Thu 21 May 2009
From Bloomberg:
Fed Officials Unconvinced Economy’s ‘Stabilization’ to Persist
Federal Reserve officials, who see possible signs of “stabilization” in the U.S. economy, signaled they’re not convinced those improvements will persist.
Policy makers, meeting April 28-29 in Washington, saw “significant downside risks” to the outlook for the economy, with the global financial system still “vulnerable to further shocks,” minutes of the session released yesterday said.
The report indicates that Fed officials may be ready to build on their plan in March to buy $300 billion of Treasuries should the economy or financial markets deteriorate further. Some policy makers said an increase “might well be warranted at some point to spur a more rapid pace of recovery” from the worst recession in five decades, the minutes showed.
…
Yesterday’s minutes also updated economic projections from the 17 Fed policy makers, who forecast a deeper U.S. contraction than they foresaw in January, with a 9 percent unemployment rate lasting through the end of 2010.Central bankers made their biggest cut yet to next year’s growth forecast, indicating the economy won’t rebound as quickly as previously anticipated. The jobless rate may remain as high as 8.5 percent in late 2011. The weaker forecasts are in line with changes to projections by private economists over the past few months.
…
“Participants generally expected that strains in credit markets and in the banking system would ebb slowly, and hence the pace of recovery would continue to be damped in 2010,” the Fed said in the minutes. Economic growth will pick up in 2011 as financial conditions improve, the Fed said.
From the WSJ:
World Economies Plummet
Steep declines in the economies of three of the U.S.’s biggest trading partners — Mexico, Japan and Germany — underscored the severity of the global recession and put pressure on major industrialized nations to revive moribund global trade talks.
On Wednesday, Mexico became the latest country to report a plunge in output. The country’s gross domestic product fell at an annualized rate of 21.5% in the first quarter, the worst performance since the 1995 peso crisis led to an International Monetary Fund and U.S. Treasury financial rescue. This time, Mexico has insulated itself somewhat by arranging a $47 billion IMF credit line in advance.
Mexico’s decline followed by a day Japan’s report that its economy contracted in the first quarter at a 15.2% clip, its worst performance since 1955. Last week, Germany said its first quarter decline in GDP, an annualized 14.4%, was the worst since 1970.
From Bloomberg:
U.K. May Lose AAA Rating at S&P as Finances Weaken
Britain may lose its top-level credit rating at Standard & Poor’s for the first time as the government’s finances deteriorate amid the worst recession since World War II.
The outlook was lowered to “negative” from “stable” because of the nation’s increasing “debt burden,” S&P said in a statement today. The pound fell the most in almost a month against the dollar. Stocks and bonds slid, and the cost of insuring debt against default rose.
Britain would become the fifth western European Union nation to lose its rating because of the economic slump, following Ireland, Greece, Portugal and Spain. The U.K. plans to sell a record 220 billion pounds ($343 billion) of bonds in the fiscal year through March 2010 as the recession cuts revenue and forces the government to raise spending.
From the NYT:
Treasury Said to Plan Second Bailout for GMAC
The Treasury Department has decided to bail out GMAC, the former financing arm of General Motors, with $7.5 billion, according to people familiar with the discussions, which would bring its total federal assistance to more than $12 billion.
The deal is expected to close on Thursday and comes two weeks after federal regulators concluded from a stress test on GMAC that it needed an additional $11.5 billion in capital to weather a severe downturn in the economy.
GMAC continues to provide crucial financing for car sales by General Motors, and Treasury officials recognized that its survival was essential to the government’s broader attempt to rescue and restructure the automobile giant, according to the individuals who were briefed on the discussions and who spoke only on the condition that they not be identified.
…
GMAC received $5 billion in federal bailout money in December.
From Bloomberg:
Greenspan Says Banks Still Have a ‘Large’ Capital Requirement
ormer Federal Reserve Chairman Alan Greenspan signaled that the financial crisis has yet to end even as borrowing costs tumble, warning that U.S. banks must raise “large” amounts of money.
“There is still a very large unfunded capital requirement in the commercial banking system in the United States and that’s got to be funded,” Greenspan said in an interview yesterday in Washington. He also said that “until the price of homes flattens out we still have a very serious potential mortgage crisis.”
…
Home prices will only start to stabilize once the “liquidation” rate of single-family homes has peaked, he said. “I don’t think we’re there yet.”
http://www.sacbee.com/topstories/story/1879764.html
“Governor and legislative leaders say deep cuts in California services inevitable now”
… “I think the message was clear from the people: Go all out and make the cuts and live within your means.”
A bit of a tax revolt here in CA. Education took an 11% cut this year - more to come. There will be additional cuts in education, health care and law enforcement.
Many are talking about looking at prisons. With the “3 strikes” law came prison after prison. Peace officers and prison guards can retire at 50 with a 3 times multiplier. (Education multiplier max is 2.4 @ 63 - city/county 2.7 @ 60 I think.)
In 1980 we had 12 prisons and a budget of 400M for 22,500 inmates. Today we have 33 prisons and a budget of $10.6B for 168,000 inmates. There are more prisons planned at billions of dollars. Something has to give there.
One thing for sure, the voters are saying to the legislators - “Do your job.” Cuts - not new taxes.
From the Star Ledger:
Meadowlands Xanadu officials now expect opening sometime in 2010
Financing problems continue to plague Xanadu, the controversial, $2 billion retail and entertainment complex in the Meadowlands, with officials now projecting the long-delayed project will not open until sometime in 2010 at the earliest.
State officials plan to meet with the developers next week and say they remain optimistic the lending problems will be resolved, but concede a temporary shutdown of the massive project still remains a scenario under consideration.
The project was initially scheduled to be completed last November, but was pushed back to this summer as the slumping economy worsened.
The New Jersey Sports and Exposition Authority, which views Xanadu as a key to the redevelopment of the Meadowlands, called the financing problems temporary.
“This project is too far along and too large for it not to be completed and open,” said Carl Goldberg, chairman of the authority.
While there has been substantially less construction work going on in recent months, Goldberg said, the project has not come to a halt. The authority today approved a large-scale landscaping plan outlined by Meadowlands Xanadu — the private development company building the complex — which officials hope will soften its garish exterior of orange, blue and green that has been the focus of so much criticism. That work is scheduled to begin in the fall.
Today, the site looked like a ghost town from the outside. Construction gates were closed. A few workers could be seen installing road lights.
I have been reading this blog for a long time and feel like I’ve received some really solid information about the present and future state of the NJ housing market. However, I find myself in the position of having to consider buying a bigger house (growing family) and need some advice. We live in a “starter” home in one of those wealthy Somerset county towns on a mid-town direct train line. The house is small, but has been updated well and sits on a nice piece of property within walking distance of town. So, does anyone have any advice on how to go about buying and selling a house in this market? Does one typically have a contract on their existing house b4 putting a bid on another house?
Incidentally, we put a bid (120K under asking) in on a house last week and the owner turned it down flat with no counter offer. The house needs an enormous amount of work (no updates since it was built in the 1950s) and had been sitting on the market for over a year.
Thanks for any insight you can provide.
Ironic that Timmay spends a few hours before Congress yesterday talking about how valuable the stress tests were and the FOMC minutes come out an hour later forecasting an unemployment number higher than the worst case scenario in the stress tests. I love this government:)
Fiiirrrssstttttt
Hiiii. Fiveeeee
This postink is closed
MSP,
Can you add-on and reconfigure your existing space? If you are looking at places that need work, is modifying your home — paid for partially by saved RE commissions, RE transfer taxes, and moving costs — a reasonable option?
MSP (7) ~ I am a RE newbie and am also shopping for houses.
You’re hitting the NNJ home-owner mentality that’s prevalent in today’s sellers. Although some houses certainly are selling, these home are going for 10%-15% off list price, and many owners don’t respond to low-ball offers lower than this, so there is some upward pressure in the sub $550K home listings, if that’s the price level you’re looking at (which I am).
I find that many sellers are still in a la-la land of 2006 seller’s market and have not yet come around to a Depression 2.0 pricing. You are probably 6-12 months too early in your bid, but bide your time. It’s on your side.
Shore,
Not really. We’ve had a few architects and contractors look at the place and adding on would be a large undertaking (300K+) which would over improve the house for our street.
“significant downside risks” to the outlook for the economy, with the global financial system still “vulnerable to further shocks,”
I don’t get it? TARP, TALF, TLGP, PPIP, etc.., and still vulnerable? Do we have to print/inject 150% of GDP? Well, the stock market is indicating all is fine. Time to margin up. OOPS, forgot, green shoots still has not taken out the down-sloping 200 dma. I’m really confused today. Anybody?
JB [1],
Got demand?
MSP,
Too bad. Is it overall space that you lack or specific things like not enough brdrooms for the family? The reason I ask is that some of us have discussed the benefits of keeping a small primary house close to rail and in the relayively-higher tax area and purchasing a weekend place, with a fair bit of land, in a lower tax area. One can head up on Friday after work and commute in on Monday morning. Given the absurd current taxation (with more to come as the chickens come home to roost) and the money one needs to pay RE brokers, yadda, yadda, it is one other approach to gaining extra space.
Hey, anybody up for some xanax* and espresso shooters this morning? The weather is really nice, we can meet on some corner in Paterson and pretend we’re junkies! C’mon, it’ll be fun!! FYI, today is my seven month anniversary looking for a job that doesn’t exist! No worries though… I think like… you know, like… Amerikan Idle totally rocks and like… that’s all that really, like… matters…. dude! Happy, happy green shoots everyone! Buy now or be priced out forever!
grim, unmod me!
GMAC bail-out, what BS. The Govt basically owns Chrysler and GM which has millions in unsold cars sitting on lots rusting away and falling in value every day. The GMAC money is just to help people buy US owned cars. Besides they changed their name to Ally a few weeks ago.
John,
Forget about the limo for your party. I need a Mack Truck, bringing mustard seeds and a ton of charts. You supply the beer.
Xanadu will be a casino one day.
Shore,
Its overall “common” space and not enough usable bedrooms (one is only suitable as a nursery). We don’t want a big house, just a bigger house where it’s possible to host a family holiday with more than six people. Right now, our party options are limited to the warm weather months (we have a great backyard).
I am sure the highly educated and wealthy elite will frequent Xanadu. Ha!
#24 - Don’t forget about the beautiful.
tbw,
Dude, totally awesome idea!! I’m going to get a job at Xanadu!! That place is going to so totally rock!!
Dream home spirals into big bust, now up for auction
Got $2.5M? You can bid on $15M mansion
http://www.detnews.com/article/20090520/OPINION03/905200377/Dream-home-spirals-into-big-bust
tbw [22],
I agree.
From MarketWatch:
U.S. initial jobless claims fall to 631,000
U.S. continuing jobless claims rise 75,000
U.S. 4-wk. avg. continuing claims rise 131,000
U.S. insured unemployment rate rises to 5.0%
From MarketWatch:
U.S. weekly initial jobless claims fall by 12,000
First-time claims for state unemployment benefits fell by 12,000 to a seasonally adjusted 631,000 in the week ending May 16, the Labor Department reported Thursday. The four-week average of initial claims fell by 3,500 to 628,500, data show. Meanwhile, the number of continuing claims hit a record high, climbing by 75,000 to a seasonally adjusted 6.66 million the week ending May 9. The four-week average of those claims also hit a record, of 6.48 million.
From Bloomberg:
Jobless Claims in U.S. Decreased 12,000 to 631,000 Last Week
More Americans than forecast filed claims for unemployment insurance last week, and the total number of workers receiving benefits rose to a record, signs the job market continues to weaken even as the economic slump eases.
Initial jobless claims fell by 12,000 to 631,000 in the week ended May 16, from a revised 643,000 the prior week that was higher than initially estimated, the Labor Department said today in Washington. The total number of people collecting benefits rose to 6.66 million, a record reading for a 16th straight week, and a sign companies are still not hiring.
COLDWELL BANKER IN NEW YORK TO CLOSE
Longstanding New York City brokerage Coldwell Banker Hunt Kennedy is closing its doors, according to multiple sources familiar with the company.
The 21-year-old, 214-agent company — Manhattan’s sixth largest, according to a recent survey by The Real Deal — will cease operations within 60 days, the sources said
http://ny.therealdeal.com/articles/coldwell-banker-hunt-kennedy-in-new-york-to-close-william-morris-hunt-iii-and-joanne-kennedy-nrt-realogy-corporation
(cont)
Today’s Labor report showed the unemployment rate among people eligible for benefits, which tends to track the jobless rate, climbed to 5 percent in the week ended May 9, the highest level since December 1982, from 4.9 percent. These data are reported with a one-week lag.
MSP [7]
Sub-$500k price point in walking distance to a mid-town direct line is still VERY in demand right now, despite all the poo-pooing and job loss discussion on this blog. Set an asking price that is below market value and you will have multiple bids to choose from. Not saying you are going to get better than 2004 price for your home but it will sell. Make sure your listing agent specifically mentions that the home is walking distance to train.
As for the buy side, find something you like that has been on the market for some time. I have to agree that most sellers are still delusional so you have to target someone with realistic pricing out of the gate, an estate sale, or a home that has been rotting on the MLS for over 180 days.
You can always make a closing date a contingency on the sale of your home but if you find someone who is ready to buy from you quickly, don’t make them wait too long.
“Meanwhile, the number of continuing claims hit a record high, climbing by 75,000 to a seasonally adjusted 6.66 million the week ending May 9.”
Record high? Margin up.
Gold Coast Market Report From Halstead (for what it is worth)
http://media.halstead.com/pdf/Halstead_QuarterlyReport_NewJersey_1Q09.pdf
“COLDWELL BANKER IN NEW YORK TO CLOSE”
He,
Me thinks I’ll be shopping for a Mem Day boot sale. I may need then this autumn/next winter.
“signs the job market continues to weaken even as the economic slump eases.”
What is wrong with the second part of that sentence? Retail sales still dropping, home starts and sales dropping, who’s the friggin editor at Bloomberg?
MSP (7)-
You’re too early to the game. The pain will come to your blue-ribbon train town, though it may take another 6-9 months.
It WILL come, so be patient. Wouldn’t be the worst thing in the world to sell your place now and go into a rental for a year or so. One piece of your equation that’s not a variable is that your house is losing value every day. Might as well capture as much as you can out of that sale and stop the erosion of equity.
You will have eons of time to buy and a great selection when your trade-up segment hits the dumper. There will be no bounce or V-shaped recovery, so better to trade-up a little late than too early.
Best to be buying when utter hopelessness rules the market. Right now, just way too many people pumping sunshine and drawing in the suckers.
BC,
Silly Coldwell should have spent more time finding all those foreigners that were going to save the NYC market.
This bond even scares me. But it gets me thinking since they have a monopoly on making axles and you can’t make cars without axles will O have to bail them out too? Trouble is O has entered straw that breaks the camel backs phase and this might just be it.
AMERICAN AXLE & MFG INC SR NT 5.250% 02/11/2014 MAKE WHOLE
Price (Ask) 27.402
Yield to Worst (Ask) 41.500%
02406PAE0
BC (15)-
I’m not confused. I’m taking action.
Shiny and short. Just like John’s member.
BC we may recover like a Charlie Brown t-shirt with a few more zigs and zags but we will get there.
Seneca,
Thanks for your input. We will be pricing our house reasonably as we are not delusional, so I’m pretty sure it will sell relatively quickly. It really is a nice house in a nice location and we’ve taken great care of it and made improvements (siding, all new wood windows, new bathroom, carpeting upstairs, patio outside, etc.) without overdoing it. My only concern is that if we market our house and it sells quickly, what do we do if we haven’t found a house yet? The thought of moving in with family or friends scares me.
Shore,
Thanks for your input as well. Much appreciated.
Jobs #s are like telling someone with cancer “you are getting new carcinomas at a slowing pace but we can’t cure the ones you already have.”
Disclosure: I am not a doctor, I only play one on this blog.
Green shoots!
gary (18)-
Have you tried growing pot in your basement?
gary-
You want to be a Realtor; I can just feel it.
If you get a license, I will open an office around the corner from you.
John (20)-
The scary thing is, I think you really believe this.
“The GMAC money is just to help people buy US owned cars.”
MSP
I used to rent a townhouse in a blue ribbon train town. We moved out and our old place is still for rent 7 months later.
I’m seeing houses sit for months unrented. I don’t think it will be too hard to find a townhouse or single family to rent. Prices keep dropping. We rent a small SFH for what we were paying for the townhouse. Next move will either be to a larger, fully renovated house or to a luxury townhouse, only this time we will be paying less than we are now.
My goal is to find another bagholder and let them subsidize my lifestyle.
MSP (44)-
The thought of pulling off a once-in-a-lifetime tradeup into a demolished market segment should excite you.
“The thought of moving in with family or friends scares me.”
Fear- and fear of loss- drives almost all RE deals. If you can switch your focus to capturing opportunity, you will eventually make out like a bandit.
John [43],
Linus is hearing bells toll in the distance. Mr Volume came back, when the market began selling off. In addition to this, the Dow traced out a reversal. What does it mean? Nothing. What could it mean? A headache for Charley?
Mish, on fire again.
Abolish the Fed!
“Now that the love affair with Obama is starting to wear off, it is time to Speak Out!
Voters in California have just spoken out against Propositions 1A-1E (see California Voters Immediately Rewarded For Voting Down Propositions 1A Thru 1E) and now it’s your turn.
It’s time to take action on many issues, and the way to do that is to let Congress know how you feel.
The first order of business is Ron Paul’s Campaign Audit the Fed, Then End It!
Audit the Fed, Then End It!
I have been very pleased with the progress of my legislation, HR 1207, which calls for a complete audit of the Federal Reserve and removes many significant barriers towards transparency of our monetary system. This bill now has nearly 170 cosponsors, with support from both Republicans and Democrats. Senator Bernie Sanders has introduced a companion bill in the Senate S 604, which will hopefully begin to gain momentum as well. I am very encouraged to see so many of my colleagues in Congress stand with me for greater transparency in government.
Some have begun to push back against this bill, and I am very happy to address their concerns.
The main argument seems to be that Congressional oversight over the Fed is government interference in the free market. This argument shows a misunderstanding of what a free market really is. Fundamentally, you cannot defend the Federal Reserve and the free market at the same time. The Fed negates the very foundation of a free market by artificially manipulating the price and supply of money – the lifeblood of the economy. In a free market, interest rates, like the price of any other consumer good, are decentralized and set by the market. The only legitimate, Constitutional role of government in monetary policy is to protect the integrity of the monetary unit and defend against counterfeiters.
….
Please fax your representatives and express support for HR 1207 and Senate S 604. Make sure your representatives know this is not just an audit issue, but a free market issue and the entire Fed must go.
Unfortunately some members of Congress are seeking to expand the Fed’s powers! We must do everything we can to prevent that. The Fed does not need more power, they micro-mismanaged the economy to the sorry state that it is in.
Please point that out when Faxing Congress. I am not going to draft a letter, it is best if you express these issues in your own words.”
http://globaleconomicanalysis.blogspot.com/2009/05/speak-out-audit-fed-then-end-it.html
#34 seneca: Very in demand right now? From who? I would not be so sure of that.
Lots of those type houses in my blue ribbon Bergen Co train town rotting on the market right now.
NSP: My Uncle sold his home in Mountainside over the last couple of months. It needed complete updating. Regardless, he was walking distance to Route 22 buses to NYC and a 2 mile walk to Westfield center. He viewed all the available comps in the area and put himself on the lower side of the middle of it. I thought he was asking too much. In four days he received: a 20% off low-ball; $20K below ask; one full price offer; and two offers through ask by about $5K. It helped that he came to market right as all the stimulus came through in March. He was essentially at the $500K price point.
9% unemplyment rate are we not just about at that rate now (8.9%)?
May’s numbers released on Friday June 5, will put us over that, and we will still have 7 months left in the year.
MSP 44:
I know it sounds horrible, but sell now, rent until the market bottoms and move into your dream home.
Live minimalistic for a year. You won’t believe how great that will feel. Especially considering that you won’t have to mow the lawn.
Clot,
But if you end the Fed LIBOR might actually reflect lending risk again and those “profitable” banks would have to take that trillion $ worth of crap they dumped with FED back on their books? You want to leave fantasyland and go back to reality? You know you live in America right?
Stu [57],
I have now rented since 9/05, previously owned RE for 20 years. Have not had 1 rent increase, pay cash every month. It has been one of the best trades I have ever made. When analyzing, I didn’t throw freedom into the blackbox, it was strictly RE bubble, rent/purchase calculator. That said, I have not been to Home Depot in 4 years and spend my weekends away from honey do’s. If I need/want to move, I pick up and say Good Night it’s all right Jersey.
13:
This is exactly what my observations are. Almost all listings are 2006 level, many relisted this year dropping 20-30K off (600K range) prices. My target is at least 25% off these levels, ideally 30%.
I think there will be more responce to low offers once UI benefits start running out and the belief in “the worst is over” propaganda disappears. This belief appears to be whats holding these prices as many sellers hope they can sit it out and prices will start appreciating again in 1-2 years.
HE (58)-
You’re right. How silly of me. Everybody knows the gubmint prices risk better than anyone.
BCBob:
As much as I’m sick of moving, I wish I had played that trade as well.
Stu,
True, moving is one big pita.
3b - I am not one to blow smoke up backsides but I am in the “walk to train” market myself.
Most of the homes are sitting and rotting. Whenever one in decent shape (updated kitchens and whatnot) comes on the market for under 500, the open houses are busy and the houses are on and off the market in a week.
There are some people who know how to price in this market and have a decent place to sell and when they do, it flys. I am looking in Union and Essex, not Somerset.
Please note I did not say “every” house is getting multiple bids. Updated home + walk to train + 2004 asking price = sold home. This has been my actual experience. How frequently do I see this happen? Maybe one home a month in the list of towns I am looking in. Not much, but I am just saying you fit the equation, your home will sell.
You want $100k over what you paid in 2003 because you added a granite countertop, your home will sit and spin.
“Forget about GDP, NAIRU, or RBL… just ask your local bartender how they’ve been making out on a consistent basis recently. That will give you the true measure of whether we are poised for a turn around in the near future.”
“Once they start experiencing a sustained level of cash income, then and only then will this country be ready to climb out of the dumpster. Until then… we will continue the downward plunge into this abyss of debt, piss, and vinegar.”
http://www.examiner.com/examiner/x-8340-SF-Business-Commentary-Examiner~y2009m5d20-Theres-Only-One-True-Barometer-of-the-Economy-Bartenders?ref=patrick.net
[7] MSP
I was going to tell you to sell your home and rent in NJ, but Stu has already given you that advice.
The rent v. buy calculation stil favors renting. You can then afford more house in a great neighborhood.
And, to reiterate BC Bob’s comment (and if you know me, I never like to agree with someone from BC), you can pick up and beat feet if things get bad here.
There’s a reason property-owners are called “bagholders” on this sight. And if the spouse objects about not owning, ask which she would rather have: A house in her own name or college and retirement funded? That question worked quite well for me.
Marketwatch headline states that jobs data fails to lift gloom.
What in the data would have lifted the gloom, with the continued rise in continuing claims?
[42] clot
“Shiny and short. Just like John’s member.”
Damn good thing I finished my coffee before reading that.
#63 seneca: I am not disagreeing with you, just pointing out that in my town we have more than a few of thsoe type hosue,a nd most are sitting.
I think this Spring we have the ususal increase in buying, but at a very depressed pace.
After the inital surge, that will be it as we head into the summer. Typically the Spring market I have been told ends around the end of June.
Latest from BNA on NJ taxation and budget:
Weak Revenues Prompt New Jersey Proposal
For Additional Increase in Income Tax Rates
PHILADELPHIA—Faced with steeply declining revenues and a constitutional mandate to enact a balanced budget by July 1, the administration of New Jersey Gov. Jon Corzine (D) May 19 proposed to raise tax rates on annual income in excess of $400,000 and suspend property tax rebates for 1 million New Jersey homeowners and renters for one year.
New Jersey State Treasurer David Rousseau told the Assembly Budget Committee the state’s leaders have to solve “a fiscal problem that simply defies comparison to any previous crisis” because revenues have plummeted to a five-year low and are still falling.
Since the governor’s fiscal year 2010 state spending plan was proposed in March (45 DTR H-4, 3/11/09), the revenue shortfall has grown from $7.2 billion to $8.8 billion, forcing the administration to identify additional spending cuts and revenue raisers, Rousseau said.
Corzine in March proposed a one-year increase in the tax rate on income greater than $500,000 to generate $380 million. That plan has now been amended to encompass more taxpayers and raise rates further for the highest earners.
Rousseau said the revised budget proposal would boost the tax rate on annual income between $400,000 and $500,000 to 8 percent, from 6.37 percent now, an increase that would affect 17,000 taxpayers and raise $80 million.
The tax rate on income between $500,000 and $1 million, which is now 8.97 percent, would climb to 10.25 percent, as Corzine proposed in March.
New Tax Bracket for Millionaires
In addition, the administration’s current plan calls for a new top rate of 10.75 percent that would apply to income in excess of $1 million.
The newly proposed income tax rate increases would apply for one year, affect about 61,300 of the 3.9 million people who file New Jersey income tax returns, and generate $280 million, according to Rousseau.
In addition to the other revenue raisers he proposed in March, the governor now proposes a boost in the 2.0 percent tax on health maintenance organization (HMO) and other insurer premiums. Raising the HMO tax to 3 percent would increase revenues from that tax by $50 million, to $160 million a year, Rousseau said.
He said raising the insurance premium tax, which applies to all other insurers, to 2.25 percent would generate $66 million more annually.
Property Tax Rebates
Suspending New Jersey’s property tax rebate program for one year for all homeowners and tenants other than senior citizens and disabled people would save the state an estimated $943 million.
Rousseau said some 468,000 senior and disabled homeowners with incomes of up to $100,000 would continue to receive an average of $1,295 in property tax relief and another 36,000 with incomes between $100,000 and $150,000 would get an average benefit of $763 in fiscal 2010 under the governor’s proposal.
He estimated the state’s cost for those rebates at $640 million.
An estimated 108,000 senior and disabled renters would receive up to $860 each in property tax relief in 2010, at a cost of $74 million.
Lawmakers Respond
State lawmakers responded to the Corzine administration’s newest budget proposal along party lines, with Republicans in both chambers demanding more spending cuts in place of tax hikes to ease the impact on middle-class taxpayers and Democrats on the defensive.
“No matter how the governor, his administration, and the Democrats in the Legislature try and portray this issue, the bottom line is that the promise made in 2006 to deliver property tax relief was a farce,” Assembly Republican Conference Leader Peter Biondi (R) said in a statement.
“The elimination of rebates for most homeowners represents a tax increase, and that is how it should be viewed,” Biondi said. “For a number of years this group has been delivering a fiscal house of cards to New Jerseyans which is now collapsing on the middle class.”
Assembly Budget Committee Chair Louis Greenwald (D) said the updated revenue report and budget proposal reflect the global economic collapse, “but the time for empty rhetoric and criticism is over. Critics must offer alternatives. That has not happened. The public deserves better.”
3B,
I honestly believe there’s been pressure placed on all the MSM media outlets to positive spin everything since back in March. It’s on record CNBC had a meeting where the “talent” was told to stop bad mouthing the administration.
The Powers That Be believe that maintaining the facade of a stable economy in the hopes it motivates economic activity is their only out of this mess. Plan will never work, ask Japan.
Traitor nom deplume says:
May 21, 2009 at 9:37 am
[42] clot
“Shiny and short. Just like John’s member.”
Damn good thing I finished my coffee before reading that.
“Shiny and short.”
From polishing the insides of too many Vidalias….
sl
Nom [66],
Funny, we have both been on the same side of the aisle regarding rule of law, capital outflows, citizenship outside the US, currency debasement, etc.. Somebody slap me.
“. And if the spouse objects about not owning”
In such circumstances, sell the current home and buy a mountain home, the weekend place for cash. Then rent the workweek place. That way one is stil a homeowner, but less likely to be left a bagholder with continuing declines.
http://www.youtube.com/watch?v=bNhBcSVrcZY
Start at the 3 minute point to see how F’ed up things are in Montclair!
[70] redux
FWIW, Corzine’s plan is a 20% tax increase on those earning over 1MM, and a 25% tax increase on those earning between 400K and 1MM.
The 1MM+ crowd is smaller and more mobile, and I think that their estimates are gonna fall flat. When one is considering moving their income production to a state with no income tax, saving $107,500 per year looks awfully attractive.
I don’t get hit by this, and it isn’t likely that I will. If I were though, I would be calling up friends in Bucks Co. and renting their closet for $100 a month as the roughly $18,000 you save on a 400K salary makes that sort of tax evasion awfully attractive.
[73] BC
I don’t find it that unusual that I agree on most issues with a BC grad. I know enough of them.
But we disagree violently on the relative importance of BC and its place in the solar system.
“The Powers That Be believe that maintaining the facade of a stable economy in the hopes it motivates economic activity is their only out of this mess.”
Now, if Capt. Smith had just said, “forget about abandoning ship folks, we have LOTS of extra ice for drinks,” all would have been well on the Titantic.
[74] shore,
That’s the plan (and the reason for the nompound), and once we do that, we will be residents of the nompound for tax purposes.
That is one reason PA is high on the list.
Any thoughts on this prestigious Montclair kitchen?
http://emailrpt.gsmls.com/public/media.do?method=gethighresolution&mlnum=2677987&num=4&res=highres&imagecnt=8&sysid=3941047&pubid=259341&servername=http://pargraph.gsmls.com/imagedb/
plume (68)-
Please pass the onion dip.
I got a million where that came from…I’ll be here all week…be sure to tip your waitress…try the fish…
[80] clot
Between you and Still, I am LMAO right now.
3b (69)-
Must I remind you again? The Spring market ends at halftime of the Super Bowl.
Grim - 80 is stuck in mod. All it is is a link to an image of the fantastic kitchen for GSMLS 2677987 in Montclair.
Click through to the 5th image. It’s a dream kitchen.
http://tinyurl.com/qx3v3p
Nom,
As soon as the little Shore’s are out of high school, unless I am in congress then, we are likely to shift our primary residence to a low/no-tax state. It makes no sense to go into a storeand pay 4-5X the cost of the same product one can buy across the street for less. I love this area but the enjoyment does not justify the extra cost, especially when I can still spend nearly half a year here anyway and pay less in the process.
Gator (84):
The booze display and the matching wallpaper and bedspread are priceless. So if you buy the house, do you get to keep the bed spread? Otherwise, you are completely screwed.
Clotpoll (39) “Best to be buying when utter hopelessness rules the market. Right now, just way too many people pumping sunshine and drawing in the suckers.”
I am sooo with you on this.
Actually it is not short I always go long, but the knob has been polished more times then you can count so it sure is shinny.
still_looking says:
May 21, 2009 at 9:44 am
Traitor nom deplume says:
May 21, 2009 at 9:37 am
[42] clot
“Shiny and short. Just like John’s member.”
Damn good thing I finished my coffee before reading that.
“Shiny and short.”
From polishing the insides of too many Vidalias….
sl
Nom [77],
That’s funny, I never did tout the academics of the school on this blog, nor its importance in the big picture. Sounds like you’re the one with the coronary. You bring it up much more than me? Why not just discuss with your wife, this site does not give a crap. I’m not like most, I could give a sheet where someone graduated from. BC, BU, ND, G’Town, Nova, etc.. Who really cares? I believe the mirror is the final arbiter.
BC (90)-
Unless you’re a Dookie.
” Im not like most, I could give a sheet where someone graduated from. BC, BU, ND, GTown, Nova, etc.. Who really cares?”
Indeed, if it is not Harvard or Princeton, it is just a waste of time and money. Tongue planted firmly in cheek.
You guys are still missing that PPIP will work like RTC i a non-centralized manner, I would rather we have an RTC but there is no longer an appitite for that. PPIP needs makers and takers for liquidity. The Fed will force insolvment banks to sell into PPIP and will lend with great leverage and cheap rates to Private Equity, Hedge Funds and other types to buy. Thus moving he sludge off banks balance sheets. The risk is the stuff is sold at fire sale prices and the rich get richer, the upside is the stuff really is sludge and when the second leg of defaults come the non-regulated non entitled to a bailout crowd gets slammed we can let them take the fall without systemic risk.
Clot [91],
And if you are, in some manner, associated with that point guard from JC.
John [93],
Which pe, hedge fund manager wants to partner with Timmy, Barney and O? Hasn’t precedence been set?
John (93)-
RTC sold assets. PPIP will sell crap.
I think it’s safe to say that the market in crap is overbought at present.
“I would rather we have an RTC but there is no longer an appitite for that.”
For there to be another RTC, banks and assets would have to be seized. Instead, the gubmint has decided to dilute shareholders to the consistency of water, while propping up the debt by promulgating the illusion that the dead can be brought back to life.
I also don’t remember the gubmint offering me 6x leverage and an underlying put at any RTC auctions I attended, either.
May 20 (Bloomberg) — One of Bruce Springsteen’s old haunts is about to go on the auction block.
The building that once housed the Upstage Club in Asbury Park, New Jersey, a hall in which Springsteen and fellow rockers used to jam in the late 1960s and early 1970s, will be offered for sale next month.
“There was probably no other club like it not only in New Jersey, but in all of rock and roll history,” Robert Santelli, executive director of the Grammy Museum in Los Angeles and author of a history of Springsteen’s E Street Band, said by telephone. “Without the Upstage Club, there’d be no Bruce Springsteen, there’d be no E Street Band.”
Springsteen, a New Jersey native who named his first album “Greetings from Asbury Park, N.J.,” performed at the Upstage with musicians such as Southside Johnny Lyon and Steve Van Zandt before the venue closed in 1971. Some of the building’s second and third floors are still covered with Day-Glo paint from that period, said Eric Kaufman, senior managing director of Bedford, New York-based Symphony Property Group, which is organizing the sale.
The three-story, 7,500 square-foot (697 square-meter) building at 700 Cookman Ave. is one of 10 properties that are due to be auctioned at the building on June 18. Eight of the properties are in Asbury Park and two are in Jersey City. Asbury Park is a shore town about 60 miles south of Manhattan that was famous for its rides and arcades in the mid-20th century before beginning a long decline.
Kaufman declined to give an asking price for the building. He said the couple who own all of the 10 properties that are up for auction hope to raise a total of about $5 million.
Rock Museum?
Tom and Margaret Potter, who owned 700 Cookman Ave. during New Jersey’s musical heyday, opened the alcohol-free after-hours Upstage Club on the top floor, above the psychedelic Green Mermaid Café, which was on the second floor.
“It would be great to make it a rock museum,” Kaufman said. “So let’s get all the Jersey rockers to chip in and buy it.”
Kaufman said he contacted the Rock and Roll Hall of Fame in Cleveland to ask for help in finding wealthy musicians who might be interested in preserving the building.
In the liner notes for “I Don’t Want to Go Home,” the 1976 debut album by Southside Johnny and the Asbury Jukes, Springsteen described how musicians from New York and northern New Jersey used to flock to the club after their regular gigs.
“Everybody went there ‘cause it was open later than the regular clubs and because between 1 and 5 in the morning you could play pretty much whatever you wanted,’’ Springsteen wrote.
The musicians who played there ‘‘were each in their own way a living spirit of what, to me, rock ‘n’ roll is all about,’’ he wrote. ‘‘It was music as survival, and they lived it down in their souls, night after night. These guys were their own heroes, and they never forgot.’’
BC Bob, Hedge Funds right now are on the verge of being regulated. They better play ball in PPIP or face regulation.
J [98],
They’ll flee faster than you can get shiny.
John (98)-
It will be fun watching all that money go offshore. Maybe I should get into the poolside/beach concession business in the Caymans.
Rum swizzles for everybody!
[90] BC
Lighten up Francis. Just the usual trash talk betwixt BC and UMass alums. Comes from being on the receiving end of a lot of BC hubris. Especially back in the home state.
If you are not typical of the BC grads I met who feel that their DNA was somehow enhanced by their time in Chestnut Hill, then it speaks well of you, and we can limit the trash talk to sports (which will get the ‘Nova spouse riled up to be sure).
J [97],
“cause down the shore everything’s all right
You and your baby
on a saturday night
You know all my dreams come true
When i’m walking down the street with you”
[100] clot,
Provision in one of the stim acts treats a foreign company, especially a hedgie, as a domestic company for tax purposes if they are managed from the U.S.
Further, foreign financial companies are regulated here if they do business here. Banks, for example, are regulated in a manner similar to domestics as to their US ops, and bank regulators will seek to impose a sort-of jurisdiction over them with respect to their offshore business by holding their domestic business hostage to regulation, as it were.
Another option is to punish US investors that invest with foreign hedge/PE funds, probably through the tax code.
So I don’t doubt that the feds will find a way to impose regulation on foreign hedge/PE funds that do business in the U.S., though it will be muted.
“Maybe I should get into the poolside/beach concession business in the Caymans.”
Clot,
The next GTC. Bring plenty of shorts.
By the way, that Caribbean Trading Center? Who are those guys? I do know they are big. Funny, not 1 trader from that office can be identified. Such a mystery?
got in the car to drive home last night, turned on the radio (which was tuned to Bloombert) and, I sh*t you not, the very first words I heard were “green shoots.”
Musta been a re-run of a Knicks game from the Sidney Green era.
montclair: all nj towns all like that
towns are broke
but we’re getting a new mall/
[108] As the new mall will contain the largest Cabela’s store in the country, Nom will finally have a nearby place to stock up on ammo.
“3 bad reasons to buy a home”
“Before being taken in by all the ‘now’s the time to buy’ chatter, keep in mind that there’s a flip side to the conventional wisdom about homebuying.”
http://articles.moneycentral.msn.com/Banking/HomebuyingGuide/the-3-worst-reasons-to-buy-a-house.aspx
They better play ball in PPIP or face regulation
IMO, They’re getting regulated no matter what, it’s just a matter of time.
Not that it is objective proof, but one of the G20’s main conclusions was that regulation of the hedge fund industry was a necessity.
I don’t know why Hedge Funds should be regulated. I don’t see them asking for a bailout.
John,
It’s OK if it’s short as long as it’s shiny.
It’s better then Margin calling long John.
Make,
LMAO.
#112 - Vic - The logic was along the lines of; “As long a we’re responsible for the pensions funds who invest in hedge funds they (hedgies) should be regulated”.
I’m not taking a stance either way with regards to the govt’s regulation of said industries. I’m just saying I believe they see it as needed and inevitable.
Make,
Back to long and shiny;
http://www.smartmoney.com/breaking-news/on/?story=ON-20090518-000552-1921
Here’s a handy link to the working group’s pdf on regulation and transparency. It was discussed a bit when it was first released in Feb.
Once again, it’s just IMO that this is where policy is headed….
… I won’t even mention what I think is going to happen with regards to “trust busting”.
Oh those Wildwood Days!!!! 25 months of inventory…the Miami of New Jersey.
http://njbiz.com/article.asp?aid=47896082.5986857.1015404.4939021.84066802.201
New money long I put into market since November I am up 100K. By staying long into weakness and by not selling into a panic, shorting is a good stratgy short term. Long term I like to buy heavy on heavy down days and slowly sell on better days while keeping 100% invested has been working. I only use Margin for extreme bargins. Borrowing short term at 8% to lock in a long term 30% bond is risky not crazy.
make money says:
May 21, 2009 at 10:47 am
John,
It’s OK if it’s short as long as it’s shiny.
It’s better then Margin calling long John.
115 -
Tosh, that is incredible. Aren’t hedge funds supposed to be for people who are “sophisticated” investors, who are able to take larger amounts of risk for a potential large gain?
Pension funds were supposed to only invest in the safest assets. Maybe the pension funds need to be regulated to disbar them from putting money into hedge funds! Also, the pension funds need to dial down their expectations, IIRC, they are projecting an annual growth of 8%!!
When the government picks a scapegoat, there is a fair chance that the party in question is not to blame. They should look at putting regulations like Glass-Steagal back into place, so that banking is a boring business once again.
#71 disident; I agree.
#120 - Vic - Yup, but Neg Am option arms were supposedly only used by the “savvy” (God, I hate that word) as well.
A lot of pension funds have been forced in to ever riskier investments in order to get some sort of returns. I’d make a comment here about fiat currencies, but I won’t.
How will NY Metro real estate fare once these zombies manage to succeed?
COUNT ONE: CONSPIRACY TO USE WEAPONS OF MASS DESTRUCTION WITHIN THE UNITED STATES
From at least in or about June 2008, up to and including in or about May 2009, in the Southern District of New York and elsewhere, JAMES CROMITIE, a/k/a ‘Abdul Rahman,” a/k/a “Abdul Rehman,” DAVID WILLIAMS, a/k/a “Daoud,” a/k/a ‘DL,” ONTA WILLIAMS, a/k/a “Hamza,” LAGUERRE PAYEN, a/k/a “Amin,” a/k/a “Almondo,” the defendants, at least one of whom traveled in and caused another to travel in interstate commerce in furtherance of the offense, and others known and unknown, unlawfully and knowingly did combine, conspire, confederate and agree together and with each other to use a weapon of mass destruction, to wit, a surface-to-air guided missile system and an improvised explosive device (”IED”) containing over 30 pounds of Composition 4 (’C-4″) military grade plastic explosive material against persons and property within the United States.
http://graphics.nytimes.com/packages/pdf/nyregion/20090520-bomb-plot-arrests/complaint.pdf
(Link to PDF File)
[109] cobbler,
A bit late for that. Time to buy was before the election, and certainly before the inauguration (which I found amusing–did folks who waited until just before inauguration think that there was a chance O’bama would not be inaugurated???).
Now there is an ammo bubble. Demand is sky-high, supplies are scarce, and prices are through the roof. I have enough to hold off the hordes that would seek personal redistribution, and can even sell some back into the marketplace at a nice profit.
I don’t have a lot but I have enough. And if things blows over, and I need more, I won’t be buying at bubble prices.
Nom… do you see ammo as an insurance policy (if SHTF) or as collectibles, or worse as an investment? I am sure that you are not one of those idiots with an itchy-finger playing with a new toy.
S
QWERTY 124
a SAM and C4 are not weapons of mass destruction. thats like calling a honda civic a high performance super car. While they may have been engaged in a plot to detonate explosives if they didnt have a nuke, bioweapons, or a large thermobaryic weapon, then these was no “mass destruction” involved.
Otherwise the US uses weapons of mass destruction on a daily basis in iraq and Afghanistan
[126] sastry.
I will answer that and devote no more bandwidth to what is a trivial topic.
First, for actual use. I do go to the range though not that often. I have been involved in this sport since age 8.
Second, as a hedge against price increases/unavailability. I think this is self-explanatory. Further, one of the calibers is very hard to find so I got what I needed while it was available and relatively cheap.
In this sense, it is an investment as well since I can also sell some. Assume that the price doubles, then I can sell half my inventory and my remaining stock is free. And if I keep it for personal use, it is not like food—it keeps rather well if stored properly.
Third, for SHTF insurance. Realistically, my Y2K leftovers were sufficient for that. I only bought more because of 1 and 2. Mostly 2.
Fact is, I have no more than 600 rounds in each caliber I use, and less than 100 in .223. Ask anyone in this sport and they will tell you that is not much. I’d like more .223 and a lot more .22LR as I have enough for only 1 or 2 visits to the range.
“thats like calling a honda civic a high performance super car.”
Hey kettle, you leave my high performance super car alone!
[128] sastry
And if you promise to be serious, I may take you to the range sometime (and no, I won’t use you for a target).
[129] sir
I believe Stu drives one of those high performance supercars.
Stu? Have you pimped your ride yet?
not knocking the civic, at the moment i would much rather have a civic then my audi
my latest adventure with audi has cost me a few thousand $ and 4 days stuck in NC!!!!
thats like calling a honda civic a high performance super car
But mine has a big rear wing! That has to make faster!
Ok, fine. I’ll add a loud exhaust too, and vinyl graphics. That’ll add performance.
the super car!!!
http://tiny.cc/Supercar
is this yours stu?
What do you think is the right distance to say a house is “walk to train” or “walk to bus” distance?
My place is about 20 minutes walk from a train, 15 minutes walk to a bus.
I actually did the walk to the train for a few years, with health benefits, before breaking down and buying a parking lot sticker. Wished it was closer, but then we’d be hearing the train too. Train station has bike parking - would be a 7 minute bike ride.
Other advantage is that house is truly an easy walk to schools: 4 minutes to elementary, 2 minutes from high school. (Backyard backs up to a relatively inactive school field- which is considered a negative).
Of course the seller marketed it as “walk to school, walk to NYC transportation”, which is literally true.
kettle1: (127) “thats like calling a honda civic a high performance super car.”
Bite your tongue!
In other news, it looks like I get to stay a bit longer at my current place of employment. I was just given a vital role in three new projects that will keep me busy at least through September. I’m off to Grove City Ohio again on Tuesday. The smallest of my projects is to carbon footprint every single piece of my company and vendors both w/ and w/out electricity use. This is a requirement of working with BOA. Expect many BOA ‘green’ commercials in the near future.
The other two projects are much less of a waste of time.
[135] ket
Wow, its the Toshmobile!!!!
[136] a.west
“Of course the seller marketed it as “walk to school, walk to NYC transportation”, which is literally true.”
As Stephen Wright used to say “anyplace is within walking distance, if you have the time.”
All: I hate to break some bad news to people, but while you weren’t looking, the “Stress Test” has allowed a number of banks to queue up hellacious amounts of capital. Regardless of dilution, we can defend solvency here. The Test in itself is irrelevant. It has resulted in a series of events that allowed access to capital.
Further, there just a boatload of investment grade companies coming to market for benchmark debt offerings. One of the key issues that concerned observers was the amount of corporate debt maturing and also short-term debt outstanding. First the CP market loosened up, and now you have companies going out the curve for 2’s, 5’s and 10’s at CHEAP absolute rates. The UST’s are low, and even with blown out spreads, the money is cheap.
The economy is anemic, but the super doomsday scenario is moving further and further away from the table. The next move is probably down, but the quad shot espresso with half sugar is holding things up.
Do I have any editorial commentary? NO….just don’t ignore what is happening simply because it pisses you off…..
Nom #130
Channeling Dick Cheney? “I won’t use you for target, but will blow your face off anyway” :)
S
As for pimpin’ my ride, I haven’t done anything to increase the horsepower. I do have two 15″ woofers in hatch pumpin 150 watts per channel although my 1995 Denon face finally croaked. I replaced it with an $85 Clarion with a USB input to listen to podcasts and tunes and I think it actually sounds better than my former $700 head unit.
Of course, my favorite thing to do is to blast the ghetto with the sweet sounds of Bloomberg Radio.
Chi (140) -
Point taken. However, considering that there is no such thing as a “free lunch”, what is the collateral damage in this case?
Did anyone hear about this in the creit card bill: those who pay off their balance every month will be charged 1-2% fee?
crazy if it is true
HH(144):
Better not be true!
Ouch;
http://www.usdebtclock.org/
Chi,
Thanks for stating that the “greater fool” theory is working. What’s the government’s plan when they run out of fools?
“Regardless of dilution, we can defend solvency here”
Chi,
We is plural. McKinsey does not agree with you, nor do I.
“The economy is anemic, but the super doomsday scenario is moving further and further away from the table”
Agree with that. The anemia is probably long-term, however.
Chi,
If they’rr solvent then I guess we can end TALF, TARP, etc and let them reclaim all the sh*t the Fed has on it’s books?
chi (140)-
What do they do when all the capital is eaten up by future loan losses?
Or, when nobody qualifies (or, more important, applies) for loans?
Funny how raising capital- by any means-doesn’t cure insolvency.
From The Business Insider, May 21, 2009:
Subprime is done. All the teaser rates are over, the interest rates have reset and the writing is on the wall.
But in the coming quarters, the scenario will play out with other exotic mortgages, Option ARM (pick-a-pay), Alt-A, etc. The homebuyers may have had better credit, but they had the same strategy: Get a low interest rate upfront, and then deal with the reset down the road, by either refinancing or selling the home. But, whoops, home values are way lower and the economy sucks. Plan derailed.
Zacks analyst Dirk van Dijk warns of the troubles ahead:
The vast majority of the homeowners with these ‘pick a payment’ mortgages pay only the minimum payment. When it exceeds a set level, or at a set date in the future (whichever comes first), the mortgage holder has to start paying the fully amortizing payment of the now much larger mortgage. This can cause huge jumps in the monthly payment, with increases of over 50% not uncommon.
These are the ultimate in ‘exploding mortgages.’ The number of these recasts is relatively small right now — at about $1 billion per month — but that number is set to grow dramatically over the next few years, exceeding $8 billion per month in the fall of 2011. If the equity in your house is gone and your monthly mortgage payment suddenly jumps from $2000 per month to over $3000 per month, what do you think is going to happen? How about if one or both of the people in the household has been laid off?
This is going to be a huge problem, particularly for Wells Fargo (WFC). The biggest writer of these abominations of housing finance vehicles was Golden West, which was bought by Wachovia, which was then absorbed into WFC. Unlike sub-prime mortgages, these were for the most part targeted at more upscale homeowners. The next wave of foreclosures will be in gated communities, not on the ‘wrong side of the tracks.’
Victorian says:
May 21, 2009 at 12:04 pm
Chi (140) - Point taken. However, considering that there is no such thing as a “free lunch”, what is the collateral damage in this case?
Vic: Mind your own store, keep your nose clean, and don’t worry about how French Connection UK’ed many people are. The sheer fact that you participate on this site reflects a higher likelihood that you will be ahead of the curve on what ever happens next……..
BC Bob says:
May 21, 2009 at 12:15 pm
“Regardless of dilution, we can defend solvency here” Chi, We is plural. McKinsey does not agree with you, nor do I.
Bost: Just sent to me by McKinsey at 12:28PM
What next? Ten questions for CFOs
As companies shift their attention from fighting the crisis to getting the most from the recovery, CFOs must keep them focused
MAY 2009 • David Cogman, Richard Dobbs, and Massimo Giordano
Source: Corporate Finance Practice
This short essay is a Conversation Starter, one in a series of invited opinions on topical issues. Read what the authors have to say, then let us know what you think.
The credit crisis and its shocks to the real economy have put chief financial officers on the front lines, as they implement emergency measures to help companies survive the recession. Now, as an eventual recovery begins to seem more likely, the CFO’s task may become still more complex. Even for those whose companies avoided the most severe effects of the crisis, uncertainty about the future is abundant, and credit remains tight. Capital and management time are available for only a few relatively big moves, and a new appreciation of risk accompanies each opportunity.
So the CFO’s judgment will be critical to push the management team’s thinking on the opportunities and to cast a dispassionate eye over the costs, benefits, and risks of pursuing them. Here are ten questions we think all CFOs should be asking themselves and their executive colleagues as the recovery approaches. Read the questions and tell us what you think a CFO’s priorities should be coming out of the crisis.
1. What shape will a recovery take? Even if the worst is over—though we make no assurances that it is—much uncertainty remains about the recovery’s nature and pace. A steady recovery over 12 to 18 months would pose challenges very different from those of a tepid one over, say, five years or even a slip back into recession. What weight are you giving to the possibility of wage and price inflation, high unemployment, lower international trade, or dramatic swings in currency values? What’s more, if excess leverage inflated demand and profitability in the years leading up to the crash, CFOs must help managers to understand what they should expect as normal after the crisis has fully passed and to set appropriate performance targets.1
2. Have you restructured enough? A weak economy makes it easier to implement unpopular operational changes and divestitures: companies have more leverage over suppliers, unions and regulators are more cooperative, and employees understand the need for change. When the economy strengthens, these advantages will quickly vanish. CFOs should challenge their colleagues to examine how much more restructuring might be undertaken to secure a company’s cost position for the medium term.
3. Is your supply chain sufficiently flexible? In 2008, the key question was what would happen if the downturn was worse than expected. In 2009, it’s worth considering what happens if the surprise comes on the upside. An intense focus on reducing costs and working capital will leave many companies incapable of responding to a rapid pick-up in demand. Can they respond without either bringing back high costs or cutting the quality of their products? If not, CFOs should take time now to consider whether their companies may have stretched the supply chain a little too thin.
4. Do you have a short list of acquisition targets ready? This crisis, so far, seems to echo the experience of previous ones: equity market valuations are recovering a lot faster than economic fundamentals.2 Acquisition-minded companies that wait for clear evidence of recovery before moving on attractive deals may well find themselves preempted by better-prepared competitors and miss the opportunity entirely as valuations bounce back.
5. Should you restart conversations with potential alliance partners? Last year, many companies put discussions about strategic alliances and joint ventures on hold. This year, if the underlying logic of those deals remains sound, many potential partners are finding themselves under greater pressure to close them. Moreover, businesses that may emerge from the recession at a competitive disadvantage could find a quick and effective solution in joint ventures with companies in a similar predicament.
6. Are you ready to divest newly underperforming businesses? There’s no room for sentimentality in portfolio planning. The downturn changed many industries fundamentally, and once-strong businesses may emerge from the crisis in a weaker competitive position. Divesting them now may be better than spending the next economic cycle trying to fix them. Buyers will emerge as the market recovers—and companies can free up cash for better opportunities elsewhere.
7. Do you have the financial resources needed for an upturn? Growth requires capital. Companies may require more working capital or have to finance the development of additional products, distribution channels, and marketing programs or the acquisition of new businesses. Credit and equity have become scarce resources, and new financing may not be timely enough to support the market’s full recovery. To finance growth, CFOs should prepare a battle plan—including ways to line up new equity, as well as bonds and new debt—that can be activated if necessary. CFOs in countries where the volatility and uncertainty of the crisis have pressured the currency should understand how a recovery will affect the ability to raise capital.
8. Have you taken advantage of the buyers’ market for talent and other resources? In a recession, most companies focus on cutting costs—head counts, discretionary marketing expenditures, R&D, product development, and capital spending. But all of these now cost less than they have in a decade, especially hiring new finance professionals. Research on previous downturns shows that the future winners made disproportionate investments in talent, marketing, R&D, and capital spending at exactly this point.
9. Do you know what risks a recovery might bring? Risk management and contingency planning are typically better at highlighting day-to-day issues than at anticipating major shifts. Yet an economic turnaround could bring a number of structural changes, some relatively predictable and with far-reaching effects. How well, for example, do you understand your company’s exposure to major currency or commodity price movements? Do you know whether the health of channels, customers, or suppliers might create substantial structural change or whether your company is prepared to deal with high levels of volatility that may continue even as a recovery builds?
10. Can you sell your recovery plan to investors? Too many companies were unprepared for the downturn, lacking clear plans to communicate with investors or good answers to difficult questions from analysts. Don’t be caught without a response when someone asks you what you’re doing to capitalize on the upturn.
A few big ideas that become realities will be worth much more than a dozen that don’t quite get off the launching pad. Thoughtful CFOs will ask themselves which handful of bets could have the biggest payoffs and then mobilize the bulk of their time, capital, and resources to make those bets succeed.
About the Authors
David Cogman is an associate principal in McKinsey’s Shanghai office, Richard Dobbs is a director in the Seoul office, and Massimo Giordano is a director in the Milan office.
The roller coaster rides from Sept 08 to March 09 was fun. I am missing those days. Things are boring now which is pissing me off now.
I want the Dow to fall 400 points so that adrenaline starts kicking again..
I bet the above sentiment is shared by a lot of people who are watchng the markets and they are probably the ones being bearish now.
#149 sir:but the super doomsday scenario is moving further and further away from the table”
For now perhaps, but there is way too much unknowns and uncertainity out there to rule it out.
For instance wehave the credit card and commerciial real estate explosion that is just starting,and yet these banks want to give back their TARP money.
Are they going to give it back now, only to ask for it back in say October?
“Are they going to give it back now, only to ask for it back in say October?”
If it impacts executive compensation? Absolutely!
Chi [154],
Granted this was 2/09 and banks have subsequently raised capital. However, not close to the impaired assets that McKinsey estimates. In addition to this, the banks are bracing for further losses; cc, cre and futher declines in housing.
“McKinsey—as well as others, such as Goldman Sachs—estimates that US banks may currently hold as much as $2 trillion of impaired assets. Given the likely depth and duration of the recession, the losses on them could eventually exceed $1 trillion—on top of the $500 billion in losses already realized. Whatever the precise tally, the final reckoning is certain to be larger than many US banks can absorb out of common equity and from their earnings.”
http://www.mckinseyquarterly.com/A_better_way_to_help_banks_2314
See Chi, even the senile think they need to raise more capital:
Greenspan Says Banks Still Have a ‘Large’ Capital Requirement
http://www.bloomberg.com/apps/news?pid=20601087&sid=a25ocYh4V5vI&refer=worldwide
Did you guys see the move in the 10 yr?? Ben better get those presses warm.
#160 - I’ve saw that too. I would have expected it to move lower on the S&P warning of cutting UK credit to outlook neg. No flight to quality or am I missing something? A failed auction, the same cut for US, etc.
Walking Distance.
Due to special circumstances, my definition is 5 to 10 minutes but I don’t blame anyone who is within a 15 min. walk for claiming they are walkable.
One great way to severely limit your RE buying/renting opportunities is to need 5-10 min walk to a train. It’s been a pain but, also probably saved me a fortune thus far.
#161 I’ve saw that too
Make that I. Unnecessary compound.
Even I the great Citi Bull could not have imagined a non-senior Citi bond yielding 2% this quick!
CITIGROUP INC GLBL NT 4.25000% 07/29/2009 ISIN #US172967CN90 SEDOL #Price (Ask) 100.381
Yield to Worst (Ask) 2.002%
Actually in NJ what sells is walking distance to unemployment office and a food bank.
Alap 152…see Dr. housing bubble:
http://www.doctorhousingbubble.com/
Stu…I am trying to find something legitimate posted about the credit card thing…most will try to limit or get rid of the bonus programs (like travel, points etc) but charging you for paying a bill on time is insane…I just will not use it any more, that’s my response
#152
I’m waiting for those high end option arm foreclosures in the next couple yrs.
#85 NJGator,
That kitchen must have been inspired by Pee Wee’s Playhouse.
Vic/Tosh,
There’s a disconnect, at least for today, between dollar/stocks and 10 yr/stocks. The 10 year may be focusing on the drubbing the dollar is taking. Quantitative easing and unintended consequences. Yes, crank up the presses.
#133 kettle1
my latest adventure with audi has cost me a few thousand $ and 4 days stuck in NC!!!!
Which was worse, the money or the location?
BC Bob says:
May 21, 2009 at 12:53 pm
Chi [154], Granted this was 2/09 and banks have subsequently raised capital. However, not close to the impaired assets that McKinsey estimates. In addition to this, the banks are bracing for further losses; cc, cre and futher declines in housing.
Bost: I don’t disagree. I think that we have a basic common ground on our view of fundamentals, just that your degree of negativity is just stronger than mine.
I will throw out something I saw last night on Fast Money regarding commercial real estate…
basically banks can earn their way out of this in CRE
video
http://www.cnbc.com/id/30847981
http://online.barrons.com/article/SB124284778041040317.html
Since the fourth quarter of 2007, Citigroup has reduced headcount by 20% and overall expenses by 25%. Since the third quarter of 2007, Citigroup has trimmed its balance sheet by 23%, including a 65% decrease in collateralized debt offerings (CDOs) and subprime exposure. Adding together public, private and government-related fund raising, over the last five quarters Citigroup has raised nearly $80 billion dollars in an effort to combat a once highly leveraged and risky balance sheet. Moreover, Citigroup is raising an additional $33 billion in common equity through an already announced preferred exchange in response to the findings of the U.S. Government’s Supervisory Capital Assessment Program (SCAP). The end result is a rock-solid capital structure strong enough to endure Great Depression level stress tests.
Lending was strong in the first quarter, and we expect further signs of traditional banking and correlated revenue growth in the quarters and years to come now that Citigroup has a balance sheet that can withstand increased lending activity and overall asset growth. In addition, we have experienced firsthand, Peter Lynch-esque customer service and marketing across the bank’s operations, all the way down to the teller window where new products are being offered.
We are forecasting fully diluted 2009 earnings of ($0.08) per share to account for the first-quarter operating profit, first-quarter one-time items, as well as further growth and profitability for the remainder of the year. For 2010, we are issuing an earnings forecast of 25 cents to account for increasing growth expectations upon economic recovery.
We are looking for a near-term price target of $5.50 based simply on Citigroup trading at 1.0 times its tangible common book value.
“That kitchen must have been inspired by Pee Wees Playhouse.”
Better than Pee Wee’s movie theatre.
John,
Sounds great, my friend at C will be so relieved by the news that their balance sheet is rock-solid:)
safe
its a draw. i am actually crashing with family in SC about 3 hours from where my car is, instead of paying for a hotel and have a 2 yr old stuck inside with nithing to do.
Did i mention i HATE SC. repairs keep getting delayed, but good news is car is ready today!!!!!!
I could have seen my family in SC for a lot less then the repair+expense bill. It would have been cheaper to extend my stay at the beach house in NC and the family come there! :(
#85 njgatot; One of the worst I have seen without a doubt.
173 john
don’t believe what you read
#174 Shore Guy
Better than Pee Wee’s movie theatre.
Shore, the poor guy just had a stroke of bad luck.
Ket,
What was it? I too am a disgruntled outie owner after 2 sets of suspension arm, broken spring, headgaskets, etc etc.
#176 kettle1
I was in South Carolina a few times. Once to Kings Mountain (good), once looking at neighborhoods right across the border from Charlotte (not good).
He sure was stroking it.
safeashouses says:
May 21, 2009 at 1:45 pm
#174 Shore Guy
Better than Pee Wee’s movie theatre.
Shore, the poor guy just had a stroke of bad luck.
As a bondholder every day you friend shows up to work he is stealing from me. We need to cut headcount and I am not cutting back on grey poupon to carry dead weight.
HEHEHE says:
May 21, 2009 at 1:41 pm
John,
Sounds great, my friend at C will be so relieved by the news that their balance sheet is rock-solid:)
Fish & Richardson Puts One-Third Of Its Incoming Associates On Ice
Last week, Fish & Richardson laid off 120 people. It was the second round of layoffs from the firm this year.
But that wasn’t the end of Fish’s cost cutting measures. Yesterday, the firm cold offered one-third of its incoming first year associate class. Another third of the class will start on time, and the rest have been deferred until October 2010. Above the Law has obtained this statement from the firm:
http://abovethelaw.com/2009/05/fish_richardson_puts_one-third.php
I always wondered if you get married in South Carolina move to New York and then get divorced are you still brother and sister?
#70
“the administration’s current plan calls for a new top rate of 10.75 percent that would apply to income in excess of $1 million.
The newly proposed income tax rate increases would apply for one year, affect about 61,300 of the 3.9 million people who file New Jersey income tax returns, and generate $280 million, according to Rousseau.”
**********
10.75%?! try to get a company to move to NJ after imposing this rate
#71
” honestly believe there’s been pressure placed on all the MSM media outlets to positive spin everything since back in March. It’s on record CNBC had a meeting where the “talent” was told to stop bad mouthing the administration.”
the sad thing is that most journalists are so biased in favor of O that they are probably excited by the invitation to help the team out
#166 - House Hunter
Who the hell would actually get a mortgage that negatively amortizes and increases your initial balance 13% after 5 years. Simply insane and stupid.
RE: “they didnt have a nuke”
Why, do you think they would hesitate to use one if they did?
How will NY Metro real estate fare once these zombies detonate one in Times Square?
hubba,
catasrophic cat failure, blewup my turbo as well and some other damage
I smell a link to the blast zone calculator coming…
Ket, hubb,
Wow, and I thought my 9-5 was a money pit.
#190 - blewup my turbo as well
The only solution to this is much larger turbo (T-03/04), and a bigger intercooler, new exhaust headers, 3in racing exhaust, bigger throttle body, etc. Maybe new cams as well. For, you know, “reliability”.
Seriously though, a blown turbo is expensive. Ouch.
From Ritholtz re The Banks Solvency:
Holy Sheet: Slate Article on FAS 140/OBS Assets; Long and Wrong Big Banks??? Duh!
I am constantly amazed at the willingness of some very smart people on Wall Street to follow the herd, even over the proverbial cliff. How can we believe in rational markets when so many investors are sticking their heads in the sand? The people buying bank stocks on “value” fall into this camp, IMHO. More on this lemming phenomenon in our comment next week.
http://www.ritholtz.com/blog/2009/05/holy-sheet-slate-article-on-fas-140obs-assets-long-and-wrong-big-banks-duh/
vic (160)-
A machine that is run 24/7- with no downtime- eventually falls apart.
“Ben better get those presses warm.”
skep (186)-
Doesn’t matter. Those same companies don’t want to come here now. This is just NJ trying to shake down those who have the misfortune to already be here.
Alap (188)-
I can introduce you to people who took out loans like this to finance investment properties on which they incurred negative net cash flow.
“I can introduce you to people who took out loans like this to finance investment properties”
Meet most of my neighbors!
“Who the hell would actually get a mortgage that negatively amortizes and increases your initial balance 13% after 5 years. Simply insane and stupid.”
Probably led to the birth of the NJRER?
196- Clot,
I wouldn’t want to meet those people. Their stupidity might rub off on me. As you can see from this current crisis, its pretty contagious. Spread through the country like Herpes @ slutgers frat house.
““Who the hell would actually get a mortgage that negatively amortizes and increases your initial balance 13% after 5 years.”
Same people who pay the minimum monthly amount on their credit cards I would bet.
Hey…Where’s bi?
[187] skep
“most journalists are so biased in favor of O that they are probably excited by the invitation to help the team out”
“probably”???
Not long after the election, Chris Matthews appeared on Scarborough (MSNBC) and openly told Scarborough that it was his job as a journalist to advance the administration agenda.
Joe nearly fell out of his seat. Joe queried Matthews on it, and Matthews confirmed what he said and what he meant. Here’s the transcript:
MATTHEWS: You know what? I want to do everything I can to make this thing work, this new presidency work.
SCARBOROUGH: Is that your job? You just talked about your being a journalist.
MATTHEWS: Yeah, that’s my job. My job is to help this country.
SCARBOROUGH: So your job as a journalist is to make this presidency work?
MATTHEWS: To make this work successfully, because this country needs a successful presidency, more than anything right now . . .
BRZEZINSKI: Well, I’m a little confused about what the job is here, because of course we all want things to work, but I’m not sure it’s our job. Rick Stengel, in terms of, when someone is—
MATTHEWS: How can you not root for the success of a new president?
“Who the hell would actually get a mortgage that negatively amortizes and increases your initial balance 13% after 5 years.”
Welcome to realestate.com, circa 2003-2006.
“Hey…Where’s bi?”
Stu,
Batteries don’t function on down days.
“Why bother to pay-down a mortgage when RE values are always rising? ”
“Paying-off a mortgage is stupid. Who wants to tie-up their money in a house?”
Two things that multiple people said to me from 2000 on.
[201] redux
And there is this little exchange:
“when Joe asked what Rep. Rahm Emanuel’s motives might be in not immediately accepting the job offer of chief of staff, Chris blurted out, “I don’t question motive … it’s the worst thing you can do in journalism.”
Whaaaat????
BTW, Matthews is associated with MSNBC, the network Ed Rendell called “the official network of the O-bama presidency,” so his position is to be expected, but I have heard Tavis Smiley of PBS make similar remarks about helping out the administration, and these are just the whales that have surfaced.
meh - we just had 8 years of mainstream journalists telling us that to question the president was anti-American and helped the terrorists, so this is nothing new.
I don’t really get taking a small 4 banger japanese car and making it fast, why don’t you take a fast car and make it faster. My old college cars had a 400 ci V8 engine with a B&M rachet shifter, triple leaf springs, G-60s, posi rear and a 4 barrel carb, in my town I see all the these little focuses and hondas all “souped up”.
toshiro_mifune says:
May 21, 2009 at 2:21 pm
#190 - blewup my turbo as well
The only solution to this is much larger turbo (T-03/04), and a bigger intercooler, new exhaust headers, 3in racing exhaust, bigger throttle body, etc. Maybe new cams as well. For, you know, “reliability”.
Seriously though, a blown turbo is expensive. Ouch.
WOW Green Shoots, BTW I used to work with the guy who wrote this and he is a smart cookie.
NEW YORK (MarketWatch) — Citigroup Inc. raised its earnings estimate by 10% for the S&P 500 next year, the bank said Thursday in a note to clients. The bank reiterated a $51 operating earnings per share for 2009, and beefed-up its guidance for 2010 from $54 to $56, and believes it will jump 14% to $64 in 2011. “While significant fragilities and some risk of a ‘relapse’ remains, we continue to expect a more cyclical recovery to gradually gain traction - with the necessary assistance of truly massive policy steps,” wrote Steven Wieting, a market analyst at Citi, in the report. The estimated gains for 2010 EPS reflect a pace of growth below what was experienced in the late 1990s, and is far removed from what Citi believes the U.S. economy could generate if at full potential, the note said. The calculations assume a financial sector profit level similar to the mid 1990s. Earlier in the week Treasury Secretary Timothy Geithner told lawmakers the financial system is “beginning to heal.”
renty (206)-
Just wait ’til a mob comes to my door, led by one of these “journalists”.
Hopefully by that point in time, my wife will have acceded to my demands to buy an AK and as many rounds as I deem necessary.
Re 206,
Not arguing with your analysis. Corporate media is in bed with DC>
#207 - Smaller engines are lighter = less to move = less weight carried through a corner, etc. op cit, Colin Chapman.
Displacement is not the end-all, be-all of speed.
An oldy but Top Gear goody of an Evo vs Murcielago. This is, obviously, an exception.
Most of the 4-bangers you see aren’t fast. They just have loud mufflers and body kits.
A lot of people also got tired of push-rod V8s. In the early to mid 90’s over amping a GST Eclipse was new territory, and interesting.
Fox satisfied a news market for right wing lunatics, MSNBC is doing the same thing for left wing lunatics.
I had a bad thought yesterday. Take the Prius, rip out the hybrid and replace with a Chevy LS7. I think it would tear the frame in two.
anyone see Woody Brock’s paper “The End is Nigh” discussing debt/GDP and long term growth etc?
I like his thoughts…..
What’s happening to the 10 year? It went up to 3.35 from 3.15 this morning!
grim - 199 in mod
“What’s happening to the 10 year? It went up to 3.35 from 3.15 this morning!”
Joey [215],
“I used to think if there was reincarnation, I wanted to come back as the President or the Pope or a .400 baseball hitter. But now I want to come back as the bond market. You can intimidate everybody.”
~ James Carville, Campaign Advisor to President Clinton
Wall Street Journal, February 25, 1993
Joey (215)-
That’s the call from the bullpen. The vigilantes are warmed up and ready to throw peas.
BC (217)-
It’s eerie how often you & I react the same to posts here. Straight to baseball metaphors…
John,
Rice rockets in your prestigious WS town? Am I reading this correctly?
Rubbish.
Surely, these must be servants hurrying to make it to their quarters before their shift begins.
Didn’t the 10 year drop around .25 like just yesterday?
It dropped .10 yesterday because the fed said they were going to spend money.
Dollar in toilet, bond in trouble.
Yeah, this is gonna end well.
Sell in May, and go to hell.
“What’s happening to the 10 year? It went up to 3.35 from 3.15 this morning!”
http://finance.yahoo.com/q/bc?s=^TNX&t=my&l=on&z=l&q=l&c=
So what?
“What’s happening to the 10 year? It went up to 3.35 from 3.15 this morning!”
UK on credit watch negative. Fears that the US could lose its AAA credit rating.
“So what?”
Stu,
Price today, principal, -1-02. So what?
Want to see our credit rating?
http://www.usdebtclock.org/
Chart of the day:
http://finance.yahoo.com/q?s=%5Evix
Volume and .vix, rushing back in.
My kind of rally.
#211 - Turbo imports have redefined what it takes to be considered a supercar.
My 4 door Legacy GT does the 0-60 in the high 4 second range.
Can’t help but link to one of the most amazing examples of automotive insanity, Ken Block (owner of DC Shoes), beating the hell out of a WRX.
http://www.youtube.com/watch?v=rs-jAImScms
http://www.youtube.com/watch?v=v60CaKqE4Bo
Clot…We need a 5 handle on the VIX before I get excited again.
Yes, the vigilantes are back. The sharks smell big profits. At the same time the fed is monetizing its debt, yields have risen. Don’t fight the fed?
Don’t fight Mr. Market.
Full faith and credit seems to have taken an eensy pause.
#233 Clot
Faith replaced by Hope
Credit line is maxed out
Question for the Realtors - a friend of mine is under contract to sell her house and because the buyer has a house sale contingency, the contract allows her to continue to market the house and solicit offers. The attorneys have approved the final contract yet her Realtor is telling her that the “law” says that the listing still has to say that the contract is in attorney review. Is the Realtor feeding her a line?
Thanks.
#229 - Turbo imports have redefined what it takes to be considered a supercar.
That they have. We are also living in a golden age of performance. A relatively small amount of cash will give you access to some truly stunning levels of speed and handling. The Evo and WRX STi are capable of doing things at just stupid speeds.
I suspect that at somepoint the fed will just take the Treasuries it borrowed and burn them. Just another ledger accident.
Does anyone have reliable information/resource on how to purchase a distressed or foreclosed timeshare in the Naples, FL area??
Speaking of cars. What are the chances of the “cash for clunkers” going through? I’m looking forward to my ‘95 Exploder being worth $4,500.
Any good outbursts on CNBC today?
Cool, do you wear your members only jacket and capezzios when you take your legacy out for a spin?
My urge for speed off the line died when I totally smoked it up in college and while I was laying black tar the damm carb pulled the wing nut right off my airfilter cover and sucked it into the carb and wrecked a valve. That and being a passenger in a head on 60 mph crash with no seatbelt, I was lucky when I was thrown from the car my head broke the fall, the crash would have killed a democratic person in a second. I just got up had a beer and made out with the hot EMS girl.
grim says:
May 21, 2009 at 3:55 pm
#211 - Turbo imports have redefined what it takes to be considered a supercar.
My 4 door Legacy GT does the 0-60 in the high 4 second range.
Jersey shore beach report. Not a cloud in the sky. Brisk wind off the ocean diminishes air temps by about 15 degrees. Perfect if you have a sweatshirt. Ocean-choppy, no waves and COLD.
#241 - Prefer Z. Cavaricci and strapped Reeboks, L GT is the new IROC Z.
#242 - Heading down to LBI as soon as the parkway clears up a bit.
NJC [242],
Martini, shaken or stirred?
playgolfdesigns.com
http://www.time.com/time/business/article/0,8599,1900046,00.html
I should of thought of this.
http://www.playgolfdesigns.com/professionals.html
Can’t decide which one I like best.
http://www.newsday.com/business/ny-webjobs2112792279may21,0,4396550.story
LI is hurting.
Beach club opens tomorrow so no martinis today.
Looks like I’m going up to the Meadowlands to visit the boys on Saturday- are you going?
“my head broke the fall”
J,
Hope you didn’t wax the bishop before the crash.
[247] John
Not the most glamourous lot, but I am sure each of them can out-drive me.
Now that I think about it, I am surprised we don’t have some quip from you like “this gives a whole new meaning to ‘get in the hole.’”
Or does the fact that I beat you to it make me a bigger perv? Pass the onions?
NJC,
Yes, with/without tickets. Still trying.
[239] prtrade
Still in committee. I have an Audi POS (is that redundant?) that is not worth more than the voucher, and if this gets passed, off she goes. It leaks oil like the Exxon Valdez but I have decided no more money goes into repairs. When it fries, it dies.
Think this guy doesn’t feel like being a Fed tool, or getting chased with piano wire?
“American International Group announced Thursday that Chairman and Chief Executive Officer Edward M. Liddy has informed the Board of Directors of his intention to step down once the Board successfully concludes a search for replacements for the roles.”
#208 John:BTW I used to work with the guy who wrote this and he is a smart cookie.
What is your point? the guy wrote it, so it must be true?
in my town I see all the these little focuses and hondas all “souped up”.
They always want a pieace of me at the red light. Then after I smoke them they just have a goofy smile on their faces.
Spending money on a honda is fullish.
It’s like getting a diamond bezel and diaomond face for a fossil watch.
It’s still a Fossiland in about a year trhe watch will break down.
grain (235)-
Yes and no. The law does not compel agents to inform others of an accepted offer in attorney review; however, the NAR Code of Ethics (I even gag when I type this) compels agents to inform other agents of accepted offers on listed homes.
Green shoots. Yeah right. Who ARE these people?? Neighbor’s house is being sold on the courthouse steps next month. Another neighbor, a boomer, has been out of work since fall, no leads, little hope. And perhaps most troubling of all - business at the gun store is tapering off a bit but people are bringing in their grandpa’s vintage weapons, hoping to sell them to pay the rent.
chase (238)-
Go stand with a bucket under the balconies of homes in communities you like. Eventually, keys will fall into the bucket.
Alternatively, you can stand at mailboxes and ask everyone if the envelopes they’re trying to put in contain keys.
I nominate John for CEO of AIG.
I second that motion
Bank failure Thursday??
Press Release
BankUnited Acquires the Banking Operations of BankUnited, FSB, Coral Gables, Florida
BankUnited, a newly chartered federal savings bank, acquired the banking operations, including all of the nonbrokered deposits, of BankUnited, FSB, Coral Gables, Florida, in a transaction facilitated by the Federal Deposit Insurance Corporation (FDIC).
sl
make: for you good buddy….
http://www.thesharkguys.com/wp-content/uploads/2009/03/albania2_op_402×600.jpg
Chi,
I heard that if Peter Cammarano does not become Mayor of Hoboken he is going to be named diplomat to Albania.
The end is nigh….
May 21, 2009
Northern NJ man admits mob ties, racketeering
A former government investigator in northern New Jersey has pleaded guilty to a federal racketeering conspiracy charge.
Acting U.S. Attorney Ralph J. Marra says 56-year-old Ralph Cicalese of Roseland acknowledged being part of the Gambino organized crime family from 2002 to 2008.
Cicalese was one of 23 suspected members of the Gambino and Lucchese crime families arrested May 8, 2008.
In pleading guilty Thursday, Cicalese acknowledged operating an illegal gambling business, collecting debts, extorting lunch truck vendors and allowing employers to bypass a union work list. He faces up to 20 years in prison.
Cicalese once worked as an investigator with the Essex County Prosecutor’s Office.
Defense attorney Stephen Turano declined comment.
238: Clot’s approach will work. Only interested in timeshare?
HEHEHE says: May 21, 2009 at 5:54 pm
Chi, I heard that if Peter Cammarano does not become Mayor of Hoboken he is going to be named diplomat to Albania.
HE: After that louse voted for the Hospital, I asked a question on Hoboken 411. Did his wife give birth in the Hoboken, or Hackensack or NYC? Nobody seemed to have an answer….
I saw him through a temper tantrum in 2005 outside of the PATH station on election night. Pathetic. I can’t believe this lightweight has managed to get this far.
through = throw
Chi,
Sad thing is he’s got it locked up unless the yuppies come out and vote.
You of course heard of his previously undisclosed child?
#262 - Odd that they did it on a Thurs. SOP has been for Fridays so they have the weekend to sort everything out.
Tosh,
They beauracrats want to hit the Del beaches early?
#272 - Well, there is that. They’ve been working hard this year too (34 banks so far), who am I to begrudge them a little splish splash time in the pretty blue water?
‘World’s oldest blogger’ dies in Spain at 97
http://newsinfo.inquirer.net/breakingnews/infotech/view/20090522-206462/Worlds-oldest-blogger-dies-in-Spain-at-97
If cammarano wins, It will be a disapointment for me.
I loathe him such a rat
Yes, we have stabilized;
WASHINGTON (MarketWatch) - The Treasury Department on Thursday evening injected $7.5 billion into auto-financing company, GMAC LLC, as part of a financial infusion that could reach $14 billion and leave the U.S. government with a majority stake in the troubled corporation. The capital injection, which is made in preferred equity, is intended to prop up the ailing auto sector by helping the GMAC make loans for purchasers of General Motors Corp. and Chrysler cars. The investment in GMAC will be made in the form of 9% convertible preferred securities. Treasury also expects to exercise the exchange rights to a $884 million loan it made to GM for common equity interests in GMAC. The investment includes $4 billion to back GMAC’s anticipated growth in Chrysler dealer and retail loans. Treasury already pumped $5 billion into GMAC from the rescue package in December, but the company has been in talks for several weeks to get more money.
Stabilized? As in, getting used to being screwed upside-down on a daily basis?
We’re getting real good at that. So good, I think I need a syphilis test.
#140
“The economy is anemic, but the super doomsday scenario is moving further and further away from the table. The next move is probably down, but the quad shot espresso with half sugar is holding things up.
Do I have any editorial commentary? NO….just don’t ignore what is happening simply because it pisses you off…..”
I agree. Things definitely seem to be picking up. Not a mirage.
Skep,
Continuing claims at new highs, capacity util. lowest ever, lei new lows, U-6 close to 16%, Mexico, Italy, Japan, Germany, exports in the sh*tter; no US demand. Credit is tightening and 20% of homeowners are underwater.
Yeah, the economy is certainly picking up. I’m in Rosenberg’s camp; “Green shoots or garbage chutes”
#212
“Fox satisfied a news market for right wing lunatics, MSNBC is doing the same thing for left wing lunatics.”
except fox has significantly higher ratings than MSNBC and CNN combined, so they are actually mainstream.
“Things definitely seem to be picking up”
Not from my vantage point. The bill for all this bailout cr@p can’t be ignored.
It is still a case of consumer discretionary having been replaced by government spending. Government spending is massive borrowing from the future. We’re talking World War Two levels of borrowing and the American public ain’t buying the war bonds this time. When Japan and Europe were shelled into oblivion, it was easy to pay off the debt through our manufacturing base and through exports. How we gonna do it this time? Perhaps simulcast Dancing with the Stars to the world? We are supremely F’ed and whatever chance of a real recovery has essentially been gambled away to keep the rich man rich. Same as it always was. Barbed wire fences for all who can afford them!
BC– the situation is bad, no doubt, but the super doomsday scenario has been taken off the table for the time being. It would take a totaly dollar collapse to short circuit the bailout avalanche that is happening, and no one wants that to happen so it won’t for a while. Financing is now readily available for good companies, which wasn’t the case a few months ago. The situation is improving.
#281
“It is still a case of consumer discretionary having been replaced by government spending. Government spending is massive borrowing from the future. We’re talking World War Two levels of borrowing and the American public ain’t buying the war bonds this time.”
Agree, but this will work for a while (it is working now). Eventually, if average citizens don’t recover, this debt scheme will collapse too. But we can go on replacing private debt with public debt for a while
skep-tic:
Credit ALWAYS been available for good companies. We still in a deep poop-hole, just sinking slower.
“the situation is bad, no doubt, but the super doomsday scenario has been taken off the table for the time being.”
Skep,
That’s fine. Now, where’s the growth? Financing was alwyas available for crdit wothy borrowers.
Always, worthy and credit. Watching the Yanks and typing at the same time.
skep,
One other item. Pull out a dollar chart and now compare this to the recent tic data. Comforting?
What segment of the economy is improving?
“But we can go on replacing private debt with public debt for a while”
skep,
Really? Then again, selfish reasons, I hope you are right. What is actually accomplished? You can’t solve massive debt problems by printing more debt. The problem does not magically disappear. You’re just transferring debt.
Now explain why 10 year rates have been moving steadily higher at the same time the fed monetized debt? The fed has shaken the bond vigilantes out of the trees. Now the world markets will test the fed’s resolve. Let the fun and games begin. One solution to now bring rates back down. A major crash. Comforting?
There will be a major price to pay for this debasement. It is occuring right before all of our eyes. Problem is, most don’t even recognize it. What are your thought regarding recent capital outflows? Dollar issues?
Why there’s no mass exodus from NJ to KY
http://www.liveleak.com/view?i=eea_1242691693
A Senate candidate to make y’all proud.
http://teamstormy.com/?page_id=94
“Does anyone have reliable information/resource on how to purchase a distressed or foreclosed timeshare in the Naples, FL area??”
With a roll of quarters and some spare postage stamps?
“getting used to being screwed upside-down on a daily basis?”
Iguana style?
“Green shoots. Yeah right. Who ARE these people?? Neighbor’s house is being sold on the courthouse steps next month. Another neighbor, a boomer, has been out of work since fall, no leads, little hope. And perhaps most troubling of all - business at the gun store is tapering off a bit but people are bringing in their grandpa’s vintage weapons, hoping to sell them to pay the rent.”
A friend of mine has been without work for two years now. he friend has a technical and sales background but everything is dead.
“Looks like I’m going up to the Meadowlands to visit the boys on Saturday- are you going?”
BC/NJC,
Enjoy the show for me. Mrs. Shore and I have a bit of business entertaining to do on Saturday evening and can’t be there. They bloody-well better add a U.S. leg after Europe. In need a couple more shows this year.
Gator,
I can just hea the ads:
“Finally, a politician who has no interest in scr-ew-ing you.”
skep-tic:
was in a hurry, my full version should be:
Credit has ALWAYS been available for good companies. We are still in a deep poop-hole, just sinking slower. It’s true that the current layer of poop stinks a little bit better then the previous one. We’ll see what the next one will be.
And count on it - when we reach the bottom of the hole we might start DIGGING the hole even deeper.
BC and others– I agree that the long term situation is just as bad as it ever was. Nothing really has been accomplished with the bailouts other than delaying the inevitable. The gov’t hasn’t even really taken the opportunity to properly acknowledge the problem and try to build/encourage an alternative system– they just want to re-start the machine. But my point is that I think they have succeeded in delaying the all out collapse that we were on the verge of last fall. You have to admit there is a big difference between then and now. How long they can maintain this is anybody’s guess, but we have relative stability now given how much sh*t is in the system. That is somewhat amazing.
I can tell you that credit was not really available for non-investment grade companies until recently. I’m sure others on here know a lot more about this than me, but this is a big difference. again, how long this last, who knows
I think that if they stay aggressive and congress and the President don’t spend the money on non productive political paybacks, we have a chance of getting out of this. A “W” bottom will be devastating! If we fall back again unemployment goes into the mid-teens. It will surely be a depression. As you look back at history, depression was either every 30 or 60 years. We have been lucky. This time we need a lot of help due to the severe overvaluation of our assets, which have deflated first in the Nasdaq and now in Real Estate.
This credit crunch has big set backs. How do we replace securitization? Lenders are still very tight on giving money. Maybe they really don’t want to lend and keep their balance sheets propped up. Either way the economy is still tight on credit standards. At this point the standards should be loosened due to lower prices. Unfortunately the standards were loose at rising prices, reverse of what any prudent person would do. When prices were high they should of tightened standards, as they went up and it would of tempered the rise. This would have averted a great fall. Now the cow is out of the barn and senior lenders have closed the door. Maybe if they open the door the cow will go back in.
Really long article in tomorrow’s Journal….
WSJ 5/22/09
Recession Turns Malls Into Ghost Towns
By KRIS HUDSON and VANESSA O’CONNELL
CHARLOTTE, N.C. — Malls, those ubiquitous shopping meccas that sprang up in the 1950s, are dwindling in number, with many struggling properties reduced to largely vacant shells.
On the low-income east side of Charlotte, N.C., the 1.1-million-square-foot Eastland Mall recently lost a slew of key tenants, including a Dillard’s and, next month, a Sears. Sales per square foot at the venue fell to $210 in 2008 from $288 in 2001.
The Metcalf South Shopping Center in Overland Park, Kan., is languishing after plans to redevelop it into an open-air shopping district fizzled. The stretch of shops that connects the two largest tenants — a Sears and a Macy’s — stands mostly vacant, patrolled by security guards.
With their maze of walkways and fast-food courts, malls have long been an iconic, if sometimes unsightly, presence in the American retail landscape. A few were made famous by their sheer size, others for the range of shopping and social diversions they provided.
But the long recession is helping to empty out the promenades. Some analysts estimate that the number of so-called “dead malls” — centers debilitated by anemic sales and high vacancy rates — will swell to more than 100 by the end of this year.
In the 12 months ended March 31, U.S. malls collectively posted a 6.5% decline in tenants’ same-store sales, according to Green Street Advisors Inc., a real-estate research firm. The recent slump was led by an average 7.3% sales drop at Simon Property Group Inc., the operator with the largest number of mall locations.
The industry’s woes are worsening. Thinning customer traffic, and subsequent hits to tenants’ sales and profits, prompted Standard & Poor’s Corp. last month to lower the credit ratings of the department-store sector. That knocked Macy’s Inc. and J.C. Penney Co. into junk territory and pushed others deeper into junk. Sears Holdings Corp., a cornerstone tenant at many malls, is expected to close 23 stores this month and next.
General Growth Properties, which owns more than 200 U.S. malls, filed for bankruptcy protection April 16, due mainly to its failure to refinance billions of dollars of debt coming due. While the real-estate investment trust has said the filing will have no impact on its mall business, analysts say a prolonged bankruptcy proceeding could make retailers nervous about sticking around once their leases expire.
The severity of the recession is turning some malls that were once viewed as viable into potential casualties. “Any mall that’s sitting on life support is probably going to get its plug pulled” as the economy stalls, says Michael Glimcher, chairman and CEO of Glimcher Realty Trust, which owns 23 U.S. properties, including Eastland Mall in Charlotte.
Look back at the American mall’s rise to prominence and recent woes.
One industry rule of thumb holds that any large, enclosed mall generating sales per square foot of $250 or less — the U.S. average is $381 — is in danger of failure. By that measure, Eastland is one of 84 dead malls in a 1,032-mall database compiled by Green Street. (The database focuses heavily on malls owned by publicly traded landlords and doesn’t account for several dozen failing malls in private hands.) If retail sales continue to decline at current rates, the dead-mall roster could exceed 100 properties by the end of this year, according to Green Street. That’s up from an estimated 40 failing malls in 2006, before the recession began.
“This time around, because of the dramatic changes in consumer spending practices, we’re very likely to see more malls in the death spiral than we’ve ever seen before,” says Green Street analyst Jim Sullivan.
Failing malls didn’t get into trouble overnight, and most began their descent long before the tough climate. Typically, a mall begins to suffer due to job losses and other pressures in the surrounding neighborhood or because a newer mall opens nearby. The loss of key tenants — such as the wave of department-store closures over the past three years — hastens the demise. Also sapping malls’ vibrancy: the increased preference among consumers for big-box stores, such as Wal-Mart Stores Inc. and Target Corp., which rarely operate in malls.
Developers, in fact, have been moving away from the enclosed-mall format in favor of big-box centers anchored by free-standing giants such as Wal-Mart or open-air shopping centers with tiny parks and outdoor cafes sprinkled among fashion stores. Only one enclosed mall has opened in the U.S. since 2006: The Mall at Turtle Creek in Jonesboro, Ark.
These pressures, coupled with landlords’ difficulties refinancing debts in the bone-dry capital markets, signal tough years ahead for retail-property owners — even after consumer spending begins to rebound. “The shopping-center bankruptcies and the REIT bankruptcies are the ticking time bomb that people aren’t talking about,” says Burt P. Flickinger III, managing director of Strategic Resource Group, a research firm.
Four months ago, executives at J.C. Penney headquarters in Plano, Texas, called a “triage” meeting to discuss a recent study of the financial condition and health of the 550 malls housing Penney stores. The study’s conclusion: 15 of its stores are located in malls at risk of failure.
“We started to see things heading south,” says Penney CEO Myron “Mike” Ullman III. It was important, he notes, to “get ahead of this” mall problem by reviewing Penney’s new store strategy to determine whether it might relocate existing mall stores. Over the past 18 months, Penney’s weekly sales have been trending better at stand-alone stores that aren’t attached to traditional malls.
Shoppers watched ice skaters on the central ice rink of Eastland Mall when the Charlotte mall opened in 1975. The ice rink closed last year, along with several of Eastland’s stores.
Hundreds of other anchor stores — generally two- and three-story department stores that drive mall momentum — are pulling out of properties. Several anchor chains, including Gottschalks Inc., Goody’s Family Clothing Inc. and Boscov’s Department Store LLC, filed for bankruptcy protection in recent months. Goody’s ended up liquidating its 282 stores, as Gottschalks is now doing with its 58. Boscov’s closed 10 locations. As mall-based chains face the prospect of a much smaller market, more closures are likely. So far for 2009, monthly sales declines at upscale retailers such as Saks Inc., Nordstrom Inc. and Neiman Marcus Group have registered mostly in the double digits, compared with results a year ago.
Saks CEO Stephen Sadove is talking with mall owners about closing a few of the retailer’s 53 Saks Fifth Avenue stores. “You have to ask yourself: Do you believe the prospects for a given store or mall are going to be positive? Can you make money over the long term?” he says.
For towns and cities that are home to dying malls, the fallout can be devastating. Malls hire hundreds of workers and are significant contributors to the local tax base. In suburbs and small towns, malls often are the only major public spaces and the safest venues for teenagers to shop, hang out and seek part-time work.
Commonly, “the mall will be a meeting place, or, in some cases, like a city center,” says Carl Steidtmann, chief economist at Deloitte LLP. The deterioration of a mall can spawn broader problems, he notes. “It can become a crime magnet.”
The gradual fade-out of marginal malls has prompted a thriving Web culture dedicated to sharing information about dead or dying properties. Sites such as Flickr.com, Deadmalls.com and Labelscar.com are drawing traffic from mall employees, shoppers and other mall mourners who swap stories, photos and predictions about the status of centers on their way out.
“So sad!” wrote Edith Schilla, 45 years old, of Independence, Ohio, in an April 3 posting on Labelscar.com following her visit to a Sears liquidation sale at the Randall Park Mall in North Randall, Ohio. “I was able to peek into the mall and was so overtaken by the vast emptiness,” she wrote, recalling it as previously “so busy.”
After the Sears closes next month, Randall Park will be left with only a few remaining tenants, including an Ohio Technical College automotive school. It currently has the most popular page on Labelscar.com, which so far this year has a 25% increase in postings on its “dead malls” category. Mall owner Whichard Real Estate LLC is trying to sell the property, which likely needs to be torn down and rebuilt into something else, says Whichard asset manager Kenneth Whichard. Local officials, meanwhile, want to fill the mall with education and industrial tenants.
During past economic cycles, dead malls were frequently redeveloped into mixed-use space that includes apartments, offices or parks. Repurposing mall space today will be more difficult. Lenders and investors are moving away from commercial real estate as property values decline and delinquencies rise on debt used to acquire or develop properties. Retail real estate has been hit especially hard, as declining retail sales and store closures hammer mall landlords.
In Charlotte, Eastland’s deterioration into a dead mall matches the fate of many others across the U.S.
Faison Enterprises Inc. opened Eastland in 1975 as the city’s second regional mall. Shoppers crowded four-deep around its skating rink to see local dignitaries kneel gingerly on the ice as a Presbyterian minister blessed the structure with prayers. In the early years, shoppers flocked to the mall’s Miller & Rhoads and Ivey’s department stores, among others.
“It was just a great place to go and be seen,” said Mary Kate Cline, a 51-year-old who frequented the mall in its early years but can’t recall the last time she entered it.
Eastland’s reign lasted roughly two decades. Its market began to erode when the area around Eastland fostered low-income housing. Meanwhile, the Charlotte area’s more affluent residents and new arrivals gravitated to suburbs on the city’s north and south ends. Developers built and renovated malls in those suburbs, drawing shoppers away from Eastland. In recent years, discount stores such as Wal-Mart and midtier Kohl’s Corp. sprung up near Eastland, siphoning off more of its shoppers.
A string of major store exits at Eastland began with Penney’s departure in 2002. Belk Inc. closed in 2007, along with several national specialty stores. The closures gained momentum amid the recession last year, when stores including New York & Co., Genesco Inc.’s Journeys, Finish Line Inc. and Dillard’s Inc. pulled out, leaving behind empty, gated storefronts.
A handful of retail holdouts — stores for Footlocker Inc., Burlington Coat Factory Inc. and several local merchants, many paying reduced rents — are reluctant to leave, even as sales dwindle. “I’ve made my business here,” Luz Pavas said, while manning her kiosk of health and beauty aids. “I don’t want to move to another mall. I want Eastland Mall to be like it was eight years ago.”
Boarded-up stores near the mall languish as reminders of departed retailers, including Mega Food Market, Uptons department store and Harris Teeter Inc. Neighbors and community leaders want Eastland razed and replaced with developments such as upscale housing to attract a new demographic.
But the mall’s current owner, Glimcher Realty Trust, the Columbus, Ohio-based owner of 23 malls, is keen to sell Eastland rather than spend the hefty sums needed to redevelop it. A better investment, says the company, “would be to put money into assets that were doing well,” according to Glimcher spokeswoman Lisa Indest.
Charlotte city officials have lined up resources to help reinvent the mall, including $20 million in public financing. They acknowledge that finding a developer willing to underwrite the additional $180 million needed to turn Eastland into a mix of housing, shops and parks will be tough.
“No one’s kidding themselves that this is an easy real estate deal,” says Charlotte City Councilman John Lassiter. “It wasn’t easy when the market was good. Now it’s much harder.”
Richard the real estate agent:
I’m proud of you for spelling ‘loose’ correctly. Loosen credit? Naw. My kid’s paying enough for this garbage already. No more losers should be given any more of her money. I want every penny of her money back from GMAC. Ally. Should be pronounced like alley…the place behind your shack where you dump your garbage.
She just learned how to add up her piggy bank money correctly. She still needs $300 bucks for the Wii she wants with all the trimmings. She’s earned every penny herself. Yard sales. Lemonade. Chores.
Should’ve ..I’ll give you that one.
RE:skep-tic
“The gov’t hasn’t even really taken the opportunity to properly acknowledge the problem and try to build/encourage an alternative system– they just want to re-start the machine. But my point is that I think they have succeeded in delaying the all out collapse that we were on the verge of last fall.”
Are you kidding? Re-start consumer debt machine with 8.9 unemployment. It’s not going to happen.