Server Crash!
Lost some memory, followed by a fried motherboard. Not to worry, the techs tell me she’s back up and runnin’ like never before.
This is the time and place to post observations about your local areas, comments on news stories or the New Jersey housing market, open house reports, etc. If you have any questions you wanted to ask earlier in the week but never posted them up, let’s have them. Also a good place to post suggestions, requests for information, criticism, and praise.
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From the Record:
New Jersey foreclosure rate hits a new high
The rate of new foreclosures in New Jersey reached a record in the fourth quarter of 2007 as more borrowers began to sink under the weight of heavy debt in a weakening economy, according to a new Mortgage Bankers Association survey.
The group said Thursday that new foreclosures rose to 0.68 percent in New Jersey, the highest percentage since the study began in 1979.
Borrowers who took out loans to buy homes at inflated prices they couldn’t afford are driving the surge in foreclosures, said Joel Naroff, chief economist for Cherry Hill-based Commerce Bancorp.
“People who bought homes in 2005 and 2006 had to stretch, and many stretched an awful lot,” he said.
Foreclosures are climbing in North Jersey, especially in Passaic County, according to RealtyTrac, a California company that follows foreclosures nationwide. In January, there were 714 foreclosure filings in Passaic, up from 227 in January 2007. There were 276 foreclosure filings in Bergen County in January 2008, up from 138 in January 2007. These include all stages of the process, from default notices sent by the lender through the sheriff’s auction.
The recent rise in default notices points to “a high level of foreclosure activity in 2008, as many of those defaults turn into foreclosure auctions and bank repossessions,” said RealtyTrac spokesman Daren Blomquist.
“Another reason that we would expect foreclosure activity to remain relatively high in 2008 is that there are still a lot of adjustable-rate mortgages that were taken out in recent years and are scheduled to reset during 2008,” Blomquist said. “These are the types of loans that appear to be most susceptible to foreclosure.”
New Jersey’s foreclosure inventory rate — the total of all homes in the process of foreclosure — climbed to 1.89 percent, the highest since reaching 1.90 percent in the first quarter of 2002, said John Mechem, a spokesman for the group.
The mortgage bankers’ quarterly delinquency report, released Thursday, underscored the continuing decline of the housing market, a key component of the overall economy.
“Declining home prices are clearly the driving factor behind foreclosures, but the reasons and magnitude of the declines differ from state to state,” Doug Duncan, the mortgage bankers’ chief economist, said in a statement.
Home prices during 2007 slid 5.6 percent in the New York metropolitan area that includes North Jersey, the S&P/Case-Shiller Home Price Indices reported last month. That decline was not as large as the 9.1 percent drop in Case-Shiller’s 20-city composite index. And it was dwarfed by the plunging prices in several deeply troubled real estate markets, including Miami, Las Vegas and Phoenix, all of which were down by more than 15 percent.
…
The number of New Jersey homeowners late on mortgage payments rose at a faster pace than in the nation as a whole in the fourth quarter.
The ratio of New Jersey home loans on which payments are 30 or more days late but not yet in foreclosure rose to 5.39 percent, the largest percentage since reaching 5.44 in the fourth quarter of 2004.
From Bloomberg:
Jobless Rate in U.S. Probably Rose to Two-Year High
The jobless rate in the U.S. probably rose in February to a two-year high and payrolls increased at a quarter of last year’s pace as builders and manufacturers fired more workers, economists said before a government report today.
The projected increase in the unemployment rate to 5 percent, matching December’s as the highest since late 2005, is based on the median estimate in a Bloomberg News survey. Payrolls likely rose by 23,000, compared with an average 95,000 a month last year.
A weakening job market, combined with falling home values, higher fuel bills and stricter lending rules, raises the odds consumer spending will keep slowing. Increasing joblessness is one reason Federal Reserve Chairman Ben S. Bernanke has signaled central bankers are prepared to lower interest rates again.
“It’s not going to be a pretty picture on the February employment numbers,” said Lindsey Piegza, an analyst at FTN Financial in New York. “Construction firms are hit hard and the goods-producing sector isn’t going to turn around. The report will substantiate concern that we’re going into a recession.”
From the Record:
Furniture importer files for Chapter 11
An Englewood-based importer of high-end home furniture and two related companies have filed for bankruptcy, the latest victims of the housing-related slump in the furniture market.
Collezione Europa U.S.A. Inc. filed for Chapter 11 reorganization last week in U.S. District Court in Newark, saying it lost $7 million last year after the bankruptcies of two key customers.
Collezione Europa said it lost $3 million and significant future sales when Levitz Furniture, the home furnishings retailer, filed for bankruptcy in November.
From the Record:
Bad loans multiplying at N.J. banks
When consumers and businesses stop making loan payments, that is not a good sign for the economy.
The Federal Deposit Insurance Corp.’s latest quarterly report on bank and thrift performance showed that credit quality took a big step backward in 2007 as the bursting of the housing bubble driven by reckless lending resulted in record numbers of home-loan foreclosures.
The 69 commercial banks based in New Jersey saw their ratio of non-performing loans and other assets to total assets climb to 0.85 percent from 0.52 percent, a 0.33 percentage-point rise — nearly identical to commercial banks nationwide, which rose to 0.85 percent from 0.51 percent. Loans are generally deemed non-performing when payments are 90 or more days late.
“Weakness in the housing sector and the credit squeeze in financial markets made it a very challenging time for many institutions,” said FDIC Chairman Sheila Bair said in a statement. “We can expect these problems to continue in 2008.”
Loan-loss provisions at banks and thrifts nationwide totaled $68.2 billion at the end of 2007, more than double the $29.5 billion the industry set aside to cover possible charge-offs in 2006.
…
The problems stem from the downturn in housing. Home prices are declining in many parts of the country, and potential buyers are waiting on the sidelines expecting them to fall further. So it is hard for homeowners who are squeezed for cash to refinance their mortgage or sell their house, particularly if they have little equity. Tightening of credit has spread into the commercial credit markets as recession fears loom larger.
From Bloomberg:
Fisher Says Credit Markets May Not Force Fed to Act
Federal Reserve Bank of Dallas President Richard Fisher said investors shouldn’t assume that rising credit costs will force the central bank to cut interest rates as deeply as it did in January or in an emergency meeting.
“We reacted with very deliberate actions that took place over a very short timeframe” in January, Fisher said in an interview with Bloomberg Television in Paris. “That shouldn’t lead markets to expectations that we will continue to react in that manner.”
Fisher also downplayed speculation that the Fed is set to reduce its benchmark interest rate before policy makers’ next scheduled session on March 18. Yesterday, yields on agency mortgage-backed securities rose to a 22-year high relative to U.S. Treasuries, while the cost to protect corporate bonds from default climbed to a record.
“I would discourage you from thinking that simply because of a significant action in the credit markets, like we had yesterday, that suddenly we’re going to have an Open Market Committee meeting, and that suddenly we’re going to move Fed funds rates in response,” said Fisher. “It doesn’t work that way.”
We are the new Japan.
Except we don’t have
1) Savings
2) Cutting edge technology
3) Good sushi and snacks
In a few weeks, Fisher will be explaining why they had to do it.
Confidence Sinks to Lowest Point in Records Going Back to 2002
According to the RBC Cash Index, confidence sank to a mark of 33.1 in early March, down from 48.5 in February. The new reading was the worst since the index began in 2002 and surpassed the previous low reached in February.
http://biz.yahoo.com/ap/080307/consumer_confidence.html
Fresno Bee – Thurs. 3/6
“U.S. mortgage industry needs to be monitored” by Sen. Dianne Feinstein (D) CA
and Sen. Mel Martinez (R) Florida
“No National Standards”
“Part of the problem is that today there is no national standard for mortgage brokers and lenders. Instead, there is only a thin patchwork of regulation by the states.”
“We believe Congress should require that all residential mortgage loan brokers and lenders obtain a state license. This would include providing fingerprints and a summary of work experience and consenting to a background check by authorities.
To be licensed, these brokers and lenders must:
Have no felony convictions. Have had no similar license revoked. Demonstrate a record of financial responsibility. Pass a written exam after taking courses in federal lending laws, ethics, consumer protection, and subprime mortgage lending.”
“And brokers and lenders who become licensed should be listed on a database that’s easily accessible to the public. This will allow consumers to verify whether or not brokers or lenders they are thinking of working with have the proper credentials and are licensed.”
“To be sure, these actions will not by themselves solve America’s subprime mortgage crisis. But they would play a vital role in addressing it.”
“We believe it is just as important to look to the future, to take steps to ensure that this never happens again. ”
“Cleaning up the mortgage business will do just that.”
“If the subprime mortgage crisis has taught us anything, it is this: American home buyers are vunerable to unscrupulous brokers and lenders.”
“The price is too high, and our states, California and Florida, have been especially hard hit.”
“Last year, more than 2.2milliom foreclosures were filed in the United States – a jump of 75% over 2006.”
“Lenders repossessed 84,375 homes in California last year, a nearly seven-fold increase over the 12,672 homes repossessed in the Golden State in 2006.”
“The handwriting is on the wall. So it is time for congress to act.”
I had no idea mortgage brokers didn’t even need a license. They make realtors jump through hoops but a mortgage broker or lender can just set up shop?
I know many got into this mess knowingly…but the public ought to at least be able to check and see if those they are considering working with are licensed, non-felons who have taken a few courses in ethics and lending. – I can’t believe I’m saying this, but I agree with Diane Feinstein on this one.
The Fed as battered spouse? “It’ll be different next time…”
From Bloomberg:
Bank Debt More Risky Than Corporate Bonds, Default Swaps Show
The cost of protecting banks from default rose higher than the companies they lend to because of speculation the suspension of Carlyle Group’s mortgage-bond unit in Amsterdam trading may signal losses for creditors.
…
Carlyle Capital Corp. said today creditor banks forced the sale of some holdings and that it had “substantial” margin calls and additional default notices from lenders. Banks are hoarding cash and cutting lending to hedge funds as record U.S. home foreclosures and loan defaults stoke concern financial firms may collapse.
“Banks have counterparty exposure to funds,” said Willem Sels, head of credit strategy at Dresdner Kleinwort in London. “The market is anticipating more forced selling.”
From the AP:
New Jersey’s many small towns in bull’s-eye amid cost worries
New Jersey’s many hamlets, villages and burgs claim they’re under attack.
But Gov. Jon S. Corzine contends he’s just trying to streamline a state with the nation’s highest property taxes.
Corzine’s $33 billion budget proposal calls for eliminating valued state aid for municipalities with less than 5,000 residents and cutting it for those with 5,000 to 10,000 residents. The state has 323 such communities.
His goal: force New Jersey’s small towns to share services or merge with neighbors as Corzine seeks $2.7 billion in state budget cuts amid troubled state finances.
“The fact is New Jersey has a government its people cannot afford,” Corzine said.
New Jersey has 21 counties, 566 municipalities, 616 school districts and 186 fire districts, all with their own bureaucracies many argue contribute to property taxes that average $6,800 per homeowner, or twice the national average.
But local officials who met Thursday with Corzine’s administration contend the cuts would lead to higher property taxes, reduced municipal services and police and firefighter layoffs.
“This is the most unfair legislation I’ve ever seen,” said Knowlton Mayor Frank Van Horn.
I don’t get all this talk about laying off police and firefighters.
Merge the towns, lay off the mayors (eg Administration).
Municipalities can keep their identities through the use of vanity addresses.
Rumor afoot that the Fed will cut after the uneomployment number this AM.
CNBC reporting rumors of an emergency Fed conference call last might.
“This is the most unfair legislation I’ve ever seen,” said Knowlton Mayor Frank Van Horn.
Suck it up, Frank. And, get your resume together.
Re 9 – typical Congress solving problems after they become catastrophic
(12) Grim – Look at that school stat -616 school districts in New Jersey….
There are only 1,040 public school districts in all of California. Talk about merging and cutting some administration costs.
From the APP:
Residents say taxes taking a toll
“The state of New Jersey is being taxed to death,” said Lopez, 69, who lives on a fixed income. “They are literally driving me out of my house. My family’s here, and I certainly don’t want to move out of the state, but they’re taking steps to force me to consider that, and that makes me very angry.”
“What has New Jersey done when it got huge pots of money?” asked Assemblyman Michael J. Doherty, R-Warren, at the Ocean Township meeting. “School construction corporation: They were given $8.5 billion and what happened? No bid contracts. No questions asked, and the contracts were given out at two or three times the going rate. So if a contract normally went out at $10,000, they were going out at $20,000 and $30,000. And this money is gone.”
Doherty cited other examples of what he said were recent state debacles, including the alleged Medicare fraud and no-show jobs at the University of Medicine and Dentistry of New Jersey, and before that, the state’s tobacco settlement.
“We were supposed to get $300 million a year for 25 years at $7.5 billion,” Doherty said. “But (former) Gov. McGreevey had to get it all up front (for a reduced amount.) So we got $2.5 billion in two years, and it was gone . . . So this is what happens in the state of New Jersey when you give the government a large pot of money. There’s no accountability, and it disappears. But the governor is saying: “Just give it to us one more time, we’ll really get it right this time.’ Well, I’m sorry, I’m not going to buy that.”
Cindy (17)-
I’ve lived in both CA and NJ…until you’ve been here a while, you have no idea how hard it is to wean people from the gubmint teat. It’s the friggin’ USSR.
At least in CA, a goodly amount of the population wants a streamlined, responsible gubmint sector. Here, everybody just wants to get one of those cradle-to-grave jobs with bennies.
NJ apathy. Eventually you have to pay the price of not standing up for yourself. It’s great to support (or be apathetic about)a welfare state when times are flush but when things tighten…..will the true liberals please stand up!
Carlyle/forced liquidation:
http://www.bloomberg.com/apps/news?pid=20601087&sid=aQNTCxSEI3kA&refer=home
March 7 (Bloomberg) — Carlyle Group’s mortgage-bond fund was suspended in Amsterdam trading after creditors forced the sale of some holdings, jeopardizing shareholders’ capital.
Lenders who issued default notices have liquidated some residential mortgage-backed securities held by the fund and may sell more as talks continue, Carlyle Capital Corp. said in a statement today. The fund had “substantial” margin calls and additional default notices from lenders yesterday, it said.
Carlyle Capital said yesterday it had failed to meet margin calls, prompting creditors to seek immediate repayment. Started by David Rubenstein in 1987, Carlyle increased its mortgage holdings last year, selling $300 million of shares in Carlyle Capital. The fund used leverage to buy about $22 billion of AAA rated mortgage debt issued by Fannie Mae and Freddie Mac.
12 – Even funnier complaining about laying off police when many of them don’t have police and get the rest of us to subsidize them with State Police.
I have absolutely no sympathy.
(19) Clottpoll -Where did you live in CA?
Granted, many of our school districts are TOO large (LA is something like 740,000 – with the next largest being San Diego 140,000 – even Fresno just next to me is 80,000.) But…what a great way to save a buck…Any idea what the average enrollment is? Administration per pupil – that sort of thing? 616 districts just seems excessive.
NJ The State Where Money and Bodies Disappear
#13,
“I don’t get all this talk about laying off police and firefighters.
Merge the towns, lay off the mayors (eg Administration).”
Mayors in NJ make $4000 a year, you’ll not save much by laying them off.
Meanwhile police officers make $100,000 for 3 days of work for 20 years + pension. You’ll save a lot more if you lay them off.
“We are the new Japan.”
Bairen [6],
I’ve been singing, “I think I’m turning Japanese, I really think so”, in my sleep.
In conjuction with this, we are also the 2008 version of the 1970’s. In those days, we had a war to finance, large spending programs, spiking oil prices, booming grain markets, dovish monetary policy and accelerating metal prices. We also had a fed that masked the real CPI #’s HMMM?
Stark differences; we are much more energy dependent today, no longer a creditor nation but the largest debtor and the baby boom generation, young and productive in the 70’s time, is plodding toward retirement.
The similarities and differences are quite troubling.
I just wanted to chime in re the index v. active debate (and what its degenerated into). I’m an unabashed index investor. Granted, the equities portion of my portfolio, Total US Index and FTSE International Index, have been getting whacked. Still, I plan on staying the course with index funds for a few reasons.
Beyond cost (there are many low-cost active funds, though perhaps not for international), active funds have problems: (1) tax efficiency of active funds is unpredictable and often terrible; (2) style drift – active funds often invest in things outside their stated goals; (3) manager turnover – good ones leave all the time and I don’t want to incur capital gains to follow them; (4) no tracking error makes me sleep better – at least if my equities are doing badly, it’s not my fault (that’s market performance); and (5) even if you have a “smart” manager, “the markets can remain irrational longer than you can remain solvent.” Just look at how long it took the markets to clue into this housing problem: I’ve been a lurker/occasional poster since this blog was linked to via the now defunct “walk-through” nytimes blog in 2005 but the stock market didn’t begin correcting until November of 2007.
I know some here disagree with me because I don’t invest in commodities or foreign currency. I have an asset allocation plan I’m comfortable with and don’t plan on deviating from it, certainly not in favor of assets that have been run up so dramatically in price (is that me market timing?) and whose historic real return is zero.
Clot [14],
It wouldn’t be surprising. The S&P futures rallied a very quick 10 points, starting around 6:45 AM.
Merging towns will never happen here in NJ. It will certainly never happen voluntarily.
Municipalities are not sovereign, but they think they are. It will take the State Legislature, sitting down and merging them, to do it. But then what will happen to that Legislature next cycle? Out they all go.
U.S. stock futures ticked higher as the Federal Reserve said it is taking steps to add cash to the banking system, increasing the size of term auction facilities to $100 billion.
>>
Can i get 20K for my 11 year old car?
Ouch!!
OK if we can now get 700K confirming 30 year mortgages but at 6% that is $4200 a month and with property taxes it is $5200 a month and heat and elec etc. that is $6000 a month and cross your fingers nothing breaks. If 95% of people earn under $145K a year who is taking on 6K a month debt?
Nonfarm Payrolls Feb -63K!!!
“the stock market didn’t begin correcting until November of 2007.”
[27],
Many would argue the opposite, that the correction began in mid-late 2002.
Employment out and not so good.
Thank god the Fed added $100bil to the TAF for this month.
tosh [35],
WASHINGTON (MarketWatch) — The Federal Reserve on Friday announced two new steps to add cash to the banking system. The Fed said the measures were needed to address “heightened liquidity pressures in term funding markets.” The Fed said it was in close contact with foreign central banks concerning liquidity conditions in markets. In the first measure, the Fed said it would increase the size of the two Term Auction Facility auctions to $50 billion each or a total of $100 billion. This is a total increase of $40 billion. Secondly, the Fed said it will initiate a series of term repurchase transactions that are expected to cumulate to $100 billion. These transactions will be conducted as 28-day term repos in which primary dealers may elect to deliver as collateral agency mortgage backed securities if they so choose. The Fed said it would consider increasing both the repos and the TAF if conditions warrant.
BS birth death adjustment 135K
http://www.bls.gov/web/cesbd.htm
The U.S. unexpectedly lost jobs in February for the second consecutive month, reinforcing concern the economy is contracting.
Payrolls fell by 63,000, the biggest drop since March 2003, after a decline of 22,000 in January that was larger than initially estimated, the Labor Department said today in Washington. The jobless rate declined to 4.8 percent, reflecting a shrinking labor force as some people gave up looking for work.
A weakening job market, combined with lower home values, higher fuel bills and stricter lending rules, raises the odds consumer spending will keep slowing. Falling employment is one reason Federal Reserve Chairman Ben S. Bernanke has signaled central bankers are prepared to lower interest rates again.
“The labor market is experiencing a significant slowdown,” Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities in New York, said before the report. “Growth will probably contract in the current quarter as consumer spending is stagnant.”
http://www.bloomberg.com/apps/news?pid=20601087&sid=a7D0UZKL2TsM&refer=home
“Merging towns will never happen here in NJ. It will certainly never happen voluntarily.”
I disagree. I think it’s the one thing that the folks may back-up in theory state-wide (although there will be a lot of “not in my backyard”).
I’ve lived in NJ for much of my life, and I still here of a town/hamlet/township/borough that I’ve never heard of before all the time! There are something like five franklin townships for christ sake! In fact, I live in Mercer county, and STILL don’t know all the towns in the county alone.
It’s incredibly obvious that we need to merge and streamline! Whether it’s cops/majors/adminstrators etc, it’ll save tremendous money.
Nonfarm Payrolls Feb -63K!!!
…and only because the govt. added 38k jobs. Private sector payrolls actually dropped 100k.
From MarketWatch
Fed takes new steps to add cash to banking system
The Federal Reserve on Friday announced two new steps to add cash to the banking system. The Fed said the measures were needed to address “heightened liquidity pressures in term funding markets.” The Fed said it was in close contact with foreign central banks concerning liquidity conditions in markets. In the first measure, the Fed said it would increase the size of the two Term Auction Facility auctions to $50 billion each or a total of $100 billion. This is a total increase of $40 billion. Secondly, the Fed said it will initiate a series of term repurchase transactions that are expected to cumulate to $100 billion. These transactions will be conducted as 28-day term repos in which primary dealers may elect to deliver as collateral agency mortgage backed securities if they so choose. The Fed said it would consider increasing both the repos and the TAF if conditions warrant.
From MarketWatch
Payrolls fall by 63,000 in February
Drop in labor force pushes jobless rate down to 4.8%
It was the largest drop in payrolls since March 2003.
The drop was unexpected; economists were looking for a gain of about 20,000 in the survey of business establishments.
Payrolls for December and January were revised down by 46,000. The job loss in January was revised to 22,000 from 17,000. In December, 41,000 net jobs were created, half the number estimated a month ago. Payrolls have declined by an average of 28,000 over the past three months, down from a gain of 80,000 or so a year ago.
The unemployment rate fell unexpectedly to 4.8% in February from 4.9%, due to a 450,000 decline in the labor force, the largest drop in nearly five years. Economists were expecting the jobless rate to climb to 5%.
According to the separate survey of households used to derive the jobless rate, employment fell by 255,000 in February. The labor participation rate fell to 65.9% from 66.1%. The employment rate fell to 62.7% from 62.9%.
BC,
“The U.S. unexpectedly lost jobs in February” show your what the “experts” know.
Mishkin has now started doing stand-up
Mishkin; “Dollar drop has little inflationary effect, also I’m drunk!”
Re: state cuts in municipal aid – municipal aid and direct grants are two of the bigger line items in the state budget. Lots of jobs are funded though state direct grants! It really does make alot of sense to control costs in those areas. The inspector general should also pay more attention to how aid sent to the big cities is spent. Not sure the mayors in those places would buy into that though…
Cindy (23)
West Hollywood…Sweetzer & Sunset.
Well 5 rate cuts have only benefited those long currencies and commodities. The TAF has not increased liquidity. Credit conditions are tightening, spreads, corp/treasury have widened. On to the next option. A 2008 version of the RTC, let’s call it the RBC. The Resolution Bust Corp. It will make the RTC look like a walk in the park. Get ready, it’s coming.
45: The mayors that wouldn’t ‘buy into that’ are most likely those with something to hide.
They should change the name to “FINANCIALS DEATH WATCH” or some such thing
From MarketWatch
SUBPRIME TODAY
Fed takes new steps to add cash to banking system
Carlyle receives further substantial margin calls
Fortis in talks to bolster finances, shares recover
Ambac Financial raises $1.5 billion in stock offering
Dallas Fed’s Fisher: Don’t expect repeat of emergency cut
MBIA: Board cancels some executive stock options
Crunch, from Alabama to stocks
Regulators push the banks
Allianz loses as Dresdner ignores Pimco on subprime
Citigroup CEO denies South Korea unit sale talk: source
J.P. Morgan upgrades Arch Capital
Hedge funds spark fixed income stress
Details to headlines at above link, Rich
he [43],
The experts are charlatans.
BC (26)-
It’s nothing but troubling. The wheels are coming off.
On Active or Index funds:
I was shocked today morning looking at my 401K balance. I have both type of funds and they both have not done good at all in last few months.
Cindy (23)-
In LA, my local high school, Fairfax High, had a really neat metal detector at the entrance.
Who would have guessed there would have been so many rate cuts so frequently? “Emergency” substantial rate cuts certainly could not have been predicted. A year ago, I’d have thought the new fed chief would want to assert some will by taking a stance against existing inflation. Glad I didn’t put my money where my, uh, mind was. Attempting to time the market may be for some, but it’s not for me.
39 Ready to Buy
I’m not saying we shouldn’t merge towns, I’m just saying it won’t happen. Actually, I think people would be ok with merging municipalities and sharing services, if they could really see a drop in their taxes (ha).
The place I see staunch resistance is if merging school districts comes up. I would be against that, at least for my town.
I am starting to believe that by the next spring interest rates on 30 years fixed will be at 10%……
Right now might be horrible time to buy- Ohh well, another “fight” with my wife – I promised to her to seriously look this spring.
NEW YORK (Dow Jones)–Shares of Ambac Financial Group Inc. (ABK) fell 10% to $ 6.69 before the opening bell Friday, even after the troubled bond insurer raised $1.5 billion in a stock and convertible security offering Thursday night, an amount that investors had expected the company to generate.
The offering, which priced 185.2 million common shares at $6.75 each and 5 million equity units at $50 each, was completed in an attempt to fend off downgrades from rating firms Moody’s Investors Service and Standard & Poor’s Ratings Service, which have kept Ambac Financial Group’s triple-A rating on review for downgrade.
In an interview on CNBC, Ambac Chairman and Chief Executive Michael Callen said with $16.5 billion in claims-paying resources, there is “no possibility” the company will ever fail to pay a claim.
“The empirical evidence…indicates that pass-through from exchange rates to import prices is low and has declined markedly over the past two decades,”
tosh [44],
I may have to join you for a martini. What the hell is he talking about?
“Driven by a weaker dollar and much higher prices for petroleum and natural gas, import prices surged 2.7% in November, the largest monthly increase in 17 years, the Labor Department reported Wednesday.”
“Even excluding fuels, import prices rose 0.5%. Import prices have now risen 11.4% in the past year, the largest gain in the 25-year history of the import price index.”
http://www.marketwatch.com/news/story/import-prices-rise-27-november/story.aspx?guid=%7BAE22879A-0A22-4910-9ACB-0130365B4E3B%7D
Small NJ Towns
I agree that the towns themselves will never merge on their own. Corzine might be trying to force this. They may have no choice. A friend of mine lives in one of these towns that recently took a 250k budget hit as state aid was cut. Taxes went up 50% for most and doubled for others. Point is that these municipalities count on the state aid and built infrastructure based on that. A small financial hit could cripple some of these towns.
Herring (27)-
So, predictable and low-cost underperformance trumps erratic and costly underperformance?
$hit return is $hit return. Can somebody please explain to me how indexing is anything other than dilution of potential return via a forced proportional investment in bad companies?
#26 BC Bob: Well I finished yesterday’s post with our young pret, and his all is well belief. What can I say, I am dumbfounded.
I cannot belive this kid is in some type of position of repsonsibility, and yet is that thick headed and blind. If he ever gets the ax the child will never make it.
Goldman is getting hammered,and so is Bear, they are still laying off big time in Whippany. A guy I know last night I was talkibg to, they bagged most of their fixed income operation, including him (foreign bank.), and on and on. Yet pret is in complete denial.
Young pret does not understand that that talk on the street, is usually more right than its wrong.
The boy has much to learn.
Clot,
The lifeguards, on that secret caribbean island, have alerted all to get out of the water and demanded they return immediately to their respective offices.
Theses mayors probably hold 5 different posts.
48: True. Or it could be straight politics. Jersey City, Newark, Patterson, Elizabeth and Trenton could determine the result of a state election by themselves. Then you have the next tier…East Orange, Irvington, Clifton, Hackensack, Passaic, Rahway..etc. Of the top of my head…that’s ….alot of state aid. And alot of votes.
There may also be room in the state agencies (ie – commissions within state departments, etc) for some “realignment” of resources. There are lots of smart people working with those commissions that could double up in departments where we need competant leadership. We’d need to entice them away from their day jobs first though…
3b (61)-
My prediction: within one year, Pret will be a waiter.
Then again, I may be one, too.
Herring123 Says:
March 7th, 2008 at 8:24 am
I appreciate your response.
My opinion, which people have implied is self-serving, is that you need to separate the theoretical and strategic issues regarding passive investing, and the cost issue.
Please recognize that many people hold substantial assets in account arrangements that are either tax-deferred or tax exempt.
Also, research has proven that the place that index funds work very well is in U.S. large cap stocks. Everything else: fixed income, mid, small, and all variations non-US, the coverage turns into a bastardized mess that has been manipulated by people interested in marketing product.
Ultimately, the really problem with indexing is the implicit problems, some of which you highlighted. The more insidious ones that I consider relate to the ability of market actors to “game” the indeces. Remember that the index is not the Ten Commandments handed down on Mt. Sinai. A bunch of bean counters on Water Street spit out their “opinion”. These people are part of the same organization that gave you AAA CDO’s. Think about it.
It is the reason that I have great respect for DFA, because they develop their OWN indeces.
BC (62)-
No Red Stripes today. Battle stations!
(53) Clotpoll –
“In LA, my local high school, Fairfax High, had a really neat metal detector at the front entrance.”
You folks were ahead of the times…sounds scary. But I’ll bet you have some great stories from West Hollywood.
#49 Rich: -Fed takes new steps to add cash to banking system
-Carlyle receives further substantial margin calls
-Fortis in talks to bolster finances, shares recover
-Ambac Financial raises $1.5 billion in stock offering
-Dallas Fed’s Fisher: Don’t expect repeat of emergency cut
-MBIA: Board cancels some executive stock options
Crunch, from Alabama to stocks
-Regulators push the banks
-Allianz loses as Dresdner ignores Pimco on subprime
-Citigroup CEO denies South Korea unit sale talk: source
-J.P. Morgan upgrades Arch Capital
-Hedge funds spark fixed income stress
-pret says everything is fine
-pret says layoffs on Wall St will nly affect Calif
“So, predictable and low-cost underperformance trumps erratic and costly underperformance?”
All things being equal, yes. Except with indexing, its not underperformance since you’re getting the market returns (ie, market performance – neither overperformance or underperformance).
I am planning to do this analysis on Performance of Mutual Funds (including Indexed ones). Here is what I am thinking, do let me know anyone has better idea.
Most online analysis tool is that they let you screen by 1 year, 3 year, 5 year return. I haven’t seen any tool that compares performance (lets say by quarter), over a long period of time. I think that is best comparison since it would tell whether the fund performed well in all types of economic conditions compared to Market. So here is what I am thinking of doing.
1. Get Price data for large number of funds over long period of time (lets says since 1995).
2. Find performance for each quarter.
3. Compare that performance with S&P performance.
4. Put them in grid, mark with color, for e.g. Above S&P would get green, Below S&P Red.
5. The fund that consistently beat market (more greens) should be considered better than other ones.
Any thoughts before I begin the journey.
#65 clot: Just make sure you don’t end up in the same restaurant with him.
BC
“In conjuction with this, we are also the 2008 version of the 1970’s.”
I’m waiting for the return of Manhattan in the ’70s.
Doyle and I are meeting for drinks in 2017.
Cindy (68)-
Two words: Halloween Parade.
Living there was a 24/7 freak show.
Perfect Storm brewing…..
100 plus dollar oil
Housing mess
credit is tight EVERYWHERE
Jobs in the tank and will get worse
Recession
Dem president possible
Remember Jimmy Carter…..15% interest rates 18% inflation…gas line. What a freakin treat that was
No Roll Tide Roll in Jefferson County.
“Jefferson County, Alabama, the municipality that was going to teach America how to use swaps and derivatives, says it is running out of money and isn’t sure it can pay its bills.”
“And you can blame swaps and derivatives.”
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aB.0vvPgGcaE
Manhattan and the Street are still pretty much thriving. There are blips, but there always have been (even in the big up years). The doomsday scenarios touted on this board are just not happening. The bulge brackets have culled the ranks and re-organized, but they are also hiring. Just my 2 cents from the front line…
Is the fed entering the building?
Clot / BC (26/51),
Fear not, Larry Krudlow says all is well.
I’m sure bi will be here soon to assure us as well.
Imus,
You’re right. Each day is looking brighter and brighter.
Hey… do you hear a train?
Herring (70)-
“Except with indexing, its not underperformance since you’re getting the market returns.”
Market returns are NOT underperformance? I’d submit the vast majority of index returns- especially when inflation-adjusted- are the very definition of underperformance.
If all I thought I could get was “market returns”, I’d move to Vegas and begin studying MLB statistics. When all the gubmint entitlements go bust, and it’s every man for himself (which looks like it’s coming any day now), how are years of “market returns” gonna get you and yours thru until your eventual expiration at the new, improved age of 127?
Any investment plan that does not factor in the absence of gubmint cheese (talk about “who moved my cheese”!) is based upon a wish and a prayer.
WASHINGTON (MarketWatch) — The Federal Reserve on Friday announced two new steps to add cash to the banking system. The Fed said the measures were needed to address “heightened liquidity pressures in term funding markets.” The Fed said it was in close contact with foreign central banks concerning liquidity conditions in markets. In the first measure, the Fed said it would increase the size of the two Term Auction Facility auctions to $50 billion each or a total of $100 billion. This is a total increase of $40 billion. Secondly, the Fed said it will initiate a series of term repurchase transactions that are expected to cumulate to $100 billion. These transactions will be conducted as 28-day term repos in which primary dealers may elect to deliver as collateral agency mortgage backed securities if they so choose. The Fed said it would consider increasing both the repos and the TAF if conditions warrant
Can someone say Hyper-Inflation. I bet Paulson will come out and state that the US is in favor of a strong dollar.
Imus Says:
March 7th, 2008 at 9:26 am
Manhattan and the Street are still pretty much thriving. There are blips, but there always have been (even in the big up years). The doomsday scenarios touted on this board are just not happening. The bulge brackets have culled the ranks and re-organized, but they are also hiring. Just my 2 cents from the front line…
Manhattan ans Street are thriving because they are the ones who is getting bailed out by the goverment – they get all cheap loans from fed and rescues.
Average Joe who is wayyy low on pecking order getting killed – but he does nto know it yet…
In couple of years we all will hear a lot of screaming and complaining and people will really suffer – but it will be too late, Fed will inflate the dollar, and as usual people who are close to the top will get benefits of it, and people at the bottom will suffer.
Welcome to the world of 10-20% interest rates and 3% salary increases.
Thanks Chi, for a return to civilized talk on the matter.
Re Clot’s “forced proportional investment in bad companies” that’s partly true, except it’s tough to tell which companies are “bad” and which are poised for a rebound and merely undervalued. At ~$20 per share, even Citi looks purty to me, in spite of what we know it isn’t disclosing.
Given my lack of faith in others, lack of time in general (its a slow day in junior associate land), and that I don’t qualify for (low-cost) DFA advisor minimums, indexing aint a bad play.
Re effectiveness of indices outside of large cap, I buy that. For example, even Vanguard acknowledge that the TIPS index created by the bean counters stinks, and actively manages that fund.
#25 Ah, the seventies – cars that rusted out in a few years or fell apart before that, pollution, coffee at $5 a pound, sugar almost as bad, long lines at gas stations with red and green flags, 12 percent fixed rate mortgages and 15% annual raises.(And the ugliest clothes ever for both men and women – in polyester.) Then came Reagan, Thatcher and Volcker and things started to get better. I did make a little money with gold though – the real stuff.
SG (71)-
You’ve got to factor in the costs of active trading, adverse tax consequences of distributions and management fees. Those costs, compounded over time, are a dramatic contributor to underperformance.
Rule #1 of getting rich: you never get rich by splitting your money with other people, be it “advisers” or gubmint.
Oops – that’s #26
3b (72)-
That’d be my definition of hell.
#77 Imus: Dude, the street is contracting, and will continue to.
I see it everyday, heck I am on the street, and have been for years.
Do you work on the street, do you have any clue at all?
The towns here will inevitably merge, but it will take decades for two reasons: police forces and schools. All they have to do is raise the specter of “gangs” –nudge, nudge, wink, wink– and all that “they’re killing me with property taxes!” whining will die down to a barely perceptible whimper.
Make (82)-
Wheelbarrows are on special at Home Depot right now.
re: small town mayors fighting mergers–
They fight so hard because the stakes are so small.
Oh yeah, I forgot about all the “state aid” supposedly draining from impoverished Ho-Ho-Kus into the coffers of the welfare queens in Paterson. Just keep up that chatter and we’ll have 500 person municipalities well into 2520.
Imus (77)-
Multiple seized markets = growth?
You must work on the Street. Nobody else could even say something like that without throwing up in their mouths.
Somebody e-mailed me a photo of Imus at his desk:
http://tinyurl.com/3b2rhr
#88 bubble: It may not take that long, as things continue to decline across the board, it may be sooner than later.
Plus (perhaps wishful thinking on my part) I would think that towns would start courting each other and merge voluntarily, rather than being forced to by the state.
At least they would still have control over who they merge with.
Dean Baker Paper re Foreclosure Bailouts:
“This report analyzes recent proposals suggesting that the government buy up or guarantee bad mortgage debt in an attempt to slow the increasing number of foreclosures the nation has seen in the wake of the housing market’s meltdown. The study, which focuses on the plan put forth by the Office Thrift Supervision, shows that banks and mortgage holders end up being the true beneficiaries of such plans at the expense of taxpayers and with few gains for the majority of homeowners currently facing foreclosure.””
http://www.cepr.net/documents/publications/bailout_2008_03.pdf
Make (82)-
Wheelbarrows are on special at Home Depot right now.
I’m long on wheelbarrows due to pent up demand.
3b (94)-
“I would think that towns would start courting each other and merge voluntarily…”
Thanks. That just prompted a copulative visual I could’ve done without.
#92 clot: At least he did not say ” a sea of wealth”.
Talk about a clusterf*&k.
#96 make to pent up demand.
It’s pant up demand.
3B,
Everyone in America knows that I can’t spell by now. But if it makes you feel better then Thanks fo rthe heads up.
By the way if you are working on the street you should be learning how to spell in Chinese as we are on the brink of loosing another industry. World Financial Center will one day turn into a museum where they will charge $1 MILLION US DOLLARS FOR ADMISSION.
That will be the equivalent of 10 Euros.
#75 Pot: oh but don’t talk those “presidential politics” on this blog as some, including the “host”, seem to thing politics and money don’t correlate. That is crazy talk, how could politics ever affect real estate? uh duh, I dunno not no….let’s talk about the mets
#94: You can’t underestimate the power of xenophobia. Merchantville “courted” Cherry Hill and got called “white trash” by the Cherry Hill residents. Merchantvillains call Pennsauken “Little Camden” and won’t share services.
It’s a case of the “grass is always greener” on your own side of the fence.
“Just my 2 cents from the front line…”
Imus [77],
The street is thriving? Can you elaborate regarding your postion on the front line? The yellow brick road?
Imus
“Manhattan and the Street are still pretty much thriving.”
Are you saying you believe that Bear, Goldman, Merrill, Lehman, JP, etc. are all experiencing rapid revenue growth in Q1 ’08?
“Wheelbarrows are on special at Home Depot right now.”
Are you gonna get the Kate Spade, Coach or Louis Vuitton wheelbarrow? I hear pastels will be in for the spring.
#10 make It was a joke, you are right, it is pent up demand. I guess you forgot the pant up joke a few months ago.
Merrill before the melt down was planning on leaving WFC, to build a new headquarters on 39th street.
I have not heard if that is still the plan or not.
Maybe they can turn WFC into luxury condo’s, to add to the already huge supply of luxury condos, luxury coops, and luxury rentals on the market down here, with many more in various stages of completion.
But then again this area is part of the sea of wealth, so absorbing all this inventory should nto be a problem.
Imus, I guess I’d like to know how you define “the Street”, “thriving”, and “front line”.
Oh – and “2 cents”.
#93: Cool pic! I looked for one of you, but just take any picture of a scene from the movie “Boiler Room”. Piker.
Have a good weekend all…
BC Bob:The yellow brick road, which runs alongside the sea of wealth.
JLB
“oh but don’t talk those “presidential politics” on this blog as some, including the “host”, seem to thing politics and money don’t correlate.”
If only you would thing a little more…
Don’t attack grim – he merely asked us to stop a particular long-winded, vicious thread on _his_ blog.
#106 njpatient: Basic black always in fashion, and it goes so well with a red hand truck.
“Maybe they can turn WFC into luxury condo’s”
3b [107],
The NYMEX bldg will either go condo/rentals or office space. Maybe some combination.
What about the NYSE? Not far behind.
From MarketWatch:
Lehman now sees U.S. in recession
The U.S. economy is now in a recession that will be more painful than either of the recessions in 1990 or 2001, said Ethan Harris, chief U.S. economist at Lehman Bros. “The economy is likely to experience an extended period of very weak growth, a rising unemployment rate and significant further Fed rate cuts,” Harris wrote Friday in a note to clients. The federal funds rate will likely drop to 1.5% by next year from 3% currently.
JLB,
My request had nothing to do with correlations, and everything to do with dividing this community.
This site is very much a community to me, the value of this site is found in the comments, not on the front page.
The last thing I want to see is readers and commenters get so frustrated over political arguments that they don’t bother to return.
Are they correlated? Absolutely. Should we talk about it? Yes. But how do we do it without pissing each other off to the point where it destroys the community?
#113 BC Bob:What about the NYSE? Not far behind.
In fact right across the street, at 15 Broad, that building including the old Morgan bank on teh corner, are in the process of beiong converted into luxury condos now.
#115 grim Thanks JB it is a community,and we would like to keep it that way.
“BC Bob:The yellow brick road, which runs alongside the sea of wealth.”
3b [110],
Sounds like a rock and roll exorcism.
#114
What a ballsy call by Lehman…….clowns
3b Says:
Plus (perhaps wishful thinking on my part) I would think that towns would start courting each other and merge voluntarily, rather than being forced to by the state.
At least they would still have control over who they merge with.
________________________________________________
I think that is definitely what we’ll see with the wealthier towns that they have their choice of courtiers–I can definitely see an Upper Saddle River/Saddle River, or perhaps a Wyckoff/Franlin Lakes merger. But these are all towns that probably could survive on their own, and have their choice of merger partners, what about towns that really need to merge–does River Edge REALLY want to merge with New Milford? Is Cresskill ready to become CressMont? This is where we’re going to see resistence (I’m not even gonna touch tinderboxes like Englewood/Englewood Cliffs).
Don’t mean to push guys, but the wife is drving me crazy on that Wantage, NJ listing #2461588, any info much appreciated.
Fed liquidity announcement not timed to job data: staffer
hmmm
“Fed liquidity announcement not timed to job data: staffer”
bear [121],
Maybe that staffer would like to buy KC Royals season tickets. It’s also possible that Gil Meche will shock the baseball world and lead the Royals to the World Series.
The worst part of a stock market crash and sky high fuel prices is that unlike the 1970’s we now only have book entry securities so I can’t burn my worthless stock certificates to keep warm.
BTW – NYSE already announced that the amex floor is coming to their empty space and the amex building will be sold most likely for condos.
BC,
Do you still feel that Bergabe is doing a good job considering the circumstances?
Maybe that staffer would like to buy KC Royals season tickets. It’s also possible that Gil Meche will shock the baseball world and lead the Royals to the World Series.
I’ll throw in my Knicks Season tickets for free.
Some more from MarketWatch:
Broad downturn in credit markets spurred action: Fed staffer
Credit market woes accelerated in recent days: Fed staffer
Fed likely to take more mortgage products in repos: staffer
Unemployment down is good news not bad. It if was flat or up the Fed would not be able to cut rates on the 18th. everyone on this site has locked into commodiites or bonds/cds already so the rate cut is a non-event.
Fed as GSE?
#115 Grim: totally respect the community comment and obviously I find value in the blog since I am here but presidential politics in the year of the election are worth disagreeing over and worth debating (and god forbid if we question the candidates’ truthfulness). People should not feel disenfranchised due to facts that don’t agree with their particular viewpoint they should feel energized. BTW, if you want a blog that only reflects one side it shouldn’t be labeled new jersey real estate report because that would be misleading, right? You seem to want to deal in facts so you should encourage the debate not stomp on it. The politics discussed were grounded in facts even if some of the parrots could not digest them.
http://bp3.blogger.com/_nSTO-vZpSgc/R9DXO8B-HZI/AAAAAAAACPc/yecVIlUa0g8/s1600-h/freddie-mac-15yr-fixed-a.png
Check out this chart and take notice of the 15yr mortage rate and the 10yr note DISCONNECT starting January 2008.
What does this tell you about our financial system. God, I seriously hope I’m wrong.
Make [124],
I never made that statement. If I felt that way, I would be stuffed full of dollars as opposed to crapping gold.
JLB,
Agreed, but it’s a waste of time and space for posters to debate ideology at this site.
It would be more helpful to discuss current actions and policies (along with possible future policy changes that have been reported) by either political party that would effect our economy and state economy and ultimately NJ housing.
Hey, new reader here, just found this site about a week ago and I’m addicted. Thanks for all the great info–I’ve learned a lot already and hopefully will be able to contribute something to the board.
I’m starting a very preliminary search for a home this weekend–just going to drive around, check out towns, see how many for sales signs are up, etc. Thinking either Somerset/Morris county (comparing Mendham, Chatham, Bernardsville, all the way to places like Stirling, Washington Township to see the more reasonably $$$ houses), or Monmouth county (again, comparison b/w places like Rumson & Fair Haven to Middletown & Red Bank).
I’m looking at mid-2009 purchase at the earliest. I’d prefer to wait a little longer to be able to put more money down, but my wife is itching to buy a house. I think I’ve sold her pretty well on doom & gloom forecasts though(not a difficult sell given the daily news stories), so mid-2009 and even early 2010 is looking pretty good.
Any thoughts on putting much more money down than necessary in order to reduce mortgage payments? Rate are sure to go up, and I don’t see them getting back to 5%-ish anytime soon (b/c of the failure of MBSs to sufficiently protect against default through diversification, investors will not be so willing to throw money at these investments thinking they are safe).
RY, +2.0%
BNS, +1.9%
LEH, +2.1%
TD, +1.6%
STI, +1.9%
BAC, +1.5%
WFC, +1.8%
TCB, +1.4%
JPM, +1.3%
BANK BAIL OUT DAY
PNC, +1.5%
BK, +0.8%
WB, +1.6%
C, +0.09%
Not that my opinion is worth anything, but I see little value in putting down more than 20%, especially if you are in a high tax bracket, as the long-term return of alternative investments (stock market) is pretty high.
There’s something to be said for carrying less debt. If I had a comfortable cash cushion, I’d use it to take out a 15 year fixed mortgage at a reduced interest rate.
Calculated Risk did the “leg work” to pull the following info for the Temporary Jumbo Conforming Loan Limit guidelines from Fannie Mae
1. Fixed rates can be sold to Fannie on or after April 1; ARMs on or after May 1. The loan has to be closed on or after March 1 to be subject to the following rules; inventory loans (closed from last July to March) have to be subject to a “negotiated commitment.”
2. No AUS approvals. It seems they plan to update Desktop Underwriter (their automated underwriting system) before the year is out, but they haven’t done so yet and they’re rollin’ without it.
3. For principal residences, fixed-rate loans are limited to 90% LTV/CLTV for a purchase, and 75% LTV/95% CLTV for a no-cash-out refi. ARMs are limited to 80%/80% on a purchase and 75%/90% on a no-cash-out refi. CASH OUT REFIS ARE NOT ALLOWED.
4. For second homes and investment properties, the maximum LTV/CLTV is 60% in all cases for purchases and no-cash-out refis.
5. Minimum FICO for any loan is 660, with a minimum of 700 for LTVs greater than 80%.
6. One-unit properties only.
7. On a primary residence, existing subordinate liens must be resubordinated. The new loan cannot “cash out” an existing subordinate lien.
8. No late mortgage payments in the preceding 12 months.
9. 45% maximum DTI, with ARMs qualified at fully-amortizing fully-indexed rate.
10. Full doc only.
11. For purchases, the borrower must make at least 5% of the down payment from his or her own funds.
12. A full appraisal with interior inspection is required on all loans; if the property value is more than $1 million, a field review appraisal is also required.
13. Loans are subject to all current pricing adjustments, plus another .25 for FRMs and .75 for ARMs.
[Emphasis added]
#132 Rich: Do you think that a president who has a inclination toward putting his influence to work towards one ethnic group more than the others might affect our economy and state economy and ultimately NJ housing? What if that president really did back the “black value system” and chose to lend his influence to putting everything he could back into promoting one ethnic groups’ prosperity over the others, what impact might that have? That is simply one example but frankly there are many reasons we question the integrity of the presidential candidates and one of the reasons is that integrity (or lack thereof) can make policy, right? I think you are very short sighted if you don’t think that the candidates need to picked apart, especially this year–I want all the dirty laundry out there and my wallet is reason number one and let’s be honest this blog is about money! But hey, what if Obama is our President and raises taxes and commits those monies to social programs that advance “African-Americans” and who cares if he holds talks with terrorists and when we don’t cave to their unceasing demands they blow a few thousand of us up, as long as it isn’t in your new jersey neighborhood and doesn’t affect your house value I guess it’s all good!
Rich,
That won’t help anyone but well qualified, cash-stuffed buyers.
Clotpoll Says:
March 7th, 2008 at 9:28 am
Herring (70)-
Market returns are NOT underperformance? I’d submit the vast majority of index returns- especially when inflation-adjusted- are the very definition of underperformance.
clot/SG/herr: bear in mind something…..I have never bothered to delve into this topic deeply enough, but when people talk about “the market” return and what percentile performance index funds fall in a peer comparison…..are they referring to the “peer group” as merely a list (i.e. implicitly equally-weighted) of all similar asset managers?
My point?
We have many outperforming & asset bloated mutual funds such as those from American, Fidelity and others. However, if the majority of market participants (i.e. invested dollars) are indeed “outperforming”, then the index is by definition “below average”. What is the savings grace of indexing is the low costs, so these garbage returns are held constant as all of the fees and charges of the competition is dragged down.
JLB Says:
March 7th, 2008 at 10:52 am
#132 Rich: Do you think that a president who has a inclination toward putting his influence to work towards one ethnic group more than the others might affect our economy and state economy and ultimately NJ housing? What if that president really did back the “black value system” and chose to lend his influence to putting everything he could back into promoting one ethnic groups’ prosperity over the others, what impact might that have?
________________________________________________
JLB Says:
As opposed to a president who puts his influence towards backing the “white value system” lending everything he could to promoting the prosperity of whites over others (which of course never has and never would happen–I’m just playing devils advocate here!)
shail: why would you perform such an analysis? Parsing the data in that manner provides no insight. Look at a rolling 10-year period….why do you need anything else?
JLB (137),
You have a plethora of choices.
Knock yourself out.
Rich
#16 HeHeHe..I am looking in Mercer Co as well, a lot of consolidation needs to occur there, what town are looking in?
JLB,
at least you aren’t hiding your perspective. I perfer your approach to the guys who smile in my face at work and call me names at home to make themselves feel better. In case you didn’t know…Obama is half white…or do you consider anyone with less than 100% european blood to be black?
Just a comment on all this gov’t attention to a huge problem out of control…where were they in the past 6-8 years? Where has the affordable housing been? I would love to see Barney Frank et. al. from the Senate housing and/or banking committee members to at it on on CNBC with Charlie Gasparino,that would be the best!
#135 Herring: I was thinking that if rates go up to something like 8% for jumbos, by putting down more money up front you are in effect guaranteeing yourself an 8% return every year for 30 years. While you can do better than 8% in the market, you cannot do better than 8% with anything close to 100% certainty in any investment. The only risk is inflationary risk, which, if the U.S. economy experiences anything like the late 70s, would make the decision to put more $$ down pretty dumb.
RGB Says:
March 7th, 2008 at 10:38 am
or Monmouth county (again, comparison b/w places like Rumson & Fair Haven to Middletown & Red Bank)
RGB: depends where you commute to/from….look at three different vantage points:
(1) access to SeaStreak/NY Waterway
(2) access to Middletown or Matawan NJ Transit stops
(3) access to GSP exits 120, 117, 114 or 109
If so, you should look in Rumson, Fair Haven, Holmdel, selected sections of Middletown, Colts Neck.
What you will find is that Middletown is going to be the most cost effective, but the better of the two secondary schools is slightly substandard (it can be a perfectly fine option). Regardless of all of the parsing that you see published, I would have to rate Holmdel high as the best option, with High Technology as very alluring, but only for students with very specific interests. Christian Brothers and Rumson/Fair Haven have some very interesting people, but ultimately, the driving force in these communites isn’t really scholarship, instead money.
Chi:
For indexing to be “below average” it must be true that the majority of market participants are indeed actually “outperforming.” While there are many time frames in which many mutual funds outperform “the index” I believe very few outperform over the long term. I can think of maybe three: fidelity magellan, fidelity contra fund, and aack I forgot the name. Oh well. And to the extent that they’ve outperformed, I don’t believe it is “substantial.” Now granted a lot of active mutual funds from American, etc, didn’t exist in the 1970s etc. but a lot of mutual funds that existed then are now gone. My point is, it’s very tough to predict which active funds will be “above average” ahead of time.
#140: it is important to make the distinction between class and race!
#144: I don’t care if he is half purple, it is the fact that he has committed himself to a religious/moral/value code that says he will concentrate his influence on one ethnicity which some rational people call racism? He could choose to commit to only supporting white’s prosperity and I would call that racism too.
HH,
I am on the sidelines right now but will be looking in Hoboken once things get reasonable.
House Hunter…145.
That is the problem with all government at all levels. The policy trails the problems. We spend too much time fixing problems and not anticipating and taking early steps to resolve anticipated issues. Other than a poor hiring policy/system one of the reason’s is that the culture of bureaucracy is so strong that even people with the best intentions become disillusioned into a state of “waiting for a problem to fix”. That’s one of the reason’s I have some sympathy for Corzine…at least he’s making proposals that he thinks will stop the bleeding. Even if his ideas are not all good…just compare them to what Whitman and McGreevey did as far as spending and the budget …it makes him look like a saint.
#145: they were making money! We all know policy makers who saw this housing crisis coming and chose to take their money off the table. Start looking at some of those influential politicians and their real estate transactions, could get interesting…oh which brings me back to that nice piece of property that Obama got for a nice low price from his buddy that is now in the justice system….
Good read:
http://www.minyanville.com/articles/GS-BKX-C-jpm-bac-fnm/index/a/16181
I especially like his quote re Thornburg:
“Alas me thinks that by the time the roaches festering in the underwriting of CDS come to light, TMA’s 14:1 leverage model will be bandied about as an example of conservative balance sheet management.”
Hi All!
I’ve missed so much! Motherboard crash…….not up and running yet. I have a lot of reading and laughing to look forward to when I’m up and running.
KL
Someone yesterday mentioned that the divorce rate will go up as the bubble implodes…. I couldn’t agree more. So many young couples act as if Viking ranges and granite countertops are birthrights and have known nothing but good times in their adult lives. Financial stress is a true test of any relationship.
The finance sector is a cut-throat, vicious environment. If your dept has a bad quarter, you are vaporized. I’ve known guys with a decade or more of experience, high 6 to low 7 figure salaries, who have been canned at the drop of a hat in this recent mess. The rewards are there, but so are the risks.
JLP 149,
I know when I see or hear racism. I think you’re one of those people that try to hide behind logical sounding arguments that are based on biased presumptions.
Did the site crash [no pun].
“Inflation in the United States, while disappointing at the moment, is likely to moderate, San Francisco Fed president Janet Yellen said Friday.”
“Speaking at a Bank of France conference in Paris, Yellen said there are downside inflationary pressures relating to the slowdown in the U.S. economy.”
“With the U.S. economy hurting from the unwinding of the housing bubble and turmoil in financial markets, “quite a bit of slack could emerge” in the U.S. labor market, she said.”
“In addition, food and energy prices will have to stabilize, she added.”
[Edit- Maybe pet.com will also have to trade $100 this year]
http://www.marketwatch.com/news/story/yellen-expects-inflation-moderate/story.aspx?guid=%7B7938E9D0%2D7BF2%2D4D86%2DA746%2DF05FA7D4AD35%7D
Economic strength/weakness is not the cause of higher/lower inflation. You can have low inflation with growth, 1980’s. Knock, knock; It’s the growth of the money supply,[M3] and declining dollar that’s causing inflation. Janet, please stop Yellen, read up on the 70’s.
Another Foreclosure Problem For Cities:
http://www.bloomberg.com/apps/news?pid=20601109&sid=a4QXOv7cvVKs&refer=home
I think it was an attack of KL and the Motherboard!!!
#155 jamc: You know guiys, etc. well pret says that is all just hearsay,and we should not pay attention to it.
He has charts that prove that layoofs are only happening in mtg. subsidiaries in Cal. everything here is fine, OK, so no more stories.
Dear lord, do you realize how addicted I am to this site? I just had a 6 hour f*cking panic attack!
A Parochial view of the candidates may think Mccain is a White male, Clinton a White female, and Obama a Black male, but reality is they are all Globalist Capitalists, of neutral Gender, sharing the color (Green)(i.e Greenback). They are Rainbow United in the Brotherhood of the Self Serving and none cast a reflection in a mirror.
CNN announced that Charter Schools in NYC will be paying teachers $125K, with performance options to $250K, based upon student achievement. Meanwhile, Mayor Bloomberg is trialing an innovation from Mexico to pay Students directly to Excel. If you put those two initiatives together, you may have a job equal to Wall Street Pay, with much better benefits, and job security. Power to the Government.
#161 Pret is way off. At least 1/3 of the people i used to work with in mtg allocations, mtg ops, and mtg middle office spots have been laid off since the summer or been notifed they are history.
I actually had recruiters tell me to look for work in another industry and hide there for a year or two.
Long outage. Figured the NJREA had finally pierced the veil. Lucky I had taxes to do. ;)
chifi [139]
However, if the majority of market participants (i.e. invested dollars) are indeed “outperforming”, then the index is by definition “below average”.
I assume you have knowledge of the literature on this subject so you know that what you wrote there is false.
The majority of market participants, measured either as number of people or weighted by dollars invested, underperform an appropriately constructed index benchmark. That’s true in every asset class. Some of it is due to fees but much is due to bad investor behavior, i.e. performance chasing. The data on this is irrefutable.
You might think this is the result of some emotional defect among DIYs and rubes. Yet there is also documentary evidence that clients with advisers and professional portfolio managers similarly underperform.
The markets give you x%. Out of that, fees for a lot of investors take 1-2% and fear and greed take another 3-4%. Yes, those investors are dead meat, because they are taking all the risks for the market return less 4-6%. They would be better off in CDs.
Points to you for mentioning DFA. It’s not that they don’t use indices. It’s that they don’t give a damn about tracking error and they will not sell directly to retail but only through well disciplined and trained advisers.
As for many of the rest of the new “indices”, you’re right that the system has been gamed. Once Bogle showed that you could gather assets by getting the index return less a tiny fee, everybody jumped on the bandwagon. Now there are “index funds” that track an index built especially for them, tracked by no other person or product, completely opaque, built by back test and cherry picked. It’s a scandal but no rational investor needs to play that game.
#159 saw this quote from that link.
“Almost 1 million U.S. homes were seized last year, the highest ever and more than double the pace of 2006,”
I bet we get 2 million plus in 2008.
Hoboken is getting hit hard by foreclosures.
Get out while you can.
http://www.realtytrac.com/MapSearch/MapSearch/MapSearch.aspx?txtZip=07030
Punch My Ticket Says:
March 7th, 2008 at 8:38 pm
chifi [139]
I assume you have knowledge of the literature on this subject so you know that what you wrote there is false.
EXCUSE ME. CONSIDERING THAT I AM REQUIRED TO ACT AS A FINANCIAL FIDUCIARY, SUCH A STATEMENT IS A SERIOUS CHARGE.
The majority of market participants, measured either as number of people or weighted by dollars invested, underperform an appropriately constructed index benchmark. That’s true in every asset class [ABSOLUTELY UNTRUE]. Some of it is due to fees but much is due to bad investor behavior, i.e. performance chasing. The data on this is irrefutable. EXCUSE ME. WHAT ON EARTH ARE YOU TALKING ABOUT? IRREFUTABLE?
You might think this is the result of some emotional defect among DIYs and rubes. Yet there is also documentary evidence that clients with advisers and professional portfolio managers similarly underperform.
The markets give you x%. Out of that, fees for a lot of investors take 1-2% and fear and greed take another 3-4%. Yes, those investors are dead meat, because they are taking all the risks for the market return less 4-6%. They would be better off in CDs.
YOU EXAGGERATE – YOU ARE TAKING CERTAIN ARGUMENTS THAT HAVE SUPPORTERS AND DETRACTORS, AND THEN JUST STATING POINT BLANK THAT THEY ARE FACT. THEN YOU ARE EMBELLISHING WITH YOUR OWN OPINIONS.
Points to you for mentioning DFA. It’s not that they don’t use indices. It’s that they don’t give a damn about tracking error and they will not sell directly to retail but only through well disciplined and trained advisers. WHAT? DO YOU EVEN KNOW THESE GUYS OR ANY OF THEIR COLLEAGUES? YOU SEEM TO UNDERSTAND OPERATIONALLY WHAT THEY DO. DO YOU APPRECIATE THE THEORECTICAL UNDERPINNINGS OF THEIR PHILOSOPHY?
As for many of the rest of the new “indices”, you’re right that the system has been gamed. Once Bogle showed that you could gather assets by getting the index return less a tiny fee, everybody jumped on the bandwagon. YOU MISSED MY POINT HERE.
“GAMING” INVOLVES TAKIND ADVANTGAE OF THE DYNAMIC RECONSTITUTION OF THE INDEX OVER TIME AND TRADING AROUND THE KNOWN PROTOCOLS FOR EXCESS PROFIT TO THE DETREMENT OF THE REST OF THE INDEX HOLDERS.
ALSO, IN THE SAME SENSE THAT BY NO-ARBITRAGE YOU FIND THAT EXCESS ECONOMIC PROFITS ARE ELIMINATED, YOU FIND THAT THE BENEFITS DERIVED BY INDEXING ARE ELIMINATED AS SO MANY MARKET ACTORS FOLLOW THE SAME STRATEGY. WHAT DO THIS MEAN? IT MEANS THAT ASSETS TEND TO BE OVERPRICED AND UNDERPRICED DUE TO THE ARTIFICIAL CONSTRUCT THAT FOLLOWS THE INDEX. THESE LOSSES ARE NOT OBVIOUS, THEY ARE BURIED AND ONLY ARE APPARENT IN MONITORING ABSOLUTE RETURNS.
I guess some people got the word already inventory in Hoboken jumped by 50 units this week. I smell a bubble that’s finally ready to pop.
Read My Lips…….
HOBOKEN CONDOS FOR EVERYONE
RE agents were very busy this week in NJ, adding 1500 units to already bloated market.
150 HeHeHe good luck on your search!
151 an 152 you are right on..
Punch: I just realize something. To be clear, what I am above arguing is the essential philopsophy of DFA. As evidence, note that you are unable to find a publicly listed source of their index weightings. They don’t want trading interference in their activities…..AND THESE ARE PASSIVE INVESTORS!
OK, who b0rkd3d njrereport.com?
Did Bi’s black box gag on that happened today, eating up all of the site’s bandwidth? Or was it some crazy routing issue?
Also, is there a TAF Futures market? I don’t see TAF going away any time soon, so why not start a market on how much Uncle Ben will bring to the “other” window?
Any takers?
Off topic of housing, although not completely…after selling in 2005 and sitting on the profit, we moved into the school district we wanted for our son. Still renting which is fine. That move was not only for his education now, but to put us in a good postion to save for college. I was thinking a Roth, since I have about 7 years to save that may be a good tool. If the hubby gets the promotion it may put us over the limit. Anyone been down this road and have a 529? Just wondering if anyone has advice.
HH: If you want to use a Roth, you can still make a 2007 contribution until 4/15. Also, the income limitation is removed after 2009, so you can just plan for a gap of 20 months in depositing funds. Unless you will be 59 1/2 by the time you child attends college, I am not sure why you would use a Roth for this purpose.
If you live in NJ, the 529 has no state tax deduction benefit, unless you are looking to use the “prepay” plan and are commited to using a NJ State school. NY, PA and CT all provide a tax deduction. If you live in PA or NJ you should use the best plan you can find from any state. If you DERIVE INCOME FROM A NY STATE DOMICILED SOURCE (you do not need to live in NY) you should use one of the NY plans.
If you use a 529 that is not a clusterf— of expenses, it is a slam dunk. Be careful, a lot of the 529’s are “just adequate.”
Thanks Chicago!! Appreciate it
ok I have officially lost my mind on this one:
go to msnbc for full article
http://www.msnbc.msn.com/id/23525100/
..snipit here:
WASHINGTON – At a cost of nearly $42 million, the IRS wants you to know: Your check is almost in the mail.
The Internal Revenue Service is spending the money on letters to alert taxpayers to expect rebate checks as part of the economic stimulus plan.
The notices are going out this month to an estimated 130 million households who filed returns for the 2006 tax year, at a cost $41.8 million, IRS spokesman John Lipold confirmed.
Chicago…I will be 52 when my son goes to college. I was liking the flexibility of being able to invest myself in the Roth. Also, if he decides against college, which Mom is not entertaining, no loss. With the 529 you take a hit don’t you? Also, what about qualifying for student loans, 529 counts agains the student I think.
(delurk) We use the Vanguard NY 529. (We live in NYC, so it makes sense for us) I’ve been content with it. We have 15 years for it to accumulate, so I’m pretty sanguine. (Disclaimer: We also use index tracking funds for a lot of our investments, and have never bought gold besides jewelry. We aren’t the most exciting/savvy investors out there.)
chifi: not that I wouldn’t be delighted if this were true, but I had not heard that the income limit on Roth IRAs was going to be removed. Is there a catch or other limit?
thanks alia, I have heard good things on vanguard
Corzine will solve the NJ increase in unemployment by changing the Teacher/Student ratio from 1:16 to 1:1. Of course the property tax will increase by the same multiple.
Just for giggles anyone have sales history of Maxwell Place in Hoboken? I remember before they even put the shovel in the ground it was rumoured at 450 per sqft, but than eventually offered at the outset around 700 or 800 per sqft. What’s it at nowadays?
here is my weekend call again: long financials and homebuilders for a short-term bounce, hedged with SPY.
55#, ann, most people in small towns don’t want to be merged, espcially for schools. they paid premium when they bought house there.
also as a matter of fact, they paid more to the state/county than people in large towns.
>The place I see staunch resistance is if merging school districts comes up. I would be against that, at least for my town.
bi (187),
You left out “in my opinion”.
Or you know as a matter of fact AND can prove it.
Ridgewood
SLD 246 CIRCLE AVE $881,000 9/8/2005
ACT 246 CIRCLE AVE $899,000 11/16/2007
PCH 246 CIRCLE AVE $889,000 2/5/2008
PCH 246 CIRCLE AVE $874,000 3/7/2008
Site’s back
Thank g*d
I had the shakes.
bi,
Sell DUG?
Teaneck
SLD 1278 BEAUMONT AVE $370,000 2/4/2005
REO Owned
SLD 1278 BEAUMONT AVE $300,000 3/7/2008
178#, chifi, i think you can have state tax benefits if you are openning account at franklin templeton.
http://www.njbest.com/about/njb_advantages.htm
Advantages of NJBEST
If you’re comparing NJBEST with other types of college savings programs, start with the 10 advantages below.
1. Double tax-free advantage
Your investments in NJBEST grow tax deferred if they’re withdrawn to pay for qualified education expenses; you will not owe federal or New Jersey state income taxes on earnings.
> If you live in NJ, the 529 has no state tax deduction benefit, unless you are looking to use the “prepay” plan and are commited to using a NJ State school. NY, PA and CT all provide a tax deduction. If you live in PA or NJ you should use the best plan you can find from any state. If you DERIVE INCOME FROM A NY STATE DOMICILED SOURCE (you do not need to live in NY) you should use one of the NY plans.
Gary
“Dear lord, do you realize how addicted I am to this site? I just had a 6 hour f*cking panic attack!”
Hee! I emailed grim that he had to hurry ‘coz I had the delirium tremens.
Upper Saddle River
SLD 48 UNION AVE $1,150,000 7/2/2004
ACT 48 UNION AVE $1,299,000 5/31/2007
PCH 48 UNION AVE $1,199,000 8/10/2007
W-U 48 UNION AVE $1,199,000 10/6/2007
Relist
ACT 48 UNION AVE $1,199,000 10/6/2007
W-U 48 UNION AVE $1,199,000 11/10/2007
New broker & agent
ACT 48 UNION AVE $1,199,000 11/10/2007
PCH 48 UNION AVE $999,000 12/28/2007
ACT* 48 UNION AVE $999,000 1/7/2008
U/C 48 UNION AVE $999,000 1/18/2008
SLD 48 UNION AVE $985,000 3/6/2008
191#, rebear, DUG is ultra short of energy stocks, not crude oil itself. sometimes it follows oil price and sometimes it doesn’t. for example, it went up almost 4% while oil stays around $105 – maybe it is an indication that oil price is going to come down.
188#, rich, easy to prove. most high income people live in small to middle sized towns and they paid more tax to the county and the state.
bi (193),
You’re in finance?
Franklin Templeton is LOADED with fees.
$25 Annual maintenance fee
Annual program management fee of .40% of assets
Underlying fund expenses up to .85%
And sales loads adn annual & deferred sales charges (vary by class of shares)
Button it up and read more. You may accidentally learn something.
bi (187),
Easy to prove?
Who are you, the Amazing Kreskin?
You know what these people are thinking?
It’s your opinion, not a fact.
Guess what I’m thinking right now….
137#, i like your posts on presidential elections. when you buy a house, you need to do home inspection. obama is a fairly new face and it is fair to dig out more records before we board on.
Thanks bi.
I knew that. What is your recommendation for DUG? Buy, sell or hold?
njpatient,
I just snorted six lines of crushed klonopin and chased it with a shot of witch hazel. I think I’ll….. gooooooo… toooo oo o oooo…. bed….. na… na……… zzzzzzzzzzzz.
FYI Post 199:
I’m referring to Franklin Templeton’s 529.
Who wants to lock their child into going to a NJ state school or any school for that matter? Might as well do a planned marriage at this time too.
(bi, you plan on “boarding” Obama?)
198#, rich, every funds charge management fees. even etfs. that is not a problem to me. can you share us other better sources on 529 plan?
bi (204),
No… no… you’re breeding?!
I, unlike you, do not make recommendations for stocks, commodities, collectibles (though I read something recently about Cabbage Patch Kids), etc on a blog.
Yes, many funds carry fees but you need to look at the loads. You’ll need to do your own research there.
—–
See what happens to me when this site is down for 6 hours. I become an ineloquent Clotpoll.
G’nite
to the guy who mentioned he might look in Chatham. Most of the realtors are trying to keep prices artifically high by citing the NJ Monthly article. Privately, there is a lot of pain among sellers who cant sell their homes. Chatham has at least 150 homes on the market and maybe alot more with FSBOs. The town was reassessed in 2005 and that was at the top of the market. Homes that are prices 50 to 100K beloew assessement are selling within 30 days. Homes that are priced 100K or more over assessment are sitting for months on end. Some homes on and off the market for over a year now.
Also be careful, Chatham is a place that lenders are not appraising as high as the sales prices and you need to bring extra money to the close
I am long The Famous Grouse, which you all should be at the rate I am consuming it.
Confidence Sinks to Lowest Point in Records Going Back to 2002
http://biz.yahoo.com/ap/080307/consumer_confidence.html
Did anyone notice the photo that accompanied this story?
Caption reads:
“Mohammed Alsabahi stocks up on Ramen noodles at the recently opened Wal-Mart in Dearborn”
Reminded me of booyah bob…
Rich
“I become an ineloquent Clotpoll.”
But you repeat yourself.
;p
OT: On the topic of how Active Mutual Funds perform compared to Index fund. I have taken set of MFs and compared performance on quarterly basis. See the report at,
http://www.geocities.com/skgala/mf/
Do let me know if anyone has opinion or suggestions.
From the Courier Post:
Loss of jobs serious sign
Tradesmen, factory workers, shop girls and thousands of other Americans lost their jobs last month, the government said, a harbinger that recession is imminent — or already here.
“With numbers like these, it’s really tough to avoid a recession,” said Joel Naroff, chief economist for Cherry Hill-based Commerce Bancorp. “What we’re seeing is wide segments of the economy running into trouble.”
In the worst performance in five years, New Jersey shed 9,500 jobs in January, the latest numbers available from the state Labor Department. Gov. Jon S. Corzine is expected to ask lawmakers to cut 5,000 state positions next week. The January jobless rate was 4.5 percent, still below the U.S. unemployment numbers.
Nationally, 63,000 workers received pink slips in February, the highest rate in five years, the U.S. Labor Department reported Friday. The unemployment rate dipped slightly from 4.9 percent to 4.8 percent, as 450,000 people left the labor force. Had they been factored in, joblessness would have risen to 5.1 percent.
Economists theorized many people gave up looking.
“It stands to reason that a large share of the people left because they didn’t feel like anything was there for them — that the market was too weak to be searching for a job at this point,” said Mark Zandi, chief economist at Moody’s Economy.com in suburban Philadelphia.
The private sector shed 101,000 jobs last month.
From the Star Ledger:
Job loss figures raise more alarm on the economy
Optimists on Wall Street were hoping for a sign the economy was slowly adding jobs again, forestalling a recession.
Instead, they got a cold, hard slap.
The Labor Department yesterday said U.S. employers cut 63,000 jobs last month, a grim report that suggests rising energy prices, a credit squeeze and a slumping housing market have taken a greater toll on the economy than expected. Market watchers had been forecasting a gain of 25,000 jobs.
“We are now penciling in a recession in the first half of 2008 and have trimmed our already very anemic recovery figures,” the chief economist of Lehman Brothers, Ethan Harris, wrote in a note to clients.
This is the second straight month the nation’s employers have shed jobs. Construction, retail and the manufacturing sectors suffered disproportionate losses. To add insult to injury, the Labor Department revised its January job loss figures upwards, from 17,000 to 22,000.
Philip Kirschner, president of the New Jersey Business and Industry Association, said he wasn’t surprised by the dismal February jobs report. The state lost 9,500 jobs in January, and the trends — nationally and locally — point to a recession, he said.
“Whether it technically is or isn’t, I think business people are reacting as if we’re in one,” he said, adding that consumer spending and business investment are in a “holding pattern.”
From the New York Times:
End to the Good Times (Such as They Were)
If history is a reliable guide, the recession of 2008 is now unavoidable.
The dismal jobs report released Friday showed overall employment to be lower than it was three months ago. Every time such a slump has occurred since the early 1970s, a recession has followed — or already been under way.
And if the good times have really ended, they were never that good to begin with. Most American households are still not earning as much annually as they did in 1999, once inflation is taken into account. Since the Census Bureau began keeping records in the 1960s, a prolonged expansion has never ended without household income having set a new record.
For months, policy makers and Wall Street economists have been predicting, and hoping, that the aggressive series of interest rate cuts by the Federal Reserve would keep the economy growing, despite the housing bust. But the possibility seemed to diminish almost by the hour on Friday.
“The question was always, ‘Would the economy hang on by its fingernails?’ ” said Ethan Harris, the chief United States economist at Lehman Brothers. Based on the employment report, Mr. Harris said, “there’s a very high probability that we’re in a recession now.”
Even the one apparent piece of good news in the employment report was a mirage. The unemployment rate fell to 4.8 percent, from 4.9 percent in January, but only because more people stopped looking for work and thus were not counted as unemployed by the government.
Over the last year, the number of officially unemployed has risen by 500,000, while the number of people outside the labor force — neither working nor looking for a job — has risen by 1.3 million.
Employment has risen by 100,000, but even that comes with a caveat: there are also 600,000 more people who are working part time because they could not find full-time work, according to the Labor Department.
“The decline in the unemployment rate,” said Joshua Shapiro, an economist at MFR, a research firm in New York, “should not be viewed as good news.”
#213 How will those eCONomists spin this one?
Lets see something like
“Rising unemployment and increased lending standards when combined with significant bank charge offs for underperforming assets will only increase the stabilization of the housing market”
Bairen can speak Greenspanese
From the Star Ledger:
Economy stirs job jitters in Jersey
Day after day, Roberta Weiss hopes to get the call that will send her back to work.
Weiss was laid off from a student loan processing company in January. She knew times were tough, but she figured to find another job quickly. After all, she has 24 years of experience in information technology.
So far, no luck.
“In the past, all my jobs have come from people calling me, said the South Brunswick resident. “This is the first time in my life I’ve actually looked for a job.”
Every day seems to bring another piece of bad economic news. Home foreclosures and the price of oil are at record highs, and the Standard & Poor’s 500 stock index is at a 52-week low. Now comes an employment report today that could signal whether the economy is headed into a full-fledged recession.
Economists are hoping for a minimal gain — which would be an improvement over January when the economy lost jobs for the first time in four years — but the forecasts are all over the map. One thing is certain, there is an increasing number of people in the same situation as Weiss.
“People are taking a little longer to find work, because fewer new jobs are being created,” said New Jersey Labor Commissioner David Socolow.
The state recently reported it lost 9,500 jobs in January. The next report is March 19.
…
Naroff pointed out a previously reported gain in New Jersey jobs was wiped out by last week’s annual revision of the statistics. So instead of gaining 29,400 jobs last year, the state actually crated only 4,700 new jobs last year. Losses were highest in financial services and construction — two industries battered by the collapse of the credit market.
“The New Jersey job market is flat and that’s not vastly different than anywhere else in the country,” Naroff said. “This is not one of the better years to be looking for a job.”
Love the dynamic here. Downgrade ME? YOU CAN’T DOWNGRADE ME!
MBIA Asks Fitch Credit Agency To Stop Rating Insurance Units
The world’s largest bond insurer, MBIA, asked Fitch Ratings to stop issuing credit ratings on its insurance units, saying the grades have become less valuable to investors, of little use to the company and too expensive to maintain.
MBIA’s request covers business units including AAA-rated MBIA Insurance, the company said in a statement yesterday. Fitch has been reviewing the rankings because of concern that MBIA may not have enough capital to cushion against losses on mortgage-linked securities it guaranteed.
“The fact that they requested the withdrawal of the rating takes a lot of gall,” said Martin Weiss, president of Weiss Research in Jupiter, Fla..
Fitch is alone among the top credit-rating companies in continuing to consider a downgrade of MBIA. Moody’s Investors Service and Standard & Poor’s both affirmed the company last week on the heels of MBIA raising $3 billion in capital, eliminating its dividend and shutting its asset-backed insurance business for six months to overcome losses on subprime mortgages.
From the WSJ:
FBI Investigates Countrywide
U.S. Scrutinizes Filings
On Financial Strength,
Loan Quality for Fraud
By GLENN R. SIMPSON and EVAN PEREZ
March 8, 2008; Page A3
WASHINGTON — The Federal Bureau of Investigation is probing subprime lender Countrywide Financial Corp. for possible securities fraud, according to law-enforcement officials and finance-industry executives.
The inquiry involves whether company officials made misrepresentations about the company’s financial position and the quality of its mortgage loans in securities filings, four people with knowledge of the matter said. It is at an early stage, they emphasized.
…
Fifteen other subprime companies also are under scrutiny by federal agents and prosecutors in a broad look at the subprime industry sparked by huge losses on residential mortgages and the securities used to fund them. The investigations are examining mortgage-origination fraud, conflicts of interest and undisclosed relationships within the industry, and the practices used to package mortgage-backed securities for sale to investors.
…
Countrywide also is the subject of a class-action, securities-fraud civil lawsuit by various government pension funds and their managers, including the city and state of New York. The lawsuit identifies more than 25 firms that helped Countrywide package and sell mortgage-backed securities, including Goldman Sachs Group Inc., J.P. Morgan Chase & Co. and Lehman Brothers Holdings Inc. The firms have denied any wrongdoing.
Countrywide “misled investors by falsely representing that Countrywide had strict and selective underwriting and loan origination practices, ample liquidity that would not be jeopardized by negative changes in the credit and housing markets, and a conservative approach that set it apart from other mortgage lenders,” the suit alleges.
Bloomberg, March 8, 2088:
MASSIVE INTERNET ATTACK DISABLES BLOG
New Jersey- A massive internet attack, described as “denial of service” (DOS), disabled a popular New Jersey blog, New Jersey Real Estate Report, on Friday. The outage occurred as the blog’s participants were beginning to discover the connection between the current US housing collapse and pork belly prices on the CME.
Although the origin of the attack is under investigation, preliminary reports indicate that it orginated from a bank of servers in the Cayman Islands. The servers are normally purposed to support operations for several offshore financial institutions.
Several blog posters suffered injuries in the attack, with most of the injured described as exhibiting symptoms ranging from generalized anxiety disorder to outright narcotic withdrawal. Several posters were rushed to area hospitals, suffering from panic attacks caused by the realization that they might actually have to get some work done.
A group claiming to be the Peoples’ Economic Liberation Front of Zimbabwe delivered videotaped messages to Bloomberg, the AP and several other media outlets, claiming responsibility for the attack.
more from Bloomberg, March 8:
…in the videotaped message, the self-described leader of the Peoples’ Front threatened the blog with further attacks, unless its moderator, an individual known as “Grim”, could guarantee that a series of posts denigrating current Zimbabwean strongman, Robert Mugabe, be halted.
Evidently, these posts drew unflattering comparisons between Mr. Mugabe and current Federal Reserve chairman Ben Bernanke.
When contacted for comment, Mr. Grim replied, “Hell, no, we won’t stop. I’m not afraid of anybody who’ll pay 24 million dollars for a hamburger. They know where to find me.”
From the APP:
Housing picture turns much darker
Nervous homeowners and economic analysts have been wondering how much worse the housing market could get. On Thursday they got an answer: Plenty.
Foreclosures are at a record high. Home equity is at a record low. The housing market is spiraling down with no end in sight — and taking people’s sense of economic security with it.
For the first time since the Federal Reserve started tracking the data in 1945, the amount of debt tied up in American homes now exceeds the equity homeowners have built.
The Fed reported Thursday that homeowner equity actually slipped below 50 percent in the second quarter of last year, and fell to just below 48 percent in the fourth quarter.
And that was just one example in a day of dismal housing reports.
The Mortgage Bankers Association said foreclosures hit an all-time high in the final quarter of last year. And pending U.S. home sales — those in the gap between when a buyer signs a contract and when the deal closes — came in below analyst expectations for January and remained at the second-lowest reading on record.
“There is no sign that we’re near the bottom in the housing market,” said Douglas Elmendorf, a senior fellow at the Brookings Institution and former Fed economist. “Housing prices will probably fall for a year, two or three to come.”
The trifecta of reports illustrates a housing market caught up in a “very negative, reinforcing downward spiral,” said Mark Zandi, chief economist at Moody’s Economy.com.
Felt like an addict looking for my fix yesterday afternoon
Confused
Do you have a link for that piece from CNN? Usually, charter school employees get paid far less then NYC school employees.
Another 78,800$ to go, but sellers are giving in….wait patiently. this market is going to kill a few goats.
2466169 – 6 Bark Mill Terrace – Montville
LP: $478,800 ( changed today after 97 days)
OLP: $508,800
lostinny..
Here’s the NYT’s story:
http://www.nytimes.com/2008/03/07/nyregion/07charter.html?em&ex=1205125200&en=c18aedbd6cf07f29&ei=5087
Thanks Curmudgeon
I’m not a sure a 31 year old with 3 years of teaching experience has enough experience to lead a school. It will be very interesting to see how the whole thing plays out.
HE (224)-
I actually worked for six hours straight. First time in ages.
I should try it more often. :)
GM, I am currently renting, I have a growing nest egg(now 6 figures) and I have no debt. I have been watching and waiting for what seems to be a lifetime for home prices to drop and now I’m concerned that by the time they drop to reasonable levels the mort rates will be in the teens… How long do I sit on the sidelines?
229,
You brave soul.
I tried other blogs… but it wasn’t the same.
I finally gave up and just laid balled up in a corner.
Where’s the NJ recession? So far I don’t see it. Traffic is out of control, house prices are sky high and jobs are plentiful.
Clot #221-222- very clever!
I, for one, selfishly wish this blog could crash EVERY time I’m away.
Cuts my “get back up to speed” time.
It’s like getting back to the office and being relieved to find only 6 inches of mail instead of an empty paper box sitting on my chair, filled.
SG:
About indexing vs managed funds.
Backtesting does not make much sense. That way it is possible to find out perfect investment strategy (actually, many get-rich-quick scammers use that). Of course, it does not work forward.
First, bad managed funds will be closed so they are not around anymore. This distorts your statistics and makes managed funds look much better. Only the “good” ones are left.
You should go back to 1995 (or whatever year you want to use as a start date) and see what were the managed funds then and then follow these.
Nowadays, some fund families use similar methods to fool investors: They open dozens of managed funds at the same time (e.g. similar, but investing slightly different ways) and then close the bad ones and then advertise how all their super hyper funds are getting 20% annual returns.
I think indexing is a guaranteed way to became wealthy, if you do it long enough (ie start at 30). Managed funds are guaranteed way for your fund manager to get rich.
Oops.. fix that.
I noticed a very admirable attempt at expository discussion on indexing this week. Not too, too much clubbing each other about the head.
DT…why are you attempting to re-create the wheel? I don’t get the quarterly needs reason.
Clot, I’ve moved beyond the point at which people’s time on this blog seems to be only about addiction. I’m halfway through your book.
If you ever park in economy parking at the Philadelphia airport in the middle of the night, and stupidly leave your overhead light on, do NOT contact the autoclub normally used to jumpstart a battery.
After two hours of waiting, alone in the cold, wet parking lot at 11 pm (with no battery power), I was finally told by a CSR that I could’ve simply asked the nice folks at the booths for a charge. They have portable units.
I have to admit skulking over to housingpanic for a few minutes yesterday.
However, the pea-brained comments and over-the-top flamethrowing of the moderator render the thing unreadable.
Grim uber alles.
jamil (235)-
“I think indexing is a guaranteed way to became wealthy…”
What, if you live to be 127? The open-ended, ill-defined nature of your statement renders it neutered.
There are a handful of growth managers out there (most famously, Navellier) focusing on alpha- rather than beta- and combining this approach with a monitoring eye on institutional buying pressure. It is the antithesis of indexing and overly-complex quant/value investing styles and has achieved an admirable long-term track record of BTA gains.
In a market in which a long-term bias shift from value to growth has just begun, indexing is an invitation to disaster.
Frank re 232
It’s here Frank and I am living proof, I do specific contracting related to the construction trade. The phone has literally stopped ringing, except for telemarketers.
I have not seen it this bad since the 70’s, probably long before many people on this blog were old enough to know what their parents were going through.
Fortunately I sold a few buildings, including my primary residence{tax free income}, and still get income from rental buildings.
But the kicker is even though I do not show up on lost jobs reports, the lack of taxes which I pay will show up, due to lack of income. Hang on to your dollars, most people are not ready for this impending recession, and do not understand the severity.
JIM
Check out this ad from craigslist for age 55-plus condos in Edison.
40-year mortgage?
$247997 Brand New 2 Bedroom Condo in 55 plus Community
Date: 2008-03-08, 9:22AM EST
Third Floor, Elevator, Two Huge Walk In Closets, Totally Upgraded Eat in Kitchen with all new appliances, Built In Microwave, Tile Backsplash, Tile Kitchen Floor, Stackable Extra Large Laundry in Spacious Upgraded Tile Bathroom, Living Room w/Balcony, nice view. Sunny Location. Immediate occupancy. 40 year fixed term mortgage with 5% down to qualified buyers, restrictions apply. Situated minutes to all major highways, and shopping. Free Transportation to shopping.
Clot #221 Hilarious!!!!!
Clotpoll: not fair re: Mayor Frank Van Horn. The job pays almost nothing (a few thousand a year) and is a part-time job. He drives a truck for his real job. And I believe I heard he donates the tiny salary from being mayor to deserving charities.
190 bi
“ann, most people in small towns don’t want to be merged, espcially for schools. they paid premium when they bought house there.
also as a matter of fact, they paid more to the state/county than people in large towns.”
Exactly. Everyone thinks their town is special, and when it comes down to it, no one will want to merge, especially school systems. It would have to be mandated by the Legislature, and what elected official is going to do that.
Look at WWP, lots of folks there want to split that school district back into towns.
Glad to see the site was down yesterday, I thought they figured me out at work and blocked it.
chifi, 150: I’ll be communting to the financial district, so NJ Transit or the Seastreak need to be near by, which is why I’m looking at those overpriced areas. Seastreak is probably a major reason I wouldn’t move to Rumson or Fair Haven…$7K a year in commuting costs + $15K a year in taxes is not too appealing.
Bill, 209: Thanks for the info, I looked at Chatham prices recently and couldn’t believe what those people are still asking. My wife and I went to a few showings with a realtor last year, told her around $550K range, she took us to a few hovels where I was bumping into the walls. Also, I don’t know if I can get my nose up high enough in the air to be an accepted member of their community.
187………..Corzine will solve the NJ increase in unemployment by changing the Teacher/Student ratio from 1:16 to 1:1. Of course the property tax will increase by the same multiple.
*******************************************
Layoffs are beginning — teachers are being fired….not sure where you get your information ‘cornfused’.
RGB….Chatham? You’d be surprised at that area….you have a mix of people who have been there forever….and have no money….haven’t maintained their homes….etc.
And those who moved in hoping for the lily white existence of 1950.
Both are outdated.
I am just outbid yesterday. I offered 18% less from the LP with 15% down. Another offered slightly higher with 20% down. Both offering price is year 2002 level and about 30% below from the highest. Good news is thatthe seller starts to accept an offer with 30% less price from the peak. I was very close to my gaol this time.
240…unfortunately most people ‘are never’ ready for a recession….and don’t really care as long as their income stream continues….
As a homeowner I am glad to hear about lowball offers being topped. There is hope for decent homes that have value.
“I actually worked for six hours straight. First time in ages.
I should try it more often. :)”
Perhaps the PPT was trying to influence the next issuance of productivity statistics?
The housing bubble is bursting
The dollar is collapsing
Subprime has collapsed with Alt-A to follow
Credit and liquidity is frozen
Lending Standards have tightened
Stagflation has resurfaced
Financials are on the brink of insolvency
Gold and Oil are surging
There is a tsunami of defaults, bankruptcies and foreclosures
Soaring federal deficits
and then we have this:
http://www.realtor.com/search/listingdetail.aspx?ctid=83045&mnp=35&typ=7&sid=f8e66bb549134472857e25451479bbbe&pg=2&lid=1093637750&lsn=12&srcnt=48#Detail
Yeah but…..”There is no greater a critic of corporate abuse than yours truly. And by political standards, a somewhat left-of-center critic, at that.
But when it comes to CEO pay, it’s about common sense, not politics.
CEO pay, as outrageous as it may at times appear, is between a public company and its shareholders — not politicians who know a juicy topic when they see it.
If investors don’t like the compensation structure of a company, which is available in detail in the annual proxy and in sometimes hard-to-find employment contracts that are exhibits to SEC filings, they don’t have to buy the stock. It’s really that simple.”
CEO Pay? Hilarious.
#252 Gary,
come on man it’s FAIRFIELD!!
Where and what is Fairfield? Only born and raised in NJ and never heard of it.
jamil hussein Says:
March 8th, 2008 at 9:14 am
SG: About indexing vs managed funds.
Backtesting does not make much sense. That way it is possible to find out perfect investment strategy (actually, many get-rich-quick scammers use that). Of course, it does not work forward. SO SHAIL PRODUCED SOMETHING THAT DOESN’T JIBE WITH YOUR EXPECTATIONS – NAMELY THAT (I think) EVERY ONE OF HIS DATA POINTS SAVE A FEW OUTPERFORMED. SO IT DOESN’T “make sense”.
First, bad managed funds will be closed so they are not around anymore. This distorts your statistics and makes managed funds look much better. Only the “good” ones are left. NOT TRUE. PLENTY OF GARBAGE OUT THERE. LOOK AT THE FUNDS IN YOUR 401(k). PUTNAM STILL EXISTS. ONE OF THE MOST EGREGIOUS EXAMPLES IS VAN WAGGONER. BTW – HOW DOES THAT ASSERTION REFUTE WHAT SHAIL ANALYZED.
You should go back to 1995 (or whatever year you want to use as a start date) and see what were the managed funds then and then follow these. I AGREE. IF YOU WANT TO PROVE THAT INDEXING UNDERPERFORMS, ONE OF THE MOST EFFECTIVE WAYS IS TO USE ANY DATA SET FROM 1999 FORWARD. WHY? IT HAS NOT PERFORMED WELL. ONE CAN CONTINUE TO DEFEND THE APPROACH AND MERELY STATE IT IS PART OF THE HISTORICAL CYCLE. I TEND TO BE A LITTLE MORE DEMANDING, AND DRAW THE CONCLUSION THAT AFTER THE MID-1990’s THE INDEXING APPROACH HAS LOST A TREMENDOUS AMOUNT OF UTILITY DUE TO FORCES I HAVE PREVIOUSLY DESCRIBED.
See guys we live in country where no one gives a crap about your problem…..the fact that you can’t afford a split level ranch….or bacon with your eggs. Because you are not the focus here. It is the top of the pay scale that matters. Get that straight and keep on paying your taxes.
BTW – Shail, you should not analyze the returns in that manner. Take the running absolute return over the period. It should not be a statistical exercise, merely an arithmetic one.
#252 Gary
What a gap between the real world and the dream home! Surely the homeownership is really a dream now.
bairen and MT,
Amazing, isn’t it? I’m convinced that the only two things that will survive nuclear fallout in The Workers Republic of New Jersey are house prices and cockroaches.
That Fairfield home has been posted here before, we got one like it down the street from us….decent enough place….fairly blah styling….probably an OK home….but overpriced and sits on the market for months on end. As it should be.
MT=empty? As in pockets?
grim,
unmoderate me, please. :)
Can ayone give me some info on this house in Green Brook MLS ID# 2493591
It’s listed at 399,999
Another 15 to 20% off and we might be tempted if it is north of 22.
marv (243)-
Sorry. Didn’t mean to sling bricks at well-intentioned public servants. However, there ain’t many like that.
#260
I offered $450,000 LP home in Springfield. How do you think about my pocket, empty? or …?
Dook about to get a nasty surprise. Lawson will run Paulus into the ground.
264…..Wow. Sorry. Didn’t realize.
It’s really amazing how many houses are for sale AND for rent.
I haven’t seen anything like this since the late 80’s.
Stuck flippers? People buying a house before selling another? Out of state relos?
Look at the rentals in any town, then check what’s for sale. I bet around half of the rentals are also for sale.
Curious, never saw an answer to this recently…
I have a friend who placed a solid offer (not lowball) just a few days ago on a house here in Hunterdon. The house was listed for about 4-6 months(?) already.
Their agent said another offer came in 1/2 hour after theirs and wants some more concessions from my friends, the buyers.
My friend’s agent here in HC said he/she saw the “other” agent actually go in the office to make the offer…
So my ? is: Is a phantom second offer a legal tactic?
#266
Here is my story. I first purchased a house in 2001 and first purchased an investiment condo in 2003. sold the condo in 2005 in 3 days with doubled price.
I paid half of my own house’s mortgage with the profits and put the rest in a high interest web saving bank. The money and a little saving after 2005 till now is sitting as my downpayment for the next. I believe the price of 2002 is the bottom and also ROI(Return on Invest) become even”0″ in 2002 price, means possible cash flow in future.
MT sounds full to me…..there-a-bouts.
I’m just a regular guy with a decent household income….a place that I like enough to fix it up a bit…and a penchant for dry humor.
How bad will Hovnanian earnings be on Monday? Are they going belly up any time soon?
RGB [245]
“I’ll be communting to the financial district, so NJ Transit or the Seastreak need to be near by, which is why I’m looking at those overpriced areas. Seastreak is probably a major reason I wouldn’t move to Rumson or Fair Haven…$7K a year in commuting costs + $15K a year in taxes is not too appealing.”
You should check out the Atlantic Highlands/Middletown area in hills behind downtown AH (Chapel Hill/07716 zip, around Beacon Hill CC). There are some beautiful homes on nice lots that come much cheaper than Rumson or Fair Haven with reasonable taxes. From the area it’s about 5-10 min drive/park to the AH ferry, about 15 min to NJT Middletown station.
If you are going to use NJT, best places are Lincroft (07738 zip, section of Middletown), Holmdel, Little Silver, or perhaps Red Bank if you are not worried about schools or can afford private schoools.
Also, you should take into account that the Seastreak is constantly rumored to be on the brink of shutting down as the boats are supposedly being sold.
spam (268)-
Nothing illegal about it. However, it’s a trick only employed by hacks. You’d be amazed how many times the gambit comes unraveled. Then, the negotiating leverage goes entirely to the other side.
A good agent won’t try to pull off the “phantom offer” trick. There are simply easier ways to get the job done.
From The Record:
Manhattan office market blinks
Vacancies in the Manhattan Class A office market increased for the second month in a row in February, while rents rose more slowly than expected, suggesting the seemingly invulnerable Manhattan office market may be softening.
241 scribe
Sales pitch: ‘just think how great you’ll feel when you’re 95 and have paid off your mortgage!”
Off to the accountant to do taxes……no government handouts this year I am afraid.
I am curious about lending. Several condos in one development near me sold for about 850,000 last month. It seems like the average down payment was about 100,000. The rest of the mortgage was split between a home equity line of credit and a mortgage, usually both from Wells Fargo. I know that’s how people have been doing it, but I can’t really explain to my partner how you can get an equity line of credit or an equity loan without having equity.
I am a little bit surprised this is still going on; is that just the standard way to get a mortgage?
here is the link to mj monthly “best town rankings”.
http://njmonthly.com/articles/best_of/placestolive/best-places-to-live—the-complete-top-towns-list-.html
there are two towns in middlesex county: south amboy ranked 52 and cranbury ranked 518.
52 South Amboy City Middlesex 7,865 -0.6% $309,450 148% $4,458 21% 89 70 79 18.4 4.6 8 Yes
518 Cranbury Township Middlesex 3,899 20.7% $599,000 61% $9,651 2% 96 96 94 20.0 2.1 4 Yes
268 spam
IMO, easy answer is “thanks for letting us know. We’re comfortable with our offer, and will be making no concessions. This is not the only house for sale.”
JBJB [272]: Good advice, I was thinking about Atlantic Highlands last year, but I don’t know anything about it. I’ll check out the areas you suggested.
Interesting note on the Seastreak ferry shutting down: we were looking at a new condo development in South Amboy last year where one of my friends bought a place. It had ferry service to Manhattan. No more ferry service, it went bankrupt. My friend was an attorney w/ NYSE, but now he’s with a small law firm in Central Jersey.
253 Essex
“If investors don’t like the compensation structure of a company, which is available in detail in the annual proxy and in sometimes hard-to-find employment contracts that are exhibits to SEC filings, they don’t have to buy the stock. It’s really that simple.”
I love the assumption that, after you buy stock in a company, its exec comp arrangements can’t change. They just assumed me out of existence.
Question re: housing price fluctuations.
What is more likely to fluctuate with the market: (1) a less expensive house, say around $400-$500K, 3BR, decent town, longish commute to NYC, decent schools; (2) more expensive home, say around $700-$850K, 4BR, nice downtown, nice commute to NYC, great schools; (3) 2-3 BR condo on waterfront in Hoboken/J.C.?
Here’s why I’m asking. My wife and I would like to end up in #2 above. But, if #1 drops like a rock and is likely to rebound when housing prices go back up, and the #2 type home won’t drop much now and won’t skyrocket later, we might be better off buying a cheaper home now. Not sure if this was very clear.
Anyone want to advise this guy?
http://tinyurl.com/37u726
Buying a Secaucus condo?
283
IMO The best bet in a declining market is to wait a bit more unless you need to get in.
All 3 you mention are set up to drop to an unkown point and time. (1) due to its poor prox to metro area (2) due to a huge flood of step-up homes that will continue to be very competitive for the next 5 years. (3)condos will take the biggest fall when the NY market finally dies (as it is doing now).
If you do go in, you can probably make a decent deal compared to a few years back, but it should be a place you will NOT want to move from for the next 4-8 years.
You fail to mention a starter house in a close prox, solid area. THese take the least drop in bad markets, get a well-priced rough one without major renov needed, that you can patch and paint for another few years, will allow you to step up at a reduced premium in a few years.
Or wait another year or so to see if you can steal a (2).. There certainly wont be a shortage of inventory to choose from.
285 —
I forgot to mention that I’m looking at 2009 at the earliest, so I’m in no rush at all. I’d prefer to buy between mid-2009 and early 2010, depending on the market. So I’m definitely not looking for a starter that won’t fall…I’m waiting until everything falls. But I don’t need to wait for the evasisve “bottom” because who knows when and where that will be.
On a side note, when’s the last time anyone looked at the WSJ and saw these types of stories on the front page of various sections, all in the same day:
-Job Data Sugest U.S. Is in Recession
-More People Pushed Into Part-Time Work Force
-March May Be Quite Cruel
-Latest TUmble Leaves the Dow Off 10% on Year
-Carlyle Capital Aims to Halt a Meltdown
-Even Thornburg, “Strong” Lender, Is On the Brink
And how about this for the Weekend Journal section:
Cutback Cuisine: With food costs soaring, restaurants are making changes. Steaks are out. Patas and shrinking portions are in (maybe my health insurance will go down?)
#218: 24 years in IT? Fuggeddaboudit. No one will touch someone with 24 years in IT, no matter how current your skills are. Old = death for IT workers. I know; I am one. Fortunately, I’m employed for now, but I know damn well that if this job ends, my career is over. (I’m 52.)
Ann #244: I would LOVE for my town to be merged. We are getting over $800K in state aid cuts and the hacks and cronies who run my town (with no opposition, ever) want to spend $2-3 million on plastic-turfed sports fields. My guess is that a buddy of someone on the council will get the contract. Meanwhile, our town clerk is being sued for violations of the open records act. Merger can’t happen soon enough for me.
Clot[221],
F—ing hilarious. I think the fiber optics were cut in the Caribbean after happy hour, SDS, was posted.
“You’re in finance?”
Rich [201],
Now I know all the pundits are idiots and the analysts are ***holes but this a low blow to anyone who works within the financial sector.
Bi in finance? There’s s better chance that Rosie O’Donnell will be next month’s Playboy centerfold.
Layoffs are beginning — teachers are being fired….not sure where you get your information ‘cornfused’.
I know in the Woodbridge district where my wife works that there isn’t going to be enough “DEPA” money to go around so all first year teachers will be let go in the entire district. All second and third year teachers can stay.
244 Jill
I see your point.
I just think when it comes to merging school districts, most people don’t want to see any mergers, including myself.
5 rate cuts, hundreds of millions in TAF, any crap accepted at the window, floors lowered, ceilings raised, windows wide open, stimulus, Hope Now and Lifelines. A plethora of band aids, rubber bands and paper clips. Net result? Credit conditons are tightening, margin calls are flying and credit spreads are at record levels. Pay special attention to the bond market, not treasury rates, rather the spread of corp’s to treasuries. It’s usually a precursor for the stock market.
The fed is trying to treat the patient with the wrong medicine. Just come out and tell the public the truth. Yeah sure?? Welcome to the biggest financial bust ever. Yes, much worse than the Nasquack, multiplier effect.
Interest rates are not the villain. You can’t force a passed out drunk to drink more. We have just culminated the greatest credit/debt bubble in our history. Unfortunately, lowering rates is not the savior. Mr Market will continue to drive RE lower while the fed feeds inflation. Not BB’s game plan. Sorry, you can only manipulate for X amount of time. It will take years to clean out the excess crap. This implosion will continue much longer and further than most can imagine.
I need to sell my house fast. Sell? To whom?
That’s billions in TAF
chifi [172],
A wee bit touchy, no?
Frankly, I don’t care whether you have to act as a fiduciary. I’ve met good fiduciaries and bad fiduciaries, educated fiduciaries and uneducated fiduciaries.
I seem to recall some indication that you’re a CFA. (If not, my mistake.) AFAIK, the CFA curriculum has for years included and likely still includes a series of readings on the subject of underperformance by the average big pot of money, whether that be pension funds, mutual funds, or endowments. The whole genre was kicked off by Jensen’s 1968 paper reviewing pension fund performance and basically every look since then has confirmed his findings. Every quarter or so, S&P publishes their SPIVA stats, which confirms this over and over and over for mutual funds. There is now 40 years of documentation and the evidence just keeps mounting.
It’s true in every asset class. I don’t care if you say it’s untrue. I don’t care if you can point to this fund or that fund or Buffett or DFA or the Yale endowment. The majority, measured either by numbers or dollars, underperform their benchmarks.
On the behavior side, Morningstar has recently started to publish comparisons of total returns by mutual funds, as measured by the now standard chained time weighted, versus total returns actually experienced by investors. Pick a fund, any fund, at M*, click on Total Returns in the menu on the left and then on the Investor Returns tab. For many funds, there is a substantial gap as investors play the buy-high and sell-low game. Largely that’s not so at DFA, because there is a poised intermediary in place to remind both the greedy and the scared to ignore gyrations, but it’s true for many other funds.
I assure you I am quite familiar with DFA and its methods. I suspect that I was reading papers by Fama, French, and Sinquefield when you were but a pup.
Thank you for the explanation of what you meant by gaming. It’s true that some indices are easily gamed, the most egregious example being the R2K. So what? Once you figure that out, you can just stop playing where the game is rigged. No one has to get their exposure to that class by mimicking that particular index.
Finally, to SG, I’m sorry but your pretty tables are not proof of anything. Jamil has already noted the survivorship bias. I will add that cherry picking a few dozen funds and not even comparing them to an appropriate benchmark in some cases is classic investment pornography. You might not know any better so I give you the benefit of the doubt but that is the same sort of sucker play pulled on rubes around the world every day of the week.
One of my former colleagues had a theory about why NJ towns will never willingly merge. Built into the price of a home is the strength of the school district, which is handled at the municipal level in most cases. As an example, if I live in East Brunswick and paid an ungodly sum for a 3-BR crapshack so my kids could have good schools, I would never vote to merge with North Brunswick and watch my kids join MS-13 instead of pursuing a M.S. somewhere, ha ha.
NJ has many examples of big price differences between neighboring towns based primarily on perceptions of the schools. Montclair wouldn’t be Montclair without Bloomfield nearby, and Bloomfield looks good compared to Belleville, and Belleville, well, it’s not Newark.
NJ might be able to fuse fire departments and possibly police departments, but people will fight school district mergers until the last moving van departs for NC.
thanks clot and NJP.
My friend’s husband woke up sick yesterday morning; he has himself completely frazzled over the new house and I wonder if the agent cares a snot about the human stress caused by these tactics…
I told her to remind him “It’s only a house” and how “he won’t be thinking about this house on his deathbed”, blah blah blah… but the decision to move was not light for him (for a few reasons) and getting to a signed contract should have been easier… methinks this agent is hungry and sadly, has used this tactic before, with results.
BTW-They’re putting 50% down. These are not bootstrappers.
“Bi in finance? There’s s better chance that Rosie O’Donnell will be next month’s Playboy centerfold.”
There’s an ugly thought! (bi in finance, I mean).
292
Sing it, BC!
225.lostinny Says:
March 8th, 2008 at 8:15 am
Confused
Do you have a link for that piece from CNN? Usually, charter school employees get paid far less then NYC school employees.
I’ll look, it’s been on the TV news for last two days including this A.M.
The kids who’ve been setting fires in Bernards High come from Basking Ridge and Far Hills. And they wrote grafitti.
So much for the value of a “good school district” and hanging out with the right kind of kids. And of course avoiding all the horrible potential career criminals, Crips and Bloods and grafitti writing M-13 entrants in the “lesser towns”.
225.lostinny Here’s one article. TV news said bonus could double salary.
The $125,000 Teacher
“I would much rather put a phenomenal, great teacher in a field with 30 kids and nothing else than take the mediocre teacher and give them half the number of students and give them all the technology in the world.”
ZEKE M. VANDERHOEK, 31, who is starting a charter school that will pay teachers $125,000 a year.
At Charter School, Higher Teacher Pay
By ELISSA GOOTMAN
Would six-figure salaries attract better teachers?
A New York City charter school set to open in 2009 in Washington Heights will test one of the most fundamental questions in education: Whether significantly higher pay for teachers is the key to improving schools.
The school, which will run from fifth to eighth grades, is promising to pay teachers $125,000, plus a potential bonus based on schoolwide performance. That is nearly twice as much as the average New York City public school teacher earns, roughly two and a half times the national average teacher salary and higher than the base salary of all but the most senior teachers in the most generous districts nationwide.
The school’s creator and first principal, Zeke M. Vanderhoek, contends that high salaries will lure the best teachers. He says he wants to put into practice the conclusion reached by a growing body of research: that teacher quality — not star principals, laptop computers or abundant electives — is the crucial ingredient for success.
Ann & Jill
I lived in a small NJ town that has no schools. Tuition is payed on a per student basis to a neighboring school district. Since almost everybody opts not to send their children there the school tax is almost nothing. I much preferred the low taxes and sending my kids to the school of my choice.
For decades they have shared volunteer fire, police and garbage collection services with surrounding towns. Lots of townspeople actually go to the council meetings and go over expenditures line by line each month and there had better be three bids for each project. Municipal workers’ salaries and raises are discussed ad nauseum.
I now live in a large township where fire, police, school and administrative costs are out of control and property taxes go up & up. The former mayor just went to jail for taking bribes from developers.
It seems to me the larger the town the more waste, graft, and corruption.
295 spam
“BTW-They’re putting 50% down. These are not bootstrappers.”
Then definitely should tell the current sellers that it’s a good offer which will be shopped around to other sellers.
246.Essex Says:
March 8th, 2008 at 10:19 am
187………..Corzine will solve the NJ increase in unemployment by changing the Teacher/Student ratio from 1:16 to 1:1. Of course the property tax will increase by the same multiple.
*******************************************
Layoffs are beginning — teachers are being fired….not sure where you get your information ‘cornfused’.
Messex; What is the school by school breakdown of layoff’s you are quoting?
re: (292) Bob, the crux of the issue is that credit was created from nothing, and ultimately that’s what it’s worth, these band aids and this quiet/stealth bailout of the Banks via TAF is not going to fire up the cheap money and low lending standards anytime soon.
Check this post on the FEDs latest actions via TAF, and refer to strongman Bergabe’s speech a few weeks ago where he said he would hold TAF auctions weekly if necessary.
http://interfluidity.powerblogs.com/posts/1204920896.shtml
.
Our financial institutions are designed to try and cheat economic fundamentals, but they can only do so for a time. Economic fundamentals always prevail. Just take a look at inflation. It is now $3-$4 bucks for a slice of Pizza, and Joe Sixpack/Homer Simpson is starting to take notice.
Unfortunately we are in the midst of a stage one or this correction. Homer Simpson is starting to now wake up from his stupor of cheap credit, cheap food, cheap energy and cheap beer and realize that his good fortunes are over.
Evidence of his awakening can based upon the current state of the Democratic Primaries. A virtually unknown Chicago black man of African and Muslim heritage is about to win Wyoming, Dick Cheney’s home state. 94.5% of the population in Wyoming is white blue collar Christian god fearing patriots and they are voting in droves, which means they are afraid and may soon become angry.
Anger can also be seen in the Arson of mansions in Seattle and the bombing of the
recruitment center in NYC. The fringe are nothing compared to the rage of Homer.
sean,
to borrow a line from the manhatten project….
Our economic shenanigans and gluttonous consumption on all levels for the last several decades is a case of “tickling the dragons tail”
BC bob,
did you find that youtube link appropriate yesterday?
Sean[304],
Great article. Funny, we are now slicing repos into tranches. Yes, the nationalization of our banks in in process. Only we would accept 3% while Abu Dhabi receives junk bond rates. Northern Crock is minor leagues compared to our fiasco.
Kettle[306],
I never had a chance to see it. Can you post the link again? Thanks.
BC (307)-
I sense a return of the sausage metaphors.
For the Anglophiles;
http://www.youtube.com/watch?v=2t8YTvdYXws
Get a mortgage, buy a home
So dad took out a great big loan
For a while there we were chuffed
Now the market has collapsed
And we’re absolutely stuffed
Our house, in the middle of the slump
Our house, no one wants to buy this dump
Our house in the middle of the boom
Our house it was worth a small fortune
Our house left us in a dreadful state
Our house, why the h@ll’d we decorate?
Our house didn’t work out like we’d planned
Our house prices dropped by fifty grand
Our house threw us out and changed the locks
Our house – it is now a cardboard box
Great lisoosh!
I miss Madness. What a great band!
BC Bob
# BC Bob Says:
March 6th, 2008 at 2:51 pm
“Believe me, this real estate situation is just a blip on the screen.”
50.5,
Blip or crashing blimp?
# kettle1 Says:
March 6th, 2008 at 2:57 pm
169
regarding 50.5
OH The Humanity!!!!
(obscure perhaps)
http://www.youtube.com/watch?v=xiAT9xvTVKI
Has anyone noticed that prices in Westfield are dropping like a rock? Any low balls from Westfield?
Anybody can tell me what 1410 Vincenzo Drive sold for in Toms River?
294 in moderation?
dont if this was already posted…
Banks face “systemic margin call,” $325 billion hit: JPM
By Walden Siew
NEW YORK (Reuters) – Wall Street banks are facing a “systemic margin call” that may deplete banks of $325 billion of capital due to deteriorating subprime U.S. mortgages, JPMorgan Chase & Co (JPM.N: Quote, Profile, Research), said in a report late on Friday.
JPMorgan, which sent a default notice to Thornburg Mortgage Inc. (TMA.N: Quote, Profile, Research) after the lender missed a $28 million margin call, said more default notices and margin calls were likely. The Carlyle Group’s mortgage fund also failed to meet $37 million in margin calls this week.
“A systemic credit crunch is underway, driven primarily by bank writedowns for subprime mortgages,” according to the report co-authored by analyst Christopher Flanagan. “We would characterize this situation as a systemic margin call.”
The credit crisis that began about a year ago will likely intensify after Friday’s weak February U.S. employment report “that most definitely signals recession,” JPMorgan said.
Indeed, corporate bond spreads widened to a new record on Friday, surpassing levels seen in October 2002 during a boom in bankruptcies following the dot-com crash. U.S. employers cut payrolls in February for a second consecutive month, slashing 63,000 jobs, the biggest monthly job decline in nearly five years, the U.S. Labor Department reported on Friday.
“The weak February employment report points to an economy in recession,” JPMorgan said.
The JPMorgan report included a revised bleaker forecast for subprime-related home prices. The bank now sees prices falling 30 percent, from its prior 25 percent forecast. Those prices have declined 14 percent since mid-2006, JPMorgan said.
The U.S. jobs results also came after the Federal Reserve expanded the amount of its short-term auctions to $100 billion in total in the central bank’s latest effort to ease credit concerns. Ongoing concerns about bond insurers, known as monolines, and their effort to save their top ratings also are weighing on market sentiment.
I’m trying to figure something out.
The case involves a $290K condo in Middlesex and someone who makes around $55K a year.
Would this person have been approved for a mortgage at this moment? How about this time last year?
Were lenders aggressively peddling ARMs a year ago?
sign of the time is I got my long term incentive comp portion of my bonus pegged to euros. People on Wall street are not going to stay at a job three years to get worthless dollars. I did not ask they did if for everyone that way, short term usd, long term euros.
Hey listen, it does make you wonder though, doesn’t it? Does anyone know what a ball park figure for property taxes on this one would be?
http://www.realtor.com/realestate/charlotte-nc-28213-1094866604/
Frank
“Has anyone noticed that prices in Westfield are dropping like a rock?”
Yes. Mrs. Patient and I have noticed.
Apropos of which, where’s Reech?
RE302,
Now you know why Corzine wants bigger towns, both unions and corruption will flourish.
JIM
319 Gary
My guess is 2500.
GARY where’s Mitchell when you you need him!
3k you think?Nice bang for the buck down there have to admit.To tell the truth I’ve been interviewing out of state trying to get out of the tax state.Taxes on the the house I sold 06 almost doubled in the 9 years I owned it at this rate why would I want to buy another here.Luckily so did the price but that boat has sailed.
“Were lenders aggressively peddling ARMs a year ago?”
Yes.
lost and Mike,
Yeah, I was thinking of Mitchell, too! lol! So, 2500 to 3000 in taxes… wow, we must be nuts, right? Makes you wonder what we’re striving for.
Gary its pissing in the wind to buy in NJ now that the big money has been made.The only way I’ll stay is if I can get what I want cash.If things go the way I think it might just happen.That being said the taxes aren’t going away & can only get much worse.
So I can buy cash out of state with silly low taxes & get a positon I like I’ll
go for it.
If your property is in Charlotte, to calculate your 2007 city/county taxes, take the tax value of your property, divide by 100 and multiply by 1.2973. Owners of a $150,000 house will have an annual city/county tax bill of $1,945.95
If your property is in Mecklenburg County and not in Charlotte or other town,
take the value of your property, divide by 100 and multiply by 1.0149. Owners of a $150,000 house will have an annual county tax bill of $1,522.35
http://www.realestate-charlotte.com/Property_Tax_Rates/page_208967.html
Punch so we are looking at about 4700 taxes on the house Gary posted.Not bad at all.
Mike, lost, gary
As I’ve said, I’m out after two more bonuses.
njpatient,
Are you gonna go to NC?
Test
330 gary
No
PA
Maine Line
John
How is the value of your LTIC paid in € (as opposed to $) conveyed? (Genuinely curious). Can you give any more light on bonus metrics? Thanks.
Sorry ’bout the “test”. Kept getting error msg. Almost got the DTs again. Was going to fly to Zimbabwe to take out Ber…er, Mugabe with a rusty grenade launcher, but I couldn’t get ahold of Clot to borrow his…..rusty grenade launcher.
NJ patient,
Would you mind sharing some your housing research on PA? i can ask grim to kick you my e-mail.
sorry, last post was a mistake
Would you mind sharing some your housing research on PA? i can ask grim to kick you my e-mail.
Kettle
I don’t have anything useful, but you can get my email from grim. We’re probably making the PA move in winter 09/10.
I talked briefly with grim at the last GTG about getting him qualified in Montco, Delco and environs, but there are apparently roadblocks beyond the expense that I wasn’t sober enough to follow at the time. I haven’t yet stumbled across an agent that seems trustworthy on the buy side (recommendations for a non NAR-fluffer welcome), though I have eliminated Lavinia Smerconish.
Bye, Dook.
patient (334)-
I think one determined man and a rusty grenade launcher could take out Mugabe.
patient (338)-
Paulus- 2 assists.
Nothing- and I mean nothing- beats punking Dook in front of the pack of weasels they call their fans.
Maybe Coach Ratface will shut up about us and mind his own business. Right now, he has a team that plays like Benetton Treviso. That ain’t gonna cut it, now that the games count.
It’s gonna be fun in 9 days, when we get these guys in the ACC final and kick their a$$es again.
Go to hell, Dook.