Suppose the S&P goes under 600 later this year, what middle class investor will ever touch equities again? If the gap between the markets and the real economy grows any larger the next downturn could be a complete game changer.
We shall go on to the end, we shall loan in Finance, we shall loan on the seized assets, we shall loan with growing confidence and growing strength in the air, we shall defend our Island of fiscal insanity, whatever the cost may be, we shall loan on beach homes, we shall loan on the shakiest grounds, we shall loan in all fields of Wall Street, we shall loan in the trillions; we shall never surrender our consumerism.
I am reminded of the Zimbabwe stock market, which consistently rose in Zimbabwe dollars. Either folks believe that kind of wild ride is coming next, or the propaganda spooks are extremely competent. I thought fascist regimes scared away competent people....
CR, what is going to drive the bottom in residential investment this year besides demolishing vacant houses in the Inland Empire (true....a socially worthwhile investment)? It seems like there is going to be an inventory overhang for a very long time. I've heard this bottom claimed but not clearly explained.
Check out private construction for manufacturing:
Mar 2008: $51B
Mar 2009: $84B up 63%!
Lodging up a little too, for the second month.
This is just mind boggling to me. I understand there are huge lag times for commercial construction. But surely, there must be more projects ending than starting?
Remember TALF is going to back cre spending. It will buy bonds, make loans, whatever it takes. Nothing a few trillion won't fix. From here to china what will we put in all the new buildings?
I see ground breakings on more strip centers, office parks, a new type of "high-end" neighborhood shopping complexes and I gotta ask why? Were these loans made before the bust? I cannot imagine any bank making such loans today. I don't get it.
Anyone with access to better tools an info that I have a chart of any changes in the spread between the 30 year bond and a 30 year mortgage? It would seem to be that the risk premium for a mortgage is getting kind of low.
When I was with a homebuilder in Southern California 2007, they decided to start some homes in a remaining phases they owned because they realized they would lose the financing as things got even worse and they would be stuck with vacant land they couldn't do anything with (it was residentially zoned). They just wanted to take the write off and get the asset off their books forever.
1) returning from Northwest a couple months ago, waiting in Salt Lake City for connector. Several from the North Slope waiting too. All said they were 'stacking rigs'.
2) Another time, another place, from the Western Slope fof the Rockies: 'They're stacking the rigs.'
3) Last week, Louisiana. A couple from the NG fields and another from off shore operations: 'They're stacking the rigs.'
Shutting down exploration and developmental wells all over. Expect a ratchet of price to break out above 60 and then who knows?
Ancillary impacts all around. Probably just in time for round two next fall of whatever the flu bug transmogrifies into.
Yep, the bottoms in, screw the limit. It's clear skies and smooth sailing from here.
Did helicopter Ben just turn on the printing press? It looks like Glod got goosed.
Hey, if Ben will print money to manipulate the bond market upward, why not every other market.
Just remember the net result:
The American saver is once again "saving" by buying overpriced stocks and bonds. Companies no longer have to work or be productive to raise cash - they just sell overpriced bonds and equities into markets supported by taxpayer wealth. Again it is a direct transfer of wealth from those who produce wealth to those who produce paper. It creates further incentives for companies that once produced wealth to only produce paper to sell into manipulated, economically meaningless markets.
Bernanke continues "inflating away the middle class".
From the previous thread but applicable to all y-o-y comparisons: anoddamoose (profile) wrote on Mon, 5/4/2009 - 7:12 am reply Ignore user
Seasonal variation does not explain the 1.3% increase YoY.
Yes, it does and then some. Sometimes. Mar 2008 had 21 business days. Mar 2009 had 22. For pending houses last thread that more than wipes out the 1.3% gain with 5% more business days. For this thread we spent less in 22 business days than we spent in 21 last year.
This bullshit rally will flame out and turn quickly the other way because there is no return path to ‘normal’ for the US economy
Why ?
1) The projected budget deficit for 2009 is $2 trillion
2) The debt-drowned United States debt is already 350 percent of G.D.P and rising fast !
3) The Fed is now holding $10 Trillion of ‘assets’ ( mostly toxic ) transferred from too big to fail banks.
4) Other countries are now buying less of our debt
So what can most Americans look forward to ?
a) for production businesses the wages of American workers will drop in order to compete
b) We already know most service based businesses ( excluding legal, medical, financial, a few others ) don't pay that well.
Bottom line: being frugal is the new black and with 70% of US GDP historically driven by consumer spending this is simply not sustainable going forward !
///"The American saver is once again "saving" by buying overpriced stocks and bonds. Companies no longer have to work or be productive to raise cash - they just sell overpriced bonds and equities into markets supported by taxpayer wealth. Again it is a direct transfer of wealth from those who produce wealth to those who produce paper. It creates further incentives for companies that once produced wealth to only produce paper to sell into manipulated, economically meaningless markets.
Bernanke continues "inflating away the middle class". "///
ac, this is happening because we have an entire generation (mine) raised in the 90s and 00s that doesn't actually not know how to produce anything of value. What else do you expect?
I could be totally wrong on this, but I don't think Joe 6 pack is buying the market.
I doubt J6P is driving the market, but the simple fact is a lot of people save by buying stocks and bonds. All the possible options for my 401k plan, for example, involve some type of stock or bond allocation. So long as these markets are manipulated upwards, these types of retirement plans are actually inflationary wealth looting plans.
Likewise for all those pension plans out there that buy stocks and bonds.
km4 (profile) wrote on Mon, 5/4/2009 - 10:41 am
"...and with 70% of US GDP historically driven by consumer spending this is simply not sustainable going forward ! "
We're just waiting for Peter, Paul & Mary to finish the theme song that ushers us into a new "Age of Aquaris."
Which is worse - bankers or terrorists, it is possible for new residential construction to go to zero, but that won't happen. So the next question is how far down will it go?
I guess I wouldn't mind too much if the financial markets were widely recognized and advertised as the Wall Street Lottery (as long as no one is confused into thinking it is 'investing' or perhaps even 'speculation'.
But THEY NEED TO TAKE THE THUMBS OFF THE SCALE. Even a lottery is sort of free of human manipulation.
We are reduced to trying to guess what Wall Street manipulators (people and computers) and government apparatchicks may be trying to do with massive electronic cash at their disposal. Even a ponzi scheme is better than this (you can get out before the final fall if you are smart and early enough).
Anyone with access to better tools an info that I have a chart of any changes in the spread between the 30 year bond and a 30 year mortgage? It would seem to be that the risk premium for a mortgage is getting kind of low.
ac, this is happening because we have an entire generation (mine) raised in the 90s and 00s that doesn't actually not know how to produce anything of value. What else do you expect?
They also don't know how to judge value.
And the people running this country seem to be depending on that and in fact reinforcing that lack of knowledge in order to maintain control.
However with the type of economy that we have which is so highly diverse, complex, and specialized it simply won't work to have our population turned into mindless financially and economically brain dead cattle. You won't have companies like Apple and Google emerge out of garages in a country of financial illiterates.
And yet this seems to be the goal of the government and economics profession - deliberately foster economic ignorance in order to funnel consumer savings into the government and Wall Street.
It won't work with this type of economy. We'll become North Korea or 1960s China.
"Which is worse - bankers or terrorists, it is possible for new residential construction to go to zero, but that won't happen. So the next question is how far down will it go?
Here was my most recent post on the topic.
Best wishes"
Sorry, CR, I missed it as I was traveling for work.....
OK right.....can't go below zero percent. This may describe much of our economy going forward.
"And yet this seems to be the goal of the government and economics profession - deliberately foster economic ignorance in order to funnel consumer savings into the government and Wall Street."
I agree.
In all seriousness, what's the hedge? Which regime do we flee to in the absence of ours functioning in the preferable manner?
Dot-connecting was certainly MIA the next day, when many restaurant stocks (already the beneficiaries of huge rallies in the past month or so) finished higher. It was somewhat incongruous to witness world markets like our own panic over swine flu (to the point of pounding the price of hogs, etc.) while speculators partied in restaurant stocks, even though the flu's spread might keep many cautious diners at home.
I can't tell whether that means the fears of swine flu are overblown and it was just an excuse for traders to lower the stock market, or whether restaurant stocks are caught up in some weird orbit of their own.
In any case, I found it striking that the consequences of swine flu would apparently matter to everything except for one particular group that would definitely be affected by a flu pandemic.
Which is worse - bankers or terrorists (profile) wrote on Mon, 5/4/2009 - 8:00 am reply Ignore user
OK right.....can't go below zero percent. This may describe much of our economy going forward.
Sure it [residential construction] can. Did you see the houses being demolished videos? All those gems of the desert were counted as permited and starts and no doubt some were even counted as new sales.
Volume seems very light folks...I'm not sure I'd make much of Kermit other than there just aren't too many sellers...I think everyone is sitting tight...waiting on their existing positions to see what happens Thursday...just my very humble WAG.
That's an ugly YOY trend in residential...no end in sight, huh?
CalculatedRisk (profile) wrote on Mon, 5/4/2009 - 5:50 pm reply Ignore user
"Which is worse - bankers or terrorists, it is possible for new residential construction to go to zero, but that won't happen. So the next question is how far down will it go?
Here was my most recent post on the topic.
Best wishes"
CR, when working for the homebuilders in California in the mid-decade I do remember all all saying "no one is going to believe this, but there may actually be an uptick in new home sales just because never in any previous remembered downturn had we stopped new home production for so long". Given the cycle time of a new home (8-36 months construction depending on whether it is SFR of vertical high rise) almost everything in the pre-2007 pipeline has either been built out or lost the validity of any land use entitlements it got (they last 3 years in California unless you're under a Development Agreement or vesting Tentative Map). So this will likely in California constrict supply pretty well....everything at this point has to start entitlements from scratch which will take several years. This will create a tight situation on the supply side going forward unless the rules change from an environmental review point of view, and of course there appears no political reason to do that in the current environment.
I could be totally wrong on this, but I don't think Joe 6 pack is buying the market.
Maybe, maybe not. I see a lot of complacency and shrugged shoulders around here. It appears that most of my peers have accepted the stock market decline as temporary and have made no adjustments to their 401k. Consequently, I wonder how much 401k money is still pouring in-you know dollar cost averaging and all that great stuff.
"Rob Dawg (homepage, profile) wrote on Mon, 5/4/2009 - 11:04 am
Sure it [residential construction] can. Did you see the houses being demolished videos? All those gems of the desert were counted as permited and starts and no doubt some were even counted as new sales."
If any vagrants were living inside, they can count it twice more:
first as "affordable housing," then as a funeral home.
I pulled my money out of stocks in late 2007. I am hesitant to gt back into the market because I can't tell which gains are due to improved fundamentals vs government intervention. Until we get more transparency, I think most people will stay on the sidelines.
Obama to Wall St - I provide you with trillions in bailout $$$ and in return you pump up the market ( the ole lipstick on the pig ) to create illusion of change and false economic prosperity
Man I have been repairing a leaky shower all morning, just stepped in to take a break and good grief....this looks like a moonshot. How high will Kermit go today?For the sake of reason, how, how, how...Just change the name to the United States of Las Vegas. Install the one handle bandits in everyone's home and we will all have 'change' we can believe in.
"I see ground breakings on more strip centers, office parks, a new type of "high-end" neighborhood shopping complexes........."
.....lets not forget the private prison that started ground breaking here last week. The populace didn't want it, but the County commissioners did - guess who won? No problems getting construction spending for prisons, by golly!
Net Net: America today is mostly about false statistics, illusions, hype because most Americans do not have acumen with critical thinking skills to discern REAL from fake. So US gov, Wall St, and Global 2000 companies take full advantage of the rubes !
Gavshire Hathaway - Thanks...I still think the debate is the "recovery", I see stabilizing, but little if any growth for sometime...what happens when everyone realizes that? I wish I knew the answer...
crispy, stablization is one thing, recovery is an entirely different animal. My original fear of stagflation and L shaped recovery is still quite valid. In fact, I would say it is better than 50/50 odds now. People will learn to get by on less, perhaps we won't have a complete collapse but that doesn't mean we won't be feeling pain for a very long time nor does it mean we will ever see things the way they were EVER again.
Regarding mortgage spreads, I have posted on this in the past, and zerohedge posted a graph of it. Basically the comparison is the spread of 10 year treasuries over the current coupon fannie MBS.
Today, that spread is 91bps (10 year at 3.16 vs 4.07 for the mtgefncl).
Generally, the MBS holder takes prepayment risk (on both sides), and increasingly, fannie/freddie credit risk.
To give some historical perspective, since 1/1/2000, the average of the spread has been 135. That is a pretty reasonable level given the extension/prepayment risk in an MBS.
The spread did spike to over 200 a few times in the past year, mostly on short term liquidity (a spike last March when some hedge funds liquidated), and then on fears of fannie/freddie counterparty risk.
This is when the Fed started stepping in.
So basically we are in a situation where the Fed has driven the spread below what is normally found in the market, in spite of the uncertainty around the future of fannie/freddie.
Despite what the Fed talks about "getting out" of their positions, they will only get out of these positions at great cost, leaving money that can not be taken back out of the system.
They have been able to sell, as well as buy, MBS, but they are only selling the higher coupons they bought earlier, and at some gain since they have continued to drive up the market. Once that totally exit the market, it has no place to go but down.
"wages are stagnating, but employer health care costs are skyrocketing. i don't have the study in front of me, but measuring total employee compensation might be a better metric.
Despite of the certain efficiencies caused created by universal coverage, health care use will probably have to correct on the down side. Anecdotal evidence only--most of the measures to reduce moral health care hazard (co-payments, premiums, etc.) actually increase use. The theory being, I'm paying for it, I might as well use it. then again, my friends are all webMD hypochondriacs."
very true. a good thing will be to get rid of the "tax of taking care of yourself" by allowing insurance companies to charge much more to the obese and overweight than to those that are fit and take care of themselves. the fat use 3 times more health care than those that are not fat, why shifting the burden? take the UAW, they complain about health care cost rising but they are not informed enough to see that a big part of those costs comes from teh fact that they are very obese. price transparency will bring the right incentives and a true cost of being fat. it'll help to fight the obesity epidemic.
crispy, I expect we have similar access to numbers, given what we both do for a living. I'm seeing the stabilization as well, but my perspective is that the stabilization is the result of unrealistic Q3/Q4 growth assumptions. When those aren't realized, it's going to be another round of cuts and freefall.
Take a drive up hwy 99 and you'll be amazed at just how much heavy equipment is just sitting there gathering dust in lots that are so overflowing, they have no place to stick additional equipment. Chock-a-block full.
You have to keep your eyes wide open, if you want to see the big picture
"The one [prison] in Jean has been closed and empty for around a year with plenty of capacity."
.......the whole thing has been tainted with invisible money, land fortunes made, Cheney talk, prisoner transportation hidings, all sorts of BS. Not to mention it's being built on the "hill" so everyone and their brother can see it at night. I'd guess it's just for the first 1500 rabble-rousers that live here.
Don't kid yourself renterinNYC, the rising cost of health care comes from the ever increasing government payments into the medical industrial complex. Cut off their supply of money and the price of health care will crash.
I can understand why banks don't feel the need to raise capital. They're already so hopelessly insolvent that really, what's the point? All it does is force them to admit it, impair the market's confidence, and scare counterparties. As long as you think the government's liquidity will be there forever, you're far better off holding out and paying your liabilities as they become due.
I liked AMF's analogy this morning about the White Star Line raising the Titanic 10 feet above the ocean floor. Sure you can, but why would you want to?
Plus, if there's any hope that Bernanke will be successful at reflation -- or the hyperinflation scenario comes true -- or you can get lucky trading/manipulating the market -- you certainly don't want to dilute your equity for nothing.
Imputations are made for projects that have not reported at the time of the monthly tabulation, based on
estimated total construction value and month of start of the project. Weighted data are summed over all sample
projects by type of construction. The results are increased by 25 percent to account for undercoverage of
construction projects not reported by MHC. The adjustment for undercoverage results from comparison studies,
conducted by the Census Bureau, of Dodge reports with building permits for a sample of projects for which
permits were issued.
The manufacturing category is further adjusted by benchmarking the tabulated estimates to the latest detailed
structures data from the Census Bureau’s Annual Capital Expenditures Survey (ACES). The 1992, 1994, 1998,
and 2003 levels for industrial buildings are based upon actual ACES data. Estimates for other years are
extrapolations from the 1992, 1994, 1998, and 2003 levels.
I do...and quite often. The big wigs where I am at are the overloards of thousands of acres of land up and down 99...its ugly, but what happened in 2003-2007 was never sustainable and that demand will never come back in my lifetime. Those investors were fools and will be wiped out, but we already know that
Dann Adams, president of U.S. Information Systems for Equifax Inc (EFX.N), said 4.7 percent of payments on bank-issued credit cards were at least 60 days late in March, an increase of 38.3 percent over March 2008.
"There are higher degrees of instability now in prime than in subprime," Adams said. "It's accelerated with the acceleration of unemployment.
[what makes you think I'm still holding out for this "change" from Obama ?]
Just appears that way. Not picking on you in particular but was truly amazed when during the campaign it seemed that all the gung-ho supporters really expected some sort of radical shift to some new form of leadership, transparency, responsibility. The only change you'll get is change you don't notice or don't want.
Truth is, it's now worse than ever. And the next one will be even worse...
Well, maybe they are right. Maybe the economy is recovering.
I think the biggest threat going forward is the fact that the government is now the dominant player in the housing, banking, auto, insurance and CRE industries. Over time, this lends itself to cronyism, mis-allocation of resources and market failure.
I am also bothered that markets are no longer functioning in their primary role: directing the proper allocation of resources. Ultra low mortgage rates are encouraging the housing industry when it already suffers from overcapacity, etc.
Then again, I could be wrong and it is all blue skies from here.
Kermit has taken Elmo out to the shed this morning
Who the hell is buying this rally?
Suppose the S&P goes under 600 later this year, what middle class investor will ever touch equities again? If the gap between the markets and the real economy grows any larger the next downturn could be a complete game changer.
/I weep for my puts.
KER MIT. KER MIT KET MIT!
GOOOOOOO KERMIT!
Ah, the calm voice of reason. Thanks, CR.
2x+ good stuff, Winston...
We shall go on to the end, we shall loan in Finance, we shall loan on the seized assets, we shall loan with growing confidence and growing strength in the air, we shall defend our Island of fiscal insanity, whatever the cost may be, we shall loan on beach homes, we shall loan on the shakiest grounds, we shall loan in all fields of Wall Street, we shall loan in the trillions; we shall never surrender our consumerism.
Good thing they're still building malls, offices, and hotels. No problem with oversupply there, right?
This wouldn't have anything to do with all the existing crap that isn't moving, would it?
I am reminded of the Zimbabwe stock market, which consistently rose in Zimbabwe dollars. Either folks believe that kind of wild ride is coming next, or the propaganda spooks are extremely competent. I thought fascist regimes scared away competent people....
CR, what is going to drive the bottom in residential investment this year besides demolishing vacant houses in the Inland Empire (true....a socially worthwhile investment)? It seems like there is going to be an inventory overhang for a very long time. I've heard this bottom claimed but not clearly explained.
@ Tupuli
I'm thinking the same thing. They're the knife catchers of the stock market.
Check out private construction for manufacturing:
Mar 2008: $51B
Mar 2009: $84B up 63%!
Lodging up a little too, for the second month.
This is just mind boggling to me. I understand there are huge lag times for commercial construction. But surely, there must be more projects ending than starting?
Did helicopter Ben just turn on the printing press? It looks like Glod got goosed.
Yeah, when does the Enpire (homage to Enron) strike back?
Remember TALF is going to back cre spending. It will buy bonds, make loans, whatever it takes. Nothing a few trillion won't fix. From here to china what will we put in all the new buildings?
I see ground breakings on more strip centers, office parks, a new type of "high-end" neighborhood shopping complexes and I gotta ask why? Were these loans made before the bust? I cannot imagine any bank making such loans today. I don't get it.
"30-Year Bond 89.750 4.10%"
30 Year Fixed 4.92%
Anyone with access to better tools an info that I have a chart of any changes in the spread between the 30 year bond and a 30 year mortgage? It would seem to be that the risk premium for a mortgage is getting kind of low.
Bada bing, more strip centers...
See, it's all good.
Who is ready to buy into a PIPP mutual ?
Nothin' but GREEN! Just WOW. This rally is nothing short of unfukcenbelievable.
Blackhalo,Mortgages are risk free because Real Estate always goes up in value.
When I was with a homebuilder in Southern California 2007, they decided to start some homes in a remaining phases they owned because they realized they would lose the financing as things got even worse and they would be stuck with vacant land they couldn't do anything with (it was residentially zoned). They just wanted to take the write off and get the asset off their books forever.
Oh,wait,that was 2006.
Is it possible to back into how much Au would need to be purchased to give a spike like that?
Is a strip center kinda like a big box strip club?
(steps away slowly)
anecdotal stuff:
1) returning from Northwest a couple months ago, waiting in Salt Lake City for connector. Several from the North Slope waiting too. All said they were 'stacking rigs'.
2) Another time, another place, from the Western Slope fof the Rockies: 'They're stacking the rigs.'
3) Last week, Louisiana. A couple from the NG fields and another from off shore operations: 'They're stacking the rigs.'
Shutting down exploration and developmental wells all over. Expect a ratchet of price to break out above 60 and then who knows?
Ancillary impacts all around. Probably just in time for round two next fall of whatever the flu bug transmogrifies into.
Yep, the bottoms in, screw the limit. It's clear skies and smooth sailing from here.
It's like a miasma of money misinformation.
Did helicopter Ben just turn on the printing press? It looks like Glod got goosed.
Hey, if Ben will print money to manipulate the bond market upward, why not every other market.
Just remember the net result:
The American saver is once again "saving" by buying overpriced stocks and bonds. Companies no longer have to work or be productive to raise cash - they just sell overpriced bonds and equities into markets supported by taxpayer wealth. Again it is a direct transfer of wealth from those who produce wealth to those who produce paper. It creates further incentives for companies that once produced wealth to only produce paper to sell into manipulated, economically meaningless markets.
Bernanke continues "inflating away the middle class".
I could be totally wrong on this, but I don't think Joe 6 pack is buying the market.
From the previous thread but applicable to all y-o-y comparisons:
anoddamoose (profile) wrote on Mon, 5/4/2009 - 7:12 am reply Ignore user
Seasonal variation does not explain the 1.3% increase YoY.
Yes, it does and then some. Sometimes. Mar 2008 had 21 business days. Mar 2009 had 22. For pending houses last thread that more than wipes out the 1.3% gain with 5% more business days. For this thread we spent less in 22 business days than we spent in 21 last year.
This bullshit rally will flame out and turn quickly the other way because there is no return path to ‘normal’ for the US economy
Why ?
1) The projected budget deficit for 2009 is $2 trillion
2) The debt-drowned United States debt is already 350 percent of G.D.P and rising fast !
3) The Fed is now holding $10 Trillion of ‘assets’ ( mostly toxic ) transferred from too big to fail banks.
4) Other countries are now buying less of our debt
So what can most Americans look forward to ?
a) for production businesses the wages of American workers will drop in order to compete
b) We already know most service based businesses ( excluding legal, medical, financial, a few others ) don't pay that well.
Bottom line: being frugal is the new black and with 70% of US GDP historically driven by consumer spending this is simply not sustainable going forward !
///"The American saver is once again "saving" by buying overpriced stocks and bonds. Companies no longer have to work or be productive to raise cash - they just sell overpriced bonds and equities into markets supported by taxpayer wealth. Again it is a direct transfer of wealth from those who produce wealth to those who produce paper. It creates further incentives for companies that once produced wealth to only produce paper to sell into manipulated, economically meaningless markets.
Bernanke continues "inflating away the middle class". "///
ac, this is happening because we have an entire generation (mine) raised in the 90s and 00s that doesn't actually not know how to produce anything of value. What else do you expect?
ac,
What's wrong--aren't you seeing change you can believe in?
ah, good catch Rob Dawg
I could be totally wrong on this, but I don't think Joe 6 pack is buying the market.
I doubt J6P is driving the market, but the simple fact is a lot of people save by buying stocks and bonds. All the possible options for my 401k plan, for example, involve some type of stock or bond allocation. So long as these markets are manipulated upwards, these types of retirement plans are actually inflationary wealth looting plans.
Likewise for all those pension plans out there that buy stocks and bonds.
Hey CR and KenC - you need to ban user kiki - check out the last thread for why.
J6P is a paycheck or 2 missed from being broke, but he's not missing this buying opportunity on Wall Street.
km4 (profile) wrote on Mon, 5/4/2009 - 10:41 am
"...and with 70% of US GDP historically driven by consumer spending this is simply not sustainable going forward ! "
We're just waiting for Peter, Paul & Mary to finish the theme song that ushers us into a new "Age of Aquaris."
Which is worse - bankers or terrorists, it is possible for new residential construction to go to zero, but that won't happen. So the next question is how far down will it go?
Here was my most recent post on the topic.
Best wishes
I guess I wouldn't mind too much if the financial markets were widely recognized and advertised as the Wall Street Lottery (as long as no one is confused into thinking it is 'investing' or perhaps even 'speculation'.
But THEY NEED TO TAKE THE THUMBS OFF THE SCALE. Even a lottery is sort of free of human manipulation.
We are reduced to trying to guess what Wall Street manipulators (people and computers) and government apparatchicks may be trying to do with massive electronic cash at their disposal. Even a ponzi scheme is better than this (you can get out before the final fall if you are smart and early enough).
@ Samdog......very funny
Anyone with access to better tools an info that I have a chart of any changes in the spread between the 30 year bond and a 30 year mortgage? It would seem to be that the risk premium for a mortgage is getting kind of low.
The spread went negative!
Zero Hedge: Late Day Chartology
Chicago Dude, Ken will take care of it ... thanks for the heads-up.
best to all.
ac, this is happening because we have an entire generation (mine) raised in the 90s and 00s that doesn't actually not know how to produce anything of value. What else do you expect?
They also don't know how to judge value.
And the people running this country seem to be depending on that and in fact reinforcing that lack of knowledge in order to maintain control.
However with the type of economy that we have which is so highly diverse, complex, and specialized it simply won't work to have our population turned into mindless financially and economically brain dead cattle. You won't have companies like Apple and Google emerge out of garages in a country of financial illiterates.
And yet this seems to be the goal of the government and economics profession - deliberately foster economic ignorance in order to funnel consumer savings into the government and Wall Street.
It won't work with this type of economy. We'll become North Korea or 1960s China.
Chicago Dude (profile) wrote on Mon, 5/4/2009 - 10:46
"Hey CR and KenC - you need to ban user kiki - check out the last thread for why. "
Ban?
Torture to death seems more appropriate ...
I am going to be in San Diego tomorrow and have a day to play so to speak.
What should I not miss?
?????
Royal Caribbean Cruises Ltd.
up over 12%
Royal Caribbean Cruises Ltd. - Google Finance
yep, great time to go on a cruise to mexico.
this market is only short covering, shill buying and zimbabwe ben.
Saw a $399 8 day cruise to Mexico in Sept, in the newspaper the other day. $50 a night including meals?
Yikes~
CalculatedRisk (profile) wrote on Mon, 5/4/2009
"Which is worse - bankers or terrorists, it is possible for new residential construction to go to zero, but that won't happen. So the next question is how far down will it go?
Here was my most recent post on the topic.
Best wishes"
Sorry, CR, I missed it as I was traveling for work.....
OK right.....can't go below zero percent. This may describe much of our economy going forward.
Jas I think we are finding out who the real dope is...look in the mirror
Jas was just a Dupe of Hazard (D'oh!)
ac,
"And yet this seems to be the goal of the government and economics profession - deliberately foster economic ignorance in order to funnel consumer savings into the government and Wall Street."
I agree.
In all seriousness, what's the hedge? Which regime do we flee to in the absence of ours functioning in the preferable manner?
Burb-claves anyone?
--bh
Royal Caribbean Cruises Ltd.
up over 12%
Haha... from Fleck:
Swine flu concerns? Go out to dinner!
Dot-connecting was certainly MIA the next day, when many restaurant stocks (already the beneficiaries of huge rallies in the past month or so) finished higher. It was somewhat incongruous to witness world markets like our own panic over swine flu (to the point of pounding the price of hogs, etc.) while speculators partied in restaurant stocks, even though the flu's spread might keep many cautious diners at home.
I can't tell whether that means the fears of swine flu are overblown and it was just an excuse for traders to lower the stock market, or whether restaurant stocks are caught up in some weird orbit of their own.
In any case, I found it striking that the consequences of swine flu would apparently matter to everything except for one particular group that would definitely be affected by a flu pandemic.
Swine Fluke
Which is worse - bankers or terrorists (profile) wrote on Mon, 5/4/2009 - 8:00 am reply Ignore user
OK right.....can't go below zero percent. This may describe much of our economy going forward.
Sure it [residential construction] can. Did you see the houses being demolished videos? All those gems of the desert were counted as permited and starts and no doubt some were even counted as new sales.
Volume seems very light folks...I'm not sure I'd make much of Kermit other than there just aren't too many sellers...I think everyone is sitting tight...waiting on their existing positions to see what happens Thursday...just my very humble WAG.
That's an ugly YOY trend in residential...no end in sight, huh?
Fighting this tape hasn't been a particularly prosperous or joyful experience.
CalculatedRisk (profile) wrote on Mon, 5/4/2009 - 5:50 pm reply Ignore user
"Which is worse - bankers or terrorists, it is possible for new residential construction to go to zero, but that won't happen. So the next question is how far down will it go?
Here was my most recent post on the topic.
Best wishes"
CR, when working for the homebuilders in California in the mid-decade I do remember all all saying "no one is going to believe this, but there may actually be an uptick in new home sales just because never in any previous remembered downturn had we stopped new home production for so long". Given the cycle time of a new home (8-36 months construction depending on whether it is SFR of vertical high rise) almost everything in the pre-2007 pipeline has either been built out or lost the validity of any land use entitlements it got (they last 3 years in California unless you're under a Development Agreement or vesting Tentative Map). So this will likely in California constrict supply pretty well....everything at this point has to start entitlements from scratch which will take several years. This will create a tight situation on the supply side going forward unless the rules change from an environmental review point of view, and of course there appears no political reason to do that in the current environment.
I could be totally wrong on this, but I don't think Joe 6 pack is buying the market.
Maybe, maybe not. I see a lot of complacency and shrugged shoulders around here. It appears that most of my peers have accepted the stock market decline as temporary and have made no adjustments to their 401k. Consequently, I wonder how much 401k money is still pouring in-you know dollar cost averaging and all that great stuff.
"Rob Dawg (homepage, profile) wrote on Mon, 5/4/2009 - 11:04 am
Sure it [residential construction] can. Did you see the houses being demolished videos? All those gems of the desert were counted as permited and starts and no doubt some were even counted as new sales."
If any vagrants were living inside, they can count it twice more:
first as "affordable housing," then as a funeral home.
I pulled my money out of stocks in late 2007. I am hesitant to gt back into the market because I can't tell which gains are due to improved fundamentals vs government intervention. Until we get more transparency, I think most people will stay on the sidelines.
Obama to Wall St - I provide you with trillions in bailout $$$ and in return you pump up the market ( the ole lipstick on the pig ) to create illusion of change and false economic prosperity
Thread music...
YouTube - Bulls On Parade - Rage Against The Machine
Man I have been repairing a leaky shower all morning, just stepped in to take a break and good grief....this looks like a moonshot. How high will Kermit go today?For the sake of reason, how, how, how...Just change the name to the United States of Las Vegas. Install the one handle bandits in everyone's home and we will all have 'change' we can believe in.
There may be lipstick on the pig, but you still can't make a sow's ear into a silk purse.
km4, you're a funny guy. You seem to be holding out for this "change" from Obama.
Jas is right about 1 thing - America has no shortage of dupes for politicians to abuse over and over.
getting out of some SSO today and looking to get back into SRS for trading
Chart ruse is the pigs favorite shade of lipstick.
DRINK whenever you hear the phrase, "better than expected!"
bearly I'm simply stating the facts of the matter as I see them....what makes you think I'm still holding out for this "change" from Obama ?
There may be lipstick on the pig, but you still can't make a sow's ear into a silk purse.
=======
Nor can you teach a pig to sing
Merck And Elsevier Exposed For Creating Fake Peer Review Journal
Merck And Elsevier Exposed For Creating Fake Peer Review Journal | Techdirt
Obama admin and Wall St. should be exposed for creating illusion of change and false economic prosperity
"I see ground breakings on more strip centers, office parks, a new type of "high-end" neighborhood shopping complexes........."
.....lets not forget the private prison that started ground breaking here last week. The populace didn't want it, but the County commissioners did - guess who won? No problems getting construction spending for prisons, by golly!
Pahrump Valley Times - Nye County's Largest Newspaper
Circulation
Nor can you teach a pig to sing
OMG, a thought of Bernake doing Miss Piggy singing "Don't Cry for Me, Argentina" just flashed through my mind.
JPO, thanks for putting that in my head...
"Fighting this tape hasn't been a particularly prosperous or joyful experience. "
+1
errr. Bernanke, that is.
no AM coffee yet.
Net Net: America today is mostly about false statistics, illusions, hype because most Americans do not have acumen with critical thinking skills to discern REAL from fake. So US gov, Wall St, and Global 2000 companies take full advantage of the rubes !
Hope don't feed the bulldog. Government bailouts do.
Wow lots of bears crying in their beer here...I said things were stabilizing where I am at several months ago, yet you all disagreed....
crispy, good call in march. Come back here in 6 months, if you have the courage.
Timmay talking about taxes. the irony!
Black Star Ranch, why do they need a new prison in Pahrumpvalley? The one in Jean has been closed and empty for around a year with plenty of capicity.
Irony isn't worth a bucket of warm spit.
Crispy stick around... We'd hate to lose you like we lost Sebastian.
Gavshire Hathaway - Thanks...I still think the debate is the "recovery", I see stabilizing, but little if any growth for sometime...what happens when everyone realizes that? I wish I knew the answer...
Crispy: lots of people thought things were getting better in Spring 1930
I'm noticing banks getting loose as a goose with their money again. It's last call, get your's before it's gone for good.
Are we raising taxes already???????
crispy, stablization is one thing, recovery is an entirely different animal. My original fear of stagflation and L shaped recovery is still quite valid. In fact, I would say it is better than 50/50 odds now. People will learn to get by on less, perhaps we won't have a complete collapse but that doesn't mean we won't be feeling pain for a very long time nor does it mean we will ever see things the way they were EVER again.
BlackHalo
Regarding mortgage spreads, I have posted on this in the past, and zerohedge posted a graph of it. Basically the comparison is the spread of 10 year treasuries over the current coupon fannie MBS.
Today, that spread is 91bps (10 year at 3.16 vs 4.07 for the mtgefncl).
Generally, the MBS holder takes prepayment risk (on both sides), and increasingly, fannie/freddie credit risk.
To give some historical perspective, since 1/1/2000, the average of the spread has been 135. That is a pretty reasonable level given the extension/prepayment risk in an MBS.
The spread did spike to over 200 a few times in the past year, mostly on short term liquidity (a spike last March when some hedge funds liquidated), and then on fears of fannie/freddie counterparty risk.
This is when the Fed started stepping in.
So basically we are in a situation where the Fed has driven the spread below what is normally found in the market, in spite of the uncertainty around the future of fannie/freddie.
Despite what the Fed talks about "getting out" of their positions, they will only get out of these positions at great cost, leaving money that can not be taken back out of the system.
They have been able to sell, as well as buy, MBS, but they are only selling the higher coupons they bought earlier, and at some gain since they have continued to drive up the market. Once that totally exit the market, it has no place to go but down.
"wages are stagnating, but employer health care costs are skyrocketing. i don't have the study in front of me, but measuring total employee compensation might be a better metric.
Despite of the certain efficiencies caused created by universal coverage, health care use will probably have to correct on the down side. Anecdotal evidence only--most of the measures to reduce moral health care hazard (co-payments, premiums, etc.) actually increase use. The theory being, I'm paying for it, I might as well use it. then again, my friends are all webMD hypochondriacs."
very true. a good thing will be to get rid of the "tax of taking care of yourself" by allowing insurance companies to charge much more to the obese and overweight than to those that are fit and take care of themselves. the fat use 3 times more health care than those that are not fat, why shifting the burden? take the UAW, they complain about health care cost rising but they are not informed enough to see that a big part of those costs comes from teh fact that they are very obese. price transparency will bring the right incentives and a true cost of being fat. it'll help to fight the obesity epidemic.
crispy, I expect we have similar access to numbers, given what we both do for a living. I'm seeing the stabilization as well, but my perspective is that the stabilization is the result of unrealistic Q3/Q4 growth assumptions. When those aren't realized, it's going to be another round of cuts and freefall.
@Tupuli
"The spread went negative!"
Thanks!
cc,
Take a drive up hwy 99 and you'll be amazed at just how much heavy equipment is just sitting there gathering dust in lots that are so overflowing, they have no place to stick additional equipment. Chock-a-block full.
You have to keep your eyes wide open, if you want to see the big picture
" Tim waiting for 2012 (homepage, profile) wrote on Mon, 5/4/2009 - 8:40 am
Are we raising taxes already???????"
No, no, no, just closing "loopholes".
We don't need to raise taxes, we can just issue more debt that Zimbabwe Ben will buy with newly minted electrons.
"The one [prison] in Jean has been closed and empty for around a year with plenty of capacity."
.......the whole thing has been tainted with invisible money, land fortunes made, Cheney talk, prisoner transportation hidings, all sorts of BS. Not to mention it's being built on the "hill" so everyone and their brother can see it at night. I'd guess it's just for the first 1500 rabble-rousers that live here.
Wells Fargo asked to raise money after stress test
Yahoo! 404 - Page Not Found
F-ing get it from Buffet, I swear if we give those people more money after what Buffet said this weekend I will go postal
Don't kid yourself renterinNYC, the rising cost of health care comes from the ever increasing government payments into the medical industrial complex. Cut off their supply of money and the price of health care will crash.
"Consequently, I wonder how much 401k money is still pouring in-you know dollar cost averaging and all that great stuff. "
A fair amount. My professional peers are still doing it. I think another big leg down will start to kill this mentality though.
I'd rather be Jimmy than Warren, if you must force me to go to a Buffett.
Obama says current tax code rewards corp's who create jobs overseas more than in US. No specifics, that's over our pretty little heads...
Here is some depression humor for my fellow serfs:
Not One Cent: Obama and Bernanke Enforce Dystopian Farce
Have a serfy day.
I can understand why banks don't feel the need to raise capital. They're already so hopelessly insolvent that really, what's the point? All it does is force them to admit it, impair the market's confidence, and scare counterparties. As long as you think the government's liquidity will be there forever, you're far better off holding out and paying your liabilities as they become due.
I liked AMF's analogy this morning about the White Star Line raising the Titanic 10 feet above the ocean floor. Sure you can, but why would you want to?
Plus, if there's any hope that Bernanke will be successful at reflation -- or the hyperinflation scenario comes true -- or you can get lucky trading/manipulating the market -- you certainly don't want to dilute your equity for nothing.
Imputations are made for projects that have not reported at the time of the monthly tabulation, based on
estimated total construction value and month of start of the project. Weighted data are summed over all sample
projects by type of construction. The results are increased by 25 percent to account for undercoverage of
construction projects not reported by MHC. The adjustment for undercoverage results from comparison studies,
conducted by the Census Bureau, of Dodge reports with building permits for a sample of projects for which
permits were issued.
The manufacturing category is further adjusted by benchmarking the tabulated estimates to the latest detailed
structures data from the Census Bureau’s Annual Capital Expenditures Survey (ACES). The 1992, 1994, 1998,
and 2003 levels for industrial buildings are based upon actual ACES data. Estimates for other years are
extrapolations from the 1992, 1994, 1998, and 2003 levels.
http://www.census.gov/const/C30/methodology.pdf
I smell bullshit.
"Take a drive up hwy 99"
I do...and quite often. The big wigs where I am at are the overloards of thousands of acres of land up and down 99...its ugly, but what happened in 2003-2007 was never sustainable and that demand will never come back in my lifetime. Those investors were fools and will be wiped out, but we already know that
Kinky sex makes the world go around
YouTube - Kinky sex makes the world go around
When I look at the market, I can't help but think of shares of the South Seas Company circa 1721
cc,
Everybody got big or got out well before the housing boom, in all walks of business.
Look @ Clear Channel nowadays, for the radio example.
When I look at the market, I can't help but think of shares of the South Seas Company circa 1721
mind over wedgie. ...............[ I'm in the same boat ]
test
More March credit card payments late
Dann Adams, president of U.S. Information Systems for Equifax Inc (EFX.N), said 4.7 percent of payments on bank-issued credit cards were at least 60 days late in March, an increase of 38.3 percent over March 2008.
"There are higher degrees of instability now in prime than in subprime," Adams said. "It's accelerated with the acceleration of unemployment.
I wondered why the Dow was surging today.
Speaking of 401(k) money, it is that time of the month. Even if the flow is diminished, it's still a good bump.
I see Assignats everywhere...
I tend to side with Gavshire on this.
The market's flying on hum-drum earnings and solid job losses. It's stabilizing, but only the rate of descent.
The market's going to take another tank in the near future.
[what makes you think I'm still holding out for this "change" from Obama ?]
Just appears that way. Not picking on you in particular but was truly amazed when during the campaign it seemed that all the gung-ho supporters really expected some sort of radical shift to some new form of leadership, transparency, responsibility. The only change you'll get is change you don't notice or don't want.
Truth is, it's now worse than ever. And the next one will be even worse...
hey zimbabwe ben,
kinda stunning the last 200 minutes in currencies, huh?
here
Michael Milken for Debt Czar and Financial Engineering/Alchemy 101 - turning toxic assets into AAA gold
THE BARRICADE » Blog Archive » Financial Engineering/Alchemy 101 - turning toxic waste into AAA gold - Contrarian Grapeshot for a Teetering World
Well, maybe they are right. Maybe the economy is recovering.
I think the biggest threat going forward is the fact that the government is now the dominant player in the housing, banking, auto, insurance and CRE industries. Over time, this lends itself to cronyism, mis-allocation of resources and market failure.
I am also bothered that markets are no longer functioning in their primary role: directing the proper allocation of resources. Ultra low mortgage rates are encouraging the housing industry when it already suffers from overcapacity, etc.
Then again, I could be wrong and it is all blue skies from here.
Bubbles always end the same way.
just got done reading the krugman thread from last night
was great to see stagflationary mark still visits from time to time