Thu 15 Oct 2009
RealtyTrac: “They were the worst three months of all time”
Categories: Foreclosures , National Real EstateFrom RealtyTrac:
U.S. FORECLOSURE ACTIVITY INCREASES 5 PERCENT IN Q3
New Jersey - Q3 Foreclosure Activity
Lis Pendens - 11,816 (Defaults)
Notice of Sale - 3,878
REO - 2,414
From Bloomberg:
U.S. Foreclosure Filings Jump 23% to Record in Third Quarter
U.S. foreclosure filings climbed to a record in the third quarter as lenders seized more properties from delinquent borrowers, according to RealtyTrac Inc.
A total of 937,840 homes received a default or auction notice or were repossessed by banks, a 23 percent increase from a year earlier, the Irvine, California-based seller of default data said today in a report. One out of every 136 U.S. households received a filing, the highest quarterly rate in records dating to January 2005.
“The problem is prime loans going into foreclosure and people being underwater and losing their jobs,” Richard Green, director of the Lusk Center for Real Estate at the University of Southern California in Los Angeles, said in an interview. “It’s a really bad number.”
Mounting foreclosures mean U.S. home prices probably will resume falling, analysts from Amherst Securities Group LP in New York said Sept. 23. A “shadow inventory” of 7 million properties are in the foreclosure process or likely to be seized, up from 1.27 million in 2005, they said.
The pace of prime and so-called alt-A loan defaults is accelerating as subprime defaults slow, Standard & Poor’s analysts led by Diane Westerback said yesterday in a report. Prime loans are those made to borrowers with the best credit records while alt-A loans are considered riskier because they were often granted without documenting the borrower’s income.
From CNN/Money:
Foreclosures: ‘Worst three months of all time’
Despite concerted government-led and lender-supported efforts to prevent foreclosures, the number of filings hit a record high in the third quarter.
“They were the worst three months of all time,” said RealtyTrac spokesman Rick Sharga.
During that time, 937,840 homes received a foreclosure letter — whether a default notice, auction notice or bank repossession — according to RealtyTrac, the online marketer of foreclosed homes. That means one in every 136 U.S. homes were in foreclosure, which is a 5% increase from the second quarter and a 23% jump over the third quarter of 2008.
From the Star Ledger:
Official: ‘Stretch’ Corzine’s jobs record
In the midst of a tough re-election campaign focusing on his stewardship of the economy, Gov. Jon Corzine’s office recently instructed his cabinet officers to orchestrate events showcasing job creation — even if it is “a stretch.”
In an Oct. 5 e-mail obtained by The Star-Ledger, Corzine deputy chief of staff Mark Matzen asked the commissioners of several departments to “come up with an event or two or three that show job creation or economic development in the private sector.” The events, planned for this week, would “get our message out” that “the economic policies of Governor Corzine are working,” in part by generating “stories in weekly as well as daily newspapers,” Matzen wrote.
…
“I know that it might be a stretch for some of you, but please be creative,” the e-mail states. “While many programs might not created [sic] jobs directly, they do have some connection to job creation either through training, giving money to sustain employment or create demand for workers.”
From the APP:
N.J.’s jobless rate rises to 9.8%
In September, though, New Jersey lost more than its fair share of the 263,000 jobs lost nationwide. The state’s jobless rate now matches the nation’s.
“This just puts a little damper on getting overly exuberant in terms of what’s been happening in New Jersey,” said James W. Hughes, an economist and dean of the Edward J. Bloustein School of Planning and Public Policy at Rutgers University. “It seemed as if we had some stabilization in June, July and August, but in retrospect it seems to be a blip.”
From the Philly Inquirer:
Laid off yet again, one Sunoco worker digs in
Len Norvilla has felt the sting of unemployment three times - and his wife was pregnant each time.
Norvilla depleted his savings to pay medical bills, “gardened to eat,” and did odd jobs until he was hired somewhere.
It usually took only a few months, he said, because he wasn’t choosy. He found paychecks as a laborer and tester in industrial plants - chemicals, paint, gasoline, it didn’t matter much.
“I’d take anything to feed my family,” he said.
The 51-year-old is a father of four now - he had a job when that last one was born, in 1985 - and out of work again. He got a pink slip by certified mail on Tuesday from Sunoco, saying his last day will be Dec. 13.
Norvilla is among 450 employees to be furloughed from Sunoco’s sprawling Eagle Point refinery in West Deptford, which is being idled.
From the Star Ledger:
Improving economy does little to cut glut of commercial space in N.J.
Despite the improving economy, commercial landlords in New Jersey are still struggling to find tenants for offices left empty by the layoffs of white collar-workers.
In the northern and central parts of the state, more than 18 percent of the office space was vacant at the end of the third quarter, according to a survey by Cushman & Wakefield, a real estate firm. Class A office space, which is the highest quality, had an overall vacancy rate of 21.6 percent.
Morris and Passiac counties had the highest vacancy rates in northern New Jersey, at 23.1 percent and 22.7 percent, respectively, according to Cushman & Wakefield.
In central Jersey, Hunterdon County has a vacancy rate of close to 30 percent, according to the survey, while Monmouth County has an overall vacancy rate of more than 26 percent.
During this recession, about 50 percent of job losses have come from white collar industries that are the prime tenants for such commercial space, compared to about 17 percent in the 2001 to 2003 recession, said Jim Hughes, dean of the Edward J. Bloustein School of Planning and Public Policy at Rutgers University. That has helped fuel the glut, he said.
I say move the homeless into vacant commercial buildings.
Or, park the homeless in all the unsellable condos:
“New federal loan-guarantee rules imposed to fend off future government losses from plummeting condominium prices have rendered condos utterly worthless, Valley real-estate experts said.
The Federal Housing Administration rules, which took effect Oct. 1, prohibit any new FHA-backed loans on condo units in projects that include more than 25 percent commercial space.
In addition, no single investor - including the developer - may own more than 10 percent of the units in a particular project. That particular restriction alone creates a catch-22 from which condo builders most likely cannot escape, said mortgage originator Jill Hoogendyk of Wallick & Volk in Glendale.
Another rule that has sellers and brokers scratching their heads prohibits FHA loans
in condo developments that aren’t “primarily residential,” which could be taken to mean the FHA won’t guarantee loans in future mixed-use projects.
“I’m predicting that what we’ll see is whole condominium complexes sitting empty,” Hoogendyk said.”
http://globaleconomicanalysis.blogspot.com/2009/10/fha-rules-render-condos-utterly.html
More good news! Looks like we will rally some more today. Imagine what will happen when we really have some good news.
Want a fun read? Look for some stuff on Baltimore declaring bankruptcy in the near future.
good morning America opens with this: “Down 10,000, 2.0?”
up up and away!
They did have pom-poms on the desk, though.
Shump - If the super-subsidy government, via FHA, won’t back loans with more than 25% commercial, what does that tell you about their proclivity to back commercial loans in the future? The govt. will insure any and all single family residential, but throw in a commercial component and they run for the hills.
CRE is going to get basted in the next 2 quarters.
home (10)-
You’ll know it’s time to get back into SRS when every other post here is from bi, signaling the all-clear for CMBS.
This WILL happen.
I am proud to admit that I made my first foray into SRS 2 weeks ago. My career is in the commercial space and I can attest that the numbers of CRE loans that are being moved into special servicing is staggering and accelerating.
Well I finally got Mrs Procrastinator to cough up some final numbers and on the last day possible, I can finally file my f%53652 taxes.
Oh how I yearn for PAYE.
Clot
Baltimore cloe to declaring bankruptcy…..
Links?
Reagrding the FHA owner occupancy rules for condos… Weren’t they always like this? Or am I confusing FNM underwriting rules for FHA ones….
… actually, I think I just answered my own question there.
Tosh - FNM rules are much more liberal but FHA has better terms. The difference is FHA will close your commercial loan sometime between now and 2025
All this negativity…the DOW just crossed 10,000 yesterday. All is well people! Take Jim Cramer’s advice and buy CIT shares with both fists…IT’S A NO BRAINER!!!
Sarcasm off.
Staten Island continues to feel pain of home foreclosures
One in every 251 homes in the borough was in foreclosure during the third quarter, according to a report released today by RealtyTrac, which also posted the highest-ever quarterly number of foreclosures nationwide.
A total of 710 homes on Staten Island received at least one foreclosure filing during the third quarter, up 15 percent from the second quarter.
http://www.silive.com/news/index.ssf/2009/10/staten_island_continues_to_fee.html
“Gov. Jon Corzine’s office recently instructed his cabinet officers to orchestrate events showcasing job creation — even if it is “a stretch.”
How long does it take to paint “Jersey and You, Perfect Together” on a coffin?
“Imagine what will happen when we really have some good news.”
[7],
HMMM? Imagine what would happen if the fed/printing press walked away?
http://www.youtube.com/watch?v=jIfu2A0ezq0&feature=related
I owe my soul to the company store…
The next WSJ article I’m going to post made me think of this…
http://online.wsj.com/article/SB125554787267585505.html
Deficit Dilemma: How to Dig Out?
David Wessel
homeboken[12],
Any thoughts, SPG?
Of course; all disclaimers.
vodka (14)-
Best Baltimore BK article:
http://globaleconomicanalysis.blogspot.com/2009/10/time-for-baltimore-to-pull-vallejo-and.html
tosh (15)-
Expect to see FHA rules getting tighter and tighter.
Of course, all the horses are out of the barn…the barn’s pretty much burned down…and everybody at the fire department is passed out drunk.
lost (18)-
How can the entire Island of Staten be foreclosed? Then, emptied of people and surrounded by razor wire?
#18 - lost - The comments in that link are great.
“Deficit Dilemma: How to Dig Out?”
Cindy,
Send 1,000 of these to DC. Wanna bet that our leaders would still f*ck it up?
http://www.picable.com/Objects/Machines/Largest-Digging-Machine.522201
I have a friend who lost his job two years ago. At the time, given the state and nature of his industry, II could not understand how he could hope to hold onto his house and urged him to sell and downsize to a small apartment where his expenses would be lower and he could afford to live. He demured, and, managed to hang on cobbling together a series of short-term jobs and then making up for the shortfall with savings and borrowing from relatives.
During this two-year period, he did not reduce expenses by any meaningful amount, even though his income plunged.
Now, his savings is gone, his relatives are also broke, the quality of his supply of short-term work has diminished to the point of $9/hr jobs. He needs around $70,000 income to cover his basic bills, at his current consumption rate. There is NO way he can meet that, he tells me, anytime in the next 6 months.
Here is the kicker, he knows that he is about to default on his mortgage. BUT he refuses to talk to his bank about working out a repayment plan or doing a short sale. He has been in the house about 25 years but used the place as a piggy bank multiple times.
His feet are stuck in sticky mud and the water is rising quickly but he refuses to shed the millstones he carries. It is very sad — like watching a slow-moving train wreck but unable to stop it.
My apologies if this was already posted,retiring public employees are hitting the jackpots. We are picking up the tab.
http://www.dailyrecord.com/apps/pbcs.dll/article?AID=200991012064
Jim
How can the entire Island of Staten be foreclosed?
Just cut off SI’s supply of Uggs boots and Ed Hardy clothes, they’ll leave on their own.
Also, would I sound completely insane if I said I was thinking of moving back to SI, and the St. George area, specifically?
Who says there are no second chances in America. Five months ago many folks wished they had sold everything at Dow 10,000. Well, for those who missed the last opportunity….
Tosh
would I sound completely insane
Yes.
Shore [32],
I told my wife not to put away my shorts for the winter. Can’t wait for the Santa rally.
#33 - Thanks ket, that’s what I thought.
Would saying I was thinking of moving to Brooklyn sound better?
St. George is much cheaper than BK, btw.
Jobless claims in at 514000.
Coming down but that 5 handle sure seems stubborn.
26 Clot
If you can help me figure that out, I’d be happy to make it happen.
27 Tosh
I’m too tired to read through all of them but the first couple were great.
31 Tosh
You wouldn’t be crazy if you scored a unit in Bay Street Landing. Other then that, I don’t know if I’d do it if I wasn’t already in SI.
“How can the entire Island of Staten be foreclosed? Then, emptied of people and surrounded by razor wire?”
Wouldn’t it be better to lock the people on the island INSIDE the razor wire?
Jobs are overrated. Amount of consumer debt extended to households and the amount of time expected for a borrower’s mortgage lender to take in foreclosing, obtaining an eviction notice and getting a marshal to carry it out are much more important.
If a borrower can go 18-24 months making no payment at all for shelter, that allows for a pretty nice cushion to be built.
BTW, I’m seeing LLs take on foreclosed tenants and demanding the entire first year’s rent be paid upfront. Not surprisingly, some tenants can do it, since they’ve had plenty of time to save up $$$.
ruggles (40)-
Cruel and unusual punishment. Will never fly.
Shore,
I think facing the reduction in one’s standard of living is almost impossible for many people The mentality is that of a gambling addict who thinks the next bet will be the big win. Your friend thinks “If I can just keep this going another month then I can turn it around.”
renter (43)-
This is most disturbing when you see the same attitude in a multibillion-dollar pension fund manager.
40 renter
“Wouldn’t it be better to lock the people on the island INSIDE the razor wire?”
Sure as long as I’m off the island before it happens.
12#, srs is allowed to be mentioned again? ask the board what the average basis is, stu’s in particular.
>homeboken says:
October 15, 2009 at 7:50 am
I am proud to admit that I made my first foray into SRS 2 weeks ago. My career is in the commercial space and I can attest that the numbers of CRE loans that are being moved into special servicing is staggering and accelerating.
#31 tosh,
Yes. You would be certifiable.
It’s just way too easy to bait the village idiot here.
hey I represent that remark!
look! srs is loser’s favorite. if you don’t believe, just tell us how much money you lost in srs and other ultrashorts.
“It’s just way too easy to bait the village idiot here.”
Clot,
Which one?
47.james says:
October 15, 2009 at 2:07 am
#9 I dont think anyone in this forum believes this economic recovery is real. Most believe that a sh#t storm is brewing and we are buying umbrellas.
jaime: define “real”……
“if you don’t believe”
I believe that O will save us. He told us that.
i said yesterday here that you may want to take some chips off the table while cheering dow passing 10K. but ultrashorts are no no. my strategy is simple: reduce equity portion by 10%whenver s&p moves up 5%.
Bi(54)
It’s a pleassure to have a black box quant on this board. Where is oil heading to?
54.bi says:
October 15, 2009 at 9:12 am
my strategy is simple: reduce equity portion by 10%whenver s&p moves up 5%.
bipolar: Will you give me two $10 for a $5?
BC - Re SPG, I am not well versed in their capitalization or what their balance sheet looks like. All I can say is that the current wave of troubled mortgages coming in is predominatnly from hotels and regional malls. As said many times on these boards, the consumer has shut down, retailers are holding out for the holiday shopping season. When the sales numbers for the holidays come in weak, many of these retailers will have to come to Jesus.
Extned and pretend will cease by 1Q10. Of course, there could always be some magical stimulus bill that will save them all.
55#, oil is every one’s guess. I would put $55 to $85 range for a while. my model is simple: buy low sell high. so i am more interested in natual gas this time.
“If I can just keep this going another month then I can turn it around.”
At this point, I am not sure he believes that anymore. STILL, he reuses to recognize the need to aligne expenses with income. It really doesnt matter if income goes up or expenses go down as long as the income meets or exceeds expenses. It strikes me as a pretty basic concept. That said, and despites the wolves at the door, he is unable to weap his head around the need to do this.
Heck, if I had been in my home for 25 years and were faced with losing it, I would be dejected and doing what I could to avoid it. But, when expenses are outstripping income by two or three to one and one has no more savings or relatives to help out, what is the alternative but to abandon ship and find a rowboat. Even if the rowboat has a bit of a leak, it is easier to bail than a larver vessel.
57#, please go back to the archive of this blog. you will find tons of posts here predicted that all stores would closed after xmas 2008. of course, this time is different -:)
>When the sales numbers for the holidays come in weak, many of these retailers will have to come to Jesus.
Re: That Staten Island Article
The comments are really priceless. Where else could I have learned the phrases “all these houses are shuddered” or “lis pendents”.
And here’s the Piece de Resistance….”RealtyTrac is misleading people, to show them that there are more foreclosures than in actually. It’s all meant to drive up sign ups for their memebership ($50/mo).”
Honestly, it’s better than the website http://www.peopleofwalmart.com/
61 Fiddy
Now you see why the articles are written as if they’re from 4th graders- the general population isn’t too much brighter.
make (55)-
Only accept advice from certified Mexican quants.
bi - I am not making predictions and I don’t care to talk my own book. I am not a stock-picker or day trader. Just giving some anecdotes from my world. Consider my involvement in this coversation over.
(58)-
Somebody should tap bi’s head. It may contain more NG than the Fayetteville Shale.
“define “real”……”
Chi [52],
I’ll take a stab;
Liquidity has been shoveled to the market by the world’s cb’s. Unfortunately, there is no need for this capital to be utilized to purchase new infrastructure; i.e, new plants/equipment, sustainable inventory builds, increase in work hours, nor new labor. Forget about new labor, we can’t even register a blip in temp help. Net result approx 20%, real #’s, unemployed/underemployed.
If our economy is 70% consumer oriented, how does it fare in the face of declining house prices, rising foreclosures, real incomes being pulverized and a debt/GDP ratio worse than the GD.
Is this befitting of real? Guess it depends on your definition?
BC,
I was stuck behing a car yesterday that had several B.O. stickers on it. With nothing else to do, I took a close look at the “O” and, especially with all the adoration his supporters throw at him, the imagry struck me as never before.
The “O” seems to show a sun on the horizon shining upon farmland. Take a look. Right after that hit me, I thought of the Japanese Rising Sun Flag from WWII and a comment that Admiral Yamamoto, at least I believe it was Yamamoto, made after Pearl Harbor, or maybe it was Midway or the Coral Sea, about not knowing whether the sun on the Japanese flag was a rising sun or a setting sun.
I wonder which one B.O.’s represents.
Of course, for the true-believers among his followres, I wonder how many of them are, on one level or another, buying into the religious theme — after all the Risen Son and rising sun are linked in Christian literature through the ages. Given the cult of personality that has built up around this guy, nothing would surprise me.
homeboken[57],
Thanks.
“our economy is 70% consumer oriented”
BC,
Call me a cynic if you will but, this 70% figure includes healthcare spendng. What is it that congress and the administrtion want to pour a trillion dollars into? Humm, I had it here a moment ago. What could it be now, humm, humm, humm. Oh, yea! Healthcare! Doh! That should help “consumer spending” numbers.
Every day it becomes harder and harder not to file for election.
#66 I can define real as 5 friends of mine who not only did not get rasies last year, put took significant pay cuts ranging from 10% to 30%. Thats all the real I need, the rest is BS.
homeboken [64],
You must realize that you are addressing the equivalent of Ted Williams, hanging upside down in a freezer. That said, nobody his tapping him/her for genetic purposes.
How hard it it to make a profit if one gives a company its inventory for no cost? The banking profits are as real as my date with Sela Ward.
#60 Take a drive up rts 4 and 17 and look at all the empty retail space avaiable, stop in at Paramus Park Mall and take a look there.
Drive through the business districts of Ridgewood and Westwood, lots of vacant space there too.
Shore - you put your finger on it: since January 2008 I have been hating myself for not selling my equity positions. Now that one fund has broken even I can’t bring myself to sell - I keep hoping ofr at least a little upside…do I need counseling or what??
there will be no more crashes. we will just prod on in this muck forever, slowly losing our purchasing power and standard of living. USA is truly f’d for anyone under 25 who has not been able to gain significant job experience– the jobs are not coming back. But I think it is senseless to plan for an armagheddon type event. It is happening, just drawn out very slowly.
Beach,
I am inclined to sell every equity that is currently a loss. Then, on the future crash, sell the new losses. At least tht way there is something offsetting gains for the next 100 years.
“there will be no more crashes.”
Skep,
Depends if one is hunkering down for an instantaneous crash or a Chinese Water Tortue crash?
“slowly losing our purchasing power and standard of living”
Unless we jump into manufacturing things like solar panels, wind turbines, etc. that allow our manufacturing processes to be freed from hydrocarbons (and their various costs, including defending the House of Saud) we cannot are behind the eightball when it comes to competing with low-cost nations that make the everydssy stuff that we used to make here. Places that do not make things are doomed. Just look to some of the most mineral-rich places on earth; they may have had wealth in the ground but most of them were and still are poor as dirt and were exploited by the nations that made things.
Anybody have any experience with the contestibility period for life insurance. I want to change insurance carriers and the old one is sent me cancellation forms warning that the new carrier could have contestibility periods of up to 2 years.
All I am doing is replacing one term policy with another. I’m doing it to extend coverage from 10 years to 20 years and increase coverage amounts.
Is this a scare tactic or a legitimate concern?
ignore “cannot”
#75 Regarding your comments from yesterday, about the worst of the decline being over, and prices not dropping another 20% in year. I would not be so sure of that.
This burst of activity these last few months in the housing market have been driven by the tax credit,and FHA, the new sub prime,and artifically low interest rates.
At some point the props will collpase/be removed and price declines will accelerate again.
What would the market look like if rates were 7 or 8% (rates ironically that were very attractive in the 90’s).
Unemployment stated #’s will be over 10% year end or early next year, where will the new buyers come from? Where are the new jobs?
This resession although some deny it is a resssion, and some say it is over, is far worse than the one in the early 90’s, and prices fell more at that time. Take away the props this time around,and it would have collapsed.
You may buy a house now and this time next year it may or may not have dropped 20%, but what about the following year if and when the props are gone,and mtg rates are at 7% or 8%?
20% price drop, oh yes and more,and than flat prices for years.
So as I said yesterday people who have bought recently or will be buying will be living in houses for 15 or 20 years, and when they sell, they will not make a dime.
Maybe they should work at Goldman.
3b says:
October 15, 2009 at 9:42 am
#66 I can define real as 5 friends of mine who not only did not get rasies last year, put took significant pay cuts ranging from 10% to 30%. Thats all the real I need, the rest is BS.
3b,
I actually wonder how much people ever “made” on sf housing. I was in my old neighborhood recently and did a back-of-the-envelope analysis of what the homes sold for in 1963ish and what they are selling for now and I am not sure that they even keptup with inflation. After considering all the costs of home ownership, I would not be at all surprised if the houses were net losers as “investments.”
Of course a primary residence is not an investment; it is a fancy nest, and its value cannot be simply boiled to a p&l statement.
82 I used to work her for many years John as you know> I can tell you what it was like in the old days when it was a partnership.
Some good stories too, probably not like yours however.
John -re: Goldman
Can you even imagine how big of a hard on you would have 24×7 if you worked there?
One can only dream…….
Shore [83],
A house is not an investment, strictly consumption. The cost to carry is an albatross.
Sean [85],
John missed his calling, he should have been head of talent acquisition for Score’s or a host on CNBC. One caveat, not sure if he has webbed feet; a strict requirement for CNBC.
BC Bob you were right on Gold, I was right on everything else. I am a raging bull in bear markets. Right now I am more like a piece of veal then a bull.
I think I could easily take over for KUDLOW, he is a little too bearish for my liking.
BC,
Agreed. A second home or multi can be an investment, but, the place one rears a family, it is consumption. If one breaks even in the end, it is icing on the cake.
Bi-tard,
Why do you have such an interest in everyone else’s finances? Maybe you should take all of your winnings and take a vacation from this board.
John,
No Land Shark stories?
#79, 2 year period is standard
Watched the game on big screen tv where drinks were free Interesting trip. Met former head of legal and compliance of Lehman Brothers and former second in charge of risk manageement at Bear. Good stories.
In regards to rates, several Fed people and Econmist I met said 06/10-12/10 rates are going to start going up. That combined with expiring new buyer credit and chance Fed will slow MBS purchases will give us a little double dip in housing prices in 2010, but early 2011 is not a bad time to dip your toes into housing.
#83 One could argue that 20+ years ago and before when many houses were under 200k,and for the old timers who bought for 25k or less, that a house could be an investment. Also property taxes were much lower, taxes on my first house were $1500 a year.
Now I believe the investment piece is no longer applicable.
You cannot even accurately value real estate today, due to the distortion and manipulation of the market.
So my point is buy (rent from the bank) if you want to. Go FHA if applicable, with the least amount down, take the shrinking tax write off benefit, and when you sell in 15 or 20 years assume you wont get more than what you “paid” for it if that.
Also although clot may disagree, lowball, lowball, all the sellers can do is say no, does not hurt to try.
90#, hehehe, i am not interested in anyone’s finance. just a bit of warning to lurkers and newbies on the board: some of self-claimed smart boys here lost shirts on these ultrashorts.
btw, are you still holding your 100 shares of fxp. fyi, now it’s at 8.38.
My mother bought her home Jan 74 for 36K and it was sold in 2003 for 555K. Other than keep it spic and span and one kitchen put in 1978 and a bath in 1996 there was no other renovations down. House had very low taxes. It was an excelent investment. My Moms Mortgage was 300 a month and house rose in value 1,500 a month for 29 years straight. Also people forget, that back then noone was leverage. My parents put down 20K on a 36K house and my mom was concerned with the 16K mortgage she took out. She put down over 50% and bought when houses were cheap, later on when houses were expensive people put down less and expected the same type of returns.
Problem is children of people like my Mom assumed this would happen forever. It was amazing a house could rise in value five times the mortgage payment for 3 decades. But it is kinda like making 30 free throws in a row blindfolded, the odds you could do it another 30 times are slim to none.
Just a disclaimer, I did not lose money on ultra shorts and in fact in my personal life I am ultra long.
bi says:
October 15, 2009 at 10:53 am
90#, hehehe, i am not interested in anyone’s finance. just a bit of warning to lurkers and newbies on the board: some of self-claimed smart boys here lost shirts on these ultrashorts.
btw, are you still holding your 100 shares of fxp. fyi, now it’s at 8.38.
#95 - i am not interested in anyone’s finance……btw, are you still holding your 100 shares of fxp
Now that is just funny.
” lowball, lowball, all the sellers can do is say no, does not hurt to try.”
And it provides one with cheap entertainment.
“But it is kinda like making 30 free throws in a row blindfolded, the odds you could do it another 30 times are slim to none.”
Unless you’re Dollar Bill Bradley.
J[96],
Some useless stats;
Exhibition Free-Throw Shooting
While Blindfolded;
63 straight John Sebastian, 5/18/1972 (at Maine East High)
88 straight Fred Newman, 2/5/1978 (at Central YMCA, San José, Cal.)
Trying to post from a blackberry f*cking sucks
.sl
SL,
Have you tried Stoli blackberry? Good stuff.
Beach,
Have you looked at any property onthe coast east-ish of Jacksonville? I am not a big fan of Florida but at first glance this looks like it might have some promise. it is just about two hours from Savannah, and just over five to Miami and just under five to Charleston. Add the lack of income tax and it is looking all the more promising.
Kettle,
How long before you head to my favorite island?
[97] John
Your comment reminds me of this from my youth, about a million years ago.
“Long and thin goes too far in, and does’t please the ladies.
Short and thick does the trick, and produces proper babies”
And long and thick?
Or does thst just describe this recession.
Nom,
Here is the rest of that ditty:
Long and thin goes too far in
And doesn’t please the ladies.
Short and thick will do the trick
And bring out proper babies.
Our Mary did it once.
Once was once too many.
Wasn’t she a silly dunce?
Did it for a penny.
SAS,
“what did we talk about? Lets just put it this way, Elijah lived well past 1975.
I was just saw this post from several days ago. I’m astounded.
Comrade,
Been quite busy. I’ll be sending you a message this weekend.
Morningstar Advisor
A Call for Nudges
by John Rekenthaler | 10-15-09
Richard Thaler believes that financial advisors have a major advantage over most economists: They know that investors are human.
Thaler leads a relatively new area of research, behavioral economics, that attempts to “bound” the notion that financial markets are unfailingly rational. The success of Thaler’s efforts in bringing legitimacy to his field may be seen by the University of Chicago’s decision in 1995 to recruit him for a chaired position in its business school to become the school’s first behavioral economist. Thaler now presides over 15 faculty members in running Chicago’s Center for Decision Research.
Thaler’s work has always been unfailingly practical, from his Ph.D. dissertation on pricing the value of a human life, to his seminal 1980s research on mean reversion in stock prices and the apparent outperformance of value stocks, to later work on motivating 401(k) participant behavior, which he called Save More for Tomorrow. Recently, he co-wrote the book Nudge (Penguin, 2009), which advocates that regulatory bodies use behaviorally gained knowledge to create policies that “nudge” consumers toward making optimal decisions. Proof that Nudge succeeds in its goal of carving out a philosophical middle ground may be seen in its diverse readership, which includes both President Barack Obama and David Cameron, the leader of Great Britain’s Conservative Party.
In this free-ranging interview, Thaler discusses the development of behavioral economics, its influence in the current Obama administration, and what behavior economics can say about several current investment topics.
John Rekenthaler: To start, should we be talking about behavioral finance or behavioral economics? Do you have a preference for which term I should use?
Richard Thaler: I think behavioral economics is broader. It’s applying psychology to the principals of economics, and finance is one branch of economics. For Morningstar’s readers, behavioral finance is what we should talk about. On the other hand, something like Save More for Tomorrow and principles such as loss aversion and overconfidence are more general than finance.
Rekenthaler: Whether we call it behavioral economics or behavioral finance, where do the roots lie?
Thaler: I can tell you my own roots started when I was a graduate student working on my doctoral dissertation. My dissertation was on the value of a human life. This is not as sexy as it sounds. It was really a question in public finance. If the government is going to do something that will make things safer, like improve a road or an airport, and it’s going to save three lives a year for the next 20 years, how much is that worth? Clearly, not an infinite amount, but something more than zero. It was mostly an econometrist exercise of estimating how much you had to pay people to get them to take risky jobs.
In the midst of thinking about this problem, I decided it might be fun to ask people some questions. One of the questions I asked was: Suppose you’d been exposed to a rare disease, with a one in a 1,000 risk of dying; how much would you pay to eliminate that risk? Typically, people would give an answer in the range of $5,000. I’d then ask them: We’re running some research on this disease over at the hospital, and we need people to expose themselves to it. How much would you charge to participate in this study? People would typically give answers that were two or three orders of magnitude bigger: $500,000 or $5 million. Some people would say they wouldn’t do it at any price.
Economic theory says those answers have to be about the same. This got me started on keeping a list of weird behavior on my blackboard. Eventually, I was introduced to the work of two Israeli psychologists, Daniel Kahneman and Amos Tversky, who were studying how people make decisions and judgments and how those judgments aren’t consistent with what economists call rational. The three of us ended up spending a year together at Stanford in 1977-78. They didn’t really know anything about economics, and I didn’t know anything about psychology, and we spent the year educating one another. That was the beginning.
Rekenthaler: Obviously, when you started, you didn’t really have a vision of where this would be 30 years later. Are there parts to the development of behavioral economics that might have seemed predictable to you at the time? And are there branches that have surprised you?
Thaler: I think finance is the biggest surprise. But let me come back to that.
I think that in some ways the things we started working with back then are still very important. I was interested in things like self-control and loss aversion and what came to be called mental accounting. Those have remained big themes today. So in some sense, I think we knew what was important early on.
As for the role of markets, it was clear that a question that needed to be asked was: Well, look, if people do dumb things in the privacy of their homes, like they watch the wrong television show or what have you, that’s one thing. What happens in markets?
I think it was clear that there was going to have to be a lot of attention paid to that. I started writing papers about it. The first ones were published in 1985.
But I certainly never would have expected that the branch of behavioral economics that would really take off first was behavioral finance. Our expectation was that finance would be the least likely place that we’d find big anomalies, and the reason is that financial markets are the most efficient markets. They are markets in which many of the traders are professionals. The stakes are huge. So if there’s something that’s not working right, people can make tons of money exploiting that and making it go away.
It was a surprise that it turned out to be pretty easy to find puzzles in financial markets. Perhaps because they were so surprising, and because the data is so rich in financial markets, this branch of the enterprise really has been the most successful to date–successful in the sense of attracting a fairly large group of academics who consider that’s what they do for a living and attracting the interest of practitioners like you.
Rekenthaler: It’s my sense that under the Obama administration, behavioral economics now has an official link into policy-making. It is more directly connected with what goes on in Washington than ever before.
Thaler: Yes. It’s funny. About five years ago, I organized a session at the American Economists Association meeting called “Memos to the Chairman of the Council of Behavioral Economic Advisors.” It was meant to be sort of a whimsical title and science fiction. If there were such a group, what would people be thinking about?
Now, here we are, and it’s not that there’s a Council of Behavioral Economic Advisors, but in some sense, it’s even more than that. There are behavioral economists scattered through the administration, including the co-author of Nudge, Cass Sunstein, who, let’s hope, by the time this article is published will be confirmed in his job as the director of the Office of Information and Regulatory Affairs. It’s in the Office of Management and Budget, and it’s the most important job in Washington that no one’s ever heard of. It essentially has to give approval for any new regulation.
So OMB has really become the Council of Behavioral Economic Advisors, because Peter Orszag, the director, has written extensively about behavioral economics. Another guy in the OMB, [executive associate director] Jeff Liebman, from Harvard, has as well. There are other people around the administration, too, most notably Michael Barr, who’s an assistant secretary of the Treasury in charge of consumer regulation. Even Larry Summers wrote some early papers on behavioral finance. Neither he nor I would call him a behavioral economist primarily, but he is a very eclectic guy, and he is certainly happy to use behavioral economics when it seems to be the appropriate tool at hand.
Rekenthaler: Can you give an example of ideas that you and Sunstein worked on that are making their way into policy?
Thaler: One of the first things that the administration did was announce a carbon emissions inventory. Starting in 2010, firms will have to announce what their emissions are. The idea–and we talk about this in the book–is that simply by having to announce their emissions, companies will be shamed into greening up their act a little bit. If you have the dirtiest factory in town, maybe people will get on your back. This is in preparation for some sort of cap-and-trade system where we’ll need those data anyway, but the idea was let’s just start with this. In some other fields, this “announcement effect” has been helpful.
Something more finance related is an idea that we talk about in the book that has been picking up a lot of steam. We call it RECAP–Record, Evaluate, and Compare Alternative Prices. The idea is that firms would be required to give two kinds of data to their customers. Let’s think about it from the perspective of credit cards.
Once a year, every credit-card holder would get two electronic files from their credit-card company. One would be usage data. The file would list all the ways you’ve used your credit card in the past year that are capable of incurring charges. The basic principle is that as the user of a service, you should be entitled to know how much you’re using it. Right now, it’s very hard to get that information. You might have to spend hours with a calculator to figure it out, if you can at all.
The second file would be information on prices. It would be essentially a spreadsheet that would list all the ways that the credit-card company can charge you.
Now, it’s not that we expect that very many people would actually look at those files themselves. Instead, with one click, they could upload the files into third-party Web sites that would analyze the files and make suggestions, such as how you might save money by, say, paying your bill on time. Or if you travel and you have a card that charges you a lot for foreign purchases, maybe you should switch to a card that doesn’t. Then, it would do the shopping for you, given the way you purchase–here’s a card that would be better for you.
That proposal has now made its way into a document that the government released. There is a proposal to create a Consumer Finance Protection Agency. One of the lists of things this agency would do is require electronic, machine-readable disclosures.
Rekenthaler: It seems to me in reading through Nudge that a core principle is rather than to take the approach of regulation and telling people and companies what they can and can’t do, you’re really about disclosure and information design. That properly accessible information will lead to better outcomes than coming up with a particular rule to prohibit a particular practice.
Thaler: Yes. We wouldn’t want to argue that disclosure can solve all the problems. But what’s true, of course, is that the existing disclosure rules are really obsolete. For a credit card, you get 30 pages of fine print that no one reads. So, there are a couple of steps one could take.
One is that you can regulate the form of the disclosure. You might say, “Look, there are three numbers that everybody ought to know and they ought to be on the first page in 20-point font.”
The step that we’ve taken is to say, “Wherever possible, let’s make the move toward machine-readable disclosure.” Let’s remember we’re in the 21st century. Once you make things machine readable, then all kinds of Web sites can emerge to essentially do, on other domains, what Morningstar does for mutual funds. Have a simple place where you can get all the basic facts, what the expense ratios are and what the returns have been, and then, perhaps, proprietary evaluations of the sort that Morningstar does.
We imagined that that would be true for mortgages, credit cards, and mobile calling plans. I’m about to take a trip to Asia, and I’m trying to figure out which international calling plan I need, and I need to know how many megabytes of data I use. How the hell am I supposed to know that? We want to make that type of information more available.
Now, that’s not to say there are no activities that one would ban. Fraud, for example, needs to be against the law. Nobody’s proposing that we eliminate that. But if we think about Bernie Madoff, just a little bit of disclosure would have prevented that. Suppose he had to show were all the money was. I suppose one could say that the SEC already should have done it, but they didn’t. So we need to figure out how we can require financial firms to disclose enough that the regulators can make sure that they’re not ripping people off–but not so much that they can no longer make a living. I wouldn’t propose that hedge funds have to reveal what their secret sauce is. But maybe they have to tell us what their leverage ratio is, and certainly they have to tell us where they keep the money.
Rekenthaler: We should probably move from behavioral economics in general to how it can help advisors. Any advice?
Thaler: Well, one thing I would say is that the advisor community was very quick to pick up on behavioral finance. I think the reason is that they know that their job is at least as much like a clinical psychologist as it is like an accountant.
Rekenthaler: They know their clients are nuts?
Thaler: Well, that’s what John Rekenthaler says
Rekenthaler: I’ve heard it from few advisors, as well.
Thaler: Let’s just say they’re human. Rekenthaler: Same thing, right?
Thaler: Yes, exactly. I think it’s fair to say that many clinical psychologists spend a lot of time talking to their clients about money and that many advisors think that they’re more of a shrink than anything else.
Another thing I would say is that the big problem going forward–especially as I’m the tip of the baby-boom generation and as our generation starts to retire–is that nobody really thinks that they found the solution to how we should handle decumulation.
And what’s the right role for annuities? Part of this is behavioral. Most people don’t like annuities. One reason is they don’t like the idea that if they die too young, then the insurance company makes a lot of money. New products need to be invented and new marketing schemes created that will make people comfortable with at least putting some of their portfolio into products like that.
One other thing that obviously jumps to mind is what will be the long-term implications of 2008? I suppose that will depend on how quickly the market recovers. The bear market of 2000-03 seemed to have been forgotten pretty quickly. I think maybe it’s because the money that people made came in so fast that it was “easy come, easy go.”
Rekenthaler: Or another way of putting it is a lot of the people didn’t really lose money in a sense, they just lost what they had made in 1999 and early 2000.
Thaler: Right. We sometimes call that the house money effect. You win $1,000 at a casino and then lose it back; you don’t really feel like you’ve lost anything. It was their money.
Obviously, the market’s fall in 2000 was concentrated. Nasdaq fell by two thirds, but the rest of the market didn’t get hit so badly. Here, everything got crushed, including real estate. So, I don’t know what the longrun effect is going to be. The next time I talk to a group of financial advisors I’ll be interested in hearing their war stories about this.
Rekenthaler: I’d say in the short term, from what we’re hearing from the advisor community, which, of course, is a reflection from what they hear from their customers, is skepticism about the fundamental notion of Modern Portfolio Theory. Because it seemed like everything fell at the same time, people are questioning the point of diversification. And they have an increased desire to find what I would call market-timing strategies. The notion of long-term strategic asset allocation got rocked a bit.
Thaler: I think that’s true. Of course, the sad truth is that nobody has ever had much success with tactical asset allocation or market-timing. Even my dear friend Bob Shiller, who was prescient about the Internet and the real estate bubbles, in both cases was early.
I remember when I came out to meet with Kahneman and Tversky in ‘77, my impression was California real estate was a bubble. I was happy I didn’t have to buy into it then. You can see how smart that was.
Nobody has really figured out how to do timing. I remember in the 1990s, advisors told me that they were having a hard time talking clients out of investing everything in technology stocks. It was hard to convince anybody that real estate wasn’t a sure thing.
But in some ways, individual investors have come out looking pretty good in all of this. There’s no sense in the data that I’ve seen–at least in 401(k) plans–that there’s been a massive move away from equities. The biggest mistakes and the biggest losses were all made by the professionals. We’ve had entire companies blow up. I think the observation that diversification “ain’t what it used to be” is quite profound, and one that the pros didn’t get. Let’s hope they’ve gotten it going forward.
John Rekenthaler, a former student of Richard Thaler’s, is Morningstar’s vice president of research and new product development.
” Elijah ”
The world is a funny place and when governments and intelligence agencies get involved it gets even funnier. I know a lad who had some tangential connection with Zia and had some interesting documents regarding Zia’s, um, departure from the world stage.
grim unmod - long post from Thaler
Did anyone catch the BLS statement that CPI-U was up .2% in Sept., following .4% increase in August?
Shore,
Unknown, project on hold.
Good to keep on hold until January.
bost, shore, 3b:
I appreciate the cynicism, but I do not entirely agree with you. I think it is a matter of degree. A good amount of the shift in conditions we observe is due to stimulus. However, this method is how stimulus is intended to work. The degree? Yes, a different discussion. That said, I think it unwise to discard a lot of factual evidence for anecdotal evidence.
In reality, we are a consumerist society. A lot of people are just fine. A good number of people have been emboldened by their investment portfolios. There is a good amount of potential p[a]nt-up retail demand.
You can build the case that the next three months are going to represent a surge of positive activity. It will induce nausea in many quarters (especially here), but you can’t ignore data because you don’t like it.
Please quote me here in the future 10/15/09 11:50AM.
BC,
My schedul may have me in the City on Monday, November 9. If so, I may be inclined to go in and catch the Sunday show if I can get my hands on a good ticket. If you hear of anything, please let me know.
96.John says:
October 15, 2009 at 10:55 am
My mother bought her home Jan 74 for 36K and it was sold in 2003 for 555K. Other than keep it spic and span and one kitchen put in 1978 and a bath in 1996 there was no other renovations down. House had very low taxes. It was an excellent investment. My Moms Mortgage was 300 a month and house rose in value 1,500 a month for 29 years straight. Also people forget, that back then no one was leverage. My parents put down 20K on a 36K house and my mom was concerned with the 16K mortgage she took out. She put down over 50% and bought when houses were cheap, later on when houses were expensive people put down less and expected the same type of returns
I bought my house in New Providence in 1976 for $51K with $15K down and a salary of $40K. The metric back then was mortgage must not exceed 2x’s Gross Income. Property Taxes were $1,200/yr and Net Income was greater because their was less taxes of every kind. As an example, my first two hot water heaters did not require town permits. Living within my means my stay at home spouse for 16 years raised our children and only entered the work force as kids neared College. That is the only scenario that makes sense to me.
chifi,
I agree to some extent, but eventually there is only so much punch a drunk can drink before he falls over. I think the low rates and the market surge has been a band-aid for some of the ailing banks to recapitalize before the party officially ends and they have to write-off the mountain of debt.
Chifi,
I would love to believe the good news. My problem with it is that I no longer trust the cheerleaders. I see huge debts, I see increased “savings” rates that is not really savings but debt write offs, I see a loss of quality jobs, I see unchecked illeagal immigration (just ask the Romans what happens when one does not secure a boarder that is largely defined by a river with poor neighbors on the other side and accceptance of the invasion by your own citizens who live near the border), I see squandering of money on stimulating 20th-century projects at the expense of future technology, I see politicians who are afraid to level with the American people, I see massive debtloads and increasing deficits and a lack of proper action to deal with either (let alone both), I see a society focused on instant gratification and quick fixes and an outside world looking to eat us for lunch (but as fat as we have become, it might not be healthy to do so). So, all in all, I see real issues that we have yet to face, and which will destroy that which we cherish if we do not solve quickly.
Hard Place says:
October 15, 2009 at 11:54 am
chifi, I agree to some extent, but eventually there is only so much punch a drunk can drink before he falls over. I think the low rates and the market surge has been a band-aid for some of the ailing banks to recapitalize before the party officially ends and they have to write-off the mountain of debt.
HP: you hit the nail on the head; these friggin’ zombies cheated death by pricing secondary’s left and right…..but they managed to get them off….they needed a new liver…but the got one….yes they are scum, but not dead; exempting Citi and Wasserstein…
John,
Living within my means my stay at home spouse for 16 years raised our children and only entered the work force as kids neared College. That is the only scenario that makes sense to me.
That’s why I rent an apt that is just big enough for 2 kids. 2BR and 2 kids under 4 sharing a room. We send the older one to daycare and the younger one has a nanny. My wife makes a decent salary, so its worthwhile for her to work. Since we only commute 20 mins to work, the kids get a good amount of family time. I really like the setup.
shore: I agree with your entire post except that the last word should be removed.
Shore Guy says:
October 15, 2009 at 11:58 am
quickly
The end is nigh…..
http://www.nypost.com/p/news/national/poll_hillary_more_popular_than_obama_lX2MYhTlHsZcuE1dfXqyJL
There is no true recovery, there never will be a true recovery. There’ll be a quarter or two of positive GDP “growth” followed by a fall-back into recession absent another “stimulus”.
I’ve no problem with a bear market rally or the positive impact a rising stock market has on the sheeple and there’s a possibility that may take us to a place that is higher in the next six months than we would have been without the stimulus.
The problem is the stock market is pricing in a “recovery” back to 2006 standards which is ridiculous given the underlying fundamental problems we are facing and the mom and pop investors are going to be the saps yet again when this bubble bursts.
“but you can’t ignore data because you don’t like it.”
Chi,
What data are you referencing? Please explain how this liquidity is flowing to John Q?
Chifi,
If in a post of tht length one only objects to one word, I can live with excising it.
chifi,
you hit the nail on the head; these friggin’ zombies cheated death by pricing secondary’s left and right…..but they managed to get them off….they needed a new liver…but the got one….yes they are scum, but not dead; exempting Citi and Wasserstein…
It amazes me that professional money managers actually bought into these secondary’s. I had a friend who is a PM at a “value shop”. They bought a secondary during the initial round of capital raises from some of these banks. Why? They did not realize the extent of the problem. I’m sure they do now and would not invest in the banks, but it was a fairly expensive mistake. Of course these guys all make more money than I do.
“liquidity is flowing ”
The only liquidity flowing is Timmy, B.O. and their Wall Street masters stnding on a building piddling on the “little people,” in the words of Leona Helmsely, as they walk by to stuff bailout money into the kettle.
Supporting the old chestnut that “all real estate is local”:
(from the Bloomberg article)
Nevada had the highest foreclosure rate: one in every 23 households, or almost six times the national average. A total of 47,925 Nevada homes got filings, up 10 percent from the previous quarter and 59 percent from a year earlier, RealtyTrac said.
In both Arizona and California, one in 53 households received filings. They were followed by Florida, at one in 56, and Idaho, at one in 97. Utah, Georgia, Michigan, Colorado and Illinois rounded out the top 10 highest rates.
“What data are you referencing? Please explain how this liquidity is flowing to John Q?”
It’s not it’s sitting at the banks many of which are using it to bid the markets higher.
#117 The problem I have is with the so called factual evidence. It is like putting wallpaper over a hole in the wall, or painting before priming. MAny of the same people who clamied there were no problems in the first place, are now claiming that the problems are or will be over.
Some people are doing just fine, but they certainly have been influenced by all that has happened, and when they see freiends and family getting laid off salaries cut, than it does impact I would think on decesions that they make.
As far as pant up retail demand, I am nto so sure, people were on a binge for so long, I would have to ask how much more do they really need unlesss they are replacing cheap imports such as clothes that were not designed to last.
Right now IMO the so called anecdotal evidence portrays a better reality than the so called factual evidence.
Chifi,
Regarding Hillary, had she been the Democrat’s nominee last year, I would have voted for her. Compared to the people who my party seems to be considering for ‘12, I would vote for her over all of them. The current joker, no friggen way; well, maybe if he wins an Oscar for watching a movie. THAT would give me hope that he has a plan to solve all of our problems.
“There is no true recovery, there never will be a true recovery.”
He,
I agree. Recover from what? The economy, post 2001, was a charade. The foundation of our economy was built on debt/credit and speculators shuffling paper. That’s kaput. Now the asset gets obliterated but the burdensome debt remains.
That’s why this is no ordinary recession; it’s a balance sheet recession. There is no recovery from this. It will take years and years to work off the debt. Then, the only foundation which will be sustainable is investment fueled by savings.
Sure you can print/inflate. Funnel monopoly $ into the stock market. Manipulate, freeze, ignore and change the rules of the game. That said, you will create bigger problems in the future. You can take that to the bank, IF you can find one that is solvent.
HEHEHE said:
“What data are you referencing? Please explain how this liquidity is flowing to John Q?”
It’s not it’s sitting at the banks many of which are using it to bid the markets higher.
…
Liquidity is flowing to John Q when upon realization of the severity of his situation he goes to the local bar to drown his sorrows.
Rut ro:
http://www.foxnews.com/politics/2009/10/15/report-ginsburg-released-hospital-fall/?test=latestnews
If she is falling over while sitting in a chair, one wonders how long she can stay on the Court. Of course, it is hard to see how B.O. could find anyone to the left of her to fill the seat, so any replacement would move the court further to the right.
Humm, with Hillary being more popolar than he, I wonder if the Rising Sun/Son would appoint Hillary to the Supreme Court just to eliminate the potential threat of a challenge in ‘12?
I’d like to see some group rain liquidity down upon Timmy et. al as they appear in public someplace. Drink up boys, we have to produce some liquidity. Our nation needs us.
Note to Timmy, yu might do well to remember to always wear grandmas clear plastic rain kerchief when not under an overhang.
We have such boring criminals compared to the UK.
http://www.thesun.co.uk/sol/homepage/news/2684168/Naked-intruder-attacked-family.html?OTC-RSS&ATTR=News
#135 Agreed. Yesterdays JP announcement, who cares IMO. In the “street” world, yea, yea!! They had a profitabel quarter. Oh yes let me take all my toxic stuff off my books, the govt gives me billions,and I make a profit trading fixed income and doing some IB deals with rates at 0%. As a former trader, I say not big whoop.
But in the same breath they report setting aside billions for credit card losses and mtg losses; that is the real world.
BC (66)-
I thought I was hallucinating this AM when I saw Ratigan on the Today show, basically accusing the whole financial community of being the “giant vampire squid”, draining capital from the economy at large.
Then, they double-boxed him with Michael Moore, who went off on some cry-ass rant.
Great stuff. I suspect Ratigan is not long for any NBC network at this point.
[137] shore
“Of course, it is hard to see how B.O. could find anyone to the left of her to fill the seat, so any replacement would move the court further to the right.”
I beg to differ. At most, it would be a wash, and look for BO to nominate a young, firebrand liberal to the bench.
Also, it is considered extremely bad form for an administration to even suggest that a justice in ill health should step down. But, that said, look for the following to happen:
1. Someone in the admin. will suggest precisely that.
2. MSM will start reporting on Ginsburg’s health, and there will be a steady stream of talking heads, encouraging her do step down.
Note that the latter has never happened in the past (beyond the sporadic op-ed), so if there is a sustained reporting cycle on this, it will be further proof that MSM is carrying BO’s water for him.
s/b “to step down”
Printing Money
BC (87)-
The other requirement? You have to look like Beaker…and have a brain to match your looks.
http://tinyurl.com/yksg64t
“John missed his calling, he should have been head of talent acquisition for Score’s or a host on CNBC. One caveat, not sure if he has webbed feet; a strict requirement for CNBC.”
[109] shore guy
There was more???
Proof, if any was needed, that you are older than me.
3b (94)-
Yeah, go ahead and lowball…as long as your time and effort have no value.
The gubmint has given enough hope to homedebtors to make them brave again. That game’s shut down, at least for the near future.
The new game is buying crapshack REO: all-cash, down-and-dirty.
No homeowner who thinks an expanded tax credit program is in the pipes is entertaining lowballs today.
Game over.
#147 Understood. But I will make it quick and simple, throw the bid in, 24 hours to respond, on to the next one.
Pant up demand, my ass. The masters have even f*cked this up. It’s the 2009 version of Pavlov’s Dog. If you don’t bribe them, they won’t salivate. What a way to build a stabe, long term economic foundation.
Got real demand?
Schump [145],
Another buffoon.
So I had my home inspection completed yesterday and surprisingly (for a 45 year old home) there were no major issues. Ownership has changed hands once before so most of the 20 year old upkeep/repairs were completed already.
Although in my perpetual negotiating state of mind, I’m going to forgo the odds and ends repairs and simply ask for an extension on the offered 1 year home warranty. Hopefully, 2 years will be enough time for the old hot water heater, ac unit and boiler to go kaput and I’ll get new ones for just a $90 deductible.
7 Ways to Survive the Jobless Recovery
Don’t wait for lost jobs to return.
Don’t count on big companies.
Become entrepreneurial.
Juggle jobs.
Hold on to your dreams, but adjust your expectations.
Downsize everything.
Solve problems.
http://www.wherekeyneswentwrong.com/
pfizer shutting down facility in bridgewater
http://www.mycentraljersey.com/article/20091015/NEWS/91015022&referrer=FRONTPAGECAROUSEL
#153 No jobs = No recovery.
#81
“At some point the props will collpase/be removed ”
I don’t think that will happen for decades.
What recovery?
Businesses that got stimulus contracts directly from the federal government reported creating or saving 30,383 jobs so far, according to data published Thursday by the Obama administration.
White House officials were clearly sensitive to the gulf between the 30,383 jobs that were reported saved or created so far, and their goal of creating or saving 3.5 million jobs.
http://www.nytimes.com/2009/10/16/us/16stimulus.html?_r=1&hp
Anecdotal? Probably, after all what would one of our top suppliers know?
“The U.S. economy will deteriorate into 2011 as the effects of excess consumption and the financial bubble linger,” said Daisuke Uno at Sumitomo Mitsui, a unit of Japan’s third- biggest bank.”
http://www.bloomberg.com/apps/news?pid=20601109&sid=a_A5nqmw9Dq8
#157 Decades? IMO that is impossible, but if so, even more uncertainity in actually trying to value a house;way too much uncertainity.
“Businesses that got stimulus contracts directly from the federal government reported creating or saving 30,383 jobs so far”
AIG saved a job, the Kitchen Queen, 7.7K, bonus.
SAVED JOBS????
you have to love an economic indicator that has no definition besides “trust me, i said so”
The new game is buying crapshack REO: all-cash, down-and-dirty.
Clot,
Spot on.
re: #162 Kettle1 - White House is hot under the collar on this 30k job report, which is right off their website.
http://www.recovery.gov/Pages/home.aspx
The White House says today that the American Recovery and Reinvestment Act has created or saved about 1 million jobs during its first seven months.
The direct count by Recovery Act recipients of jobs created or saved from this small percentage of the Recovery Act exceeds our projections,” he said. “All signs — from private estimates to this fragmentary data — point to the conclusion that the Recovery Act did indeed create or save about 1 million jobs in its first seven months, a much needed lift in a very difficult period for our economy.”
BOOOOOYAAAA!!!!!
October 20, 2009 - New York City, NY - An Evening with John Williams ‘74, Owner, Frog’s Leap Winery. Reception and Dinner at the Cornell Club in New York City. Co-sponsored by the Cornell Club of New York City and the College of Agriculture and Life Sciences Alumni Association. Cost is $90 per person. Space is limited.
what are people’s opinions on “house swappping”?
onlinehousetrading.com
besthouseswap.com
goswap.org
this may seem a viable option for me since i need to “upsize” while someone “downsizes” into my apt…
lish:
Let me understand correctly. I am a low grade, genetically inferior and inbred mongrel from a third-world country. You expect me to believe that a culture capable of this level of heightened douchebaggery would allow me to become a medical doctor (for free no less?). At best I could be a Metro motorman. Maybe they would let me wash their laundry if I promised to wear gloves.
WSJ
Wall Street Journal
PAGE ONE
OCTOBER 14, 2009
The French Get Lost in the Clouds Over a New Term in the Internet Age
By MAX COLCHESTER
PARIS — The word on the table that morning was “cloud computing.”
To translate the English term for computing resources that can be accessed on demand on the Internet, a group of French experts had spent 18 months coming up with “informatique en nuage,” which literally means “computing in cloud.”
France’s General Commission of Terminology and Neology — a 17-member group of professors, linguists, scientists and a former ambassador — was gathered in a building overlooking the Louvre to approve the term.
“What? This means nothing to me. I put a ‘cloud’ of milk in my tea!” exclaimed Jean Saint-Geours, a French writer and member of the Terminology Commission.
“Send it back and start again,” ordered Etienne Guyon, a physics professor on the commission.
Keeping the French language relevant isn’t easy in the Internet age. For years, French bureaucrats have worked hard to keep French up to date by diligently coming up with equivalents for English terms. Though most French people say “le week-end” and “un surfer,” the correct translations of the terms are “fin de semaine” (”end of the week”) and “aquaplanchiste” (”water boarder”). A “start-up” company is referred to as “jeune pousse,” or “young shoot” (the term pousse is used for vegetable sprouts), while the World Wide Web is translated as “toile d’araignée mondiale” (literally, global spider web).
But technological advancements mean new Anglicisms are spreading over the Internet at warp speed, leaving the French scratching their heads.
Before a word such as “cloud computing” or “podcasting” (”diffusion pour baladeur”) receives a certified French equivalent, it needs to be approved by three organizations and get a government minister’s seal of approval, according to rules laid out by the state’s General Delegation for the French Language and the Languages of France. The process can be a linguistic odyssey taking years.
“Rigor cannot be compromised,” said Xavier North, the 57-year-old civil servant who heads the General Delegation.
On the Beach
On its Web site, the General Delegation for the French Language reminds French citizens that the terms beach volleyball, beach tennis and beach hockey aren’t always correct. As these sports are becoming more popular, “they are often taking place … in arenas,” the General Delegation states.
As these sports don’t necessarily take place on beaches, the word “beach” should be replaced with “on sand” (”sur sable”).
Hence the terms hockey sur sable, tennis sur sable and volley sur sable are recommended by the General Commission of Terminology and Neology.
Mr. North? Vraiment? The guardian of French takes umbrage at the suggestion his name might be English. “My name is absolutely not Anglo-Saxon,” he says. “It comes from Alsace,” in the east of France. Also, he pronounces it Nort.
Article Two of France’s Constitution states that, “The language of the Republic shall be French.” The French government, therefore, has a duty to offer citizens French alternatives to English words, he says. “Our citizens have a right to communicate without speaking English.”
French linguistic legislation started in 1593. That year, King François I ousted Latin as his country’s administrative language and replaced it with French. Until the 20th century, things went well: Local dialects were supplanted, and French became the language of diplomacy and love. But after World War II and the rise of the U.S. as a superpower, French was pushed onto the back burner.
FRENCH VOCAB: Big air snowboarding, above, is ’saut acrobatique sur tremplin de neige’ (or acrobatic jump on a springboard of snow). Source: the General Delegation for the French Language and the Languages of France’s online dictionary
Big air snowboarding
In 1994, the French government passed laws to ensure that all advertisements, work-contracts and government documentation were in French. The General Delegation was charged with overseeing the creation of new French terms.
Every year, about 300 new terms are officially introduced into the French language. Some — like cloud computing — get accidental priority.
About 18 months ago, Bénédicte Madinier, head of language development at Mr. North’s General Delegation, was on holiday when she read a magazine piece about cloud computing. “I realized it was pretty important,” she says. The 59-year-old quickly sent a request that the expression be sped through France’s translation and definition system.
Each of France’s government ministries has at least one terminology committee attached to it. The job of the people on the committee is to spot new English words and create and define French alternatives before the English version catches on. Ms. Madinier called on the committee in charge of computing terminology — which is part of the French Finance Ministry — to handle the expression “cloud computing.”
Stepmaster is ’simulateur-ergomètre d’escalier’ (stair simulator). Source: the General Delegation for the French Language and the Languages of France’s online dictionary
Stair simulator
Stair simulator
The 20-person team of volunteers got off to a slow start because they weren’t sure cloud computing was an important enough concept, recalls Ms. Madinier. Last summer, however, several committee members attended a conference on new Internet trends and realized that they had better get cracking.
The problem was the word “cloud.” In French, to be “dans les nuages” — or in the clouds — is a common expression meaning to be distracted. So, committee members were wary of using the word “nuage.” One would not want to have his head in the clouds. They came up with alternatives, including Capacité Informatique en Ligne (or online computing capability), which could be shortened to CIEL, which, of course, means “sky” in French.
“Going from ‘cloud’ to ’sky’ seems to be a bit far-fetched,” one committee member wrote his colleagues last August in an email.
Shortly after, another member complained that using a term that includes cloud “involuntarily causes laughter and at best a smile,” according to another email. He suggested blending the French words for computing and cyberspace to create “cyberinformatique.” That set off a series of other suggestions, including cybergerance (cybermanagement), cybercalcul and cyberservice.
Translating to Keep French Alive
As new English words pop up, the French government creates alternatives in its native tongue. It makes for some interesting translations; here are a few:
Automobile:
Air bag — sac gonflable (inflatable bag)
Business:
Brainstorming — remue-méninges (Brain-stirring)
Viral marketing — bouche à oreille électronique (electronic word of mouth)
Fashion:
Supermodel — mannequin vedette (model star)
Food:
Snacking — grignotage (nibbling)
Sports (general):
Big air (when snowboarding) — saut acrobatique sur tremplin de neige (acrobatic jump on a springboard of snow)
Draft — recrutement des espoirs (recruitment of hopes)
Frisbee — disque-volant (flying disc)
Skateboard — planche acrobatique terrestre (terrestrial acrobatic board)
Stepper (Stepmaster) — simulateur-ergomètre d’escalier (stair simulator)
Technology:
Emoticon — frimousse (show-off)
Personal digital assistant (PDA) — assistant électronique de poche (electric pocket assistant)
Trojan horse (computer virus) — cheval de Troie (horse of Troy)
Tennis:
Break — brèche (breach)
Let — Filet! (net!)
Tiebreaker — jeu décisif (decisive game)
Source: The General Delegation for the French Language and the Languages of France
No compromise was reached, so by the end of September, the committee went back to the literal translation, “informatique en nuage.”
“It resembles the English term and does not distort the French language,” committee member Bernard Bourguignon wrote his colleagues in an email. Another member ventured that the phrase was catchy enough to inspire good newspaper headlines announcing the new term:
“Desperate times in the computing cloud, the quiet before the storm” or “Lightning love in the computing cloud: ZZZ and YYY merge.”
The term “informatique en nuage” was passed on for approval before the General Commission of Terminology and Neology.
But at the meeting earlier this month, the 17 members of the commission were quickly confused. “How are we supposed to understand it?” asked Alexandre Grandazzi, a Latin professor.
“I think we can survive without the term ‘cloud computing,’” said physics expert Mr. Guyon, slamming his hand on the table.
“Cloud computing” will now go back to the drawing board.
Had it been approved, the term would still have required ratification by the Academie Française, which was founded in 1635 and is the official authority on grammar and vocabulary of the French language. It would have also required final approval by the French finance minister.
For Mr. North, head of the French Delegation for the French Language, the long process is important. He points to various translation successes, including the French for email — courriel — which was approved in 2003 and has since become popular. Over the years, French language committees have succeeded in turning the word CD-ROM into “cédérom” and fuel into “fioul.”
“We won’t cut people’s heads off if they don’t use it,” says Mr. North. But, he adds: “Language is what brought this country together.”
Recently, Mr. North came upon another hot Internet term: the computer applications known as “Web widgets.”
“I thought, ‘Why not say that in French?’”
Depends how hot the other guy’s wife is.
dxp says:
October 15, 2009 at 2:39 pm
what are people’s opinions on “house swappping”?
onlinehousetrading.com
besthouseswap.com
goswap.org
this may seem a viable option for me since i need to “upsize” while someone “downsizes” into my apt…
Insurers dropping Chinese drywall policies
http://news.yahoo.com/s/ap/20091015/ap_on_re_us/us_chinese_drywall
“informatique en nuage”
I thought this was a kind of lingerie.
Shore 196,
another case of honesty biting you in the a$$
informatique en nuage
It does sound better than ‘cloud computing’ or ‘distributed computational modelling’.
Ket,
From that same article:
“Even if a homeowner does not file a claim over the drywall and remains covered, they could later be denied a claim for a fire or another calamity if insurance investigators determine the home contained undisclosed Chinese drywall.
“If you think that by not telling your insurance company about the drywall that you’re protected, you’re sadly mistaken,” Durkee said. “
Speaking of Wife Swap.
File this one under bad parenting.
http://www.9news.com/news/article.aspx?storyid=125161&catid=339
Dirty Politics in Atlantic City.
http://www.philly.com/philly/wires/ap/news/nation_world/20091014_ap_njcitycouncilmansexwaslastthingonmymind.html
“Speaking of Wife Swap.”
Sean,
You go me thinking.
For those in their 20’s/30’s read up on Fritz Peterson, Mike Kekich.
got me.
This makes taking the partnts’ car without permission seem like nothing:
FORT COLLINS, Colo. – A 6-year-old boy climbed into a homemade balloon aircraft in Colorado and floated away Thursday, forcing officials to scramble to figure out how to rescue the boy as the balloon hurtled through the air. The bizarre scene played out live on television and prompted fears that the flying saucer-shaped balloon would crash with the young child inside. The balloon rotated slowly in the wind, tipping precariously at times.
Cathy Davis of the Larimer County Sheriff’s Department told reporters the balloon was owned by the boy’s parents and tethered behind the family’s home. She said two sons were playing outside when the older boy saw the younger one go into a compartment at the bottom of the balloon and fly away.
“We’ll just have to respond the best we can,” Davis said. “This is a first and we’ll do what we need to do.”
She said the family was in contact with experts to provide details on the craft, including what it’s made of and what might happen when it reaches the ground.
The Colorado Army National Guard was preparing to launch an OH-58 Kiowa helicopter to help in the response effort, said Capt. Michael Odgers. It wasn’t immediately clear what role the helicopter would play.
Federal Aviation Administration spokeswoman Laura Brown said the agency is tracking the balloon through reports from pilots and that air traffic control facilities in the region are aware of the situation.
Larimer County sheriff’s spokeswoman Eloise Campanella said the device had the potential to rise to 10,000 feet.
snip
http://news.yahoo.com/s/ap/20091015/ap_on_re_us/us_boy_in_balloon
SHore 173,
But then the Ins company has to prove that you knew there was chinese dry all in th e house.
oops, sean beat me to it.
Honey, I launched the kid.
Ket,
Naw. They deny it and you have to persuade them or a court that they need to pay.
re #178 - shore guy it was a “Wife Swap” reality TV participant.
Here is the kid and family in some kind of rap video.
http://www.youtube.com/watch?v=EBWJXXgaYBo
Nom,
Do banks know the squirm dance?
http://jsmineset.com/wp-content/uploads/2009/10/October1509-Judgment.pdf
http://www.around-the-horn.com/?p=131
168 john
lol…
but does it matter?
RE: “The French Get Lost in the Clouds Over a New Term in the Internet Age”
Chi, a veritable gold mine.
Très magnifique!
Shore, it doesn’t look good:
“The child’s fate was unclear, and there was no sign of him in the balloon when it landed.”
Boost(183)
Please translate.
SG (153)-
There should be an 8th item on that list:
Arm yourself to the teeth.
Make [188],
http://www.massrealestatelawblog.com/massachusetts-land-court-reaffirms-controversial-ibanez-ruling-invalidating-thousands-of-foreclosures/
vodka (162)-
The fact that there are people out there stupid enough to make public statements like this are proof positive that when the wheels finally come off, it will be Mad Max all the way.
Note to self: last year’s Mossberg 500 was a great Xmas gift. Time to start lobbying for a Tec-9 now.
Tragic
http://www.cnn.com/2009/US/10/15/colorado.boy.balloon/index.html#cnnSTCVideo
BC,
190 yikes. I thought MERS was sufficient.
Japan is a homogeneous society- which values protocol, propriety and circumspection- that simply collapsed on itself when its deflationary depression hit.
The US is a society of disparate, competing elements- which tolerates infantile, violent outbursts from disaffected individuals and groups- which will descend into chaos when things start going from gray to black.
Cf,
will you be using your allotment of tickets?
Make [193],
http://www.ritholtz.com/blog/2009/09/gretchen-explains-mers-for-you/
BC (196)-
Good luck to them if they have to start re-recording mortgages in NJ.
Boost (193),
So when it time to pay the piper comes then a judge can tell the piper to go away and stop being a bully.
Who in their right mind is gonna play the role of the piper in the future?
make (198)-
I’m sure C would dance right into that snake pit…should they still be standing.
Shore, just popped back in - saw your questions - I need to stay in NJ and want to be less than a half hour from Red Bank where my mom lives and Middletown where my brother lives. If I didn’t have those concerns, I like Litchfield Beach in SC where I have some family and around Charlestown because there is culture there in addition to beautiful beaches!
“Who in their right mind is gonna play the role of the piper in the future?”
Make,
The Fed and FHA; aka you and me.
Beach,
Tell me more about Litchfield Beach.
The Fed and FHA; aka you and me.
Boost,
that’s exactly what I thought. Our currency is now backed by FHA. This is gonna end really bad.
[183] BC
They do now.
I have yet to read the opinion, but it sounds like its gonna be a bench slap.
grim says:
October 15, 2009 at 4:23 pm
Cf, will you be using your allotment of tickets?
Yes.
Trying again….
chicagofinance says:
Your comment is awaiting moderation.
October 15, 2009 at 11:39 am
Morningstar Advisor
A Call for Nudges
by John Rekenthaler | 10-15-09
Richard Thaler believes that financial advisors have a major advantage over most economists: They know that investors are human.
Thaler leads a relatively new area of research, behavioral economics, that attempts to “bound” the notion that financial markets are unfailingly rational. The success of Thaler’s efforts in bringing legitimacy to his field may be seen by the University of Chicago’s decision in 1995 to recruit him for a chaired position in its business school to become the school’s first behavioral economist. Thaler now presides over 15 faculty members in running Chicago’s Center for Decision Research.
Thaler’s work has always been unfailingly practical, from his Ph.D. dissertation on pricing the value of a human life, to his seminal 1980s research on mean reversion in stock prices and the apparent outperformance of value stocks, to later work on motivating 401(k) participant behavior, which he called Save More for Tomorrow. Recently, he co-wrote the book Nudge (Penguin, 2009), which advocates that regulatory bodies use behaviorally gained knowledge to create policies that “nudge” consumers toward making optimal decisions. Proof that Nudge succeeds in its goal of carving out a philosophical middle ground may be seen in its diverse readership, which includes both President Barack Obama and David Cameron, the leader of Great Britain’s Conservative Party.
In this free-ranging interview, Thaler discusses the development of behavioral economics, its influence in the current Obama administration, and what behavior economics can say about several current investment topics.
John Rekenthaler: To start, should we be talking about behavioral finance or behavioral economics? Do you have a preference for which term I should use?
Richard Thaler: I think behavioral economics is broader. It’s applying psychology to the principals of economics, and finance is one branch of economics. For Morningstar’s readers, behavioral finance is what we should talk about. On the other hand, something like Save More for Tomorrow and principles such as loss aversion and overconfidence are more general than finance.
Rekenthaler: Whether we call it behavioral economics or behavioral finance, where do the roots lie?
Thaler: I can tell you my own roots started when I was a graduate student working on my doctoral dissertation. My dissertation was on the value of a human life. This is not as sexy as it sounds. It was really a question in public finance. If the government is going to do something that will make things safer, like improve a road or an airport, and it’s going to save three lives a year for the next 20 years, how much is that worth? Clearly, not an infinite amount, but something more than zero. It was mostly an econometrist exercise of estimating how much you had to pay people to get them to take risky jobs.
In the midst of thinking about this problem, I decided it might be fun to ask people some questions. One of the questions I asked was: Suppose you’d been exposed to a rare disease, with a one in a 1,000 risk of dying; how much would you pay to eliminate that risk? Typically, people would give an answer in the range of $5,000. I’d then ask them: We’re running some research on this disease over at the hospital, and we need people to expose themselves to it. How much would you charge to participate in this study? People would typically give answers that were two or three orders of magnitude bigger: $500,000 or $5 million. Some people would say they wouldn’t do it at any price.
Economic theory says those answers have to be about the same. This got me started on keeping a list of weird behavior on my blackboard. Eventually, I was introduced to the work of two Israeli psychologists, Daniel Kahneman and Amos Tversky, who were studying how people make decisions and judgments and how those judgments aren’t consistent with what economists call rational. The three of us ended up spending a year together at Stanford in 1977-78. They didn’t really know anything about economics, and I didn’t know anything about psychology, and we spent the year educating one another. That was the beginning.
Rekenthaler: Obviously, when you started, you didn’t really have a vision of where this would be 30 years later. Are there parts to the development of behavioral economics that might have seemed predictable to you at the time? And are there branches that have surprised you?
Thaler: I think finance is the biggest surprise. But let me come back to that.
I think that in some ways the things we started working with back then are still very important. I was interested in things like self-control and loss aversion and what came to be called mental accounting. Those have remained big themes today. So in some sense, I think we knew what was important early on.
As for the role of markets, it was clear that a question that needed to be asked was: Well, look, if people do dumb things in the privacy of their homes, like they watch the wrong television show or what have you, that’s one thing. What happens in markets?
I think it was clear that there was going to have to be a lot of attention paid to that. I started writing papers about it. The first ones were published in 1985.
But I certainly never would have expected that the branch of behavioral economics that would really take off first was behavioral finance. Our expectation was that finance would be the least likely place that we’d find big anomalies, and the reason is that financial markets are the most efficient markets. They are markets in which many of the traders are professionals. The stakes are huge. So if there’s something that’s not working right, people can make tons of money exploiting that and making it go away.
It was a surprise that it turned out to be pretty easy to find puzzles in financial markets. Perhaps because they were so surprising, and because the data is so rich in financial markets, this branch of the enterprise really has been the most successful to date–successful in the sense of attracting a fairly large group of academics who consider that’s what they do for a living and attracting the interest of practitioners like you.
Rekenthaler: It’s my sense that under the Obama administration, behavioral economics now has an official link into policy-making. It is more directly connected with what goes on in Washington than ever before.
Thaler: Yes. It’s funny. About five years ago, I organized a session at the American Economists Association meeting called “Memos to the Chairman of the Council of Behavioral Economic Advisors.” It was meant to be sort of a whimsical title and science fiction. If there were such a group, what would people be thinking about?
Now, here we are, and it’s not that there’s a Council of Behavioral Economic Advisors, but in some sense, it’s even more than that. There are behavioral economists scattered through the administration, including the co-author of Nudge, Cass Sunstein, who, let’s hope, by the time this article is published will be confirmed in his job as the director of the Office of Information and Regulatory Affairs. It’s in the Office of Management and Budget, and it’s the most important job in Washington that no one’s ever heard of. It essentially has to give approval for any new regulation.
So OMB has really become the Council of Behavioral Economic Advisors, because Peter Orszag, the director, has written extensively about behavioral economics. Another guy in the OMB, [executive associate director] Jeff Liebman, from Harvard, has as well. There are other people around the administration, too, most notably Michael Barr, who’s an assistant secretary of the Treasury in charge of consumer regulation. Even Larry Summers wrote some early papers on behavioral finance. Neither he nor I would call him a behavioral economist primarily, but he is a very eclectic guy, and he is certainly happy to use behavioral economics when it seems to be the appropriate tool at hand.
[break]
cont’d
Rekenthaler: Can you give an example of ideas that you and Sunstein worked on that are making their way into policy?
Thaler: One of the first things that the administration did was announce a carbon emissions inventory. Starting in 2010, firms will have to announce what their emissions are. The idea–and we talk about this in the book–is that simply by having to announce their emissions, companies will be shamed into greening up their act a little bit. If you have the dirtiest factory in town, maybe people will get on your back. This is in preparation for some sort of cap-and-trade system where we’ll need those data anyway, but the idea was let’s just start with this. In some other fields, this “announcement effect” has been helpful.
Something more finance related is an idea that we talk about in the book that has been picking up a lot of steam. We call it RECAP–Record, Evaluate, and Compare Alternative Prices. The idea is that firms would be required to give two kinds of data to their customers. Let’s think about it from the perspective of credit cards.
Once a year, every credit-card holder would get two electronic files from their credit-card company. One would be usage data. The file would list all the ways you’ve used your credit card in the past year that are capable of incurring charges. The basic principle is that as the user of a service, you should be entitled to know how much you’re using it. Right now, it’s very hard to get that information. You might have to spend hours with a calculator to figure it out, if you can at all.
The second file would be information on prices. It would be essentially a spreadsheet that would list all the ways that the credit-card company can charge you.
Now, it’s not that we expect that very many people would actually look at those files themselves. Instead, with one click, they could upload the files into third-party Web sites that would analyze the files and make suggestions, such as how you might save money by, say, paying your bill on time. Or if you travel and you have a card that charges you a lot for foreign purchases, maybe you should switch to a card that doesn’t. Then, it would do the shopping for you, given the way you purchase–here’s a card that would be better for you.
That proposal has now made its way into a document that the government released. There is a proposal to create a Consumer Finance Protection Agency. One of the lists of things this agency would do is require electronic, machine-readable disclosures.
Rekenthaler: It seems to me in reading through Nudge that a core principle is rather than to take the approach of regulation and telling people and companies what they can and can’t do, you’re really about disclosure and information design. That properly accessible information will lead to better outcomes than coming up with a particular rule to prohibit a particular practice.
Thaler: Yes. We wouldn’t want to argue that disclosure can solve all the problems. But what’s true, of course, is that the existing disclosure rules are really obsolete. For a credit card, you get 30 pages of fine print that no one reads. So, there are a couple of steps one could take.
One is that you can regulate the form of the disclosure. You might say, “Look, there are three numbers that everybody ought to know and they ought to be on the first page in 20-point font.”
The step that we’ve taken is to say, “Wherever possible, let’s make the move toward machine-readable disclosure.” Let’s remember we’re in the 21st century. Once you make things machine readable, then all kinds of Web sites can emerge to essentially do, on other domains, what Morningstar does for mutual funds. Have a simple place where you can get all the basic facts, what the expense ratios are and what the returns have been, and then, perhaps, proprietary evaluations of the sort that Morningstar does.
We imagined that that would be true for mortgages, credit cards, and mobile calling plans. I’m about to take a trip to Asia, and I’m trying to figure out which international calling plan I need, and I need to know how many megabytes of data I use. How the hell am I supposed to know that? We want to make that type of information more available.
Now, that’s not to say there are no activities that one would ban. Fraud, for example, needs to be against the law. Nobody’s proposing that we eliminate that. But if we think about Bernie Madoff, just a little bit of disclosure would have prevented that. Suppose he had to show were all the money was. I suppose one could say that the SEC already should have done it, but they didn’t. So we need to figure out how we can require financial firms to disclose enough that the regulators can make sure that they’re not ripping people off–but not so much that they can no longer make a living. I wouldn’t propose that hedge funds have to reveal what their secret sauce is. But maybe they have to tell us what their leverage ratio is, and certainly they have to tell us where they keep the money.
Rekenthaler: We should probably move from behavioral economics in general to how it can help advisors. Any advice?
Thaler: Well, one thing I would say is that the advisor community was very quick to pick up on behavioral finance. I think the reason is that they know that their job is at least as much like a clinical psychologist as it is like an accountant.
Rekenthaler: They know their clients are nuts?
Thaler: Well, that’s what John Rekenthaler says
Rekenthaler: I’ve heard it from few advisors, as well.
Thaler: Let’s just say they’re human. Rekenthaler: Same thing, right?
Thaler: Yes, exactly. I think it’s fair to say that many clinical psychologists spend a lot of time talking to their clients about money and that many advisors think that they’re more of a shrink than anything else.
Another thing I would say is that the big problem going forward–especially as I’m the tip of the baby-boom generation and as our generation starts to retire–is that nobody really thinks that they found the solution to how we should handle decumulation.
And what’s the right role for annuities? Part of this is behavioral. Most people don’t like annuities. One reason is they don’t like the idea that if they die too young, then the insurance company makes a lot of money. New products need to be invented and new marketing schemes created that will make people comfortable with at least putting some of their portfolio into products like that.
One other thing that obviously jumps to mind is what will be the long-term implications of 2008? I suppose that will depend on how quickly the market recovers. The bear market of 2000-03 seemed to have been forgotten pretty quickly. I think maybe it’s because the money that people made came in so fast that it was “easy come, easy go.”
Rekenthaler: Or another way of putting it is a lot of the people didn’t really lose money in a sense, they just lost what they had made in 1999 and early 2000.
Thaler: Right. We sometimes call that the house money effect. You win $1,000 at a casino and then lose it back; you don’t really feel like you’ve lost anything. It was their money.
Obviously, the market’s fall in 2000 was concentrated. Nasdaq fell by two thirds, but the rest of the market didn’t get hit so badly. Here, everything got crushed, including real estate. So, I don’t know what the longrun effect is going to be. The next time I talk to a group of financial advisors I’ll be interested in hearing their war stories about this.
Rekenthaler: I’d say in the short term, from what we’re hearing from the advisor community, which, of course, is a reflection from what they hear from their customers, is skepticism about the fundamental notion of Modern Portfolio Theory. Because it seemed like everything fell at the same time, people are questioning the point of diversification. And they have an increased desire to find what I would call market-timing strategies. The notion of long-term strategic asset allocation got rocked a bit.
Thaler: I think that’s true. Of course, the sad truth is that nobody has ever had much success with tactical asset allocation or market-timing. Even my dear friend Bob Shiller, who was prescient about the Internet and the real estate bubbles, in both cases was early.
I remember when I came out to meet with Kahneman and Tversky in ‘77, my impression was California real estate was a bubble. I was happy I didn’t have to buy into it then. You can see how smart that was.
Nobody has really figured out how to do timing. I remember in the 1990s, advisors told me that they were having a hard time talking clients out of investing everything in technology stocks. It was hard to convince anybody that real estate wasn’t a sure thing.
But in some ways, individual investors have come out looking pretty good in all of this. There’s no sense in the data that I’ve seen–at least in 401(k) plans–that there’s been a massive move away from equities. The biggest mistakes and the biggest losses were all made by the professionals. We’ve had entire companies blow up. I think the observation that diversification “ain’t what it used to be” is quite profound, and one that the pros didn’t get. Let’s hope they’ve gotten it going forward.
John Rekenthaler, a former student of Richard Thaler’s, is Morningstar’s vice president of research and new product development.
ok - the front half got mod
“Thaler: Right. We sometimes call that the house money effect. You win $1,000 at a casino and then lose it back; you don’t really feel like you’ve lost anything. It was their money.”
A loser’s mentality.
Shore,
10 years ago I spent a weekend in St. Augustine (about 40 miles south of Jacksonville). I thought the area was very backwards and the locals kept staring at us as we walked around. (St. Augustine has a Spanish fort and is a tourist area) . I was on a long term assignment in Tampa at the time and all my Florida coworkers told me Jacksonville was even worse.
OT - I need a scotch recommendation for a gift. Have already given Lagavulin, Balvenie and Macallan.
Hail Hail To Michigan!!!
http://www.browardpalmbeach.com/2009-10-15/news/that-s-foul/1
OBAN
#213 Thanks, ChiFi! It will be my next purchase.
can a non-subscriber access this item?
http://advisor.morningstar.com/uploaded/images/spot101109.tif
Outofstater says:
October 15, 2009 at 5:28 pm
#213 Thanks, ChiFi! It will be my next purchase.
it can run $80 a bottle!
Layoffs here today. We lost about 15% of our overall headcount.
Maybe Corzine should take a cue…
Paterson Calls For $5 Billion In Budget Cuts Over Two Years
As the state budget deficit continues to grow, Governor David Paterson today proposed cutting the budget by $5 billion over two years, with education and health care taking the largest hits.
Paterson says the plan does not include tax hikes.
http://ny1.com/1-all-boroughs-news-content/top_stories/107343/paterson-calls-for–5-billion-in-budget-cuts-over-two-years
thats no good…
No sign of boy said to have floated off on balloon
…. 6-year-old Falcon Heene get into a box that was attached to the balloon with pegs. The box was not found when the balloon landed; video appeared to show something falling from the balloon at some point after it launched.
I keep hearing about headcount reductions @ Gator’s place of employment… are you at 1/4th of the original crew now? Damn. Maybe time for a smaller space in order to save a few heads…
woah, hodl on a second cowboy
the ballon boys father…
“When the Heene family aren’t chasing storms, they devote their time to scientific experiments that include looking for extraterrestrials and building a research-gathering flying saucer to send into the eye of the storm,” it says.
He plans to fly a manned helium balloon into the eye of a large storm? thats suicide before you even get close.
Sorry to hear it Gator, you safe?
Yes.
Figured you would, was worth a shot.
Hearing some rumors about some big chopping coming to Madison.
Grim,
Wyeth, Madison in on the chopping block in a big way
219 Kettle
The boy was found safe at home according to Faux News.
He [212],
Probably the worst call ever in NCAA finals. John Clougherty choked.
Clearly it wasn’t the boy who was seen boarding the craft, but an alien shapeshifter that had taken on the appearance of the boy in order to gain access. The craft flew high enough to dock with the mothership, who was cloaked at the time, and the creature along with the basket, were taken aboard via tractor beam. It really is the most plausible explanation, when you think about it.
Channel 7 news (ABC) has a story tonight on rising foreclosures. 10,000 foreclosures a day, nationwide …
#228 grim,
I’m delighted they are not my neighbors.
Outofstater says:
October 15, 2009 at 5:03 pm
“OT - I need a scotch recommendation for a gift. Have already given Lagavulin, Balvenie and Macallan.”
Glenmorangie 18 year old.
Just found a promo video for John….
http://www.youtube.com/watch?v=-xEzGIuY7kw&feature=channel_page
Gator,
Did you escape?
countdown to balloon boy’s Larry King appearance.
glad you are safe Gator
WaPo: Many Small Investors Have Sat Out Rally - Rebound Driven by Institutional Clients
By Tomoeh Murakami Tse
Washington Post Staff Writer
Thursday, October 15, 2009
The likely drivers of the rally are instead institutional investors such as large pension funds and hedge funds, market analysts said. And in interviews over the past two weeks, fund managers and financial advisers said most small investors have only recently begun to talk about getting more aggressive with their beaten-down portfolios.
“For the first six months of the year, people just had their heads down. I don’t know how many people told me they haven’t looked at their statements,” said Dan Lash, a financial planner in Vienna.
[..]
Investors in mutual funds, which are among the most common ways for individuals to participate in the stock market, pulled more than $205 billion out of stock funds between September 2008, when equities plunged, to the end of March, when they began their rally, according to data from the Investment Company Institute. During the same period, small investors sought the safety of cash, pouring $357 billion into money-market funds.
In contrast, only $56 billion returned to stock funds between April and the end of August, the most recent date for which data are available. Money-market-fund levels remained high.
“This market rise certainly is not being driven by mutual fund investors,” said Brian Reid, the ICI’s chief economist. “Mutual fund flows are not causing this run-up, and I would think that probably carries over for retail investors in general.”
In fact, there’s evidence that small investors in the past few months have once again been moving money out of U.S. stocks. On a weekly basis, small investors took out $2 billion to $4 billion more than they put into funds focusing primarily on domestic stocks from July to September, Reid said.
ICI data show that small investors have been pushing into bonds this year, taking advantage of falling interest rates and rising prices. During the first eight months of the year, $220 billion flowed into bond funds.
Zack says:
October 14, 2009 at 12:29 pm
#118
If the opportunity cost of investing the balance (20% minus 3.5%) in a very conservative portfolio of stock, bonds and commodities beats the alternative (higher FHA rate and PMI) over a 10 year period, then why put down 20% down?
Do the math and you will find out..
you’re assuming, of course, that you’ll still have your job. if you have some kind of 5-year job assurance, then yeah, it totally makes sense.
Tooling around on those mtg calc web sites, and the old buy no more than 2.5 to 3 times income. Guess they do not count 10k and more property taxes in our area.
Wyeth is closing another facility in Great Valley, right outside of Philadelphia.
http://www.philly.com/philly/business/homepage/20091015_Pfizer-Wyeth_merger_is_completed__WYE_to_end.html
238 3b
What would you suggest as far as income ratio factoring in taxes?
I don’t know if this was already posted today.
Insurers dropping Chinese drywall policies
WEST PALM BEACH, Fla. – James and Maria Ivory’s dreams of a relaxing retirement on Florida’s Gulf Coast were put on hold when they discovered their new home had been built with Chinese drywall that emits sulfuric fumes and corrodes pipes. It got worse when they asked their insurer for help — and not only was their claim denied, but they’ve been told their entire policy won’t be renewed.
http://news.yahoo.com/s/ap/20091015/ap_on_re_us/us_chinese_drywall
BC,
It looks like Karma caught up to him
From The Day CT:
Layoff cloud now hangs over local Pfizer employees
Now, Pfizer Inc. employees must wait for the painful part.
The New York-based pharmaceutical giant’s $68 billion deal to acquire Wyeth Pharmaceuticals has cleared its final regulatory hurdles in the United States and Canada, Pfizer said Wednesday, and the megamerger is expected to close today.
But that’s not the end of the story. The real question now: How many of Pfizer’s 5,000 employees at its research-and-development campuses in Groton and New London will remain after the combined companies complete an expected 19,500 layoffs related to the merger?
…
Pfizer has not said whether any of its current R&D facilities - which include sites in Sandwich, England, St. Louis and LaJolla, Calif. - will face downsizing or elimination. But analysts have said they expected Wyeth sites, including its headquarters in Madison, N.J., to be hit the hardest in the merger.
Thanks all. Yes, I am safe. I hear more layoffs are coming in other departments tomorrow.
Gator
I hope you’ll be ok.
Some great news.
Jon & Kate has been canceled.
http://www.yourtango.com/200940070/jon-kate-tv-show-cancelled
#231 Thanks, ’soosh. I’ll get that one too.
@243
I haven’t heard much recently about the layoffs in Nutley as a result of the Roche/Genentech merger. Earlier this year they did make it clear that there would likely be a net loss of jobs there, but not much has been said since.
BC Bob says:
October 14, 2009 at 7:21 pm
By the way, I’m rooting for the stock market. Hope it gets inflated to 20K. Will even wear a 20K Dow hat. In this scenario gold will be trading at 5-10K.
what he said. if this could happen before april/may/june, even better. get everyone fat and happy before summer.
i stayed clued to my idiot box today thinking there was a little tike in that balloon. Thank goodness he was alright.
SAS
james says:
October 15, 2009 at 2:07 am
Most of the posters in here are preparing for civil unrest. Real Estate is discussed in terms of how fertile is the soil not how much square footage. Also how easily it can be defended and the water table depth.
I dont think anyone in this forum believes this economic recovery is real. Most believe that a sh#t storm is brewing and we are buying umbrellas.
Many of that have houses wish we didnt because when the SHTF we would like to ride it out in the bahamas.
mostly agree; at the risk of speaking for others … i dont think anyone is hoping for civil unrest. everyone just wants to be prepared in case society breaksdown.
“i dont think anyone is hoping for civil unrest. everyone just wants to be prepared in case society breaksdown”
things never get as bad as you think they will…but, the glory days are for sure over.
we all have to get use to it.
SAS
i don’t think the Rooskies & China will let Omama have its way with Iran?
ha.
Omama better escalates the rhetoric, and he wins a Nobel.
“Russia and China eye $5.5bn deals”
http://news.bbc.co.uk/2/hi/business/8302016.stm
Gator,
Is CN activly attempting to commit suicide?
http://shine.yahoo.com/channel/beauty/french-vogue-does-blackface-since-when-is-this-ok-525789/
Another one for Gator. How about these guys:
http://rivals.yahoo.com/ncaa/football/blog/dr_saturday/post/FSU-releases-NCAA-transcripts-Some-Noles-readi;_ylt=AgvDwPT7caayWyg3.N9q5v8cvrYF?urn=ncaaf,196189
Get ready for revolution gentlemen. Its not far off now.
James, the revolution will be televised.
shore (255)-
I’m surprised they’re that proficient. My guess would’ve been that they were stuck on coloring books.
James, you and me should form our own brigade.