no kids sending 413 telegrams a day, back in the day.
Our complexity in comparison makes 1929 look like a couple of orange cans and string affair.
--
From Economist' View blog: "Leaving Economics to the Economists, Not the Politicians"
LOL! As if economists are not political animals.
Jas
Funny how it works. When the price of glod was low late last year, you couldn't get the Eagles anywhere. Now that it's back up at around $1K, no problem.
Kind of wanted to get my feet wet with some physical coins, to go along with the bars I bought a couple of years ago when it was under $700/oz.
Already have a lot of GLD, and am now thinking that despite the premium, it is a safer bet to go with physical rather than paper. I just am not sure how much I can trust the GLD price to reflect reality going forward.
As far as the public is concerned, everything will still be presented in the aggregate
So... so what? This is all just a scheme to shift assets on taxpayer balance sheet and mask it by considering only cash inflow/outflow?
Is that deal? Hide it all now, admit to current cashflows because they have to and let "discovery" take place over the next two decades?
.
Maybe they will make it more than one tick.
Anonymous
Add traders, C,D,E, etc.
EHP,
I guess I did not think it was as much of an issue as Bloomberg. The bond issuers that have been subject to AMT (well, interest income on their bonds) need all the help they can get right now in this market.
"Since the Krugerrand is minted from gold alloy that is 91.67 percent pure (22 karats), the actual weight of a "one ounce" coin is 1.0909 troy ounces (33.93 g), to provide one troy ounce of pure gold. The remainder of the coin's mass is made up of copper (2.826 grams)",
Krugerrand - Wikipedia, the free encyclopedia
UMM Now I am not sure if you can believe wiki as in squirrel eating denizens of cr blog
The 70's bubble is barely visible on a graph showing the bubble that just popped.
bobn | Homepage | 02.25.09 - 5:28 pm | #
Is that true if you put it on a log scale? The Great Depression is barely visible on a chart of stock prices if your vertical axis is linear. Just askin'.
xxxxx | 02.25.09 - 5:32 pm | #
I was wrong about the 70s being barely visible, but it is still MUCH smaller. See here
and here 
. These charts are ratios of house price to income and house price to rental price, so inflation cancels out.
The Notorious A.I.G. said: "re Sebastian, there comes a point you look at the charts and just feel sorry for the guy"
I don't deserve (or want) any sympathy. I made my up my own mind, placed my bets accordingly and things played out the way they played out. That's life in the Big City, and now it's up to me to learn from it.
Ironically, keeping my house offset most of my stock-market losses, so I caught a lucky break there.
Sebastia
Here's a link (via Ezra Klein's blog at The American Prospect) to President Obama's remarks to the Regulatory Reform meeting in the WH today.
We will not always see eye to eye in our work. We may disagree -- and disagree strongly -- about particular provisions. But there are certain core principles that I believe must shape any proposal for reform -- and these are the principles that will guide our work.
Then follows the 7 core principles he outlined.
Good stuff!
Here's my guess:
The continuing evolving ideas to "prevent foreclosures" will finally get seriously strong just about the time house prices get back to 2000-2001 levels.
In other words, all this so far is like a warm-up.
They'll finally make it happen just about there at the level price level before much of an overshoot.
But that is about 15% further down nationally.
thanks bobn for the charts.
The stock market fell by about that much, from 1929 to 1933, losing 89% of it's value.
Events like what's going on, tend to sink all ships.
And the world back then was barely connected.
Timothy Leary of Geithner | 02.25.09 - 5:27 pm | #
True.
I found just enough info with a light skimming to bear out that huge of a loss. It reminds me of the stat for how many species have gone extinct over the eons....
"Then follows the 7 core principles he outlined.
Good stuff!
JimPortlandOR"
I think his core principles are sound. Can he implement an action plan to see them through, though?
I honestly can't keep track of the numbers anymore. Here's two more articles with another $1 trillion+ in proposed spending - $634B for health care and $410B in "domestic spending".
Obama seeks $634B over 10 years for health care
House OKs $410B bill to boost domestic spending
So, what? That puts us at what? $15 trillion in debt?
.
The people who voted in Smoot-Hawley were hardly
"stupid"
Smoot-Hawley was at most a minor contributor to the Great Depression.
Imports/exports were ~ 5% of GDP in 1929. They fell ~ 30%. Basically in-line with the drop in overall GDP.
Be very skeptical of any eCONomic truisms.
Asst. Treasury Sec. for Raygun hits the nail on the head
Jesse's Café Américain: How the Economy Was Lost
If glod is hard to find, or gets too pricey, don't forget sliver.
Sliver comes in smaller denominations, and can therefore be useful in smaller transactions.
If it really is TEOTWAWKI.
Just sayin'.
In any event, glod and sliver usually track and may both be a useful hedge against currency value fluctuations.
I don't see much stress there. If we built bridges that way we'd all be in the river. Or up the creek. Whatever.
SmootHawley is often cited, but overlooked is FordneyMcCumber which was bigger increase in tariffs but lead to prosperity.
Need larger sample sizes for better p-values, people. Then you can be smug and sure.
ah....yeah my idea 15% down is in nominal terms at Jan 2002, is about right.
In real terms that's near Jan 2000.
In nominal terms, near Jan 2002.
--
"Good stuff!"
JimPortlandOR,
Great propaganda stuff!! Born-and-bred American dopes fall for propaganda every time.
I wonder who drafted these principles. Some agent of Financial Nazis? Obama is a spokesperson for Financial Nazis himself.
Propaganda must be maintained at a high pitch to keep dopes in line.
Jas
"I think his core principles are sound. Can he implement an action plan to see them through, though?"
that's where they say, the rubber meets the road...hmmmm
I believe he will try, and there will be measures of success...but they will be far and few between in a cascade of bad news...
In 1981 I bought a house that I still own. I was young and my house cost me 2.2 times my annual salary (not including my wife). That was at the peak price just before the interest rates went thru the roof.
There is no reasons for the prices to be higher today. In fact, considering the level of indebtness, houses prices should be even less today.
At the time, inflation and interest rates where high. With my beginner salary going up 10-15% per year, it was very easy to pay the house in 10 years even if our interest rate was 15%.
Quick math.
Where we want to buy is falling faster than case Shiller, but lets say it falls as much as these scenarios. Eyeballing numbers, we're at 160 going to 135 (optimistic) or 120 (pessimistic).
or a $900k home drops to $675k to $759k. Obviously its a great time to buy!
Got Popcorn?
Neil
Glod is old school CR.
What sort of long term items have you stocked away in anticipation of need?
Timothy Leary of Geithner | 02.25.09 - 5:34 pm | #
I'll just say that my pantry/barn/garage usually has enough must-haves to cope until I can either restock or adapt.
I read somewhere that silver was worth like a quarter an ounce during the great depression. No silver lining apparently.
I was young and my house cost me 2.2 times my annual salary (not including my wife).
How much did your wife cost?
Ummm...sheesh! It was a bit of a joke.
You can't sell a one troy ounce (PM) coin unless it contains one troy ounce.
OK...
I'm gonna go finish cleaning up the mess my bulldozer made earlier.
Nostrovia,
Jas,
for what it's worth, yes many people in the states are bible-thumping, unthinking, unwitting good little germans.......
but, your sermons are misplaced here...
Jas Godwin is outdoing his previous attempts @ Godwinism on this thread.
Indianazi that he is.
Jas the Financial Nazis if they are true Nazis will soon be gassing your sons and torturing your grandchildren. So really you should leave the country, as the lucky Jews left Europe. I don't know why you stay, with Nazis controlling everything.
Instead of buying 5 ounces of silver, why not just put away a $75 brand new vaccum cleaner, to replace the one that breaks?, when there are no retailers left in about 5 years.
I was telling someone yesterday, that prices here behind the Orange Curtain, still needed to fall at least another 20%.
I bought my condo for around $100K in 1998, and using roughly a 5% inflation rate, the price should be under $200K still. Yet, people are still attempting to get $275K for my unit, without much success.
I figure another 20-30% drop will put prices in line of where they should be.
Smoot-Hawley was only a problem when the US was a net exporter. As a client state of China, India and anywhere else that pays $0.00025/hr in labor rates protectionism in the 21st Century would not hurt anything like the the early 20th Century. What mass market goods do we actually export in any volume that would hurt us ?
More than likely a Smoot-Hawley would be of benefit. A leveling of the playfield as it were.
However as the current crop of politicians, of both parties, would craft such legislation it would be a complete debacle.
Our complexity in comparison makes 1929 look like a couple of orange cans and string affair.
Timothy Leary of Geithner | 02.25.09 - 5:39 pm | #
And how much food was extremely locally grown, compared to now? Many folks still had a milk cow, garden & hens.
Imports/exports were ~ 5% of GDP in 1929. They fell ~ 30%. Basically in-line with the drop in overall GDP.
Be very skeptical of any eCONomic truisms.
I'm delighted to find such facts, but....
it seems the number is in question. Source?
Doomed by the Myths of Free Trade
That's a good article, very close to what I've seen first-hand during the past decade. Atlantic Monthly ran a similar article during the early 90s but based on English history.
.
Joanna
Many folks still had a milk cow, garden & hens.
A decent sized chicken run is definitely against the HOA rules
those charts are missing unicorns
I'm hungry guys.
Happy dooming.
Does that budget have a line item for food banks?
"when there are no retailers left in about 5 years."
A manufacturer and UPS is all you need.
And how much food was extremely locally grown, compared to now?
Same issue in the late 1800s. Food production increased almost tenfold and was a major source of trade disputes, except the U.S. was doing the exporting and destroying the economies of Europe.
.
Sliver comes in smaller denominations
threetorches | 02.25.09 - 5:49 pm | #
Silver comes in pretty antique flatware too
I was wrong about the 70s being barely visible, but it is still MUCH smaller. See here
bobn | Homepage | 02.25.09 - 5:42 pm | #
Still, zero suppression and linear scale screw up the conclusions one might draw from the graphs. Log scale would be better.
Broward Horne,
The USA was also the intellectual property pirate of the day and just like movies are pre-released in Asia on DVD royalty free, Dickens was outraged his works were being freely printed
Manufacturers are going out of business hourly, and ups's business model was based upon the scale of their business ever-expanding, whoops.
Silver comes in pretty antique flatware too
which drawer in the supermarket checkout machine do they use for the salad forks, dinner folks, knives, and teaspons? (lol)
A decent sized chicken run is definitely against the HOA rules
splat | 02.25.09 - 6:04 pm | #
All the more reason to avoid them....oh well. MRE's for you!
US exports (alone) in 1929 were about 5.7% of GDP, imports (alone) about 5.4%.
http://www.bea.gov/scb/pdf/NATIONAL/NIPA/2000/0400nipa.pdf
TLoG,
"Manufacturers are going out of business hourly, and ups's business model was based upon the scale of their business ever-expanding, whoops."
And IF we have a Mad Max future, with no retailers, what good is that saved electric vacuum cleaner with a 5 year old, dried out drive band gonna be without electricity?
Nostrovia,
Instead of buying 5 ounces of silver, why not just put away a $75 brand new vaccum cleaner, to replace the one that breaks?, when there are no retailers left in about 5 years.
Timothy Leary of Geithner | 02.25.09 - 5:59 pm | #
Because in 4 years, when there are still some retailers, that vacuum cleaner will only cost $10.
get out the carpet beaters....
(talk about buggy whips!)
why hoard? jus shoot a splat and take his mres
--
"Jas the Financial Nazis if they are true Nazis will soon be gassing your sons and torturing your grandchildren. So really you should leave the country, as the lucky Jews left Europe. I don't know why you stay, with Nazis controlling everything."
1 currency almost [yogi],
How would an ignoramus like you know what role the Financial Nazis of London and NYC played in the Holocaust.
Most born-and-bred American dopes and you only know the propaganda version of history put out by Financial Nazis of America. Got it?
Jas
which drawer in the supermarket checkout machine do they use for the salad forks, dinner folks, knives, and teaspons? (lol)
JimPortlandOR | 02.25.09 - 6:09 pm | #
People like pretty things that are made of mutually-recognized-as-valuable materials. May not be accepted at a store, but I have neighbors who would swap for me for something useful. And I like eating off silverware more than my ounce coins
We are still getting the optimist's worst case scenario.. Lets get a Mad Max pessimist to make a prediction and work off the average.
all you need is a manufacturer and UPS
Not really. Middle men exist for a reason. There's a finite amount of traffic you can route through any node (i.e. business, person) and there's a certain amount of time & knowledge necessary to make it happen.
Small manufacturers sometimes do that in-house but almost all large manufacturers don't want to geek with it so they outsource delivery logistics to other companies.
Nature of transaction costs.
.
Comrade Scared Shitless writes:
I bought my condo for around $100K in 1998, and using roughly a 5% inflation rate, the price should be under $200K still. Yet, people are still attempting to get $275K for my unit, without much success.
I figure another 20-30% drop will put prices in line of where they should be.
That assumes no depreciation due to the ravages of time, dogs and children.
More importantly, the house/condo should reflect what wages have done in the local area since '98.
Also, public perception of the prospect for future appreciation and continued employment!
just kiddin, splat - but making the point that even the best laid plans...
good luck!
And IF we have a Mad Max future, with no retailers, what good is that saved electric vacuum cleaner with a 5 year old, dried out drive band gonna be without electricity?
Comrade Misean is Dope | 02.25.09 - 6:11 pm | #
If we have a Mad MAx future, I sure as hell won't be worried about clean carpets!
And IF we have a Mad Max future, with no retailers, what good is that saved electric vacuum cleaner with a 5 year old, dried out drive band gonna be without electricity?
Comrade Misean is Dope | 02.25.09 - 6:11 pm | #
Sell it in Bartertown. You may recall that they capture methane from the hog farm and use it to generate electricity.
US exports (alone) in 1929 were about 5.7% of GDP, imports (alone) about 5.4%.
As I said approximately 5%.
Now explain to me how replacing 5% of GDP with domestic goods over imported goods caused a depression.
I just don't buy it.
"Manufacturers are going out of business hourly"
This is what the unemployed should be keeping an eye on. Open up a vacuum cleaner repair biz. Failure leads to opportunity. Too many people act like they are owed a job.