More ponies on credit, what could possibly go wrong. Can I sell my wife my house and buy hers and we each get $8,000 (or $15,000) on this. Sign me up. Might as well pour some gasoline on the fire as they take the USS Debtstroyer to the bottom.
Strangely the $40 billion is less than $500 per family and from my position it serves to "preserve" several hundred thousand of paper equity. Still, I'm agin' it. I think extend and pretend ultimately costs more than ripping off the bandaid.
your post makes it seem like the housing credit is a bad thing. [/snark]
as many of you know, I took advantage of that cash for clunkers program. bought a brand new car for $6700 out of my pocket. say what you will, that's a good deal.
I will for sure also take advantage of the tax break for housing if they are foolish enough to increase it to $15k.
I stopped fighting this year. If the govt is going to keep giving away free money, then i'm going to take it.
I may buy a house for one of my depenents.
interestingly, they rent now. so when I buy we'll simply give up the apartment.
hey... isn't that what CR is predicting? new homeowners would just cause increases in rental vacancies. Golly is he smart. i'd listen to him if I were an important person.
"Mr. Market may be pricing in a fine future for the U.S.," Rosenberg wrote in a morning comment. "But when the 3-month Treasury-bill yield is 13 basis points north of zero, you know that there are still substantial fundamental imbalances that need to be worked through."
I'll I can scream is
That was a few days ago, and the sky is falling .... Tom Petty theme:
Then call the economists at the Federal Reserve and ask how CPI deflation will impact consumer behavior and monetary policy. Welcome to the Fed's nightmare.
Yeah, but the relitters get to keep makin' them buckz.
TJ and The Bear, you know a tax credit is a really bad idea when it would be better to drive around town and throw the $15 billion (or $40 billion next year) out the car window. That would have the same impact on the deficit, but it would actually provide some stimulus - kids would scoop it all up and buy high tech toys or whatever - and it wouldn't be deflationary.
I'm surprised the NAHB admits the cost will be over $100,000 per additional home sold - that is a reasonable estimate.
There seems to be an assumption that this will help set a floor in prices. Buyers are already getting whatever price they want for properties. Despite protestations otherwise, this will not raise values. What it could potentially do is move some buyers into the market that otherwise wouldn't have the savings. This is different then bringing unqualified people into the market.
This is idiotic. All the tax credit does is increase the price of every starter home by $40k-80k. (Each purchaser has $8k more money; assume a down payment of 10-20% and you get $40k-80k additional purchasing power.)
Put another way, it is a direct transfer of taxpayer money to home builders. It does nothing for home buyers.
Larry Summers for all his faults should be smart enough to block this plan. But Obama is a big-time delegator and Rahm could sell it, but I just don't think there is any political gain in it.
The short-sightedness of these Federal puppets is amazing... Again showing our social preference to disregard the long-term view or consequences of our actions in favor of near-term benefits. It will be fun enough to watch demand for vehicles suffer from demand pushed forward over the next few months. I can't wait to see the hoocoodanodes that result from this housing farce.
Again, the assumptions here are clear. Either our legislators are morons, or what they are really saving has nothing whatsoever to do with the consumer nor housing relief. Given who owns them, I think the right answer is a foregone conclusion at this point. The secondary crash will be fun already just from our imprudent $8k giveaways.
Extending the credit through Nov. 30, 2010 and making it available to all purchasers of a principal residence would result in an additional 383,000 home sales ...
Coercing renters into purchasing will take $$'s away from PCE if the cost of ownership is greater than renting. The pie of household income/credit is getting smaller and the only thing the government can do is influence how big a slice any sector can have. C4C took $$'s away from retail. House credit will take $$'s away from PCE.
Additionally, fiscal conservatives should hate this b/c its $40B more of deficit spending. Those on the left should dislike it b/c the benefits of this tax credit skew far north of the truly poor.
It's kinda hard to build a ledge while falling. Much easier to wait and build a ramp when you hit the bottom.
That's if you survive the fall, of course.
I see this sort of crap with subsidies for farmers all the time. Crank up payments, and it just gets capitalized into the value of land. Give homeowners an extra $15K, and we all know where it's going to go. I agree with Nemo and most everyone else here...this is, as we've discussed ad infinum, monumentally stupid.
Then call the economists at the Federal Reserve and ask how CPI deflation will impact consumer behavior and monetary policy. Welcome to the Fed's nightmare.
Isn't this the Fed's wet dream, so Ben can prove that "it" can't happen here?
Eric,
If prices go down anyways, no one will be thankful for it. Meanwhile $40bn is 8 times the highspeed rail grant they're giving out now. I'm sure paying a little bit extra to get people into jobs for a year will have a bigger effect and garner more support than getting 5mn people into a new house.
Why not just cut the payroll tax for 2 years
ehp-that double dog dare of 1100-1150 is going to happen but thats where the rubber meets the road....lots of 6-7% downhill grades from there....hope everyone bought a can of stops brake fluid....
actually I would say all of these stimulants are discrimination against savers, renters and citizens who have homes....
Surprise her with the news once she graduates from higher education and can't find a job in her chosen field, and is working @ Quiznos as a lunch engineer...
ehp-that double dog dare of 1100-1150 is going to happen but thats where the rubber meets the road....lots of 6-7% downhill grades from there....hope everyone bought a can of stops brake fluid....
Well, even our current 1050ish levels are about 100-200 points higher than I ever thought we'd see. Now I think it'd be groovy to see 1250-1300.
I mean come on, did you hear? Alcoa beat estimates by 13 cents!
The proposal does not appear to be limited to US citizens yet. Maybe I'll pick up a place in Seattle just to use for duty free exemptions, and ordering stuff not delivered to Canada
The proposal does not appear to be limited to US citizens yet. Maybe I'll pick up a place in Seattle just to use for duty free exemptions, and ordering stuff not delivered to Canada.
Maybe I will spend Christmas in Florida this year...
Ultra-safe U.S. Treasury bonds led the way, which is usually a bearish signal. However, other aspects didn't take it that way; risky 'junk' bonds were also well bid.
This sets up a fundamental paradox, says Gluskin Sheff Chief Economist David Rosenberg.
Not necessarily -- treasuries rallied straight into the housing bubble back in 2003. There was no paradox, the treasury market was simply wrong. People who were long t-bonds got crushed because they didn't see the bubble coming.
Eric,
No, I mean like this winter. Prices are going down. 10%+
C4H was not enough to stop the shadow inventory from growing.
Moreover, the supply data have been distorted in part because of all the inventory
that has been held off the market on bank balance sheets, but this cannot last
forever. Estimates we have seen, peg the “shadow” inventory at 7 million housing
units — those in foreclosure, those just entering the process, and those that have
been in arrears for the past year but have yet to receive a notice. Tack these on to
the “official” unsold inventory count of 3.6 million and what we are talking about is
an overhang equivalent to 25 months’ supply. It is truly hard to believe that home
prices are doing anything more than a wiggle right now in a long-term downtrend; a
wiggle, mind you, that has come courtesy of unprecedented government support.
Rosenberg 30 Sept 2009
.....I'm sorry, this is nuts..........how does this crap even get put on the table?.........It's like a room full of "stoners" sit around and make shit up..........
I take that back; it does one thing for home buyers, which is saddle them with an extra $32k-72k in debt for the same property.
The economics of this are manifestly insane.
Nemo,
The entire system is insane. We either expand debt or the system dies. The worst part is that the Fed and bankers have decided to expand the system with non-economic debt such as CONsumption debt, private equity debt, share buyback debt etc.
Pyramiding debt for consumtion is the road to ruin. And private equity is a way to arbitrage interest rates to siphon wealth from the system by cutting pensions, benefits, employees, etc. It looks good in the short run but at it's core is a sham. It dumps what were private expenses on the government.
We need a system that allows for grow, but can exist without growth.
Why not do it all the time if it's such a great thing?
on the one hand, I agree that these credits are foolish.
on the other, I disagree with this line of thinking.
there are many activities that IMO should be situation dependent. Various stimuli programs being one subset of them. The problem is that we clearly tend to use the wrong stimuli at the wrong times.
now, some people believe that the govt should never stimulate the economy. I'm not sure I agree with that. But if you believe in govt stimulus at all, you must recognize that it should not be done all the time.
(fwiw: I know that your comment was really tongue in cheek, but it made me think, and post, anyway).
obviously C4C and Housing credit are terrible. it isn't going to stop me from cashing in and getting mine, but they're terrible.
"Sequentially, revenues were helped by an increase in realized prices for primary aluminum to $1,972 per metric ton from $1,667 per metric ton in the second quarter, as well as stabilization in the end markets." black dog - beneficiary of china commodity buy now over?
...
"Capital expenditures in the quarter were $370 million, on-target to reach the 2009 goal of a nearly 50 percent reduction from 2008."
...
"Due to low inventories at distributors and rising shipments, regional premiums are improving and global aluminum consumption is expected to increase 11 percent in the second half of 2009."
I don't think deflation will be all that much of a problem. If the numbers begin to look bad then change the formula. No problem. I agree that throwing money out the window would be better. At least that might spread the stimulus around.
.....I'm sorry, this is nuts..........how does this crap even get put on the table?.........It's like a room full of "stoners" sit around and make shit up..........
BSR-
It's like a room full of "stoners" sit around and make shit up.......... nope me cheech, chong and woody were thinking topless coffee bar...we resent your insinuation....
I almost posted a Tom Petty song this morning. I was in the mood for Two Gunslingers. I'd like to take control of my life...seems I am last in line these days with everyone else getting first dibs.
I take that back; it does one thing for home buyers, which is saddle them with an extra $32k-72k in debt for the same property.
The economics of this are manifestly insane.
Think about it; even though it saddles home "buyers" with more debt, it effectively increases the values of all existing homes proportionally, making available a similar amount for HELOC, Home ATMs, etc.
It's true, but it's still a snark....
But if you believe in govt stimulus at all, you must recognize that it should not be done all the time.
Why must I recognize that? If you're defining government stimulus as something that should be done at specific times, that's fine. But that in no way addresses the issue of why these particular credits (housing, cars, employment) should be done now.
I.E. there's no reason I "must recognize" that these specific things are in the class of things that "should not be done all the time but should be done now" even if such a class of things is definable and potentially recognizable in practice.
I want to know why these specific credits belong in that category.
For example, why won't an employment tax simply encourage businesses to spend money on things that don't need to be done and create more overcapacity and structural deformation of the economy?
"You ascribe a much longer memory to voters than I."
As for voters I think the unemployment issues will be the main driver next fall, but the immediate payback for the politician is the PAC money from the home purchasing industry, as opposed to the home rental industry.
The homebuilders have a powerful lobby. Why not get the government to buy the house and just give it to these people. Why worry about a little tax credit?
If you want to stabilize home prices, you need to pour enough new money in such that the full amount of negative equity is offset. Let's call it $4 trillion. 3.5% down payments, you need $115bn. After that all you need to do it cut unemployment in half and keep mortgage rates low for the next 40 years. This little plan is pissing in the wind.
ac,
You have to define the buy and sell dates very specifically for that. Yields are how low today? Treasuries had some record rallies
I'm referring to the rally into the Spring of 2003 IIRC that turned into a rout when the ISM indexes started shooting straight up. I think the ISM service index got up to 65 in August or so.
Well it looks like Murphy definitely didn't leave my house yet. Routine A/C checkup, and I apparently have a clogged drain pan and standing water in the unit up in the attic. I love saving money for Murphy's visits. Time for him to go visit someone else.
Like so many policies before it and those yet to come, here we have yet another attempt to prop up an unsustainable reality that requires the permanent and ever-increasing issue of debt, with the intent to protect the perceived value of asset holders.
Who holds the majority of assets? Oh yes, that's right: the nobility.
If you want to stabilize home prices, you need to pour enough new money in such that the full amount of negative equity is offset. Let's call it $4 trillion. 3.5% down payments, you need $115bn. After that all you need to do it cut unemployment in half and keep mortgage rates low for the next 40 years. This little plan is pissing in the wind.
Perhaps that's not such a bad idea; it the Govt. "becomes" the market for mortgages, perhaps they can set the mortgage rates while still having the flexibility to raise other rates to control inflation in the remainder of the economy. However, that almost certainly will turn into yet another arbitrage (a.k.a. scam) opportunity to be abused by TPTB. I still think we're 'ed
CR is the best analyst and most forceful writer in the nation right now on this important topic. Others are ripping off his stuff.
I think he's doing great analysis here.
I'd like to see this kind of detailed analysis in support of/against other types of stimulus though as opposed to the argument that "Keynes would do it and he's super awesome."
Cinco-x
That still wouldn't be enough. The economy needs credit growth at a rate that can only be paid off with even greater credit. At best you would be extending more credit to homeowners just to pay the interest they can't afford because they're unemployed and with no savings
However when the tax credit eventually ends (it will someday), ...
Huh? Has there ever been a real estate industry tax break or subsidy that was later rescinded or repealed???
Those I can think of have all been expanded or enriched over the years.
Soon the tax credit will be $15,000. And when that's pulled forward all the demand that amount can, and sales head vertically downward, they'll up it to $30,000. Next? $60,000?
This program is so brain-dead I'm near to running down the street screaming. (And I'm a liberal Democrat.)
The economy needs credit growth at a rate that can only be paid off with even greater credit.
And it needs real credit, not just paper credit - i.e. the economy needs the kind of resource sharing that only comes from mutual trust and cooperation, and it needs it in a way that's sustainable in the long-term.
Cinco-x
That still wouldn't be enough. The economy needs credit growth at a rate that can only be paid off with even greater credit. At best you would be extending more credit to homeowners just to pay the interest they can't afford because they're unemployed and with no savings
And that's just another reason that we're, as I said, 'ed
Soon the tax credit will be $15,000. And when that's pulled forward all the demand that amount can, and sales head vertically downward, they'll up it to $30,000. Next? $60,000?
Hey, if $8,000 is good, $15,000 has to be better, right?
Members of both parties could care less about this country. Each side just wants the other to fail, country be damned. Vote$ and future job opportunities are the only thing that matter. They preach about us "saving the planet" for our children and grandchildren all the while they throw them down a river of debt. Like all politicians, do as I say, not as I do.
President Obama......... buy the Silverdome during the scheduled auction today for all the "Downers" in Michigan and turn it into a tax-free "Shantytown commune" - less the hurricane - see how THAT works out.
"Less than a week after reporting a sharp drop in September sales, GM said its U.S. sales chief is leaving as the automaker struggles to prop up its falling share of the market."
ac
gotcha
still you did say bonds, and if they held the 10 or 30yr until recently, it would have beat many investments over that period
Yep. I'm just making the comment that just because stocks AND t-bonds are rallying doesn't mean something mysterious is going on. Either of the markets could simply be wrong, and (in the short-term) it's not necessarily the stock market.
If the Fed keeps pumping liquidity into the markets at a ferocious pace I would go as far as saying that currently stocks are probably "right" and t-bonds are probably "wrong".
Jezzz. With great "challenges" come great "opportunities". The smart amoral scum-bags are figuring out how to profit from this opportunity right now. This site might not have THE smartest or THE (most?) Amoral or THE scummiest, but we can try to live up to the best that Merica has to offer! We can complete with these guys! We've (almost) got what it takes! We need to give 110% in this effect. Come-on team. There's no I in team (unless you spell it in another language).
This is just somehow perfect. Can't tell you what it means in the scheme of things, but if you flash forward a few hundred years and read a history article about today... this would be one of those curious facts about the times around the border...
If the Fed keeps pumping liquidity into the markets at a ferocious pace I would go as far as saying that currently stocks are probably "right" and t-bonds are probably "wrong".
Isn't it also possible that they are both "right". If a lot of the money for stock pumping and T pumping is coming from banks, it could simply be asset allocation.
Banks borrow at 0%, and finding no worthy and willing borrowers, spread their free cash around stocks, bonds, and commodities. Liquidity seeking a home and being shotgunned across all financial markets. Possible?
OVERVIEW
Ford Motor Company is currently rated as having Very Aggressive Accounting & Governance Risk (AGR). This places them in the 8th percentile among all companies, indicating higher accounting and governance risk than 92% of companies.
Ford Motor Company also received a legacy AGR score of 34 out of 100.
The cash flow between accounts payable and accounts receivable is like a time bomb. Increasing production might in fact kill the company if sales don't increase faster than production
The safety of the current system:
Ben S. Bernanke: 'Deflation - making sure "it" doesn't happen here.' Speech by Bernanke, Wash. DC. Nov. 21, 2002
'So is deflation a threat to the entire economic health of the United States? Not to leave you in suspense, I believe the chance of significant deflation in the United States in the foreseeable future is extremely small, for two principal reasons. The first is resilience and structural stability...the second bulwark against deflation in the United States...is the Federal Reserve System itself.' http://www.bis.org/review/r021126d.pdf
ac,
How big of a lag time is there? It's 7 months on by that measure. To date I believe the Fed has not kept up with deleveraging. It has had some additional help from giving discretion when accounting for assets, and the withholding of shadow inventory from the real estate market. Neither of those aids provides ongoing support, and the $1.75tn of mortgage related purchases is almost over. Along with other subsidies. So we're more likely to have a panic next than a everything goes to 11 rally. The Fed will eventually catch up, of course, but the key as you pointed out is the sequence of events
This program is so brain-dead I'm near to running down the street screaming. (And I'm a liberal Democrat.)
BSR did mention above this had to be cooked up by some boys smoking the kind Kush buds Urban Dictionary: kush
Again me, Cheech, Chong, Woody, Oliver, Charlize, Paris, Justin, Snoop and Willie were didn't think of this...we were looking at opening up a 24 hour topless coffee shop that also served Pizza and ice cream.. 35 Celebrities Who Smoke Pot - Pot smoking celebrities - Jezebel
You may argue (Hell, you ARE arguing) that extending the HBCredit is a bad idea, but consider it from the perspective of the government.
The banking system is fragile. Falling housing prices will create more underwater "ruthless defaulters." Continuing/increasing defaults could push the banking system over the edge, which would result in widespread financial chaos.. Goosing house prices takes some of the pressure off the debtors, and maybe they won't default (for a while). Maybe the banks can hang on until the economy turns.
Rob Dawg had it right upthread. The credit has probably boosted the total current value of the housing market by many $100B.
That's what the credit is intended to accomplish; supporting house prices. It has nothing to do with helping buyers!
Can you give me a bit of a tutorial on the deflation issue and it's impact on the Fed (ala their worst nightmare). Thanks and sorry if that's a stupid question. Cheers!
hello
Nemo ?
The Greater Depression remains on schedule.
Yes?
nova,
Don't even think of using diamonds to store and move wealth. Rare gems are the real deal if you're not talking PMs.
More ponies on credit, what could possibly go wrong. Can I sell my wife my house and buy hers and we each get $8,000 (or $15,000) on this. Sign me up. Might as well pour some gasoline on the fire as they take the USS Debtstroyer to the bottom.
Strangely the $40 billion is less than $500 per family and from my position it serves to "preserve" several hundred thousand of paper equity. Still, I'm agin' it. I think extend and pretend ultimately costs more than ripping off the bandaid.
I'm confused.
your post makes it seem like the housing credit is a bad thing. [/snark]
as many of you know, I took advantage of that cash for clunkers program. bought a brand new car for $6700 out of my pocket. say what you will, that's a good deal.
I will for sure also take advantage of the tax break for housing if they are foolish enough to increase it to $15k.
I stopped fighting this year. If the govt is going to keep giving away free money, then i'm going to take it.
I may buy a house for one of my depenents.
interestingly, they rent now. so when I buy we'll simply give up the apartment.
hey... isn't that what CR is predicting? new homeowners would just cause increases in rental vacancies. Golly is he smart. i'd listen to him if I were an important person.
Nemo's busy.
Nothing.. .Just saying hello.
fudge_hend wrote:
Well, just don't give her away!
ouch
anyone want to speculate what the simple reasoning behind this one is?
My fellow Americans...
CREDIT MARKETS: Broad Credit Rally, Though Paradox Remains - WSJ.com
I'll I can scream is
That was a few days ago, and the sky is falling .... Tom Petty theme:
YouTube -
Treasuries portend a correction. The USD is just mostly dead and has a holocaust cloak.
Then call the economists at the Federal Reserve and ask how CPI deflation will impact consumer behavior and monetary policy. Welcome to the Fed's nightmare.
Yeah, but the relitters get to keep makin' them buckz.
TJ and The Bear, you know a tax credit is a really bad idea when it would be better to drive around town and throw the $15 billion (or $40 billion next year) out the car window. That would have the same impact on the deficit, but it would actually provide some stimulus - kids would scoop it all up and buy high tech toys or whatever - and it wouldn't be deflationary.
I'm surprised the NAHB admits the cost will be over $100,000 per additional home sold - that is a reasonable estimate.
best to all
First on topic comment.
There seems to be an assumption that this will help set a floor in prices. Buyers are already getting whatever price they want for properties. Despite protestations otherwise, this will not raise values. What it could potentially do is move some buyers into the market that otherwise wouldn't have the savings. This is different then bringing unqualified people into the market.
Nemo SahBee!
Speed wrote:
Have fun storming the castle!
This is idiotic. All the tax credit does is increase the price of every starter home by $40k-80k. (Each purchaser has $8k more money; assume a down payment of 10-20% and you get $40k-80k additional purchasing power.)
Put another way, it is a direct transfer of taxpayer money to home builders. It does nothing for home buyers.
Disgusting.
CR, have another puff of 'Hopium' and swallow your reservations. The ObaMessiah knows what he is doing, sir.
I'm surprised the NAHB admits the cost will be over $100,000 per additional home sold - that is a reasonable estimate.
this is ridiculous. I want the full $100k, not the piddly $15k.
@badger: I resent your assertion. my post above was definitely on topic!
At least that would do more to stimulate the economy then thier proposal
Agreed it's an outrageously bad idea, but when has that ever stopped them.
It's my cynicism towards TPTB's actions -- which they constantly reaffirm -- that make me feel a depression is inevitable. Sigh.
The only way the credit can increase value is if the seller has pricing power. The seller doesn't.
I take that back; it does one thing for home buyers, which is saddle them with an extra $32k-72k in debt for the same property.
The economics of this are manifestly insane.
Excellent post, CR. Thanks.
Larry Summers for all his faults should be smart enough to block this plan. But Obama is a big-time delegator and Rahm could sell it, but I just don't think there is any political gain in it.
The short-sightedness of these Federal puppets is amazing... Again showing our social preference to disregard the long-term view or consequences of our actions in favor of near-term benefits. It will be fun enough to watch demand for vehicles suffer from demand pushed forward over the next few months. I can't wait to see the hoocoodanodes that result from this housing farce.
Again, the assumptions here are clear. Either our legislators are morons, or what they are really saving has nothing whatsoever to do with the consumer nor housing relief. Given who owns them, I think the right answer is a foregone conclusion at this point. The secondary crash will be fun already just from our imprudent $8k giveaways.
Sigh. Perhaps our successors will learn from our experiences and attempt a democratic republic capitalist society instead.
Tis true. By the time I had finished typing, lots of on topic posting had occured.
not sure I agree.
the cash for homes credit plus the "modernized" FHA does help get people in to homes with minimal to nothing down.
it is unlikly IMO that we could get people into homes with NOTHING down without all these govt programs.
now obviously, we must ask ourselves "is it a good idea to put people with marginal savings and bad credit into a home?"
or not. I know how I'm voting when they ask me. (sorry, couldn't resist stealing that quote)
but I just don't think there is any political gain in it.
I think you're really wrong there. This is a great sale to Joe Sixpack.
$15,000 free down payment money? Nom nom nom nom........
Re: :there are still substantial fundamental imbalances that need to be worked through."
Anyone think not?
I glossed over this initially
!
Nemo wrote:
It helps home sellers dump their properties on greater fools, no?
At least in the low to mid range of homes.
I think we have the outline for that somewhere... seem to have misplaced them about 100 years or so ago.
*Nemo wrote:
Don't forget banks.
Coercing renters into purchasing will take $$'s away from PCE if the cost of ownership is greater than renting. The pie of household income/credit is getting smaller and the only thing the government can do is influence how big a slice any sector can have. C4C took $$'s away from retail. House credit will take $$'s away from PCE.
Additionally, fiscal conservatives should hate this b/c its $40B more of deficit spending. Those on the left should dislike it b/c the benefits of this tax credit skew far north of the truly poor.
Alas, its likely to be passed (again).
My eldest in colege will definitely be buying a house with her $15k credit.
Question: should we tell her?
Doc Holiday (homepage, profile) wrote on Wed, 10/7/2009 - 3:57 pm
Re: :there are still substantial fundamental imbalances that need to be worked through."
Anyone think not?
Doc, this is a New Era in Economics. In this New World Order, We Create Our Own Reality. (And Use Lots of Leading Capital Letters)
It's kinda hard to build a ledge while falling. Much easier to wait and build a ramp when you hit the bottom.
That's if you survive the fall, of course.
I see this sort of crap with subsidies for farmers all the time. Crank up payments, and it just gets capitalized into the value of land. Give homeowners an extra $15K, and we all know where it's going to go. I agree with Nemo and most everyone else here...this is, as we've discussed ad infinum, monumentally stupid.
CR wrote:
Isn't this the Fed's wet dream, so Ben can prove that "it" can't happen here?
Don't forget banks.
Only if people buy houses with borrowed money.
Ha ha ha.
Good point.
Doc Holiday wrote:
YouTube - Tom Petty - Into The Great Wide Open
Why not Free Fallin'?
Eric,
If prices go down anyways, no one will be thankful for it. Meanwhile $40bn is 8 times the highspeed rail grant they're giving out now. I'm sure paying a little bit extra to get people into jobs for a year will have a bigger effect and garner more support than getting 5mn people into a new house.
Why not just cut the payroll tax for 2 years
ehp-that double dog dare of 1100-1150 is going to happen but thats where the rubber meets the road....lots of 6-7% downhill grades from there....hope everyone bought a can of stops brake fluid....
actually I would say all of these stimulants are discrimination against savers, renters and citizens who have homes....
Surprise her with the news once she graduates from higher education and can't find a job in her chosen field, and is working @ Quiznos as a lunch engineer...
ROFL.
I hadn't thought about simply not telling my dependents about their home purchase.
this opens up possibilities. Good thinking. Have you thought about a life in politics?
*EvilHenryPaulson wrote:
This may indirectly help the banks, but it **directly **helps the banks how?
Hoist by their own petard, I believe the expression goes.
Been there. Done that. Recovering politico. Not that I've stopped talking to the bartenders.
One question I have regarding tax credits for housing and cars and employment:
Why not do it all the time if it's such a great thing?
If prices go down anyways, no one will be thankful for it.
Oh, I agree, but by then "I'll be gone, you'll be gone"
creditcriminalslovetarp wrote:
Well, even our current 1050ish levels are about 100-200 points higher than I ever thought we'd see. Now I think it'd be groovy to see 1250-1300.
I mean come on, did you hear? Alcoa beat estimates by 13 cents!
The proposal does not appear to be limited to US citizens yet. Maybe I'll pick up a place in Seattle just to use for duty free exemptions, and ordering stuff not delivered to Canada
EvilHenryPaulson wrote:
Maybe I will spend Christmas in Florida this year...
This would be great for cash buyers of homes!
Oh, wait... who are they? Not Joe-6-Pack, or even Joe-12-Pack.... Just the five-percenters, basically. Move along, all is going according to plan.
Ultra-safe U.S. Treasury bonds led the way, which is usually a bearish signal. However, other aspects didn't take it that way; risky 'junk' bonds were also well bid.
This sets up a fundamental paradox, says Gluskin Sheff Chief Economist David Rosenberg.
Not necessarily -- treasuries rallied straight into the housing bubble back in 2003. There was no paradox, the treasury market was simply wrong. People who were long t-bonds got crushed because they didn't see the bubble coming.
If you didn't buy a new home in 2002-2007 you really weren't trying very hard, were you?
Eric,
No, I mean like this winter. Prices are going down. 10%+
C4H was not enough to stop the shadow inventory from growing.
.....I'm sorry, this is nuts..........how does this crap even get put on the table?.........It's like a room full of "stoners" sit around and make shit up..........
I take that back; it does one thing for home buyers, which is saddle them with an extra $32k-72k in debt for the same property.
The economics of this are manifestly insane.
Nemo,
The entire system is insane. We either expand debt or the system dies. The worst part is that the Fed and bankers have decided to expand the system with non-economic debt such as CONsumption debt, private equity debt, share buyback debt etc.
Pyramiding debt for consumtion is the road to ruin. And private equity is a way to arbitrage interest rates to siphon wealth from the system by cutting pensions, benefits, employees, etc. It looks good in the short run but at it's core is a sham. It dumps what were private expenses on the government.
We need a system that allows for grow, but can exist without growth.
on the one hand, I agree that these credits are foolish.
on the other, I disagree with this line of thinking.
there are many activities that IMO should be situation dependent. Various stimuli programs being one subset of them. The problem is that we clearly tend to use the wrong stimuli at the wrong times.
now, some people believe that the govt should never stimulate the economy. I'm not sure I agree with that. But if you believe in govt stimulus at all, you must recognize that it should not be done all the time.
(fwiw: I know that your comment was really tongue in cheek, but it made me think, and post, anyway).
obviously C4C and Housing credit are terrible. it isn't going to stop me from cashing in and getting mine, but they're terrible.
From Alcoa's press release:
"Sequentially, revenues were helped by an increase in realized prices for primary aluminum to $1,972 per metric ton from $1,667 per metric ton in the second quarter, as well as stabilization in the end markets." black dog - beneficiary of china commodity buy now over?
...
"Capital expenditures in the quarter were $370 million, on-target to reach the 2009 goal of a nearly 50 percent reduction from 2008."
...
"Due to low inventories at distributors and rising shipments, regional premiums are improving and global aluminum consumption is expected to increase 11 percent in the second half of 2009."
Alcoa: News: News Releases: Alcoa Strengthens Cash Position and Returns to Profitability in Third Quarter
...
"Revenues for the first nine months of 2009 were $13.0 billion, compared to $21.2 billion in the first nine months of 2008. "
ac,
You have to define the buy and sell dates very specifically for that. Yields are how low today? Treasuries had some record rallies
"Welcome to the Fed's Nightmare"
Because you hate to see such nice people get punished like this.
BWAHAHAHAHAHAHA!!!!!!!!!!!!!
BREAKING
Ron Paul calls for Bernanke confirmation delay:WSJ
I love this guy....if he just had my personality
Angry Saver wrote:
Pyramiding stocks, on the other hand, is a great way to test your coronary health. At least, so I've heard.
You are missing the real benefits of the credit - politcians buying votes and political contributions
tj,
Thanks. It was just hypothetical. I am not going anywhere. I can't afford too.
I don't think deflation will be all that much of a problem. If the numbers begin to look bad then change the formula. No problem. I agree that throwing money out the window would be better. At least that might spread the stimulus around.
Black Star Ranch wrote:
You say that like it's a bad thing-
BSR-
It's like a room full of "stoners" sit around and make shit up.......... nope me cheech, chong and woody were thinking topless coffee bar...we resent your insinuation....
President Paul does have a nice ring to it, doesn't it?
Step One: Waterboarding legalized for Federal Reserve employees.
If we don't hear more soon, then that means the NAHB just made a last ditch attempt and they are alone now. Cut off
I almost posted a Tom Petty song this morning. I was in the mood for Two Gunslingers. I'd like to take control of my life...seems I am last in line these days with everyone else getting first dibs.
Terry wrote:
You ascribe a much longer memory to voters than I. I don't see the political timing for this kind of announcement, but I'm also not in Washington.
EDIT: and on that happy note, I gotta run.
.
Nemo wrote:
Think about it; even though it saddles home "buyers" with more debt, it effectively increases the values of all existing homes proportionally, making available a similar amount for HELOC, Home ATMs, etc.
It's true, but it's still a snark....
But if you believe in govt stimulus at all, you must recognize that it should not be done all the time.
Why must I recognize that? If you're defining government stimulus as something that should be done at specific times, that's fine. But that in no way addresses the issue of why these particular credits (housing, cars, employment) should be done now.
I.E. there's no reason I "must recognize" that these specific things are in the class of things that "should not be done all the time but should be done now" even if such a class of things is definable and potentially recognizable in practice.
I want to know why these specific credits belong in that category.
For example, why won't an employment tax simply encourage businesses to spend money on things that don't need to be done and create more overcapacity and structural deformation of the economy?
"You ascribe a much longer memory to voters than I."
As for voters I think the unemployment issues will be the main driver next fall, but the immediate payback for the politician is the PAC money from the home purchasing industry, as opposed to the home rental industry.
The homebuilders have a powerful lobby. Why not get the government to buy the house and just give it to these people. Why worry about a little tax credit?
If you want to stabilize home prices, you need to pour enough new money in such that the full amount of negative equity is offset. Let's call it $4 trillion. 3.5% down payments, you need $115bn. After that all you need to do it cut unemployment in half and keep mortgage rates low for the next 40 years. This little plan is pissing in the wind.
ac,
You have to define the buy and sell dates very specifically for that. Yields are how low today? Treasuries had some record rallies
I'm referring to the rally into the Spring of 2003 IIRC that turned into a rout when the ISM indexes started shooting straight up. I think the ISM service index got up to 65 in August or so.
Well it looks like Murphy definitely didn't leave my house yet. Routine A/C checkup, and I apparently have a clogged drain pan and standing water in the unit up in the attic. I love saving money for Murphy's visits. Time for him to go visit someone else.
ac
gotcha
still you did say bonds, and if they held the 10 or 30yr until recently, it would have beat many investments over that period
Like so many policies before it and those yet to come, here we have yet another attempt to prop up an unsustainable reality that requires the permanent and ever-increasing issue of debt, with the intent to protect the perceived value of asset holders.
Who holds the majority of assets? Oh yes, that's right: the nobility.
This program is so brain-dead I can't even stand to think about it.
CR is the best analyst and most forceful writer in the nation right now on this important topic. Others are ripping off his stuff.
I don't think CR cares much about rip offs.
But at least Congress should ask him to come and testify. It would be a powerful thing for the blogosphere.
I would watch that show. Wouldn't you?
I suppose this helps those who've decided they must sell to get out of homes. And lessens the haircut at taxpayer expense.
Evidently there's a political payoff expected. Look at the end date.
EvilHenryPaulson wrote:
Perhaps that's not such a bad idea; it the Govt. "becomes" the market for mortgages, perhaps they can set the mortgage rates while still having the flexibility to raise other rates to control inflation in the remainder of the economy. However, that almost certainly will turn into yet another arbitrage (a.k.a. scam) opportunity to be abused by TPTB. I still think we're
'ed
If you want to stabilize home prices,
Again, I completely agree.
That's not the goal of the congress-critters though. Being re-elected is.
"But at least Congress should ask him to come and testify. It would be a powerful thing for the blogosphere."
Have you ever watched the committee members ask the speakers questions? It is downright embassassing.
burnside wrote:
WTF, they're running it almost 3 weeks longer than needed. Talk about a waste!
Well, well, well...
Gonna be a new sheriff in town boys: Moral Hazard!
N all them libertarians are runnin' a-skeerd.....
CR is the best analyst and most forceful writer in the nation right now on this important topic. Others are ripping off his stuff.
I think he's doing great analysis here.
I'd like to see this kind of detailed analysis in support of/against other types of stimulus though as opposed to the argument that "Keynes would do it and he's super awesome."
Cinco-x
That still wouldn't be enough. The economy needs credit growth at a rate that can only be paid off with even greater credit. At best you would be extending more credit to homeowners just to pay the interest they can't afford because they're unemployed and with no savings
Huh? Has there ever been a real estate industry tax break or subsidy that was later rescinded or repealed???
Those I can think of have all been expanded or enriched over the years.
Soon the tax credit will be $15,000. And when that's pulled forward all the demand that amount can, and sales head vertically downward, they'll up it to $30,000. Next? $60,000?
This program is so brain-dead I'm near to running down the street screaming. (And I'm a liberal Democrat.)
"Evidently there's a political payoff expected"
Let' see:
Real Estate Agents - check
Loan Brokers - check
Appraisers - check
Insurance companies - check
Fannie/Freddie - check
.. . .
Many political donors to hit vs. renting!
The economy needs credit growth at a rate that can only be paid off with even greater credit.
And it needs real credit, not just paper credit - i.e. the economy needs the kind of resource sharing that only comes from mutual trust and cooperation, and it needs it in a way that's sustainable in the long-term.
That's not something you can print.
EvilHenryPaulson wrote:
And that's just another reason that we're, as I said,
'ed
Soon the tax credit will be $15,000. And when that's pulled forward all the demand that amount can, and sales head vertically downward, they'll up it to $30,000. Next? $60,000?
Hey, if $8,000 is good, $15,000 has to be better, right?
What could possibly go wrong?
We are doomed.
Members of both parties could care less about this country. Each side just wants the other to fail, country be damned. Vote$ and future job opportunities are the only thing that matter. They preach about us "saving the planet" for our children and grandchildren all the while they throw them down a river of debt. Like all politicians, do as I say, not as I do.
President Obama......... buy the Silverdome during the scheduled auction today for all the "Downers" in Michigan and turn it into a tax-free "Shantytown commune" - less the hurricane - see how THAT works out.
jm wrote:
Hmmm......so there is an upside to this proposal!
OT, but fodder for auto bailout II:
"Less than a week after reporting a sharp drop in September sales, GM said its U.S. sales chief is leaving as the automaker struggles to prop up its falling share of the market."
Make Real profits from Fantasy Stock Trading.
Gotta be a message in there someplace.
ac
gotcha
still you did say bonds, and if they held the 10 or 30yr until recently, it would have beat many investments over that period
Yep. I'm just making the comment that just because stocks AND t-bonds are rallying doesn't mean something mysterious is going on. Either of the markets could simply be wrong, and (in the short-term) it's not necessarily the stock market.
If the Fed keeps pumping liquidity into the markets at a ferocious pace I would go as far as saying that currently stocks are probably "right" and t-bonds are probably "wrong".
NOTaREALmerican wrote:
The Last Starfighter.
It's like Fantasy Football but rewards hairbrained speculation more than picking running backs under the age of 28.
Come on everybody.
Jezzz. With great "challenges" come great "opportunities". The smart amoral scum-bags are figuring out how to profit from this opportunity right now. This site might not have THE smartest or THE (most?) Amoral or THE scummiest, but we can try to live up to the best that Merica has to offer! We can complete with these guys! We've (almost) got what it takes! We need to give 110% in this effect. Come-on team. There's no I in team (unless you spell it in another language).
This is just somehow perfect. Can't tell you what it means in the scheme of things, but if you flash forward a few hundred years and read a history article about today... this would be one of those curious facts about the times around the border...
Micro Pig Craze
I'm just guessing here, but could we by any chance buy the publicly held builders for that price? How large could their market caps be?
ac wrote:
Isn't it also possible that they are both "right". If a lot of the money for stock pumping and T pumping is coming from banks, it could simply be asset allocation.
Banks borrow at 0%, and finding no worthy and willing borrowers, spread their free cash around stocks, bonds, and commodities. Liquidity seeking a home and being shotgunned across all financial markets. Possible?
OVERVIEW
Ford Motor Company is currently rated as having Very Aggressive Accounting & Governance Risk (AGR). This places them in the 8th percentile among all companies, indicating higher accounting and governance risk than 92% of companies.
Ford Motor Company also received a legacy AGR score of 34 out of 100.
AGR Summary
The cash flow between accounts payable and accounts receivable is like a time bomb. Increasing production might in fact kill the company if sales don't increase faster than production
The safety of the current system:
Ben S. Bernanke: 'Deflation - making sure "it" doesn't happen here.' Speech by Bernanke, Wash. DC. Nov. 21, 2002
'So is deflation a threat to the entire economic health of the United States? Not to leave you in suspense, I believe the chance of significant deflation in the United States in the foreseeable future is extremely small, for two principal reasons. The first is resilience and structural stability...the second bulwark against deflation in the United States...is the Federal Reserve System itself.'
http://www.bis.org/review/r021126d.pdf
ac,
How big of a lag time is there? It's 7 months on by that measure. To date I believe the Fed has not kept up with deleveraging. It has had some additional help from giving discretion when accounting for assets, and the withholding of shadow inventory from the real estate market. Neither of those aids provides ongoing support, and the $1.75tn of mortgage related purchases is almost over. Along with other subsidies. So we're more likely to have a panic next than a everything goes to 11 rally. The Fed will eventually catch up, of course, but the key as you pointed out is the sequence of events
This program is so brain-dead I'm near to running down the street screaming. (And I'm a liberal Democrat.)
BSR did mention above this had to be cooked up by some boys smoking the kind Kush buds Urban Dictionary: kush
Again me, Cheech, Chong, Woody, Oliver, Charlize, Paris, Justin, Snoop and Willie were didn't think of this...we were looking at opening up a 24 hour topless coffee shop that also served Pizza and ice cream..
35 Celebrities Who Smoke Pot - Pot smoking celebrities - Jezebel
CR (or anyone), if $40B divided by $8, 000 = 5 million, where does the 383,000 figure come from? Something doesn't add up.
You may argue (Hell, you ARE arguing) that extending the HBCredit is a bad idea, but consider it from the perspective of the government.
The banking system is fragile. Falling housing prices will create more underwater "ruthless defaulters." Continuing/increasing defaults could push the banking system over the edge, which would result in widespread financial chaos.. Goosing house prices takes some of the pressure off the debtors, and maybe they won't default (for a while). Maybe the banks can hang on until the economy turns.
Rob Dawg had it right upthread. The credit has probably boosted the total current value of the housing market by many $100B.
That's what the credit is intended to accomplish; supporting house prices. It has nothing to do with helping buyers!
Desperate times call for desperate measures.
Calc Risk ...
Can you give me a bit of a tutorial on the deflation issue and it's impact on the Fed (ala their worst nightmare). Thanks and sorry if that's a stupid question. Cheers!