Fri 21 Mar 2008
This is the time and place to post observations about your local areas, comments on news stories or the New Jersey housing market, open house reports, etc. If you have any questions you wanted to ask earlier in the week but never posted them up, let’s have them. Also a good place to post suggestions, requests for information, criticism, and praise.
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March 21st, 2008 at 5:52 am
From the WSJ:
Citigroup Laying Off 2,000 More
By MARSHALL ECKBLAD and DAVID ENRICH
March 21, 2008; Page C3
Citigroup Inc. plans to lay off an additional 2,000 employees from its markets and banking unit, and in this latest round of job cuts, senior investment-banking officials won’t be spared, according to two people with knowledge of the decision.
The latest round of job cuts at the New York-based bank brings its layoffs since the mortgage crisis began to more than 6,000, or about 10% of the market and banking unit’s work force.
The layoffs are expected to take place by the end of the month. They are likely to take an especially sharp toll on the capital-markets side of the business, but some mergers-and-acquisition bankers will also be axed, the people said. The cuts will be concentrated in New York and London.
March 21st, 2008 at 5:53 am
From Bloomberg:
Goldman Will Reduce Capital Markets Workforce, N.Y. Post Says
Goldman Sachs Group Inc. plans to dismiss as much as 15 percent of its workforce in the capital markets and related support departments, the New York Post reported, citing unidentified people familiar with the matter.
The reductions are likely to come in the division that includes investment banking, debt and equity underwriting and merger advice, the newspaper said. Employees were first notified about the staff cuts on Monday, the Post reported.
March 21st, 2008 at 5:56 am
From the WSJ:
Home Vacancy Rates
Post Sharp Increases
By MATT PHILLIPS
March 21, 2008
Cities and counties with some of the worst fallout from the nation’s housing slump also are seeing a sharp upswing in vacant homes, a trend economists say might set up further declines in home prices.
The national homeowner vacancy rate, which gauges the number of vacant homes on the market, rose to 2.8% in the fourth quarter, according to Census Bureau data. That was up from 2.7% in the previous quarter and matched the record set in the first quarter of last year.
Vacancy rates in the 75 largest metropolitan areas showed vast differences last year, ranging from a low of 0.1% in the Poughkeepsie, N.Y., area to a high of 7.4% in Orlando, Fla., Census Bureau data show.
“The higher the vacancy rate, the greater is the degree of stress on pricing,” said Jim Diffley, managing director of regional services at economic-research firm Global Insight in Waltham, Mass. “It’s a measure of how far the market is out of whack.”
The Census Bureau’s report also showed that when compared with 2005, some of the fastest-rising vacancy rates last year were in struggling Rust Belt cities and recently sizzling Sun Belt markets, with cities in Florida — the epicenter of the housing bust — showing the biggest jumps in the gauge of vacant homes.
…
Vacancy rates alone, of course, aren’t the only gauge that economists are watching when trying to weigh future price trends. They note that other important measures, such as employment and population growth, also play a role. In that light, they say higher vacancy rates in areas with struggling economies and slumping populations could present more persistent problems than in cities with growing economies.
March 21st, 2008 at 5:58 am
From the WSJ:
Mortgage Mess Hits Home For Nation’s Small Builders
Delinquencies Rise, Hitting Local Banks;
Mr. Whitlatch Folds
By MICHAEL CORKERY
March 21, 2008; Page A1
TWINSBURG, Ohio — In the first wave of the housing crisis, homeowners across the U.S. lost their properties to foreclosure. Now, many of the nation’s small and midsize home builders are on the ropes.
…
Builders’ problems are now threatening losses for small and medium-size regional banks. Muscled out of the mortgage business by large national lenders, many of these banks flocked to construction lending as the housing market boomed. Though these institutions were generally less exposed to the subprime-backed securities that have generated billions of dollars in losses for national banks, they are the front-line casualties when builders and developers can’t make their payments.
Delinquencies on loans to build single-family houses reached 7.5% of the value of all such loans in the fourth quarter, up from 2.1% a year earlier, according to Foresight Analytics, an economic and real-estate research firm. There’s likely more pain ahead. The Commerce Department reported this week that permits for new housing construction, a barometer of future building activity, fell 7.8% in February to the lowest level in 16 years. Also this week, the Federal Deposit Insurance Corp. said it had “increased [its] overall concern” about banks with high concentrations of construction loans, particularly those for residential developments, its strongest warning to date about these banks.
Federal Reserve Chairman Ben Bernanke warned Congress late last month that he expected some small U.S. banks to fail due to the housing stress. Analysts say as many as 150 banks could fail over the next three years. By comparison, about 900 banks and savings-and-loans associations failed from 1990 to 1995, according to the FDIC.
“This credit crunch is not perceived to be as bad as the S&L crisis,” says Ivy Zelman, chief executive of Zelman & Associates, a housing research firm. But depending on how regulators respond, she says, “I think it could be.”
March 21st, 2008 at 6:11 am
From the Long Island Business News:
Slowdown tightening broker biz
The housing crunch is chasing away real estate agents.
The drop in home sales is being blamed for the lowest number of real estate offices and brokers in 33 months, with Nassau, Suffolk and Queens posting 4,420 fewer agents since last September, a drop of more than 15 percent.
There are also 213 fewer real estate offices since September.
The drop reverses a long, steady expansion, with the number of agents rising from 16,729 to 28,863, and the number of offices increasing from 1,809 to 2,895 between January 2003 and September 2007, according to MLSLI.
“What we’re seeing is a lesser number of agents because the market has been noticeably softer,” said Joseph Mottola, chief executive of West Babylon-based Long Island Board of Realtors.
…
“If agents can’t make a living or they need this as a second income they are going to think twice,” Cantor said.
March 21st, 2008 at 6:16 am
From Reuters:
Japan property firm folds, hit by subprime
A Japanese property investor has filed for court protection from creditors, the first listed company in Japan to collapse from tighter lending in the wake of the U.S. subprime crisis.
Reicof Co Ltd said it had failed with debt of 42.6 billion yen ($430 million) as investments in hotels went sour.
“Financial and real estate markets have deteriorated in the wake of the subprime crisis and we were not able to sell properties or secure loans as expected,” Masaki Nogami, a Reicof lawyer, said at a news conference on Friday.
March 21st, 2008 at 6:17 am
From BusinessWeek:
New York Feels the Crunch
It’s ugly on Wall Street. With the subprime mortgage meltdown, credit crunch, and falling stock market, investment bankers are facing the worst job losses since the months following September 11. In the wake of its near collapse last week, Bear Stearns (BSC) is expected to lay off at least half of its 14,000 employees. Citigroup (C) said on Mar. 20 that it plans to add 2,000 layoffs to the 4,200 it announced in January. And many bankers are wondering not only which firms will be hit next, but whether their own jobs are safe.
So how long before the rest of New York City gets whacked?
Thus far, much of the New York area has staved off the steep declines in home prices and employment that are sweeping so much of the U.S. But because jobs in finance account for about 23% of New York City’s overall personal income and 27% of the city’s tax revenues, eventually Wall Street’s layoffs and busted bonuses will filter down to shops, restaurants, real estate brokers, limo drivers, and other Main Street employers. The falling value of the dollar—and the concomitant surge in tourism and foreign real estate purchases—will help cushion the blow to the overall economy. But since the primary business of New York is still the money business, it’s inevitable that Wall Street’s pain will be shared.
March 21st, 2008 at 6:23 am
From the NYT:
Insurer Gives Its Reasons for Severing Merrill Pacts
Security Capital said XL Capital was promised control rights on the $3.1 billion of portfolios it had guaranteed for Merrill Lynch International, but Merrill Lynch had given those same rights to one or more third parties.
“The decision to terminate the Merrill Lynch International contracts was not made lightly,” Security Capital said.
By terminating the contracts, Security Capital is hoping to get out from under an obligation that could cost it hundreds of millions of dollars. But ending the contracts could force Merrill Lynch to write down billions of dollars of exposure.
March 21st, 2008 at 6:24 am
From the NYT:
CIT Taps Credit Lines and Talks of Asset Sales
The CIT Group, a century-old company that lends money to small businesses and midsize corporations, was forced to draw on $7.3 billion of emergency bank credit lines. Its shares and bonds plummeted.
March 21st, 2008 at 7:18 am
Merrill Lynch will be laying off 5,500 starting next month, many of them in NJ.
March 21st, 2008 at 7:21 am
No even a week goes by and RE inventory jumps by another 1,000 units in NJ. RE agents are working hard. How about trying to sell some of those homes, instead of just listing them??
March 21st, 2008 at 7:28 am
From the AP:
Leery Lenders Demand More From Borrowers
Just when consumers and the U.S. economy need banks to lend more freely, the mortgage industry is making it harder to borrow — even for those with good credit.
Mortgage insurers, whose backing is required for borrowers who can’t afford the traditional 20 percent down payment on a home, have already flagged nearly a quarter of the nation’s ZIP codes where they refuse to insure some home loans.
That encompasses a wide variety of neighborhoods: McMansions in Scottsdale, Ariz.; luxury Miami condos; 1960 ranch houses in Flint, Mich.; and early 20th century kit homes in Metuchen, N.J.
March 21st, 2008 at 7:31 am
Oh Frank
Listing is selling. Well at least it was a couple of years ago. Yet more people who are living in the past.
March 21st, 2008 at 7:33 am
From the APP:
Carpenters’ union files suit over classification of workers
A New Jersey carpenters’ union is suing a Texas-based developer for allegedly employing undocumented workers and denying them benefits by classifying them as independent contractors and not employees, it was announced Thursday.
“This is the most blatant abuse of laws I have seen in a long time,” said Albert Kroll, a former state labor commissioner who represents the carpenters in their case against D.H. Horton Inc., which calls itself “America’s Builder.”
…
“This illegal hiring scheme is quite simple,” said Kroll, saying Horton hired a subcontractor who would hire undocumented immigrants and label them contractors, paying them $8 to $14 an hour in a market where the going pay is $21 to $23 an hour, according to Tom Canto, executive secretary and treasurer of the carpenters’ group.
March 21st, 2008 at 7:35 am
Frank/Lost,
Agree, most agents have no idea how to sell homes. Getting the listing agreement signed is the hard work, once it’s in place, you sit back and wait.
What do you mean “marketing”, it’s on the MLS, it is on Realtor.com, it is on our website. We even took out a 1/4096th page ad on page 396 of the New Jersey Journal three weeks ago. Held an open house too!
I can count the number of agents I know that can actually “sell” a house on one hand (actually, 2 or 3 hands, but that doesn’t sound nearly as good).
The listing agent’s first priority isn’t to sell your house, it is to sell you into signing (and resigning) the listing agreement. But ain’t that always the way it is in the service biz. Most agencies have turned selling their service into an art, but fail miserably when trying to execute. The reason behind this isn’t a mystery, in the go-go market, listing was selling (as lost says). If you didn’t get those listings, you were done. Selling them was the easy part (see paragraph 2).
March 21st, 2008 at 7:59 am
#15…..and with Foxton’s, you get (got) a flashy website and a vanishing agent.
March 21st, 2008 at 8:17 am
re: 14 (Grim)
This has been going on for years and the Unions had turned a blind eye, in the construction trades. This lawsuit was only filed because the Union hall is now filling up with members looking for work. There was a time, when any builder tried something like this (hiring illegal Mexican workers) these large projects would go up in flames. I would not be surprised if some of the DH Horton projects are torched by angry unemployed taxpaying union members.
March 21st, 2008 at 8:23 am
Another Comp Killer in Bridgewater.
On today’s reported closings,
4 Alexis Court, sold for $495,000
During 2005, similar houses were sold at $580,000+. One person I know bought one at $595K.
March 21st, 2008 at 8:29 am
Another one in Bridgewater
42 WALTERS BROOK DR 12/17/2007 $515,000
The township assessment is $560,000+
March 21st, 2008 at 8:31 am
One of many updates that I receive and many are starting to sound like this one:
Spring has sprung and so has the market! In the past month, my new listings have had amazing results:
54 Old Short Hills Rd, Short Hills- Contract after 1st weekend
17 Undercliff, Millburn- 6 offers after 1st weekend
111 Short Hills Ave, Short Hills- 5 offers after 1st weekend
1 Tulip Lane, Short Hills- we had 6 offers after this past Sundays open house.
Interest rates are low, sellers are staging & “smart pricing”, and there has never been a better time to buy a house.
March 21st, 2008 at 8:39 am
Anyone has opinion on this site, http://www.buybankhomes.com/
What is normal process that Bank follows when trying to sell the house? Is there normally set number of months before prices are dropped? Any issues with Lowball on Bank properties?
March 21st, 2008 at 8:44 am
SG,
Easy enough to find REO homes in this area by searching the major lender sites. Local REOs are almost always MLS listed and represented by agents.
What is normal process that Bank follows when trying to sell the house?
They list it with an agency that they have a relationship with. MLS listed, not really any major difference from a typical sale.
Is there normally set number of months before prices are dropped?
No.
Any issues with Lowball on Bank properties?
No, in fact I strongly suggest it, realize that you aren’t dealing with someone who has an emotional attachment with the property.
March 21st, 2008 at 8:52 am
JLB,
Millburn Contracts
November 2006 - 17
November 2007 - 14
(Down ~18%)
December 2006 - 17
December 2007 - 12
(Down ~29%)
January 2007 - 27
January 2008 - 14
(Down ~48%)
February 2007 - 30
February 2008 - 27
(Down ~10%)
YTD 2007 - 57
YTD 2008 - 41
(Down ~29%)
I concur with her position on right pricing, Millburn is still a high demand town, price a property right and I have no doubt you can get 6 offers in a weekend. The question is, when will the other 100 sellers in Millburn realize this?
March 21st, 2008 at 8:54 am
CEO of bear stearns bought a 25 million dollar property in NYC this week…I think we all helped fund that one
March 21st, 2008 at 9:00 am
Thanks Grim. I see a property on http://www.buybankhomes.com/ but not on MLS.
I am surprised why.
Also, is there list of links to lenders REO listings? If not, can we create such a list.
March 21st, 2008 at 9:00 am
The problem as I see it with the discount brokers like help u sell(grim correct me if I am wrong)is that traditional realtors won’t even tell you about them, they don’t like the “discount” in their comish…we actually had to call our realtor and ask her to show it to us, she only sent us the traditional broker listings
March 21st, 2008 at 9:02 am
14 & 17
It has also been going on for years in some of the subcontractors business’, especially some of the large new home construction plumbing contractors in NJ.
That Plaza Grande project they mentioned has had a bunch of serious issues including prefab units that were off by a few inches, lawsuits galore, partners dropping out, a revolvong door of subcontractors. It’s been a mess.
March 21st, 2008 at 9:07 am
It’s a great time to buy a house if you have money. Most people out there don’t, which is why the US ended up in this mess.
-R
March 21st, 2008 at 9:19 am
“The cuts will be concentrated in New York and London.”
That CAN’T be true. New York is DIFFERENT.
March 21st, 2008 at 9:20 am
#21 SG..just from my experience, not a realtor jsut looking for every angle to buy a house at this point. There were some homes in my area going up for foreclosure and most had for sale signs and were on realtor.com with agents. You could find them on the sheriff sale as well. Once they (usually) went back to the bank, there was a period of time where they disappeared off the mls. Then they return under an agent for a while, then some go to auction.
check out this link to a million dollar home that for the past two years was in the process. at one point they were asking 989,000..so 50 cents on the dollar is about where the auction is starting…my long winded answer is lowball away! http://www.ushomeauction.com/property.php?auctionID=H-022&itemID=14853&venueid=88
March 21st, 2008 at 9:21 am
sorry SG…is submitted prior to to full url being typed
http://www.ushomeauction.com/property.php?auctionID=H-022&itemID=14853&venueid=88&start=0
March 21st, 2008 at 9:22 am
Grim # 15
Now I’ve read it from you and I ‘ve read it from clot “Marketing” Can you or he elaborate? What do you do? I’ve only had experience with the norm, MLS, Internet, Local Papers,open house, Flyers in the Take one please stand? Help me.
Thanks
KL
March 21st, 2008 at 9:22 am
By the way, this property in the link above sold at 1,098,000 not 1.3 mill
March 21st, 2008 at 9:24 am
SG I meant to type “sold originally”
March 21st, 2008 at 9:24 am
do you have any lowball stats for lower somerset (08540)?
March 21st, 2008 at 9:29 am
“So how long before the rest of New York City gets whacked?”
WTF!?!
Don’t these fools know NYC is different?!?
Maybe they’re not talking about Manhattan…
March 21st, 2008 at 9:33 am
Frank Says:
March 21st, 2008 at 7:18 am
Merrill Lynch will be laying off 5,500 starting next month, many of them in NJ.
Source?
March 21st, 2008 at 9:33 am
Do we have a lot of buyers on the sidelines? Is there an army of buyers waiting for the “right” price before they jump in or will tougher lending standards contain the flow? Please elaborate.
March 21st, 2008 at 9:34 am
Have some sort of a NYC complex? Hope there is a cure to that…
March 21st, 2008 at 9:36 am
Well, the lay-offs have finally started in earnest. I have to admit I was beginning to second guess myself for a little while there about how bad it was going to be.
March 21st, 2008 at 9:46 am
clot: watch the line with this crap!
Clotpoll Says:
March 20th, 2008 at 9:37 pm
JLB-Dolt (217)-
Hell, I’m averaged in so low on my miners, that the past few days represent yet another chance at loading up some more before the next moon shot.
And, that moon shot will inevitably occur as the last of the overleveraged, shaky longs is carried out on his shield.
March 21st, 2008 at 9:49 am
WSJ
PRIVATE PROPERTIES
Bear Stearns CEO Is Said to Rent House
By CHRISTINA S.N. LEWIS
March 21, 2008; Page W8
Bear Stearns Cos. Chief Executive Alan D. Schwartz has taken off the market his suburban New York house, listed for $4.5 million, and is renting it, the real-estate agent who had listed the home says.
Meanwhile, Bear Chairman and former CEO James Cayne closed last month on a $27.4 million purchase of two adjacent apartments at the Plaza condominium in New York, according to public records.
Both moves came before Bear’s fire-sale deal Sunday to be acquired by J.P. Morgan Chase. Under the terms of that deal, Mr. Cayne’s Bear holdings, once valued at $1 billion, would total roughly $13.1 million, less than half the cost of the Plaza units.
In 2000, Mr. Schwartz paid $2.75 million for the newly built, 7,850-square-foot house in Purchase, N.Y. , overlooking the ninth green of the Golf Club of Purchase. The three-story home has views of Long Island Sound, six bedrooms, a playroom and a wine cellar. In 2003, Mr. Schwartz paid $10.4 million for a 17-room, 11,000-square-foot mansion on seven acres in Greenwich, Conn., records show, and he also owns a condo in Edwards, Colo. Susy Glasgall, of Houlihan Lawrence, had the Purchase listing.
A growing number of frustrated sellers in New York’s suburbs are renting their homes. Greenwich agent Barbara Wells, of Prudential Connecticut Realty, says, “A tremendous amount of houses are for sale and for rent. We’ve never had that before.”
March 21st, 2008 at 9:57 am
How do asset sales “quell concerns about cash shortgages”?
If anything, in this situation asset sales affirm liquidity concerns.
“Nothing to see here, there is no cash shortage, we’re selling assets to raise cash, but only to prove that we don’t really need the cash. Now, if there are no further questions, I need to end this call, because we’re selling the phone system, and the building that houses it.”
CIT Plans Asset Sales to Quell Concerns About Cash Shortages
March 21st, 2008 at 9:58 am
#37 MM I used to work at ML in Princeton and Hopewell..still have friends there…layoffs definetly coming and they are usually after 1st quarter mid to late April. No official word on numbers though
March 21st, 2008 at 10:01 am
doh!
http://scores.espn.go.com/ncb/photos?photoId=1871619&gameId=284000024
March 21st, 2008 at 10:01 am
Kudos to Lehman for coming up with such a creative way to rid itself of $2b in myth-marked trash. I guess it really is all in the marketing.
Lehman plans new distressed debt funds
Lehman Brothers Private Fund Investments, the fund of funds division of Lehman Brothers Holdings Inc., has joined the growing ranks of advisors ramping up their exposure to distressed debt in the face of an increasingly uncertain economy.
The group soon plans to begin marketing Lehman Crossroads Fund XIX LP with a $1.5 billion target, according to the people familiar with the firm. It expects to allocate up to 30% of the new portfolio to distressed debt funds, one person said.
Separately, Lehman also has begun marketing Lehman Brothers Distressed Opportunities Fund LP, a dedicated distressed debt fund of funds with a $725 million target. The firm plans to commit the portfolio to a mix of distressed debt and turnaround funds, including both firms that adopt control-oriented strategies and those adopting more liquid trading strategies.
March 21st, 2008 at 10:02 am
Hunter (26)-
Help-U-Sell- and other limited-performance brokers’ listings- are in the MLS. They also usually do not feature poor incentives to the buyer’s agent. If your agent is not giving you those listings, find one who will.
Befitting the market, I rarely see listings now that do not fully-incentivize the buyer side.
March 21st, 2008 at 10:08 am
Clot,
Noticing a number of short-sales with a 6.5-7% commission lately.
Very odd. I wonder if these brokers are pitching themselves as “short-sale specialists” and demanding a higher vig. Or using the higher commission to generate a large volume of offers that they can use to bombard the lender with.
Of course, why would the seller care, it isn’t coming out of their pocket.
Although I have serious doubts that any mortgage holder would sign off on a deal that compensates the agencies so richly.
March 21st, 2008 at 10:12 am
Why now is a great time to buy:
The National Association of Realtors said that “on average home values double every 10 years”.
Disclaimer: Each market is different, so talk to your realtor today!
March 21st, 2008 at 10:12 am
kl (32)-
Short story:
1. 80% of all buyers use the internet as their primary tool to create a final wish list and gather info on agents, lenders, insurers, etc when buying a home.
2. Following from #1, listing agents must market on the internet to build a buyer pool and create buyer flow.
3. Following from #2, it is not enough to simply be on the internet with your listing. If your listing comes up #7,000 and on page 32 of a search, it might as well not exist.
4. Flowing from #3: as in any other internet marketing, optimization of placement is the name of the game. Doing what it takes to have listings appear at the top of searches is essential to effective marketing. Frankly, in most popular forums (i.e., Realtor.com), this involves the liberal application of money. It’s pay-for-placement.
5. Once an agent has addressed #1-#4, then the traditional rules of marketing come into play. Identify a need, then fill it.
6. My own little rule: price is a component of marketing, but marketing is NOT a component of price.
March 21st, 2008 at 10:13 am
Have to respond to a post Bru made last night:
“It’s too easy to say that DVD players and cell phones are the problem - in my opinion, it is the presentation of a certain type of lifestyle as “normal””
Bru– here’s where I think you’re wrong: magazines and TV are selling fantasies. The lifestyle they portrary is not supposed to be normal. It is meant as an escape from reality. I agree that many young people who lack experience get this mixed up. My sister is a senior in college and she is deeply confused on this issue. Getting unconfused is simple: go to work and look at all of the people around you. They are not spending summers in Capri and shopping at Bergdorf every weekend, nor do they expect to. And most of them are pretty happy despite this. The reason is that they judge the quality of their life compared to other real people, not fictional characters or movie stars.
March 21st, 2008 at 10:15 am
Chi,
I noticed you were digging yesterday. I found this.
“BC Bob Says:
October 31st, 2006 at 1:05 pm”
“Just got back in town and saw the news. Congrats and all the best. Now, I would have really been impressed if he added, buy gold!!!”
Gold was approx $600 at that time. Now it’s time to teach Hunter how to say 200 day moving average.
You thought I was kidding, approx 2 weeks ago, when I stated that many will be taught a painful lesson that tuition can not buy?
March 21st, 2008 at 10:16 am
High compensation for short sales - Could be a sign of the times. Desperate for buyers, the lenders are looking to entice whatever agent has a qualified buyer to unload illiquid assets off their balance sheet. If this keeps up seems like there is a battle to find whatever remaining buyers are out there.
March 21st, 2008 at 10:16 am
gary (38)-
75% of whatever “pant-up” demand may exist cannot sell their current homes. Tomorrow’s buyer is today’s seller, and the vast majority still have not gotten it through their heads that the worm has turned.
That’s why you see the mix of sellers weighted more toward the “must sell/forced to sell” variety. Lots of people who don’t have to sell are coming off the market…and, they’re going to remain off. For years.
March 21st, 2008 at 10:20 am
Chi (41)-
Believe me, I watch it closely. The PPT operates in strange and diabolical ways. It is disquieting to know that the combined forces of the gubmint, Fed and Treasury are working overtime against me. And, they have way more resources and brainpower.
In the end, Mr. Market always wins, though. And this time around, Mr. Market is going to inflict a brutal penalty on the PPT.
March 21st, 2008 at 10:21 am
And, we all must reclaim our straw men in due course.
March 21st, 2008 at 10:22 am
Follow up yesterday’s to GMAC vs. HFTC lawsuit. I wonder how many scams like this were going on in NJ?
http://www.newsday.com/news/local/ny-enforc1118,0,1299029.story
March 21st, 2008 at 10:23 am
Chi (42)-
What a d-bag. I hope the tenants trash his house and stiff him on the rent.
March 21st, 2008 at 10:23 am
Clot,
What amazes me are the number of agents who don’t think good photographs are important. This is, of course, evidenced by the vast majority of agents who take their own photographs with a cell phone or $3 digicam.
In the surveys that I’ve done as part of an entrepreneurial venture I worked on, we found that a large percentage of potential clients will ignore listings with poor quality pictures, despite the fact that those pictures aren’t representative of the property. We did a small study that had subjects browse a mock real estate website that showed two sets of photos for the same house, one set of very poor quality, another set of high quality (actually, a professional architectural photographer). When presenting the potential clients with the question of “Would you visit this house in person?”, we found that the professional photographs resulted in a statistically significant difference, surprisingly so.
So while professional photos might not sell a house, they will result in a larger number of potential clients visiting a property. Likewise, poor photos mean that the money spent on your online marketing is largely wasted.
March 21st, 2008 at 10:30 am
From THNT:
The city of New Brunswick is pressing forward with a pair of downtown redevelopment projects of major import, the latest a mega-housing, retail and office complex that calls for one 28-story high-rise and two 17-story rectangular towers on a 5-acre tract of land hard against the Northeast Corridor rail line.
…
Both projects together promise to reshape the New Brunswick skyline along with the city’s tax base, boldly ushering in a new era of growth and prosperity for the city.
…
Rough housing plans call for about 730 apartments and 28 town houses, ranging in price from $500,000 to $800,000; the concept would serve New Brunswick’s need to provide housing for its growing professional and New York City commuter base, as well as high-salaried employees of its burgeoning health-care industry and Rutgers University.
March 21st, 2008 at 10:30 am
BC Bob Says:
March 21st, 2008 at 10:15 am
Chi, I noticed you were digging yesterday. I found this. “BC Bob Says:
October 31st, 2006 at 1:05 pm” “Just got back in town and saw the news. Congrats and all the best. Now, I would have really been impressed if he added, buy gold!!!”
Gold was approx $600 at that time. Now it’s time to teach Hunter how to say 200 day moving average. You thought I was kidding, approx 2 weeks ago, when I stated that many will be taught a painful lesson that tuition can not buy?
Bost: I’ve seen your position grow….here is the result of 1 1/2 years of growth on my end…..
http://www.facebook.com/photo.php?pid=320231&id=777744763
March 21st, 2008 at 10:32 am
re (59)
I agree, before I was squeezed out of the market, probably now until at least 2012, due to the advent of prudent underwriting, I would not have wasted my time with a listing that didn’t have at least 8-10 quality photos.
March 21st, 2008 at 10:32 am
The dark prince Cheney is in Saudi Arabia today, to follow up from Bush’s visit.
Last week on CNN Jack Cafferty vilified Cheney about this trip.
Well worth to watch Cafferty again, he almost had an aneurysm during this commentary.
http://www.cnn.com/video/#/video/politics/2008/03/11/cafferty.can.cheney.lower.gas.prices.cnn?iref=videosearch
March 21st, 2008 at 10:34 am
BC, #52
Should I care about this pullback if I own the actual physical metal?
March 21st, 2008 at 10:37 am
#59 I’m amazed at the number of homes listed on Realtor.Com without pictures. I pass right over them if there isn’t a picture to begin with and I find in a lot of cases there is a reason they didn’t post a picture.
March 21st, 2008 at 10:37 am
Do we have a lot of buyers on the sidelines? Is there an army of buyers waiting for the “right” price before they jump in or will tougher lending standards contain the flow? Please elaborate.
According to the Census Bureau, home ownership levels are around all time highs (although slipping in recent quarters). In the Northeast, 65% people own their homes.
So who is left? Well, much of the remaining 35% will never own; they choose not to, have terrible credit or are structurally priced out (i.e. poor).
During the housing bubble, we “borrowed” buyers from the future. People who would have normally waited until the time was right, saved up a down payment etc., rushed into the market for fear of being “priced out forever”. At the same time, east credit made entry possible fore these buyers.
So, who is left? Where is this “pant-up” demand? Well, you have a small group of contrarians (like many of us here) who didn’t drink the Cool Aid and you have your normal pipeline of young people graduating college, getting jobs and thinking about buying. That’s really it. There is no cavalry of fence sitters coming to the rescue of the housing market. It’s a myth, they don’t exist.
March 21st, 2008 at 10:39 am
grim (46)-
Truth to tell, there have been a lot of babies thrown out with the bathwater. At the end of the day, there’s a lot of mispriced stuff out there that will quietly mature at par.
However, I’ve got to think that the search for these mispriced assets is a proprietary activity. “Inviting” the public into distressed-asset funds seems a bit disingenuous.
March 21st, 2008 at 10:40 am
#57
I wonder how many of the ultimate buyers of those properties got significant cash back at closing. Difficult to understand how you could find so many willing buyers to pay that much above comps
March 21st, 2008 at 10:40 am
Chi[61],
I can’t get in.
It’s amazing, I remember that post like it was yesterday. Did my year end 2006 post, Chi will discover that Hunter is a southpaw, come true? He must be getting big, probably a terror. If he’s not a southpaw, forego the glove and ball and put a golf club in his hands.
All the best!
March 21st, 2008 at 10:42 am
grim Says:
March 21st, 2008 at 10:23 am
Clot,
What amazes me are the number of agents who don’t think good photographs are important. This is, of course, evidenced by the vast majorit
Grim - what amazes me even more if number of photographs of interior with CRAP all over the place. In a few listings I saw bedrooms with beds not made and clothes scattered on the floor.
There was a listing with very nice living room But it had TWO BICYCLES leaning agains Dining table???
Everytime favorite - Unwashed dirty dishes in the sink and at the kitchen table…
Can client sue a realtor for posting a picture like this??
P.S. At least I haven’t seen unflushed toilet bowl, yet at least not with lid open…
March 21st, 2008 at 10:43 am
Make[64],
Get my email address from JB.
March 21st, 2008 at 10:43 am
i love when pictures on realtor.com are of everything BUT the house. like the park, train station. to me it screams that the realtor is trying to hide the money pit and sell the idea that 500k is valued in the location alone.
March 21st, 2008 at 10:45 am
Do you need a buyer’s agent, if you are (relatively) educated buyer and use a RE attorney?
Would it reduce the closing costs (or does the seller’s agent just take bigger payment)?
March 21st, 2008 at 10:46 am
Unmoderate please?
March 21st, 2008 at 10:48 am
Here are some other interesting things we learned:
Clutter is a killer
Postage stamp photos are worthless
Buyers preferred photos of furnished homes, but only if there was some semblance of interior design and modern/neutral decor. Anything dated, old, or messy was actually a detriment.
Photos of vacant homes need to be taken in such a way to not illustrate the fact that they are vacant. Focus on exterior pictures, kitchens, baths, fireplaces if the home has no furniture. Do not take pictures of empty rooms. Buyers tended to think empty rooms were smaller than they actually were.
Exterior pictures should be shot in the spring/summer, regardless of when the house is being sold. Buyers thought that winter pictures looked “cold and unwelcoming.” Yes, this means prepping prior to listing, if you are listing in the winter.
Also interesting is that buyers seemed to love night-shots of lit homes.
Dining room shots should be done with a properly set table.
Buyers thought lit fireplaces were also “welcoming”. (This one takes a damn good photographer to catch).
For the photographers out there:
Buyers love the effect of exposure or flash bracketed HDR photography. If you can take HDR shots, do it, if you don’t know what it is, learn to do them.
Wide angle lenses tend to give rooms a better sense of scale, buyers tend to think rooms are larger when shot with extreme wa lenses (distortion corrected).
When shooting interiors of larger homes, especially those in which other rooms are visible in the shot, multiple flashes are an absolute necessity.
And a useful tip for agents. Wedding photographers tend to make pretty good interior photographers, and will generally work for a reasonable wage mid-week.
March 21st, 2008 at 10:48 am
I always like the pictures where the agent couldn’t be bothered to get out of the car & does the “drive by shooting” of the house, where you see the house through the car window.
March 21st, 2008 at 10:49 am
grim (48)-
I take short sales at 8-10% total commish and offer half to the other side.
The lenders ultimately hit everyone involved in the transaction for concessions- agents, lawyers, inspectors, etc- so the extra vig gives us a high number to negotiate down.
Sometimes, if the deal is a real onion-buster (and my client is a jerk), I won’t negotiate down. I just tell the bank to go ahead and foreclose if they don’t like my fee. The bank is never in a good position at that point, and they almost always relent.
March 21st, 2008 at 10:51 am
skep (51)-
It is disquieting that a college senior could still be living in such a fantasy world.
March 21st, 2008 at 10:53 am
grim (59)-
You should see Realtor.com’s stats on no pictures/poor pictures attached to listings. In short, they are a listing-killer.
March 21st, 2008 at 10:55 am
Clot #77, I have cousins who work and still live in that fantasy world. They happen to be in workplaces where everyone - even the boss - is in the same age group and well-paid enough to sustain it.
I am lucky in a way that I work in the burbs with a bunch of middle aged guys. I learn a lot from them.
March 21st, 2008 at 10:57 am
grim Says:
March 21st, 2008 at 5:52 am
From the WSJ:
Citigroup Laying Off 2,000 More
________________________________________________
Does Citi have any busines strategy other than laying people off? I imagine at one point the only people sitting up there will be Pandit and whatever flunkies can still muster sufficient faux-enthusiasm in convincing him that he’s doing a heckuva job! I know a whole group that got the hell out of dodge when Sandy Weill was still in charge and started their own hedge fund, and life has never been better, credit meltdown and all. Something to be said for actual competence . . .
March 21st, 2008 at 10:57 am
BC Bob and Make,
What about gold teeth? I was thinking of getting some gold for my grill.
March 21st, 2008 at 10:58 am
Clot,
What? You mean buying a $150 Casio at Best Buy doesn’t make me a professional photographer?
March 21st, 2008 at 11:02 am
#77
Clot– I agree. Unfortunately, she joined a sorority full of very wealthy/spoiled girls and has developed a very warped view of the world. They all are confident that even if they fail to achieve any type of success on their own (or in the event their parents cut them off), they will just marry some rich guy who will happily fund their lifestyles. Unfortunately, I don’t think this is a particularly unusual point of view among girls her age. I’m hoping she’ll snap out of it after a year or two of work
March 21st, 2008 at 11:03 am
#59 grim
Exactly! Now real estate marketing is as same as web shop. Poor quality presentation will lead to poor results.
I almost missed the fact that a property relisted with fresh new pictures was actually the same one that’s being listed before and sitting a long time.
March 21st, 2008 at 11:03 am
Oh, one more big tip for photographers.
Learn how to take shots of rooms with large windows.
This means not blowing out the exterior when exposing for the interior. You’ll need a big flash to pull this one off (Or HDR with brackets you can drive a Mack truck through).
March 21st, 2008 at 11:11 am
What about gold teeth? I was thinking of getting some gold for my grill.
hehehe,
That’s old school. You need to put some Bling both clear and pink in there now and it has to be resting on platinum. You know what I mean.
March 21st, 2008 at 11:13 am
Make,
I work near the diamond district, I’ll see what I can find.
March 21st, 2008 at 11:16 am
Make,
I work near the diamond district, I’ll see what I can find.
holler at Jacob.
March 21st, 2008 at 11:17 am
Don’t you mean holla?
March 21st, 2008 at 11:19 am
59 grim
“What amazes me are the number of agents who don’t think good photographs are important.”
absofreakinglutely.
March 21st, 2008 at 11:21 am
In Hoboken you can tell the place is a dump or has a view of a wall when they have a bunch of pictures posted of the common areas
March 21st, 2008 at 11:21 am
grim,
What about virtual tours?
Are those significantly more expensive to produce/upload to realtor.com?
Is there any evidence that they result in greater interest?
There seems to be a lot of variation in that some have better tech, while others are poor quality and cumbersome.
Personally, I think still photos work better, and are faster to click through.
March 21st, 2008 at 11:21 am
63 Sean re:Dick Cheney in Saudi Arabia
“I’m sure they will talk about the need for a cooperative way forward to try and stabilize this market, reduce the volatility in the market, and serve the interests of both consumers and producers alike,” John Hannah, national security adviser to Cheney, told reporters.
——————-
Well there you have it. Dick Cheney is there to serve the interests of “consumers and producers alike”. Ummm, help. I don’t think I can take any more of my interests being represented by Dick Cheney.
March 21st, 2008 at 11:24 am
#85 - Actually you could just bounce the flash off the ceiling. Set it for about 2 full stops under proper exposure for the light outside and you should be fine. Unless the ceiling is very high, then I’d shoot full power into a an umbrella and bounce the light.
As a kit a Nikon D40 w/ say 2 Vivitar 285HV flashes, and 2 cheapy light stands and umberllas. Depending on how well you shop you could problably get this for around $700 (a little more if you wanted to sync the flashes wirelessly) and would be more than enough camera to do the work.
HDR bracketing is cool, but may not be nec.
Personally, I’d shoot it with Ilford FP4+ on my 501CM. You may not sell the house but the shots would be beautiful.
Also, yes the photography makes a big difference in which listings I’d look at.
March 21st, 2008 at 11:24 am
Peter Schiffs Weekly Newsletter.
Alice in Wonderland
How do you know when you’re through the looking glass? A fairly good indication is when the price of gold, which normally moves up in response to monetary easing, instead plummets in reaction to one of the largest rate cuts in Fed history. Apparently, yesterday’s 6% drop in gold resulted from the “hawkishness” shown by the Fed in only cutting rates by 75 basis points, rather than the 100 points that many had expected. It is a testament to how low the bar has been set that the Fed can slash rates in the face of a collapsing dollar and soaring commodity prices and still be viewed as hawkish on inflation. Is it just me, or is Ben Bernanke morphing into the Mad Hatter?
Despite the mildly tough language in its statement, it should be clear to all that the Fed sees inflation as the only politically acceptable “solution” to the problems it created. The conclusion that a 75 point cut shows concern about inflation is half right. The Fed is concerned, but only to the extent that the markets stay focused on bogus CPI numbers and fail to notice severe price increases throughout the economy. The fact is that inflation will be with us for some time, and the knee jerk drop in gold is yet another excellent buying opportunity.
As the credit and financial crisis spirals out of control, and the Fed moved $30 billion of garbage Bear Stearns debt onto the public balance sheet, the proposals coming from other market leaders are taking similarly phantasmagorical turns. Steve Forbes, in an interview on CNBC earlier in the week, proposed that the government suspend “mark-to-market” rules for one year so that holders of unsellable mortgage-backed securities no longer have to recognize losses. Remember, the dominos began to fall precisely when two Bear Stearns hedge funds were forced to actually sell assets they had failed to properly mark-to-market. Were the government to actually follow this advice it would destroy what little confidence remains in our financial system. However, Mr. Forbes believes that the markets can be spared unnecessary pain if participants can simply pretend that their holdings are worth par value. This amounts to a plea for accounting by mutually beneficial mass delusion.
Later in the week, investors were cheered by the Government’s decision to slash the surplus capital requirement of already overextended Fannie Mae and Freddie Mac by 33%, and by Wall Street’s success in convincing investors to dump $17.9 billion into the record IPO of Visa…which may qualify as the largest sucker bet in history. But the most bizarre idea was introduced on the pages of the Wall Street Journal when veteran opinion page writer Holman Jenkins Jr. recommended that the government buy and “bulldoze” foreclosed homes in order to prop up the values of those that remain standing. I’ll deal with these ideas in sequence.
After pushing through earlier proposals that allow and encourage Fannie and Freddie to buy larger loans, the reduction of capital requirements now pushes the government sponsored lenders farther out on a leveraged limb. By allowing the accumulation of even more taxpayer guaranteed debt, the moves will merely delay and exacerbate the housing problems and will increase the size of losses when these two government sponsored enterprises ultimately fail. In the meantime, by taking on more risk, the appeal of existing Fannie and Freddie insured debt will erode further, driving up mortgage costs, and creating additional losses for leveraged owners of these securities.
In the early stages of the biggest credit crunch in U.S. history, buying shares in Visa, a company that derives its revenues based on transaction fees from credit card purchases, qualifies as a particularly ill- timed investment. Perhaps buyers of these shares didn’t get the memo, but the days of Americans using credit cards to buy products they cannot afford are about to come to an end. For all its flaws, Wall Street does possess an extraordinary ability to apply lipstick on any pig. For the formerly private owners of Visa, this is perhaps one the best exit strategies ever engineered, on par with the Hail Mary orchestrated by Blackstone last year (shares of Blackstone are now trading for half their IPO price).
Finally, in response to Mr. Jenkins’ proposals, there is no question that we built far too many homes during the housing bubble. However, destroying them now will merely compound our losses. The one benefit we have from excess construction is an ample supply of what will soon be highly affordable homes. At the moment foreclosed houses are only unwanted because their prices are still too high. Once prices drop sufficiently there will be plenty of demand. However, destroying existing homes reduces their value to zero (actually less due to demolition costs) and only exacerbates the losses to creditors and society. Mr. Jenkins’ thinking is formed by the same perverse logic that led the Roosevelt Administration to destroy farm animals and crops during the 1930’s because he wanted to prop up food prices. As I wrote in my book “Crash Proof”, we must certainly be on the eve of our financial destruction, as we are clearly a nation gone completely mad.
March 21st, 2008 at 11:25 am
My first job was working the second shift doing QC testing at a generic penicllin maker in North NJ. I learned many life lessons from the Russian and Indian immigrants who worked there, not to mention Russian curses. While my friends were racking up cc debt I was saving. My Indian boss told me that he had been in the country for 12 years, his house was paid off, and he was part owner of a liquor store. I was under strict instructions to keep the liquor store secret, since if our American bosses found out they would be jealous. The Americans were mostly baby boomers drowning in cc debt, car payments, crippling mortgages, etc. back in 1996-96. I wonder how they fared in the bubble years.
March 21st, 2008 at 11:25 am
63 Sean
Was that first note from you?
March 21st, 2008 at 11:27 am
“However, I’ve got to think that the search for these mispriced assets is a proprietary activity. “Inviting” the public into distressed-asset funds seems a bit disingenuous.”
You said a mouthful there, bub.
March 21st, 2008 at 11:31 am
74 grim
I’d say 9 of 10 listing agents could benefit from that list. You’d think half of those items are intuitive, but if that’s the case, there’s a serious lack of intuition in the hereabouts.
March 21st, 2008 at 11:33 am
“Do you think it’s over? Was it over when the Germans bombed Pearl Harbor!? Hell no!
Animal House.
March 21st, 2008 at 11:39 am
87 hehehehe
“I work near the diamond district”
Me too. Tosh as well. Maybe we meet for lunch at Del Friscos….
March 21st, 2008 at 11:42 am
93 RayC
It’s an excellent time to buy AND sell.
March 21st, 2008 at 11:43 am
“he was part owner of a liquor store.”
this is a business I’d be inclined to try, but I wonder what percentage of an average liquor store’s sales is to alcoholics. If it’s a lot, I’d be uncomfortable with that
March 21st, 2008 at 11:45 am
I like a good steak
March 21st, 2008 at 11:47 am
“Steve Forbes, in an interview on CNBC earlier in the week, proposed that the government suspend “mark-to-market” rules for one year so that holders of unsellable mortgage-backed securities no longer have to recognize losses.”
“the most bizarre idea was introduced on the pages of the Wall Street Journal when veteran opinion page writer Holman Jenkins Jr. recommended that the government buy and “bulldoze” foreclosed homes in order to prop up the values of those that remain standing.”
[jots down names of Forbes and Jenkins on growing list of people who pretend to be free market capitalists for political purposes but who really believe in Socialism-For-Me-But-Not-For-Thee]
March 21st, 2008 at 11:49 am
grim - help out of moderation at 105?
March 21st, 2008 at 11:50 am
#101
You will have to sell your house or your first born child to eat at Del frisco’s
March 21st, 2008 at 11:53 am
#106 agreed– it is pathetic. these guys should be cheering this correction
March 21st, 2008 at 11:56 am
#104 There’s the Ted’s Montana Grill on 61st. Phenomenal burgers.
March 21st, 2008 at 11:57 am
this is a business I’d be inclined to try, but I wonder what percentage of an average liquor store’s sales is to alcoholics. If it’s a lot, I’d be uncomfortable with that
Can’t call yourself a capitalist then can you? Look at Trump and Gambling.
March 21st, 2008 at 12:00 pm
“Steve Forbes, in an interview on CNBC earlier in the week, proposed that the government suspend “mark-to-market” rules for one year”
I love that bs. He sure wasn’t complaining when they were recording record earnings slicing and dicing the stuff and claiming sh*t is gold.
March 21st, 2008 at 12:02 pm
#62 2012?
March 21st, 2008 at 12:10 pm
To all Realtors: Here’s just how important good photographs can be. Sold my condo in ‘04 and have been renting since, waiting for the market to return to sanity before getting a house. Husband and I started looking around, casually, six months ago, mostly at open houses. In January, we signed with a Realtor and started looking in earnest, but we were prepared to wait a year or more if we couldn’t find what we wanted at a good price. We were fully prepared to lowball, too.
We were looking in a handful of Bergen County towns, to be near family and friends. I saw a house on Craigs list, with 8 big, beautiful, well-lit photos and five or six paragraphs of information, including the address of the house, contact information for the Realtor, and the mls number. Everything was crystal clear–both the photos and the written information.
Although this house was in a town that wasn’t on our list, was in Essex rather than Bergen, and had higher taxes than our limit, we went to see it. We saw the house two days after it went on the market; within a week we were one of five bidders for the house and ended up paying slightly more than asking price. It’s under contract and scheduled to close in May.
That is the power of good photographs. This house had everything that we love and we never would have seen it if not for the photos. Those photos lured us out of Bergen, past our tax limit, and, astonishingly to us, past the asking price.
March 21st, 2008 at 12:10 pm
#111
capitalism isn’t imcompatible with ethics.
March 21st, 2008 at 12:13 pm
March 21, 2008
Op-Ed Columnist
Partying Like It’s 1929
By PAUL KRUGMAN
If Ben Bernanke manages to save the financial system from collapse, he will — rightly — be praised for his heroic efforts.
But what we should be asking is: How did we get here?
Why does the financial system need salvation?
Why do mild-mannered economists have to become superheroes?
The answer, at a fundamental level, is that we’re paying the price for willful amnesia. We chose to forget what happened in the 1930s — and having refused to learn from history, we’re repeating it.
Contrary to popular belief, the stock market crash of 1929 wasn’t the defining moment of the Great Depression. What turned an ordinary recession into a civilization-threatening slump was the wave of bank runs that swept across America in 1930 and 1931.
This banking crisis of the 1930s showed that unregulated, unsupervised financial markets can all too easily suffer catastrophic failure.
As the decades passed, however, that lesson was forgotten — and now we’re relearning it, the hard way.
To grasp the problem, you need to understand what banks do.
Banks exist because they help reconcile the conflicting desires of savers and borrowers. Savers want freedom — access to their money on short notice. Borrowers want commitment: they don’t want to risk facing sudden demands for repayment.
Normally, banks satisfy both desires: depositors have access to their funds whenever they want, yet most of the money placed in a bank’s care is used to make long-term loans. The reason this works is that withdrawals are usually more or less matched by new deposits, so that a bank only needs a modest cash reserve to make good on its promises.
But sometimes — often based on nothing more than a rumor — banks face runs, in which many people try to withdraw their money at the same time. And a bank that faces a run by depositors, lacking the cash to meet their demands, may go bust even if the rumor was false.
Worse yet, bank runs can be contagious. If depositors at one bank lose their money, depositors at other banks are likely to get nervous, too, setting off a chain reaction. And there can be wider economic effects: as the surviving banks try to raise cash by calling in loans, there can be a vicious circle in which bank runs cause a credit crunch, which leads to more business failures, which leads to more financial troubles at banks, and so on.
That, in brief, is what happened in 1930-1931, making the Great Depression the disaster it was. So Congress tried to make sure it would never happen again by creating a system of regulations and guarantees that provided a safety net for the financial system.
And we all lived happily for a while — but not for ever after.
Wall Street chafed at regulations that limited risk, but also limited potential profits. And little by little it wriggled free — partly by persuading politicians to relax the rules, but mainly by creating a “shadow banking system” that relied on complex financial arrangements to bypass regulations designed to ensure that banking was safe.
For example, in the old system, savers had federally insured deposits in tightly regulated savings banks, and banks used that money to make home loans. Over time, however, this was partly replaced by a system in which savers put their money in funds that bought asset-backed commercial paper from special investment vehicles that bought collateralized debt obligations created from securitized mortgages — with nary a regulator in sight.
As the years went by, the shadow banking system took over more and more of the banking business, because the unregulated players in this system seemed to offer better deals than conventional banks. Meanwhile, those who worried about the fact that this brave new world of finance lacked a safety net were dismissed as hopelessly old-fashioned.
In fact, however, we were partying like it was 1929 — and now it’s 1930.
The financial crisis currently under way is basically an updated version of the wave of bank runs that swept the nation three generations ago. People aren’t pulling cash out of banks to put it in their mattresses — but they’re doing the modern equivalent, pulling their money out of the shadow banking system and putting it into Treasury bills. And the result, now as then, is a vicious circle of financial contraction.
Mr. Bernanke and his colleagues at the Fed are doing all they can to end that vicious circle. We can only hope that they succeed. Otherwise, the next few years will be very unpleasant — not another Great Depression, hopefully, but surely the worst slump we’ve seen in decades.
Even if Mr. Bernanke pulls it off, however, this is no way to run an economy. It’s time to relearn the lessons of the 1930s, and get the financial system back under control.
March 21st, 2008 at 12:20 pm
http://www.dailybusinessreview.com/news.html?news_id=47720
This developer foreclosed on a massive 10 acre project in West Palm Beach and instead of the market and lack of buyers he blames the lenders for this mess.
March 21st, 2008 at 12:22 pm
#111
capitalism isn’t imcompatible with ethics.
Somewhat true but you can’t feel bad about your cusomers and you definitively can’t feel bad about making money.
It’s your own family that you need to worry about. Your Brain is for business and your heart is for your family.
March 21st, 2008 at 12:23 pm
tosh
“#104 There’s the Ted’s Montana Grill on 61st. Phenomenal burgers.”
typo? 51st? That’s a block from me and my favorite watering hole (Heartland).
March 21st, 2008 at 12:24 pm
skep (104)-
No greater a mix than the percentage of alcoholics in the general population.
A few good liquor store owners will also cut off drunks, or people who come into the store loaded.
March 21st, 2008 at 12:25 pm
make money #118,
It should be legal to sell kids cocaine, then. Who cares if they OD.
March 21st, 2008 at 12:25 pm
Can anyone get me an address on njmls #2747570
Thanks
March 21st, 2008 at 12:26 pm
patient (106)-
Saw Forbes blowing that twaddle yesterday and nearly lost my lunch.
That proves-once and for all- he is an inbreed and a corporate welfare junkie.
March 21st, 2008 at 12:27 pm
#119 - typo? 51st? That’s a block from me and my favorite watering hole (Heartland)
Probably just my brain in fail mode.
March 21st, 2008 at 12:29 pm
sync,
relax, You have to be 21. That’s why we have rules and laws to govern a society.
cudo’s to ml implodometer,
great pieace on Bear and JP situation,
http://www.321gold.com/editorials/willie/willie032008.html
March 21st, 2008 at 12:30 pm
grim re: 126: Oops. I used the cr@p word. Shame on me. Can you unmoderate? Thanks.
March 21st, 2008 at 12:32 pm
“capitalism isn’t imcompatible with ethics.”
hmmm. Where to start? Every day I have execs say to me “we want to do X, tell me how we can do it legally.” Because there are MANY grey areas in the law, the answer is often “it’s not clear whether or not doing X is legal.” Then the pressure is applied to say that it is legal. Even where that pressure is resisted, it now enters the province of the business judgment of the C-level guys whether or not to do X, which will be profitable, and may be legal (or not).
This process is constantly re-curring.
Is it ethical to do X if a lawyer has advised you that it may be illegal?
What I can tell you for certain is that if your top competitor is constantly doing X and you’re not, you’re not going to last long.
I guess it depends what the meaning of “ethics” is.
March 21st, 2008 at 12:34 pm
“That proves-once and for all- he is an inbreed and a corporate welfare junkie.”
As with so many who inherited their wealth and position.
Born on third base and think they hit a triple.
March 21st, 2008 at 12:35 pm
“capitalism isn’t imcompatible with ethics.”
I think one can do very well in this world with the goal that both parties of a transaction feel satisified at the end.
March 21st, 2008 at 12:35 pm
“Saw Forbes blowing that twaddle yesterday and nearly lost my lunch.
That proves-once and for all- he is an inbreed”
he always struck me a robot who didn’t really understand the things he was saying. inbreed also works
but to think that Wall St used to be populated exclusively by guys like him and they ran it better than today…
March 21st, 2008 at 12:46 pm
Pictures even come into play on eBay. You’ll see that poor quality pictures in auctions leads to less of an interest.
-Richie
March 21st, 2008 at 12:46 pm
41#, clot, chifi: moon shot?
nasa mission accomplished.now the sattelites are back to earth
http://finance.google.com/finance?q=gdx&hl=en
March 21st, 2008 at 12:50 pm
I hope our friend Reachard is OK.
March 21st, 2008 at 12:54 pm
Good article by Paul Krugman.
I have always wondered, somehow the whole financial network is like big giant feedback loop. Most folks are both in debt (primarily via mortgages and CC) and at the same time are investors via 401K, IRA, CD, Pension plas etc… Large percent of investment is in these Assets, which is used to create mortgage and CC debt.
Is it really worth it to go through such a cycle? Or is it better for most folks to payoff their mortgages before investing at least in vehicles that again invest back into Asset backed securities?
March 21st, 2008 at 12:58 pm
I think one can do very well in this world with the goal that both parties of a transaction feel satisified at the end.
What is it that you do for a living and how is it that you practice this? Or is it just empty rhetorics.
March 21st, 2008 at 1:03 pm
BStearns has (or had) 14 thousand workers, most having been paid in stock share bonuses in recent months. The economy in New York City is sure to be badly harmed, worse than already. Wall Street jobs account for 35% of NYCity wages.
35% of wages. One third of NYC econimy is directly effected by wall street. The other 2/3 are indirectly effected. A 30% Wall Street cut will have a depressionary effect on NYC.
no need to worry though, Gold Coast and NNJ will NOT be affected.
March 21st, 2008 at 1:04 pm
I hope our friend Reachard is OK.
Why did his house finally fall of the cliff(I mean it literary)
March 21st, 2008 at 1:07 pm
Out of curiosity i ran some numbers for ethanol last night feel free to cal me on any errors and remember this is a first run estimation…..
-1 US gal of ethanol (EtOH) has the same amount of energy as 1.5 gallons of EtOH.
-Per DOE, the US uses 388 million gallons of gas per day
-Per the Iowa Ag Review the US plants 80 million acres of corn per year (2006 data)
-1 acre of corn yields 158 bushels.
-current EtOH yields are 2.7 gallons EtOH per bushel of corn.
-This gives 439 gallons of EtOH per acre of corn.
-if we replace ¼ of daily US gas usage with EtOH we would need 88 million * ¼ = 9.5 million gallons of EtoH per day or 5.26 Billion gallons of EtOH per year.
-5.26 billion gallons divided by 439 gallons of EtOH per acre fo corn = 11.8 million acres of corn per year to replace ¼ of the US gasoline usage.
From the US grain council, current US corn consumption breaks down as follows: 19% export, 27% Food/Seed/Industrial, 54% Feed and residual.
Replacing ¼ of US gasoline usage with EtOH would take up 13% of the corn produced.
Consider that this scenario is only for replacing ¼ of gasoline usage. Replacing ¼ of oil usage would be much harder as the US uses approximately 7.6 Billion barrels of oil per year or about 230 Billion gallons of oil per year
Lets put that in perspective……
Assume that oil and gas are exactly equivalent ( they are not because it takes energy from oil to produce gas, so 1 gallon of gas in actually less then 1 gallon of oil but lets pretend for a first run guess)
Using this assumption ¼ of our annual gasoline usage represents 5.26 billion gallons of gas divided by 230 billion gallons of oil = 0.023 or 2.3%
So ¼ of our annual gasoline usage represents about 25 of our annual oil usage. So it takes about 13% of our corn production to replace 2% of our oil usage!!!!!! This doesn’t sound very effective to me! Lets extrapolate. If we replace 25% of our oil usage with EtOH we would use 13% / 2% = 6.5% of corn production per 1% of oil replaced. 100 / 6.5 = 15.4. this means that WE CAN ONLY REPLACE 15.4% OF OUR OIL USAGE WITH EtOH IF WE USE OUR ENTIRE ANNUAL CORN PRODUCTION!!!
March 21st, 2008 at 1:07 pm
make #136,
Wall Street jobs account for 35% of NYCity wages.
Source?
March 21st, 2008 at 1:15 pm
The other story not told is that Bear Stearns was dissolved before the wrecked investment bank had a chance to take advantage of the Term Security Lending Facility. It will be made available by the USFed at the end of March. The sleazy hogs on Wall Street wanted to remove one player at that window. The other story not told is that a liquidation of Bear Stearns would inevitably have resulted in a massive credit derivative meltdown. The consequences cannot be estimated. The derivative upside down pyramid is mammoth. No precedent exists for its partial unwind or dissolution. The pyramid holds together the entire USTreasury complex, attached to interest rate swaps, attached to credit default swaps of various types, and so on. This pyramid is leveraged 70 to 1. The talk is funny though, since the USFed has backstopped only $30 billion in Bear Stearns securities. What about the other $800 to $1500 billion rancid bonds floating within striking distance to Wall Street and major bank balance sheets? In truth, we might later learn that Bear Stearns helped to bail out JPMorgan, in helping to shore up its credit derivatives, in providing some emergency collateral, soon to bust, to prevent a JPMorgan failure!!! JPMorgan owns $7.778 trillion of credit derivatives, two and half times as much as Citigroup, the same toxic stuff that crippled Citigroup. JPMorgan skated on this one without publicity.
Any thoughts on above paragraph?
March 21st, 2008 at 1:17 pm
#139 - NY Fed, of particular interest is page 5.
March 21st, 2008 at 1:18 pm
“Why did his house finally fall of the cliff(I mean it literary)”
Have you got him confused with Duck and his faulty retaining wall?
March 21st, 2008 at 1:19 pm
Sync,
See my post #125 for the source.
March 21st, 2008 at 1:20 pm
you’re right. he definitively belongs on the top ten list.
March 21st, 2008 at 1:20 pm
njpatient,
you’re right. he definitively belongs on the top ten list.
March 21st, 2008 at 1:21 pm
MAKE,
from BEA.gov, the 2007 US GDP was 13.7 Trillion
JPM alone holds 7 trillion???? that sounds like a problem
http://www.bea.gov
March 21st, 2008 at 1:24 pm
In the 1950’s our Society was based upon Capitalism. It was still a Nation of Private Shop Keepers, Farmers, Industrialists, etc. Individual families owned Department Stores, Butcher Shops, Gas Stations, Funeral Homes, Factories, etc. Most people were able to experience the American Dream. Today’s Society is not Capitalism. A Few Very Rich People own everything. The current Shadow Financial System is Legalized Fraud & Thievery. Unfortunately, only a replay of Bastille Day, can shake the Grip of the Globalist Monarchy which has seized power, and return the Country to it’s People. Remember, the Globalists actually think they have the right to sell US infrastructure to Foreign entities. That is a Gross violation of the Constitution.
March 21st, 2008 at 1:25 pm
Kettle,
I hope you can fit a whole bunch of people in your place in Domenica as everyone you know family and friends will beg to join you.
March 21st, 2008 at 1:26 pm
147 confused
The black helicopters should be arriving shortly for your ride to GITMO. A little water boarding should get you to tell them what terrorist cell you belong to
March 21st, 2008 at 1:27 pm
148,
its a couple of acres with mature fruit trees, i should be able to handle the extended family ( its not that large really)
March 21st, 2008 at 1:27 pm
tosh
thanks for the link
wow:
“The financial services sector, which includes finance, insurance, and real estate firms, is important to New York City not only as a source of jobs but also, increasingly, as a source of earnings (Chart 5). In fact, the share of total city earnings accounted for by the sector in 2000—more than 35 percent—was almost triple its 1970 share. However, one of the key features of New York City’s financial sector is its declining share of nationwide finance employment—at 6.5 percent in 2000, this share was less than half its size in 1960.”
Doyle, see you in 2017. Drinks on me!!
March 21st, 2008 at 1:29 pm
make,
i take that back, just counted and its at least 40 ppl. better buy a few more acres!
March 21st, 2008 at 1:33 pm
fruit trees are gonna be the key.
March 21st, 2008 at 1:35 pm
149.kettle1 Says:
March 21st, 2008 at 1:26 pm
147 confused
The black helicopters should be arriving shortly for your ride to GITMO. A little water boarding should get you to tell them what terrorist cell you belong to
C’est la vie, C’est la guerre.
March 21st, 2008 at 1:36 pm
I think that $7bb number was only long CDS positions, not including any short CDS positions. I remember the net number being much more manageable in the hundreds of millions. The question than is that if the short CDS are matched positions. If they are not than JPM is not managing their risk properly. I hope that is not the case. My information was when I was cruising through the web and came across the open CDS positions for the major banks. I can’t remember where I saw it though.
March 21st, 2008 at 1:36 pm
Confused In NJ Says:
March 21st, 2008 at 1:24 pm
In the 1950’s our Society was based upon Capitalism. It was still a Nation of Private Shop Keepers, Farmers, Industrialists, etc. Individual families owned Department Stores, Butcher Shops, Gas Stations, Funeral Homes, Factories, etc.
________________________________________________
Yeah, I guess this pretty little picture is what inspired Ike’s crazy rantings about a little something called the “military-industrial complex.”
March 21st, 2008 at 1:38 pm
WE CAN ONLY REPLACE 15.4% OF OUR OIL USAGE WITH EtOH IF WE USE OUR ENTIRE ANNUAL CORN PRODUCTION!!!
great lets subsidize it with borrowed money from Saudis.
March 21st, 2008 at 1:38 pm
bi[132],
The moderator threw a curveball. If you want to discuss it, disclose your position.
Kettle[138],
Let’s summarize; buy corn?
Make[140],
Bear did not get bailed out. They were thrown to the wolves. However, they made their own bed. JPM was bailed out along with the world markets.
March 21st, 2008 at 1:41 pm
# 51 “The reason is that they judge the quality of their life compared to other real people, not fictional characters or movie stars.”
As we tell our children: Unless you are the richest person in the world, there are othere people that will have more than you, so don’t sweat having less than anyone else.
March 21st, 2008 at 1:42 pm
Aaron (129)-
For the vast majority of businesspeople, that’s how it is.
The people in corporate America who constantly complain and attempt to find ways to circumvent this simple philosophy are the exceptions…and, they’re the exceptions that prove the rule.
Their scheming, whining and bleating only reveals their corrupt nature. The fact that they can only succeed by shafting people- or compromising politicians- underlines it.
March 21st, 2008 at 1:44 pm
127.I guess it depends what the meaning of “ethics” is.
Ethics is a major branch of philosophy, encompassing right conduct and good life. It is significantly broader than the common conception of analyzing right and wrong. A central aspect of ethics is “the good life”, the life worth living or life that is satisfying, which is held by many philosophers to be more important than moral conduct.
This common definition seems to support the current philosophy of do unto all to get yours.
March 21st, 2008 at 1:46 pm
BC Bob 158
Good point,
Anyone who read that analysis nows owes me a reasonable $50 research fee. I accept gold bullion and non-US currencies
March 21st, 2008 at 1:46 pm
“Their scheming, whining and bleating only reveals their corrupt nature. The fact that they can only succeed by shafting people- or compromising politicians- underlines it”
“However, I’ve got to think that the search for these mispriced assets is a proprietary activity. “Inviting” the public into distressed-asset funds seems a bit disingenuous”
you’re dropping some bombs today Clot. I find it hard to type this but I’m impressed.
March 21st, 2008 at 1:47 pm
bi (132)-
Does “bi” stand for “bifurcated attention span”? Blow that chart back 1-2 years, and tell me what you think. At 5 years (BC’s entry point), the argument is completely moot.
Keep shorting commodities and being long HBs and the other silly stuff you do.
Please also let us know when you put on a trade. Taking the other side- simultaneous to your actions- is as good an approach as I’ve come across lately.
March 21st, 2008 at 1:48 pm
rebar (133)-
I think his wife has him strapped to a board.
March 21st, 2008 at 1:49 pm
156.BubbleYum Says:
Yeah, I guess this pretty little picture is what inspired Ike’s crazy rantings about a little something called the “military-industrial complex.”
Eisenhower was right about the Industrial (Corporate Cabal) Complex. They own & control everything, now.
March 21st, 2008 at 1:50 pm
(147)-
1:24 PM, and here’s the first call to arms of the day here.
March 21st, 2008 at 1:52 pm
“capitalism isn’t imcompatible with ethics.”
not sure what’s the point of such statement. communism isn’t incompatible with ethics. being realtor isn’t incompatible with ethics. running NJ’s gov’t isn’t incompatible with ethics.
HC
March 21st, 2008 at 1:56 pm
Annamelbourne’s post [114] is exactly the reason why I’m asking if there are a lot of buyers on the sidelines. Multiple bids over asking for a desirable home and not a single comment regarding this post.
March 21st, 2008 at 1:57 pm
In the penultimate draft of the address, Eisenhower initially used the term military-industrial-congressional complex, and thus indicated the essential role that the United States Congress plays in the propagation of the military industry. But, it is said, that the president chose to strike the word congressional in order to placate members of the legislative branch of the federal government. The actual authors of the term were Eisenhower’s speech-writers Ralph Williams and Malcolm Moos.[2]
Attempts to conceptualize something similar to a modern “military-industrial complex” existed before Eisenhower’s address. In 1956, sociologist C. Wright Mills had claimed in his book The Power Elite that a class of military, business, and political leaders, driven by mutual interests, were the real leaders of the state, and were effectively beyond democratic control.
March 21st, 2008 at 2:05 pm
Shore Guy Says:
“As we tell our children: Unless you are the richest person in the world, there are othere people that will have more than you, so don’t sweat having less than anyone else.”
Ditto.
March 21st, 2008 at 2:06 pm
gary (169)-
That post is not remarkable. A properly-priced home is so unusual in this market, that it often triggers bidding wars.
What’s also so unusual is how rarely sellers will take this course, even though there’s plenty of evidence of its effectiveness.
March 21st, 2008 at 2:07 pm
Gary, 169: IMO, the key to multiple bids over asking was an aggressive asking price, a home in top condition (truly), and the fact that the Realtor got very good photos of that home in front of as many eyeballs as possible, very quickly.
By the way, over the last six months we visited probably 50 other homes, most of which were overpriced for the condition/location and none of which we were interested in bidding on.
March 21st, 2008 at 2:07 pm
Kettle[162],
First, all disclaimers.
You can spread Dec 2008 corn calls, expire end of Nov.. Buy Dec 600 calls and sell t