From Barrons:
The Endgame Nears For Fannie and Freddie
IT MAY BE CURTAINS SOON FOR THE MANAGEMENTS and shareholders of beleaguered housing giants Fannie Mae and Freddie Mac . It is growing increasingly likely that the Treasury will recapitalize Fannie and Freddie in the months ahead on the taxpayer’s dime, availing itself of powers granted it under the new housing bill signed into law last month. Such a move almost certainly would wipe out existing holders of the agencies’ common stock, with preferred shareholders and even holders of the two entities’ $19 billion of subordinated debt also suffering losses. Barron’s first raised the possibility of a government takeover of Fannie and Freddie in a March 10 cover story, “Is Fannie Mae Toast?”
Heaven knows, the two government-sponsored enterprises, or GSEs, both need resuscitation. Soaring mortgage delinquencies and foreclosures have led the companies to gush red ink for the past four quarters, and their managements concede the outlook is even grimmer well into next year. Shares of Fannie Mae (ticker: FNM) and Freddie Mac (FRE) have lost around 90% of their value in the past year, with Fannie now trading at $7.91, and Freddie at $5.88.
Similarly, the balance sheets of both companies have been destroyed. On a fair-value basis, in which the value of assets and liabilities is marked to immediate-liquidation value, Freddie would have had a negative net worth of $5.6 billion as of June 30, while Fannie’s equity eroded to $12.5 billion from a fair value of $36 billion at the end of last year. That $12.5 billion isn’t much of a cushion for a $2.8 trillion book of owned or guaranteed mortgage assets.
What’s more, the fair-value figures reported by the companies may overstate the value of their assets significantly. By some calculations each company is around $50 billion in the hole. But more on that later.
…
Note, too, that Fannie and Freddie have nonpareil lobbying operations and formidable political strength, owing to their hefty donations and penchant for hiring former political operatives. Besides, the agencies claim they’ve landed in their current predicament through no fault of their own. As Freddie Mac Chairman and CEO Richard Syron recently put it, the GSEs have been hit by a “100-year storm” in the housing market, accentuated by some higher-risk mortgages that they were forced to buy to meet government affordable-housing targets.
From Bloomberg:
Bernanke Tries to Define What Institutions Fed Could Let Fail
Ben S. Bernanke is still trying to define which financial institutions it’s safe to let fail. The longer it takes him to decide, the tougher the decision becomes.
In the year since credit markets seized up, the 54-year- old Federal Reserve chairman has repeatedly expanded the central bank’s protective role, turning its balance sheet into a parking lot for Wall Street’s hard-to-finance bonds and offering loans through its discount window to investment banks and mortgage firms Fannie Mae and Freddie Mac.
The lack of clearly defined limits may put the Fed’s independence at risk as Congress discovers that its $900 billion portfolio can be used for emergency bailouts that might otherwise require politically sensitive appropriations and taxes.
“There is some hard thinking that needs to be done,” Philadelphia Federal Reserve Bank President Charles Plosser said in an interview last week. “The Fed has a terrific reputation as a credible institution. We have to be cautious not to undertake things that put that credibility at risk.”
From MarketWatch:
Lehman could face $1.8 billion loss: report
Lehman Brothers Holdings may face a fiscal third-quarter loss of $1.8 billion some analysts believe, which would take its losses since the start of March to at least $4.5 billion, according to a report in the Wall Street Journal. Back-to-back losses would add to the pressure on CEO Richard Fuld to show the losses won’t continue, the newspaper said. If the losses do continue to pile up, Lehman could need to raise further capital beyond the $6 billion it received in June, the Journal said.
3rd. The storm is coming. What can we do to capitalize it?
From the WSJ:
Lehman Faces Another Loss,
Adding Salt To Its Wounds
By RANDALL SMITH and SUSANNE CRAIG
August 18, 2008; Page C1
Lehman Brothers Holdings Inc. has been taking its time as it wrestles with how to escape the problems haunting the investment bank. It probably can’t wait much longer.
With the end of the New York company’s fiscal third quarter less than two weeks away, some analysts are girding for a loss of $1.8 billion or more, instead of the modest profit they previously expected. If the dour projections come true, Lehman’s losses since the start of March would total at least $4.5 billion — or more than the firm churned out in profit during fiscal 2007.
The likelihood of back-to-back quarterly losses, fueled by widely anticipated write-downs in a portfolio saddled with more than $50 billion in risky real-estate and mortgage assets, puts even more pressure on Lehman Chairman and Chief Executive Richard S. Fuld Jr. to show that the losses won’t keep piling up. If they do, Lehman could need to raise additional capital beyond the $6 billion it got in June.
In the past few months, Lehman officials have examined an array of options to bolster the company’s financial position, ranging from selling troubled real-estate assets at a discount to divesting a piece of profitable asset-management unit Neuberger Berman, according to people familiar with the matter.
Someone linked this story up and it was discussed Sunday, but I thought it was so powerful, it bore repeating:
http://seekingalpha.com/article/90892-the-great-consumer-crash-of-2009?source=front_page_most_popular_articles
In conclusion, the gathering storm has arrived. It will be long, painful and destructive. Those who prepared for the storm by not taking on excessive debt and living above their means, will ride it out unscathed. Those who built their house on sand by leveraging up and living the “good” life, will see their house swept out to sea. The storm will pass and we will rebuild. Our country is resilient. The purging of this massive debt will result in the creative destruction that is the hallmark of American capitalism. New opportunities, new technologies and a new attitude will put us back on course.
There has been and will be resistance to the inevitable deep recession that is coming. The American consumer is not cutting back willingly. They are being dragged kicking and screaming towards the joys of frugality. The “material generation” needs to dematerialize. My biggest concern is that our politician leaders and their cronies running our government will continue to try and reverse the normal capitalistic course of recession and expansion. Companies need to fail, housing needs to find its bottom based on supply, demand and price. Those who gambled must be allowed to lose and suffer the consequences. If the government attempts to shift the losses to those who lived lifestyles of thrift, an angry uprising will ensue. Government intervention in this natural process could lead to a decade long depression. Let’s hope that reasonable heads prevail.
From the WSJ:
FBI Probes Unusual Incentives for Home Buyers
Investigators Ask
Whether Payments
Misled Lenders
By NICK TIMIRAOS
August 16, 2008; Page A2
When home sales began to slow at the start of the downturn, home builders offered buyers incentives — instead of reducing prices — to stimulate demand. The incentives included cars, tuition and credit-card payments, and even cash.
Now, federal investigators are questioning whether some of those incentives misled lenders and caused them to write mortgages that were artificially inflated, contributing to today’s home-price crash.
Using incentives to sell homes has long been a marketing tool for builders. When properly disclosed and structured, the practice is legal. But the Federal Bureau of Investigation is looking into allegations that home builders, brokers and appraisers defrauded lenders by not disclosing unusually large incentives to buyers, which could have added as much as $100,000 to the price of a home.
…
Interviews with real-estate agents, home buyers and former employees at home builders describe an industry where competitive pressures fueled unusually creative giveaways in a last-ditch attempt to prevent price cuts. Home builders hate to cut prices, not only because it reduces profit, but also because their customers who paid full price complain.
From the AP:
PBGC downplays investment plan risks, report says
The federal agency charged with backstopping pension benefits for 44 million Americans has understated the risks of its new investment policy, a congressional watchdog said Monday.
The Government Accountability Office said in a report that the Pension Benefit Guaranty Corp.’s new strategy could significantly boost the PBGC’s investment returns, but it “will likely also carry more risk than acknowledged by PBGC’s analysis.”
The PBGC said earlier this year that it would take a more aggressive investment approach by investing more in stocks and adding new alternative investments, such as real estate and private equity funds.
The agency, which has assets of $68 billion, hopes the strategy will help it close a $14 billion gap between those assets and its liabilities. Otherwise, taxpayers could be called upon to pony up extra funding, the director of the PBGC has warned.
“BIRMINGHAM, Ala. — Alabama’s largest county appears headed for the biggest municipal bankruptcy in U.S. history, a $3.2 billion mess created by the nation’s credit crunch and a colossal, corruption-riddled sewer project.”
“Acting at the suggestion of outside advisers, the county borrowed money for the project on the bond market in a complex and risky series of transactions. When the mortgage crisis hit and banks began tightening up on their lending, the interest rates on the debt ballooned.”
“Politicians in Jefferson County — which has 658,000 residents and includes the state’s biggest city, Birmingham — are struggling to find a way out of the jam, but they have mostly abandoned talk of raising taxes and fees after running into fierce opposition at raucous public meetings.”
“On Thursday, with their options running out, the county commissioners all but threw up their hands and decided to let the voters weigh in on Election Day with a nonbinding referendum on whether to file for bankruptcy.”
http://www.tennessean.com/apps/pbcs.dll/article?AID=/20080816/NEWS08/808160342
grim (8)-
Great. The people who are supposed to be the prudent ones run toward the burning building.
Guess we’ll be bailing out these guys, too.
BC (9)-
They have sewers in Alabama?
“Shelters get increase in surrendered, deserted pets”
thats a damn shame.
this also revelas the underlying personality of most people facing foreclosure. People who are not very responsible to begin with, and really have emotional detachment.
yup, its true and in your face baby!
SAS
Commercial comp killer?
According to this auction website, someone bought 119 acres of commercial land on Rt 206 in Stanhope for $150k. I knew that commercial was doing pretty poorly, but this seems really cheap…
http://www.williamsauction.com/Property/ViewProperty.aspx?PropertyId=186296
From MarketWatch
Housing malaise eats into Lowe’s net
No. 2 home-improvement retailer Lowe’s Cos. said that its second-quarter profit fell 7.9%, hurt by the housing market downturn that cut into demand for big-ticket purchases, and issued a third-quarter forecast that missed analysts’ estimates.
reminds me when I did some volunteer work for the so called “poor” in the inner cities of Oakland, CA & up in the Bronx.
These so called people complained that the man & discrimination was holding them down, and thats why they couldn’t
get ahead, etc… etc…
But, as you look around, the so called poor, all had ipods, $100+ Nikes, $500 North Face jackets, Gucci sunglasses, fresh nails done, nice speakers & plasma TVs for the home or apt. But yet… no cash money to pay the rent? no cash money for the months grocery bill? No cash money for a semester of classes at the Community College (which some are very good btw)
NOt all, but most so called “poor” or low income people in this country (in other countries-different story) are not really poor and nothing is holding them down, other than themselves.
The reality is its not the lack of a high income that holds them down, but rather how they spend it and use it. Its a mindset.
You give one of those blokes a million dollars, in 12 months time, they still would be in the poor house full of piss & viniger.
Total & complete lack of personal responsibility, and its alot easy just to blame others than to take a hard look in the mirror.
ok, off my soapbox.
SAS
The usual doom & gloom (not that I’m complaining) is not as gloomy today, down at Wildwood Crest NJ for the week. Condos & townhouses everywhere eerily most dark at night no signs of life. They over built to the max down here knocking down many small motels & the like to build. Oh the humanity! To tell you the truth I’ve been coming here for over 30 years & can hardly recognize the place. Piggy backing on someones signal no wifi at the hotel. By the way bumper to bumper almost the whole way down, if that means anything. Boards mobbed last night. Time to to breakfast bye all.
so when you hear someone piss and moan about their mortgage or give you some sap story about foreclosure, take with a grain of salt.
because more than likely, than made their own bed with irresponsibility and a addiction of material consumerism, now they have to sleep in it. and they just don’t want to face it.
SAS
ok, now I’m really off the soapbox :)
Cheerio :)
SAS
Looking for house in South Jersey – Atlantic County area – but prices do not seem to be dropping much. The realtors I’ve talked to say homes will retain value. Is the South Jersey market trailing other areas’ trends, or will its real estate market remain stronger?
Clotpoll and BC Bob,
Look at #19 and read: “prices do not seem to be dropping much.”
jonbd 19
“The realtors I’ve talked to say homes will retain value.”
Bullshit!! wait them out.
(6) Laughing – I loved this article with one exception:
“Those who prepared for the storm by not taking on excessive debt and living above their means, will ride it out unscathed.”
Probably not….
(Check out the end of the comments section on the “Seeking Alpha” post though. 8/18 7:56 – Reinvestor X.)
“This article is just another one full of gloom and doom….” You can imagine the rest…
Frank [20],
Wake up. I saw two short sales this weekend in BC, 25-30% off 2005. Not tempted though, don’t want to overpay.
Grim – in moderation at 22 – If it is inappropriate – just pull it…Thanks…
No Supply in Precious Metals? from Kitco
“MPORTANT NEW NOTICE: Due to market volatility and higher demand in the entire industry, we are anticipating delays in supply of all bullion products. Please note that you can continue to place orders and prices will be guaranteed; however, cancellation fees will still be applicable regardless of the length of the delay. Consequently once inventory is received there may also be delays in processing and shipping by our vaults”
Also
Either This is the Greatest Silver and Gold Buying Opportunity of All Time, or the End of a Bull Market
http://goldprice.org/silver-and-gold-prices/
Frank (20)-
What is it you’re trying to sell?
My opinion has shifted to the bottom being 50-60% off 05/06 highs. why?
– The 2 major employment industries in NJ are leaving (Finance and Pharma). Without these 2 industries the primary source of money for the middle and upper middle class is gone.
– Uncontrolled spending/unrealistic politicians. The political organism that has developed in NJ, from the unions to the state house refuse to recognize how serious the states financial situation really is and wont until they go bankrupt.
– Exodus. The middle/upper middle class is leaving the state at a steady pace. This has been going on for several years and will most likely accelerate as the local tax burdens around NJ continue to increase and tax people out of the state; the laffer curve in action.
– End of easy money/HELOC lifestyle
you combine all of these factors and the median income in NJ is certain to decrease over the course of the bubble bursting (which can take 10 years). Combine a decreasing median income with a loss of high paying jobs, and an influx of people into the state that require more services then the people they are replacing (decreasing tax base, increasing costs).
I am not sure that 50% isnt too optimistic.
#25,
I will be selling my house in few months and I have to tell you, people are asking way more than I paid for in 2005 for houses in my neighborhood.
Sean (24)-
Couldn’t have said it better myself:
“But it is NOT the end of a bull market. Time alone argues that. A bull market runs 10 – 20 years, this one has run only 7, since 2001. Those who think silver & gold have fallen into the “bursting of the commodity bubble” completely misunderstand what drives them in the first place. Silver & gold are not commodities; they are money.
When investors pile into silver & gold, it’s not any commodity bubble forcing them there, but monetary demand. They aren’t buying metals because they think all the Indian ladies are going to be wearing two nose rings instead of one this season, or that the American bourgeoisie will suddenly begin stockpiling sterling silver forks again.
They are buying metals because — listen to this, get it straight once & forever — they distrust fiat central bank currencies (or if you prefer, national currencies). The dollar is trash, the yen is trash, the euro is trash; all are equally insolvent, equally unbacked by anything expect a politician’s or central banker’s promise, which is not nearly as good as that of any madame at any bordello anywhere.
The dollar is rising? So, why? Did it become better, acquire more gold backing, solve its chronic balance of payments deficit last night? Come on. Did the euro get worse overnight? The yen? How much worse could it get? You are seeing competitive devaluations, all very much worked out collegially in advance by central bankers. Fundamentally meaningless.”
Frank (27)-
Asking prices? Asking prices mean nothing.
How underwater are you?
Sean,
another possibility is deflation in action. Wile the US has been running the printing press 24/7 lately and m1 has seen a noticeable uptick into positive territory as of late; the question is, has the rest of the world been running their printing presses while they are also writing down hundreds of billions of dollars is disseminating $$$. Perhaps a controversial idea, but there is the possibility that the behavior seen in commodities and in the dollar recently are the first outward signs of deflation poping to the surface.
#20 Frank: What peopoe ask a d get are too very different things. Surely you have learned that by now.
I’m talking about the area surrounding Atlantic City, where the casino industry, shore houses and retirement communities directly affect the housing demand. I haven’t seen price reduction over 10%, just fewer listings. A short sale might get 25 – 30% off 2005, but will overall prices ever get that reduction. Will a homeowner, not foreclosing, trying to sell a home ever accept reducing an asking price by that much?
#19 The realtors I’ve talked to say homes will retain value.
Did you ask them why?
vodka (30)-
Stealth deflating would be a cool little trick. However, that could only be accomplished by intelligent people, acting with purpose.
I think we have to assume utter stupidity on the part of Bergabe, Klink and co. until they prove otherwise.
3b (34)-
A dealer once told me cocaine would make me smart.
by Gary North
How the Smart Money Lost $1 Trillion, So Far
The unraveling of all of these mortgage loans caught the lenders by surprise. Despite numerous warnings in the contrarian newsletter field, the best and the brightest in the richest and most successful financial institutions and banks in the United States encouraged these loans in 2004 and 2005. Alan Greenspan publicly encouraged these loans.
The man who saw this most clearly and wrote about it constantly for seven years was Dr. Kurt Richebächer. He wrote from 2001 to 2007 that Greenspan’s easy money policies would produce the worst recession since the Great Depression. Every month, his newsletter warned that this mania for debt could not be sustained for much longer. The problem is, he kept saying this, but nothing happened. People dismissed him as someone who was old-fashioned. He died in August of 2007, the month that his predictions began to come true. That was the month that the credit markets of the West froze up.
A tiny handful of investors have figured out that something is radically wrong with the capital markets of the United States, and maybe the entire world. This was what Dr. Richebächer said for at least seven years. These little people, who read the obscure e-mail letters, and who visit obscure blog sites, have a better sense of the nature of the looming crisis than the best than the brightest have. The best and the brightest keep telling us that the worst is behind us. People who read the newsletters snicker. Month after month, the people who read the newsletters turn out to be correct.
Power to the Blogs !!!
#22 BC Bob: Listing in my desireable, blue ribbon, BC train town, that sold for 430k in May of 2006.
The bank is now asking 359K!!
jonbd (32),
I haven’t seen price reduction over 10%, just fewer listings.
Where did you see these reductions, in the asking price or the sold price?
Sean/Clot,
I went to two gold dealers on Sat. They did not have any inventory to sell, at least that was their story.
jon (33)-
Bullshit. I just dealt with a family who moved here from that area. It took them almost a year to sell their house. Concessions galore to the buyers, too. Their agent on that end was an old-timer, and she told me it’s as bad as she’s ever seen it there.
BC (40)-
I may start digging in my mouth. :)
#28 Frank: You are in either deep, deep denial, or full of crap. AT least be honest at this point.
I would think that at this point even the most die hard real estate bull understands that the environment has at least changed.
You bought in 2005, accept it and move on, or perhaps in your case stay put.
“You bought in 2005, accept it and move on, or perhaps in your case stay put.”
3b,
He bought as I sold. That’s my contra party. Nothing else to say.
#33 Will a homeowner, not foreclosing, trying to sell a home ever accept reducing an asking price by that much?
If they have to, or need to, or want to, they will. And many people will fall into one of those above categories.
CLot,
I am not suggesting stealth deflation per se, but that deflation is starting to popup despite attempts to stop is. The finger in the dike scenario. you keep filling individual wholes, but more and ore start to open up and water starts spraying.
the markets are a mixture of local and global interactions. While bergabe may be running the pres sin overdrive, the rest of the world isnt. gold, silver, etc are global commodities that will sift irrelevant of borders and ntional monetay policy.
And to avoid confusion, remember that i am referring to a contraction of the money supply, not prices.
344 BC Bob: Agreed. At least we know the truth now regarding Frank.
are you ready for a leader that God has blessed us with at this time?
But the Illinois senator, introduced in San Francisco by House of Representatives speaker Nancy Pelosi as a “leader that God has blessed us with at this time,” vowed not to make the mistake of previous Democratic nominees in failing to sufficiently repel Repubican assaults.
http://www.breitbart.com/article.php?id=080818111412.ujyap6xs&show_article=1
Although I already have a house, I frequently check the mls to see if I would have been better off passing on my current house, so far no. Prices are still way out there. I will be depressed when I can find a bigger, better 1920’s house for $350,000 that:
– has a garage
– has a big lot
– does not have oil heat
– has a bathroom on the 1st floor
– has original 1920’s elements
– on a quiet street
– taxes under 10k
“Prices are still way out there.”
tbw,
Asking or closed deals?
“The realtors I’ve talked to say homes will retain value.”
The used car dealer I talked to told me that the Ford Fiesta on his lot was driven by an old lady and would go another 100k miles, but I’d better act fast!
BCBob: asking
In the asking price. I’m talking about, just outside of Atlantic City and AC itself – Brigantine, Absecon, Smithville. Doesn’t seem like magazines or newspapers really show that much of drop in the prices of these homes since January. Some claim a reduction, but only for high end homes. Homes between 200 and 300k – I expected more of a drop based on everything I’m reading about the rest of the state/country. I’ve been told shore homes retain value, obviously. Maybe I should talk to other real estate agents.
Hi all,
I met one of my friend who lives in montgomery TWSP. She told me that she bid on a foreclosed house for 410K for a 800K owed house there. The realtor who wrote it told her there are lot more houses like that in Princeton area. This seems to go against bi’s argument that his area is holding the value. Just another anecdote.
pine_brook
jon (53)-
Get yourself to another agent…fast. Again, the client I referenced earlier sold in the 200-300K range in Absecon and took an absolute bath.
And yes, it was a perfectly nice house.
#28 Frank Says:
August 18th, 2008 at 8:51 am
#25,
“I will be selling my house in few months and I have to tell you, people are asking way more than I paid for in 2005 for houses in my neighborhood.”
Must be the Frank factor.
“Those who prepared for the storm by not taking on excessive debt and living above their means, will ride it out unscathed.”
In fairy tail land, maybe.
In the real world, we live in a majority-rule democracy, where most people (voters) have overindulged. Politicians will socialize the losses in the form of tax breaks for losers and inflation to wipe out debt, which will also wipe out savings. Everyone will be punished.
Early whackage today on FNM, FRE.
Please unmoderate #57…I used the “S” word (i.e. so-shall-ize).
Just curious, but is there anyway way to adjust what get you kicked into moderation?
#53 – jondb – I’d second what Clotpoll had to say. I’m familiar with the area you are looking in as I lived there for a few years. I was absolutely floored by the number of houses for sale there earlier in the year.
It’s a nice quiet area but largely dependent upon AC. Houses asking 200K – 300K are sellers with a lot of debt and little ability to lower their asking. Find houses that are currently empty and lowball, lowball, lowball.
You could buy a pos ranch or cape for under 100k in Absecon for much of the 90’s. Now same pos house with another 10 years of wear is supposed to go in the 300’s?
There are not enough high paying jobs in that area to keep prices at that level. Especially since most people in the area claim the casinos will drive prices up, yet the casinos revenues are tanking on a YOY basis. I would think housing prices will go down a lot more than the casino prices.
Toss in $4 a gallon gas and stricter lending standards and look out below.
if this was true, i would sell my yellow stuff to buy another house in the area.
>#54, Hi all,
I met one of my friend who lives in montgomery TWSP. She told me that she bid on a foreclosed house for 410K for a 800K owed house there. The realtor who wrote it told her there are lot more houses like that in Princeton area. This seems to go against bi’s argument that his area is holding the value. Just another anecdote.
pine_brook
I tried to sell my tellow stuff but nobody was interested in some used Depends.
#61 – You could buy a pos ranch or cape for under 100k in Absecon for much of the 90’s
You could still do that up until about 2002 if you shopped hard enough.
You are absolutely correct about jobs in the area, the only place that kind of pays well are the casinos.
lots of high paying jobs in Burlington County
Hey I was in Abeson last week. Seems their are a lot of rich folks there. Went to smithville inn, gourmet italian place, great breakfast joints, storybookland and the beach. Everwhere was packed and everyone was spending like crazy. Lots of locals in doctors scrubs packed up the nearby lunch place and both golf courses at Marriot were full. Lots of good jobs at hospital, Marriot and Atlantic City. If houses go back to 100K out there I would love to buy one. Heck you can just take a 100K home equity loan and pay cash.
bairen Says:
August 18th, 2008 at 9:43 am
You could buy a pos ranch or cape for under 100k in Absecon for much of the 90’s. Now same pos house with another 10 years of wear is supposed to go in the 300’s?
There are not enough high paying jobs in that area to keep prices at that level. Especially since most people in the area claim the casinos will drive prices up, yet the casinos revenues are tanking on a YOY basis. I would think housing prices will go down a lot more than the casino prices.
Toss in $4 a gallon gas and stricter lending standards and look out below.
#66 – Seems there are a lot of rich folks there
Note the operative word. Also why would you think that the people you were encountering at a BnB, the Smithville Inn and a golf course are in any way indicative of the local populace? Especially in a shore town during the summer?
another inflation/deflation point:
per shadow stats, (http://tinyurl.com/3bhh8b) M3 is decreasing while m1 is increasing. This means the level of cash avaiable in the general economy is increasing while the total amount of money ( primarily in in large institutional funds ….. writedowns?!?) is decreasing. If i am interpreting this limited amount of data correctly then it looks like we hare seeing net deflationary trends. This could be a bump in the trend, we will have to wait and see. It is interesting that the shift from a negative M1 rate to a positive rate coincides approximately with the stimulus checks.
just my 1 cent (deflated)
#66 john,
Those are all tourist spots. Go back in February. you’ll have those places to yourself, unless some of the local toothless tattooed pineys feel like celebrating the road kill they just carved up and stuck in their freezer.
#67 toshiro: Note the operative word.
Agreed. Like one house in my town that is in foreclosure.
Seemed like they had money,big McMansion, Land Rover, and Lexus in th drive way, and yet the house is in foreclosure.
3b: same in my neighborhood. The “ballers” of the block are in foreclosure. Didnt put a cent down on their house, but they drive high end cars…
John (66),
I know the area quite well. You’re observations are off.
Rich folks and Smithville Inn do not go together in the same sentence. The food is atrocious. (Good breakfast can be had down the road from Smithville before the Marriott at Shea’s)
The Sea Pines Marriott in the only upscale joint for MILES in that area. Hence the fact the course and hotel are packed. (Great weather for golf this week)
“by some higher-risk mortgages that they were forced to buy to meet government affordable-housing targets.”
So congress forced this “predatory lending in minority communities” and is now investigating/bashing Wall Street for doing that..It is congress that should be investigated and thrown out.
John,
No offense your high! I went to college down there and calling Absecon high end would be like calling Saddle Brook upscale. It is un-buildable Pine barrens with no jobs, contaminated high water table, near sea level, and draconian regulation. Atlantic county ranks consistently with the lowest salary levels in the state and any physician’s living there work in the county medical center. Which pays like crap. I know I volunteered there when I was pre-med. Also, as an added bonus Vineland is like Paterson without the police presence. Much of Atlantic City is a post-apocalyptic wasteland. While Mays Landing, Pomona, Port Republic and Margate could have crawled right out of the movie Deliverance.
I thought you guys would enjoy this: my wife was out doing her daily walk the other day and on a single day, she saw 3 separate repo guys taking back cars in Westfield.
a range rover, some other thing and a high end bmw – like an 800 series.
Truly, the end is nigh….
Exodus. The middle/upper middle class is leaving the state at a steady pace.
Ket,
We toyed with the idea of moving, but then dropped the idea after it seemed like there was light at the end of the tunnel with housing prices starting to drop.
However, our search so far has been frustrating. We are searching in the upper 300’s. While we technically qualify for more, we want to put down 20%, don’t want to exceed 28% of my gross and we don’t want to count my wife’s salary toward the qualification, since we have a toddler and want to have another one in the next year or two. With no real child care backup, it’s tough for my wife to have a career position when day care can call at any time and say “pick up your kid, she is sick”…and boom, she’s out of work for a few days.
So far, most what’s in our price range is garbage; lot’s of run down capes and bi-levels in so-so condition with oil heat and high taxes. On the rare occasion that something decent enters our price range, it attracts multiple offers and gets bid up.
So, we are again entertaining the idea of getting out. Prices still too high, with sellers that would seem to rather sit forever than sell; property taxes high and only going up; and key industries leaving the state. The arguments for buying here seem to be getting weaker by the day.
“Battered US financial groups will have to refinance billions of dollars in maturing debt over the coming months, a move likely to push banks’ funding costs higher and curb their profitability, say bankers and analysts.”
“The banks’ need to raise capital to offset mounting credit-related losses is forcing them to pay higher interest rates to entice investors.”
“The rising funding costs are set to put pressure on earnings because, in many of their businesses, banks rely on the difference between borrowing and lending rates to make money.”
Mohamed El-Erian, co-chief executive of Pimco, the asset management group, said: “If banks keep borrowing at these levels, you will get a repricing of credit for the whole economy”
http://www.ft.com/cms/s/0/e15201ce-6c7e-11dd-96dc-0000779fd18c,dwp_uuid=eddfd4e0-4bc3-11da-997b-0000779e2340.html
Client just had a bid accepted on undeveloped land in Lichtfield County…peak pricing in 2006 was about $30K+/acre…he just snared it for $18K/per…the ask was $25K and was quickly bid down from there….he lead with a $17.5K lowball and didn’t have to move much up from there….SB is buying back all his Auction rate munis, so he has cash burning a hole in his pocket….
#76: Be patinet, The light really is at the end of the tunnel.
Lending is tightening ever day, and although you are seeing just the krap housesnow, the good stuff is right behind it.
Has anyone noticed the drop of U.S.A. chants at this Olympics compared to previous ones? Is this because we’re tapped out and can’t afford to travel, did the Chinese “request” this, or are the stands loaded with locals making it hard for tourists to get seats? Ot a combo?
About to make an offer on a short sale. We are using the seller’s re agent, who apparently doesnt want any commission. Also using a family re attorney to do our closing and he has been helpful so far. We hope to get a commitment from their bank once we settle on a price and before we apply for mortgage and get an inspector in. Any advice is appreciated. What are the possible pitfalls i’m missing? Thank you,
Clotpoll Says:
August 18th, 2008 at 8:52 am
Sean (24)- Couldn’t have said it better myself:
clotzoi: keep an open mind or be doomed…
Back in early spring I went looking for houses around my area. I found a lot of very poor inventory for sale at the same prices of nicer homes. I got the feeling that falling house prices were causing havoc on real estate agents trying to bring order to the market.
I went into one house, selling for 360,000, that smelled of cat urine and appeared to be a converted church. The owner, who was there at the time said that he wanted to move fast on the house and would take 300,000 if we could close soon.
I wouldn’t have offered that guy 200,000 for that POS.
While walking through the house-turned-litterbox I saw a brand new truck in the garage. A shiny penny in the middle of all the sludge. I wondered silently when the repo man would find it.
“get an inspector in.”
Veto [81],
The short sales I have visited have been offered as is. The banks don’t want to be responsible for the current owners trashing the place, stripping copper, etc..
The condition of the house upon inspection may be radically different as compared to when you take possession.
Question to the realtors; how do buyers protect themselves in this situation? Offer cash to the present owner to deliver the property in sound condition?
3b [79],
With all due respect my brother, you did tell me this a year ago. :)
#85 gary,
The good stuff is starting to show up at the same prices pos were listing for in Somerset county last year, even lower in some cases. Patience gary, patience.
Here’s a nice one in Warren for 465k
Pos capes and ranches were listing higer a year ago
http://www.realtor.com/search/listingdetail.aspx?ctid=91606&mxp=29&bd=4&typ=1&sid=deb59a65160b4303a0807f9616b49a35&lid=1098933445&lsn=7&srcnt=15#Detail
bairen [86],
Not bad.
what a shame. no more cookies!!
http://www.nydailynews.com/money/2008/08/15/2008-08-15_mrs_fields_cookies_plans_bankruptcy-2.html
#87 BC Bob,
Yeah. If I wasn’t getting laid off in 2 weeks that would be tempting.
I figure getting laid off will save me at least 50k since we’ll have to wait till at least next Spring or Summer to buy now.
#80 Olympic Travel:
Chinese Visa rule is very tight right now, and the locals (and there are a lot of them) were eager to obtain the tickets.
Visa Rule Updates:
http://www.travelpod.com/travel-blog-entries/happysheep/shangri-la-la/1212575580.html
bairen,
Do you know what the taxes are?
#81 Olympic Travel 2:
Anecdotes of tightened security, language barrier, and inexperience with large events may also discourage American sports tourists. Discussion of foreigners in Qingdao, the location of the sailing event:
“Spectators for the events seem to be almost exclusively from within China. In hotels and other public places near the sailing center, there are virtually no foreign tourists. The spectator area for the events is also almost exclusively occupied by Chinese tourists. In fact, it appears there are actually less foreign tourists in Qingdao during this Olympic period than is typical for a summer in Qingdao. It is hard to know exactly why this is so, but the intense security and the limits on visas for foreigners seemed to have had an impact.”
http://www.chinalawblog.com/2008/08/qingdao_olympic_update_live.html
BC Bob, You’re a good man. Thanks for the advice.
#85 gary: and with all due respect brother gary it is happening.
Take a look at this offering in my blue ribbon close to NYC town. This houes would have sold in the 600K’s 2 years ago. It is somewhat dated, but clean.
http://www.realtor.com/search/listingdetail.aspx?zp=07661&mnp=29&mxp=28&typ=1&sid=d969897f55a740ad9c666d52a65d9e1f&pg=2&lid=1102014868&lsn=14&srcnt=15#Detail
Median price in New York area falls
http://ny.therealdeal.com/articles/median-price-in-new-york-area-falls
I went to the 1996 olympics in Atlanta, let me tell you not many people were there. Drove my car into Atlanta found street parking and bought tickets at face value at window to beachvolleyball, weightlifting, ladies basketball, mens tennis etc. The celebs show up for opening day cermonies, mens basket ball finals and the big track and field event but for the most part it was TV hype.
#91 BC bob
$6,900 from a 2007 assessment
Assessments are 192k for the building and 226k for the land
I think with 20% down the PITI would be around $3,100 a month. Still about $600 or so a month more than renting, but the gap is narrowing.
That’s the kind of house I would go for in this market. A nice house in a good town I could see living in for 7 to 10 years.
3b [94],
It’s happening. This type of house went for 500-550K, in HH, at peak;
http://www.realtor.com/search/listingdetail.aspx?ctid=48354&mnp=28&mxp=28&typ=1&sid=12da7a0710d54fa08fc209c1fbf6f464&lid=1097018069&lsn=10&srcnt=24#Detail
The war and the circus; the dog and the pony – anything but a real solution
http://business.theage.com.au/business/the-war-and-the-circus-the-dog-and-the-pony–anything-but-a-real-solution-20080818-3x6s.html?page=1
gary: The POS cape listed below sold for 430K in May of 2006, it is offered as a short sale at 359K. I have seen this house. It needs work, but look at the difference in prices in just about 2 years.
More importantly whatever this house sells for, now becomes the new comp for the surrounding neighorhood, as all the houses in that 2 block area are capes. Grant it of course some in better shape than this one.
And will this house sell for 359K? I do not know, it could just as easily sell for 300k. The former owners were have returned to their native country.
I am sure people in that neighborhood are stunned at the 359k ask price.
I imagine if it sells for 300k, more than a few of the surroundinh neighbors will suffer from panic attacks.
http://www.realtor.com/search/listingdetail.aspx?zp=07661&mnp=26&mxp=27&typ=1&sid=703984eb72114b1781eb4302048f3d29&lid=1100215614&lsn=2&srcnt=6#Detail
#98 BC Bob: Attractive house, looks to be in good shape from the outside at least, and with a 3 handle. Yep, it is happening.
3b, #100
you said:
I imagine if it sells for 300k, more than a few of the surroundinh neighbors will suffer from panic attacks.
Not if they bought for $125,000, or, better still, less than $100,000.
It depends on how stable the surrounding area has been over the years.
back to ossetia for a moment….
I am still somewhat surprised that there has been little if any market response to georgia. As of today russia has diabled a significant portion of the georgian oil infrastructure ( blew up the main rail bridge and bombed the oil depot in the port city of Poti).
This significantly reduces the capacity of the region to export oil to the west. the rail bridge was the primary transport link for oil shipped by rail to Poti where it is loaded onto tankers. the oil depot that was bombed will cause significant delays in being able to load tankers even if alternative routes to the rail link are used to get oil to Poti ( not many alternatives).
Russia asserting their energy interests on the region?
Gary:
MLS: 2559926 is currently listed for $275K.
I live on the same street. Similar townhouse was sold in August 2005 at $375. That is asking price 26% off peak sold price.
And yet oil prices have hardly budged? Interesting. A month ago a little incident here or there in Nigeria and oil shoots up $10 in a day.
Just look up effect of Olympics on Oil consumption by China….
#102 Not if they bought for $125,000, or, better still, less than $100,000.
Assuming of course that they did not extract any equity , because 2 years ago they figured their house was worth 430K+. You might be surprised at how many long time home owners I know who have at least one home equity loan, more than a few have 2.
As far as stable, means nothing, whatever that house sells for becomes the new comp for that area, and area residents will have to accept that new reality, and plan accordingly.
HEHEHE Says:
August 18th, 2008 at 12:42 pm
And yet oil prices have hardly budged? Interesting. A month ago a little incident here or there in Nigeria and oil shoots up $10 in a day.
AND SO……………
gold?
AND SO…….
HEHE 105
One of the reason that i think there may be active market manipulation going on. maybe one of the commodities or finance guys can offer an explanation? 3b, BC ?
3b – I know nothing of River Edge, but trolling the tax records of sales since May I find: 672 CENTER AVE ($50,000 below last sale in 2004(!)), 2 CAROL LANE (a mere 10K above 2005 price), 24 JORDAN DRIVE (only 5% over 2004), 163 TENNEY AVE ($30,000 under 2005). There were only two with decent appreciation since 2005.
You on the mark about falling prices. Don’t know why, but River Edge lists no sales in the last few months, but if it did prices would probably be even lower.
here is what is interesting to me. both sides of the current economic debate invoke a depression as the consequence of not going their way. people like us here on this board say that if we do not allow losses to be realized and house prices to revert to the mean, then there will be major economic problems. on the other side, people say if the losses are realized, institutions will fail, the system will collapse and there will be a depression.
my understanding is that the viewpont that is prevalent here was the dominant viewpoint at the beginning of the Great Depression (i.e., that you must purge the speculative excess from the economy) among policy makers. that approach apparently did not work out so well then, so why do we insist it should be used now?
Chi [109],
I could not buy any over the weekend. I had bags of cash, the dealers said they had zero inventory. Seeems like the same story across the world. ???
113#, if you think gold is so good. you can still load it up. GLD is up only 1.5% so far from last close. (By the way, GDX up 3.5%. i am very comfortable with GDX since is in the 5-year trading range.
if you haven’t decide going to vote mr. O or mr. M this fall, i strongly suggest you watch their interview at saddleback forum. you can find it at C-SPAN
skeptic.
one of the primary differences between the great depression and toady is that today we are drowning in a staggering level of debt that will never be paid back in full. The level of debt didnt exist during the great depression.
there is also the possibility that both groups are correct. damned if you do and damned if you dont. If the US really wants to take action, then do something similar to what sweden did when its banking system became insovent.
Bi,
can we dial back the O vs M debate?
#111 lifelong: Thanks for the confirmation. Regarding 672 Center Ave, that sold in 2004 for 468K, I was under the impression that is sold this past May for 435K, are you saying it sold for 418k (50K less than 04)?
As far as no sales in the last few months, I am not surprised.
The summer inventory has been hovering right around 50 SFH’s plus another 10 to 15 condos. Nothing appears to be selling, and I do not recall this amount of inventory in the last few years for this time of year.
Plus I expect we will get a mini Fall selling season, and expect to see additional new listings come on the market after Labor Day.
I try to follow the market in River Edge as best I can. Rich and Grim have been extremely helpful in enabling me to do that, as they have access to njmls.
117#, if you are serious, you can watch it at
http://www.cnn.com/video/ by clicking related video clips. warning: 1 hour long for each cadidate.
They are pinning their hopes on a $7,500 loan?
“Builders still gloomy, but see glimmer of hope”
“Sentiment index remains at record-low level, but expectations rise”
http://www.marketwatch.com/news/story/index-home-builder-sentiment-stuck-record/story.aspx?guid=%7B45418AB5%2D729B%2D4DB1%2D94A5%2D0EB0B924E74C%7D&siteid=bnbh#comments
bi [114],
Thanks, I did not realize that.
my knowledge on the Great Depression is pretty slim. however, I have read one of the common explanations of the dowturn in the early 1930s was that it was the inevitable result the Fed reduction in interest rates in 1927, which fueled excessive buying of stocks and other assets on margin. I’m sure there are nuances here I’m missing, but on its face, it seems pretty similar to the position many people on this board take today. The Fed then in the early 30s, believing that easy money was the problem, not the solution, did not cut rates.
3b – whoops, where I said it sold for $50,000 less than in 2004, I should have said $23,000 less. It sold for $435,000 this year, and $458,000 (which I read as $485,000).
Still, down it goes. The sales info is available to all at the public tax records site, as you’re probably aware (http://tax1.co.monmouth.nj.us/cgi-bin/prc6.cgi?&ms_user=monm&passwd=data&srch_type=0&adv=0&out_type=0&district=0301).
Just punch in the time period and you get the sales, and if the house has any recent sales that’s there too.
#123 life: That is what I thought regarding 672 Center. The sad thing is at 435K they way over paid vs other houses in town that have been languishing on the market, that are bigger, and in much better locations, and priced lower.
I did not reaize that the site you reference gives sales info (makes sense though), thanks for the tip.
“because more than likely, than made their own bed with irresponsibility and a addiction of material consumerism, now they have to sleep in it. and they just don’t want to face it.”
I agree that’s why we shouldn’t be bailing out the banks or fannie or freddie either. We should also kick out the boards of the federal reserve too for not doing their jobs. They not only didn’t prevent an asset bubble, which is part of their chart, they helped create it.
I think people should do something about it. If you have money in an institution that helped create this mess, take it out and put it put it with a bank that is smarter with money.
#120 BC Bob:They are pinning their hopes on a $7,500 loan?
There can be no talk of a houisng bottom, until the credit squeeze plays out, and that is really just getting started. These clowns are pathetic.
You guys are nuts, my mother grew up in the great depression. She and her two sisters and two brothers lived in a farm with no heat, toliet, running water etc. Whatever good meat or crops they got was sold and they lived off hoofs and other nasty parts of the meat and the cheap or damaged crops. In the winter with no heat, electricity, or plumbing was nasty. They even gave up the outhouse as they could not afford the payment to the man to clean it out. My mother said she was lucky, her mother married a guy who inherited the farm so they did not lose their land. Plenty of other people she said was worse off.
Wow the Lexus dealer told me he had a few customers who let their lease expire and “yikes” bought a cheap new car and double yikes places like Kohls and casual dining is being visited by people who used to go to Macy’s and Peter Lugars. OUCH.
This is of no comparision to the great depression, heck it is nowhere near the days when old Gerrald Ford had his WIN buttons, heck this isn’t 1987 or 1991. This is a plain old mild recession that the majority of people under 40 have never seen.
SKeptic,
i am no expert on the great depression, but to put things in perspective, national debt was approx 0.7% of GDP. today it is approx 73% of GDP. Mortgages in the 20’s were around 10-20% LTV. now they are 80,90,100% LTV.
The [allow the economy to correct itself] approach apparently did not work out so well [during the great depression], so why do we insist it should be used now?
I’d actually argue the approach, while not planned, did work well during the Great Depression (in the long run). Had the govt. been able to painlessly bail out the speculators, I don’t think we would have emerged as strong as we did in the long run. We probably would have underpriced risk and just jumped to the next bubble. Why not, the govt. will backstop you?
The problem during the depression was waiting too long before administering fiscal CPR to the economy, not the fact that the Fed allowed speculators to feel the consequences of their excess.
kettle1 Says:
August 18th, 2008 at 12:54 pm
HEHE 105 One of the reason that i think there may be active market manipulation going on. maybe one of the commodities or finance guys can offer an explanation? 3b, BC ?
ugh…
#127 John: Too soon to call it mild. I cannot belive that with all that has unfoled and will continue to unfold, you are of the belief that this recession will be mild.
#131 chgo: Sorry I appear to disgust you. And to answer kettle’s question, I do not know, but it certainly would not surprise me.
Quite good:
Pt 1
http://dealbreaker.com/2008/08/im_on_the_goldman_trading_floo.php
Pt 2
http://dealbreaker.com/2008/08/even_scotch_wont_mask_the_tast.php
3b [94],
Now that’s what I want to see. Find more of those in BC. I’d like to see some of that in say… Ramsey, or that surrounding area. What do you got in that area?
skep-tic,
From what I understand it wasn’t just trading on margin. The general abundance of credit fuled all sorts of spending and when the credit turned out to be bad, banks started failing. It’s pretty similar to what we have now.
I think the difference now is the Fed cut their rates but mortgage rates haven’t dropped. Last year the rate was 5.25 and now it’s 2.0. So that’s an extra 3.25 that the banks are making on current loans.
This is just a hunch but I think that there are major problems in bank reserves that haven’t come to light. Not just that they understimated the risk, but even with the risk they estimated, they didn’t have the reserves. I think the deal with the GSE’s buying up $20billion in debt last year and the drastic cut in the fed’s discount rate are an attempt to try shore up reserves in time for people not to notice and try and keep most of the banks from failing. Just a feeling though.
The Fed didn’t do it’s job in preventing an asset bubble but now their trying to keep it from bursting. Normally lowering the rate should help consumers and stimulate the economy but right now it is only directly helping the banks.
From wikipedia.
I am not saying there is market manipulation. I am just saying it is interesting. Oil, Gold, Euro etc were due for a correction at some point. Just kind of surprised the extent of the correction in such a short period of time when nothing much has fundamentally changed.
BC: Your Opinion?
Don’t Write off Gold and Commodities Bull Run
In that case, I might get some physical gold.
chifi,
you are certainly one of the relative finance experts around here. if i am off base please , enlighten me, or suggest a new direction.
# chicagofinance Says:
August 18th, 2008 at 1:57 pm
kettle1 Says:
August 18th, 2008 at 12:54 pm
HEHE 105 One of the reason that i think there may be active market manipulation going on. maybe one of the commodities or finance guys can offer an explanation? 3b, BC ?
ugh…
#133 gary: Nothing for Ramsey, but I have to believe there are similar offerings there as well.
Part III, the underwater options line is awesome
http://www.youtube.com/watch?v=EmXnPESPaQ8
Tom 134,
from your post With future profits looking poor, capital investment and construction slowed or completely ceased. In the face of bad loans and worsening future prospects, the surviving banks became even more conservative in their lending.[8] Banks built up their capital reserves and made fewer loans, which intensified deflationary pressures. A vicious cycle developed and the downward spiral accelerated. This kind of self-aggravating process may have turned a 1930 recession into a 1933 great depression.
isnt this exactly what is happening now?
John makes a good point re: the severity of this recession. I am just saying it is good to keep things in perspective. A lot of bad things could still happen, but they haven’t happened yet and maybe it is not inevitable that they will. I recently have begun to think we are really in the best case scenario as far as the goals of most on this board are concerned. House prices are going down steadily and so far we are not seeing catastrophic collapse on the Great Depression scale. It is tempting to wish for the downfall of all the bad actors, but if targeted bailouts prevent all out economic collapse without really preventing house price depreciation, then this is probably a good thing for most of us.
“isnt this exactly what is happening now?”
Sure looks like it to me.
I think instead of steroids, congress should hold hearings on coke snorting on wall st. I think all the coke heads from the 70’s and 80’s are now in charge and that’s why we’re were we’re at. :)
# 125 “I think people should do something about it. If you have money in an institution that helped create this mess, take it out and put it put it with a bank that is smarter with money.”
Tom,
We did just that. We recently pulled about 300k out of Wachovia, and distributed it to several other banks.
skep-tic,
A lot of bad things could still happen, but they haven’t happened yet and maybe it is not inevitable that they will.”
Funny, that’s what I my friend’s realtor told her.
“It is tempting to wish for the downfall of all the bad actors, but if targeted bailouts prevent all out economic collapse without really preventing house price depreciation, then this is probably a good thing for most of us.”
It’s not just about prices. The economy in general has slowed. Spending capacity has been killed for many as they have too much debt. For those with money, confidence has fallen.
Different sectors that were making money because of all the bank and real estate spending are hurting.
Why should the banks that caused this problem be bailed out and not the rest of the economy? Have the banks shown us that they can be used as a conduit to help spread the wealth so that if we save them it will trickle down to the rest of the economy?
A eight family I flipped back in early 2004 is currently available as a short sale. I sold for 1.1M and I can pick it up for 825K.
I’m tempted to pu;; a trigger haven’t gone to closing since 2006.
Any thoughts?
chi-
Regarding your “open mind” post earlier:
I do have an open mind. I would love for someone or some event to convince me to cover my shorts and start trying to invest in a positive story again. I don’t think any rational person loves to bet on doomsday or build a financial position based on the belief that America, its resources and its leaders are morally, spiritually and physically bankrupt. I’m paranoid and self-absorbed enough to think that all of us- and our businesses- are microreflections of this festering, rotting Big Picture, so I didn’t easily or willingly get to this point.
However, I have yet to see anything resembling a compelling counter-argument to the full decline of Western civilization scenario. Anecdotally, all I do- all day long- is deal with people who are long on hope and short on cash and actionable plans. I can’t even go to a party without some yutz coming up to me- unsolicited- to tell me about some house, second home or investment property that’s somehow immune from what’s happening. Who am I, the f-ing Pope? Why do so many people feel the need to solicit a blessing from me?
Meanwhile, I see lenders going out of the lending business, inflation that’s really about 10% eating people alive and lis pendens lists so long, I can’t even keep up with them.
Until I see some scintilla of change in the fundamentals, my assumption remains that any moves to the upside- in any questionable sector- are bear traps, pure and simple.
All disclaimers. I am also waiting for soccer to become the #1 sport in the US.
nedi,
Don’t know if it would be a good property to flip in this market. You should only look at it as a long term investment property and consider if the rents will be worth the price and management.
Tom (144)-
Trickle-down? Only shit rolls downhill.
#146 clot:I am also waiting for soccer to become the #1 sport in the US.
Yeah, and I am waiting for Rugby to become #2.
Rugby is cool.
John (127):
It’s just the start! All it will take is for another major bank to go belly up. Shoot, IndyMac already used up 1/6th of the FDIC insurance and heck, I never even heard of them!
IMO, Lehman will fail and get bailed, Wamu and Wachovia will wipe out the FDIC insurance and the bank run will be followed by the major recession.
W is simply delaying the agony until he is out of office. Even Paulson said he is out in January. W has systematically either stopped the collection of a lot of negative economic data and has altered those that would be too obvious to stop.
Read that Australian “The Age” article again.
All the meanwhile, the middle class wage is declining as executives wages continue to skyrocket. But lets extend the tax cuts on the wealthy, so when we socialize the losses the wealthy will continue to get the Republican discount and you’ll slowly fade back to the lower class.
Trickle down? Your seeing it everyday in your net worth. Of course that is, if you still have any.
Olympics: In overall count, US is still on top, but in Gold Medal count we are behind China. In 2004, China had 32 Gold, this time they already have 39 gold.
http://sports.yahoo.com/olympics/beijing/medals
Am kind of impressed by Chinese Performance.
#150 clot: Agreed. It has become fairly popular as a club sport on many college campuses, but probably that will be the extent of it.
3b:
Yeah, and I am waiting for Rugby to become #2.
I think cricket or ping-pong might be number 2.
SG says: “Am kind of impressed by Chinese Performance.”
You could probably win a gold medal too if your mother and father were chosen to be married by the state and then forced to breed future Olympians.
Wow Kings Point Mansion Foreclosure down the block from the Great Gatsby’s house.
http://www.maltzauctions.com/real_estate_detail.php?ID=388822
Tom (154)-
Doubles badminton.
Jobs dip 1 percent in NJ pharmaceutical industry
Layoffs cause 1 percent employment dip in NJ pharmaceutical industry; economic impact rises
http://money.cnn.com/news/newsfeeds/articles/apwire/5e42b971ee04e00168d8c7e4d6a2245c.htm
http://www.maltzauctions.com/auction_detail.php?ID=388930
now this is a big house in foreclosure, 3,000 square foot garage!!!!!
#154 Tom: Perhaps Polo
Shore Guy,
“We did just that. We recently pulled about 300k out of Wachovia, and distributed it to several other banks.”
Hope you looked into them before you did. Annual reports seem to be a bit more honest than what they say in the press.
I’m surprised Credit Unions haven’t become more popular. When Netbank first came out the rates were pretty good but then I opened up an account with a credit union through where I was working. No fees, no minimums and almost the same interest rates with the benefit of having local branches I could walk into.
3b,
I don’t think polo is that popular in india or china.
#162 Tom: it might be with the upper class in India, as it is in Pakistan.
oh I take that back, the Saudi’s seem to like polo.
Clot: Do you expect to see an increase in inventory in your area after Labor Day;the start of the mini-Fall sell before the holidays season?
Come on bi. Wasn’t the market in full recovery mode last week?
# 161
We are stearing clear of mega banks for now and focusing on smaller banks that are in a superior financial position, and, which, should they fail, will be shut on a Fridaqy and reopened on a Monday by a larger bank. I know that the FDIC will eventually cover “losses” at the megas that fail but God knows how long it will take to clean up the mess from a BoA or Wachovia failure.
Does anyone recall the polo-like game played in Afghanistan where the “ball” is the head of one’s defeated foe?
Shore Guy,
Sounds like a good move. The community banks in NJ have generally been doing very well and it looks like they’re going to be making a good chunk of change helping to clean up this mess.
More importantly than the risk of failure, I think people should think if they want their money handled by a bunch of people that thought it would be a good idea to give mortgages to people they knew couldn’t pay them. I don’t think we should reward bad behavior.
Part of the money the used was based on people’s deposits. Do you want your bank giving out bad loans with your money?
# 169
The gems, as far as I am concerned, are the institutions that hold their own paper and, thus, do real banking, and REALLY work to minimize risk.
From the Star Ledger:
75 UMDNJ employees receive pink slips
About 75 employees of the University of Medicine and Dentistry of New Jersey have received layoff notices, with officials calling the action part of a “painful process” to close a $49 million budget deficit.
The workers, who were officially notified on Friday, ranged from secretaries and security personnel to managers and supervisors. They were assigned to UMDNJ campuses in Newark, New Brunswick and Stratford.
UMDNJ has targeted more than 300 jobs for elimination as part of a larger effort to plug the hole in its budget, with more layoffs expected. A significant number of vacant positions have also been eliminated as part of the plan.
The workforce reduction will save more than $21 million, according to UMDNJ spokesman Gerald Carey.
“This is a painful process for any institution and UMDNJ has made every attempt to limit the impact to as few employees as possible,” he said.
# 171
Wow, Grim. Healthcare with a connection to the public teat cutting.
Merrill, Wachovia in Danger of Failing: Strategist
BANKS, MERRILL, WACHOVIA, FAILURE, FANNIE, FREDDIE
By CNBC.comCNBC.com
| 18 Aug 2008 | 02:37 PM ET
Merrill Lynch, Wachovia and other financial companies are at risk of failure as the cost of raising capital soars at a time when the banks need to pay settlements over auction rate securities, David Kotok, chairman & chief investment officer from Cumberland Advisors, told CNBC Monday.
“I think the financial problem is half way through the cycle … there’s another shoe to drop ahead of us and it could be more severe,” Kotok told “Worldwide Exchange.” (Watch the video at the left to hear Kotok’s views on where oil and the dollar are heading.)
The cash companies need to shore up bad investments, “is up to about $50 billion and will probably top $100 billion before it’s over,” he added.
“Those firms — Merrill, Wachovia and others — are going to have to raise that cash,” he said. “They are either going to have to get it from the Federal Reserve, through some direct or indirect means, which means more leverage, more Fed balance sheet, more regularly oversight or they’re going to have to get it in the capital markets.”
“The price in the Federal Reserve is about 2 plus percent, in the capital markets it’s four times as high,” Kotok said. “If they pay the higher price, there is no profitability for them so their franchises are jeopardised. This is a serious developing issue as we cure years of overleveraging.”
The amount of cash written off Merrill Lynch and Wachovia’s balance sheets since the onset of the credit crisis still far outweighs the amount of cash they have raised, suggesting the need for fresh capital injections.
“Wachovia is a strong and stable company on solid footing,” a spokeswoman for the bank said, referring to the company’s statement on Friday that it “does not currently expect that the purchase of ARS under the agreement in principle will have a material effect on capital, liquidity or overall financial results.”
Merrill Lynch didn’t immediately comment.
Fannie Mae and Freddie Mac are also in jeopardy, Kotok said.
“Were it not for government aid and backing they would have already had to declare bankruptcy. Their portfolios have problems,” he said.
“You see one brick at a time in the financial problem area become addressed. Here’s Lehman trying to divest real estate holdings in a falling real estate market,” he added.
© 2008 CNBC.com
URL: http://www.cnbc.com/id/26262925/
——————————————————————————–
MSN Privacy . Legal
© 2008 CNBC.com
Shore Guy,
I agree and I blogged about some of the local NJ banksthat were in the press for doing just that. The reasons they tend to be more conservative is that they hold onto their loans. Same with credit unions. One of the things I like about credit unions are that they are non-profits. So you don’t have to worry about some stupid exec coming up with a hair brained scheme to “increase shareholder equity” that ultimately screws them up.
Right now the community banks and credit unions look like a smart place to put savings. I also kind of like ING Direct because they didn’t originate subprime mortgages and had very little invested in subprime. Their Alt-A exposure might have been a little worse but I’m not sure if it’s bad.
Musharraf is out
http://www.cnn.com/2008/WORLD/asiapcf/08/18/musharraf.address/index.html
He’s been granted safe passage to leave Pakistan so maybe he can pick up an estate in the Hamptoms and help reduce inventory.
# 176
I was counting on renting him a room in our place to help offset mu kids’ college tuition.
my, even
Clotpoll-
I know how much you loved Casey Serin and wanted to let you know he’s back blogging.
But, you have to check this guy out from Million Dollar Listing…words can’t describe…
http://www.youtube.com/watch?v=LZsrSyYRkgU
Or, this clip is priceless too…
http://www.youtube.com/watch?v=JsqsTzxZL34&feature=related
I am looking to move some securities away from Merrill and my initial impression is that an awful lot of the large Wall Street brokerage houses are in less-than-solid shape. Can anyone point me to some good sources of data on various brokerage houses’ exposure to the list of horribles we discuss every day, their current financial condition, etc? I assume that somewhere someone competent is rating them in an unbiased manner.
liar loans article:
http://finance.comcast.net/www/news.html?x=http://www.origin.comcast.akadns.net/data/news/2008/08/18/1037507.xml
181 – Shore
http://www.moneyandmarkets.com/newsletter/103/StrongestandWeakestBanksandThrifts.pdf
grim, 182 in mod…
The only bank I would like to put a deposit in is Tyra.
Hey guys,
I’ve been a lurker here for awhile and on a 6 year long house hunt in several NJ markets. So many disapointments along the way but looking back I’m glad we did not bite.
So now we want to get back in (we have to, we have a son approaching school age and another on the way), specifically in Montclair, a market where we have had lots of unfortunate experiences during previous searches.
We want to get into a three story vacant multi and renovate it back to single. In our experience, you can get the most square footage for the money with a multi and we are fairly handy so we can do some of the work ourselves.
We don’t need the best neighborhood, but we don’t want any super sketchy neighborhhods either (been there done that).
My question is, should we use the realtor we used in the past? I feel compelled for ethical reasons to go back to her, she was not at fault for our failure to get into a home, we simply balked at the prices and conditions of the homes we saw. We have friends who say to just call each listing agent directly because the biz is so crooked at this point that they are more likely to entertain a lowball offer since they will be getting double the commission. What do you guys think? Would love specific advice on how to proceed.
Also, pricing on multis in Montclair. Any advice on how to figure this one out? How low off peak? How to find the peak (is it 2006 across the board?). Thanks in advance.
Barbara
re: John at 184.
Agreed. Many deposits, multiple accounts, ect.
3b (166)-
Yes. I expect to see frantic listing activity, topped off by the year’s high-water mark inventory number being achieved by October 31. If you told me GSMLS will hit 39,500, I wouldn’t be shocked.
I also believe many of the consequences of the new housing bill- provisions of which take effect Oct. 1- will both hasten sellers’ “rush to the exits”, while at the same time removing entire segments of buyers from the market.
Good times ahead.
stu, where are you from? Any facts about your portrait or just pointing fingers?
#156 stu Says:
August 18th, 2008 at 2:50 pm
SG says: “Am kind of impressed by Chinese Performance.”
You could probably win a gold medal too if your mother and father were chosen to be married by the state and then forced to breed future Olympians.
Has anyone heard of any fines given out by the Fed to those responsible for creating the asset bubble? I haven’t been able to find any.
U.S. Code, Title 18, Part 1, Chapter 47, Section 1014:
“Whoever knowingly makes any false statement or report, or willfully overvalues any land, property or security, for the purpose of influencing in any way…shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both.”
From wikipedia “These aspects of the Federal Reserve System are the parts intended to prevent or minimize speculative asset bubbles which ultimately lead to severe market corrections.”
(184)-
When you’ve got it, you’ve got it.
Live, and in color…
Where’s bi?
Where’s Frank?
Funny how they disappear in the afternoon on days like today…
Bloomberg, today:
“The cost to protect the subordinated debt of Fannie Mae and Freddie Mac from default climbed to a record. Credit-default swaps on Fannie’s subordinated debt increased 47 basis points to 325 basis points, while contracts on Freddie Mac jumped 52 basis points to 329, according to CMA Datavision.
Contracts on the senior debt of the two companies were unchanged at 49 basis points, with the gap between the credit- default swaps on the senior and subordinated debt now at the widest ever.”
Cheng, the founder of Strategic Sports Ltd., a producer of protective helmets, is having trouble finding workers despite being in the world’s most populous nation, because China’s one-child policy has limited the available labor supply. … The Chinese government is actively trying to phase out some of the lowest-wage assembly work, such as making clothing and cheap toys, to build up more complex and more valuable manufacturing operations, including cars and high-tech equipment. … “The Chinese government is saying it no longer wants to be the world’s factory for producing junk” … So far this year, as many as 10,000 factories have closed in the province’s long-booming Pearl River Delta. By the end of the year, that total could rise to 30,000, the majority from labor-intensive industries. Still, China will continue to be the world’s factory for the foreseeable future. “It has so many institutional advantages,” says says Alexandra Harney, author of The China Price: the True Cost of Chinese Competitive Advantage, citing the strong role played by the industrial clusters that have sprung up in the Pearl River Delta to provide manufacturers with every imaginable product and service. “They have everything you need to make anything, from a motorcycle helmet to a computer,” she says.
http://www.usnews.com/articles/news/world/2008/07/22/after-long-boom-china-faces-an-industrial-downsizing.html
Where’s Frank?
busy, did I miss something?
re: #193 SG
China holds $376 billion of Fannie and Freddie bonds never mind US treasuries. I wonder how pissed they are going to get when their US investments turn south?
Can you say “tou2 xiang2”.
“Where’s Frank?
busy, did I miss something?”
Frank,
Sure did, the blow off top, 2005-06, of one of the greatest bubbles in our history.
Well, the unthinkable has happened.
njrereport has become blocked at work.
Sad day.
:-(
#196 sean
Surrender?
Clotpoll Says:
August 18th, 2008 at 2:35 pm
chi- All disclaimers. I am also waiting for soccer to become the #1 sport in the US.
clot: in one sentence….divorce your job from your portfolio……since I met you personally, I know clot and chip are two different people, so I say such a thing with the greatest reverence…….
(141) Skep-tic
“A lot of bad things could happen, but they haven’t happened yet and maybe it is not inevitable that they will.”
That pretty much sums up where I sit.
(171) Shore Guy
“The gems, as far as I am concerned, are the institutions that hold their own paper and, thus, do real banking, and REALLY work to minimize risk.”
I think they should nationalize Freddie/Fannie and fire everyone but those needed to process what is on the books
(once we get this mess cleared up.)Then get back to real banking.
I still put money in my 403B. I still try to get money in my Roth. I still plan on getting my pension….BUT – If I am wrong – I’ll adjust.
Shore, #181
Are you aware that certain types of securities and bonds are covered by SIPC?
I think the limit is $500,000, but here’s the Web site.
Note the things they say are not insured:
http://www.sipc.org/how/covers.cfm
Now don’t laugh..Fresno State plays Rutgers for our season opener 9-1 at Rutger’s Stadium – 4:00. Pat Hill, our coach, always tries to put together as difficult a pre-season schedule as he can. We always lose but the guys must learn a lot.
#188 Clot: Thanks as always.
chi (200)-
“in one sentence….divorce your job from your portfolio”
Wish I could. However, my industry is a big part of what’s deep-sixing the entire US economy.
And I keep seeing reminders of that every 12-18 hours.
Cindy (203)-
Your team might be in a bit of a tough spot there.
I’m the problem of my problems. That’s the first rule i learned to be a slumlo$d awhile back ago.
No surprising to see another familiar pointing finger in my life again since then.
#15 sas Says:
August 18th, 2008 at 8:18 am
reminds me when I did some volunteer work for the so called “poor” in the inner cities of Oakland, CA & up in the Bronx.
#199 “Surrender”
But don’t give yourself away.
(206) Clot – Kinda funny, huh. We also have Wisconsin and UCLA ..we usually lose to Oregon about this time of the year.
Since the team will travel for a game, I figure they take the game because they like to beat up on us in front of their fans.
Hawk (179)-
I don’t know whether to laugh or puke.
I drove around brigadoon Aug. 10 Sunday to test the water. To be fair, I did not see any good deal out there. But I did notice the same open houses – the realtors were not giving it up yet or there were still deep pocket buyers.
The observations are confirmed with my foreclosure findings in the link below:
http://www.net50.com/Brigadoon_Foreclosures.xls
As you may see there were not that many foreclosure filing in the past 12 months in 07090 zip code. The price won’t drop dramatically until there were cracks in the foundations – the foreclosures.
So it will take quite a while to develop the RE storm in Brigadoon – if it has a chance to avoid it.
The signs are there but we are not there yet. So we need to be very patient for the storm to develop in premium town such as brigadoon.
#75 SteveTheBrigadoonian Says:
August 18th, 2008 at 10:44 am
I thought you guys would enjoy this: my wife was out doing her daily walk the other day and on a single day, she saw 3 separate repo guys taking back cars in Westfield.
a range rover, some other thing and a high end bmw – like an 800 series.
Truly, the end is nigh…
You’ll get exactly what you deserve either in the heaven or he$$ – so does the other peoples in this earth.
#208 Shore Guy Says:
August 18th, 2008 at 8:37 pm
#199 “Surrender”
But don’t give yourself away.
i am in the market for a high end repo car, any suggestions on where to go for a repo auction of a BMW, Mercedes or Caddie?
Mercury Cougar to a high-end repo? Quite a leap there, moneybags!
Loyalty goes a long way. That apply to RE too. But you need to make sure your loyalty go to the right guy/gal who deserve it.
By committing to the same realtor myself I actually lost some deals in the past. I can’t prove it but I can feel it. Because if there is a good listing, the listing agent has already won the game. You could choose the listing agent or his broker to represent you or you have a good chance to be outwit by the listing agent if you stick to the original realtor. I do not suggest the above senario is common in RE but I did feel in my past many deals.
In the other hands, by showing the loyalty I actually got the deals never in the market. You’ll be surprised that a good realtor actually have an elephant memory. They will remember who is their loyal customers and best friends. The problem is that a good realtor is hard to find in a booming RE market.
By comparisons, you’ll find out there is only way to go in the long run – by believing the system and choose the right agent. In the end of day, you’ll be taken care of. Why should I be worried again loosing the good deal? I already know there must be a better deal waiting for me for sure.
#186 Barbara
My question is, should we use the realtor we used in the past? I feel compelled for ethical reasons to go back to her, she was not at fault for our failure to get into a home, we simply balked at the prices and conditions of the homes we saw
Clot said:
I also believe many of the consequences of the new housing bill- provisions of which take effect Oct. 1- will both hasten sellers’ “rush to the exits”, while at the same time removing entire segments of buyers from the market.
Could you elaborate?
I was in Edison for a auction one year ago, there were some very nice import lux cars. I’ll try again when I have enough money in the bank…
http://www.autoauctions.gsa.gov/
#213 John Says:
August 18th, 2008 at 8:50 pm
#186 Barbara
“My question is, should we use the realtor we used in the past? I feel compelled for ethical reasons to go back to her, she was not at fault for our failure to get into a home, we simply balked at the prices and conditions of the homes we saw”
If she worked hard for you, you worked well together, and she is willing to work in your best interest, sure, why not use her. In the end, she is a tool to help you achievy your objectives; use the best one you can, and not just the one that has been in the toolbox longest.
Don’t forget to try this one out too. You’ll be surprised to see so many fine things in a human life:
http://www.ustreas.gov/auctions/
#213 john
“Tougher And Tougher To Unload Offerings”
“Nearly every day it is getting tougher to unload debt offerings. Banks are even struggling to refinance their own debt as noted in Banks Scramble To Refinance Long-Term Debt. AIG bonds are trading at disastrous spreads as noted in What Banks Are Likely To Survive?”
“The credit crunch is alive and well and picking up steam in spite of Bernanke’s efforts. Spreads are widening and the cost of raising money is soaring even as treasury yields are stable to declining. This is just what one would expect in deflationary times.”
“How much longer underwriters are willing to assume such risks, and how much debt investors are willing to own are both coming into question. For now, the deals are still getting done. Don’t assume this will always be the case. There is not an infinite supply of bagholders.”
http://globaleconomicanalysis.blogspot.com/
rent (216)-
The bill spurred another 25 bps add-on for all Fannie/Freddie product (on top of the up to 250 bps in premiums they’ve already built into every agency loan). Practically speaking, I don’t see anybody short of Jesus qualifying at under 7%. In addition, qualification parameters will ratchet up again. Instead of today’s procto-exam, it’ll be a procto-exam with a pneumatic drill. A lot of potential buyers either won’t pass muster…or will just toss their hands in the air and give up.
Higher rates + fewer buyers + more sellers = big price drops
“Instead of today’s procto-exam, it’ll be a procto-exam with a pneumatic drill.”
Clpt.
LMAO.
a story today in Reuters that Foreclosures fuel S. California July home sales.
The interesting bits were that sales were up 13.8%, equal to March 2007 but that prices were down 31.1% from a year ago.
http://tinyurl.com/6ptwl5
Of course, we will bumble, posture, put the shrew-like mouthpiece Condoleeza Rice on TV to spew double-talk…but do nothing of substance to make this situation any better. Maybe it’s best that we’re in a position to do absolutely nothing. Hard to call Putin to account when we’re still the world’s #1 cowboys:
GORI, Georgia (AP) – Russia said Monday it had begun withdrawing from the conflict zone in Georgia, but it held fast to key positions and sent some of its troops in the opposite direction – closer to the Georgian capital.
Russian troops and vehicles roamed freely around the strategically located central city of Gori, Russian forces appeared to blow up the runway at a military base in the western town of Senaki.
There were few signs Russia was following the terms of a cease-fire to end the short war, which has driven tensions between Russia and the West to some of their highest levels since the breakup of the Soviet Union.
Olympics: In overall count, US is still on top, but in Gold Medal count we are behind China. In 2004, China had 32 Gold, this time they already have 39 gold…Am kind of impressed by Chinese Performance.
It’s really reminiscent of the Cold War; the way the old Soviet Eastern Bloc countries would compete. China is using the Olympics as a venue to demonstrate to the world that it is a superpower to be taken seriously.
Whatever it works…
When Belgian-based, Brazilian-controlled InBev launched a hostile offer for American beer king Anheuser-Busch last month, xenophobia quickly foamed to the top. Beer drinkers in St. Louis, Mo.–A-B’s home–vowed to swear off Bud if those foreigners bought “our” beer.
The Great American Yard Sale
http://www.time.com/time/magazine/article/0,9171,1832861-1,00.html
Maybe we the USA does not train as hard as before. Maybe we the USA does not allocate enough resources into the system anymore. Maybe we could blame the many super-size-it in our life …
#225 RentinginNJ Says:
August 18th, 2008 at 10:05 pm
Olympics: In overall count, US is still on top, but in Gold Medal count we are behind China. In 2004, China had 32 Gold, this time they already have 39 gold…Am kind of impressed by Chinese Performance.
Since much of the talk here is devoted to subprime, this isn’t OT:
NEW YORK — Belittled by New York tabloids that call him “American Idle,” disparaged by some teammates for his lack of durability, Carl Pavano could return to the New York Yankees this weekend.
New York needs a fifth starter on Saturday at Baltimore, and with Joba Chamberlain and Dan Giese on the disabled list, the choice comes down to Pavano or Phil Hughes.
Mike Mussina said in spring training last year that Pavano must show his teammates he wants to pitch. Yankees general manager Brian Cashman said teammates shouldn’t be dubious of Pavano in his latest comeback attempt.
$lord (227)-
Stick to slumlording. It suits you better than Olympic commentary.
OK, now I’m plumbing the depths. Watching the season premiere of The Hills with my daughter. This show makes GG look like The Iceman Cometh.
How can people this stupid not be incarcerated?
Just passively absorbed that show as well. GF is a fan.
Blech. That show is just awful. It epitomizes entitlement and what’s wrong with America.
http://money.cnn.com/2008/08/15/news/economy/Sloan_washingtons_solution.fortune/index.htm
“These are the dog days of summer, the height of our national vacation season. But instead of hitting the beach, people in Washington and on Wall Street are spending their days all atwitter with ideas of what new regulations and rules and controls we need to deal with our financial market meltdowns, the worst since the Great Depression almost 80 years ago.
But let me tell you a little secret, folks. Even though they’re scurrying around like everyone else in this game, I think the crisis managers at the Federal Reserve Board and the Treasury have quietly adopted a technique that has helped us deal with previous financial crises – what I call the “play and pray” approach.
They don’t teach it in Economics 101, and none of the players dealing with the current meltdown will talk about it on the record. But it’s a time-tested strategy – think of the mortgage crisis of the late 1970s and early 1980s, the bank problems in the early 1990s, and the Asian contagion of the late 1990s. The idea: You play for time by keeping things afloat long enough for your prayers to be answered by the markets’ turning in the right direction.”
this comes up from time to time
How The Fed Works:
Richard Russell
If the American people ever realized or understood how the Fed operates and how money is created in the US, there would probably be a ten million man and woman march on Washington and more specifically a march on the Federal Reserve Building. The Fed is a private banking monopoly that has “grabbed hold” of the money-creation of the United States. Who controls a nation’s money, controls that nation.
The US needs money to pay for building roads, for buying war planes, for fighting wars, for paying Congressmen, for paying IRS and Post Office employees, for a thousand different items. For this the government turns to the tax payers or it turns to the Federal Reserve. The Fed is nothing more than a group of private banks that charge interest on money that never existed before.
How does the system of money creation work? A simplified but true explanation. The government needs ten billion dollars (aside from what it takes in income taxes or from what it borrows). So the government then prints ten billion dollars worth of interest-bearing US government bonds. Next, it takes the bonds to the Fed. The Fed accepts the bonds, and then places ten billion dollars in a checking account. The US government then writes checks to the tune of ten billion dollars against their checking account. But where was that ten billion dollars before the Fed issued the money? The money didn’t exist. Can you believe it, the money was created by the Fed “out of thin air.”
In other words, the Fed lends the US government the money — and the crowning irony is that the Fed then charges the government interest forever on the bonds that the US government sold to the Fed in the first place. And the debts build and build and the national debt grows ever- larger.
How about the interest that is owed on the national debt, which has now grown to a choking $500 billion a year? That’s part of where our income taxes go. The government taxes our sorry asses partly to pay for expenses incurred by our very own government. And a further crowning irony — the government taxes us to pay for the interest on the ever-expanding national debt.
‘Play & Pray’? Market nanipulation is a closer call. As for this nonsense from this astrologist, he’s better off to bring his crystal ball with him to the beach.
#232 kettel1
kettle1,
That’s kind of what I was getting at with my earlier post about the large spread between mortgage rates and the discount rate.
They’re trying to pump money into the banks and hope that people think that the doomsday predictions were false because the banks stopped failing for a time. But the reality is they are being kept afloat by the fed.
This is the thing Bernake needed to do that Cramer was spitting about when he lost it on the air.
The problem is, banks are going to need to go back to regular lending practices soon, the fed can’t keep feeding them easy money like they are now. House prices are going to need to fall down to reasonable levels in accord with incomes and it’s just going to be worse because of the higher cost of goods and services and rising unemployment.
I’m telling you. I think these people thought the rapture was coming and they tried to fleece the economy so they can live large before it came time to go up to heaven and now don’t know what to do.
from http://ww2.dowtheoryletters.com/
(Richard Russell)
has certain slants evaluate with your own perspective….
“To give you a hint of what I think the combined markets are now telling us — I believe we are on the eve of world deflation. I pulled out a headline from the August 5 Wall Street Journal headline — “INFLATION PACE IS FASTEST IN 17 YEARS.”
Forget it, this is history — this is not what’s happening in the market. From what I see, the markets are telling us to prepare for hard times, and a global spate of the worst deflation to be seen in generations. This is why gold has been sinking, this is why stocks have been falling — big money, sophisticated money, is cashing out, raising cash, preparing for world deflation.”
Maybe you should sell your portfolio if you don’t know how to do the hard work.
#229 Clotpoll Says:
August 18th, 2008 at 10:21 pm
NJL$ord
whats wrong with crystal balls? Mine works very well thank you. it tells me i will be going on a date with Heidi Montag tomorrow night!
Yeah right, good luck to your date:
http://www.youtube.com/watch?v=8WLhfnHhAT8
#238 kettle1
NJl$ord,
I don’t think it’s xenophobia when it comes to A&B. Budweiser is an American institution and that’s the way they marketed it for a long time.
NJl$ord
did you mean this ?
http://tinyurl.com/694s9u
Anyone need a getaway place in Wall? It may be a bit cramped but it is close to the Belmar beaches.
http://www.fnams.com/PropSearch/Details.aspx?Id=121163
Shore Guy,
That’s a really ugly house. I hope they designed the inside better than the outside.
#243 It may be ugly but thee is LOTS of it. Supersized everything no doubt. Even lots of Home Depot marble.
slummy (237)-
Maybe you should kill yourself.
Looks like the type of place that would have home depot marble. Has that built big and cheap look to it.