Market recovery? Or just the hope for it?

From the New York Times:

Hopeful Signs in Housing

HOMEOWNERS and sellers of New Jersey, are you sitting down? You are about to read a recent state housing-trend analysis that’s not half bad: Overall sales are up; inventory is down; and, after three years, home prices may be on the verge of halting their decline.

In June, according to Jeffrey G. Otteau, whose company issues monthly reports to the real estate industry, there was a “breakthrough”: the number of home sales exceeded that of June 2008 by 12 percent. Such a year-over-year increase has not occurred since midsummer 2007, said Mr. Otteau, the president of the Otteau Valuation Group in New Brunswick.

It does not mean that the state’s economic troubles are over, Mr. Otteau said in a recent telephone interview.

Generally, he said, home prices tend to stabilize when there is a six-month housing supply. “We are getting very close,” he said, noting that the total number of homes on the market in the 21 counties that his company monitors had sunk to about the same number as were listed in 2006, before the market fell to its knees.

In June, there were 25 towns with a four-month supply, or less, according to his company’s data. These communities are scattered across 6 counties (10 in Bergen, 6 in Essex, 3 in Middlesex, 3 in Union, and a town each in Morris, Mercer and Passaic.)

Notably lacking from that list is Hudson County. Although it had the strongest market of any county until the Wall Street crisis last fall, the area is still lagging. So far this year, it has had 28 percent fewer sales than the corresponding period in 2008.

At least its sales pace has increased each month since January. In June, the inventory was down to 11.5 months, from 19. Still, that was only at the lower prices. Among homes priced above $1 million, Hudson had a 52-month supply, most of them waterfront-area condominiums.

In all counties except Passaic, the new data showed that the sales pace is slowest for homes priced over $1 million. In Passaic, the largest inventory — a 27-month supply — was for homes priced from $600,000 to $1 million.

Statewide, there is an 18.6-month supply of homes priced from $1 million to $2.5 million, and a 35.8-month supply of homes listed at $2 million or more, these numbers show.

“In general,” Mr. Otteau said, “fewer homes are being put on the market so far this year compared to last.” In June, there were 14 percent fewer new listings than a year before. Part of the reason for that, he acknowledged, is that some people gave up hope of selling their homes in a harsh market and decided to wait. Also, builders have put up fewer new houses this year.

Hudson County had 18 percent fewer new listings. And even Monmouth County, where homes in oceanfront communities inevitably swell the listings during the summer, had 8 percent fewer new listings this year than last.

“Do these very positive housing market numbers in June mean that we suddenly don’t have an economy in trouble, and unemployment up around 10 percent?” he said. “No.”

But unemployment is a “trailing indicator” of trends, he said, and while the housing market is only one measure of what lies ahead, in New Jersey its signs bode well.

This entry was posted in Economics, Housing Bubble, New Jersey Real Estate. Bookmark the permalink.

226 Responses to Market recovery? Or just the hope for it?

  1. cooper says:

    woohoo foist!

  2. yikes says:

    Bud Selig is an idiot.

    Back to real estate!

  3. safeashouses says:

    Hey Otteau,

    Please look at the data for median income and house price in NJ towns from 2000 to 2007. http://www.city-data.com/city/New-Jersey.html Explain to me why median income increased 10 to 20% from 2000 to 2007, yet housing more than doubled for every blue ribbon town I’ve looked at. housing was 3 to 4 times median income n 2000, in 2007 it went up to 5.5 to 10 times income.
    Even down 25% housing would be 4.5 to 8 times 2007 median income. But with unemployment rate doubling since 2007 has it really dropped much in relation to median income?

    Disclaimer: Currently unemployed bitter renter who has had multiple concussions, including 2 in 1 day.

  4. yo'me says:

    Yahoo!! I see that bubble forming.I do,I do promise not to pissed it away.

  5. safeashouses says:

    grim,

    #3 in moderation

  6. serenity now says:

    OK it’s been fun here. Bubble over now.
    Party at Clot’s house, last one out please
    turn off the lights. Grim you can pull the plug.
    Sarcasm off.

  7. Pol Clot says:

    I guess the 13-15% of people defaulting on their credit cards are saving up for a house DP.

    Yeah, right.

  8. Pol Clot says:

    If it’s a good time to buy now, imagine what it will be like when the Dow is at 400 and U-6 is over 25%.

  9. Aardvark says:

    I think many, many people just refuse to list their homes for sale or have just pulled their listing because they are not willing to sell at the current market prices. Is there a way to determine how many homes actually sold vs how many were just taken off the market. If they are just being pulled off the market – this could explain the drop in inventory

  10. gary says:

    “In general,” Mr. Otteau said, “fewer homes are being put on the market so far this year compared to last.” In June, there were 14 percent fewer new listings than a year before. Part of the reason for that, he acknowledged, is that some people gave up hope of selling their homes in a harsh market and decided to wait.

    Dear Sellers, I suggest that you sell now or be priced in forever.

  11. Pol Clot says:

    What kind of punch would everyone like at my end of the recession party?

    Note: all recipe suggestions must include MD 20-20 and/or codeine cough syrup.

    All suggestions for a turd in the punch bowl will be summarily rejected.

  12. Pol Clot says:

    Abandon hope, all ye who enter here.

  13. safeashouses says:

    #11 pol clot

    What kind of punch would everyone like at my end of the recession party?

    donkey?

  14. safeashouses says:

    Now we get to bail out small businesses too.

    http://www.msnbc.msn.com/id/32166532/ns/business-economy_in_turmoil/

    I’d rather the fed gov get stuck with a bad small business loan then bail out those Wall St mofos.

  15. still_looking says:

    FWIW,

    Co worker just sold his housef-

    bought 05 at “X” and had it listed at “X minus 70K” won’t know sale price til closing.

    sl

  16. Pol Clot says:

    safe (12)-

    Thanks for bringing that cool, rational voice of yours to the discussion.

  17. safeashouses says:

    #17 pol clot,

    What can i say. It’s a gift.

  18. safeashouses says:

    #3 reposted

    Hey Otteau,

    Please look at the data for median income and house price in NJ towns from 2000 to 2007. http://www.city-data.com/city/New-Jersey.html Explain to me why median income increased 10 to 20% from 2000 to 2007, yet housing more than doubled for every blue ribbon town I’ve looked at. housing was 3 to 4 times median income n 2000, in 2007 it went up to 5.5 to 10 times income.
    Even down 25% housing would be 4.5 to 8 times 2007 median income. But with unemployment rate doubling since 2007 has it really dropped much in relation to median income?

  19. cooper says:

    15 still

    “Co worker just sold his house”

    I’d like to see what the appraisal comes in at, nothing is sold until it’s closed

    Pol absinthe in the punch will definitely be a crowd pleaser but be aware of imitations

  20. serenity now says:

    Re#10
    MD20-20 is that what was in the kool aid
    back in 2005??

    Turd in punch bowl – very disturbing.

  21. grim says:

    Wonder if the 10y is going to make another attempt at 4 this week…

  22. Shelley says:

    New Listing at 21 Chatham street in Chatham. This lovely overpriced POS came on Market at $1.2 million despite its $668K assessment. The homeowners listed with a South amboy realtor as he was the fool who promised the homeowners he could get more than anyone else.

  23. Shelley says:

    It appears to me that towns like Harding, Madison and chatham have not seen the price drops that other towns have seen. The high priced housing stock still has quite a ways to fall in my opinion. These towns all have sellers who are significantly overpriced.

    Any thoughts?

  24. 3b says:

    I explained that unemployment is a lagging indicator in the weekend discussion.

    Buy the house first, than get the job.

  25. Cindy says:

    http://www.pbs.org/newshour/video/share.html?s=news01n2d2cqa98

    Bernanke on PBS last night…

    Segment 1 “I had to hold my nose….”

    I’ll just post the site, three separate segments.

  26. GerryAdams says:

    Shelley (22) – Can’t say I follow houses in those towns, but I have driven through the parade of for sale signs in them. It will take time for overpriced sellers to realize that their prices will not be matched by anyone. I would follow comps and when you bid, stick it in the faces that prices have fallen, even in the very wealthy and prestigious Chatham. I would also state that their are X number of houses for sale and Y number of sales inthe last three months, assuming that X>>Y.

    BTW I analyzed several area high schools and Chatham High beat out all others. One reason was their writing scores on the HSPA – just off the charts. Math is just too easy to teach in large classes, but writing takes time and experienced teachers.

  27. 3b says:

    We had a discussion over the weekend about people digging their heels in and acceptng nothing less than 2006 prices.

    How about 2005. 2004. 2003 prices?The listing below is now at 499K, sold in June of 003 for 445K. After realtor fees etc, 6 years and 0 or almost zero profit, depending what it sells at.

    http://www.njmls.com/cf/details.cfm?mls_number=2932332&id=999999

  28. WHYoung says:

    Know a divorcing couple where the main delay in an otherwise uncontested settlement is that the husband refuses to “sell in a down market” and unwillingness to buy out her interest in their property at this time. So this is a house that should be but is not on the market.

    They don’t seem to get that it’s not going to go back up anytime soon and the 2+ year (so far) process is eating them up emotionally and in lawyers fees and will probably end up in the hands of a judge instead of a negotiated agreement.

    Sad, as they are losing more every day.

  29. 3b says:

    Bogota in Bergen CO is one of those towns with less than 4 months inventory. You can buy the baby listed below just need soem TLC

    http://www.njmls.com/cf/details.cfm?mls_number=2917091&id=999999

  30. BC Bob says:

    “We had a discussion over the weekend about people digging their heels in and acceptng nothing less than 2006 prices.”

    3b,

    They can dig to doomsday. Just a deeper, black hole.

  31. ruggles says:

    22 – There are still too many people obsessed with living in these towns (and others like them).

    That and unmotivated sellers keep prices sticky. Either lowball everyone til you get your price, wait for a cataclysm of job losses (worse than now) or move to Plainfield (and take every other potential buyer looking at Chatham with you).

  32. Secondary Market says:

    quote of the weekend from an open house i attended:

    realtor: “it just breaks my heart to see these prices today. i mean 4 years ago i could have sold this house for 460K” (current list is 319 down from 349)

    my wife quickly turned her head towards me while she faded white as a ghost hoping i wouldn’t unload and respond to that. i bit my tongue and quipped about the crown molding.

  33. 3b says:

    #31 ruggles; They may be obsesses, but many of them I would guess are not qualifying for mtgs either. And any how real estate is so 2006.

  34. confused in NJ says:

    Federal Reserve Chairman Ben Bernanke said Sunday that lessons learned from the recession and the financial crisis will help make the economy stronger than it was before the crisis.

    The Fed chairman answered questions from members of the public as well as moderator Jim Lehrer of PBS at a town hall event sponsored by the Federal Reserve Bank of Kansas City, Mo.

    “The silver lining in this whole thing is that people are starting to save more, since they saw what happened with 401(k) investments,” Bernanke said. “People are adopting good habits, so not only will we will be back on track, but the economy will be stronger than it had been before this started.”

    Bernanke either a. has a warped sense of humor, b. thinks everyone is brain deficient, or c. is an idiot.

  35. cooper says:

    29 3b, is that the “Love Shack”?

  36. John says:

    The real reason is they don’t want to sell. I bought my house from a legally separated couple, she wanted the divorce quick and house sold. She moved her boyfriend in and filed numerous assault charges on husband. Husband was so scared near end we did walkthrough and the old husband was cooking his separated wife and boyfriend dinner while she yelled move quicker before I call cops again. Now he had no problem selling in a downmarket.

    WHYoung says:
    July 27, 2009 at 9:11 am
    Know a divorcing couple where the main delay in an otherwise uncontested settlement is that the husband refuses to “sell in a down market” and unwillingness to buy out her interest in their property at this time. So this is a house that should be but is not on the market.

    They don’t seem to get that it’s not going to go back up anytime soon and the 2+ year (so far) process is eating them up emotionally and in lawyers fees and will probably end up in the hands of a judge instead of a negotiated agreement.

    Sad, as they are losing more every day.

  37. gman says:

    #27

    It amazes me just how little of a house 500k will buy you in Bergen county.

  38. 3b says:

    #37 gman: Yeah well some people will be amazed that the sellers owned the house in a blue ribbon Bergen co train town for over 6 years,and will probably not have made a dime on it.

  39. safeashouses says:

    Another article about Timmay renting out his house.

    http://abcnews.go.com/Business/story?id=8169165&page=1

    What happens if his tenant moves out and he can’t rerent it? Has a Tres Secretary ever gone bust while in office?

  40. 3b says:

    #35 cooper; It’s a a love shack in Bergen Co, so we would prefer if you called it love cottage.

  41. PGC says:

    #37 gman

    I think this is a Relocation leaving blood on the table. They are $80K under their sale price and I think they have probably another $40K to go.

    http://www.njmls.com/cf/details.cfm?mls_number=2922322&id=999999

  42. freedy says:

    home sales better,, all clear. nj will rally?

  43. Comrade Nom Deplume says:

    [39] safe

    Don’t cry for Timmay.

    Before he gets close to going bust, he will return to the private sector, move back into the house, and take a job with annual comp north of 1MM.

    That is how it is done in the Corridor.

  44. safeashouses says:

    #45 nom,

    At least if he’s earning 1mm he can pay his fair share.

    Oh wait, he had a problem with turbotax if I remember.

  45. Seneca says:

    “New-Home Sales Jumped 11 Percent in June, Well Above Expectations”

    CNBC talking heads saying the number has “blown the doors off” expectations. Inventory numbers greatly improved.

    …but Diana Olick still not willing to call a bottom in sales yet. She is still worried about foreclosures, many of which are new home construction, still not hitting market in full.

  46. kettle1 says:

    Clot,

    spoke to some one over the weekend who is on timmy’s side of the game. I am now convinced that there is a fairly high probability we see a bank holiday this fall/winter.

    But what do i know, i am just a janitor. off to mop the boys room :)

  47. ruggles says:

    33 – Agreed but doesn’t matter (unless sellers become so desperate they have to go). As long as a few can get over the mortgage hump, and need that great school with brilliant kids, the train, the downtown, etc. hope remains alive.

    You want Chatham prices to drop? Get all potential buyers to walk away for a year–no sales, no going to open houses, no talking to agents about Chatham, nothing. Then see what happens. unfortunately someone always wants to live in Chatham.

    I think there are buyers still willing to overpay if given the opportunity. otherwise sales volume in NJ over the past 2 years would be closer to zero.

  48. kettle1 says:

    BC, 3b 30

    at leat we will have someplace to dump the bodies after they get slaughtered trying to out wait the market

  49. NJGator says:

    Nom – You’ve got mail…

  50. NJGator says:

    Am about to send a counteroffer to our town for settling our tax appeal. One of their 3 comps to defend our $580k assessment is now listed for $229,900. I am trying to figure out what I should offer.

  51. kettle1 says:

    Clot 7

    @ dow = 400 U6 = undefined as the economic fallout would be bad enough where we would start to resemble a mixture of 2000 russia after their currency crisis and argentina. A substantial portion of the existing economy would move to black/barter markets and would essentially be off the official grid.

    Any official measure of U3/U6 at that point is next to meaningless.

    (or did you mean 4000 doesnt matter they are about the same level of economic fallout)

  52. x-underwriter says:

    3B (27)

    Why does FORTUNATO CAMPESI (Sales Associate) remind me of a Gambino family underling/wannabe?

  53. 1987 Condo Buyer says:

    #34, I think (hope) he is indicating that he feels people do not think that their 401(k) or house will magically appreciate over time and they can retire on that concept. I think he is calling for a return of hard work and savings vs magical appreciation and speculation.

  54. David says:

    I thought you guys might get a kick out of this:

    http://www.nbnnews.com/NBN/issues/2009-07-13/Front%2BPage/index.html

  55. crossroads says:

    53

    is it true that paying down debt is counted as savings? does that mean walking away from a house or cc debt counts as people saving?

  56. 3b says:

    #55 crossroads: Apparently yes it does.

  57. Victorian says:

    The long-awaited Dow Theory bull signal finally arrived on Thursday. This came about as a result of the Dow Jones Industrial Average and the Dow Jones Transportation Average both breaking through their previous rally peaks (registered on 12 and 11 June respectively).

    Richard Russell, “Mr Dow Theory” and author of the Dow Theory Letters, forthwith replaced the bear on the first page of his daily newsletter with a long-horned Texas bull. The long-timer said: “I believe we are now dealing with an extended bear market rally (some will call it a cyclical bull market). But I’m operating on the thesis that a primary (secular) bear market is still in force (although it has been suspended for a while). In my opinion, the true final bottom for this secular bear market lies somewhere ahead.

    “Remember, on March 9 very few of the items characteristic of a true bear market bottom were seen. There was no extreme pessimism, there were no huge bargains in stocks, and the public continued to be hopeful. On this evidence, I concluded that the final and true bottom of the bear market had not been seen.”

  58. 3b says:

    #52 Is it the top button open pink shirt, the pink tie? I wonder if he is wearing Capezio’s

  59. Mike NJ says:

    Shelley,

    I live a few blocks down from that house on Chatham St and the seller is smoking crack. The problem with buying on Chatham st is that it is considered one of the nicer streets in the Borough (upper Washington Ave being another) and sellers for some reason are absolutely in another world when it comes to pricing. The realtors here perpetuate all this as well and so it becomes a self fulfilling prophesy with all these high prices. It will be almost impossible to get a decent/fair price on a street like Chatham St in Chatham. My advice is to do exactly as I did and live a few blocks over. There are plenty of wonderful streets in Chatham that are prices more appropriately (still high of course but at least not stratospheric).

    Where you can get a little value in Chatham is to find a place that needs some work but is workable for your current situation. A lot of these families are moving from the city looking for a place to bring up little Randolph and Mortimer and do not want to do much if anything when it comes to work. Of course the limited inventory in Chatham presents a small problem but just sit tight. People are hanging by a thread, even in Chatham. We waited two plus years until we found an acceptable place at an acceptable price.

  60. 3b says:

    Stupid question perhaps, but can new home sales include foreclosures? As in new homes that were built never lived in and than foreclosed?

  61. kettle1 says:

    Crossroads 44

    he national income and product
    accounts (NIPA) personal saving rate
    computed by the Bureau of Economic
    Analysis (BEA) includes households
    and other nonprofit institutions and entities (such
    as charities and churches), and it is calculated
    simply by taking the difference between disposable
    personal income (essentially, incomes of all
    kinds minus taxes) and personal consumption
    expenditures (outlays including non-mortgage
    interest payments), then dividing this quantity
    (i.e., personal saving) by disposable personal
    income (see Figure 1).1

    http://research.stlouisfed.org/publications/review/07/11/Guidolin.pdf

  62. kettle1 says:

    Crossroads,

    the answer is yes it includes defaulting on debt, paying down debt, foreclosures etc.

    The real savings rate is probably sill minimal as people just dont have the money.

  63. Cindy says:

    http://www.globalresearch.ca/index.php?context=va&aid=14153

    Cross #55 – No more ATM – good read from June.

    “Debt in America – What the jump in U.S. Savings Rate Really Means” – Global Research

    The reality is that most consumers have little choice but to pay.

    “The ability of most people to spend at past rates has hit a wall. The same income cannot be used for two purposes. It cannot be used to pay down debt and also for spending on goods and services.”

    “Paying down debt liabilities is counted as “saving” because one owes less.”

  64. veto that says:

    “Why does FORTUNATO CAMPESI (Sales Associate) remind me of a Gambino family underling?”

    x – probably because of the pink on pink shirt tie combo.

  65. 3b says:

    gman: Forget about 500k in Bergen Co. You can make the listing below yours fir 257K!!!

    Last Sales price Sept of 2005 690K. Previous sales price May of 2005

  66. 3b says:

    gman: Forget about 500k in Bergen Co. You can make the listing below yours for 257K!!!

    Last Sales price Sept of 2005 690K. Previous sales price May of 2005 570k. Taxes are just under 11k.

    http://www.njmls.com/cf/details.cfm?mls_number=2929643&id=999999

  67. Clotpoll says:

    vodka (46)-

    Once TPTB and CNBC inflame all the sheeple and herd them into one-way bad bets (i.e., “investments”), GS will yell “fire”, and the rout will be on.

    Pump and dump. Bait and switch. That’s how you do it, mate.

    We no longer have a functional economy. Just a giant rigged casino game.

  68. Clotpoll says:

    vodka (51)-

    4,000. Typing too fast there.

  69. Seneca says:

    Westfield

    530 Clark St.

    Sold in December 2004 for 525 and needed a ton of work
    Sold in August 2006 for 860
    Sold in June 2009 for 725

    …so yeah, the aug ’06 buyers took quite the haircut but here is the thing. Even with all the work it needed in 2004, it was WAY overpriced. My point, if I have one, is that Westfield is still commanding ridiculous prices even if they are not peak prices.

    Went to an open house in town on Sunday; constant traffic coming through. 75% buyers/25% lookey-loos by by estimation. House was overpriced by more than $100k but the previous owners bought in 2005 and are already taking a haircut so someone will walk in and think, what a bargain!

  70. serenity now says:

    #66 River Edge house-
    Is that mold on the basement wall??
    Looks like the hardwood flooring is buckling as well.
    A real charmer!!

  71. 3b says:

    #69 seneca:but the previous owners bought in 2005 and are already taking a haircut so someone will walk in and think, what a bargain.

    They will just be the initial sacrifice. Same scenario during the last bust.

  72. 3b says:

    #70 What? You cannot overlook that??

  73. A.West says:

    My neighbor in Scotch Plains had an open house yesterday. I never knew the owners, an elderly couple. Same basic structure as my house, a 4/2.5 bilevel. Yet while we’ve replaced every bathroom, and modernized the entire downstairs, this old couple stuck with the 1963 original stuff all the way. Wife was holding her nose, walking on the dirty green carpeting upstairs (vs hardwood at our place).
    The offering price? About $570k, unbelievable. It will be a miracle if it sells at $500k in my opinion, but is likely to create an even worse, somewhat false comp on my street, as the least updated house on the neighborhood.

  74. PGC says:

    #70 serenity now

    That mould is gold.

    Strip out the floor and drywall, 1Gal of bleach and a dehumidifier. New floor and drywall and you are good as new. $10-15K fix

    The problem with houses like this is that the banks or the owners cut the electric so the sump pump or dehumidifier can’t run. Or they let the pipes freeze and burst.

  75. Escape From NJ says:

    This weekend the wife and I decide to look at open houses in Mercer County. Before we left the house on July 26, 2009, we set the wayback machine to 2006. When we arrived at the various open houses; my GM vehicle had a bright future, George W was still president, unemployment was under 5%, no recession in sight and MJ was still alive. Also the home prices were the same. Who says time travel is impossible, just go to an open house in Mecer County.

  76. nynj says:

    From cnn news :

    New home sales: ‘Really good news’

    NEW YORK (CNNMoney.com) — Sales of newly constructed single-family homes spiked 11% in June to an annualized rate of 384,000 homes, according to a report released Monday.

    The gain over May was much greater than expected. A consensus of housing industry analysts had forecast seasonally adjusted sales of 352,000, according to Breifing.com.

    However, sales are still 21% below the levels of a year ago, when new homes sold in June at an annualized rate of 488,000, according to the report released by the U.S. Department of Housing and Urban Development. Four years ago, during the height of the housing boom, the sales rate for June was 1,374,000, nearly three-and-a-half times higher than last month.

  77. nynj says:

    Why does NAR compare the sales no. to previous month, when they really should be comparing to the same month last year??

  78. serenity now says:

    3b – I lived in River Edge for 17 years.
    Like to meet you some time.

  79. EWellie says:

    #32 realtor: “it just breaks my heart to see these prices today. i mean 4 years ago i could have sold this house for 460K” (current list is 319 down from 349)

    my wife quickly turned her head towards me while she faded white as a ghost hoping i wouldn’t unload and respond to that. i bit my tongue and quipped about the crown molding.

    I really wish you had gone off…these people need a reality check and I find it insulting to my intelligence when I hear them go on like this. Never mind prices are still very high for most buyers.

  80. chicagofinance says:

    Wall Street Journal
    REVIEW & OUTLOOK
    JULY 27, 2009

    Morality and Charlie Rangel’s Taxes

    Ever notice that those who endorse high taxes and those who actually pay them aren’t the same people? Consider the curious case of Ways and Means Chairman Charlie Rangel, who is leading the charge for a new 5.4-percentage point income tax surcharge and recently called it “the moral thing to do.” About his own tax liability he seems less, well, fervent.

    Exhibit A concerns a rental property Mr. Rangel purchased in 1987 at the Punta Cana Yacht Club in the Dominican Republic. The rental income from that property ought to be substantial since it is a luxury beach-front villa and is more often than not rented out. But when the National Legal and Policy Center looked at Mr. Rangel’s House financial disclosure forms in August, it noted that his reported income looked suspiciously low. In 2004 and 2005, he reported no more than $5,000, and in 2006 and 2007 no income at all from the property.

    The Congressman initially denied there was any unreported income. But reporters quickly showed that the villa is among the most desirable at Punta Cana and that it rents for $500 a night in the low season, and as much as $1,100 a night in peak season. Last year it was fully booked between December 15 and April 15.

    Mr. Rangel soon admitted having failed to report rental income of $75,000 over the years. First he blamed his wife for the oversight because he said she was supposed to be managing the property. Then he blamed the language barrier. “Every time I thought I was getting somewhere, they’d start speaking Spanish,” Mr. Rangel explained.

    Mr. Rangel promised last fall to amend his tax returns, pay what is due and correct the information on his annual financial disclosure form. But the deadline for the 2008 filing was May 15 and as of last week he still had not filed. His press spokesman declined to answer questions about anything related to his ethics problems.

    Besides not paying those pesky taxes, Mr. Rangel had other reasons for wanting to hide income. As the tenant of four rent-stabilized apartments in Harlem, the Congressman needed to keep his annual reported income below $175,000, lest he be ineligible as a hardship case for rent control. (He also used one of the apartments as an office in violation of rent-control rules, but that’s another story.)

    Mr. Rangel said last fall that “I never had any idea that I got any income’’ from the villa. Try using that one the next time the IRS comes after you. Equally interesting is his claim that he didn’t know that the developer of the Dominican Republic villa had converted his $52,000 mortgage to an interest-free loan in 1990. That would seem to violate House rules on gifts, which say Members may only accept loans on “terms that are generally available to the public.” Try getting an interest-free loan from your banker.

    The National Legal and Policy Center also says it has confirmed that Mr. Rangel owned a home in Washington from 1971-2000 and during that time claimed a “homestead” exemption that allowed him to save on his District of Columbia property taxes. However, the homestead exemption only applies to a principal residence, and the Washington home could not have qualified as such since Mr. Rangel’s rent-stabilized apartments in New York have the same requirement.

    The House Ethics Committee is investigating Mr. Rangel on no fewer than six separate issues, including his failure to report the no-interest loan on his Punta Cana villa and his use of rent-stabilized apartments. It is also investigating his fund raising for the Charles B. Rangel Center for Public Service at City College of New York. New York labor attorney Theodore Kheel, one of the principal owners of the Punta Cana resort, is an important donor to the Rangel Center.

    All of this has previously appeared in print in one place or another, and we salute the reporters who did the leg work. We thought we’d summarize it now for readers who are confronted with the prospect of much higher tax bills, and who might like to know how a leading Democrat defines “moral” behavior when the taxes hit close to his homes.

  81. 3b says:

    #79 serenity: Me too. I try and stay low, because it is not easy to have a difference of opinion in River Edge today.

    You have to go along to get along, or be silent. Still love the place, but it’s chanegd for the worst IMO. We were better when we did not think so highly of ourselves. And now that the real estate amrket ahs changed, we apepar to be in complete denial. It wnet from being almost the only topic, to not being talked about at all.

  82. 3b says:

    #80 I really wish you had gone off.

    I agree. if you do not live in the town yet, go off;you have nothing to lose.

  83. W8ting says:

    Where can I order moving boxes? I’ve used http://www.uline.com in the past. Anybody know of a better site to order from?

    Thanks for your help…

  84. 3b says:

    #78 And they never seem to mention that June is always the busiest month of the year, no matter where the market is.

  85. Comrade Nom Deplume says:

    [81]chifi

    If you or I did these things, we would be looking at back taxes and SUBSTANTIAL penalties and interest.

    Further, his excuses hold virtually no weight with the IRS or the courts. At best, if believed, they prevent criminal tax charges.

    If Pelosi doesn’t impose a sanction (and I don’t mean 20 lashes with a goose feather), then she cannot complain about Republican’s “culture of corruption” anymore, in my book.

    (which was always laughable. Anyone who grew up in the Northeast knows that the GOP hardly has a lock on political corruption, being relative newcomers to this sport).

  86. Comrade Nom Deplume says:

    Anyone know of a decent residential A/C contractor that they trust in the western half of Union county or thereabouts?

  87. Curmudgeon says:

    66..3B

    That’s not a house, that’s a tree.

  88. John says:

    some of those reos are nasty, my favorite was the old lady with the fruity son who spanked it to the pretty boys in playgirls and then used his spunk to stick it to the sheetrock, several hundred times. The Marshals tossed them but the pictures stayed.

  89. 3b says:

    #88 Yes it’s a tree that comes with a love shack/ I eman love cottage.

    Can you believe that someone actually paid 690K for that?

  90. NJGator says:

    Nom 87 – Are you looking for installation, or just repairs? Several of our friends have installed central A/C. I can ask for recommendations and horror stories for you.

  91. Clotpoll says:

    plume (86)-

    They’re all scum and should be lined up against a wall and executed.

  92. Qwerty says:

    The 2nd paragraph is fabulous…..

    http://abcnews.go.com/Business/Story?id=8169165&page=3

    Geithner Smart to Rent His House

    In that kind of market, it was probably wise for Geithner to rent. His last asking price was already $27,000 less than what he paid five years ago for the house. Add in any improvements he made to the home and a broker’s fee — up to $90,000 on a sale like that — and Stiefvater said he could be anywhere from $200,000 to $400,000 in the hole. That’s about the size of his down payment.

    “I don’t think anybody’s in a position to say that he overpaid, or anybody overpaid, when he bought his house because market value is market value,” Stiefvater said. “Back in the those days, everybody was overbidding — I’m not saying overpaying, but overbidding — and getting into bidding wars and multiple offers escalated the sale prices to what I think was higher than market value.”

  93. NJGator says:

    Dwek’s role as FBI informant was ‘worst-kept secret in New Jersey’
    by Kelly Heyboer and Maryann Spoto
    Sunday July 26, 2009, 2:00 PM
    In the years after Solomon Dwek was arrested in an alleged $50 million bank fraud scam, those watching his case said the disgraced real estate investor seemed unusually relaxed for a man facing up to 30 years in prison.

    When he appeared in court in connection with the case, the soft-spoken son of a rabbi was chatty. He freely revealed details of his alleged crime to opposing attorneys as if he had no plans of mounting — or needing — a defense.

    Over the last two years, as the judge repeatedly granted federal prosecutors’ requests to delay his trial, Dwek seemed unfazed. Many following the case said it was obvious the 36-year-old Monmouth County businessman had made a deal to become a federal snitch in exchange for a lighter sentence.

    “His wearing a wire was the worst kept secret in New Jersey,” said Dennis Kearney, an attorney representing PNC Bank in Dwek’s bank fraud case. “Everyone’s No. 1 conclusion has been for years the guy’s been cooperating.”

    Whether it was obvious or not, Dwek was able to spend the last two years getting close to some of the area’s most prominent religious leaders and political figures while secretly wearing a wire for the FBI.

    On Thursday, the FBI arrested 44 politicians, public officials and rabbis in a historic corruption and money-laundering sting that stretched from synagogues on the Jersey Shore to city halls in Hudson County and the human organ black market in Israel.

    In the days since the arrests new details have emerged about the informant at the center of the investigation. Friends, colleagues and associates say that from his days as a budding real estate mogul to his work as a philanthropist and school administrator, Dwek– known as Schlomo to friends– has effortlessly won people’s confidence. Colleagues say he also has a history of betraying his friends with ease.

    In court papers that play out like a how-to manual for FBI informants, Dwek is “CW,” the confidential informant. He is a charismatic deal maker who skillfully shmoozes prominent Jewish leaders on one page and boldly hands over cash bribes to politicians on the next.

    “I’m looking for a guy that can help me out. You know me, I know you. I trust you. Just like before the election,” Dwek told one Jersey City politician, according to one of the criminal complaints. “I’m a generous guy.”

    It seems an unlikely role for the father of five who regularly sports tiny spectacles, dark suits and a yarmulke on his balding pate. In Deal, a Jersey Shore town with a large Jewish population, Dwek was best known as the son of Rabbi Isaac Dwek, a leader in the Sephardic Jewish community and head of the Synagogue of Deal.

    But those who watched Dwek build his real estate empire in Central Jersey say they understand how the unassuming businessman from a prominent Jewish family could gain the trust of powerful religious and political figures.

    “They thought they were dealing with a guy in good faith,” said Leonard Needle, an attorney in Fair Haven who represents several of the investors who lost money when Dwek’s real estate empire collapsed.

    Dwek snatched up more than 200 properties before his arrest by routinely persuading friends and strangers to trust him with their savings. It wasn’t until later that they learned Dwek’s real estate company had collapsed into bankruptcy.

    “He seemed to be an active, legitimate investor who was making money for whoever he was investing for,” Needle said.

    Even bank tellers seemed to put an unusual amount of faith in Dwek.

    In 2006, as his real estate deals began to unravel and loans came due, Dwek rolled into the drive-thru window at the PNC Bank in Eatontown. He gave the teller a bogus $25.2 million check, according to prosecutors. The teller cashed the check after Dwek assured the bank that the money to cover the charge would be wired into his account soon.

    Dwek allegedly transferred more than $22 million of the money to another bank to pay off loans before PNC caught the fraud. He was arrested after he attempted to cash a second bogus $25 million check at another PNC bank.

    Kearney, the Morristown attorney representing PNC Bank in the case, said Dwek used his father’s prominence as rabbi at the Deal synagogue to get his foot in the door to build his real estate empire.

    “He had street cred within the community, which gave him introductions to people in the community,” Kearney said.

    Dwek didn’t care whom he hurt while he was looking for investors for his failing real estate business, Kearney said His alleged victims included his uncle, Joseph Dwek, who invested $56 million with his nephew, and other members of the tight-knit Sephardic Jewish communities in Deal and Brooklyn, according to bankruptcy filings.

    “These are very prominent people in that community, and he had no qualms about doing that to them,” Kearney said.

    Attorney Jerome Shapiro of West Long Branch worked on about 40 of Dwek’s property transactions. He is now facing lawsuits by banks that claim many of Dwek’s real estate deals were fraudulent.

    Shapiro said he didn’t realize he’d been misled until Dwek’s real estate empire collapsed.

    “Things became undone. I was hoodwinked,” Shapiro said.

    Dwek got his start in real estate as a teenager, working for other real estate investors. The rest was “on-the-job training,” said Timothy Neumann, Dwek’s bankruptcy attorney.

    Unlike many flashy real estate moguls, Dwek seemed to have no interest in showing off his wealth. He, his wife Pearl and their five children live in a relatively modest ranch house with a children’s swing set in the backyard on a tree-lined street in Deal. The grander beach front mansions are on the waterfront a few blocks away.

    He is “not an ostentatious man,” Neumann said.

    Instead, Dwek seemed to thrive on deals.

    “Business people receive gratification out of being in business. They get pumped up over the next deal. They get an adrenaline rush out of a business deal,” Neumann said. “He’s like the businessman par excellence when it comes to that. That’s what motivates him.”

    Before his arrest, Dwek also enjoyed donating his growing wealth.

    He regularly wrote checks for needy families and students at the Deal Yeshiva, where he served as a vice president and chief executive for several years. He also was a generous benefactor for causes outside of the Jewish community.

    In 2003, Dwek paid for the construction of an elaborate monument in honor of Frank Caltabilota, a West Long Branch student killed in a dormitory fire at Seton Hall University on Jan. 19, 2000. The granite pillar was placed near a ballfield in a park near the Caltabilota’s house.

    Dwek also donated more than $30,000 to help refurbish the Lumia Theater in Long Branch. The theater, which puts on six plays a year, named its 60-seat black box stage the Solomon and Pearl Dwek Theater in the family’s honor.

    Gabe Barabas, one of Lumia’s founders, approached Dwek to make the donation and met with him briefly two or three times to seal the deal. Dwek seemed interested when he heard the theater would be used to produce plays for children.

    “He struck me as a quiet person,” Barabas said. “Just a simple, unassuming man.”

    Dwek never returned to the theater to see a play. But he dropped in briefly, unannounced, to see the theater named after him after the renovations were complete.

    “He said, ‘Very good,’ or something to that effect and left as quickly as he came,” Barabas said. “He always seemed to be in a rush. It was almost like a little tornado went through.”

    http://www.nj.com/news/index.ssf/2009/07/solomon_dwek_role_as_fbi_infor.html

  94. SG says:

    Verizon to Slash 8,000 Jobs

    The AP is reporting that Verizon will cut over 8,000 employees if the face of plummeting revenues and profitability. According to the report, the cuts will come from the traditional wire-based portion of the business, and not the wireless side, and will be in effect nationwide. This comes on top of 8,000 cuts earlier this year, for a total workforce reduction of just under 7%. This is the largest announced mass layoff from a Fortune 500 company since May, and follows a string of recent…

  95. chicagofinance says:

    Victorian says:
    July 27, 2009 at 10:39 am
    “Remember, on March 9 very few of the items characteristic of a true bear market bottom were seen. There was no extreme pessimism, there were no huge bargains in stocks, and the public continued to be hopeful. On this evidence, I concluded that the final and true bottom of the bear market had not been seen.”

    Vic: pure unadulterated garbage….what was happening in late Feb / early March had all the trappings of a market bottom. I would be a liar if I said I called the market bottom, but that said, I placed big bets at the time as a calculated risk thinking that there was greater upside than downside at that point. Why? Because everyone everywhere was negative and we seemed doomed…

    Please note that the Dow is now purely obsolete….

  96. 3b says:

    #94 qwerty:Back in the those days, everybody was overbidding — I’m not saying overpaying, but overbidding — and getting into bidding wars and multiple offers escalated the sale prices to what I think was higher than market value.”

    So there is a difference between over bidding and over paying. I love it!!!

  97. 3b says:

    grim: if you are available, can you please provide me with a property address for njmls 2933376? Thanks.

  98. John says:

    100!!!

  99. Ben says:

    I didn’t call a market bottom but I did make some ridiculous gains from October to March. I was literally dumping all my cash into Silver, Mining Stocks and from December on, Petroleum stocks. I was dumping any cash I came into contact with because I was afraid of the printing press. It paid off nicely.

  100. John says:

    ChiFi you the man, how big were the bets you placed? Are you talking work or personal? I was fully in already when March 9th arrived as I was buying since November. That botton was so tempting I went 80K into Margin the last two weeks of March buying bonds at the half off salve. I picked up 160K of bonds for 80K. Come one now, XL, Hartford, CNA, C, BAC 6% coupon bonds trading at 45 to 55 cents on a dollar, people should have busting open their piggy banks.

    chicagofinance says:
    July 27, 2009 at 12:41 pm
    Victorian says:
    July 27, 2009 at 10:39 am
    “Remember, on March 9 very few of the items characteristic of a true bear market bottom were seen. There was no extreme pessimism, there were no huge bargains in stocks, and the public continued to be hopeful. On this evidence, I concluded that the final and true bottom of the bear market had not been seen.”

    Vic: pure unadulterated garbage….what was happening in late Feb / early March had all the trappings of a market bottom. I would be a liar if I said I called the market bottom, but that said, I placed big bets at the time as a calculated risk thinking that there was greater upside than downside at that point. Why? Because everyone everywhere was negative and we seemed doomed…

    Please note that the Dow is now purely obsolete….

  101. Clotpoll says:

    I think the proof of how obsolete the Dow is will come when it hits 4,000.

  102. Frank says:

    What’s with Corzine picking old lady as a running mate?? @74 is barely alive.

    http://www.nj.com/news/index.ssf/2009/07/the_winding_road_to_corzines_p.html

  103. Secondary Market says:

    its really for the wife. i’ve piped up in the past and caught an ear full on the way home. my normal practice is to see a house first by my self and then bring my wife along. that way the realtor hears my pitch and my wife doesn’t feel embarrassed.

    @ 83 3
    b says:
    July 27, 2009 at 12:06 pm

    #80 I really wish you had gone off.
    I agree. if you do not live in the town yet, go off;you have nothing to lose.

  104. Clotpoll says:

    Frank (104)-

    That broad looks like she could use a coupla new kidneys.

    Somebody should check for a pulse.

    On Corzine, that is…

  105. Clotpoll says:

    2ndary (105)-

    Take me along with you one weekend. I love lambasting open house agents.

  106. Clotpoll says:

    Jonny Boy’s fallen a long way from this:

    http://www.nypost.com/seven/04062007/photos/news021.jpg

    Now, he gets a corpse glued to his hip until Election Day…when he will (hopefully) lose, then disappear forever.

  107. Clotpoll says:

    I expect a John response here…

  108. scribe says:

    Where’s Gary?

    Gary, are you a “software engineer.”

    This tech co has offices on Wood Ave in Iselin, and they’re advertising:

    http://www.eginnovations.com/web/careers_technical.htm

  109. NJ908 says:

    #87 Nom – Reel-Strong in Cranford – learned how great their rep was doing work for them – honest, great reputation, talk to Mike

  110. Secondary Market says:

    clot, you’re more than welcome to come along. plus i always keep a bottle of kwak handy for gifts.

  111. Comrade Nom Deplume says:

    [92] gator

    Repairs on an existing system, just in the air handler.

  112. John says:

    If you want something done right hire an ugly woman.

    Clotpoll says:
    July 27, 2009 at 1:37 pm
    I expect a John response here…

  113. chicagofinance says:

    Clotpoll says:
    July 27, 2009 at 1:30 pm
    Frank (104)-
    That broad looks like she could use a coupla new kidneys.
    Somebody should check for a pulse.
    On Corzine, that is…

    clot: note this important fact that was picked up by the WSJ…
    Mr. Corzine, a Democrat, barnstormed over the weekend with his choice for lieutenant governor, state Sen. Loretta Weinberg, 74 years old, who is known for bucking authority and for losing her life savings of $1.3 million to Ponzi schemer Bernard Madoff.

  114. Secondary Market says:

    so i just got notice of audit from the IRS (2006)? wife and i were both w2 employees and had her accounting firm do the return. are we really what they are looking for? wtf!
    i should attach a nice little note to the paper work they are requesting.

  115. Qwerty says:

    RE: John @ 12:16 pm.

    Impossible to top that post?

  116. kettle1 says:

    Stu,

    good news on china:

    Rich China, Poor Peasants

    China recently announced its GDP grew by more than 7.1% in the first half of this year, putting the country on course to displace Japan as the world’s second-largest economy by year’s end. But it’s not time to break out the maotai just yet. Peasants and migrant workers, who compose more than 65% of China’s 1.3 billion people, aren’t benefiting much from this growth. Much of it is hoarded by the central government. Last year, Beijing collected taxation and other levies of more than six trillion yuan ($878 billion), an eye-popping four trillion yuan more than five years ago. Since the turn of this century, funds flowing into the Beijing treasury have increased by around 22% a year, more than double the average 10% GDP growth for the past two decades.

    This wouldn’t be a problem if worker incomes were growing in tandem with tax revenues. But according to official statistics, salaries and other income of workers and peasants as a percent of GDP declined to just 41.4% in 2006—the last year when data was available—from 53% in 1998; salaries typically are 50% to 60% of GDP in developed countries like the United States or Japan. A lion’s share of national wealth is being snapped up by about 140 state-held business groups such as the three oil-and-gas giants, four major state-owned banks and similar government monopolies in lucrative sectors such as insurance, energy, mines, telecommunications and transportation.

    http://online.wsj.com/article/SB10001424052970203946904574301110723410346.html

  117. Frank says:

    #116,
    “who is known for bucking authority and for losing her life savings of $1.3 million to Ponzi schemer Bernard Madoff.”

    Looks like she made some great choices, I can’t wait for her to run NJ gov to the ground.

  118. Jill says:

    So do realtors get kickbacks from kitchen remodelers or what? I’ve been watching shows on HGTV and the realtor mantra is still “Buyers are looking for stainless steel appliances, granite countertops, and master suites with soaking tubs.”

    Is this still true? Or is Formica the new Granite? Is Bisque the new Stainless? Is Functional the new Luxury?

  119. John says:

    Isn’t the ability to lose large sums of money the main qualification for the job, that and not wearing seatbelts.

    Frank says:

    July 27, 2009 at 2:28 pm
    #116,
    “who is known for bucking authority and for losing her life savings of $1.3 million to Ponzi schemer Bernard Madoff.”

    Looks like she made some great choices, I can’t wait for her to run NJ gov to the ground.

  120. imkeithhernandez says:

    true confession: i giggle at gary’s “dear sellers” postings like a japanese tween in a hello kitty store

  121. Frank says:

    SRS below $16, I am in heaven.

  122. 3b says:

    #121 Jill: I would say some of those shows are dated. But don’t forget that buyers are also looking for his and her offices, and room for the the 2 dogs. Not one,2.

  123. x-underwriter says:

    Chicago/John,
    Any thoughts on if we might see a double dip this fall in teh market.

  124. james says:

    Clot,

    I just found out my Firearms ID was approved after 4 months. I went down to the local armory to look at AR-15’s. Any suggestions?

    Im going to rent one first and sign up for training before I make a purchase.

  125. chicagofinance says:

    x-underwriter says:
    July 27, 2009 at 3:01 pm

    Chicago/John,
    Any thoughts on if we might see a double dip this fall in teh market.

    Which market?

  126. x-underwriter says:

    S&P 500, DOW

  127. John says:

    We are going to dip in equities and junk bonds but end the year higher. Trouble is your have to be right twice to time the marker, once on the way out and once on the way back in. Folks who were bragging they got out in September/Early October needed to get back in on March 9. Otherwise it wasn’t that big a deal.

  128. Sean says:

    No more naked shorting eh? After the SEC denying it existed for years?

  129. x-underwriter says:

    Thanks John,
    I got a bunch out (index funds) way back when Dow was 13,000 but took a little too long getting back in at 8,500. I still made out ok…am kicking myself for not jumping at 6,700 though.

  130. BC Bob says:

    “Otherwise it wasn’t that big a deal.”

    Yeah, John, no big deal.

    http://bigcharts.marketwatch.com/interchart/interchart.asp?symb=XLF&time=&freq=

  131. gman says:

    In case you missed the CNN interview with Robert Shiller – A quick update from housing guru Robert Shiller: no bounce in sight, further declines ahead.

    As summed up by DailyBail.com: A quick synopsis: commercial real estate is headed for more trouble; homeowners are still delusional in their thinking that the housing markets will recover and that we are merely experiencing a temporary blip, and now is not the time to buy a single family home.

  132. Clotpoll says:

    Already been done.

    “Looks like she made some great choices, I can’t wait for her to run NJ gov to the ground.”

  133. BC Bob says:

    Click on the 3 year chart [133].

  134. Clotpoll says:

    james (127)-

    Why not just go for the gusto of the fully-automatic M-16?

    Dig around. You’ll find one.

    When the SHTF, you want real firepower.

  135. crossroads says:

    kett and cindy 61, 62 and 63

    thanks for your response. i’ll read further.

    so the couple i know that are now collecting unemployment who are re investors or were and defaulted on over 100k in cc debt and have foreclosures pending on about $2 million in property have a savings rate which is skyrocketing? so they helped the economy during the bubble and after. wow!

  136. John says:

    I am talking plain old market not financials, btw how long is gold sitting in the 900’s? Give me that chart for last six months.

    BC Bob says:
    July 27, 2009 at 3:19 pm
    “Otherwise it wasn’t that big a deal.”

    Yeah, John, no big deal.

  137. cooper says:

    3b 40 it will be called a love cottage then. so it is written…

  138. BC Bob says:

    “I am talking plain old market not financials, btw how long is gold sitting in the 900’s? Give me that chart for last six months.”

    Old market S&P’s are down over 35% from peak. However, not a big deal.

    Gold is trading 954, 5% off peak. Kind of puzzling to me? We are in the weakest seasonal for gold, yet it is holding like a rock, close to its highs. As you are well aware, markets that consolidate for a long period of time, close to highs are building a powerful base for the next leg.

    I was hoping for a pullback to 850-880, during the weak summer seasonal, to add. Guess I’m dreaming.

  139. BC Bob says:

    “Give me that chart for last six months.”

    LOL. Get one of your pencil pushing lackeys to do something productive.

  140. Stu says:

    “I was hoping for a pullback to 850-880, during the weak summer seasonal, to add. Guess I’m dreaming.”

    I too was hoping. This whole facade of a rally is gonna collapse hard and will take a lot of suckers with it. I won’t be one of them.

    Companies can’t keep maintaining earnings by cutting costs. Eventually, there is no company left and no customers to buy the product.

  141. 3b says:

    #144 Stu: Gee Stu, Gosh, I mean really, you are so negative.

    Cutting costs is a lagging indicator, OK?? You cut costs, and buy hosues at the same time, than you get jobs. Very easy.

  142. Ben says:

    I’m pretty sure Gold will pay off better than most stocks as it has for the past 10 years. All the forces that drove gold from 300 to 900 are much much larger now and have shown no hint of reversing. I’ll stop buying gold and silver when a few things happen.

    1. Governments actually cut spending
    2. The Fed stops expanding the money supply
    3. The trade deficit gets reduced by 80%

  143. make money says:

    stu #144

    Eventually, there is no company left and no customers to buy the product.

    BINGO!!!!

  144. BC Bob says:

    “Eventually, there is no company left and no customers to buy the product.”

    Trash the dollar policy.

  145. John says:

    Yet somehow you envision a world where no one has money yet they can still pay you, $1,000 an ounce for gold. I am hungry, freezing and homeless I ain’t buying gold with my last bit of money, maybe a value meal.

    BC Bob says:
    July 27, 2009 at 4:24 pm
    “Eventually, there is no company left and no customers to buy the product.”

    Trash the dollar policy.

  146. bi says:

    144#, stu,

    the market should pull back some time in the future. the rally like this is not health. it makes everyone genius. but the problem with ultrashorts such as your beloved that particular etf is that it will be irrelevent if the market goes up another 10% from here.

  147. BC Bob says:

    J [150],

    Are you really this clueless. It’s a currency. Are you saying that worlwide currency trading will come to an abrupt halt? I’m bearish?

    By the way, I’ll be paid a lot more than 1K. Old ceilings, when violated, become new floors.

  148. Clotpoll says:

    qwerty (149)-

    Hit?

    Bottom?

    Donkey punch!

    “No worries, Kendra Todd of “The Apprentice” says we’ve hit bottom”

  149. John says:

    Yea it is a currency that is about as practical as a subway token.

    BC Bob says:
    July 27, 2009 at 4:37 pm
    J [150],

    Are you really this clueless. It’s a currency. Are you saying that worlwide currency trading will come to an abrupt halt? I’m bearish?

    By the way, I’ll be paid a lot more than 1K. Old ceilings, when violated, become new floors.

  150. yo'me says:

    NEW YORK (Reuters) – Stocks rose slightly on Monday in a late rally as investors rotated into financial shares, which had lagged in the recent two-week rally.

    Upbeat data on new home sales underpinned financial stocks, the session’s strongest sector, and prompted investors to snap up the shares of several regional banks, which had been among the worst hit by credit losses tied to a weak housing market.

    Regions Financial Corp (RF.N) jumped 8.9 percent to $4.02 on the New York Stock Exchange and Zions Bancorporation (ZION.O) soared 13 percent to $12.65 on Nasdaq, while the S&P financial index .GSPF rose 1.5 percent.

    Financials had lagged in the previous weeks, but Friday saw the beginning of a rotation into the sector and out of technology, which continued Monday, according to Michael James, senior trader at Wedbush Morgan in Los Angeles

    http://www.reuters.com/article/hotStocksNews/idUSTRE56Q0UQ20090727

  151. Clotpoll says:

    BC (152)-

    I’d like to know how old John was when his uncle first violated him.

    “Old ceilings, when violated, become new floors.”

  152. Clotpoll says:

    Good luck buying seeds and bullets with subway tokens, John.

  153. BC Bob says:

    J [154],

    You answered my question. Yes, you are clueless.

  154. yo'me says:

    PATNA, India (Reuters) – Farmers in an eastern Indian state have asked their unmarried daughters to plow parched fields naked in a bid to embarrass the weather gods to bring some badly needed monsoon rain, officials said on Thursday

    What can we do to embarrass the Real state gods?

  155. yo'me says:

    #159
    Real state=real estate you know what i mean

  156. bi says:

    stu,

    with srs closed under $16 and fxp at $9.5. are you still patient? i don’t think you are as delusional as that bsd ultrashorters hoping it back to $300. with recent oversold, i would think it may be a good summer short-term play. my target is $20.

  157. Sean says:

    ZeroHedge and David Rosenberg on the end of the recession.

    http://zerohedge.blogspot.com/2009/07/end-of-end-of-recession.html

  158. chicagofinance says:

    Stu says:
    July 27, 2009 at 3:54 pm
    “I was hoping for a pullback to 850-880, during the weak summer seasonal, to add. Guess I’m dreaming.”
    I too was hoping. This whole facade of a rally is gonna collapse hard and will take a lot of suckers with it. I won’t be one of them.
    Companies can’t keep maintaining earnings by cutting costs. Eventually, there is no company left and no customers to buy the product.

    X & Stu: I think we may be due for a melt up….as a result, fundamentals are irrelevant and the call on year-end is useless, because the roller coaster is going to be the main story…..

  159. chicagofinance says:

    Bost: Gold? We need inflation to make gold blow through resistance. If you think everything is going to fall apart, then your gold trade is going to sit in place or slide backward into the 800’s.

    You have to hope for more raging bullcrap dude…

  160. yo'me says:

    OPEC, the oil cartel, is bracing for a sharp drop in crude prices in coming weeks because huge fuel reserve continue to grow.

    This concern is causing some OPEC members, who produce 40 percent of the world’s oil, to push for more output reduction.

    http://moneynews.newsmax.com/streettalk/opec_oil_price_drop/2009/07/27/240498.html

  161. safeashouses says:

    “Skilled immigrants fleeing the U.S.”

    http://www.msnbc.msn.com/id/32172403/ns/business-world_business/

  162. yo'me says:

    Bears Beware: Some See Huge Stock Rise

    Monday, July 27, 2009 2:44 PM

    By: Dan Weil Article Font Size

    Stock analysts are more bullish than bearish on earnings for the first time in two years. And their profit estimates imply a 26 percent gain for the Standard & Poor’s 500 Index, Bloomberg reports.

    Analysts raised their earnings predictions on companies in the index 896 times last month, while lowering them 886, making them net bullish for the first time since the credit crisis began, according to JPMorgan Chase data.

    Wall Street firms now figure the S&P 500 companies will earn $74.55 a share next year, up 3 percent from their forecast in May.

    The S&P 500 traded at 13.13 times estimated profit at Friday’s close. If the index were to revert back to its 50-year average of 16.54 times earnings, stocks would have to gain 26 percent.

    “There’s a sea change of opinion, and it all goes back to the improving economic data,” Fritz Meyer, senior market strategist for Invesco Aim, tells Bloomberg.

    “Expectations got pushed too low in the depths of the recessionary mentality. That translates into upward revisions in earnings estimates and drives stock prices.”

    The new earnings estimates posit a 25 percent increase for S&P 500 earnings next year from $59.80 a share predicted for this year, Bloomberg reports.

    That would represent the biggest jump in 15 years.

    Many have turned bullish on stocks. The market is “now on its way to around the 1,200 to 1,250 level for the S&P 500,” Shane Oliver of AMP Capital Investors tells CNBC.

  163. CAIBC says:

    so grim et all, are you calling a bottom? price bottom? i NEED to buy a house….family expanding….

  164. CAIBC says:

    sorry, i should be more specific….morris county, bergen county areas?

  165. chicagofinance says:

    Sean says:
    July 27, 2009 at 4:58 pm
    ZeroHedge and David Rosenberg on the end of the recession.
    http://zerohedge.blogspot.com/2009/07/end-of-end-of-recession.html

    You be really careful with this stuff. Most of it is not particularly insightful or helpful. I would say the biggest error in the analysis is extrapolating a trend from the data and current conditions (i.e. assuming any recovery from October to now is automatic crap, when it is reasonable to assume that we overshot below fair value and merely recouped something in a natural stabilization effect).

    The other major issue is assuming that an arithmetic or median average is somehow indicative of conditions. In reality, I would argue that a subset of actors are completely fcuked beyond belief, and then the bulk of everyone else is damaged or otherwise glum. If you take this bifurcated view, then a forecast of immense doom is not going to be accurate.

    Additionally, in the same way you can take a company in financial duress into Chap 11 and have them emerge optically much more attractive. There is going to be a whole host of debt merely written down or written off. As a result, what appears to be horrific is actually going to be #1 materially different and #2 only affecting a certain group.

    Finally, there is no discussion as to whether this effect has been priced into forecasts, because they is damn sure a lot of evidence that it already is…..

  166. chicagofinance says:

    because they is = because there is

  167. Mark says:

    3 years is a long time to wait for prices to simply stabilize, how long before they get back to where we started? What a mess!

  168. relo says:

    166: they need only to bring an envelope of cash to most any NJ diner and the issue will be expedited.

  169. movedtovermont says:

    If you’re in the market it seems you need to suspend rationality and accept that there is a continuos bias and urgency to “move” the market up. Its required for stability and growth; required because of ever increasing obligations. It feels to me like trying to contain water under pressure – you can do it for so long but eventually it finds a way out. Trading currencies seems to me the only viable trade left where the relevant issues are more transparent and harder to disguise. The S&P at 600 feels over valued given the financial debacle of the last years – but every day the tape tells me I’m wrong.

  170. yo'me says:

    Option ARMs: Good News, Bad News
    by CalculatedRisk on 7/27/2009 04:04:00 PM
    The good news, according to a Barclays Capital report, is not as many Option ARMs will recast in 2011 as forecast earlier by Credit Suisse.

    The bad news is borrowers are defaulting en masse before the recast.

    http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aZKwTlyVwvxo

  171. BC Bob says:

    Chi [164],

    No, not at all. It will thrive in deflation, currency thrashing, or inflation. It rallied 75% during the greatest deflationary period in our history.

    A negative, disinflation.

    One other item, it’s a 3-5 year trade, from here. It’s serves no purpose talking about 1, 2 or 3 month periods. However, I do realize, not you, that some get their jollies off with short term moves.

  172. prtraders2000 says:

    168

    Sometimes I feel the same way. #3 just came along July 3. But then I realize that I don’t NEED to buy a house, I NEED more living space. Luckily I rented a 3br from an underwater former seller turned landlord and it’s working out. I should be o.k. until the time is right. Starting to think about bunk beds ….

  173. willwork4beer says:

    168 & 169

    Since no one is answering your question, Grim recently called a sales volume bottom. But he went to some lengths to stress that he was not calling a sales price bottom. He went on to state that, historically, the price bottom follows the volume bottom.

    Disclaimer: Everything I know about real estate, I learned on this site. Most of the time when I was reading the posts, I was also drinking beer.

  174. Comrade Nom Deplume says:

    OT alert –

    I always said that we would need protectionism to make the democratic policies work. Props to Barney for at least being honest about where he wants to take things:

    “Nations That Offer Havens From U.S. Law Will See Their Banks Shut Out, Frank Says

    Posted July 27, 2009, 6:26 P.M. ET

    Countries whose laws allow havens or escape hatches from U.S. banking laws would be barred from the U.S. financial system under regulatory reform legislation now moving through the Congress, House Financial Services Committee Chairman Barney Frank (D-Mass.) said July 27.

    According to Frank, the administration’s draft reform legislation—which has been introduced in phases over the past few weeks—is designed to be harmonized with the international framework in an effort to secure broad regulatory cooperation. That cooperation would be undermined if U.S. banks could simply find legal havens outside the United States.

    “It would be fatal to this if you had this kind of escape hatch,” Frank told reporters following a speech at the National Press Club. . . ”

    Personally, I don’t know what is is trying to say, but with Barney, that is pretty much par for the course.

  175. Comrade Nom Deplume says:

    now back to real estate (and taxes)

    “Eighth Circuit Says Company Can Sue Realtor for Not Disclosing Site in Taxing District

    Posted July 27, 2009, 6:26 P.M. ET

    The U.S. Court of Appeals for the Eighth Circuit July 27 found a construction materials manufacturer’s claims for damages that resulted from a commercial real estate company’s failure to disclose that the site chosen for the manufacturer’s new headquarters was subject to a special sales tax contained issues of material fact, overturning a district court grant of summary judgment to the real estate company (Lafarge North America Inc. v. Discovery Group LLC, 8th Cir., No. 08-2210, 7/27/09).

    The district court granted summary judgment to Discovery Group LLC in an action brought by Lafarge North America Inc. that claimed the group had an obligation to disclose that property Lafarge chose for its headquarters was subject to a 0.5 percent sales tax. Lafarge had hired Discovery to find a suitable property for its headquarters. . . .”

    Basically, the buyer’s broker fcuked up and didn’t disclose (or realize) that they put their buyer into a special district that charges a sales tax. Arguably, all of the company’s sales are now taxable there. The district court kicked the suit but the 8th circuit reinstated it.

  176. 3b says:

    #167 yome: So what is going to drive earnings for the next quarter? This past quarter it was cost cutting incluidng large layoffs. This quarter it will be what? Mor cost cutting including layoff?

    Or are all the companies going to go out and start hiring people who will than start spending? ALl of this in only 3 months,and all will be well by year end in only 5 months?

  177. 3b says:

    #168 caibc:A bottom in pricing based on what?

    There is no reason to believe we are at a bootom in pricing in Bergen or Morris or probably most other areas in NJ.

  178. leftwing says:

    Shelley re: Chatham

    You need to find a serious seller, not someone testing the market for a price.

    I suppose you saw new construction on Linden ($2.4m) and Highland ($2.0m) just sold. Even solvent developers are holding out for price and getting it. We can all agree here (and I do) that these houses are not worth the price and that they will decrease in value. The seller, however, only needs to convince ONE person to buy it.

    Seems to me that while there are some with financial problems in Chatham many sellers are willing and able to ride it out. I wouldn’t look for much more than a standoff in this market for anything other than lower end properties and forced sellers absent another major economic move downward.

  179. yo'me says:

    #184 3b You are forgetting this are global companies.GLOBALIZATION is the key word.

  180. yikes says:

    the mets are an embarrassing mess.

    as a yankees fan, this makes my day/week/month/year.

  181. 3b says:

    #187 yome: true but it will do nothing for the economy here. And most of the rest of the global economy does not appear to be in that great a shape either.

  182. Cindy says:

    Chicago #81

    “The National Legal and Policy Center also says it confirmed that Mr. Rangel owned a home in Washington from 1971-2000 and during that time claimed a “homestead” exemption that allowed him to save on his District of Columbia property taxes. However, the homestead exemption only applies to to a principal residence, and the Washington home could not have qualified as such since Mr. Rangel’s rent-stabilized apartments in New York have the same requirement.”

    Give me a *&%$ing break.

  183. 3b says:

    #186 left: They will fall there too. If they fell last time dramatically too in places like Saddle River, than they will certainly fall in Chatham too. They are simply not enough people that can pay those prices.

  184. yikes says:

    Secondary Market says:
    July 27, 2009 at 2:10 pm

    so i just got notice of audit from the IRS (2006)? wife and i were both w2 employees and had her accounting firm do the return. are we really what they are looking for? wtf!
    i should attach a nice little note to the paper work they are requesting.

    what is the statute of limitations on getting audited? do they really expect people to have all their sh*t saved from 3 years ago?

  185. yo'me says:

    3b if unemployment is 20% there are still 80% employed.100% of population will need staple items.Trimming the fat(lay offs)makes the company leaner.
    Remember the profit they are trying to beat is earnings from our lowest point.We are just getting up from this recession.3 quarters ahead from this is another question.Not unless you are seeing us and the world going into a deeper recession.

  186. Cindy says:

    From the Big Picture – Quote of the day…Mark M Hanson (aka Mr. Mortgage)

    “National new home sales, on a monthly basis, don’t add up to half of the total foreclosure activity in California in a single month.”

    That just seems impossible…

  187. yikes says:

    Clotpoll says:
    July 27, 2009 at 3:26 pm

    james (127)-

    Why not just go for the gusto of the fully-automatic M-16?

    Dig around. You’ll find one.

    When the SHTF, you want real firepower.

    LMAO
    how’s the arsenal, clot?
    have you any kevlar yet?

    i wish there was a navy seals training class, just for people who wanted to be in tip-top shape and proficient in weaponry. id take it

  188. yo'me says:

    3b The 40% rally we have seen since march is just beating expectations no true profits.Now its time to show true earnings not above expectations.
    I stayed at the holiday inn.

  189. yo'me says:

    The USA is a BARGAIN!!

  190. yikes says:

    i’d like to say I’m really, really, really PROUD of some of a select few regulars completely ignoring a certain troll. its awesome to watch.

    well done, gentlemen.

  191. yo'me says:

    what is the statute of limitations on getting audited? do they really expect people to have all their sh*t saved from 3 years ago?

    My accountant tells me to keep seven years of my IRS files.

    When audited the letter tells you what you are audited for.That is all you have to answer them.

  192. chicagofinance says:

    192.yikes says:
    July 27, 2009 at 8:23 pm
    Secondary Market says:
    July 27, 2009 at 2:10 pm
    what is the statute of limitations on getting audited? do they really expect people to have all their sh*t saved from 3 years ago?

    3 years from date of filing…yes….keep you shite until then…especially because they are backed up and it really does take that long……

  193. chicagofinance says:

    Never throw away a copy of any filed return…toss the backup after the 3 years from filing date….

  194. chicagofinance says:

    Note…..2006 return filed on March 15, 2007… can be audited until 2010

  195. BC Bob says:

    “3b if unemployment is 20% there are still 80% employed.100% of population will need staple items.”

    Staples? A harbinger of things to come? Any hope of a sustainable rally will need much more participation than staples. Which reminds me, lets fill the Aug S&P gap, probably time to go back to the spead, long staples, short disc..

  196. NJGator says:

    BC 179 – Well at least we left FSU in the dust.

  197. BC Bob says:

    Gator [204],

    Now, that’s a given. I hate Bobby Bowden.

  198. BC Bob says:

    But, my mother thinks he’s cute.

  199. NJGator says:

    Not only do I hate Bobby Bowden, but I hate Baby Bowden too.

    One of these days I have to take Lil Gator to see a game in The Swamp. It’s wrong that the only live college football that he’s been exposed to is Rutgers.

  200. yo'me says:

    Here’s how Goldman Sachs makes all that cash

    While the U.S. banking industry struggles to right itself, Goldman Sachs has figured out how to turn financial turmoil into gold. Here’s how.

    Why has Goldman Sachs prospered in this recession-depression and most other banks have fallen out or are in real trouble? … Perhaps that is where all of our money has gone. …
    -Alan M., Oregon

    The answer is that Goldman Sachs isn’t really a bank. It’s a gigantic investment company that offers very limited conventional banking services — like lending money — on the side. Because it’s one of the few investment banks left standing, it has the highly profitable field of trading and underwriting pretty much to itself

    The bulk of the $2.7 billion profit Goldman reported for the second quarter, and roughly three-quarters of its revenues, came from trading — making bets buying stocks and bonds. Though it officially became a regulated bank holding company last year when the financial crisis hit, Goldman still behaves like a traditional investment bank. Since the financial meltdown wiped out most of its major rivals — including Lehman Bros. and Bear Stearns — it has picked up investment banking business from former customers of those defunct companies.

    Goldman’s chief financial officer David Viniar put it succinctly when explaining the surge in profits: “There’s less competition out there.”

    Because there are fewer players left, each trade also becomes potentially more profitable. Here’s why. When an individual stock, for example, is heavily traded, the difference — or spread — between the price a buyer is willing to bid and what a seller is asking usually is very narrow. Traders make their money on that spread: A nickel here, a dime there and soon you’re talking real money.

    In Goldman’s case, the trades that proved so profitable were in securities that few other traders wanted to make, including dodgy bonds. With fewer buyers and sellers, the spreads on these trades are much wider. If you bet right, your payoff is much bigger.

    Goldman also entered the financial crisis with a relatively strong cash cushion which allows it to make riskier bets than banks that are still trying to rebuild their battered balance sheets. Companies such as Morgan Stanley that played it safe during the quarter paid the price in the lost opportunity to make trading profits.

    Goldman also profited from another line of business that used to be fiercely competitive: underwriting stocks. When companies want to raise cash by selling stock, they need a big investment banker to move large piles of it quickly at a good price. In the second quarter, Goldman’s equity underwriting business generated record revenues of $736 million. Ironically, it was a quarter when many of those raising money by selling stocks were other banks.

    It didn’t hurt that Goldman — like other banks — had access to extremely cheap money, thanks to the Fed’s policy of keeping short-term interest rates near zero. This is not a bad time to be a banker, despite the colossal losses incurred by the ones who made terrible loans and bought bonds backed by mortgages that people could never repay. Any time you’re in the business of lending money, it helps to be able to get your hands on what is essentially free cash.

    The taxpayer-funded TARP bailout money really didn’t help Goldman all that much. For one thing, the government was charging Goldman and other bailed-out banks 5 percent interest. The government also took warrants — essentially the right to buy some of each bailed-out bank’s stock. Goldman is now negotiating to buy those warrants back, which will cost it more money.

    But that’s not the only reason for getting out from under the government’s bank welfare program. Like all big banks, Goldman executives chafed at the government’s efforts to limit bonuses at banks that took TARP money.

    With the TARP money repaid, and the restrictions lifted, Goldman set aside $6.65 billion in the second quarter for salaries, bonuses and benefits. That’s up almost 50 percent from last year and works out to an average of about $900,000 per employee.

    The top traders who made all those winning bets can expect to take home tens of millions of dollars each.

  201. sas says:

    Tour of the
    US Income Distribution,
    “The L-Curve”
    http://www.lcurve.org/

    SAS

  202. sas says:

    “i wish there was a navy seals training class, just for people who wanted to be in tip-top shape and proficient in weaponry. id take it”

    conditioning & weaponary are the boring part. we use to train here and abroad.

    we made Rambo look like a strawberry shortcake.

    SAS

  203. dolphinbeater says:

    sas, your l-curve site links to a 9-11 truther website. Just another America hating terrorist sympathizer. Why would you post a link to a site like that unless….. no. It can’t be. Et tu?

  204. Pol Clot says:

    work (181)-

    That’s ok. Because, as we all know, beer makes you smart.

  205. sas says:

    my favorite part of training military was learning how to be saboteurs.

    One little team got sent in very interesting locations at the request of higher up dept out of DC.

    believe it or not, some members of that team even got little kickback rewards on the value of assets. especially on patented devices in which trustees had proprietary liquidation rights.

    but only if it was of “proprietary interest”

    SAS

  206. Pol Clot says:

    yikes (195)-

    Never looked into Kevlar, because I’ve heard the bullet-resistant quality in the vests actually diminishes over time.

    Would really suck to slip on my Kevlar and get ventilated because it was too old to stop bullets.

  207. dolphinbeater says:

    GSMLS #2664572 in Manville – is this in the part of town that floods? The GSMLS ad says it’s not, but I want to make sure.

  208. sas says:

    “sas, your l-curve site links to a 9-11 truther website. Just another America hating terrorist sympathizer. Why would you post a link to a site like that unless….. no. It can’t be. Et tu?”

    I wouldn’t fall into the category of a 9-11 toofer, because to be honest with you, i don’t want to know the truth.

    i just know official story is never the official story.

    Thats why I always loved Plato’s republic and allegory of the cave.

    SAS

  209. sas says:

    and we trained the Mujadeem.
    hell, some of the best smugglers came out of Mujadeem.

    in any case…
    back to RE

    SAS

  210. chicagofinance says:

    14. scottmasters
    July 27th 2009 – 20:54:39 |
    CAMPBELL BROWN AND HER GUEST REFERRED TO CAMMRANO’S ACTIONS AS “SCUMBAGERY” Put that in your Thesaurus!!

  211. Pat says:

    Mujadeem…is that from Dune?

    Worst vacation food I’ve ever eaten:
    Chincoteague, VA

    It makes me miss Seaside Heights. You know it’s bad.

    I saw this German family – tall, all of them – eating homemade sandwiches in the hotel lobby. I think they brought some spreads with them on the plane.

    So, I told them I’d give them some hot tips if they’d give me some sandwiches.

    They passed.

    I’m hungry.

  212. 3b says:

    #193 yome: Being profitable by laying off and other cut backs is not sustainable. And a consumption society needs more than consuming staples to be profitable. You are grasping at that one.

  213. nj escapee says:

    sas- comeon down…
    Navy Seals train only a couple miles from here out near Fleming Key. occasionally see them parachute into the water into the distant bay waters.

  214. yo'me says:

    3b It’s the end of the world as we know it!!!

  215. yo'me says:

    July 27 (Bloomberg) — Wells Fargo & Co., the bank that boosted its U.S. property-related holdings by acquiring rival Wachovia Corp., is adding to those investments with purchases of mortgage-backed bonds, even as Federal Reserve Chairman Ben S. Bernanke warns of another wave of defaults.

    The bank reported its portfolio of real-estate securities, excluding those backed by the U.S. government, rose 6.6 percent last quarter to $41.2 billion. San Francisco-based Wells Fargo has been buying commercial-mortgage bonds because the debt has been available at “good” prices, said Tim Sloan, an executive vice president.

    “We believe that there are good opportunities in investing in those securities,” Sloan said in a telephone interview on July 23. “There are good opportunities across the board today if you get the right people who can underwrite credit and can look into the deals and make sure you really understand what you’re investing in.”

    Wells Fargo is betting it can pick up discount-priced assets amid the recession that began in December 2007. It runs the risk of getting caught in a new round of defaults as more commercial mortgages turn sour. Properties valued at more than $108 billion are now in default, foreclosure or bankruptcy, almost double the figure at the start of the year, Real Capital Analytics Inc. said earlier this month.

    Deploying Deposits

    Banks are buying mortgage-backed securities to put increased deposits to work as tighter lending standards and lower demand limit new loans. Holdings of residential- and commercial-mortgage bonds not backed by the U.S. government at the 25 largest American banks have climbed 4.9 percent this year, to $159.9 billion on July 15, according to Fed data released July 24. The banks are ranked by assets. The Fed figures include price changes; the Wells Fargo portfolio number reflects average balances.

    Banks buying mortgage-backed debt, which caused much of the $1.5 trillion of writedowns and credit losses at the world’s largest financial companies since 2007, can be looked at “two ways,” said Thomas Atteberry at First Pacific Advisors LLC in Los Angeles.

    “One is: Your past history tells me you don’t know how to assess this risk that well,” he said in an interview. “The other is: Well, you’re bright people, you won’t make that same mistake again. Personally, I’m not convinced of the latter.” Atteberry was Morningstar Inc.’s fixed-income manager of the year in 2008, sharing the award with colleague Robert Rodriguez.

    Bailout Programs

    A goal of Treasury Secretary Timothy Geithner’s $40 billion Public-Private Investment Program, under which private investors partner with taxpayers in funds buying these securities, is to remove impaired debt from banks’ balance sheets to free them for new lending. When announced in March, the PPIP was billed as targeting purchases of $1 trillion of loans and securities.

    Wells Fargo, which received $25 billion of capital under the U.S. Troubled Asset Relief Program, owned an average of $138.1 billion of commercial-mortgage and construction loans last quarter, more than double the year-earlier level after its Jan. 2 purchase of Charlotte, North Carolina-based Wachovia.

    Experience with the debt will help in the bank’s securities investing, according to Sloan, head of commercial, real estate and specialized financial services group in Wells Fargo’s wholesale banking division.

    “You’ve got to take apart the deal,” he said in the interview. “We’re the largest commercial real estate lender in the country. We think we’ve got a terrific team of people.”

    Commercial-Property Prices

    U.S. commercial-property prices fell 7.6 percent in May from a month earlier, according to Moody’s Investors Service, bringing the total decline to 35 percent since the market’s peak.

    Bernanke told lawmakers July 22 that a potential wave of defaults in the $3.5 trillion commercial-mortgage market as borrowers find it difficult to refinance may present a “difficult” challenge to the economy.

    Mortgage-bond prices have rallied from record lows as the government unveiled programs to boost values and amid signs the recession may be easing, though much of the debt still trades at discounts unprecedented before 2008. Fixed-rate commercial- mortgage bonds rated AAA have returned an average of 15.1 percent this year, after prices fell more than 21.8 percent last year, according to Merrill Lynch & Co. index data. Those securities ended last week valued at about 87.6 cents on the dollar, compared with a low of 94 cents in the decade through 2007, according to the data.

    Large bank holdings of “non-agency” mortgage securities have increased as refinancing and defaults reduced the size of the residential-bond market, which shrank 4.5 percent in the first quarter, Fed data show.

    Wells Fargo’s portfolio of all debt securities rose 11.6 percent last quarter from the first quarter to an average balance of $180 billion, while average holdings of loans declined 2.5 percent to $833.9 billion, according to the statement.

    The company’s shares, which have declined 39 percent from a September peak, climbed 75 cents today to $24.22 in New York Stock Exchange composite trading at 4:15 p.m.

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