Households cashed out $715 billion worth of home equity between 2001 and 2005. In the three years between 2003 and 2005, owners extracted $150 million more in equity from their homes than they did in the previous eight a level three times higher than any other three-year period since Freddie Mac started tracking such data in 1993.
Households have used cash equity from their homes to cover living expenses and pay down credit card debt, further eroding their homes cash value, which many families rely
on for economic security.
Between 1973 and 2004, homeowners equity actually fellfrom 68.3 percent to 55 percent. In other words, Americans own less of their homes today than they did in the
1970s and early 1980s.
In 2006, the financial obligations ratio the percentage of monthly income to the amount needed to manage monthly debt payments has surpassed 19 percent, a record
since data started being collected in 1980.
About $400 billion worth of adjustable-rate mortgages (ARMs), representing about 5 percent of all outstanding mortgage debt, are set to readjust this year for the first time.
Another $1 trillion in loans are set to readjust next year. Adjustable-rate mortgages made up 31 percent of mortgages in 2005. Interest-only loans, which were uncommon just two years ago, made up about 20 percent of loans.
In current conditions, a typical borrower with a $200,000 ARM could feasibly see their interest rate climb from 4.5 percent to 6.5 percent, resulting in a 25 percent increase in their monthly payment.
Rising foreclosures signal many homeowners are already buckling as interest rates rise and home values soften, trends that will continue as more mortgages adjust. According to
RealtyTrac, foreclosures in the third quarter of 2006 were up 17 percent from the previous quarter, a 43 percent yearly increase from the third quarter of 2005.
Greenspan's stock market bubble, Greenspan's tax breaks for the rich, Greenspan's housing bubble, and finally, and by far the most important, Greenspan's war.
Without Alan Greenspan, Bush wouldn't exist.
If Bush is the worst President in the history of the United States, and I daresay the percentage of people who agree with that proposition is growing by the day, then Alan Greenspan has done more to harm the United States than any other single individual.
If we get a "soft landing", then it's only Greenspan's war...
From 1990-2005, Japan went through 16 years of weak economic growth, declining property values, mild recessions and mild deflation. Interesting (to me at least) that ex-MEW, the post-tech bubble US would have played out almost exactly same way to date. The good news is stagnation rather than recession better describes Japan's lost decade. The bad news is has the Fed-engineered growth through leverage boom doomed us to something worse than would have been the case for the rest of this adjustment period?
I suppose that 50% of MEW == consumption estimate is very deliberate. It could be 20%. Or it could be 80%. How can we know?
Moreover, this percentage is probably wildly fluctuating. For example, I would expect that this year most of MEW went into refinancing debts made in previous years.
Greenspan and Kennedy are talking to us through CR's graphs here. If Greenspan is correct in saying that 50% of MEW immediately moves to consumption, it's a sad commentary. They're saying the economy tanks without house flippers and kitchen ATMs. My question is: what happened to the growth engine?
mp, I suppose we could look at this the other way - the emergency rates helped the economy and maybe other areas of the economy will now pickup as both Residential Investment, and MEW related consumption, subside.
Also a big chunk of MEW flowed to imports - and as MEW falls, I expect the trade deficit to decline. So the impact is probably less than the chart indicates.
theroxylandr, I don't think anyone really knows what percentage of MEW flows to consumption - especially consumption of domestic goods and services. And your suggestion that the percentage consumed changes over time is probably correct.
As MEW declines in '07, will consumption also decline? Or, as I think dryfly has suggested, will consumers start using credit card or other debt more?
As MEW declines in '07, will consumption also decline? Or, as I think dryfly has suggested, will consumers start using credit card or other debt more?
I think that possibility is a likelihood IF the Asian CBs & OPEC continue to flood liquidity into our market via MBS purchases, 10yrs, equities & I dare say hedges(?).
When that is over (if ever) then it is REALLY over.
Until then, if the credit is offered and it's cheap... will we say 'no thank you, I have quite enough marble counter space and crap gadgets to put on it'... I doubt it.
My point has been - keep one eye on this story and the other on the CA deficits... IMHO... that is going to lead us to the closing act, whether happy (soft landing) or not...
I fear the latter but I'm always open to suggestion form bulls who can provide a convincing narrative as to how I'm wrong (other than it hasn't happened yet so won't - their mantra).
OT, but the headline in the news will be Dow hit new high, however I don't hear any talk about trade volume. I checked each of the 30 components individualy, and with the exception of 1 stock, the rest traded SIGNIFICANTLY below average volume, most about half and others as low as a third. Any thoughts on market manipulation? (obviously it's a vacation week which may account for low volume) but when DOW hits a new high on such low volume, it makes me suspect market manipulation. Or at least it makes me suspect the "rally" conotation associated with the market.
From Setser's Blog on why I think the CA deficit & reserve flows story is as big as RE & MEW...
Take Korea. The FT has reported that dealers believe Koreas government spent $4b in the first three weeks of December fighting pressure for the won to appreciate, after reportedly spending $2b or so in November. The Korean government is talking tough as well, saying that it is willing to buy dollars in infinite quantities to resist further won appreciation.
The FT again:
To stabilise the economy, it is essential to maintain the currency at a certain level and the government will make its best efforts to achieve that, Kim Sung-jin, a deputy finance minister, told KBS radio. If the government consults with the central bank and intervenes in the currency market, our resources are unlimited, Mr Kim said.
Now I ask you how is credit going to 'dry up' in this environment?
Trading was extremely light on the New York Stock Exchange, with only about 974.7 million shares changing hands -- far below last year's daily average of 1.61 billion. On Nasdaq, about 1.24 billion shares traded, below last year's daily average of 1.80 billion.
I think it's interesting that 2006 GDP ex-MEW has faired better (so far) with less MEW than it did in 2005 with more MEW.
And it represents the gush of MEW is over to me (~those that were banking on house appreciation have seen that source dry, leaving more established owners (with lower initial appraisals) to continue the practice maybe, but so far, they are high and dry) and hence a rising GDP in 06 albeit from lower levels than those in 05.
I'm not so sure about the imports falling and therefore making a positive impact on GDP. Does this entail a consumer buying the domestic product instead? I have my doubts. Just a reduction in consumption will hurt GDP, it seems to me and that is the real impact (payback) from MEW we will soon start feeling, no?
calmo and winjr, there are several assumptions that go into this calculation, so I wouldn't make much of the difference between '05 and '06. Note that I estimated Q4 '06 MEW at $100 Billion, and GDP growth for '06 at 3.3%. Maybe that accounts for the difference. Or maybe the amount of MEW flowing to domestic consumption has changed slightly.
Why on earth would anyone in their right mind attempt to trade against the CBs?
4shzl - I agree. But prior to 1997 big hedge funds could pull it off (like they did with Thailand in '97)... 'future' them down & finish them off.
And those CBs all learned that lesson and now have MORE than enough reserves to scare away all market challenges. Only another CB can threaten them & even then it would be MAD.
Even the largest hedge funds would have to be suicidal to step out in front of them now - even a Soros would know better.
winjr: I think it's interesting that 2006 GDP ex-MEW has faired better (so far) with less MEW than it did in 2005 with more MEW.
Eye-balling 2006 at around 2% ex-MEW, versus around 3% ex-MEW for 2005, I don't think you can say ex-MEW has faired better this year than last. Did I miss something?
Or you could examine the daily forex trade and wonder how long any particular few individuals, even the BoJ could hold out...and therefore the grand display, or bluff, as it turned out ending in Mar03, yes? ~$2T/day IIRC then.
So the usefulness of that particular exercise was...the CBs are small compared to the private trader segment and need to scare them to maintain order and apparently, it works for awhile.
Not that I understand fx, but this diversifying thingie with the PBoC and friends, does seem to be an item and that does seem to suggest someone else is going to have to pick up those tbills. Or be encouraged to do so, somehow without incurring higher rates which would not only increase debt servicing charges but put a huge damper on a housing market recovery, yes?
So what is it about the US economy that makes it still the best place to invest again? Are the insiders hoarding their cash or investing in other countries? I don't believe they're buying tbills, you know?
"Why on earth would anyone in their right mind attempt to trade against the CBs?"
Ask Soros. He took on the Bank of England once and made a billion dollars relatively quickly. Unfortunately I think he gave a lot of it back when he bet against the Bank of Japan.
The short answer is that central bank intervention may or may not be profitable over the long run.
Regarding your comment: "The good news is stagnation rather than recession better describes Japan's lost decade." We shouldn't forget that when the bubble popped in Japan the Japanese goverment stepped in with deficit spending exceeding 10% of GDP to replace lost liquidity.
At the same time that the Nasdaq was collapsing here, the government was moving from a (nominal) surplus to a deficit of 3%-4% of GDP, which together with negative real interest rates pumped up liquidity again and inflated the real estate bubble. But, is the US government really ready to step-up on the Japanese scale to salvage the economy after the RE bubble pops? Can you say Trillion+ dollar deficit?
Incidentally, the psychological effects of a crash can be much worse, IMHO, than the purely monetary. When people are scared and stop spending, the money supply doesn't really matter, since it goes under the mattress rather than being spent. The velocity of money drops dramatically, which decreases the effect of monetary pumping. That's why it took 10% deficits to create 1% growth in Japan.
Not clear how Dryfly's liquidity is going to bail out the overstressed borrowers listed in IM's post. These folks simply can't take on any more debt. Unless maybe the interest rates go way down and they refinance yet again? Hard to imagine.
i applaud your effort in trying to understand MEW impact CR, but it's useless in that there's no reliable way to gauge it let alone apply to GDP. we know it had some positive impact to GDP, let's just leave it at that.
With all the bearish sentiment on this board, has anyone noticed the DOW index is up almost 17% YTD? Quite staggering after hearing all year long the doom and gloom from the bears camp.
"With all the bearish sentiment on this board, has anyone noticed the DOW index is up almost 17% YTD? Quite staggering after hearing all year long the doom and gloom from the bears camp."
Yes, and the stock market can go up 17% a year forever, just likes houses.
Not clear how Dryfly's liquidity is going to bail out the overstressed borrowers listed in IM's post.
I'm not sure it does help individuals all that much who are in way over their head - those folks are screwed regardless.
However if all this offshore CB liquidity keeps pouring in, I don't see how the economy in aggregate goes into recession - too much gas poured on the fire for that - that was my point.
The difference though, is that without this continuous liquidity injection - our debt 'minor issues' become 'serious problems'. Then there will be lotsa folks in trouble & the whole economy goes in recession.
When? Hell who knows - reading the statement by the Korean CB representative tells me it isn't likely to be soon.
In fact this currency food fight might be escalating instead... with all the Asian Tigers & wannabes trying to drive their individual currency lower vis-a-vis the USD than all their neighbors so as to protect their export advantage... only one way to do that... buy USD denominated debt & equities by the container load.
This thing could go on for a very long time or end abruptly - it is a completely chaotic system.
Yep, keep in mind that before this, governments, (using the European model that protected elites), defended their currencies. A nation that put out a lot of currency, lost value as foreign entities had all of that currency they wanted.
Now we have something that keeps the masses of a nation employed, by using the resources of sovereign nations to absorb the dollar. In fact, CBs could force their citizens or banks to purchase CB bonds with their dollars and then incinerate the dollars digitally to keep the game going. The actual process is a bit more complex with dollars exchanged for local currency and then excess local currency sopped up by some method.
In theory, CBs could forgive mortgage debt and the whole thing could start up again. Strange? Lets say that Bankruptcy laws get vastly liberalized.
The problem today is that sovereign nations have decided to suspend the law of the market place. HOW that ends, we do not know. This is unique.
Imagine that if instead of war, peace had been made with Hitler and co. Then economic warfare been waged with the resources put into the war. With the communist and Nazi mindsets, they would have been bankrupted quickly and been eliminated.
Consider that the US, former master of the world is being bankrupted by our adversaries and eliminated as a superpower. It does not matter that new superpower does not rise, but that we are eliminated as a threat and the European model of aggression ended forever.
I do still expect that "GDP should grow at a 2% pace during the first half of 2007, with a flat or mild decline observed in the second half." as I posted in October.
I also continue to expect a stock market decline before then. But I have stayed in because I do not expect doomsday, and I recognize that I have generally been a little premature in calling the stock market top in prior cycles. So I was in cash and buying real estate during the last of the tech bubble, and in bonds and buying more real estate during 2000 through 2002 - with less than 10% in stocks. But I did jump into stocks in March of 2003 which turned out to be a good move.
Noland describes how we have all (well, maybe not quite all) embraced the new paradigm: "massive and intractable Trade Deficits provide the fountainhead of global liquidity overabundance". And this is good ...
Patrick - why are you driven to a frenzy by the fact that a few folks are pessimistic about the economy. Why not stick to the bullish sites where you all can applaud yourselves for how well the economy is doing. Of course we can go on forever selling our mortgages and federal debt to the Chinese - how silly of those who think this might end some day
I'm suspicious that perhaps you're trying to convince yourself that we aren't in fact in some sort of bubble. And why not make yourself useful: describe how the global imbalances will eventually self-correct in some sort of soft-landing. ALL CAPS commenting means you're probably overdue for a blood pressure test - see your internist!
FredW, I agree that comic relief is helpful. This can be a depressing topic, but spiteful comments don't help. I don't post much, but enjoy reading everyone's comments because they make me think. I don't enjoy having to shift mental gears halfway through a very interesting thread because someone decides to make an inane comment or launch a personal attack.
Anyway, I particularly enjoy reading Calmo, CR, Dryfly, TANTA, and Vader. You'll notice that I have (diplomatically ) listed their handles in alphabetical order.
The questions are damned interesting, too. Keep it up! I'm learning and hope you are too!
mp - agreed, I've also learned a lot and maybe soon will be ready to move on to second semester economics.
The signs of future peril are everywhere and the arguments of economic health seem full of holes. What's very unclear is any picture of how this will all unwind and how to prepare for it. Is there any way well return to normalcy without some major discontinuity? Folks on this site are probably not carrying a load of debt or flipping houses but is anyone doing anything particularly proactive. At thanksgiving, a friend of a friend told us hed moved to Montreal and was giving up his US citizenship because he's convinced of a US collapse. He's also heavily invested in gold and uranium. Thats being proactive, but Im not quite ready to go that far.
FredW, I'd say your friend's friend is acting in a self-defeating, if not downright self-destructive, manner. What does giving up his citizenship have to do with protecting his financial assets? Now, if he had set up in Belize or the Caymans that might be another story, but Canada?
Anyway, one needs to remember that we're talking about possible alternative futures here, "scenarios" if you will, given certain facts. Any, all, or none of the things discussed here could come to pass, but good planning is about choosing from a list of available alternative courses of action in light of present and possible countervailing forces. So, start building a playbook if you don't already have one; they're not just for football. That's pro-active.
We're calculating the risk, no pun on CR intended. One can't completely eliminate the various types of risk, but they can often be reduced to acceptable levels, and that's pro-active. Some of us are also thinking about ways to take advantage of those countervailing forces, and that's also pro-active.
light trading's fault? ask those who are still smarting over dollar's rout during thanksgiving in light trading..
The puppy never came back.At least so far.
A couple of years ago, I looked into moving to Canada, but found a long line and that I was too old.
The US is likely stable enough to survive most any crisis. We are more safe that when the US and the USSR held daggers at each other's hearts. It appears that the terror of the war on terror is receeding and the chances of a dictatorship have receeded. So things should be ok. The nimble and smart investors will prosper.
Back in the day, I had right wing friends who were paniced over the black helocopters of the UN taking over or the Clintons taking over, or the Trilateralist taking over. I had friends that buried cash and guns in remote locations and stocked can goods(1980s and 2000-different friends) in case the crazed blacks or browns or crazed someone came over the hill.
I remember these folks and apply that memory to whatever I read here.
Remember that like physics, for ever action there is a counter action in human affairs. As something bad approaches, there will be actions to counteract that approach. Yes there is far too much liquidity in the world, but there seems to be accommodation to this. Yes there are bubbles, but they are out of reach of the average person or at worst avoidable.
Maybe we are de-industrializing and losing our technical edge to China, but China at one time was the tech leader. It had blast furnaces, gun powder and stable bureaucracy centuries before Europe. It had a navy with a tonnage greater than all the navies in the world combined. It lost and is now regaining them. It is likely as the politics of Karl Rove and the GOP win at all costs dividers and the religious zealot idiots decline-they are declining-that our elites will change direction and we will re-invent ourselves.
Maybe there will be one monster of a crash and we will all be impoverished.
But any elite that lets its citizens starve for very long will be elites no more. Given that our elites at least are that smart. We will survive.
This all reminds me of two books I generally recommend:
Kevin Phillips, Wealth and Democracy
Jared Diamond, Collapse
Not like either of them is going to cheer anybody up, especially, but I confess to some impatience with the idea that the U.S. isn't on its way to the used-to-be-world-power category, like the Spanish, the Dutch, and the British. I personally can live without being a superpower, particularly if it means we stop polluting the place to the point it's unlivable anyway. Why people think it's going to happen in some sort of dramatic apocalypse is beyond me--I suspect this is just too much television. As far as I can tell, we're just going to keep getting more and more irrelevant to the rest of the world. Buddha knows Bush has accelerated that process plenty.
Stockpiling shotguns and creamed corn in case the Clintons took over? Took over what? I suppose that puts moving to Canada and investing in metals into some sort of perspective. I'm finding it hard to describe that perspective, but that doesn't mean it isn't one.
Don't mind me--I have discovered in the last two days that the warnings about mixing Cipro and coffee are not, actually, idle bullshit for the purpose of irritating the patients. Teach me to roll my eyes at Nurse Ratchet. In any case, I am seriously undercaffeinated and it shows . . .
dc1000, note that the median sale price is down significantly again. Maybe that, and the low interest rates of the past two months are reflected in the numbers.
Aren't you concerned that inventories are still at unsustainable levles? And that mortgage activity puts the lie to the spinning of those housing numbers?
All the best to you and your meds, Tanta. Good call about the dramatization of our lives: ordinary life is just not selling.
Lookit how economists compensate from their dreary lives just to stave off low ratings.
Ok, you better read this or the sky will bust wide open right over your little head: those eggs you bought yesterday? Well, they're suspect...like those consumer confidence numbers...maybe more.
At thanksgiving, a friend of a friend told us hed moved to Montreal and was giving up his US citizenship because he's convinced of a US collapse
Tell your friend he doesn't have to give up his US citizenship to gain Canadian citizenship - they could care less if you carry both just so long as you are CANADIAN when in Canada. When I was youner - I thought about the same thing.
If we are going to go deep into the doomsday scenarios...
Canada is a great place to live & is insulated from much of the US day-to-day ills so looks like a good bet... However if the US get's really sick, living there will offer you as much security as living in Austria in 1936.
If he really wants to 'escape' US influence and remain in a 'Western Culture'... then New Zealand would be better. Or Australia - but there is the risk Australia eventually gets over run by a Greater China some day - his kids problem, not his.
But this talk is all pretty unlikely & extreme... but given time even unlikely & extreme outcomes can occur. Roll the dice enough & all outcomes eventully turn up. So who knows.
someone tell me how existing home sales and consumer confidence numbers being up this month dont mean what they mean.....
Existing home sales up or down a little right now mean nothing... up a little off a big Y-O-Y decline in volume at the slowest period of the year? Inventory basically unchanged? No news there, good or bad.
Consumer confidence isn't a breaker either - data taken during the early run up to 'The Holidaze'... remember all that hype & anticipation? Talk of 19% sales increases on Black Friday? I mean the survey was taken either during or after that period... No shock it would be up.
I expect final holiday sales to be similar... up better than expected but nothing like the Thanksgiving weekend hype...
Same thing in reverse in January...just after the Holidaze when its nothing but more winter & the bills start coming due. Frequently a dip in sentiment even if adjusted for... but means little.
The real question is
(1) can consumers really afford the consumption they have incurred... plus continue to feed the beast more?
(2) what happens to home sales & inventory in say late February just prior to the peak selling season?
(3) the 'good news' is supposedly beating up the bond market (that is the initial reports I read)... raising the specter of increased lending costs & no rate spring cut by the Fed... can (1) & (2) above survive higher interest rates? Or will continued liquidity keep debt cheap?
You have comments or opinion on those - then maybe we can move beyond headlines & bullet points.
I've read pieces of it - they are FOS. A recipe to impoverish most of us & enrich a small minority. You can't keep a nation of 300 million 'employed' at first world standards of living based on 'platforms'...
If we go that route I quit 'shorting the revolution' and 'go long'.
BTW - I basically work in a 'platform' environment now as a contract new bus development & tech sales guy... it isn't just theory to me.
While a few folks can make a buck (I do) - big bucks at times... most folks here will get nothing. There really is no mechanism to 'spread the wealth'... unless the few winners hire all the losers as day labor yard boys.
I'm working on projects now where a handful of engineers & developers get paid well but all subsequent mfg & support (including white collar... purchasing, accounting, logistics, IT, quality - all of it) will be offshore. Only initial development & high level concept engineering here then move most all the rest.
Oh some sales & marketing will remain - but once the product is established - that requirement falls off to near nothing, hence the need for 'contractors' on the front end only.
So what will the THOUSANDS of white, pink & blue collar workers who used to work at this plant & make decent middle class incomes do? The platformers don't have an answer to that.
So what will the THOUSANDS of white, pink & blue collar workers who used to work at this plant & make decent middle class incomes do? The platformers don't have an answer to that.
If I remember my history and socialogy well enough, its not the forever poor that make revolutions, is the new poor. Those who succeed for a while and some force outside their control make them poor or poor again.
If I remember my history and socialogy well enough, its not the forever poor that make revolutions, is the new poor.
If 'Planet Platform' becomes a full fledged reality then there will be plenty of 'new poor' here in the west & a growing population of less poor in Asia & such.
Tanta
good to see you back with your usual pithy comments. I have neighbors who stockpile guns, food and anti-radiation meds, have calling trees to tell each other when to make specific preparation for atomic attacks (several times a year) and have tent cities planned for when "it goes down". They also keep a lookout for the black helicopters of the new world order. Rational economic planing has nothing to do with their actions.
I will admit to having some food storage on hand and it has come in handy in the past when between jobs, etc.
I still think the general thesis of our host, dryfly and others is the rapid increase in household debt of the last few years cannot continue, thus leading to a contracting economy for a while. I don't think they are predicting apocalypse, just a general contraction, probably to be followed by an expansion just as in the past decades. As in any contraction, there are those who will suffer more than others, in this case probably the ones with high levels of household dept.
I suspect dc1000 and others who are doing well in this market cycle are doing so because they have a well-thought-out business plan and are following sound business principles. The ones not doing so well are those who thought life would forever get better and the housing ATM would always be there for a quick fix of cash.
Yup pieces - posted here and there. I certainly wouldn't pay money for that thing... no more than I'd pay money for 'Rich Dad, Poor Dad'.
I first ran across it at John Mauldin's site... a real 'Oh Brother' moment let me tell you. I've seen it a few other spot's since then... most recently over at Russ Winter's where he ripped it up pretty good.
It might be the future but I am NOT encouraged. If it is our future then most Americans accustomed to a middle class lifestyle better get accustomed to something else... something a lot less middle class.
Like I said - I get it, I work under those conditions now. A handful of hot developers & designers coupled to a whole production, logistics, white collar back office support & supply chain offshore can do what a major domestic company can do and for a whole lot less.
So what do your neighbors do? Live like the neighbors do next to your production workers in Bangalore or Wuxi?
It doesn't bode well for most folks here... but great for Bangalore & Wuxi I might add.
Tanta - assuming you're finished with Phillips & Diamond you might find Doug North's "Structure & Change" very useful as a complement as well as Mancur Olsen's "Power & Prosperity". They're not technical nor mathematical but two of the major Nobel caliber economists digging deeper into how societies and economies function.
2.7% is a big number
From
http://www.demos.org/pubs/house_cards.pdf
Households cashed out $715 billion worth of home equity between 2001 and 2005. In the three years between 2003 and 2005, owners extracted $150 million more in equity from their homes than they did in the previous eight a level three times higher than any other three-year period since Freddie Mac started tracking such data in 1993.
Households have used cash equity from their homes to cover living expenses and pay down credit card debt, further eroding their homes cash value, which many families rely
on for economic security.
Between 1973 and 2004, homeowners equity actually fellfrom 68.3 percent to 55 percent. In other words, Americans own less of their homes today than they did in the
1970s and early 1980s.
In 2006, the financial obligations ratio the percentage of monthly income to the amount needed to manage monthly debt payments has surpassed 19 percent, a record
since data started being collected in 1980.
About $400 billion worth of adjustable-rate mortgages (ARMs), representing about 5 percent of all outstanding mortgage debt, are set to readjust this year for the first time.
Another $1 trillion in loans are set to readjust next year. Adjustable-rate mortgages made up 31 percent of mortgages in 2005. Interest-only loans, which were uncommon just two years ago, made up about 20 percent of loans.
In current conditions, a typical borrower with a $200,000 ARM could feasibly see their interest rate climb from 4.5 percent to 6.5 percent, resulting in a 25 percent increase in their monthly payment.
Rising foreclosures signal many homeowners are already buckling as interest rates rise and home values soften, trends that will continue as more mortgages adjust. According to
RealtyTrac, foreclosures in the third quarter of 2006 were up 17 percent from the previous quarter, a 43 percent yearly increase from the third quarter of 2005.
a significant portion of MEW related consumption probably flows to imports, and any MEW related consumption of imports does not impact GDP
Though isn't it reasonable to assume then that some of that flows back in via exports and foreign investments?
Greenspan's stock market bubble, Greenspan's tax breaks for the rich, Greenspan's housing bubble, and finally, and by far the most important, Greenspan's war.
Without Alan Greenspan, Bush wouldn't exist.
If Bush is the worst President in the history of the United States, and I daresay the percentage of people who agree with that proposition is growing by the day, then Alan Greenspan has done more to harm the United States than any other single individual.
If we get a "soft landing", then it's only Greenspan's war...
Love that chart! Makes me wonder where we are headed (looks like towards Sluggishville).
It's all about lifestyle baby!
From 1990-2005, Japan went through 16 years of weak economic growth, declining property values, mild recessions and mild deflation. Interesting (to me at least) that ex-MEW, the post-tech bubble US would have played out almost exactly same way to date. The good news is stagnation rather than recession better describes Japan's lost decade. The bad news is has the Fed-engineered growth through leverage boom doomed us to something worse than would have been the case for the rest of this adjustment period?
I suppose that 50% of MEW == consumption estimate is very deliberate. It could be 20%. Or it could be 80%. How can we know?
Moreover, this percentage is probably wildly fluctuating. For example, I would expect that this year most of MEW went into refinancing debts made in previous years.
Good news that in Japan, all those years the unemployment rate was reasonable. Stagnation is not that bad as one can fear.
If we can get through the coming recession with unemployment under 10% then most of us will be ok.
That graph makes me sick to my stomach.
Greenspan and Kennedy are talking to us through CR's graphs here. If Greenspan is correct in saying that 50% of MEW immediately moves to consumption, it's a sad commentary. They're saying the economy tanks without house flippers and kitchen ATMs. My question is: what happened to the growth engine?
Are you thinking what I'm thinking?
I think it's interesting that 2006 GDP ex-MEW has faired better (so far) with less MEW than it did in 2005 with more MEW.
Any ideas?
mp, I suppose we could look at this the other way - the emergency rates helped the economy and maybe other areas of the economy will now pickup as both Residential Investment, and MEW related consumption, subside.
Also a big chunk of MEW flowed to imports - and as MEW falls, I expect the trade deficit to decline. So the impact is probably less than the chart indicates.
theroxylandr, I don't think anyone really knows what percentage of MEW flows to consumption - especially consumption of domestic goods and services. And your suggestion that the percentage consumed changes over time is probably correct.
As MEW declines in '07, will consumption also decline? Or, as I think dryfly has suggested, will consumers start using credit card or other debt more?
Interesting times for sure!
As MEW declines in '07, will consumption also decline? Or, as I think dryfly has suggested, will consumers start using credit card or other debt more?
I think that possibility is a likelihood IF the Asian CBs & OPEC continue to flood liquidity into our market via MBS purchases, 10yrs, equities & I dare say hedges(?).
When that is over (if ever) then it is REALLY over.
Until then, if the credit is offered and it's cheap... will we say 'no thank you, I have quite enough marble counter space and crap gadgets to put on it'... I doubt it.
My point has been - keep one eye on this story and the other on the CA deficits... IMHO... that is going to lead us to the closing act, whether happy (soft landing) or not...
I fear the latter but I'm always open to suggestion form bulls who can provide a convincing narrative as to how I'm wrong (other than it hasn't happened yet so won't - their mantra).
OT, but the headline in the news will be Dow hit new high, however I don't hear any talk about trade volume. I checked each of the 30 components individualy, and with the exception of 1 stock, the rest traded SIGNIFICANTLY below average volume, most about half and others as low as a third. Any thoughts on market manipulation? (obviously it's a vacation week which may account for low volume) but when DOW hits a new high on such low volume, it makes me suspect market manipulation. Or at least it makes me suspect the "rally" conotation associated with the market.
Any thoughts on market manipulation?
Have you seen the links on Cramer's Wall St Confidential yet? Make sure to see the 12/22/2006 feed.
Manipulation? Nah....
From Setser's Blog on why I think the CA deficit & reserve flows story is as big as RE & MEW...
Take Korea. The FT has reported that dealers believe Koreas government spent $4b in the first three weeks of December fighting pressure for the won to appreciate, after reportedly spending $2b or so in November. The Korean government is talking tough as well, saying that it is willing to buy dollars in infinite quantities to resist further won appreciation.
The FT again:
To stabilise the economy, it is essential to maintain the currency at a certain level and the government will make its best efforts to achieve that, Kim Sung-jin, a deputy finance minister, told KBS radio. If the government consults with the central bank and intervenes in the currency market, our resources are unlimited, Mr Kim said.
Now I ask you how is credit going to 'dry up' in this environment?
Trading was extremely light on the New York Stock Exchange, with only about 974.7 million shares changing hands -- far below last year's daily average of 1.61 billion. On Nasdaq, about 1.24 billion shares traded, below last year's daily average of 1.80 billion.
winjr asks for ideas re:
I think it's interesting that 2006 GDP ex-MEW has faired better (so far) with less MEW than it did in 2005 with more MEW.
And it represents the gush of MEW is over to me (~those that were banking on house appreciation have seen that source dry, leaving more established owners (with lower initial appraisals) to continue the practice maybe, but so far, they are high and dry) and hence a rising GDP in 06 albeit from lower levels than those in 05.
I'm not so sure about the imports falling and therefore making a positive impact on GDP. Does this entail a consumer buying the domestic product instead? I have my doubts. Just a reduction in consumption will hurt GDP, it seems to me and that is the real impact (payback) from MEW we will soon start feeling, no?
calmo and winjr, there are several assumptions that go into this calculation, so I wouldn't make much of the difference between '05 and '06. Note that I estimated Q4 '06 MEW at $100 Billion, and GDP growth for '06 at 3.3%. Maybe that accounts for the difference. Or maybe the amount of MEW flowing to domestic consumption has changed slightly.
Best to all.
If the government consults with the central bank and intervenes in the currency market, our resources are unlimited.
What a marvelous, straightforward, and unambiguously inarguable truth. Why on earth would anyone in their right mind attempt to trade against the CBs?
Why on earth would anyone in their right mind attempt to trade against the CBs?
4shzl - I agree. But prior to 1997 big hedge funds could pull it off (like they did with Thailand in '97)... 'future' them down & finish them off.
And those CBs all learned that lesson and now have MORE than enough reserves to scare away all market challenges. Only another CB can threaten them & even then it would be MAD.
Even the largest hedge funds would have to be suicidal to step out in front of them now - even a Soros would know better.
winjr: I think it's interesting that 2006 GDP ex-MEW has faired better (so far) with less MEW than it did in 2005 with more MEW.
Eye-balling 2006 at around 2% ex-MEW, versus around 3% ex-MEW for 2005, I don't think you can say ex-MEW has faired better this year than last. Did I miss something?
To play the devil's advocate and argue:
Or you could examine the daily forex trade and wonder how long any particular few individuals, even the BoJ could hold out...and therefore the grand display, or bluff, as it turned out ending in Mar03, yes? ~$2T/day IIRC then.
So the usefulness of that particular exercise was...the CBs are small compared to the private trader segment and need to scare them to maintain order and apparently, it works for awhile.
Not that I understand fx, but this diversifying thingie with the PBoC and friends, does seem to be an item and that does seem to suggest someone else is going to have to pick up those tbills. Or be encouraged to do so, somehow without incurring higher rates which would not only increase debt servicing charges but put a huge damper on a housing market recovery, yes?
So what is it about the US economy that makes it still the best place to invest again? Are the insiders hoarding their cash or investing in other countries? I don't believe they're buying tbills, you know?
"Why on earth would anyone in their right mind attempt to trade against the CBs?"
Ask Soros. He took on the Bank of England once and made a billion dollars relatively quickly. Unfortunately I think he gave a lot of it back when he bet against the Bank of Japan.
The short answer is that central bank intervention may or may not be profitable over the long run.
Turbo,
Regarding your comment: "The good news is stagnation rather than recession better describes Japan's lost decade." We shouldn't forget that when the bubble popped in Japan the Japanese goverment stepped in with deficit spending exceeding 10% of GDP to replace lost liquidity.
At the same time that the Nasdaq was collapsing here, the government was moving from a (nominal) surplus to a deficit of 3%-4% of GDP, which together with negative real interest rates pumped up liquidity again and inflated the real estate bubble. But, is the US government really ready to step-up on the Japanese scale to salvage the economy after the RE bubble pops? Can you say Trillion+ dollar deficit?
Incidentally, the psychological effects of a crash can be much worse, IMHO, than the purely monetary. When people are scared and stop spending, the money supply doesn't really matter, since it goes under the mattress rather than being spent. The velocity of money drops dramatically, which decreases the effect of monetary pumping. That's why it took 10% deficits to create 1% growth in Japan.
Not clear how Dryfly's liquidity is going to bail out the overstressed borrowers listed in IM's post. These folks simply can't take on any more debt. Unless maybe the interest rates go way down and they refinance yet again? Hard to imagine.
i applaud your effort in trying to understand MEW impact CR, but it's useless in that there's no reliable way to gauge it let alone apply to GDP. we know it had some positive impact to GDP, let's just leave it at that.
With all the bearish sentiment on this board, has anyone noticed the DOW index is up almost 17% YTD? Quite staggering after hearing all year long the doom and gloom from the bears camp.
It certainly was a good year in the stock market. Better than average for sure. Glad I was in deep.
Kind of fun to read the doomsday predictions while watching the portfilio appreciate.
Not sure what to think anymore. But I am still in - not as much as before - but still in.
"With all the bearish sentiment on this board, has anyone noticed the DOW index is up almost 17% YTD? Quite staggering after hearing all year long the doom and gloom from the bears camp."
Yes, and the stock market can go up 17% a year forever, just likes houses.
Not clear how Dryfly's liquidity is going to bail out the overstressed borrowers listed in IM's post.
I'm not sure it does help individuals all that much who are in way over their head - those folks are screwed regardless.
However if all this offshore CB liquidity keeps pouring in, I don't see how the economy in aggregate goes into recession - too much gas poured on the fire for that - that was my point.
The difference though, is that without this continuous liquidity injection - our debt 'minor issues' become 'serious problems'. Then there will be lotsa folks in trouble & the whole economy goes in recession.
When? Hell who knows - reading the statement by the Korean CB representative tells me it isn't likely to be soon.
In fact this currency food fight might be escalating instead... with all the Asian Tigers & wannabes trying to drive their individual currency lower vis-a-vis the USD than all their neighbors so as to protect their export advantage... only one way to do that... buy USD denominated debt & equities by the container load.
This thing could go on for a very long time or end abruptly - it is a completely chaotic system.
Yep, keep in mind that before this, governments, (using the European model that protected elites), defended their currencies. A nation that put out a lot of currency, lost value as foreign entities had all of that currency they wanted.
Now we have something that keeps the masses of a nation employed, by using the resources of sovereign nations to absorb the dollar. In fact, CBs could force their citizens or banks to purchase CB bonds with their dollars and then incinerate the dollars digitally to keep the game going. The actual process is a bit more complex with dollars exchanged for local currency and then excess local currency sopped up by some method.
In theory, CBs could forgive mortgage debt and the whole thing could start up again. Strange? Lets say that Bankruptcy laws get vastly liberalized.
The problem today is that sovereign nations have decided to suspend the law of the market place. HOW that ends, we do not know. This is unique.
Imagine that if instead of war, peace had been made with Hitler and co. Then economic warfare been waged with the resources put into the war. With the communist and Nazi mindsets, they would have been bankrupted quickly and been eliminated.
Consider that the US, former master of the world is being bankrupted by our adversaries and eliminated as a superpower. It does not matter that new superpower does not rise, but that we are eliminated as a threat and the European model of aggression ended forever.
Patrick, I have not changed my basic outlook.
I do still expect that "GDP should grow at a 2% pace during the first half of 2007, with a flat or mild decline observed in the second half." as I posted in October.
I also continue to expect a stock market decline before then. But I have stayed in because I do not expect doomsday, and I recognize that I have generally been a little premature in calling the stock market top in prior cycles. So I was in cash and buying real estate during the last of the tech bubble, and in bonds and buying more real estate during 2000 through 2002 - with less than 10% in stocks. But I did jump into stocks in March of 2003 which turned out to be a good move.
Noland describes how we have all (well, maybe not quite all) embraced the new paradigm: "massive and intractable Trade Deficits provide the fountainhead of global liquidity overabundance". And this is good ...
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100 million Americans are FEASTING on porridge which is JUST RIGHT...
They might be full but the visa bill is still on the table, nice if you would pick it up for us patrick?
100 million Americans are FEASTING on porridge which is JUST RIGHT...
They might be full but the visa bill is still on the table, nice if you would pick it up for us patrick?
Patrick - why are you driven to a frenzy by the fact that a few folks are pessimistic about the economy. Why not stick to the bullish sites where you all can applaud yourselves for how well the economy is doing. Of course we can go on forever selling our mortgages and federal debt to the Chinese - how silly of those who think this might end some day
I'm suspicious that perhaps you're trying to convince yourself that we aren't in fact in some sort of bubble. And why not make yourself useful: describe how the global imbalances will eventually self-correct in some sort of soft-landing. ALL CAPS commenting means you're probably overdue for a blood pressure test - see your internist!
Who deleted Patick's posts? - we need the comic relief! (It is after all sort of a depressing topic)
FredW, I agree that comic relief is helpful. This can be a depressing topic, but spiteful comments don't help. I don't post much, but enjoy reading everyone's comments because they make me think. I don't enjoy having to shift mental gears halfway through a very interesting thread because someone decides to make an inane comment or launch a personal attack.
Anyway, I particularly enjoy reading Calmo, CR, Dryfly, TANTA, and Vader. You'll notice that I have (diplomatically
) listed their handles in alphabetical order.
The questions are damned interesting, too. Keep it up! I'm learning and hope you are too!
mp - agreed, I've also learned a lot and maybe soon will be ready to move on to second semester economics.
The signs of future peril are everywhere and the arguments of economic health seem full of holes. What's very unclear is any picture of how this will all unwind and how to prepare for it. Is there any way well return to normalcy without some major discontinuity? Folks on this site are probably not carrying a load of debt or flipping houses but is anyone doing anything particularly proactive. At thanksgiving, a friend of a friend told us hed moved to Montreal and was giving up his US citizenship because he's convinced of a US collapse. He's also heavily invested in gold and uranium. Thats being proactive, but Im not quite ready to go that far.
FredW, I'd say your friend's friend is acting in a self-defeating, if not downright self-destructive, manner. What does giving up his citizenship have to do with protecting his financial assets? Now, if he had set up in Belize or the Caymans that might be another story, but Canada?
Anyway, one needs to remember that we're talking about possible alternative futures here, "scenarios" if you will, given certain facts. Any, all, or none of the things discussed here could come to pass, but good planning is about choosing from a list of available alternative courses of action in light of present and possible countervailing forces. So, start building a playbook if you don't already have one; they're not just for football. That's pro-active.
We're calculating the risk, no pun on CR intended. One can't completely eliminate the various types of risk, but they can often be reduced to acceptable levels, and that's pro-active. Some of us are also thinking about ways to take advantage of those countervailing forces, and that's also pro-active.
light trading's fault? ask those who are still smarting over dollar's rout during thanksgiving in light trading..
The puppy never came back.At least so far.
FredW
A couple of years ago, I looked into moving to Canada, but found a long line and that I was too old.
The US is likely stable enough to survive most any crisis. We are more safe that when the US and the USSR held daggers at each other's hearts. It appears that the terror of the war on terror is receeding and the chances of a dictatorship have receeded. So things should be ok. The nimble and smart investors will prosper.
Back in the day, I had right wing friends who were paniced over the black helocopters of the UN taking over or the Clintons taking over, or the Trilateralist taking over. I had friends that buried cash and guns in remote locations and stocked can goods(1980s and 2000-different friends) in case the crazed blacks or browns or crazed someone came over the hill.
I remember these folks and apply that memory to whatever I read here.
Remember that like physics, for ever action there is a counter action in human affairs. As something bad approaches, there will be actions to counteract that approach. Yes there is far too much liquidity in the world, but there seems to be accommodation to this. Yes there are bubbles, but they are out of reach of the average person or at worst avoidable.
Maybe we are de-industrializing and losing our technical edge to China, but China at one time was the tech leader. It had blast furnaces, gun powder and stable bureaucracy centuries before Europe. It had a navy with a tonnage greater than all the navies in the world combined. It lost and is now regaining them. It is likely as the politics of Karl Rove and the GOP win at all costs dividers and the religious zealot idiots decline-they are declining-that our elites will change direction and we will re-invent ourselves.
Maybe there will be one monster of a crash and we will all be impoverished.
But any elite that lets its citizens starve for very long will be elites no more. Given that our elites at least are that smart. We will survive.
This all reminds me of two books I generally recommend:
Kevin Phillips, Wealth and Democracy
Jared Diamond, Collapse
Not like either of them is going to cheer anybody up, especially, but I confess to some impatience with the idea that the U.S. isn't on its way to the used-to-be-world-power category, like the Spanish, the Dutch, and the British. I personally can live without being a superpower, particularly if it means we stop polluting the place to the point it's unlivable anyway. Why people think it's going to happen in some sort of dramatic apocalypse is beyond me--I suspect this is just too much television. As far as I can tell, we're just going to keep getting more and more irrelevant to the rest of the world. Buddha knows Bush has accelerated that process plenty.
Stockpiling shotguns and creamed corn in case the Clintons took over? Took over what? I suppose that puts moving to Canada and investing in metals into some sort of perspective. I'm finding it hard to describe that perspective, but that doesn't mean it isn't one.
Don't mind me--I have discovered in the last two days that the warnings about mixing Cipro and coffee are not, actually, idle bullshit for the purpose of irritating the patients. Teach me to roll my eyes at Nurse Ratchet. In any case, I am seriously undercaffeinated and it shows . . .
someone tell me how existing home sales and consumer confidence numbers being up this month dont mean what they mean.....
dc1000, note that the median sale price is down significantly again. Maybe that, and the low interest rates of the past two months are reflected in the numbers.
Aren't you concerned that inventories are still at unsustainable levles? And that mortgage activity puts the lie to the spinning of those housing numbers?
All the best to you and your meds, Tanta. Good call about the dramatization of our lives: ordinary life is just not selling.
Lookit how economists compensate from their dreary lives just to stave off low ratings.
Ok, you better read this or the sky will bust wide open right over your little head: those eggs you bought yesterday? Well, they're suspect...like those consumer confidence numbers...maybe more.
dc100:
Nov 05 inventory: 5 months
Nov 06 Inventory: 7.3 months
Average sales price Nov 05 $271K
Average sales price Nov 06 $268K
At thanksgiving, a friend of a friend told us hed moved to Montreal and was giving up his US citizenship because he's convinced of a US collapse
Tell your friend he doesn't have to give up his US citizenship to gain Canadian citizenship - they could care less if you carry both just so long as you are CANADIAN when in Canada. When I was youner - I thought about the same thing.
If we are going to go deep into the doomsday scenarios...
Canada is a great place to live & is insulated from much of the US day-to-day ills so looks like a good bet... However if the US get's really sick, living there will offer you as much security as living in Austria in 1936.
If he really wants to 'escape' US influence and remain in a 'Western Culture'... then New Zealand would be better. Or Australia - but there is the risk Australia eventually gets over run by a Greater China some day - his kids problem, not his.
But this talk is all pretty unlikely & extreme... but given time even unlikely & extreme outcomes can occur. Roll the dice enough & all outcomes eventully turn up. So who knows.
This reminds me of a book I generally recommend:
Our Brave New World
GaveKal Reasearch
someone tell me how existing home sales and consumer confidence numbers being up this month dont mean what they mean.....
Existing home sales up or down a little right now mean nothing... up a little off a big Y-O-Y decline in volume at the slowest period of the year? Inventory basically unchanged? No news there, good or bad.
Consumer confidence isn't a breaker either - data taken during the early run up to 'The Holidaze'... remember all that hype & anticipation? Talk of 19% sales increases on Black Friday? I mean the survey was taken either during or after that period... No shock it would be up.
I expect final holiday sales to be similar... up better than expected but nothing like the Thanksgiving weekend hype...
Same thing in reverse in January...just after the Holidaze when its nothing but more winter & the bills start coming due. Frequently a dip in sentiment even if adjusted for... but means little.
The real question is
(1) can consumers really afford the consumption they have incurred... plus continue to feed the beast more?
(2) what happens to home sales & inventory in say late February just prior to the peak selling season?
(3) the 'good news' is supposedly beating up the bond market (that is the initial reports I read)... raising the specter of increased lending costs & no rate spring cut by the Fed... can (1) & (2) above survive higher interest rates? Or will continued liquidity keep debt cheap?
You have comments or opinion on those - then maybe we can move beyond headlines & bullet points.
Our Brave New World
GaveKal Reasearch
I've read pieces of it - they are FOS. A recipe to impoverish most of us & enrich a small minority. You can't keep a nation of 300 million 'employed' at first world standards of living based on 'platforms'...
If we go that route I quit 'shorting the revolution' and 'go long'.
BTW - I basically work in a 'platform' environment now as a contract new bus development & tech sales guy... it isn't just theory to me.
While a few folks can make a buck (I do) - big bucks at times... most folks here will get nothing. There really is no mechanism to 'spread the wealth'... unless the few winners hire all the losers as day labor yard boys.
I'm working on projects now where a handful of engineers & developers get paid well but all subsequent mfg & support (including white collar... purchasing, accounting, logistics, IT, quality - all of it) will be offshore. Only initial development & high level concept engineering here then move most all the rest.
Oh some sales & marketing will remain - but once the product is established - that requirement falls off to near nothing, hence the need for 'contractors' on the front end only.
So what will the THOUSANDS of white, pink & blue collar workers who used to work at this plant & make decent middle class incomes do? The platformers don't have an answer to that.
So what will the THOUSANDS of white, pink & blue collar workers who used to work at this plant & make decent middle class incomes do? The platformers don't have an answer to that.
If I remember my history and socialogy well enough, its not the forever poor that make revolutions, is the new poor. Those who succeed for a while and some force outside their control make them poor or poor again.
If I remember my history and socialogy well enough, its not the forever poor that make revolutions, is the new poor.
If 'Planet Platform' becomes a full fledged reality then there will be plenty of 'new poor' here in the west & a growing population of less poor in Asia & such.
Pieces?
Tanta
good to see you back with your usual pithy comments. I have neighbors who stockpile guns, food and anti-radiation meds, have calling trees to tell each other when to make specific preparation for atomic attacks (several times a year) and have tent cities planned for when "it goes down". They also keep a lookout for the black helicopters of the new world order. Rational economic planing has nothing to do with their actions.
I will admit to having some food storage on hand and it has come in handy in the past when between jobs, etc.
I still think the general thesis of our host, dryfly and others is the rapid increase in household debt of the last few years cannot continue, thus leading to a contracting economy for a while. I don't think they are predicting apocalypse, just a general contraction, probably to be followed by an expansion just as in the past decades. As in any contraction, there are those who will suffer more than others, in this case probably the ones with high levels of household dept.
I suspect dc1000 and others who are doing well in this market cycle are doing so because they have a well-thought-out business plan and are following sound business principles. The ones not doing so well are those who thought life would forever get better and the housing ATM would always be there for a quick fix of cash.
Pieces?
Yup pieces - posted here and there. I certainly wouldn't pay money for that thing... no more than I'd pay money for 'Rich Dad, Poor Dad'.
I first ran across it at John Mauldin's site... a real 'Oh Brother' moment let me tell you. I've seen it a few other spot's since then... most recently over at Russ Winter's where he ripped it up pretty good.
It might be the future but I am NOT encouraged. If it is our future then most Americans accustomed to a middle class lifestyle better get accustomed to something else... something a lot less middle class.
Like I said - I get it, I work under those conditions now. A handful of hot developers & designers coupled to a whole production, logistics, white collar back office support & supply chain offshore can do what a major domestic company can do and for a whole lot less.
So what do your neighbors do? Live like the neighbors do next to your production workers in Bangalore or Wuxi?
It doesn't bode well for most folks here... but great for Bangalore & Wuxi I might add.
Tanta - assuming you're finished with Phillips & Diamond you might find Doug North's "Structure & Change" very useful as a complement as well as Mancur Olsen's "Power & Prosperity". They're not technical nor mathematical but two of the major Nobel caliber economists digging deeper into how societies and economies function.
Changed my life
.
Which may say something therein but...