Does bottom imply recovery?

From Bloomberg:

Housing’s Tequila Hangover Isn’t Easily Shaken: David Reilly

A housing bust is a lot like a tequila hangover. After the most acute signs of distress have passed, it still takes a long time before things start to feel normal again.

So even if housing markets are approaching or have reached a bottom — a matter of great debate at the moment, especially given yesterday’s release of May home-price figures — history shows a rebound isn’t likely to be anywhere near as fast or furious as the meltdown it followed.

Sometimes, rebounds don’t happen at all. Not, at least, without a large dose of inflation. And that carries its own risks for the economy and investors.

To see a mirage-like rebound, look at Midland, Texas. That area is still waiting to fully pull out of a housing slump that began in the early 1980s.

Data from the Federal Housing Finance Agency show that inflation-adjusted prices in the Midland area finally bottomed about late 2000. They are still about 30 percent below their peak reached in 1982, the FHFA said in a June report examining past house-price declines.

This underscores how differently housing markets often behave compared with stock markets, which can quickly bounce back from lows.

Pulling out of a housing slump can take twice as long as it took for home prices to melt down, according to the FHFA. That fact should temper some enthusiasm over recent signs that housing markets are stabilizing.

Yet “real home prices for many areas within the U.S. have not yet returned to values they approached in the 1980s,” the FHFA report said. The agency found that real, inflation-adjusted home prices can take anywhere from 10 to 20 years to recover from previous peaks.

Of course, home prices look better in Midland, throughout Texas and nationally when they aren’t adjusted for inflation. So-called nominal home prices in Texas, for example, are up 80 percent from an early 1990s trough.

In this case, inflation is a meltdown antidote. Yet it isn’t clear the U.S. can easily inflate its way out of the current housing hole.

Talk of housing bottoms almost always assumes home prices will rise. That can be a dangerous notion, as many boom-time home buyers discovered.

I was reminded of this while visiting an open house last weekend in Scotch Plains, New Jersey. The house for sale was instructive because it had been built in the late 1700s and the broker supplied a transaction history.

The first ownership change with a listed dollar amount occurred in 1870, when the two-story, clapboard farmhouse sold for $13,000. Two years later it changed hands for $12,000.

The house wasn’t sold again until 1911, fetching $7,200. That marked both a nominal, and real, loss for the sellers. Two years later, the house was foreclosed on.

In 1927, the house sold for $13,500. The next sale, in 1949, was for $19,500, marking an annualized 2 percent return.

That wasn’t bad, given that the period included the stock- market crash, the Great Depression and the World War II recovery. Things were bleaker on a real basis. The Bureau of Labor Statistics inflation calculator shows that $13,000 in 1927 was worth an inflation-adjusted $19,040 in 1949. So, on a real basis, the sellers made just $400 over 22 years.

History is a good reminder that housing cycles are marathons, not short V-sprints.

This entry was posted in Economics, National Real Estate. Bookmark the permalink.

232 Responses to Does bottom imply recovery?

  1. grim says:

    From the WSJ:

    Guidelines Aim to Help Struggling Borrowers

    The Obama administration plans to announce Thursday new guidelines designed to help struggling homeowners with Federal Housing Administration-insured mortgages.

    The guidelines implement changes enacted by Congress in May to bring the FHA’s loan-modification program more in line with the White House’s foreclosure-prevention plan. The Obama plan, announced in February, provides financial incentives for mortgage companies to reduce loan payments to affordable levels.

    The FHA doesn’t have an estimate of how many borrowers are likely to be helped by the new program, said a spokeswoman for the Department of Housing and Urban Development, which is announcing the guidelines. Some 14.2% of FHA loans are at least 30-days past due and not yet in foreclosure, according to LPS Applied Analytics.

    FHA Commissioner David Stevens said the changes “offer borrowers an opportunity to stay in their homes, make payments that are manageable and defer [payment of] the money owed to a later time when, hopefully, home values have improved.”

  2. Herring123 says:

    Chi – in what world did ambac ch 11 yesterday?

  3. Pol Clot says:

    stan (64, yesterday)-

    I can’t help you on this one. Readington is sort of a Soviet-style Republican fiefdom that has a seemingly unquenchable thirst for expensive litigation and draconian zoning.

    Personally, I’ve always thought that Readington has an inferiority complex and a fixation on its neighbor, Tewksbury. Try as they might, they cannot become their low-key, old money, shabby chic neighbor…and it really rankles them.

    The fabulously wealthy who want to keep a low profile keep moving to Tewks. However, Readington still gets the nouveau riche, hopelessly gauche guidos and beaters.

  4. Pol Clot says:

    If O gets a second term, I seriously believe they will start taking houses away from people who pay on time and give them to deadbeats.

  5. cooper says:

    “The FHA doesn’t have an estimate of how many borrowers are likely to be helped by the new program”

    so out of all the borrowers X% will not be helped and Y% are “likely” to be helped. WTF does that mean?

  6. grim says:

    From CNBC:

    Unemployment Spreads Distress in US Home Loans

    Mortgages have failed the fastest in the areas with the greatest overbuilding, purchases by speculators and reliance on riskier loan products to improve affordability.

    But the source of the mortgage trouble has swung from lax lending standards to unemployment.

    With the unemployment rate near a 26-year high and many employers cutting wages, more consumers in areas that were initially spared in the foreclosure explosion are now behind in their home loan payments.

    More than 20 percent of areas with above-average foreclosure activity were in Oregon, Idaho, Utah, Arkansas, Illinois and South Carolina in the first half of the year.

    That shift points to growing unemployment more than to fallout from subprime and adjustable-rate loans, RealtyTrac said in its midyear metropolitan foreclosure market report.

    While total foreclosure activity kept rising, “some of the markets that had the highest saturation of foreclosures over the past few years have seen declining rates, while new markets like Provo, Utah, and Boise, Idaho, have seen large increases,” James J. Saccacio, chief executive officer of RealtyTrac, said in a statement.

    “As unemployment rates increase in different parts of the country, it’s very likely that we’ll see similar patterns develop elsewhere,” he said.

  7. grim says:

    From Newsday:

    New federal mortgage laws set to go into effect

    Federal rules aimed at taking surprises out of mortgage shopping will kick in Thursday, from changes that could affect the closing date to disclosures of estimated borrowing costs.

    Under the Mortgage Disclosure Improvement Act passed by Congress last year, one of the biggest changes bars lenders from charging upfront fees, except for a reasonable credit check, and allows charges only after the work is done. Before, consumers would often have to pay upward of $300 upfront for application processing and other services – lenders wanted serious applicants and loathed the idea of doing work only to have consumers walk to competitors.

    Allowing most charges only at the back end could lead to more informed borrowers and less costly comparison shopping, supporters of the changes said, because lenders probably won’t want to take on unnecessary work in case they don’t get paid.

    “The new design now is to provide consumers a better ability to shop and to understand the documents that have been given to them,” said Rholda Ricketts, New York State deputy superintendent of banks.

    Another major change includes a seven-day waiting period for the closing. It kicks in once the lender has dropped the cost disclosure in the mail or delivered it.

    The Mortgage Bankers Association backed most of the changes, despite some concern about closing delays.

    “Our biggest concern right now is timing – how much is this going to delay the closing process?” said John Mechem, spokesman for the trade group. “We’ve long supported full disclosure, better disclosures, simpler disclosures. But we want to make sure there’s a balance between that and getting a closing done within a reasonable amount of time.”

  8. cooper says:

    #4 pol

    there’s a formula to determine when it’s the best time to rent or buy, when do we have a formula to determine when it’s the best time to be a freeloader or an achiever?

    Pol Clot says:
    If O gets a second term, I seriously believe they will start taking houses away from people who pay on time and give them to deadbeats.

  9. cooper says:

    Provo Spain? No Utah

  10. yo'me says:

    Clot Something to strive for

    Glenfiddich 50-Year $16,000 Whisky Tempts Investors (Update1) William Grant & Sons Distillers Ltd., the maker of Glenfiddich whisky, today released a 50-year aged version of the liquor that will sell for 10,000 pounds ($16,000), making it the second-most expensive in the world.

  11. yo'me says:

    Chinese <3 GM cars

    GM China Sees 70%-Plus July Sales Growth on Stimulus (Update2) General Motors Co., the largest overseas automaker in China, expects to report a 70 percent-plus increase in local sales this month on the back of government stimulus measures and a rebounding economy.

  12. yo'me says:

    U.K. House Prices Increased in July, Nationwide Says (Update2) U.K. house prices increased for a third month in July as a shortage of supply helped shield the property market from the economic slump, Nationwide Building Society said

  13. Pol Clot says:

    cooper (8)-

    Don’t need a formula. Clearly and obviously better to be the freeloader.

    Welcome to the Supreme Soviet of America.

  14. yo'me says:

    Alcatel-Lucent Posts First Profit in 11 Quarters (Update2) Alcatel-Lucent SA, the world’s largest supplier of fixed-line phone networks, posted an unexpected profit, its first in 11 quarters, aided by cost cuts and a gain from selling its Thales SA stake.

  15. Pol Clot says:

    yo (10)-

    Work bad. Whiskey good.

  16. grim says:

    Cost cutting and selling organs is the business model of the new economy.

  17. Cindy says:

    http://online.wsj.com/article/SB124890969888291807.html

    “NYSE’s Fast Trade Hub Rises Up in New Jersey”

    “The future of the New York Stock Exchange is inside the red-brick building that is rising from the ground here about 35 miles from Wall Street.”

    Any employment opportunities?

  18. leftwing says:

    “But the source of the mortgage trouble has swung from lax lending standards to unemployment.”

    References to lax lending standards are really starting to bother me. While I understand that a ‘victim’ is the new hero in our culture enough is enough.

    If I survive on a diet of McCheeseburgers and Coke, never see the inside of a gym, and drop dead of heart disease it wasn’t ‘lax food service standards’ that killed me. It was my fat a** sedentary lifestyle.

    If I’m not Michael Phelps and I decide to take a sunrise swim 300 yards out in the wild surf currently on the shore I didn’t drown from ‘lax lifeguarding standards’. I stupidly ignored the risks associated with my actions.

    And if I blow my whole family up to the pearly gates because I DIY’ed fixing my gas heater in a failed attempt to save a few bucks I didn’t expire from ‘lax home repair standards’. I cut some corners and it came back to bite me.

    ‘Lax lending standards’ are not harming people. Lax BORROWING standards are.

  19. Pol Clot says:

    Cindy (18)-

    I’d like the job of trying to blow it up.

  20. Pol Clot says:

    Love it or hate it, ZH has loads of great info and commentary on high frequency trading.

    IMO, this could be the thing that triggers the next Black Monday-type event.

  21. ruggles says:

    3 – Re: Readington – “Try as they might, they cannot become their low-key, old money, shabby chic neighbor…”

    That position is held by Lebanon Township. except for the old money part.

  22. ruggles says:

    Okay, its old news but just heard that Smith and Hawkins is closing. One more small step towards the Plainfieldification of Westfield. if TJs goes, expect riots.

  23. Cindy says:

    Clot – I see now that it’s a high-frequency trading center.

  24. BC Bob says:

    “History is a good reminder that housing cycles are marathons, not short V-sprints.”

    Thank you David Reilly.

    Everybody should stop crying about why prices have not crashed. Actually, I am surprised how far they have come down in a short period of time. It’s like moving a super tanker in another direction. This is a long,painstakingly slow process.

    If this does not coincide with your buying strategy, too bad. Either step up to the plate and buy or continue to rent. We are only half way thru this marathon. Heartbreak Hill is not even on the radar.

  25. grim says:

    From the NYT:

    Lucrative Fees May Deter Efforts to Alter Troubled Loans

    This week, the Obama administration summoned mortgage company executives to Washington to demand they move faster to lower payments for homeowners sliding toward foreclosure. Treasury officials called on the companies to hire and train more people quickly to field applications for relief.

    But industry insiders and legal experts say the limited capacity of mortgage companies is not the primary factor impeding the government’s $75 billion program to prevent foreclosures. Instead, it is that many mortgage companies are reluctant to give strapped homeowners a break because the companies collect lucrative fees on delinquent loans.

    Even when borrowers stop paying, mortgage companies that service the loans collect fees out of the proceeds when homes are ultimately sold in foreclosure. So the longer borrowers remain delinquent, the greater the opportunities for these mortgage companies to extract revenue — fees for insurance, appraisals, title searches and legal services.

  26. BC Bob says:

    Cindy,

    The Cinn Stock Exchange is a blackbox in JC.

  27. NJGator says:

    ruggles 23 – A bourgois riot.

    ‘if TJs goes, expect riots.’

  28. hughesrep says:

    New mortgage rules, and less than spectacular Treasury auctions this week have me kicking around the idea of locking in my mortgage this morning.

    Pol- What do your guys say is a competitive rate for a 30 year, conforming, 20% DP, 800+ FICO? I just want to keep my mortgage guy honest.

  29. BC Bob says:

    hughes [30],

    Yesterday’s 5 yr note auction was abysmal.

  30. BC Bob says:

    make [31],

    I think Booyaa Bob is in Miami, picking up play things for pennies on the dollar.

  31. grim says:

    From MarketWatch:

    U.S. 4-wk. continuing claims fall to 6.41 mln

    U.S. continuing jobless claims fall to 6.19 mln

    U.S. 4-wk. avg. jobless claims fall to 559,000

    U.S. weekly jobless claims up 25,000 to 584,000

  32. hughesrep says:

    BC (32)

    I know. I don’t imagine today’s seven year is going to be any better.

  33. make money says:

    BC,

    I miss Booyaaa Bob but I still picture him in Bermuda sipping something chilled. Plenty of time for taking toys away from little brats.

  34. Cindy says:

    http://blogs.reuters.com/felix-salmon/2009/07/29/judging-high-frequency-trading/ Felix Salmon – High-frequency trading..

    Clot/BC – Wasn’t Schumer’s warning to the SEC related to curbing flash orders?

    I’ll see if I can find that –

    I do not understand flash orders/ high-frequency trading…

  35. Cindy says:

    http://www.automatedtrader.net/news/automated-trading-news/13601/schumer-warns-sec-to-curb-traders-flash-orders

    Schumer Warns SEC to curb Traders’ Flash Orders

    “If the SEC fails to curb this practice, I plan to introduce legislation in the U.S. Senate to prohibit the use of flash orders in connection with optional pre-routing programs in order to ensure that trading in U.S. public capital markets is fair and transparent for all market participants, Schumer said.”

  36. Pol Clot says:

    rep (30)-

    Without having seen rates in a couple of days, I’d say nothing over 5.6% for your kind of score.

  37. Barbara says:

    11. Yikes
    Whats wrong with Greyhound?

  38. Pol Clot says:

    Cindy (37)-

    Flash seems to go hand-in-hand with HFT. Allegedly, outfits like GS use Flash to “preview” orders and use that info to frontrun.

  39. hughesrep says:

    Clot (40)

    Thanks. I’ve got an offer for a bit better with a local bank. Seems like a good day to lock it down.

  40. make money says:

    I know. I don’t imagine today’s seven year is going to be any better.

    As the auction fails anonymous buyer from a the coast of Dalmatia will save the day.

  41. Pol Clot says:

    rep (43)-

    Agreed. The CNBC propaganda machine is playing the “raise rates/incipient inflation” card today.

    As if.

  42. make money says:

    http://www.bloomberg.com/apps/news?pid=newsarchive&sid=ajf0L9wTPq6Y

    Northwestern Mutual Makes First Gold Buy in 152 Years.

  43. John says:

    Northwestern is an old client of mine. They are very consertive. The cafe is free as in the great depression the owners saw some of their workers hungry and decided they should have one good free meal a day. It is still free as the owner who made that decision died before the depression ended and no one wants to second guess his decision. They give employees a cake for every 5 years of service and they ring a bell and everyone in dept stops working and has a slice. The bell rang a few times in my 14 weeks there, 5, 10, 20, 30, 40, 45 etc. Crazy. people go there at 21 and stay to 65. Even weirder the other two big employers in town is Miller Bear and Harley which is mainly men. Northwestern is nearly all women. I felt like I was on a coach on Oprah for the 14 weeks, I swear by week 9 I almost was PMS’sing with the gals.

  44. Comrade Nom Deplume says:

    [28] gator

    Bourgeoise don’t riot. They leave.

    Rioting is for lower classes that have no easy way to relocate and start over.

  45. yo'me says:

    Buffett Loses to Desmarais as Power Exceeds Berkshire Return

    http://bloomberg.com/apps/news?pid=20601170&sid=am2tdSNHYLK4

  46. chicagofinance says:

    38.Sean says:
    July 30, 2009 at 8:39 am
    Malibu Pete, Hilarious!

    unbelievably good

  47. chicagofinance says:

    2.Herring123 says:
    July 30, 2009 at 6:19 am
    Chi – in what world did ambac ch 11 yesterday?

    agreed…blew it..

    By LAVONNE KUYKENDALL and JAY MILLER
    The outlook for Ambac Financial Group Inc. turned bleaker, as Standard & Poor’s Ratings Services pushed the bond insurer’s ratings deep into junk territory due to its worsening financial condition.

    S&P cut its rating on Ambac’s bond insurance unit to CC from BBB, saying the move reflected “significant deterioration” in the company’s insured portfolio of subprime residential mortgage-backed and related securities.

    On Monday, Ambac said it expected to post a second-quarter loss of $1.3 billion because of higher write-downs on derivatives contracts backing losses on the securities.

    Bond insurers have taken it on the chin as the weak housing market leads to rising defaults and delinquencies on home loans. Ambac will report its second-quarter results on Aug. 5 before the market opens.

    Ambac also said Monday that it will discontinue paying the monthly dividends on its outstanding auction market preferred shares and the semiannual interest on its directly issued subordinated capital securities beginning Aug. 1.

    S&P credit analyst David Veno said the losses have required the company to bulk up reserves, which will have a big effect on operating results and likely cause the company’s surplus to fall below regulatory minimums.

    Ambac has asked its regulator, Wisconsin’s Office of the Insurance Commissioner, for permission to release some of its $1.9 billion in contingency reserves into surplus. Even if Wisconsin approves the request, S&P would raise the rating only one notch, Mr. Veno said.

    Sean Dilweg, Wisconsin’s top insurance regulator, hadn’t reached a decision on Ambac’s request to release what his office called “a substantial portion” of its contingency reserves, a spokesman said Tuesday.

    In after-hours trading, Ambac shares were down 3.6% at 80 cents. The shares have more than doubled since early March but they are still down more than 90% from their high in September.

  48. chicagofinance says:

    Note: as ridiculous as it seems, it just got cut from low investment grade to deep junk only a few notches from default in one step….kind of a joke…

  49. Comrade Nom Deplume says:

    Smoke and Mirror Tax news of the day:

    New Jersey Governor Signs Bill Aimed
    At Promoting Business Retention, Job Growth

    PHILADELPHIA—New Jersey Gov. Jon S. Corzine (D) July 27 signed legislation (A. 4048) that provides for a variety of tax and fee reductions and other financial incentives to promote economic development in New Jersey. . . .

    Transfer of Tax Credits
    The legislation increases by 50 percent, to $15 million, the value of unused tax credits that a corporation can transfer under the New Jersey Emerging Technology and Biotechnology Financial Assistance Program. That program enables new or expanding emerging technology and biotechnology companies with fewer than 225 employees, at least 75 percent of whom are based in New Jersey, to sell their net operating losses and research and development credits to profitable New Jersey-based corporations. The credits can be sold for 75 percent of the value of the tax benefits.

    Urban Transit Hub Tax Credits
    In addition, the legislation revises the Urban Transit Hub Tax Credit Act, which was enacted in January 2008 to give businesses a tax incentive for capital investment that creates jobs in areas around commuter train stations in urban areas.

    The New Jersey Business and Industry Association (NJBIA) said there have been no applicants for the transit hub tax credit because the requirements are too onerous.

    The law now allows a company to receive a 100 percent corporate business tax credit if it makes capital investments of at least $50 million in a business facility near a mass transit station in any of nine New Jersey cities and creates or relocates at least 250 jobs there.
    Originally, the investment threshold was $75 million. The new law also allows for the transfer of transit hub tax credits. The purchaser is subject to the same conditions and limitations as the business that originally claimed the credit.

    Other changes make it easier for businesses to meet the 250-employee requirement and relax the provision requiring employers to forfeit their tax credits if they eliminate more than 10 percent of their New Jersey jobs, by increasing the trigger to a 20 percent statewide workforce reduction.

    Sales Tax Exemption
    The legislation includes provisions allowing recycled material manufacturing companies to obtain a seven-year exemption from sales and use tax and surcharges on the purchase of energy and utility service.

    In its fiscal note on the bill, the state Office of Legislative Services (OLS) said it is unable to determine if any manufacturers would qualify for the exemption.

    New Municipal Taxes
    The legislation authorizes the cities of Newark and Elizabeth to impose a rental car tax equal to up to 5 percent of the vehicle rental fee to fund local redevelopment projects. The OLS estimated the tax would generate about $8 million a year.

    In addition, the legislation allows local governments in New Jersey to impose a surcharge on admission and parking fees at major stadiums and entertainment arenas, with the proceeds dedicated to economic development purposes.

    Tax Increment Financing
    A grant program created under the bill is aimed at encouraging developers to invest in specific economic redevelopment areas around the state.
    Under a redevelopment incentive grant agreement between a developer and the state or a municipal government, up to 75 percent of the incremental increase in revenues from state or local taxes generated by businesses operating on the redeveloped property would be pledged to fund the incentive grant.

    An incentive grant agreement can extend for up to 20 years but the combined amount of tax revenues paid to the developer under the grant agreement cannot exceed 20 percent of the total cost of the project.

    Municipalities can pledge their incremental revenue increases from payments in lieu of taxes; the developer’s lease payments to the municipality; property, car rental taxes, parking, and payroll taxes; or admissions and sales taxes from the operation of a public facility.

    The state can pledge incremental revenue increases from a variety of taxes, including: corporation business taxes, insurance and public utility taxes, gross income taxes paid by S corporations and partnerships, sales and use taxes, hotel and motel occupancy taxes, and real estate transfer taxes.

    The Economic Redevelopment and Growth Grant program replaces New Jersey’s Revenue Allocation District program, an unsuccessful tax increment financing program that has resulted in the creation of only one redevelopment district in New Jersey since the program was enacted in 2002.”

    Whew. That was a lot. ATEOTD, we have some tax increases, some redistribution of credits and incentives, and some new “job creating” programs that won’t create any jobs because the programs are designed such that they won’t actually get used.

    So Corzine says he is out there pitching, but he is actually tossing an intentional walk.

  50. veto that says:

    Sorry about all the fussing about renting yesterday fellas. Truth be told, we had a low ball bid come within $20 grand of our price and someone snagged it away from us at the last second. It was one of the first times we got emotionally attached to a home so it was a tough day, especially for mrs veto that. Anyway, the good news is that it was sold for a much lower price than we’ve seen in the last 8 years around here.

    But it got me thinking about these temporary green shoots in house prices that we are witnessing. And then it hit me. Didn’t we experience the same thing last year during this time? A fake stabilization in prices, only to experience another leg down in fall.

    See these cs charts i threw together and judge for yourself…

    http://tinyurl.com/mcxvnt

  51. Cindy says:

    http://www.tradersmagazine.com/issues/20_296/-103978-1.html?zkPrintable=true

    “Flash Point” Trader’s Magazine July 2009

    “Equities industry clashes over flash and step-up orders”

    More than anyone in their right mind would want to read on the subject….it cured me. I no longer CARE.

  52. make money says:

    by week 9 I almost was PMS’sing with the gals.

    John,

    You’re one crazy SOB.

  53. grim says:

    But it got me thinking about these temporary green shoots in house prices that we are witnessing. And then it hit me. Didn’t we experience the same thing last year during this time? A fake stabilization in prices, only to experience another leg down in fall.

    See these cs charts i threw together and judge for yourself…

    http://tinyurl.com/mcxvnt

    Very nice, and I agree. We’ve seen blips before from a volume perspective as well.

    http://njrereport.com/images/mar09_salespace.gif

    The volume “blip” appears to correlate roughly with the prior price stabilization.

  54. x-underwriter says:

    John (47)
    You should try working in the mortgage industry. If you’re swingin’ a set, you’re a serious minority

  55. safeashouse says:

    John really should write a book or at least a collection of short stories. His 1 paragraph posts are so vivid and rich.

  56. veto that says:

    Im thinking about making a huge day trade on double long S&P 500 SSO today, just in time for tomorrow’s GDP release.
    Im pretty sure they will cook the books to show a huge improvement from last quarter and then a month later they will ‘adjust and re-state’ the number down to reality like they did last quarter.

  57. dp says:

    16 clot

    being the whiskey connoiseur, how much do you think a bottle of 35-year old speymalt (by macallan) whiskey is worth?

  58. John says:

    CHIFI, AMBAC low ball bond bids on it;s sr. debt might be a good move tommorow when the investment grade bond funds are dumping. If they are going near RR not much downside and lots of upside

  59. NJGator says:

    Nom 48 – See Miami c Nov 2000. I had minute by minute narration of the events from Peter Jennings – I was sitting next to him in first class on a Continental flight from Newark to Las Vegas and his was getting regular airfone updates about what was going down at the Miami Dade Board of Elections. Coolest airplane ride of my life.

  60. John says:

    AMBAC FINL GROUP INC DEB 5.95000% 12/05/2035

    LAST TRADE – $2,350 for a $10,000 face bond!!!

  61. Sean says:

    This post if for our bi –

    Q2 GDP numbers are out tomorrow. Early forecasts say second-quarter real GDP estimate that GDP fell by -1.6% in the second quarter.

    Just a reminder bi, I said I would go out and purchase 10 houses if the recession was over in the 2QT, based upon your predicitons.

    I believe you promised to zip it permanently.

  62. NJGator says:

    Corzine Won’t Follow the Script

    Just weeks before Election Day in 2002, with the campaign of incumbent senator Robert Torricelli overwhelmed by questions about his relationship with a shady contributor, his party gave him the hook in favor of the tried-and-true Frank Lautenberg.

    So it is that within hours of last Thursday’s spectacular roundup by federal agents of dozens of allegedly crooked public officials, word was circulating that Jon Corzine wasn’t long for the governor’s race.

    There’s firm precedent in Jersey Democratic politics for last-minute, election-saving switcheroos, and the motivation to pull one off now is particularly compelling. Mr. Corzine was already lagging badly in polls, and the takedown of so many of his allies (almost all of those arrested were Democrats) would incalculably strengthen his Republican challenger, Chris Christie—a man who has built his campaign on a corruption-busting record as U.S. attorney.

    Mr. Corzine would soon be hustled out of the race by his own party, the thinking went, and replaced by either Cory Booker, the ambitious and media-savvy mayor of Newark, or Frank Pallone, a Shore-area congressman.

    But don’t hold your breath. It’s been nearly a week since “Corruption Thursday,” and Mr. Corzine is still in the race—and will almost certainly remain there until the bitter end.

    To be sure, plenty of Democrats want Mr. Corzine out. But they lack the leverage they enjoyed with Mr. Torricelli, who knew he’d need friends in high places to carve out a lucrative post-Senate living in New Jersey.

    That approach is a non-starter with the mega-rich Mr. Corzine, who, like many politicians, tends to believe he’s far more popular—and far more skilled at communicating with the public—than he actually is.

    The reality of his 10-year political career, launched when Henry Paulson orchestrated his ouster from Goldman Sachs in 1999, is less impressive than his win-loss record would suggest. He officially spent $63 million to win election to the U.S. Senate in 2000. His winning margin was 3 points—after national Republicans had abandoned their efforts in the state and as fellow Democrat Al Gore was routing George W. Bush by 16 points in the state.

    Then, after Jim McGreevey’s resignation in 2004, Mr. Corzine dipped into his pockets again, essentially purchasing the Democratic gubernatorial nomination one county machine at a time. He won in the general against a Republican opponent with communications skills so poor that his own campaign wouldn’t use his image or voice in campaign ads, and as Mr. Bush and the national G.O.P. were in post-Katrina free fall.

    In both 2000 and 2005, Mr. Corzine was a lousy candidate. But his money and party label, along with the national political climate, saved him. This year, with the Bush bogeyman gone and the economy in shambles, they won’t.

    But Mr. Corzine doesn’t believe that his success in politics has come in spite of himself, and he’ll soldier on, determined to prove his critics wrong.

    That’s bad news for Democrats, who last lost a statewide race in New Jersey back in 1997. The truth is that, barring some miraculously bad development for the Christie campaign, Mr. Corzine is doomed.

    A favorite Corzine-crowd talking point at the moment involves Jim Florio, the only modern-day New Jersey governor to be defeated for reelection. Mr. Florio incited a tax rebellion in the early ’90s and saw his popularity plummet below 20 percent—and yet he still came within 1 point of winning reelection in 1993. So if he could come that close, the spin goes, then Mr. Corzine will be fine.

    But they forget that the Jim Florio of 1993 had recovered substantially from his nadir. A month before the election, 45 percent of voters had a favorable view of him and he led his G.O.P. foe by 12 points. Mr. Corzine, by contrast, is viewed favorably by only 34 percent of New Jerseyites and trails by 12 points in a recent poll. He is in far, far worse shape now than Mr. Florio was 16 years ago.

    It looks like the New Jersey Democrats are finally going down. And Mr. Corzine is determined to lead the way.

    http://www.observer.com/2009/politics/corzine-wont-follow-script

  63. John says:

    CHIFI, this is the bond I recommended the day before Lent at 19, how much did you buy. I just got out as it is still C rated and and 73 is too rich for my blood for junk when I can buy Fifth Third Investment grade bonds at 71.

    Status Filled at $72.90
    Bond CUSIP 345370CA6
    Description FORD MTR CO DEL GLBL SEC 7.450% 07/16/2031 ISIN #US345370CA64
    Action Sell

  64. TARP losses at an estimated $148B.
    That’s some nice investin’ there Lou.

  65. Clotpoll says:

    dp (61)-

    Dunno. Scotch is not my specialty.

    Kentucky Bourbon and Irish Whiskey? Now, that’s another story.

  66. John says:

    I love the smell of a bull market in the morning. Ford ROCKS THE HOUSE. Bonds are up 300% YTF, that translates into a 550% annual return, FU ING Direct with your 1.5%. Would take me a few hundred years at ING to get a 550% return. The bulls are running wild.

    Ford Motor Co sets a new 52-week high and crossed above its 52-week high of $7.32 on 9:53 AM ET on July 30, 2009.

  67. Clotpoll says:

    I’m licking my chops too, John.

    For a very different reason.

  68. Clotpoll says:

    Pump and dump. Bait and switch.

    Same as it ever was.

  69. John says:

    Re 72, Clot are you telling me that I can’t make 10K a month from 5 minutes of on-line trading every day forever? How dare you, it is my god given right.

  70. #18 – Cindy –Any employment opportunities?
    Yes, but probably not a huge amount. This is really a co-location facility so a Hedgie/IB can co-lo their machines at the exchange. The sys admins, developers, PMs are still going to be where ever they are currently (Manhattan, Stamford, Hong Kong, London etc). So some construction jobs, some maintenance jobs and few high paying IT jobs, but that’s about it.

  71. erm… some maintenance jobs and a few high paying IT jobs.
    That’s better.

  72. Alexnyc88 says:

    Why is everyone talking about the bottom? North New Jersey (Bergen) prices are still 2006 peak fantasy stuff. Too bad now these idiots will start thinking that prices will go up again and hang on to them for one more year.

  73. John says:

    Yea but remember wall street profits and rising 401Ks and investment accounts helped fuel the original boom that started in 1996. Lets take me as an example. My downpayment account has risen 50K in value since March. Unless home prices have risen 50K since March I am ahead. The problem is if you are all in cash, as you should be, what I do is a little crazy, you are only getting 1% a year interest. But remember you are competing with people in bond and stock funds who had the same downpayment amount as you on March 9th are now pulling ahead. It is a fools games, but the fools who dumped into stock in March may get lucky and drive housing higher. A couple folks I worked with jumped in on Ford and already they are selling and taking vacations and buying cars. People have a very very very short memory, they have already forgotten the October to March wipe out. Heck my Chase stock is now only down 3% in the last 52 weeks. Big Deal.

  74. Frank says:

    SRS below 15, I am in heaven.

  75. grim says:

    SRS below 15, I am in heaven.

    SRS? You guys are talking about ancient history. Been there, done that, walked away with a pile of cash. But we can’t make money flapping lips about the past. So, you tell me, Frank. What’s the next to move?

  76. Ben says:

    veto, the fake real estate results are the product of Fannie/Freddie, the state, and banks delaying the foreclosure process. There are a lot of empty homes out there missing the for sale signs. A lot of foreclosed homes that I visited in Hamilton have yet to sell but mysteriously, their for sale signs disappeared. Unless they plan on keeping these homes empty ad infinitum, they are going to tank the market once they bring them back. I wonder if they pulled them off the market with the elimination of mark to market accounting. If they actually sold them, the losses would be real. But if they don’t sell, they can pretend they didn’t lose anything. Anyways…patience grasshoppa…

  77. BC Bob says:

    Frank,

    A total bore. Yawn.

  78. Frank says:

    #80,
    So you are saying you’re a RE bull now?? I thought this blog was all about gloom and doom.

    What’s the next to move?? Invest in Poland, it’s on fire.

    http://www.bloomberg.com/apps/news?pid=20601109&sid=aSWHsrxUx2ho

  79. John says:

    I think RE will stagnate or fall a bit more. The crash of good homes in good neighbors with good commutes to NYC won’t happen. There is just too much cash floating around.

  80. Cindy says:

    Tosh @75 – I have been thinking a lot about unemployment. – an email this am – 137K Californians are set to lose benefits next month – the first of the unemployed no longer have any other options.

    http://www.visaliatimesdelta.com/article/20090729/NEWS01/907290323

    And this from a local paper:

    “New Calif Budget to Withhold More in State Taxes”

    Not talked about much but how did they reconcile that budget at the last minute?

    Just wait until folks get their November paychecks and discover they are LOANING THE STATE money. 10% more will be withheld in state income taxes from our paychecks. Sure, many will get the money back come tax time but month to month it will feel like higher taxes.

    Shore – It is my understanding that self-employed are supposed to send 30% estimated taxes Q1 then 40% estimates for Q2 instead of the usual 25% a quarter to help out as well.

    They didn’t raise state taxes but it will feel like it. It’s basically an interest free loan.

  81. Clotpoll says:

    I just looked at a list of close to 100 homes in central NJ whose owners have inquired about short sale opportunities with a financial planner I know.

    Anybody who thinks this crap is over has a hole in his brain.

  82. Clotpoll says:

    Cindy (86)-

    Nice. Gubmint as shakedown scheme.

    Honestly, the mafia could run CA gubmint better than the people at the controls now.

  83. #86 – Cindy – I have been thinking a lot about unemployment.

    I don’t blame you. I’m not sure what to do about the large number of people with expiring benefits. The numbers are too large for us to pretend that they don’t exist.
    I’d guess that these people are why we’ve been hearing about a second stimulus package on the Federal level. We really can’t have them starving in the streets. The package could allow for a further extension of benefits. There was even an article the other day in the NYT proposing WPA type programs.

  84. grim says:

    So you are saying you’re a RE bull now?? I thought this blog was all about gloom and doom.

    No, I’m saying that SRS is old news. Move on. Something will happen, but it ain’t gunna be there, not with everyone watching.

    What’s the next to move?? Invest in Poland, it’s on fire.

    Already there, I’ve got a flat in Krakow. In the old town near the universities, a hell of a place. Krakow is the new Prague.

  85. Clotpoll says:

    No number is too large for gubmint and CNBC to pretend it doesn’t exist.

  86. #90 – I’ve got a flat in Krakow

    Does the dollar go far there?

  87. make money says:

    Already there, I’ve got a flat in Krakow. In the old town near the universities, a hell of a place. Krakow is the new Prague.

    I love to hear this. Is this the second place.

    Ps. The is no such thing as the “new” anything. Sell into madness.

  88. make money says:

    tosh,

    Dollar only goes far in Zimbabve and Iceland.

  89. BC Bob says:

    “The crash of good homes in good neighbors with good commutes to NYC won’t happen. There is just too much cash floating around.”

    J,

    Lame. Sounds like a 2005 argument.

    I know many with tons floating around. They are sipping dark and stormies, very patient. Yes, some will be buyers, vulture buyers. They are too smart to buy a dead, dying asset at a bloated price level. Also, who’s to say all those with cash burning will plow into RE? Many already own.

    The crash will continue for much longer than you can imagine. Sorry, homeowners, no FASB for you.

  90. grim says:

    Does the dollar go far there?

    Not as far as it did. Polish plumbers all went home, the pay is better there.

  91. HEHEHE says:

    Rally RALLY R-A-L-L-Y!!!!

  92. veto that says:

    “There are a lot of empty homes out there missing the for sale signs”

    Ben, i see this all the time in mercer county too but you dont read anything about it except a few mentions of shadow inventory.
    You know something. Its working. As a result of the banks doing this, the inventory seems to be shrinking and there are many great house where banks are just holding posession while at the same time i’m witnessing 2 or 3 offers on quality homes that are for sale. While i cant say they are doing bidding wars because the offers are usually lower than ask, the net result has been a merket that closes near or at asking prices.

    My concern is that this is working and it may not result in a price crash like you may think. Instead, banks may just keep hoarding inventory for 5 years until a floor is in place and and then eventually they will start to unload the inventory slowly when demand returns.

    I dont know the exact details but it is my understanding that banks are getting some type of benefit or credit or accounting gain for holding the inventory and not dumping onto the market.

    If this is part of the grand plan, its brilliant and its another reason why its not smart to fight against the gubmint and fed. if they put their minds to it and want to manipulate the market enough, they can skew it all into growth again while we are all pounding our fists on the table declaring that they cheated. As a potential buyer on the sideline, this hoarding of inventory is one of my fears.

  93. BC Bob says:

    Clot [87],

    Actually, I think it is just starting to pick up steam.

  94. #94 – Dollar only goes far in Zimbabve
    The exchange rate is phenomenal.

    #96 – Not as far as it did.
    Nuts.
    Poland does have some very pretty cities from what i’ve seen.

  95. Frank says:

    #90,
    “Already there, I’ve got a flat in Krakow.”

    Don’t tell that to the IRS.

  96. Comrade Nom Deplume says:

    [63] Gator

    I remember the LibCity riots. I had been accepted to “The U” and they were sending me things nearly every day to convince me to go there. It was almost like being recruited, except as an academic (the presence of a lot of out of state students helps their rankings, so guys like me were solid gold to admissions) The riots occurred in the middle of that period and they sent me a letter disclaiming how they were far removed from the riot area.

    The riots didn’t inform my decision to say no to Miami, but they certainly didn’t help.

  97. BC Bob says:

    J,

    How’s this for a commute into the city?

    From yesterday’s main page.

    “New York City’s market, however, has shown further signs of deteriorating, in both the sales and rental markets. In the second quarter, the median sales price for existing co-ops and condos in Manhattan reportedly fell 26 percent from a year earlier, while the number of sales transactions fell 50 percent; the inventory (number of units listed) was up 9%, though there is reported to be a substantial “shadow” inventory of new apartments-condo units that are unsold but not yet listed.”

  98. Comrade Nom Deplume says:

    [63] gator

    Read too fast. Thought you were talking about riots, not elections. Honest mistake — I get 1980 and 2000 messed up all the time.

  99. Sean says:

    Firefighters from Weehawken, N.J. must make a nice living

    You get to have an entire 32 story condo building in Ft. Meyers as a vacation home to yourself.

    http://www.news-press.com/article/20090730/NEWS0110/90729077/1075/Downtown-Fort-Myers-condo-has-32-stories-and-one-lonely-tale

  100. Comrade Nom Deplume says:

    [61] dp

    I’d say in the $135-175 range, but it could go higher. Really don’t know.

  101. NJGator says:

    Nom 104 – Just referring to this:

    “Miami Heat
    A burgher rebellion in Dade County. by PAUL A. GIGOT
    Friday, November 24, 2000 12:01 A.M. EST

    MIAMI–If it’s possible to have a bourgeois riot, it happened here Wednesday. And it could end up saving the presidency for George W. Bush.

    With both parties spinning, I thought I’d go south to see the Miami-Dade manual recount firsthand. Surely it couldn’t be as arbitrary as it sounded from Washington? And it wasn’t. It was worse. Little did I know it’d be bad enough to inspire 50-year-old white lawyers with cell phones and Hermès ties to behave, well, like Democrats.”

    http://www.opinionjournal.com/columnists/pgigot/?id=65000673

  102. zieba says:

    Frank,
    You’re years late with that link.

    BC,
    What are your views on the USD/PLN exchange. Bounced nicely from the 2.8X area which is a fib retracement.

    Tosh,
    “Nuts.
    Poland does have some very pretty cities from what i’ve seen.”

    The cities are nice but the women are even better. :)

  103. Clotpoll says:

    veto (98)-

    That’d be great, if the banks maintained them, ran the AC in Summer, heat in Winter, etc…I know for a fact that virtually no NJ lender is doing any kind of maintenance on their REO inventory. Most won’t even have the yards mowed.

    Ever been in a house that’s been abandoned for just one change of seasons?

    Now, times that by five.

    “Instead, banks may just keep hoarding inventory for 5 years until a floor is in place and and then eventually they will start to unload the inventory slowly when demand returns.”

  104. yo'me says:

    The cities are nice but the women are even better

    I second that

  105. relo says:

    109: Was thinking the same thing. Bulldozer time way prior to that.

  106. Clotpoll says:

    Unloading decrepit housing inventory slowly is a concept akin to getting rid of spent uranium rods by parcelling them out amoung a series of dumpsters.

  107. freedy says:

    so the banks, they will hoard inventory.

    how does that go over with the Loan Mod
    programs they are trying to pull off.

  108. Truly this is the end-of-days, Snuggies for dogs has been released.

  109. yo'me says:

    Is the land more valuable than the stick in 5 years?

  110. Ben says:

    veto, I’ll take the opposite side of this government’s trade until the government is bankrupt. If they want to prop up housing prices, I’ll just keep buying gold, silver, and oil. My gold won’t tarnish. Their glut of empty houses will fall apart within a year or two. Considering how damn humid it’s been this summer, maybe 6 months.

  111. BC Bob says:

    zieba [108],

    Don’t pay attention to the zloty. Sounds like a technical area has held?

  112. chicagofinance says:

    Report: Manny, Ortiz tested positive
    Comment Email Print Share
    ESPN.com news services

    Manny Ramirez and David Ortiz tested positive for performance-enhancing drugs in 2003, lawyers with knowledge of the results told The New York Times.

    The two were key members of the Boston Red Sox World Series teams in 2004 and 2007

  113. BC Bob says:

    Ben [116],

    I agree. Let them manipulate and distort markets, then take the other side. Can’t fight the fed? Hogwash.

  114. zieba says:

    Bc,
    My modest sized PLN denominated accounts warrant at least some attention.

    The board should get together and write a bubble bust related reality show. Fat checks for everyone. I already have a special role for Gary in mind.

  115. gary says:

    Afghanistan, Iraq, North Korea, a $787,000,000,000 tax and spend program, the abduction of the Auto, Financial and Health industries, 16% real unemployment and the headline story is: A beer-fest with a two guilt ridden elitists and guy trying to follow protocol. Keep the masses fat, stupid and sedated. What aditional proof is required to identify the beginning of the demise of a once great Nation?

  116. chicagofinance says:

    John says:
    July 30, 2009 at 10:05 am
    AMBAC FINL GROUP INC DEB 5.95000% 12/05/2035
    LAST TRADE – $2,350 for a $10,000 face bond!!!

    If you clip one coupon from that one, I will take you out to dinner…name the place…

  117. yo'me says:

    July 30 (Bloomberg) — PennyMac Mortgage Investment Trust, the real-estate firm that will buy home loans and bonds, fell in its first day of trading after cutting the size of its initial public offering by 20 percent.

    Underwriters for Calabasas, California-based PennyMac priced 16 million shares at $20 each, raising $335 million including a private placement, according to a company statement. The IPO had already been reduced from $750 million on July 16. Bank of America Corp., Credit Suisse Group AG and Deutsche Bank AG led the offering.
    “People who are critical of Wall Street will find with justification things to criticize here,” said Stanley Nabi, who oversees $7.5 billion as vice chairman of Silvercrest Asset Management Group in New York. “They’re going to say, ‘Look, these are the people who created this crisis, and now they’re buying this paper on the cheap.’”
    http://www.bloomberg.com/apps/news?pid=20601087&sid=asJxl9VTksuk

  118. chicagofinance says:

    grim says:
    uly 30, 2009 at 11:35 am
    Already there, I’ve got a flat in Krakow. In the old town near the universities, a hell of a place. Krakow is the new Prague.

    Is that the one overlooking the statue of Ivan Putski?

  119. chicagofinance says:

    JJ: stop bragging so much; you did good and you have my respect; go buy a nice piece of tail if you need to….

  120. chicagofinance says:

    GE Shares Gain After Frank Says Finance Unit Doesn’t Have to Be Separated General Electric Co. rose the most in three months after U.S. Representative Barney Frank said manufacturers that already own finance businesses should be allowed to keep the units under revised banking rules.

    I don’t why this makes me think of neighborhood dogs….

  121. Hard Place says:

    Just tried convincing a friend to not buy a foreclosure in FL. They put a bid in and broker of course say that their offer will not be countered. Now of course they are considering going up to the ask. I told them let the bank sweat. They thought even at the ask they are getting 50% off peak prices. Don’t know FL that well, but I hope the neighborhood holds. I’m sure there are a lot of future ghost towns around.

  122. HEHEHE says:

    Well China’s market action the past few days doesn’t give me a lot of confidence. The mere hint that they might reign in lending caused a near panic. Once they reign it in or it stops working, one or the other of which has to happen, look for them to tank and take the rest of the green shoots with them.

  123. veto that says:

    Clot, Relo,
    Whether they maintain the property or not doesnt matter much. the property is still not adding to inventory so it has the same effect on the market by manipulating the supply and demand. As far as destroying the house, the bank may not even care if they are being compensated enough in the mean time.

    BC, Ben, You can fight the fed as much as you want and buy buckets of gold but they have a limitless amount of tricks and will keep delaying the innevitable until they can hatch an escape plan. They have a longer time horizon than all of us. Just when you think they are in a corner, they can press one button and push this thing out another ten-fifteen years without thinking twice.

  124. lostinny says:

    114 Tosh
    My dog would rip my face off if I tried to put that on her.

  125. Dink says:

    Daily Show’s piece on one homeowner unable to unload his house. Good stuff.

    http://www.thedailyshow.com/watch/wed-july-29-2009/home-crisis-investigation

  126. veto that says:

    Clot, I went through the short sale process a year ago and low-balled a house in a solid neighborhood by 20% but it was eventually denied.
    I heard from the realtor that the bank will take possession and wind up auctioning for about 20% less than my offer.
    So i have been all over the bank website looking for it but its nowhere to be found. In the meantime, the place is growing weeds knee high.
    Its clear to me that these banks dont even want to sell their foreclosure inventory… something is super fishy with the whole damn thing.

  127. #132 – Hi lost! I’m hoping for a cat version myself.

  128. relo says:

    128: Lots of variables, of course, but if they are intent upon buying they may be better off going to a builder w/ inventory. At minimum, wait for the first good hurricane scare. Seasonality effect there is basically the opposite of NE.

    Where are they looking in particular?

  129. ruggles says:

    135 – what do you think they make them out of?

  130. HEHEHE says:

    Cammarano will resign tomorrow

    Peter Cammarano III is expected to announce his resignation as Mayor of Hoboken tomorrow, sources say. His resignation comes one day short of a month after taking the oath of office, and eight days after he was arrested on federal corruption charges.

    Council President Dawn Zimmer, who lost a June 10 runoff to Cammarano by 161 votes, will become the Acting Mayor. A special election will be held in November to fill the remainder of Cammarano’s term.

    The 32-year-old Cammarano, a protege of Democratic superlawyer Angelo Genova, was viewed as a rising star in New Jersey politics. According to a criminal complaints, Cammarano is accused of accepting cash payments in $5,000 increments from a man he thought was a developer looking for a pay-to-play connection in Hoboken.

    http://www.politickernj.com/max/31905/cammarano-will-resign-tomorrow

  131. Ben says:

    Veto, there was a home we were in on Longleaf Dr over by Youngs Rd in Hamilton. We went in about a day after it was on the market. It was foreclosed on. The outside looked great. Inside, every wall needed spackle, every carpet needed to be replaced, kitchen needed to be redone as well as the bathrooms. If it were in perfect shape, I could see it going for $340k. It was listed for $260k. We tried contacting the agent and he refused to call us back. Within 7 days of it initially being listed, the for sale sign disappeared and it was never sold. I’ve consistently checked the public records. It’s still empty and desolate. Every time we’ve driven by, we’ve never seen any vehicle in the driveway. Whoever holds that property can’t keep it off the market forever.

  132. BC Bob says:

    “They have a longer time horizon than all of us. Just when you think they are in a corner, they can press one button and push this thing out another ten-fifteen years without thinking twice.”

    Veto,

    Exactly. That’s why I’m long gold. Do you think the fed will err on the side of accomodation or tightening? Two words; Arthur Burns.

  133. veto that says:

    Ben, in school we are taught the three tools of the fed: reserve requirement, discount window and money supply.
    They forgot to teach us the other 300 that they have at their disposal.

  134. Clotpoll says:

    veto (141)-

    Don’t forget thuggery as one of those tactics.

  135. BC Bob says:

    Also, we weren’t taught that the fed were puppets.

  136. veto that says:

    “That’s why I’m long gold. Do you think the fed will err on the side of accomodation or tightening?”

    BC, im long gold too but that doesnt solve anything if we get the chinese to cooperate with us we can keep inflation tame for another decade or four, despite the deficit.
    To answer the question i dont think the fed will err at all, i think they will work some magic and pull a stabilization and eventual recovery out of a hat the way they have done a hundred times before.
    But im not sitting here like a cheerleader saying the economy is great and i told you so. Im only 20% invested and im skeptical of the outlook but chances are they will pull it off no problem.

  137. BC Bob says:

    veto,

    If you don’t believe that you can fight the fed, step up to the plate and bid at their auctions, join them. Hold on to treas offering microscopic yields. Subsequently, when investors demand higher yields,causing rates to rise and the bond market crashes, just remember; don’t fight the fed.

  138. veto that says:

    “Also, we weren’t taught that the fed were puppets.”

    or that we were puppets for that matter…

  139. Ben says:

    Veto, all of the fed’s tools are the same. They have 300 different ways of creating inflation. Central banks have never defeated market forces in the long run and never can. Don’t worry about China. Foreign central banks don’t have the power to stop inflation here in the US without causing inflation in their own countries. All the world’s central banks have been powerless to stop gold from rising the past 10 years. They’ve only slowed it. The fed does not have infinite solvency. No one does. The US Government is on an adjustable rate mortgage that currently has a ‘teaser rate’ of 2%. When that rate resets, it’s over. The Chinese aren’t big enough to hold inflation off here in the US for 10 years. In fact, they were never able to do it in the first place. If you look at the price of gold, oil, silver, health care, tuition, tolls, and god knows what else going back to 1998, we’ve seen nothing but inflation the entire time. The only way to stop inflation is to stop expanding the money supply. No central bank in the world has done that. In fact, they’ve all moved in the opposite direction at record paces.

  140. veto that says:

    bc cmon, of course i would invest in treasuries. i have most of my savings in treasury mmkt.
    I realize we are up the creek fiscally but do you really think a treasury default is likely to occur?
    honestly i could think of a hundred things we would do before we let that happen, including starting a big war somewhere.

  141. BC Bob says:

    veto,

    I’m not playing the inflation game, at this time. Look at a dollar chart, that’s my barometer.

    The fed is our savior? They created this whole mess from the dot com bust. They allowed their member banks to lever up, 40-1, and sat idle while the biggest charade ever blew the doors off its hinges. This great institution never believed there was a bubble, praised the use of derivatives, [they disperse risk] and stated that the underlying fundamentals supported the growth in the RE industry. Yet, they will somehow drag us out of this abyss, which they never saw coming and didn’t undersatnd it when it hit?

    They are the main perpetuators in bringing the economy to its knees. Now they will somehow create magic, print 24 hours a day and substitute consumer debt with govt debt. How do you pay off debt with debt? I guess magic.

    I have a better idea, fight the fed. It’s worked like magic for me over the past 8 years.

  142. chicagofinance says:

    veto that says:
    July 30, 2009 at 1:58 pm
    bc cmon, of course i would invest in treasuries. i have most of my savings in treasury mmkt.

    veto: just put it in the mattress dude…..you are insane

  143. BC Bob says:

    “I realize we are up the creek fiscally but do you really think a treasury default is likely to occur?”

    veto,

    I never said anything about a treasury default. Too many are hypnotized by low rates. My first mortgage was a 12.5% adjustable. Do you think that there is a slither of a chance that worldwide investors may demand higher rates at some point down the road? Is it possible to see 8% 10 yr treas in the future? If yes, it will cause a bond market crash. It may happen over a # of years, like the RE crash. Nonetheless, your principal will be decimated.

  144. BC Bob says:

    “or that we were puppets for that matter…”

    Speak for yourself.

  145. Ben says:

    Veto, the fed is already losing. They are getting desperate. Those “evil speculators” are driving up prices again. Funny how they always blame price rises on the boogie man rather than the printing press. Hell, friggin Bernanke is on a PR campaign going around trying to assure people that he’ll remove the liquidity at just the right time. Listen to his voice when he answers to Alan Grayson or Dr. Ron Paul. He’s got a crack in his voice which is usually a dead give away that he’s lying. If you have a friend who’s a cop, play them a video clip of Bernanke. They’ll tell you when he’s full of crap.

  146. Ben says:

    there will be no treasury default, and that’s why you should be worried. They will make good on all those treasury promises. Obama’s running up all the spending he can before he turns on the presses to pay the world back. Hell, he even told the public to refinance their mortgages in one of his speeches when the rates when below 5%. That’s his convoluted idea of being a man of the people. I can see it clearly. Next election.

    Barack Obama: “I steered millions of Americans into refinancing their home at 4% before we destroyed the currency. Because of our actions, millions of Americans who were underwater now completely own their home.”

  147. Clotpoll says:

    I can tell when Bernanke’s lying just by the change in his voice. Don’t even need to see the body language.

  148. Ben says:

    Clot, this is what amazes me. He gets all nervous whenever he lies or is pinned into a corner. Congress should attach him to a polygraph machine that updates on the TV screen on CSPAN as he’s speaking. Maybe then, the public would get the message.

    It amazes me that when Geithner goes to China and lies, the people there laugh in his face. When he comes here and lies, the people commend him.

  149. veto that says:

    “just put it in the mattress dude…..you are insane”

    Chi, this one is a classic.
    from a guy who places diclaimers next to every other post that he does not give investment advice, he has no problem proclaiming that its safer to have a pile of gold chips and japanese yen sitting in the house…

    i get your point though and im sure its well intended. i’ll consider diversifying a little.

  150. Anon E. Moose says:

    Veto [134]:

    The sales flack was just trying to make you feel better in order to keep you engaged in the process with him/her. They have no idea what the bank plans to do with the house or why they rejected your offer. They are just a hired hand to the bank; they don’t sit in on strategy meetings.

  151. veto that says:

    BC,
    Currency collapse and inflation, its anybody’s guess dude. These are not likely events.
    More importantly, there is a whole boat load of stuff that you and i dont know.

    They may have planned and implemented the whole crisis to begin with as one big huge pump and dump. Are they really that foolish that they just didnt see the credit or housing or dot com bubble building? not saying they did or didnt.

  152. veto that says:

    Yeah Anon im aware of that. thx.
    He had recent short sale experience and was offering opinion based on his experience.

  153. BC Bob says:

    veto,

    It all boils down to your strategy, time frame and understanding the ramifications of your decisions. If you believe that the 10 year will go much lower, you will be a big winner. On the flip side, if rates rise you will get smacked. Unless, of course, if you are holding to maturity. If this is the case you are then playing deflation vs inflation.

  154. chicagofinance says:

    veto that says:
    July 30, 2009 at 2:26 pm
    “just put it in the mattress dude…..you are insane”
    Chi, this one is a classic.

    v: reacting to the fact that any money market is not good enough…you need a UST money market….ouch…aside from the fact that most of these funds now need indemnifications from their sponsors to cover expenses so the return isn’t negative….

  155. Secondary Market says:

    can anyone tell me the story on mls: 5567008 ?

    it’s in cherry hill so not sure if your trend reports make it down that far.

    something smells here. bought in may for 360 now on sale for 399?

    thanks in advance

  156. chicagofinance says:

    BC Bob says:
    July 30, 2009 at 2:40 pm

    veto,
    Unless, of course, if you are holding to maturity.

    Bost: he is holding a fund, so he can be exposed for playing out the curve

  157. Ben says:

    veto, they are aren’t clueless. They are heavily educated in junk economics. They laid out the theoretical frame work to deal with the crisis in published literature and are following what they laid out to the bone. They aren’t smart enough to know what they are doing. They tried their little experiments by going over to Japan and giving them advice. It didn’t work. Now they get to try it here. Unfortunately, the conditions aren’t exactly the same. We have a massive trade deficit and already bloated national deficit. We also have a large debt held by the general public and a low savings rate.

    As a scientist, I try to do all my experiments in identical conditions. If I decided to experiment like Bernanke is doing, I’d be doing chemistry with the windows open and the rain flying into my lab. I wouldn’t expect good results.

    The economics taught at Princeton is 100% garbage, and the world is going to find that one out the hard way.

  158. BC Bob says:

    veto [159],

    Currency collapse? I believe that a currency crisis is forthcoming and will be the fuel for major chaos, socially and economically. No inflation? That’s a real bold call. I experienced 15% inflation, a 20.5% prime rate and 18.5% 30 year mortgages, all in the early 80’s. Personally, I would never state that inflation is not likely.

    After all, if you believe in the magic of the fed, that’s what they are stirring in the kettle [no pun]. Inflation is their only cure. Are you now flip flopping, you want to fight the fed?

  159. BC Bob says:

    Chi [164],

    Didn’t know that. You are correct.

  160. Clotpoll says:

    Quick, buy me some IYR:

    “More space will be coming available from Bank of America, Citigroup (C), Wells Fargo (WFC), and others. The sheep always line up. If one bank starts closing branches the rest will too.

    Expansion for expansion’s sake failed miserably, as it always does. And the Fed forever blowing bubbles of increasing amplitude is the primary reason.

    That said, it’s important to note that commercial real estate in general is the key take away from this story. Indeed, the same over-expansion problems that plague banks also apply to Starbucks (SBUX), Home Depot (HD), Lowes (LOW), Target (TGT), Pizza Hut (YUM), and for that matter, nearly every business on the planet.

    So while everyone else is putting their party hats back on, celebrating the end of the recession, I caution the “horn tooters” this is not an ordinary recession.”

    http://globaleconomicanalysis.blogspot.com/2009/07/overexpansion-by-banks-hits-brick-wall.html

  161. Clotpoll says:

    I remember my Dad, back in the (inflationary) day, doing wrap mortgages at 14.5% and his customers treating him like he was Jesus.

    Arthur Burns? Arthur Burns was a genius compared to the dolts known as Timmay and Bergabe. I honestly believe that this pair, along with some help from Messrs Frank and O, could spawn the bastard child of Weimar and Zimbabwe as a weekend project.

  162. Comrade Nom Deplume says:

    Veto and BC:

    I put in a call to POTUS. Join him, Gates and Crowley on the South Lawn at 6.

  163. Victorian says:

    They may have planned and implemented the whole crisis to begin with as one big huge pump and dump

    Veto –

    Do not attribute to conspiracy which can explained by incompetence and greed.

  164. BC Bob says:

    Nom,

    I might consdie if it was held at the Cask’n Flagon.

  165. BC Bob says:

    consider

  166. veto that says:

    BC,
    cmon now. i never said we wont get a currency collapse or inflation, im just saying they’re not easily predicted, and timing them is even harder.

    All of us put together have about 1/10 of the real story so im not offering my predictions, mostly because i dont have any.
    Furthermore, the outcome may not have even been decided yet.
    But if you are confident in the future outcome, godspeed to you my friend and i hope you make a a lot of money.

    Nom, just found out BC is my brother. we both descended from zimbabwae but were rushed to the states when the currency collapsed.

  167. veto that says:

    Vic,
    Just because incompetence and greed are having a party, doesnt mean you cant invite a little conspiracy to liven up the place.

  168. Sean says:

    Conspiracy?

    How about this one.

    I heard a crazy conspiracy theory that the government had fabricated evidence of nuclear weapons in a tiny country so that they would have a pretext to invade and murder tens of thousands of innocents while stealing that country’s energy. The story gets crazier and crazier! Next they said that innocent people where being kidnapped, held without trial in foreign countries and tortured ( sometimes for years )! What are the chances that such a vast conspiracy, that must have involved hundreds of people in the military and the press could be perpetrated on the American people? Surely someone must have seen the truth? Some real nut balls suggest that this is still going on. What do you think of that Conspiracy?

  169. Clotpoll says:

    I’d just like five minutes along in a room with Bergabe. With a cattle prod.

  170. BC Bob says:

    veto,

    I was addressing your statement below, from #159.

    “Currency collapse and inflation, its anybody’s guess dude. These are not likely events.”

    Of course I don’t know how this will play out. I agree, the outcome is not close to being decided. I am only playing the hand that has been dealt. In addition to this, I hedge to lock in gains. If gold went to $300, I would not care. I’m locked at 5% off the high. Some say I’m nuts; paying premium for protection. I say it’s nuts not to protect years of gains.

  171. veto that says:

    sean, please. they are just dumb and greedy neanderthals.
    move along now and stop causing trouble.

  172. veto that says:

    im all about downside protection too right now.
    i dont rule out any of your foreseen risks. i’d like to be hedged against them no matter how unlikely i consider them at this point, even if it means limiting the upside.

    will likely throw most of my savings down on a house by this fall and keep the ira 80% cash until the next correction where we get the blue light specials again.

  173. John says:

    Roof top Hustler Club, BTW I have clipped more coupons this year than the whole population of Williamsburg Brooklyn.

    chicagofinance says:
    July 30, 2009 at 12:55 pm
    John says:
    July 30, 2009 at 10:05 am

    AMBAC FINL GROUP INC DEB 5.95000% 12/05/2035
    LAST TRADE – $2,350 for a $10,000 face bond!!!

    If you clip one coupon from that one, I will take you out to dinner…name the place…

  174. Sean says:

    Veto – who created a casino-like atmosphere on Wall Street where tens of trillions of dollars of transactions were done in the dark?

  175. veto that says:

    sean,
    thats easy.
    unbeknownonst dumb and greedy neanderthals.

  176. BC Bob says:

    “i dont rule out any of your foreseen risks. i’d like to be hedged against them no matter how unlikely i consider them at this point, even if it means limiting the upside.”

    Veto,

    I agree.

    Some fcuk up, overseas,[not saying many can’t fit the bill here] could fart and markets can automatically explode/go into a tailspin. These markets are wound up. It won’t take much either way. The key is to protect yourself on the downside. Live to fight another day. You’re right, beware of the unforeseen, it’s lurking.

  177. who created a casino-like atmosphere on Wall Street where tens of trillions of dollars of transactions were done in the dark?

    Umm. It wasn’t me, was it? `cause I was, like, totally out sick that day. Swears.

    /apologies

  178. Clotpoll says:

    John (181)-

    Try the clams.

    “Roof top Hustler Club…”

  179. Sean says:

    veto – the credit rating agencies colluded with loan originators. Collusion certainly is a factor in a conspiracy don’t ya think?

    And before you say the did not collude I would say you would be better off googling all the lawsuits that they now face in addition to the congressional testimony on the records that say they did collude.

  180. Victorian says:

    Sean (176) –

    Not a very well hidden conspiracy, was it? It was outed fairly quickly. That is the whole point, conspiracy cannot be hidden for a long time.

    As far as the whole wall street debacle goes, Chuck Prince(?) said it the best – “When the music is playing, you have to keep dancing”. Everybody knew this was unstainable, but nobody wanted to yell “FIRE!”.

  181. veto that says:

    “Umm. It wasn’t me, was it? `cause I was, like, totally out sick that day. Swears.”

    Greenspan, is that you?

    Paulson?, Mozillo? Ken… ??

    Come closer now, let me look atcha in the light.

    Ahhh, Cammarano…

  182. BC Bob says:

    “who created a casino-like atmosphere on Wall Street where tens of trillions of dollars of transactions were done in the dark?”

    Could it have been the NJ Vulture Fund? Creating the bubble and shorting it at the top? I don’t think GS is the only entity that knows how to game the system?

  183. veto that says:

    “Collusion certainly is a factor in a conspiracy don’t ya think?”

    sean, yes. The ratings agencies still have their issues, with 10 fingers in the dam, hoping the whole model doesn’t internally combust on their cushy little corner offices.
    but they will be protected. its all part of the larger network. someone wants it this way and no congressman looking out for the little guy is going to change that.

  184. yo'me says:

    Hoboken Mayor Peter Cammarano will resign after N.J. corruption sting arrest

  185. Sean says:

    veto – all the kings horses and all the kings men can’t put securitzation back to together again.

    I am left wondering just how facist our government can really become trying to maintain the oligopoly.

  186. BC Bob says:

    Nom [170],

    I will be impressed if it turns into a DC pub crawl.

  187. John says:

    Beats the Crabs

    Clotpoll says:
    July 30, 2009 at 3:38 pm
    John (181)-

    Try the clams.

    “Roof top Hustler Club…”

  188. veto that says:

    pol clot,
    did you see mls lose to everton last night?
    howard is rediculous.

  189. John says:

    http://msync.org/health/GeneralMotorsDiet.html

    welcome to a govt pension GM employees

  190. make money says:

    Barack Obama: “I steered millions of Americans into refinancing their home at 4% before we destroyed the currency. Because of our actions, millions of Americans who were underwater now completely own their home.”

    In addition, my campaign has brought in tall Paul who will beat inflation with a stick and bring back a sound monetary policy. That damn Bergabe had to be ousted in the name of “WE the people” and brought back to Larchmont NY where Timmy G still resides.

    Now that’s change we can all believe.

  191. make money says:

    Some say I’m nuts; paying premium for protection. I say it’s nuts not to protect years of gains.

    The only protection you will need is from Feds when they come in knocking with an order signed by the president to confiscate your gold.

  192. veto that says:

    Despite Gains in Home Sales, Real Recovery Is Still Elusive

    Federal initiatives to stimulate the housing market have created a shallow and narrow recovery, making it likely that Congressional proponents of an expanded homebuyer incentive program will make another push to make it law following the August recess.

    “The problem in our marketplace is the move-up market, which is basically dead,” says Sen. Johnny Isakson (R-Ga.), who is chief Senate sponsor of legislation to expand the tax credit. “People are buying bargains. There’s almost no market for the average home. We’ve got to drive the knowledgeable buyer and willing seller market.”

    http://www.cnbc.com/id/32203319

  193. yikes says:

    DL says:
    July 30, 2009 at 5:41 am
    Yikes; we’ll be touring Montgomery and Bucks county in Oct trying to nail down a town where we might want ot live. Do you have any recommendations? Wife doesn’t drive so a walkable town center is a plus. We’ve been to Newtown and Doylestown. Was curious if there are any hidden gems. Chalfont? Ambler? Lansdale? Yardley? Grateful for any observations.

    Doesn’t drive? New York, Chicago or London.

    Finally went to Doylestown for dinner. It was called Honey and the food was good. Owner’s v cool – she works as a hostess and her husband is the cook.

    Have never been to any of those other places except Yardley. Depends on what else you want – school, taxes, proximity to xyz …

  194. Comrade Nom Deplume says:

    [194] BC

    I wonder if Archibald’s is still on K Street? Not that far away, and downstairs is the adult entertainment.

    FYI – damn few “pubs” anywhere near the WH. Capitol Hill is a different story.

  195. Comrade Nom Deplume says:

    [200] DL

    Yardley is nice but overpriced and it floods. Frequently.

    If you don’t mind paying more and want a Mainline feel at off-ML prices, consider Jenkintown. Want further out Bucks, there is North Wales. Also the Churchville section of Southampton feels quite rural but isn’t.

  196. Ben says:

    Casino like atmosphere on Wall St? Damn it? That’s a low blow. At this point, the Casino gives you a much better chance of winning than anyone on Wall St. does. At least in the Casino, you might have a 40% chance of winning. On Wall St., the house always wins, especially when they lose.

  197. Secondary Market says:

    way off topic but does anyone know or work with a reliable conference call service company?

  198. Stu says:

    Secondary,

    My company uses Raindance and it’s fantastic.

    I’m working late tonight (in Manhattan) as I must meet with a 3rd shifter who is coming in around 9pm. I’m doing dinner with a project manager from St. Paul and we are heading down to Big Wong’s as she wants adventure over fancy. This should be fun. Congee and roast pork and roast duck for all!

  199. Stu says:

    Raindance is now intercall, but nothing has changed.

  200. Secondary Market says:

    thanks, stu. i’ll check’em out.

  201. Qwerty says:

    “People are buying bargains. There’s almost no market for the average home.”

    Then let’s help create more bargains — stop preventing foreclosures and let people who can actually afford the homes move into them, and those who took on too much debt can rent housing.

  202. yo'me says:

    Arizona cops find 97 migrants in refrigerated truck

    PHOENIX (Reuters) – Arizona police pulled over a refrigerated truck and found 97 illegal immigrants in the back among near-freezing produce, police said on Thursday.
    The officer stopped the truck on a highway a few miles (km) north of the border city of Nogales late on Wednesday, the Arizona Department of Public Safety said.

    An inspection found 97 adults and children from Mexico and Guatemala crammed into the trailer, which was heavily chilled to one degree Celsius (34 Fahrenheit).

    No one was harmed. The immigrants were handed over to Border Patrol agents, who processed them for deportation
    http://www.reuters.com/article/newsOne/idUSTRE56T6RZ20090730

    Go home nothing to see here

  203. yo'me says:

    Private health insurance is also available in Canada, as a supplement to the government-funded insurance system, and Canadians face the same television advertisements as Americans about the risks of not having it.

    Canadians can also pay private clinics for some procedures to avoid waiting, but major medical treatments must be done through the government-funded system.

    Ouellet says each country has something to learn from the other about health care, and should also take lessons from European countries that provide universal care while reducing both costs and wait times
    http://www.reuters.com/article/newsOne/idUSTRE56S37T20090729

  204. longtime lurker says:

    Can some one with MLS access give some details about MLS ID #2626287?

    The house has been on the market for more than a year. Last heard, it’s being foreclosed on. thanks

  205. veto that says:

    Speaking of more market manipulation.

    Mortgage/principle forgiveness is coming down the pike for homeowners. i can feel it.

    They are intent to prop Bernie back up come hell or high water.

  206. marv says:

    That farmhouse in Scotch Plains probably started out with a lot more land included than it had when it was sold in later years, which would account for the lower prices.

  207. yo'me says:

    Oakland one of “hottest” real-estate markets?
    for gunslinger

  208. Victorian says:

    More conspiracy against falling RE prices in NJ

    “The figures released on Thursday by the New York attorney general, Andrew M. Cuomo, provided the most detailed accounting yet of Wall Street’s millionaire ranks. In the report, Mr. Cuomo said that 738 bankers and traders at Citigroup took home bonuses of $1 million or more in 2008 even as the bank posted a $27.7 billion loss. In all, Citigroup paid $5.33 billion in bonuses; it received $45 billion in bailout funds.

    Bank of America and Merrill Lynch, whose merger brought the combined company to the brink of collapse, paid 868 employees bonuses worth at least $1 million. Both banks, whose compensation packages are being reviewed by a federal pay czar, turned to the government twice for bailouts, receiving a total of $45 billion. ”

    http://www.nytimes.com/2009/07/31/business/31pay.html?_r=2&hp

  209. kettle1 says:

    the healthcare debate is nothing but a charade at this point. everyone is fighting over whether they would rather have the corrupt bank owner politicians running healthcare or the corrupt robber barons of the corporate machine run healthcare.

    There is little difference between that choice and choosing whether you want death by hanging or death by firing squad. The end result is the same!!!

    In this debate both sides are wrong and both are right. Either end of the proposed spectrum of solution will end up a boondoggle for all but the wealthy and privileged.

    Until the public hold both the corporate barrons and the bank owned politicians responsible for their actions then this entire debate is nothing but political theater to keep the sheep occupied.

    any solution that does not essentially rebuild the system from the ground up and not just modify the existing system is a lose-lose proposition for the sheeple.

    As many have pointed out before the people have the power to stop all of this through peaceful non cooperation. stop spending except for the true necessities such as food. see how quickly you get the establishments attention.

    But who am i kidding, wont happen. there is a new episode of American idol on tonight and the new playstation gets released tomorrow!!!

  210. yo'me says:

    Senate to Probe Goldman, Deutsche for Fraud

    Goldman Sachs Group Inc and Deutsche Bank AG were issued subpoenas by a U.S. Senate panel looking for evidence of fraud in the 2008 mortgage-market meltdown, the Wall Street Journal said, citing people familiar with the matter

    http://moneynews.newsmax.com/financenews/goldman_sachs_fraud/2009/07/30/241874.html

  211. yo'me says:

    CNBC on-air personality Michelle Caruso-Cabrera got a home refinance loan from the Obama administration’s Making Home Affordable program, she says.

    This despite the fact that she doesn’t belong in the demographic the program was designed to help.

    A few months back interest rates were at record lows, Caruso-Cabrera decided to refinance her fixed rate mortgage. Bank of America, her loan servicer told her that she qualified for the new government program.

    “That can’t be possible,” Caruso-Cabrera protested on her CNBC blog.

    “That program is for people in dire straits. It is meant to help people in trouble. I’m just trying to do a basic refi.”

    Despite the fact that she is far from needy, Caruso-Cabrera got the refi loan with no income check or home appraisal, she notes.

    http://moneynews.newsmax.com/financenews/caruso_cabrera_loan/2009/07/30/241894.html

  212. yo'me says:

    Why are so many homeowners underwater on their mortgages?

    In crafting programs to prevent foreclosures, policymakers have assumed that the primary reason homeowners owe more on their home than it is worth is that they bought at the top of the market. In other words, they’ve lost equity primarily through forces beyond their control.

    A new study challenges this premise and finds that excessive borrowing may have played as great a role.

    Michael LaCour-Little, a finance professor at California State University at Fullerton, looked at 4,000 foreclosures in Southern California from 2006-08. He found that, at least in Southern California, borrowers who defaulted on their mortgages didn’t purchase their homes at the top of the market. Instead, the average acquisition was made in 2002 and many homes lost to foreclosure were bought in the 1990s. More than half of all borrowers who lost their homes had already refinanced at least once, and four out of five had a second mortgage.

    The original loan-to-value ratio for these borrowers stood at a reasonable 84%, but second and third liens left homeowners with a combined loan-to-value ratio of about 150% by the time of the foreclosure sale date.

    Borrowers, meanwhile, took out around $2 billion in equity from their homes, or nearly eight times the $262 million that they put into their homes. Lenders lost around four times as much as borrowers, seeing $1 billion in losses.

    “[W]hile house price declines were important in explaining the incidence of negative equity, its magnitude was more strongly influenced by increased debt usage,” writes Mr. LaCour-Little. “Hence, borrower behavior, rather than housing market forces, is the predominant factor affecting outcomes.”

    If other housing markets across the country offer similar findings, then the study argues that current “policies aimed at protecting homeowners from foreclosure are misguided” because lenders, and not borrowers, have born the lion’s share of economic losses.

    Borrowers that bought homes without ever putting any or little equity in their homes could have seen huge returns on investment simply by extracting cash through refinancing. “Why such borrowers should enjoy any special government benefits such as waiver of the income taxation on debt forgiveness or subsidized loan modifications to reduce their borrowing costs is at best unclear,” the authors write.

  213. abe says:

    by Brad
    One thing that has puzzled me is that some of the countries that have — implicitly at least — been most critical of the expansion of the Fed’s balance sheet during the crisis long have had much larger balance sheets than the US Federal Reserve.

    Before the crisis, the Fed’s balance sheet was around 6% of US GDP. Right now, it is around 15% of US GDP. A big increase no doubt. But the balance sheet of the People’s Bank of China (PBoC) is around 70% of China’s GDP. Foreign assets make up about 80% of the PBoC’s balance sheet — or around 55% of China’s GDP. And the PBoC’s estimated holdings of US treasuries and agencies are about equal to 30% of China’s GDP — a level that is far higher, relative to China’s GDP, than the US Fed is ever likely to achieve. The Fed expects its balance sheet to peak at roughly $2.5 trillion, or between 15% and 20% of US GDP
    http://blogs.cfr.org/setser/2009/07/29/pot-calling-kettle-black/

  214. Pol Clot says:

    veto (196)-

    Hard to watch MLS players.

    Howard is the bomb, though.

  215. Pol Clot says:

    yo (222)-

    Wait ’til Michelle finds out that Home Affordable refis are a ding on your credit score. To the tune of about 100 points.

  216. Pol Clot says:

    yikes (228)-

    Our country is run by a bunch of pea-brained monkeys.

  217. nj escapee says:

    please, don’t insult monkeys like that

  218. Pol Clot says:

    When will the front ranks of the insurgency start capping Congressmen?

Comments are closed.