Dan Quayle offered one of the most original (and inconveniently true) suggestions: “Bank failures are caused by depositors who don’t deposit enough money to cover losses due to mismanagement.”
"Lagarde said that any discussion of currencies needs to encompass the dollar, the euro, the yuan and the yen and that the meetings of the Group of 20 are the appropriate place to have it. “The appropriate platform is the one in which all the major currencies are represented,” she said."
No mention of Pound. hmmmm......
I have also suggested that the ultimate outcome will be parity of dollar with Euro and Pound.
By: Meraiah Foley, The New York Times | 04 Jul 2009 | 10:01 AM ET
Just a few years ago, Australia was being hailed as the great international success story of the wine business, challenging the dominance of France, Italy and Spain. From 1999 to 2007, foreign sales grew more than threefold, making Australia the world’s fourth-largest exporter. But even as its star appeared to be rising, the Australian wine industry was sliding, selling a greater volume of wine at increasingly lower prices. Last year, the average price per liter of Australian wine sold overseas was about 25 percent lower than it was a decade ago, a level many say is unsustainable.
Governor Arnold Schwarzenegger, optimistic California can finish its budget negotiations in a few days, is willing to reconsider his proposed cuts to education in hopes of averting a cash crisis, the San Francisco Chronicle said Saturday. A compromise between the Republican governor and Democratic lawmakers may help clear the way for an agreement on an overdue state budget and avert a cash crisis for the government of the most populous U.S. state. California already is issuing billions of dollars in "IOUs" and, without a deal, is on track to run out of cash this month.
on the last thread I got a bit full of myself for calling out Palin's Nixon strategy of '62 before the Times
did... but I grew up immersed in politics 24/7...
... hate to say it but my dad got Dan his first job in state gov. working for AG Ted Sendak in IN...
I knew his first campaign manager whom he fired half way through the campaign against Birch Bayh,
few thought he stood a chance of beating Birch...
\
Residential rents have fallen for the fifth quarterly period, with a decline of 1.9% in June 2009, according to the Knight Frank Prime London Rental Index. On an annual basis rents are now 19.3% lower than in June 2008.
Welcome to the free market. Emphasis is "free" in that phrase. Harsh business conditions are more than an economics lessons. They've brought dramatic change to buying patterns at all levels of the financial spectrum. Consequently, "free" is an all-but-required marketing tool.
Take Bill Seward, manager of the new Archstone Gateway apartment complex in Anaheim's slowing refurbishing Platinum Triangle district near the stadium. His job is to rent 884 luxury units while fending off the demons of a bad economy and in a hyper-competitive part of town. What's Seward's best weapon against five equally new complexes in a battle for a thin line of prospects? Offering two months of free rent -- yes, two -- for those who'll sign a lease for 10 months or more.
Some school districts throughout the county have begun serving free lunches and breakfasts to students this summer as part of the U.S. Department of Agriculture's Summer Meals Program. Under the program, dozens of schools, parks, community centers and other sites throughout Orange County are serving meals to children while on summer break. No forms are needed. Everyone under 18 is welcome.
blowing my horn a bit on that last thread for calling out Palin's Nixon strategy of '62 before the Times
did, beat 'em by a day...
Quayle was a good senator just not right for that spot.
{I am sure most of you forget that he bested Gore in their debate in '92, of course the media downplayed it,
the opposite of what they did in '88 against Bentsen}
campaigns are a messy business...
pity they can't be funded 100% by taxpayers...
....
what did Brokaw call them - 'the Greatest Generation'. growing up I saw many members of that
generation rigging votes, buying votes, and all kinds of nastiness!
I can't tell you how many times I was assured by Nor and SoCal homeowners that prices could never fall too far because those areas are special
Further, the only way they COULD fall would be if people sold and then rented, which would push up rental prices which would support housing prices, pushing them up.
Thus you see, it was impossible for prices to fall.
Interesting that rents fell. hoocoodanode?
Seeing the same thing in SF. except that the data is hard to track because much of the time the rental decreases come in the guise of free months rent or other giveaways.
It is just so very interesting that obvious things were so overlooked during the mania. I'll never lose my astonishment over that.
I mean OBVIOUS things like:
rents can only go as high as people can afford with their income, since you can't get a mortgage to pay your rent.
and
if housing prices (rent/mortgage) gets too high then people really are priced out, and they must then either move away or cohabitate.
clearly rental prices were stretching people to the Max in the mid 2000's already. thus clearly as the downturn hit they'd have less disposable income. thus clearly they'd have to either move away, or get roomates, or something.
and now people are still surprised by this stuff. incredible.
the thing that is scary to me:
I still hear so many people in my life and on the tele (govt officials, bankers, CNBC, etc) talk about "getting things back to normal. But when they say "normal" they mean the height of the bubble insanity.
Lucifer,
maybe it's me but I always thought Aussie wines were over-priced, I could always get more bang for the buck with a French or Spanish
wine in NYC.
I can't figure out the Cali crisis. They've spent months arguing about 2-3 billion in cuts, when they need 24 billion in cuts. I gotta believe if the stock market gets woozy in the next few weeks, the states get bailed out. For BHO, and his plan of hope, It's all about where the market is.
just noticed this in Frank Rich's column:
"In a scathing and controversial new article in Rolling Stone, Matt Taibbi accuses Goldman of having earned such rewards by engineering “every major market manipulation since the Great Depression.”
....
has anyone read it? and does Taibbi have good cred?
YTL - "But when they say "normal" they mean the height of the bubble insanity"...
Absolutely right. This is global too. Goes for FDI, trade, gov revenue and spending projections, behavior of philanthropics and agents, remittance intermediaries and beneficiaries, the works. There was some UN blather last week about "commitments" in foreign aid. Well, yeah, but if the commitments date back to 2005, then no matter what the volume is of "but I was promised a pony!" it's just not going to happen.
Rents in Phx metro are down at least 20%. I own a property management firm, so I know.
This is single family homes as well as apartments, condos take 2 to 3 months to lease up.
I think the new normal is back to the early 70s in some ways, before credit was wide spread. Think cash to buy things. Some businesses are offering discounts for cash because they don't want to pay the fees and are happy to pass the savings to the customers. I could very well be wrong about the new normal, but I know it will not include the bubble we just went through.
volker the viking (profile) wrote on Sun, 7/5/2009 - 7:02 am
re: rents--rents will continue to fall, hoocoodanode?
That isn't a rhetorical question. Late '05 all through '06 this was a massive fight in the blogosphere with respectable people on both sides. The last property I sold was at a 273x multiple. That was insane. It was clear to me that with investors willing to pursue such massively negative cash flow deals there would be rational pricing. There were just going to be too many amateurs making pricing errors the the only thing to do was step aside. It worked. Now I'm looking forward to leveraging those proceeds into 3 times as many properties as soon as the great cleansing is finished.
Does the board think that should Cali get their budget mess straightened out that we are one step closer to a stay of execution (of The Greater Depression), or are the cuts they would have to make so deep that the system would destabilize before we reached a balanced budget?
volker the viking (profile) wrote on Sun, 7/5/2009 - 7:34 am
Rob Dawg: my metric for any rental is 5.5 to 6 X ASR. I wouldn't go near a SFD until the apartment complexes get close.
Note for the casual reader my 273x is monthly, VVs 5.5-6 is annual price to rent ratios. Thus 273x is VVs 23. VVs 6 is my 72.
We still aren't even close in any area I'd reconsider. I have a preference for small SFR or duplex through fourplex. In the next few years a lot of these are going to hit the market as revenue streams drop but their early boomer owners try to maintain lifestyles.
//"In a scathing and controversial new article in Rolling Stone, Matt Taibbi accuses Goldman of having earned such rewards by engineering “every major market manipulation since the Great Depression.”//
Seriously. I've looked at this in depth before, and posted about it here. If you look across the entire country, in a few cities at a few points in time you will find rent declines. They aren't very big in nominal terms. I don't think any of them hit 10% from peak.
You will see different numbers turning up. One set of numbers will show asking rents with concessions. This is the most volatile. Another set will show asking rent without concessions. Somewhat less volatile. The one which goes into the CPI is average rent being paid, regardless of how long the renter has been there. This is a very stable number.
Now, having said that, the elephant in the room risk for California is vacancy. Partly caused by overbuilding, and partly by outward migration. If the outward migration continues, there is no bottom in single family home prices, or hotel prices, or retail prices, or office prices. Rents could fall some too, maybe 15% over a period of years in some places for residential. A lot more for office and retail.
Home prices will fall by about 70% in Los Angeles, and over 80% in Phoenix and Las Vegas.
I read much of the Taibbi article.
If you liked the "Creature from Jeckyll Island" book then I think you'd like the Taibbi article.
If you found "Creature" to be a little far fetched and a little too conspiracy theory (as I did) then you'll think that the Taibbi article is just a little bit overdramatic/far fetched.
I personally believe that Goldman is a sickness that blights our economy. I think that they have entwined themselves into government and finance in an unholy way. I think that they use their govt contacts and their insider information to profit hugely in boom and bust times.
But I don't think they have the power to COMPLETELY move our economy. That is hubris at our finest. Even the Fed can't do that, and they are far more powerful than even Goldman.
The Taibbi article is good if for no other reason that it will be read by the regular joes of the Earth, and it hopefully will start to show our leaders that the this nonsense isn't going to be tolerated much longer...
Just for clarity, the 10% decline is in the CPI measure of rent.
You can get larger declines for newly rented apartments, but it takes a long time for that to be fully reflected in the average for all renters. Rental rates for new places down 20% in Phoenix doesn't surprise me, but I'll bet it's still not much of an impact on the CPI measurement of all currently rented apartments.
broward and Dawg: the opportunities are already extant. It's like baseball, you gotta hit them where they ain't.
Look for small universities in small towns as a driver for demand. Keep turning over the tenants, stay close to your properties and work it.
Also, look for Section 8 opportunities. The best deal I was ever in was a duplex on a Section 8 Rehab program. Paid cash of 38k with ASR of just shy of 10K, 0 vacancy. Dunno if these still exist, but I would put my George Washingtons on the bet that these or similar programs will return.
//The Taibbi article is good if for no other reason that it will be read by the regular joes of the Earth, and it hopefully will start to show our leaders that the this nonsense isn't going to be tolerated much longer//
For what it's worth, rents are not yet particularly dropping in the
Miami area. I think a lot of the foreclosures are already ruinous, so
that they can't be lived in without extensive repair.
"Taibbi not only has good cred, but possibly Best Metaphor award for the face-sucking alien squid image."
I've been following his stuff since he posted out of a renegade web site in Moscow some years ago. Gonzo lives (in a more sober age). Great writer, and fearless.
Offering two months of free rent -- yes, two -- for those who'll sign a lease for 10 months or more.
My kid & her husband recently signed a one year 'plus' lease and got almost three months free rent, a discount off previous years rent and had the landlord do some renovation & spruce up. That was a couple months ago. The bet on the part of the landlord is that because she is a 'professional student' and going to be in school year around for the next three years... and the rent she quoted them was somewhat below past market rents... and the specific unit is a MUCH nicer apartment than others they looked at... that they won't move. I think the landlord made a smart move and was pretty savvy - they won't want to leave. But she seems to keep her places rented while everyone else dickers and plays games and then finds they have units empty. She seems to have very few units empty at any given time - even in this glut.
It is taking longer in California but places I am not interested in are almost there. High Desert SFRs are easy cash flow examples. Problem is rents are crashing and the next batch of investors with even lower purchase prices will be able to undercut you.
I own some some apt. units in IN along with my 2 gangster brothers... in 13 years I have yet to
see a nickel... why? most of the tenants pay in cash (lower socio-econ renters) and that cash disappears,
or the 'unit' is never rented officially... I wish Harvard would do a case study on our so called biz... a sick joke
I try ever so often to get bought out using Volker's 5.5-6x ASR for valuation... but they say that's wrong, plus
why buy the cow when you can steal the milk?
The deep pocket investors are already having bidding wars over nice 3/2s in the city. Some are flips, some are rentals,
I tried to play in that game for awhile last spring - even in this Midwestern city I found my pockets weren't deep enough... prices on FCs with rehab included pushed cap rates to low single digits. Obviously I don't get the 'new math'.
Unfortunately true - at least from the perspective of the realtor showing me properties... she kept talking about 'appreciation' and I kept scowling at her & replying with 'cashflow'. Pretty funny exchange...
EDIT: oh and she also was convinced rents were going up, way up... "they have to to support these prices"... ya right.
No guarantees here, that I know of. But I haven't done section 8 rentals in many many years. Got tired of the repairs the tenants caused and the owner had to pay for and never see the money from anyone.
Sales agents make me insane. The promise high rental rates etc. Then the investor is shocked when I tell them it isn't going to happen. I wish they would ask me what the market rate is before they make an offer.
back in late '87 I walked into Solly's corp bond research one day and there up on the bulletin board was a picture of
Mike Millken... at that moment Drexel controlled about 83% of the Junk Bond market... we had just set-up a Hi-Yield research unit at SB,
(one of the new guys on that team was a Notre Damer named Tom Maheras) like many other Wall St firms were doing...
... the interesting thing about Millken's picture was that
someone had drawn jail bars across his face... I knew at that moment that his days were numbered! The Street was out
gunning for him...
.
gotta roll and meet up with the LB posse for some beer drinkin'
Keep turning over the tenants, stay close to your properties and work it.
Thanks but no thanks.
Too much work.
I feel no need to buy a cool sports car.
I look forward to reading Dawg's laments of how hard he works for the gov't, though.
I was looking at beat up foreclosures in the central city not too far from the U of MN. My SIL & I would do rehab while they lived in them and then either rent or sell after they move on [three to four years - maybe more].
These were priced way below their previous selling prices... and the realtor believed they would be back there again 'soon'. I [politely] told her she was FOS.
Why work with a realtor like her? Because she really did know the territory well - far better than I - just was ignorant as to what was happening economically... so I use her for her skills and pass on the rest of the S she doesn't know. I am strong enough to not let someone like her talk me into something I don't want to do. Drove the poor woman crazy.
most of the tenants pay in cash (lower socio-econ renters) and that cash disappears,
or the 'unit' is never rented officially...
Several years ago, i was helping my sister move into a new condo in DC. When I went to pay the rent, the manager said they couldn't accept cash. But they had no problems with an out-of-state check from a podunk bank written by an eighteen year old. Found out the reasons were the ones you mentioned.
Also saw a sign at the ice cream store where the manager would give you a free ice cream if the cashier didn't provide a receipt; trying to prevent under the table ice cream sales. when a scoop of ice cream costs as much as a cashier makes in an hour, things like this are bound to happen.
broward: that's the beauty of the market, people get to choose
who said anything about a sports car?
We made the 20 unit property I bought the 'in' place to be. Tenants got a T shirt that identified them as a tenant, we had an annual BBQ for a tenant get together at the first of the school year.
Zero vacancy, waiting list to get in. But then, what do I know, I sell advertising.
what is the standard metric for rental occupancy YOY... 80%, 85% or 90% occupied?
....
I'll read everyone's smart comments about the renting biz and then have a good cry....
in all the years we've been in operation we never did better than 74%, usually closer to
70% and one year it was 58% ... in the last 8 years...
....
like I said cash biz and phantom rentals along with some ethically challenged partners
lawyerliz (profile) wrote on Sun, 7/5/2009 - 8:15 am
Any realtor still out there has at least something to offer. Or, it's just a
hobby.
Jim the Realtor and Effective Demand are two examples right here.
concerning rent payments. I hand my tenants a pad of pre-made deposit slips for the local bank branch. They can pay in pennies for all I care. The beauty is there is never ever a question of payment or amount or most important; time of payment.
Mpls/St. Paul is acting like many other markets IMO.
some areas are just getting slaughtered like North Minneapolis,(a poor 'hood for those not in the know) and also like the further exurbs and the downtown condos (way overbuilt).
some areas are holding up pretty well (like Southwest Minneapolis, the "Lakes" area as it's called).
overall RE makes its ever constant grind downwards... but each individual property is a crapshoot.
information assymetry indeed.
one thing that helps is that in general the RE is affordable. overvalued still, but affordable. you don't have as many $60k/year people buying $400k homes as you did in the prime bubble markets. Instead it's people making $50-60k buying $220k homes. Still more extended than they should be but doable.
not to say things won't continue to fall... they most certainly will as employment continues to struggle. Only that for the most part it's doable.
but I agree that buying RE now for investment purposes is a losing proposition unless you figure in the very real risk of home price depreciation going forward.
You just didn't appreciate how badly she needed that 6%.
She didn't even need the money that bad. She was older than I am - been selling in that market before I was out of engineering school [early eighties]... she could retire anytime... but what the hell would she do? Sit around the pool at some retirement 'complex' and place wagers on which old man keels over next?
I really enjoyed talking with her - just that she was wrapped up too deeply in what was... not what is now.
And I agree that if this debt gets monetized... there is going to be fierce inflation down the road and these properties are going to explode in 'nominal price'. Problem for me is when and I need them to cashflow NOW to make it to THEN... and they don't cashflow now. Not even close unless rents go up or purchase prices go lower. A lot lower.
Once saw a no-receipt shakedown at Bailey's Crossroads in Arlington; guy buys a small soda, loses receipt, works the claim that if you're not given a receipt you get a pizza. Duty manager told him to take a hike and in seconds there's a major pantomime going on with the guy and his friends all banging on the counter demanding delivery, and patrons with small children moving towards the door...
From memory that was when I was looking for a rental in Arlington.
And I agree that if this debt gets monetized... there is going to be fierce inflation down the road and these properties are going to explode in 'nominal price'
I am not so sure about this.
I've been of the mindset that eventually housing prices would increase nominally due to inflation. but that path may not be as linear as it seems as first.
it depends on the ordering of the price inflation during the monetary inflation.
If the monetary inflation feeds into energy and food and other necessities first, and in a big way, it may not leave room for Real Estate.
$5/gallon gas, $1000/month heating bills, and $7 loaves of bread aren't good for house prices.
I think it is safe to assume that eventually the monetary inflation will work its way into housing prices... but in between there we could see some crushing pressure on housing prices due to price inflation of other necessities.
just food for thought, because In general I agree with your statement as long as we're talking about "eventually".
On the receipt topic, in Taiwan they have a VAT. In order to better assure compliance with on the books sales, all retailers receipts are stamped with a number . . . that eventually becomes a monthly lottery draw. Essentially banking on the Chinese love of lotteries to keep the retailers honest. Prizes are on the small side, but frequent enough to get folks hoarding receipts. People get a receipt for a little as a pack of gum.
All real estate is different. Two houses next door to each other will have differant rents due to condition, amenities, appliances included, pool, spa, layout.
Owners are different. What do you want? cash flow, flip, long term, estate holding, retiring into the property. Do you want a rehab or a move in ready unit.
Lots of variables. So each client and property is managed a bit differently.
"By the end of March, the Fed will have lent or guaranteed at least $8.7 trillion under a series of new bailout programs — and thanks to an obscure law allowing the Fed to block most congressional audits, both the amounts and the recipients of the monies remain almost entirely secret."
.....there's not too much "stretching" involved in that statement.
And I agree that if this debt gets monetized... there is going to be fierce inflation down the road and these properties are going to explode in 'nominal price'
Prices now based on 5-6% rate. Fierce inflation where will the rates be then? 10-15-20%? Could see prices decline or stagnate for decades.
Mpls/St. Paul is acting like many other markets IMO.
some areas are just getting slaughtered like North Minneapolis,(a poor 'hood for those not in the know) and also like the further exurbs and the downtown condos (way overbuilt).
some areas are holding up pretty well (like Southwest Minneapolis, the "Lakes" area as it's called).
overall RE makes its ever constant grind downwards... but each individual property is a crapshoot.
Yup.
I wouldn't touch N Minneapolis [Camden to locals]... nor would I look at St Paul north of the capital or east St. Paul... I focused on:
Mpls Neighborhoods
- Prospect Park/ University
- Como
- Longfellow/ Minnehaha
- Uptown/LOTI
- Some Powderhorn Park, some 'Nordeast'
St Paul
- Como, St. Paul Campus & Fairgrounds
- Grand Ave., Crocus
- Highland/Ford Parkway
Most all still way over priced compared to available rents... so my kids rent in one of those neighborhoods instead.
you can still have RE debt monetization without an explosion in asset prices, since the feds are guaranteeing/backstopping the debt side. so even if the asset side crashes or stagnates, then debt side will still be taken care of.
josap, what kinda deal can you get me on a nice 4/3 w/ that takes dogs- we rented our last one for a year in 2005- I wanted to keep renting, but the powershopper just HAD to buy another house.
Take a name asswipe (profile) wrote on Sun, 7/5/2009 - 8:29 am replyIgnore userAnd I agree that if this debt gets monetized... there is going to be fierce inflation down the road and these properties are going to explode in 'nominal price'
Prices now based on 5-6% rate. Fierce inflation where will the rates be then? 10-15-20%? Could see prices decline or stagnate for decades.
I agree, as interest increases, prices fall. It will always remain "How much down and how much a month."
maybe it's me but I always thought Aussie wines were over-priced, I could always get more bang for the buck with a French or Spanish
Spanish especially. I have been drinking almost exclusively Spanish and Italian wines for 6 months (and I live in the California Wine Country), to get away from those high alcohol fruit bomb reds that Parker has demanded for the market place.
I have been pleasantly surprised.
Disclaimer: I export wine
Prices now based on 5-6% rate. Fierce inflation where will the rates be then? 10-15-20%? Could see prices decline or stagnate for decades.
Between fed & treasury there is something like $13T in new debt... if that isn't sopped up there is going to be a huge increase in money supply & resultant 'price increases' in EVERYTHING. Question is how much gets sopped up vs. how much leaks out... when... and how fast [effects psychology].
Ben & Tim think they can sop it all up... I very seriously doubt it. What I can't put a finger on is how soon until we see the effects & how significant will it be. I'm guessing it will take longer than I or any of us on the 'inflation' side expect [deflationary pressures are very significant - I fully concede & understand this]... but I also guess that when it comes it will be more severe than I can imagine [$13T on top of future entitlements is a LOT of cash spilling out].
Those properties will experience the effect of all that new money just like everything else...
.....there's not too much "stretching" involved in that statement.
Black Star:
I'm not saying that the Fed and/or Goldman aren't well positioned for some outside gains. Nor that they aren't immensely powerful in the marketplace. Nor that their practices aren't ruthless and illegal and immoral.
I'm saying that I disbelieve that one entity can control the entire world (or even American) market so fully as to induce manias and crashes ALL BY ITSELF.
From the title of his article: Matt Taibbi on how Goldman Sachs has engineered every major market manipulation since the Great Depression
that IS stretching.
I myself hate Goldman Sachs with every fiber of my being. within just the last few days I decried Goldman and the financial elites. I see the problem. But Mr. Taibbi's article is hyperbole. That is fine. as I said, if you like "Creatures from Jeckyll Island" then you will like Taibbi's article. If you found Creature to be just a wee bit out there, then you may find the same with Taibbi.
I was wondering what a 2/1.5 apartment or SFR in the Irvine, CA area would go for these days, say in the Univ area? I may have to relocate down there in short order from NoCa . Thanks much!
I'll read everyone's smart comments about the renting biz and then have a good cry....
in all the years we've been in operation we never did better than 74%, usually closer to
70% and one year it was 58% ... in the last 8 years...
Low income housing, it's not very stable. Turn over is always high.
BTW- We're looking at a stealth rent increase. We're sub-metering the water. Not sure how it's going to play out, but we're looking at the next few years bringing in water rate hikes, not to mention restrictions or rationing, and figured now is the time.
you can still have RE debt monetization without an explosion in asset prices, since the feds are guaranteeing/backstopping the debt side. so even if the asset side crashes or stagnates, then debt side will still be taken care of.
Money is fungible... $13T is like squeezing the Mississippi through a garden hose - unless mopped up something will have to give.
dryfly:
yeah, every neighborhood you're looking in has held up.
I'm not seeing much pressure at all in reasonable homes in the Lakes/Calhoun area (that's where I live). Anything that would be rentable is holding up very well. There's a house on my block that could have been "investable" but it sold in 1 day a few weeks ago.
the stuff in the Lakes/Calhoun area that's really taking a beating is the ultra high end stuff. (The $1-5 million places) especially the higher end condos ($500k plus) and the very high end condos ($1-3M). I'm guessing that's not what you're looking for!
on your list the first that is seeing some pressure is the Longfellow/Hiawatha neighborhood, but you gotta be careful. t here are great little blocks there and not so great blocks.
also in St. Paul you can sometimes get not-so-bad deals just south of Como neighborhood (which is nice)
if you cross the tracks and go more by Hamline University that area is under more pressure than the true Como nabe.
I don't think they'll cash flow yet (Longfellow or Como), but they're getting nearer.
Our debt is now 11.4Trillion , and no one around here makes much more than 10.00 dollars per hour. Rents are 300.00 for trailers and 600.00 for houses in great neighbors. GS will pay 700k this year to their employee's, now go figure. Oh, and I'm in Hayley's State and corner.
Fair point, Yearning........I'm saying that while you have just ONE GS, there are many "growing grubs" spawned by them, utilizing the same mentality and business "acumen". While they might not control everything just yet, they have positioned themselves such that they are "turned to" in all major decisions specifically because their "grubby hands" have hold of the offending soil and/or root.
overall, I don't disagree with most of Taibbi's claims. in fact, I agree that Goldman did most everything that Mr. Taibbi claims.
what I disagree about is the power of Goldman to MOVE basically the entire world marketplace.
I would word his article a bit differently.
I would say that Goldman has an unholy alliance with the US Government (multiple facets, not just the Fed by the way) that allows them
-to have inside information about what future legislation will be, which gives it an advantage
-overly large input into future legislation. (such as being present to help with the AIG bailout, or helping write bills for Phil Gramm to propose to Congress)
-a monopoly on certain markets
-on overly large role/influence on the various exchanges
etc etc etc.
and then worse: they use that information and influence to profit madly.
it is egregious and horrible and against everything I believe in.
but I DON'T believe that Goldman alone CAUSED our most recent bubble, nor that they single handedly CAUSED the oil spike to $150, nor that they CAUSED the crash after the bubble...
instead, I think that they were one of many actors that caused this, and then they used their inside influence/information to profit on that. And they have way more insider information and insider influence than anybody else.
While they might not control everything just yet, they have positioned themselves such that they are "turned to" in all major decisions specifically because their "grubby hands" have hold of the offending soil and/or root.
Agreed. but it is not just Goldman. this is the way that American business "works."
It's not just finance either. There is a reason why Air Force officers go and work for Boeing.
Finance perfected this unholy alliance though, with greater stakes.
Goldman is the poster child for everything that is wrong in American finance. however, to target Goldman alone neglects that it is the SYSTEM that is the problem. getting rid of Goldman will only help us for a short amount of time until the next Goldman rises.
Goldman is simply the tumor... our system is the radiation that caused the tumor.
we can cut out the tumor (and should). but we really need to get rid of that radiation.
"instead, I think that they were one of many actors that caused this, and then they used their inside influence/information to profit on that. And they have way more insider information and insider influence than anybody else."
Every conflict requires an alliance to succeed. Every alliance needs a strong man. Every strong man becomes corrupt.
I DON'T believe that Goldman alone CAUSED our most recent bubble
I do not think the point is whether there is one party responsible for all financial bubbles.
I would say that Goldman has an unholy alliance with the US Government
That is the main point. One has to wonder whether a representative democracy can function as expected when a small number of companies (I-Banks) have very strong influence on two out of three branches of the government (legislative and executive) as well as on MSM. This imbalance of power was tolerable so long as everybody standard of living was rising, albeit at different rates for different income groups. Once deleveraging started and the standard of living began to decline, this imbalance of power can (will?) lead to significant instability.
Every conflict requires an alliance to succeed. Every alliance needs a strong man. Every strong man becomes corrupt.
I agree with the gist of your argument, although I hesitate to use absolutes.
I would argue that there is a case to be made that Ghandi and Martin Luther King, Jr were not corrupted, although I am willing to be proven wrong. you could also argue that they didn't have time to be corrupted due to their deaths. so I won't argue too strongly here.
But their perserverance was in part due to the fact that they fought for what they felt to be a moral endpoint.
The problem when it comes to finance is that there is no moral goal.
Profit is amoral (not immoral, but amoral...outside of the moral/immoral system). Hence there is nothing to keep the strong man from corruption.
so in the case of finance/capitalism I agree with you that every strong man will become corrupt.
"This imbalance of power was tolerable so long as everybody standard of living was rising, albeit at different rates for different income groups."
This imbalance, as you so euphemistically put it, was never tolerable. It is and always has been the stuff of revolution. What form this revolution takes depends on the emptiness of the belly.
Imagine having virtually no groundwater, when traditional sources from hundreds of miles away dry up?
What's the value of a residential home in San Diego, when you turn on the faucet and nothing comes out?
(from the SD Union Tribune)
Water officials across the county are looking skyward, seaward and inward to scrounge up enough drinkable H2O to supply their customers. Just beneath the ground’s surface, from Oceanside to the border and from the coast to Interstates 805 and 15, are groundwater basins that few cities have explored because the water is mostly brackish – slightly salty, like V-8 juice – and limited in supply.
Last year, groundwater supplied 2 percent of the county’s 692,000 acre-feet of water, Liarakos said. An acre-foot can keep two households of four going for a year. The water authority hopes that by 2020, local cities can produce enough groundwater to supply 6 percent of their needs, Liarakos said.
I would agree. GS is very good at taking advantage of all situations, changing what situations can, to their advantage, and making money on any side of a "deal". Stockholders gotta love them, and all the baby financial firms want to be just like GS when they grow up.
OT..........beware of 20-year old girlfriends who know how to use a firearm.
I do not think the point is whether there is one party responsible for all financial bubbles.
Then don't title your article:
"The Great American Bubble Machine
Matt Taibbi on how Goldman Sachs has engineered every major market manipulation since the Great Depression"
That is the main point
Perfect. Then name the article
"How Goldman Sachs' unholy alliance with the Federal Government is harming regular Americans and may even threaten the foundations of Democracy itself".
One has to wonder whether a representative democracy can function as expected when a small number of companies (I-Banks) have very strong influence on two out of three branches of the government (legislative and executive) as well as on MSM.
on the previous thread it seemed to me that you quoted a wall street journal article and drew the inference that zero down was the most salient factor contributing to the mortgage meltdown
you wrote
"New Evidence on the Foreclosure Crisis: Zero money down, not subprime loans, led to the mortgage meltdown."
i didnt see anywhere in the article that zero down per se was the factor
i get a different take from the article...that home owners" being upside down was the primary indicator of future default
it wouldnt be hard to imagine how a modest downpayment would soon leave homeowners underwater in a declining market
i dont see the author specifically talking about "zero down" as you referenced
btw i agree with you that "the poor people and minorities caused it" is a meme
Lucifer (profile) wrote on Sun, 7/5/2009 - 6:49 am
So it was not irresponsible minorities.. hoocoodanode
This imbalance, as you so euphemistically put it, was never tolerable. It is and always has been the stuff of revolution. What form this revolution takes depends on the emptiness of the belly.
Revolutions require anger and desperation, as well as central coordination.
So long as the population was focused on buying TVs and renovating kitchens, few people cared about imbalances of power.
Bread and circuses can be quite effective, no?
dang. rolling stone puts ads inline in the print view now.
anecdote:
I talked my landlord down $300 dollars per mo. here in the IE in april, using current adverts for similar rentals as basis for my argument- in three months, those same places are down another $200 mo.
"Program Trading: One thing Taibbi misses is how GS has turned the stock market into a roulette wheel with their program trading: Trades that can last only an hour and are run by computer algorithms. On some days GS program trades are nearly 40% of the NYSE volume!!"
........that's why piddly little investors like me got out - it would be like me sitting down at a Mafia poker game - I figured I'd get eaten for a snack. Now I'm KING of my own cucumber and tomato sandbox, LOL, and I sleep like a baby every night.
it depends on the ordering of the price inflation during the monetary inflation.
If the monetary inflation feeds into energy and food and other necessities first, and in a big way, it may not leave room for Real Estate.
$5/gallon gas, $1000/month heating bills, and $7 loaves of bread aren't good for house prices.
The Fed is doing its d**dest to make the inflation happen in real estate prices. They are inflating exclusively by buying MBS, which means all the new cash is going into the pockets of real estate speculators, largely large institutional ones. They aren't going to spend the money on food or clothes - they are business structures and can't eat or wear clothes. They buy stock, bonds, real estate, and commodities - all the products whose prices appear to be propped up at present, based on cash flow and stockpile analysis.
Remember also, as von Mises pointed out, inflation always involved wealth transfer from those who get the new money early from those who get it late. The Fed is engineering a massive transfer of wealth to asset speculators from everybody else in the economy. (I say speculators because no sensible investor would own any ordinary non-derivative asset they could avoid right now.)
We are simple men with simple existences. You living out your years in a bucolic paradise, me sweating away in the swamp. Sure beats drilling down after the unattainable.
"Program Trading: One thing Taibbi misses is how GS has turned the stock market into a roulette wheel with their program trading: Trades that can last only an hour and are run by computer algorithms. On some days GS program trades are nearly 40% of the NYSE volume!!"
"The Community Reinvestment Act of 1977 seeks to address discrimination in loans made to individuals and businesses from low and moderate-income neighborhoods.[7] The Act mandates that all banking institutions that receive FDIC insurance be evaluated by Federal banking agencies to determine if the bank offers credit (in a manner consistent with safe and sound operations) in all communities in which the bank takes deposits.[3] The law does not list specific criteria for evaluating the performance of financial institutions. Rather, it directs that the evaluation process should accommodate the situation and context of each individual institution. Federal regulations dictate agency conduct in evaluating a bank's compliance in five performance areas, comprising twelve assessment factors. This examination culminates in a rating and a written report that becomes part of the supervisory record for that bank.[8]
The law, however, emphasizes that an institution's CRA activities should be undertaken in a safe and sound manner, and does not require institutions to make high-risk loans that may bring losses to the institution.[3][4] An institution's CRA compliance record is taken into account by the banking regulatory agencies when the institution seeks to expand through merger, acquisition or branching. The law does not mandate any other penalties for non-compliance with the CRA.[6][9]"
"An institution's CRA compliance record is taken into account by the banking regulatory agencies when the institution seeks to expand through merger, acquisition or branching. The law does not mandate any other penalties for non-compliance with the CRA."......................
.........defined: We have ways of painfully and horrifically breaking your fingers and toes without ever manually touching said appendages.
$10 an hour seems to be the default wage for people that used to get double or triple that much...
Why is some prole that scans items @ a checkout worth $8 an hour now?
Seems like they're the ones that collect all your money for you. Pay $6 an hour and hope you get someone that can count and is trustworthy or pay a little more and get a better guarantee. Perhaps $2 an hour is the going price of insurance. Advertise the job @ $15 an hour with an excellence demand and you'll probably get it.
I know that Aldi's pays extremely well for store clerks and they end up able to run a store with very few employees. I'm pretty sure they pay nearly $20 an hour for a checkout clerk and have very little turnover or theft and very high efficiency.
Based on what I remember from '91-'95 here in a desirable coastal area of California, rents will fall through a combination of outmigration and household consildation.
Desirable areas with hot economies contain more recent immigrants, here for the opportunity. Many of them will move on, or return to where they came from, once economic activity here vanishes. (At least "back home" they have friends, a support structure, etc.) I monitored this anecdotally on California/Bay Area based Usenet newsgroups in the early '90s.
The other issue is consolidation: moving back home with Mom or Dad, or never leaving at all. We have 70-year-old friends whose 35-year-old single daughter just moved back in with them. Even on the college-town level, there is the impetus for students with limited means to try to stuff as many roommates into a house as possible. My friend with the 6-br he rents to students allowed eight in last year. He decided he didn't want to allow that this time, but his new set of six are already agitating to get another roommate in, and he's probably going to give in.
Rents here in my coastal college town were lower in '95 than in '91. I vacated a 1-br at 625 in late '90 after I bought a house; five years later the same place was renting for $595. And there was a little inflation, so real price was even lower.
I see no reason why rents should not fall as much as then, and a number of reasons why they may fall more.
I could train a monkey to use a scanner @ the checkout, but i'd worried about it flinging feces @ the customers and the possibility of banana shoplifting.
DC does not dodge recession bullet:, jobs require skills beyond capabilities:
"Slightly more than one in three Washington residents cannot read or write on a functional level, giving the city the dubious distinction of having one of the highest illiteracy rates in the nation."
"More and more people own their homes in America today. Two-thirds of all Americans own their homes, yet we have a problem here in America because few than half of the Hispanics and half the African Americans own the home. That’s a home ownership gap. It’s a — it’s a gap that we’ve got to work together to close for the good of our country, for the sake of a more hopeful future. We’ve got to work to knock down the barriers that have created a home ownership gap.
I set an ambitious goal. It’s one that I believe we can achieve. It’s a clear goal, that by the end of this decade we’ll increase the number of minority homeowners by at least 5.5 million families . . .
Home ownership is also an important part of our economic vitality. If — when we meet this project, this goal, according to our Secretary of Housing and Urban Development, we will have added an additional $256 billion to the economy by encouraging 5.5 million new home owners in America; the activity — the economic activity stimulated with the additional purchasers, the additional buyers, the additional demand will be upwards of $256 billion. And that’s important because it will help people find work."
George W. Bush, U.S. President, October 15, 2002 1:55 P.M.
"Someone oughta start a Facebook group promoting deleting all your FB friends who work for Goldman Sachs."
OH NO!.........The Horror!........There surely are laws against this inhumane act! Deleting FB friends. I am truly appalled and grievously shocked something as hideous as this is even discussed in open text!
in testimony before the house committee on financial services
Michael Barr said
"The majority of subprime loans were originated by non-CRA covered financial institutions. In fact, only about 25 percent of sub-prime loans were made by institutions covered by CRA. "
to my knowlege, the basic fact that CRA covered insitutions made far less than 50% of the loans
AND
that, as CR and others have pointed out here
alt A, prime and CRE are also set to implode
makes little sense to blame the fianancial crisis on CRA
a bunch of poor people and even a bigger bunch of house flippers are not capable of bringing down a world economy
for that you need leveraged debt, SIVs and other exotic "investments" like collateralized debt obligations
pure and simple, the bankstas turned our financial system into a casino
in a country where 70% of the economy is retail and
financial services industry went from 7 tyo 15 to more than 30% of GDP in three decades
Lenin: "Revolutions start in the belly." Leave us not forget this essential fact.
The elite has always understood the need for bread and circuses to keep the proletariat complacent.
That may be coming to an end.
Then, another Lenin quote may be in the spirit of the times:
"The Capitalist will sell us the rope we will hang them with"
"I could train a monkey to use a scanner @ the checkout, but i'd worried about it flinging feces @ the customers and the possibility of banana shoplifting."
Once you've got those problems solved, there's cheap labor for you. But monkeys have no pockets, bank accounts or retirement plans.
How hungry do people have to be or how homeless, before they get angry enough to change a system that will allow their children to go hungry and homelss?
I think each state sets the income level for eligibility. But it can't be much of an income.
that is it exactly - when "Daddy, I'm hungry" intersects with a realization that situation might not be entirely based on personal failings - but I think it will take more FWO (Formerly Well Off) joining the actively downwardly mobile to get past the "they're bums" narrative (just as it did in the last depression)...then the anger levels requiring action will occur.
How constructive or destructive the result will be is anyone's guess...
dr munch, what happens to the bond market when everyone and his cousin gets a pass? If they can through Chrylsler and GM bondholders under the bus, they will certainly through the BRICs under the bus in a heart beat.
Bob Dobbs: Based on what I remember from '91-'95 here in a desirable coastal area of California, rents will fall through a combination of outmigration and household consildation.
USA Counties
Occupied housing units with 2.01 or more persons per room 2000 (sample)
UNITED STATES 1,052,831
CALIFORNIA 484,415
I'm not sure I want to see what consolidation looks like.
When obama's hyperinflation comes housing prices will have to move lower even more. With hyperinflation interest rates, prices most drop to compensate. Remember 18% mortgages during Carter. Housing prices can't move up in an inflation era. Fed is wrong in this movement. Things will get worse before ??????????.
Dan Quayle offered one of the most original (and inconveniently true) suggestions: “Bank failures are caused by depositors who don’t deposit enough money to cover losses due to mismanagement.”
Rent: Price Ratios..
from bloomie article posted by C:
"Lagarde said that any discussion of currencies needs to encompass the dollar, the euro, the yuan and the yen and that the meetings of the Group of 20 are the appropriate place to have it. “The appropriate platform is the one in which all the major currencies are represented,” she said."
No mention of Pound. hmmmm......
I have also suggested that the ultimate outcome will be parity of dollar with Euro and Pound.
Deflation that I can live with..
For Australian Winemakers, More Turns Out to Be Less
For Australian Winemakers, More Turns Out to Be Less - CNBC
By: Meraiah Foley, The New York Times | 04 Jul 2009 | 10:01 AM ET
Just a few years ago, Australia was being hailed as the great international success story of the wine business, challenging the dominance of France, Italy and Spain. From 1999 to 2007, foreign sales grew more than threefold, making Australia the world’s fourth-largest exporter. But even as its star appeared to be rising, the Australian wine industry was sliding, selling a greater volume of wine at increasingly lower prices. Last year, the average price per liter of Australian wine sold overseas was about 25 percent lower than it was a decade ago, a level many say is unsustainable.
re: rents--rents will continue to fall, hoocoodanode?
Who cares.. UK is toast..
No mention of Pound.
How does that address the real problems.
Schwarzenegger Signals Key Budget Concession
Schwarzenegger Signals Key Budget Concession - Economy * US * News * Story - CNBC.com
By: Reuters | 04 Jul 2009 | 04:05 PM ET Text Size
Governor Arnold Schwarzenegger, optimistic California can finish its budget negotiations in a few days, is willing to reconsider his proposed cuts to education in hopes of averting a cash crisis, the San Francisco Chronicle said Saturday. A compromise between the Republican governor and Democratic lawmakers may help clear the way for an agreement on an overdue state budget and avert a cash crisis for the government of the most populous U.S. state. California already is issuing billions of dollars in "IOUs" and, without a deal, is on track to run out of cash this month.
Luci: maybe, seems the others may be stressing the matter to get them under the European currency umbrella.
on the last thread I got a bit full of myself for calling out Palin's Nixon strategy of '62 before the Times
did... but I grew up immersed in politics 24/7...
... hate to say it but my dad got Dan his first job in state gov. working for AG Ted Sendak in IN...
I knew his first campaign manager whom he fired half way through the campaign against Birch Bayh,
few thought he stood a chance of beating Birch...
\
Central London residential rents fall 1.9%
Central London residential rents fall 1.9% | Easier
5 July 2009
Residential rents have fallen for the fifth quarterly period, with a decline of 1.9% in June 2009, according to the Knight Frank Prime London Rental Index. On an annual basis rents are now 19.3% lower than in June 2008.
The Ongoing Chronicles of Duke the Elder. Fascinating.
C
Columnist's O.C. economic index shows the pain of deep discounting.
O.C. economic index down for 9th straight time | seward, index, business - Business - The Orange County Register
Jonathan Lansner
Sunday, July 5, 2009
Welcome to the free market. Emphasis is "free" in that phrase. Harsh business conditions are more than an economics lessons. They've brought dramatic change to buying patterns at all levels of the financial spectrum. Consequently, "free" is an all-but-required marketing tool.
Take Bill Seward, manager of the new Archstone Gateway apartment complex in Anaheim's slowing refurbishing Platinum Triangle district near the stadium. His job is to rent 884 luxury units while fending off the demons of a bad economy and in a hyper-competitive part of town. What's Seward's best weapon against five equally new complexes in a battle for a thin line of prospects? Offering two months of free rent -- yes, two -- for those who'll sign a lease for 10 months or more.
Luci: we are just beginning the process of discounting. It gonna get a lot sweeter for those who wait, if they can wait.
Orange county going all "new deal". The irony..
Free lunches help in tough times : Dozens of schools and other sites across Orange County are offering federally subsidized meals to anyone under 18.
Free meals provided at schools through summer | meals, summer, program - News - The Orange County Register
By FERMIN LEAL
Saturday, July 4, 2009
Some school districts throughout the county have begun serving free lunches and breakfasts to students this summer as part of the U.S. Department of Agriculture's Summer Meals Program. Under the program, dozens of schools, parks, community centers and other sites throughout Orange County are serving meals to children while on summer break. No forms are needed. Everyone under 18 is welcome.
How many people can afford to pay $1500-2000 month rent in the city of angles anymore?
Wouldn't most everybody have to make around $50k a year (before taxes) to make it so, number 1?
Brit QE set for a buying week. Presume they'll have some tuppennies left over for the indirects on Thursday's T auction...
U.K. Pound Declines as Service Industry Growth Slowed in June - Bloomberg.com
C
Luci: this program is in effect nationally. OC is not nearly alone. We're all New Deal now.
There is no free lunch, except behind the Orange Curtain...
Teaching people that you'll feed them with no compensation required of them, is a recipe for disaster.
I don't mind free lunches for kids - free lunches for bankers [HUGE free lunches at that] piss me off.
blowing my horn a bit on that last thread for calling out Palin's Nixon strategy of '62 before the Times
did, beat 'em by a day...
Quayle was a good senator just not right for that spot.
{I am sure most of you forget that he bested Gore in their debate in '92, of course the media downplayed it,
the opposite of what they did in '88 against Bentsen}
campaigns are a messy business...
pity they can't be funded 100% by taxpayers...
....
what did Brokaw call them - 'the Greatest Generation'. growing up I saw many members of that
generation rigging votes, buying votes, and all kinds of nastiness!
I can't tell you how many times I was assured by Nor and SoCal homeowners that prices could never fall too far because those areas are special
Further, the only way they COULD fall would be if people sold and then rented, which would push up rental prices which would support housing prices, pushing them up.
Thus you see, it was impossible for prices to fall.
Interesting that rents fell. hoocoodanode?
Seeing the same thing in SF. except that the data is hard to track because much of the time the rental decreases come in the guise of free months rent or other giveaways.
OC has an interesting history of supporting old fashioned conservatism.
//OC is not nearly alone. //
SFSP About the Program
It is just so very interesting that obvious things were so overlooked during the mania. I'll never lose my astonishment over that.
I mean OBVIOUS things like:
rents can only go as high as people can afford with their income, since you can't get a mortgage to pay your rent.
and
if housing prices (rent/mortgage) gets too high then people really are priced out, and they must then either move away or cohabitate.
clearly rental prices were stretching people to the Max in the mid 2000's already. thus clearly as the downturn hit they'd have less disposable income. thus clearly they'd have to either move away, or get roomates, or something.
and now people are still surprised by this stuff. incredible.
the thing that is scary to me:
I still hear so many people in my life and on the tele (govt officials, bankers, CNBC, etc) talk about "getting things back to normal. But when they say "normal" they mean the height of the bubble insanity.
aaarrrgggghhhh.
Lucifer,
maybe it's me but I always thought Aussie wines were over-priced, I could always get more bang for the buck with a French or Spanish
wine in NYC.
They used to be.. but are no longer over priced.
//but I always thought Aussie wines were over-priced//
the current meme is the "new normal"
I can't figure out the Cali crisis. They've spent months arguing about 2-3 billion in cuts, when they need 24 billion in cuts. I gotta believe if the stock market gets woozy in the next few weeks, the states get bailed out. For BHO, and his plan of hope, It's all about where the market is.
just noticed this in Frank Rich's column:
"In a scathing and controversial new article in Rolling Stone, Matt Taibbi accuses Goldman of having earned such rewards by engineering “every major market manipulation since the Great Depression.”
....
has anyone read it? and does Taibbi have good cred?
YTL - "But when they say "normal" they mean the height of the bubble insanity"...
Absolutely right. This is global too. Goes for FDI, trade, gov revenue and spending projections, behavior of philanthropics and agents, remittance intermediaries and beneficiaries, the works. There was some UN blather last week about "commitments" in foreign aid. Well, yeah, but if the commitments date back to 2005, then no matter what the volume is of "but I was promised a pony!" it's just not going to happen.
C
Taibbi has good cred.
Good morning everyone.
Rents in Phx metro are down at least 20%. I own a property management firm, so I know.
This is single family homes as well as apartments, condos take 2 to 3 months to lease up.
I think the new normal is back to the early 70s in some ways, before credit was wide spread. Think cash to buy things. Some businesses are offering discounts for cash because they don't want to pay the fees and are happy to pass the savings to the customers. I could very well be wrong about the new normal, but I know it will not include the bubble we just went through.
volker the viking (profile) wrote on Sun, 7/5/2009 - 7:02 am
re: rents--rents will continue to fall, hoocoodanode?
That isn't a rhetorical question. Late '05 all through '06 this was a massive fight in the blogosphere with respectable people on both sides. The last property I sold was at a 273x multiple. That was insane. It was clear to me that with investors willing to pursue such massively negative cash flow deals there would be rational pricing. There were just going to be too many amateurs making pricing errors the the only thing to do was step aside. It worked. Now I'm looking forward to leveraging those proceeds into 3 times as many properties as soon as the great cleansing is finished.
"
They used to be.. but are no longer over priced.
//but I always thought Aussie wines were over-priced//
"
I gave up on Aussie wines. Too many of them were just abhorrent.
We went to Argentina several years ago and fell in love with the wines. Very happy we can get them here now at a cheap price.
I suspect a good many So Cals are making their way to cheaper digs elsewhere in the country.
You could scoop up a similar apartment for around $500 a month, that would cost $1000 more in LA/OC
Rob Dawg: my metric for any rental is 5.5 to 6 X ASR. I wouldn't go near a SFD until the apartment complexes get close.
Does the board think that should Cali get their budget mess straightened out that we are one step closer to a stay of execution (of The Greater Depression), or are the cuts they would have to make so deep that the system would destabilize before we reached a balanced budget?
Of course this just means that getting back to normal levels of Price to rent means that we are shooting at a moving target.
OT: PS I'm enjoying some global warming here in North Texas this morning. It's in low 70s with a gentle breeze. Very nice.
duke...ive got the full article on pdf if you want it.
Volker
is that 5.5 or 6 X Yearly Gross Cash Flow? (what's ASR?)... are you talking about buying the property
...
thanks Volker!
Taibbi not only has good cred, but possibly Best Metaphor award for the face-sucking alien squid image.
C
annual scheduled rents
And once you're positioned such, the process is driven by owner renovations followed by slowly increasing rents.
More likely
//cuts they would have to make so deep that the system would destabilize before we reached a balanced budget?//
josap,
Are you Sanford?
//We went to Argentina several years ago and fell in love with the wines.//
volker the viking (profile) wrote on Sun, 7/5/2009 - 7:34 am
Rob Dawg: my metric for any rental is 5.5 to 6 X ASR. I wouldn't go near a SFD until the apartment complexes get close.
Note for the casual reader my 273x is monthly, VVs 5.5-6 is annual price to rent ratios. Thus 273x is VVs 23. VVs 6 is my 72.
We still aren't even close in any area I'd reconsider. I have a preference for small SFR or duplex through fourplex. In the next few years a lot of these are going to hit the market as revenue streams drop but their early boomer owners try to maintain lifestyles.
Who is surprised?
//"In a scathing and controversial new article in Rolling Stone, Matt Taibbi accuses Goldman of having earned such rewards by engineering “every major market manipulation since the Great Depression.”//
It took two to untango yet another hypocrite righty-tighty-trogdolighty.
The Wide Elephant Party still has it's Rush Chairman however...
Oooohhhh. 1.7%. I'm shaking in my boots.
Seriously. I've looked at this in depth before, and posted about it here. If you look across the entire country, in a few cities at a few points in time you will find rent declines. They aren't very big in nominal terms. I don't think any of them hit 10% from peak.
You will see different numbers turning up. One set of numbers will show asking rents with concessions. This is the most volatile. Another set will show asking rent without concessions. Somewhat less volatile. The one which goes into the CPI is average rent being paid, regardless of how long the renter has been there. This is a very stable number.
Now, having said that, the elephant in the room risk for California is vacancy. Partly caused by overbuilding, and partly by outward migration. If the outward migration continues, there is no bottom in single family home prices, or hotel prices, or retail prices, or office prices. Rents could fall some too, maybe 15% over a period of years in some places for residential. A lot more for office and retail.
Home prices will fall by about 70% in Los Angeles, and over 80% in Phoenix and Las Vegas.
Quite the difference.
Phooey. There is no normal. Calling it new means somehow normal changed.
I read much of the Taibbi article.
If you liked the "Creature from Jeckyll Island" book then I think you'd like the Taibbi article.
If you found "Creature" to be a little far fetched and a little too conspiracy theory (as I did) then you'll think that the Taibbi article is just a little bit overdramatic/far fetched.
I personally believe that Goldman is a sickness that blights our economy. I think that they have entwined themselves into government and finance in an unholy way. I think that they use their govt contacts and their insider information to profit hugely in boom and bust times.
But I don't think they have the power to COMPLETELY move our economy. That is hubris at our finest. Even the Fed can't do that, and they are far more powerful than even Goldman.
The Taibbi article is good if for no other reason that it will be read by the regular joes of the Earth, and it hopefully will start to show our leaders that the this nonsense isn't going to be tolerated much longer...
but I think overall he stretches.
just IMO
Now I'm looking forward to leveraging those proceeds into 3 times as many properties as soon as the great cleansing is finished.
Do you think you'll live that long?
Not Sanford
Just for clarity, the 10% decline is in the CPI measure of rent.
You can get larger declines for newly rented apartments, but it takes a long time for that to be fully reflected in the average for all renters. Rental rates for new places down 20% in Phoenix doesn't surprise me, but I'll bet it's still not much of an impact on the CPI measurement of all currently rented apartments.
The emperor (Arnold) has no cloture.
some investor guy (profile) wrote on Sun, 7/5/2009 - 7:43 am
Rents could fall some too, maybe 15% over a period of years in some places for residential. A lot more for office and retail.
Jaw on floor. Does the name Greg Swann mean anything to you?
broward (homepage, profile) wrote on Sun, 7/5/2009 - 7:45 am
Now I'm looking forward to leveraging those proceeds into 3 times as many properties as soon as the great cleansing is finished.
Do you think you'll live that long?
2012? You have a point.
Juvie Another hahahahahahahahah.
How is not cutting schools gonna help unless he cuts somewhere else.
Blasted stupid game of chicken.
2012? You have a point.
2012?
Bahahahaha.
That would be a quicker bottom than the 1990 crash.
broward and Dawg: the opportunities are already extant. It's like baseball, you gotta hit them where they ain't.
Look for small universities in small towns as a driver for demand. Keep turning over the tenants, stay close to your properties and work it.
Also, look for Section 8 opportunities. The best deal I was ever in was a duplex on a Section 8 Rehab program. Paid cash of 38k with ASR of just shy of 10K, 0 vacancy. Dunno if these still exist, but I would put my George Washingtons on the bet that these or similar programs will return.
That is my hope!
//The Taibbi article is good if for no other reason that it will be read by the regular joes of the Earth, and it hopefully will start to show our leaders that the this nonsense isn't going to be tolerated much longer//
For what it's worth, rents are not yet particularly dropping in the
Miami area. I think a lot of the foreclosures are already ruinous, so
that they can't be lived in without extensive repair.
"Taibbi not only has good cred, but possibly Best Metaphor award for the face-sucking alien squid image."
I've been following his stuff since he posted out of a renegade web site in Moscow some years ago. Gonzo lives (in a more sober age). Great writer, and fearless.
I bet GS doesn't like freedom of speech at all.
Offering two months of free rent -- yes, two -- for those who'll sign a lease for 10 months or more.
My kid & her husband recently signed a one year 'plus' lease and got almost three months free rent, a discount off previous years rent and had the landlord do some renovation & spruce up. That was a couple months ago. The bet on the part of the landlord is that because she is a 'professional student' and going to be in school year around for the next three years... and the rent she quoted them was somewhat below past market rents... and the specific unit is a MUCH nicer apartment than others they looked at... that they won't move. I think the landlord made a smart move and was pretty savvy - they won't want to leave. But she seems to keep her places rented while everyone else dickers and plays games and then finds they have units empty. She seems to have very few units empty at any given time - even in this glut.
Section 8 housing is alive and well.
University area rentals stay full.
Outter areas are vacant, unless the rent is in the $800 to $900 range for a McMansion.
The deep pocket investors are already having bidding wars over nice 3/2s in the city. Some are flips, some are rentals,
Testify brother VtV.
It is taking longer in California but places I am not interested in are almost there. High Desert SFRs are easy cash flow examples. Problem is rents are crashing and the next batch of investors with even lower purchase prices will be able to undercut you.
I own some some apt. units in IN along with my 2 gangster brothers... in 13 years I have yet to
see a nickel... why? most of the tenants pay in cash (lower socio-econ renters) and that cash disappears,
or the 'unit' is never rented officially... I wish Harvard would do a case study on our so called biz... a sick joke
I try ever so often to get bought out using Volker's 5.5-6x ASR for valuation... but they say that's wrong, plus
why buy the cow when you can steal the milk?
YTL - good point. The squid can't move the markets from the face end without the cooperation of the giant tapeworm in the corpus.
C
The deep pocket investors are already having bidding wars over nice 3/2s in the city. Some are flips, some are rentals,
I tried to play in that game for awhile last spring - even in this Midwestern city I found my pockets weren't deep enough... prices on FCs with rehab included pushed cap rates to low single digits. Obviously I don't get the 'new math'.
josap: are you aware of any rehab programs connected to Section 8? The one I know of guaranteed the owner a certain return on investment.
The LA article has the same to say about university area rentals. How do uni enrollments look? Haven't seen any mention.
dryfly,
You do however get the old math. Anybody who stuck with the old math is doing just fine be they owner occupiers or investors.
Cash prices from REO are 30 cents on the dollar here. And you usually have to buy several at once for that discount.
One of my clients bought a 3/1 SFR all fixed up for mid $30,000.00. Paid cash, rent is $595.00 mo.
duke -- YGM
CPI for rent in Los Angeles, essentially unchanged at +0.1% in May. http://www.bls.gov/ro9/cpilosa.pdf
You do however get the old math.
Unfortunately true - at least from the perspective of the realtor showing me properties... she kept talking about 'appreciation' and I kept scowling at her & replying with 'cashflow'. Pretty funny exchange...
EDIT: oh and she also was convinced rents were going up, way up... "they have to to support these prices"... ya right.
she kept talking about 'appreciation' ?
Wow. And this is in what city?
No guarantees here, that I know of. But I haven't done section 8 rentals in many many years. Got tired of the repairs the tenants caused and the owner had to pay for and never see the money from anyone.
Dryfly,
You just didn't appreciate how badly she needed that 6%.
Sales agents make me insane. The promise high rental rates etc. Then the investor is shocked when I tell them it isn't going to happen. I wish they would ask me what the market rate is before they make an offer.
back in late '87 I walked into Solly's corp bond research one day and there up on the bulletin board was a picture of
Mike Millken... at that moment Drexel controlled about 83% of the Junk Bond market... we had just set-up a Hi-Yield research unit at SB,
(one of the new guys on that team was a Notre Damer named Tom Maheras) like many other Wall St firms were doing...
... the interesting thing about Millken's picture was that
someone had drawn jail bars across his face... I knew at that moment that his days were numbered! The Street was out
gunning for him...
.
gotta roll and meet up with the LB posse for some beer drinkin'
Keep turning over the tenants, stay close to your properties and work it.
Thanks but no thanks.
Too much work.
I feel no need to buy a cool sports car.
I look forward to reading Dawg's laments of how hard he works for the gov't, though.
Harvard's time and effort might be better spent on a case study of Harvard...
C
Wow. And this is in what city?
Twin Cities - Minneapolis, St. Paul.
I was looking at beat up foreclosures in the central city not too far from the U of MN. My SIL & I would do rehab while they lived in them and then either rent or sell after they move on [three to four years - maybe more].
These were priced way below their previous selling prices... and the realtor believed they would be back there again 'soon'. I [politely] told her she was FOS.
Why work with a realtor like her? Because she really did know the territory well - far better than I - just was ignorant as to what was happening economically... so I use her for her skills and pass on the rest of the S she doesn't know. I am strong enough to not let someone like her talk me into something I don't want to do. Drove the poor woman crazy.
Yep, C.
most of the tenants pay in cash (lower socio-econ renters) and that cash disappears,
or the 'unit' is never rented officially...
Several years ago, i was helping my sister move into a new condo in DC. When I went to pay the rent, the manager said they couldn't accept cash. But they had no problems with an out-of-state check from a podunk bank written by an eighteen year old. Found out the reasons were the ones you mentioned.
Also saw a sign at the ice cream store where the manager would give you a free ice cream if the cashier didn't provide a receipt; trying to prevent under the table ice cream sales. when a scoop of ice cream costs as much as a cashier makes in an hour, things like this are bound to happen.
Turning over tenants usually means lower cash flow.
Unit will need some maint. or allot of maint.
Vacancy will be a month, or more in a very competitive market.
You can't make up that lost rent.
Keep good tenants in place, keep them fairly happy. Raise the rent when the market will handle it.
And the most important part, when do you sell it? Figure out your exit before you buy.
Any realtor still out there has at least something to offer. Or, it's just a
hobby.
big thanks for that Stone article on GS... GDD9000!
Re: ice cream. Naive me. I never understood why those
receipt signs.
Sheesh.
broward: that's the beauty of the market, people get to choose
who said anything about a sports car?
We made the 20 unit property I bought the 'in' place to be. Tenants got a T shirt that identified them as a tenant, we had an annual BBQ for a tenant get together at the first of the school year.
Zero vacancy, waiting list to get in. But then, what do I know, I sell advertising.
what is the standard metric for rental occupancy YOY... 80%, 85% or 90% occupied?
....
I'll read everyone's smart comments about the renting biz and then have a good cry....
in all the years we've been in operation we never did better than 74%, usually closer to
70% and one year it was 58% ... in the last 8 years...
....
like I said cash biz and phantom rentals along with some ethically challenged partners
lawyerliz (profile) wrote on Sun, 7/5/2009 - 8:15 am
Any realtor still out there has at least something to offer. Or, it's just a
hobby.
Jim the Realtor and Effective Demand are two examples right here.
concerning rent payments. I hand my tenants a pad of pre-made deposit slips for the local bank branch. They can pay in pennies for all I care. The beauty is there is never ever a question of payment or amount or most important; time of payment.
dryfly:
Mpls/St. Paul is acting like many other markets IMO.
some areas are just getting slaughtered like North Minneapolis,(a poor 'hood for those not in the know) and also like the further exurbs and the downtown condos (way overbuilt).
some areas are holding up pretty well (like Southwest Minneapolis, the "Lakes" area as it's called).
overall RE makes its ever constant grind downwards... but each individual property is a crapshoot.
information assymetry indeed.
one thing that helps is that in general the RE is affordable. overvalued still, but affordable. you don't have as many $60k/year people buying $400k homes as you did in the prime bubble markets. Instead it's people making $50-60k buying $220k homes. Still more extended than they should be but doable.
not to say things won't continue to fall... they most certainly will as employment continues to struggle. Only that for the most part it's doable.
but I agree that buying RE now for investment purposes is a losing proposition unless you figure in the very real risk of home price depreciation going forward.
You just didn't appreciate how badly she needed that 6%.
She didn't even need the money that bad. She was older than I am - been selling in that market before I was out of engineering school [early eighties]... she could retire anytime... but what the hell would she do? Sit around the pool at some retirement 'complex' and place wagers on which old man keels over next?
I really enjoyed talking with her - just that she was wrapped up too deeply in what was... not what is now.
And I agree that if this debt gets monetized... there is going to be fierce inflation down the road and these properties are going to explode in 'nominal price'. Problem for me is when and I need them to cashflow NOW to make it to THEN... and they don't cashflow now. Not even close unless rents go up or purchase prices go lower. A lot lower.
As our gracious host says... "Oh well."
Duke, too many variables to qoute vac rate.
Markets are different, location, rent range, age. Rental markets are about 1/2 mile by 1/2 mile.
Once saw a no-receipt shakedown at Bailey's Crossroads in Arlington; guy buys a small soda, loses receipt, works the claim that if you're not given a receipt you get a pizza. Duty manager told him to take a hike and in seconds there's a major pantomime going on with the guy and his friends all banging on the counter demanding delivery, and patrons with small children moving towards the door...
From memory that was when I was looking for a rental in Arlington.
C
All real estate is local.
All owners are different.
And I agree that if this debt gets monetized... there is going to be fierce inflation down the road and these properties are going to explode in 'nominal price'
I am not so sure about this.
I've been of the mindset that eventually housing prices would increase nominally due to inflation. but that path may not be as linear as it seems as first.
it depends on the ordering of the price inflation during the monetary inflation.
If the monetary inflation feeds into energy and food and other necessities first, and in a big way, it may not leave room for Real Estate.
$5/gallon gas, $1000/month heating bills, and $7 loaves of bread aren't good for house prices.
I think it is safe to assume that eventually the monetary inflation will work its way into housing prices... but in between there we could see some crushing pressure on housing prices due to price inflation of other necessities.
just food for thought, because In general I agree with your statement as long as we're talking about "eventually".
On the receipt topic, in Taiwan they have a VAT. In order to better assure compliance with on the books sales, all retailers receipts are stamped with a number . . . that eventually becomes a monthly lottery draw. Essentially banking on the Chinese love of lotteries to keep the retailers honest. Prizes are on the small side, but frequent enough to get folks hoarding receipts. People get a receipt for a little as a pack of gum.
Wonder if the US goes to a VAT someday?
All real estate is different. Two houses next door to each other will have differant rents due to condition, amenities, appliances included, pool, spa, layout.
Owners are different. What do you want? cash flow, flip, long term, estate holding, retiring into the property. Do you want a rehab or a move in ready unit.
Lots of variables. So each client and property is managed a bit differently.
Once burned twice wary. If a sector loses favor, people will be slow to return.
Stocks, houses, for example will be a very long time returning to favor. O! to be young again and be situated to wait and see.
"but I think overall he stretches."
"By the end of March, the Fed will have lent or guaranteed at least $8.7 trillion under a series of new bailout programs — and thanks to an obscure law allowing the Fed to block most congressional audits, both the amounts and the recipients of the monies remain almost entirely secret."
.....there's not too much "stretching" involved in that statement.
And I agree that if this debt gets monetized... there is going to be fierce inflation down the road and these properties are going to explode in 'nominal price'
Prices now based on 5-6% rate. Fierce inflation where will the rates be then? 10-15-20%? Could see prices decline or stagnate for decades.
Mpls/St. Paul is acting like many other markets IMO.
some areas are just getting slaughtered like North Minneapolis,(a poor 'hood for those not in the know) and also like the further exurbs and the downtown condos (way overbuilt).
some areas are holding up pretty well (like Southwest Minneapolis, the "Lakes" area as it's called).
overall RE makes its ever constant grind downwards... but each individual property is a crapshoot.
Yup.
I wouldn't touch N Minneapolis [Camden to locals]... nor would I look at St Paul north of the capital or east St. Paul... I focused on:
Mpls Neighborhoods
- Prospect Park/ University
- Como
- Longfellow/ Minnehaha
- Uptown/LOTI
- Some Powderhorn Park, some 'Nordeast'
St Paul
- Como, St. Paul Campus & Fairgrounds
- Grand Ave., Crocus
- Highland/Ford Parkway
Most all still way over priced compared to available rents... so my kids rent in one of those neighborhoods instead.
you can still have RE debt monetization without an explosion in asset prices, since the feds are guaranteeing/backstopping the debt side. so even if the asset side crashes or stagnates, then debt side will still be taken care of.
josap, what kinda deal can you get me on a nice 4/3 w/ that takes dogs- we rented our last one for a year in 2005- I wanted to keep renting, but the powershopper just HAD to buy another house.
just curious to have a comp for the negotiations.
Someday this war's gonna end...
Take a name asswipe (profile) wrote on Sun, 7/5/2009 - 8:29 am replyIgnore userAnd I agree that if this debt gets monetized... there is going to be fierce inflation down the road and these properties are going to explode in 'nominal price'
Prices now based on 5-6% rate. Fierce inflation where will the rates be then? 10-15-20%? Could see prices decline or stagnate for decades.
I agree, as interest increases, prices fall. It will always remain "How much down and how much a month."
maybe it's me but I always thought Aussie wines were over-priced, I could always get more bang for the buck with a French or Spanish
Spanish especially. I have been drinking almost exclusively Spanish and Italian wines for 6 months (and I live in the California Wine Country), to get away from those high alcohol fruit bomb reds that Parker has demanded for the market place.
I have been pleasantly surprised.
Disclaimer: I export wine
Citizen AllenM
What area? In Scottsdale $1700.00 mo. In Maricopa $950.00. Pool service included.
"Disclaimer: I export wine"
Well, whaddaya know! I export beer--from the store to my house to my toilet. 8)
Moon Valley/NE Phx.
1700?
Wow in 2005 I paid 2300 for 3400 sq ft.
Have rents dropped that much?
Prices now based on 5-6% rate. Fierce inflation where will the rates be then? 10-15-20%? Could see prices decline or stagnate for decades.
Between fed & treasury there is something like $13T in new debt... if that isn't sopped up there is going to be a huge increase in money supply & resultant 'price increases' in EVERYTHING. Question is how much gets sopped up vs. how much leaks out... when... and how fast [effects psychology].
Ben & Tim think they can sop it all up... I very seriously doubt it. What I can't put a finger on is how soon until we see the effects & how significant will it be. I'm guessing it will take longer than I or any of us on the 'inflation' side expect [deflationary pressures are very significant - I fully concede & understand this]... but I also guess that when it comes it will be more severe than I can imagine [$13T on top of future entitlements is a LOT of cash spilling out].
Those properties will experience the effect of all that new money just like everything else...
volker - that's import and intermediate factor production.
C
RE Fruitbombs. Yes. Yes, they are.
.....there's not too much "stretching" involved in that statement.
Black Star:
I'm not saying that the Fed and/or Goldman aren't well positioned for some outside gains. Nor that they aren't immensely powerful in the marketplace. Nor that their practices aren't ruthless and illegal and immoral.
I'm saying that I disbelieve that one entity can control the entire world (or even American) market so fully as to induce manias and crashes ALL BY ITSELF.
From the title of his article:
Matt Taibbi on how Goldman Sachs has engineered every major market manipulation since the Great Depression
that IS stretching.
I myself hate Goldman Sachs with every fiber of my being. within just the last few days I decried Goldman and the financial elites. I see the problem. But Mr. Taibbi's article is hyperbole. That is fine. as I said, if you like "Creatures from Jeckyll Island" then you will like Taibbi's article. If you found Creature to be just a wee bit out there, then you may find the same with Taibbi.
Moon Vally in the Country Club area is still at a bid of premium.
Scottsdale house is 2300 sq ft. 4/2, extra large lot, pool, RV gate. Not rehabed.
I was wondering what a 2/1.5 apartment or SFR in the Irvine, CA area would go for these days, say in the Univ area? I may have to relocate down there in short order from NoCa . Thanks much!
What would have happened to houses and rent if GS had not of stepped in and refused to let the banks fail?
I'll read everyone's smart comments about the renting biz and then have a good cry....
in all the years we've been in operation we never did better than 74%, usually closer to
70% and one year it was 58% ... in the last 8 years...
Low income housing, it's not very stable. Turn over is always high.
BTW- We're looking at a stealth rent increase. We're sub-metering the water. Not sure how it's going to play out, but we're looking at the next few years bringing in water rate hikes, not to mention restrictions or rationing, and figured now is the time.
you can still have RE debt monetization without an explosion in asset prices, since the feds are guaranteeing/backstopping the debt side. so even if the asset side crashes or stagnates, then debt side will still be taken care of.
Money is fungible... $13T is like squeezing the Mississippi through a garden hose - unless mopped up something will have to give.
Good news! Asia has decoupled. And Asia will save us. Their green shoots are ours.
Hang on...
‘Buy China’ Pesticide Withers Those Green Shoots: William Pesek - Bloomberg.com
C
From Zero Hedge
Matt Taibbi's piece on RS web site
Inside The Great American Bubble Machine : Rolling Stone
Taibbi talking about his article on the Canadian Business News Network
The Close : July 2, 2009
Look at Craigslist?
"Ben & Tim think they can sop it all up..."
It's just a few key strokes. snark off/
Taibbi would welcome a law suit.
dryfly:
yeah, every neighborhood you're looking in has held up.
I'm not seeing much pressure at all in reasonable homes in the Lakes/Calhoun area (that's where I live). Anything that would be rentable is holding up very well. There's a house on my block that could have been "investable" but it sold in 1 day a few weeks ago.
the stuff in the Lakes/Calhoun area that's really taking a beating is the ultra high end stuff. (The $1-5 million places) especially the higher end condos ($500k plus) and the very high end condos ($1-3M). I'm guessing that's not what you're looking for!
on your list the first that is seeing some pressure is the Longfellow/Hiawatha neighborhood, but you gotta be careful. t here are great little blocks there and not so great blocks.
also in St. Paul you can sometimes get not-so-bad deals just south of Como neighborhood (which is nice)
if you cross the tracks and go more by Hamline University that area is under more pressure than the true Como nabe.
I don't think they'll cash flow yet (Longfellow or Como), but they're getting nearer.
Our debt is now 11.4Trillion , and no one around here makes much more than 10.00 dollars per hour. Rents are 300.00 for trailers and 600.00 for houses in great neighbors. GS will pay 700k this year to their employee's, now go figure. Oh, and I'm in Hayley's State and corner.
Fair point, Yearning........I'm saying that while you have just ONE GS, there are many "growing grubs" spawned by them, utilizing the same mentality and business "acumen". While they might not control everything just yet, they have positioned themselves such that they are "turned to" in all major decisions specifically because their "grubby hands" have hold of the offending soil and/or root.
$10 an hour seems to be the default wage for people that used to get double or triple that much...
Why is some prole that scans items @ a checkout worth $8 an hour now?
I'd like to make a clarification:
overall, I don't disagree with most of Taibbi's claims. in fact, I agree that Goldman did most everything that Mr. Taibbi claims.
what I disagree about is the power of Goldman to MOVE basically the entire world marketplace.
I would word his article a bit differently.
I would say that Goldman has an unholy alliance with the US Government (multiple facets, not just the Fed by the way) that allows them
-to have inside information about what future legislation will be, which gives it an advantage
-overly large input into future legislation. (such as being present to help with the AIG bailout, or helping write bills for Phil Gramm to propose to Congress)
-a monopoly on certain markets
-on overly large role/influence on the various exchanges
etc etc etc.
and then worse: they use that information and influence to profit madly.
it is egregious and horrible and against everything I believe in.
but I DON'T believe that Goldman alone CAUSED our most recent bubble, nor that they single handedly CAUSED the oil spike to $150, nor that they CAUSED the crash after the bubble...
instead, I think that they were one of many actors that caused this, and then they used their inside influence/information to profit on that. And they have way more insider information and insider influence than anybody else.
While they might not control everything just yet, they have positioned themselves such that they are "turned to" in all major decisions specifically because their "grubby hands" have hold of the offending soil and/or root.
Agreed. but it is not just Goldman. this is the way that American business "works."
It's not just finance either. There is a reason why Air Force officers go and work for Boeing.
Finance perfected this unholy alliance though, with greater stakes.
Goldman is the poster child for everything that is wrong in American finance. however, to target Goldman alone neglects that it is the SYSTEM that is the problem. getting rid of Goldman will only help us for a short amount of time until the next Goldman rises.
Goldman is simply the tumor... our system is the radiation that caused the tumor.
we can cut out the tumor (and should). but we really need to get rid of that radiation.
THAT is hope for change that I can believe in.
"instead, I think that they were one of many actors that caused this, and then they used their inside influence/information to profit on that. And they have way more insider information and insider influence than anybody else."
Every conflict requires an alliance to succeed. Every alliance needs a strong man. Every strong man becomes corrupt.
Denninger is bellicose, but he does at least cite sources:
Conspiracy To Hide Bubble-Formation - The Market Ticker
I DON'T believe that Goldman alone CAUSED our most recent bubble
I do not think the point is whether there is one party responsible for all financial bubbles.
I would say that Goldman has an unholy alliance with the US Government
That is the main point. One has to wonder whether a representative democracy can function as expected when a small number of companies (I-Banks) have very strong influence on two out of three branches of the government (legislative and executive) as well as on MSM. This imbalance of power was tolerable so long as everybody standard of living was rising, albeit at different rates for different income groups. Once deleveraging started and the standard of living began to decline, this imbalance of power can (will?) lead to significant instability.
Every conflict requires an alliance to succeed. Every alliance needs a strong man. Every strong man becomes corrupt.
I agree with the gist of your argument, although I hesitate to use absolutes.
I would argue that there is a case to be made that Ghandi and Martin Luther King, Jr were not corrupted, although I am willing to be proven wrong. you could also argue that they didn't have time to be corrupted due to their deaths. so I won't argue too strongly here.
But their perserverance was in part due to the fact that they fought for what they felt to be a moral endpoint.
The problem when it comes to finance is that there is no moral goal.
Profit is amoral (not immoral, but amoral...outside of the moral/immoral system). Hence there is nothing to keep the strong man from corruption.
so in the case of finance/capitalism I agree with you that every strong man will become corrupt.
"This imbalance of power was tolerable so long as everybody standard of living was rising, albeit at different rates for different income groups."
This imbalance, as you so euphemistically put it, was never tolerable. It is and always has been the stuff of revolution. What form this revolution takes depends on the emptiness of the belly.
Imagine having virtually no groundwater, when traditional sources from hundreds of miles away dry up?
What's the value of a residential home in San Diego, when you turn on the faucet and nothing comes out?
(from the SD Union Tribune)
Water officials across the county are looking skyward, seaward and inward to scrounge up enough drinkable H2O to supply their customers. Just beneath the ground’s surface, from Oceanside to the border and from the coast to Interstates 805 and 15, are groundwater basins that few cities have explored because the water is mostly brackish – slightly salty, like V-8 juice – and limited in supply.
Last year, groundwater supplied 2 percent of the county’s 692,000 acre-feet of water, Liarakos said. An acre-foot can keep two households of four going for a year. The water authority hopes that by 2020, local cities can produce enough groundwater to supply 6 percent of their needs, Liarakos said.
incorruptible players are eliminated
I would agree. GS is very good at taking advantage of all situations, changing what situations can, to their advantage, and making money on any side of a "deal". Stockholders gotta love them, and all the baby financial firms want to be just like GS when they grow up.
OT..........beware of 20-year old girlfriends who know how to use a firearm.
I do not think the point is whether there is one party responsible for all financial bubbles.
Then don't title your article:
"The Great American Bubble Machine
Matt Taibbi on how Goldman Sachs has engineered every major market manipulation since the Great Depression"
That is the main point
Perfect. Then name the article
"How Goldman Sachs' unholy alliance with the Federal Government is harming regular Americans and may even threaten the foundations of Democracy itself".
BSR: We're more well warned to beware of large angry women to whom we have forged a written agreement.
One has to wonder whether a representative democracy can function as expected when a small number of companies (I-Banks) have very strong influence on two out of three branches of the government (legislative and executive) as well as on MSM.
bingo.
As I said, Goldman is just the tumor.
The system is the problem.
Lucifer
on the previous thread it seemed to me that you quoted a wall street journal article and drew the inference that zero down was the most salient factor contributing to the mortgage meltdown
you wrote
"New Evidence on the Foreclosure Crisis: Zero money down, not subprime loans, led to the mortgage meltdown."
i didnt see anywhere in the article that zero down per se was the factor
i get a different take from the article...that home owners" being upside down was the primary indicator of future default
it wouldnt be hard to imagine how a modest downpayment would soon leave homeowners underwater in a declining market
i dont see the author specifically talking about "zero down" as you referenced
btw i agree with you that "the poor people and minorities caused it" is a meme
Lucifer (profile) wrote on Sun, 7/5/2009 - 6:49 am
So it was not irresponsible minorities.. hoocoodanode
New Evidence on the Foreclosure Crisis: Zero money down, not subprime loans, led to the mortgage meltdown.
New Evidence on the Foreclosure Crisis - WSJ.com
By STAN LIEBOWITZ
JULY 3, 2009
ps i agree with you and others that "zero down" like ninja and other new inventions were, are, not good policy
".....large angry women to whom we have forged a written agreement. "
........my condolences, volker.
Walt Disney World monorail crash kills employee
http://news.yahoo.com/s/ap/20090705/ap_on_re_us/us_disney_monorail_crash
BSR: Thank you. There are many brothers in this fraternity. My big mistake was letting her have witnesses to the signing ceremony.
This imbalance, as you so euphemistically put it, was never tolerable. It is and always has been the stuff of revolution. What form this revolution takes depends on the emptiness of the belly.
Revolutions require anger and desperation, as well as central coordination.
So long as the population was focused on buying TVs and renovating kitchens, few people cared about imbalances of power.
Bread and circuses can be quite effective, no?
Lenin: "Revolutions start in the belly." Leave us not forget this essential fact.
And as for central coordination, more like some nimble character pre-positioned to take advantage.
YTL - I do not speak for Matt Taibbi
linky for the SDUT water article:
Going to the Well
thx juvenal
dang. rolling stone puts ads inline in the print view now.
anecdote:
I talked my landlord down $300 dollars per mo. here in the IE in april, using current adverts for similar rentals as basis for my argument- in three months, those same places are down another $200 mo.
"Program Trading: One thing Taibbi misses is how GS has turned the stock market into a roulette wheel with their program trading: Trades that can last only an hour and are run by computer algorithms. On some days GS program trades are nearly 40% of the NYSE volume!!"
BSR: correctamundo! Can anyone say Plunge Protection Team?
........that's why piddly little investors like me got out - it would be like me sitting down at a Mafia poker game - I figured I'd get eaten for a snack. Now I'm KING of my own cucumber and tomato sandbox, LOL, and I sleep like a baby every night.
it depends on the ordering of the price inflation during the monetary inflation.
If the monetary inflation feeds into energy and food and other necessities first, and in a big way, it may not leave room for Real Estate.
$5/gallon gas, $1000/month heating bills, and $7 loaves of bread aren't good for house prices.
The Fed is doing its d**dest to make the inflation happen in real estate prices. They are inflating exclusively by buying MBS, which means all the new cash is going into the pockets of real estate speculators, largely large institutional ones. They aren't going to spend the money on food or clothes - they are business structures and can't eat or wear clothes. They buy stock, bonds, real estate, and commodities - all the products whose prices appear to be propped up at present, based on cash flow and stockpile analysis.
Remember also, as von Mises pointed out, inflation always involved wealth transfer from those who get the new money early from those who get it late. The Fed is engineering a massive transfer of wealth to asset speculators from everybody else in the economy. (I say speculators because no sensible investor would own any ordinary non-derivative asset they could avoid right now.)
We are simple men with simple existences. You living out your years in a bucolic paradise, me sweating away in the swamp. Sure beats drilling down after the unattainable.
"Program Trading: One thing Taibbi misses is how GS has turned the stock market into a roulette wheel with their program trading: Trades that can last only an hour and are run by computer algorithms. On some days GS program trades are nearly 40% of the NYSE volume!!"
On zero added liquidity.
bary rithholtz throws down the gauntlet
challenging the lie that CRA was the cause of the mortgage meltdown
$100,000 CRA Challenge | The Big Picture
given the 300 plus pages he reported on this issue i doubt anyone will accept
CRA Thought Experiment | The Big Picture
rithholtz well known... and respected
Someone has posted the text of the Taibbi GS article here:
The Something Awful Forums
Sorry if this article has already been posted.
NW
Stupid ? what does CRA stand for?
community reinvestment act
community reinvestment act
must've lost a step
community re-investment act of 1977
CRA
required that community banks make PRUDENT loans in neighborhoods where they get deposits
ie rulled against neighborhood red-lining
because everyone wants to live there.
from wikipedia
"The Community Reinvestment Act of 1977 seeks to address discrimination in loans made to individuals and businesses from low and moderate-income neighborhoods.[7] The Act mandates that all banking institutions that receive FDIC insurance be evaluated by Federal banking agencies to determine if the bank offers credit (in a manner consistent with safe and sound operations) in all communities in which the bank takes deposits.[3] The law does not list specific criteria for evaluating the performance of financial institutions. Rather, it directs that the evaluation process should accommodate the situation and context of each individual institution. Federal regulations dictate agency conduct in evaluating a bank's compliance in five performance areas, comprising twelve assessment factors. This examination culminates in a rating and a written report that becomes part of the supervisory record for that bank.[8]
The law, however, emphasizes that an institution's CRA activities should be undertaken in a safe and sound manner, and does not require institutions to make high-risk loans that may bring losses to the institution.[3][4] An institution's CRA compliance record is taken into account by the banking regulatory agencies when the institution seeks to expand through merger, acquisition or branching. The law does not mandate any other penalties for non-compliance with the CRA.[6][9]"
Can we just leave the CRA agonistes over at Ritholtz's place? I see nemo's got in on the act.
C
"An institution's CRA compliance record is taken into account by the banking regulatory agencies when the institution seeks to expand through merger, acquisition or branching. The law does not mandate any other penalties for non-compliance with the CRA."......................
.........defined: We have ways of painfully and horrifically breaking your fingers and toes without ever manually touching said appendages.
$10 an hour seems to be the default wage for people that used to get double or triple that much...
Why is some prole that scans items @ a checkout worth $8 an hour now?
Seems like they're the ones that collect all your money for you. Pay $6 an hour and hope you get someone that can count and is trustworthy or pay a little more and get a better guarantee. Perhaps $2 an hour is the going price of insurance. Advertise the job @ $15 an hour with an excellence demand and you'll probably get it.
I know that Aldi's pays extremely well for store clerks and they end up able to run a store with very few employees. I'm pretty sure they pay nearly $20 an hour for a checkout clerk and have very little turnover or theft and very high efficiency.
I immediate like anybody who advocates advertising!
Based on what I remember from '91-'95 here in a desirable coastal area of California, rents will fall through a combination of outmigration and household consildation.
Desirable areas with hot economies contain more recent immigrants, here for the opportunity. Many of them will move on, or return to where they came from, once economic activity here vanishes. (At least "back home" they have friends, a support structure, etc.) I monitored this anecdotally on California/Bay Area based Usenet newsgroups in the early '90s.
The other issue is consolidation: moving back home with Mom or Dad, or never leaving at all. We have 70-year-old friends whose 35-year-old single daughter just moved back in with them. Even on the college-town level, there is the impetus for students with limited means to try to stuff as many roommates into a house as possible. My friend with the 6-br he rents to students allowed eight in last year. He decided he didn't want to allow that this time, but his new set of six are already agitating to get another roommate in, and he's probably going to give in.
Rents here in my coastal college town were lower in '95 than in '91. I vacated a 1-br at 625 in late '90 after I bought a house; five years later the same place was renting for $595. And there was a little inflation, so real price was even lower.
I see no reason why rents should not fall as much as then, and a number of reasons why they may fall more.
I could train a monkey to use a scanner @ the checkout, but i'd worried about it flinging feces @ the customers and the possibility of banana shoplifting.
DC does not dodge recession bullet:, jobs require skills beyond capabilities:
"Slightly more than one in three Washington residents cannot read or write on a functional level, giving the city the dubious distinction of having one of the highest illiteracy rates in the nation."
U.S. capital city, once recession-proof, feels pain
| Reuters
What is less widely known is how many can count. Initial evidence suggests not many.
C
president Bush said,
"More and more people own their homes in America today. Two-thirds of all Americans own their homes, yet we have a problem here in America because few than half of the Hispanics and half the African Americans own the home. That’s a home ownership gap. It’s a — it’s a gap that we’ve got to work together to close for the good of our country, for the sake of a more hopeful future. We’ve got to work to knock down the barriers that have created a home ownership gap.
I set an ambitious goal. It’s one that I believe we can achieve. It’s a clear goal, that by the end of this decade we’ll increase the number of minority homeowners by at least 5.5 million families . . .
Home ownership is also an important part of our economic vitality. If — when we meet this project, this goal, according to our Secretary of Housing and Urban Development, we will have added an additional $256 billion to the economy by encouraging 5.5 million new home owners in America; the activity — the economic activity stimulated with the additional purchasers, the additional buyers, the additional demand will be upwards of $256 billion. And that’s important because it will help people find work."
"Someone oughta start a Facebook group promoting deleting all your FB friends who work for Goldman Sachs."
OH NO!.........The Horror!........There surely are laws against this inhumane act! Deleting FB friends. I am truly appalled and grievously shocked something as hideous as this is even discussed in open text!
W got 6 standing ovations in Oklahoma yesterday, which tells you all you need to know about the Sooner State, don't it?
"W got 6 standing ovations in Oklahoma yesterday, which tells you all you need to know about the Sooner State, don't it?"
I've met many fine people from Oklahoma -- mostly, the ones who had enough, joined the Navy, and never went back.
were they members of the Cherokee Nation?
http://www.house.gov/financialservices/hearing110/barr021308.pdf
in testimony before the house committee on financial services
Michael Barr said
"The majority of subprime loans were originated by non-CRA covered financial institutions. In fact, only about 25 percent of sub-prime loans were made by institutions covered by CRA. "
to my knowlege, the basic fact that CRA covered insitutions made far less than 50% of the loans
AND
that, as CR and others have pointed out here
alt A, prime and CRE are also set to implode
makes little sense to blame the fianancial crisis on CRA
a bunch of poor people and even a bigger bunch of house flippers are not capable of bringing down a world economy
for that you need leveraged debt, SIVs and other exotic "investments" like collateralized debt obligations
pure and simple, the bankstas turned our financial system into a casino
in a country where 70% of the economy is retail and
financial services industry went from 7 tyo 15 to more than 30% of GDP in three decades
gee, who would have expected a collapse
Far more people are innumerate than are illiterate...
what sounds worse to an innumerate person: highest illiteracy rate, or lowest literacy rate?
But that is actually getting into a much larger arena, framing issues...torquing the emotional lugnuts of cognition.
Lenin: "Revolutions start in the belly." Leave us not forget this essential fact.
The elite has always understood the need for bread and circuses to keep the proletariat complacent.
That may be coming to an end.
Then, another Lenin quote may be in the spirit of the times:
"The Capitalist will sell us the rope we will hang them with"
corollary: The mob will steal the rope from the capitalist.
"I could train a monkey to use a scanner @ the checkout, but i'd worried about it flinging feces @ the customers and the possibility of banana shoplifting."
Once you've got those problems solved, there's cheap labor for you. But monkeys have no pockets, bank accounts or retirement plans.
torquing the emotional lugnuts of cognition.
thats fun to say, ee
which one of you smart people can link to the hanging of bankers in London, 19th century?
"But monkeys have no pockets, bank accounts or retirement plans."
.....no, but even monkeys will continually press the "monkey-candy" button regardless of need.
Julius: You know the saying, "Human see, human do."
lol. nothing but articles about Chris Knight on the googles volker.
G20 Summit: university professor suspended over bankers 'hanging from lampposts' comment - Telegraph
"One in Nine Americans on Food Stamps"
One in nine Americans on food stamps, USDA says
| Reuters
How hungry do people have to be or how homeless, before they get angry enough to change a system that will allow their children to go hungry and homelss?
I think each state sets the income level for eligibility. But it can't be much of an income.
my wife, the smartest living woman, says there was this big deal in the 1870 where a bunch of rioters hung a bunch of banksters
somebody find it, she's hell to live with when she is unfulfilled by confirmation
josap: have you ever seen what hungry looks like? up close and personal?
that is it exactly - when "Daddy, I'm hungry" intersects with a realization that situation might not be entirely based on personal failings - but I think it will take more FWO (Formerly Well Off) joining the actively downwardly mobile to get past the "they're bums" narrative (just as it did in the last depression)...then the anger levels requiring action will occur.
How constructive or destructive the result will be is anyone's guess...
"One in Nine Americans on Food Stamps"
Wouldn't the real number be closer to 1 in 5?
It's not as if each member of a family gets food stamps, do they?
Roberto Calvi - Wikipedia, the free encyclopedia
Best I could find on the banker hanging.
dr munch, what happens to the bond market when everyone and his cousin gets a pass? If they can through Chrylsler and GM bondholders under the bus, they will certainly through the BRICs under the bus in a heart beat.
Bob Dobbs: Based on what I remember from '91-'95 here in a desirable coastal area of California, rents will fall through a combination of outmigration and household consildation.
USA Counties
Occupied housing units with 2.01 or more persons per room 2000 (sample)
UNITED STATES 1,052,831
CALIFORNIA 484,415
I'm not sure I want to see what consolidation looks like.
When obama's hyperinflation comes housing prices will have to move lower even more. With hyperinflation interest rates, prices most drop to compensate. Remember 18% mortgages during Carter. Housing prices can't move up in an inflation era. Fed is wrong in this movement. Things will get worse before ??????????.
which one of you smart people can link to the hanging of bankers in London, 19th century?
Henry Fauntleroy - Wikipedia, the free encyclopedia ? (1824)