Wednesday, December 31, 2008
Tuesday, December 30, 2008
Six Degrees of Madoff
From New York Magazine: Madoff’s Latest Victims: Kevin Bacon and Kyra Sedgwick.
The crap thing about being Kevin Bacon, it turns out, is that sometimes you find yourself six degrees from the wrong kind of guy. Such as, for instance, Bernie Madoff. We'd heard that along with Hollywood boldfacers Jeffrey Katzenberg and Steven Spielberg, Bacon and his wife, Kyra Sedgwick, lost money in Madoff's devastating $50 billion Ponzi scheme, and Bacon's rep, Allen Eichorn, confirmed it for us. "Unfortunately, your report is true," he wrote.
The crap thing about being Kevin Bacon, it turns out, is that sometimes you find yourself six degrees from the wrong kind of guy. Such as, for instance, Bernie Madoff. We'd heard that along with Hollywood boldfacers Jeffrey Katzenberg and Steven Spielberg, Bacon and his wife, Kyra Sedgwick, lost money in Madoff's devastating $50 billion Ponzi scheme, and Bacon's rep, Allen Eichorn, confirmed it for us. "Unfortunately, your report is true," he wrote.
Saturday, December 27, 2008
The House of Dog
From the WSJ: In the Great American Bailout, Pet Doctors Hope to Flush Out Cash.
Mortgages are under water all over this town. But at the local pet hospital, there's a liquidity crisis of a different order. It isn't about solvency. It's about sewage.
Thanks to a class of human clientele that wouldn't dream of denying an MRI to a dog, the Metropolitan Veterinary Hospital is in good financial shape. It wants to put up an extension and grow. For a building permit, though, it has to run a pipe to a sewer line.
Except there is no sewer line, and no money to pay for one in any government budget. That's where the huge public-works economic stimulus being pondered in Washington comes in. Like many, many other projects, a sewer line that improves life for animals in Ohio stands as good a chance as any of being part of the program.
"Our expansion won't cost less than $1 million," he said. "And we're adding 20 jobs. But we can't do a thing until that sewer comes through. If I was Barack Obama, I'd write the check tomorrow."
Make it out for $300,000, Mr. President-elect.
Highway, airport, transit and wind-farm lobbies are all knocking out lists of backhoe-ready jobs. So is the sewer lobby. The National Association of Clean Water Agencies wants $64 million to remove grease in Columbus, Ga.; $1.2 million for screw pumps in Kankakee, Ill.; and $24 million for the Nasty Branch flow-controller in Asheville, N.C. The association's latest sewer tally adds up to $7.4 billion.
The longest list comes from the U.S. Conference of Mayors: 1,391 things to do costing $73.2 billion in 427 cities, including a new sidewalk on Elm Street in Kokomo, Ind., and an upgrade to the street lights on the Cottonwood Loop in Holladay, Utah.
Akron has a list, too, and Mayor Don Plusquellic was flipping through it in his cabinet room not long ago.
Akron had levied income tax in Copley since the mid-90s, in return for laying water and sewer lines worth $60 million. Before the backhoes reached the pet hospital, the money was gone. So the sludge-pump truck still comes twice a week.
The hospital today has 45 veterinarians associated with it, and 120 full-time staffers. It has operating theaters, a CAT scanner, an intensive-care unit, busy wards of single-occupancy cages. It has outgrown its space. The MRI is in a trailer out behind the cesspool; patients have to be chauffeured to it in a golf cart.
Two years ago, the vets who own the hospital bought the lot next door for $235,000 to build a new wing. Then word came that they had to get a sewer put in first.
Sick-pet traffic is off a bit now, but the vets still want to build. They're longing for a recession-borne solution. Bobbie Kenna, an oncology intern, raised the question with Bear, a Tibetan terrier who had come into her ward for treatment. "The stink will be gone," she said. "It'd be more pleasant for everybody, wouldn't it, Bear?"
Akron's public utilities manager, Mike McGlinchy, concurs. If he had the extra $300,000, he'd lay this pipe today. "The business case is fabulous," he says. "And a lot of dogs and cats will be grateful."
Pork-tastic!!!
Mortgages are under water all over this town. But at the local pet hospital, there's a liquidity crisis of a different order. It isn't about solvency. It's about sewage.
Thanks to a class of human clientele that wouldn't dream of denying an MRI to a dog, the Metropolitan Veterinary Hospital is in good financial shape. It wants to put up an extension and grow. For a building permit, though, it has to run a pipe to a sewer line.
Except there is no sewer line, and no money to pay for one in any government budget. That's where the huge public-works economic stimulus being pondered in Washington comes in. Like many, many other projects, a sewer line that improves life for animals in Ohio stands as good a chance as any of being part of the program.
"Our expansion won't cost less than $1 million," he said. "And we're adding 20 jobs. But we can't do a thing until that sewer comes through. If I was Barack Obama, I'd write the check tomorrow."
Make it out for $300,000, Mr. President-elect.
Highway, airport, transit and wind-farm lobbies are all knocking out lists of backhoe-ready jobs. So is the sewer lobby. The National Association of Clean Water Agencies wants $64 million to remove grease in Columbus, Ga.; $1.2 million for screw pumps in Kankakee, Ill.; and $24 million for the Nasty Branch flow-controller in Asheville, N.C. The association's latest sewer tally adds up to $7.4 billion.
The longest list comes from the U.S. Conference of Mayors: 1,391 things to do costing $73.2 billion in 427 cities, including a new sidewalk on Elm Street in Kokomo, Ind., and an upgrade to the street lights on the Cottonwood Loop in Holladay, Utah.
Akron has a list, too, and Mayor Don Plusquellic was flipping through it in his cabinet room not long ago.
Akron had levied income tax in Copley since the mid-90s, in return for laying water and sewer lines worth $60 million. Before the backhoes reached the pet hospital, the money was gone. So the sludge-pump truck still comes twice a week.
The hospital today has 45 veterinarians associated with it, and 120 full-time staffers. It has operating theaters, a CAT scanner, an intensive-care unit, busy wards of single-occupancy cages. It has outgrown its space. The MRI is in a trailer out behind the cesspool; patients have to be chauffeured to it in a golf cart.
Two years ago, the vets who own the hospital bought the lot next door for $235,000 to build a new wing. Then word came that they had to get a sewer put in first.
Sick-pet traffic is off a bit now, but the vets still want to build. They're longing for a recession-borne solution. Bobbie Kenna, an oncology intern, raised the question with Bear, a Tibetan terrier who had come into her ward for treatment. "The stink will be gone," she said. "It'd be more pleasant for everybody, wouldn't it, Bear?"
Akron's public utilities manager, Mike McGlinchy, concurs. If he had the extra $300,000, he'd lay this pipe today. "The business case is fabulous," he says. "And a lot of dogs and cats will be grateful."
Pork-tastic!!!
Friday, December 26, 2008
Thursday, December 25, 2008
Wednesday, December 24, 2008
The Ghost of Christmas Future
Destruction of the EMU
Derivatives Meltdown
Depression
The Ghost of Christmas Present
Let us revisit the "theory" that printing enough money will solve the problem. This seems to be the preferred solution, and we need to see why it will fail.
The theoretical position is correct. Print enough money and you will boost the nominal price level enough, and the insolvency problem goes away.
Unfortunately, that's not how it works in practice.
Firstly, the Fed doesn't "print" money. What it does do is lower the price of money below the market rate which has an effect similar to but not the same as printing money. This is an exceedingly critical point, and I cannot emphasize it enough.
What that means is that it cannot control the channel in which this money will flow. It could flow into commodities, or it could flow into absurd Internet ventures, or it could flow into gold. They have no control over where it goes.
Everyone with me so far?
Now, where the money goes is a matter of psychology. No banker or trader in their right mind is going to throw money at a clearly collapsing asset (which is what housing currently is.) You'd have to be borderline retarded to do so,
The bankers are in it for the money. They don't give a crap about what economists or central banks desire.
In fact, you can see it in the headlines. Wells Fargo now wants 25% down in California. Whether the Fed likes it or not, this is tightened credit for housing (which means they are balking at loaning money for a collapsing asset.)
In fact it is precisely this reason that no bubble in history has ever failed to collapse, inflation or no inflation, central banks be damned!
Now in order to "cushion" housing prices, the money would have to flow into wages because the borrowers need to make their monthly payment. Anybody who believes that wages will increase in the presence of China and India online also believes in the Tooth Fairy.
Even assuming the Tooth Fairy actually shows up to town, the wages would have to go up right now not 12-18 months later because the borrowers need to make their monthly nut now not 12-18 months later.
Theoretical economists don't worry about time lags. etc. Wave the wand and double the money supply. Yeah, OK.
In what time frame, sir? And what will the borrowers be doing while you're waving the wand?
Finally, we come to the coup de grâce. This is where micro trumps macro every single time.
The needs of an individual are clear. First air (which is free), then food and fuel (heating, getting to job.) Only after that do they need shelter, and clothing. Everything else may safely be classified as discretionary. (Note if you can't get to your job, you won't be making any money.)
Now, each household has a finite pot of money each month (and this pot will not be increasing as explained above.) If food and fuel costs increase, then the amount of money they can spend on the rest must go down. Since food and fuel are absolute necessities, there is less money left over for shelter. I leave it as any easy exercise to the reader to figure out what happens to home prices in that situation.
So while theoretically inflation solves the problem, it has absolutely no chance of doing so in practice. In fact, it is going to make house prices collapse faster i.e. it will actually have the perverse effect of doing the exact opposite of what is intended.
Put that in your pipes and smoke it, economists!
The theoretical position is correct. Print enough money and you will boost the nominal price level enough, and the insolvency problem goes away.
Unfortunately, that's not how it works in practice.
Firstly, the Fed doesn't "print" money. What it does do is lower the price of money below the market rate which has an effect similar to but not the same as printing money. This is an exceedingly critical point, and I cannot emphasize it enough.
What that means is that it cannot control the channel in which this money will flow. It could flow into commodities, or it could flow into absurd Internet ventures, or it could flow into gold. They have no control over where it goes.
Everyone with me so far?
Now, where the money goes is a matter of psychology. No banker or trader in their right mind is going to throw money at a clearly collapsing asset (which is what housing currently is.) You'd have to be borderline retarded to do so,
The bankers are in it for the money. They don't give a crap about what economists or central banks desire.
In fact, you can see it in the headlines. Wells Fargo now wants 25% down in California. Whether the Fed likes it or not, this is tightened credit for housing (which means they are balking at loaning money for a collapsing asset.)
In fact it is precisely this reason that no bubble in history has ever failed to collapse, inflation or no inflation, central banks be damned!
Now in order to "cushion" housing prices, the money would have to flow into wages because the borrowers need to make their monthly payment. Anybody who believes that wages will increase in the presence of China and India online also believes in the Tooth Fairy.
Even assuming the Tooth Fairy actually shows up to town, the wages would have to go up right now not 12-18 months later because the borrowers need to make their monthly nut now not 12-18 months later.
Theoretical economists don't worry about time lags. etc. Wave the wand and double the money supply. Yeah, OK.
In what time frame, sir? And what will the borrowers be doing while you're waving the wand?
Finally, we come to the coup de grâce. This is where micro trumps macro every single time.
The needs of an individual are clear. First air (which is free), then food and fuel (heating, getting to job.) Only after that do they need shelter, and clothing. Everything else may safely be classified as discretionary. (Note if you can't get to your job, you won't be making any money.)
Now, each household has a finite pot of money each month (and this pot will not be increasing as explained above.) If food and fuel costs increase, then the amount of money they can spend on the rest must go down. Since food and fuel are absolute necessities, there is less money left over for shelter. I leave it as any easy exercise to the reader to figure out what happens to home prices in that situation.
So while theoretically inflation solves the problem, it has absolutely no chance of doing so in practice. In fact, it is going to make house prices collapse faster i.e. it will actually have the perverse effect of doing the exact opposite of what is intended.
Put that in your pipes and smoke it, economists!
The Ghost of Christmas Past
In Miami, Ron Shuffield, president of Esslinger-Wooten-Maxwell Realtors, predicted that a limited supply of land coupled with demand from baby boomers and foreigners would prolong the boom indefinitely.
"South Florida," he said, "is working off of a totally new economic model than any of us have ever experienced in the past."
"South Florida," he said, "is working off of a totally new economic model than any of us have ever experienced in the past."
Tuesday, December 23, 2008
The Boxer Rebellion
The Independent reports: Bank of China furious at Deutsche debt move.
Investors in bank debt are threatening to boycott lenders that follow Deutsche Bank in breaking an unwritten rule and failing to exercise a call option on subordinated debt.
In a co-ordinated action, angry bond investors are writing to bank treasurers and investor relations heads telling them that any failure to exercise a call option will be considered a breach of trust that could cause all the issuer's debt to be shunned.
Deutsche stunned the debt market last week by choosing not to redeem €1bn (£932m) of subordinated lower tier 2 bonds because to do so was cheaper than refinancing. But though the move saved Germany's biggest bank up to €150m, it caused fury among buyers of the debt who worked on the assumption that bonds would always be redeemed at their first call date.
Refusing to call the debt means that the hybrid notes effectively become longer term and more risky than the investor originally assumed. Deutsche's decision caused the entire subordinated debt class to be repriced last week.
Bank of China, a major buyer of bank debt, has gone further in its communication with issuers. The giant Chinese lender's Hong Kong operation has told banks that "any non-call by a given institution will result in that institution's debt (not just lower tier 2 but senior and tier 1 as well) being ineligible for future investment consideration".
Bank of China added that Deutsche Bank had also been removed from consideration as a counterparty for any credit derivative transaction in future.
Deutsche Bank will be hoping that other banks follow its lead, giving it safety in numbers. The wave of threats from investors is intended to stop others opting to join Deutsche, and is the most hard-line response yet to the breaking of the debt-market code.
Bring back the Society of Righteous and Harmonious Fists!
Investors in bank debt are threatening to boycott lenders that follow Deutsche Bank in breaking an unwritten rule and failing to exercise a call option on subordinated debt.
In a co-ordinated action, angry bond investors are writing to bank treasurers and investor relations heads telling them that any failure to exercise a call option will be considered a breach of trust that could cause all the issuer's debt to be shunned.
Deutsche stunned the debt market last week by choosing not to redeem €1bn (£932m) of subordinated lower tier 2 bonds because to do so was cheaper than refinancing. But though the move saved Germany's biggest bank up to €150m, it caused fury among buyers of the debt who worked on the assumption that bonds would always be redeemed at their first call date.
Refusing to call the debt means that the hybrid notes effectively become longer term and more risky than the investor originally assumed. Deutsche's decision caused the entire subordinated debt class to be repriced last week.
Bank of China, a major buyer of bank debt, has gone further in its communication with issuers. The giant Chinese lender's Hong Kong operation has told banks that "any non-call by a given institution will result in that institution's debt (not just lower tier 2 but senior and tier 1 as well) being ineligible for future investment consideration".
Bank of China added that Deutsche Bank had also been removed from consideration as a counterparty for any credit derivative transaction in future.
Deutsche Bank will be hoping that other banks follow its lead, giving it safety in numbers. The wave of threats from investors is intended to stop others opting to join Deutsche, and is the most hard-line response yet to the breaking of the debt-market code.
Bring back the Society of Righteous and Harmonious Fists!
Cold Hands
The diseased New York Times reports: Head of Fund Invested in Madoff Said to Commit Suicide.
Rene-Thierry Magon de la Villehuchet, a founder of the hedge fund Access International Advisors, was found dead early Tuesday in his office in Manhattan, the French business daily La Tribune reported on its Web site, after losing as much as $1.4 billion that had been invested with Bernard L. Madoff, the money manager accused of running a $50 billion Ponzi scheme. Mr. de la Villehuchet, 65, committed suicide, La Tribune said, citing a someone close to Mr. de la Villehuchet.
Hot-diggity, this is getting better each day.
Rene-Thierry Magon de la Villehuchet, a founder of the hedge fund Access International Advisors, was found dead early Tuesday in his office in Manhattan, the French business daily La Tribune reported on its Web site, after losing as much as $1.4 billion that had been invested with Bernard L. Madoff, the money manager accused of running a $50 billion Ponzi scheme. Mr. de la Villehuchet, 65, committed suicide, La Tribune said, citing a someone close to Mr. de la Villehuchet.
Hot-diggity, this is getting better each day.
Don't Choke Laughin'
From Reuters: Madoff investor seeks relief from SEC: report.
An investor who lost nearly $2 million investing with Bernard Madoff has filed a claim against the U.S. Securities and Exchange Commission (SEC) alleging the agency was negligent in failing to detect an alleged decades-long fraud, the Wall Street Journal said.
Phyllis Molchatsky, a 61-year-old retiree from Valley Cottage, New York, is seeking $1.7 million in damages from the agency, the paper said.
The claim is believed to be the first attempt by an investor to recover lost money from regulators, according to the paper.
Can we say throwing good money after bad?
An investor who lost nearly $2 million investing with Bernard Madoff has filed a claim against the U.S. Securities and Exchange Commission (SEC) alleging the agency was negligent in failing to detect an alleged decades-long fraud, the Wall Street Journal said.
Phyllis Molchatsky, a 61-year-old retiree from Valley Cottage, New York, is seeking $1.7 million in damages from the agency, the paper said.
The claim is believed to be the first attempt by an investor to recover lost money from regulators, according to the paper.
Can we say throwing good money after bad?
That Decoupling Feeling...
From the Independent: Default by Kuwaiti investment house hits Gulf's reputation as financial hub.
The reputation of the Arabian Gulf as a financial hub was dealt a blow yesterday as Global Investment House (GIH), one of the region's biggest institutional investors, confirmed that it was unable to repay a $200m loan, and had appointed HSBC to renegotiate the deal, and its other debts, with international creditors.
Analysts had expected the Kuwaiti government to meet the obligation in order to save face in the international debt markets.
The credit ratings agency Standard & Poor's cut the group's rating to "speculative default" last week after previously judging the group's debt to be investment grade, or a solid investment choice.
Oil yah? We hardly knew ye.
The reputation of the Arabian Gulf as a financial hub was dealt a blow yesterday as Global Investment House (GIH), one of the region's biggest institutional investors, confirmed that it was unable to repay a $200m loan, and had appointed HSBC to renegotiate the deal, and its other debts, with international creditors.
Analysts had expected the Kuwaiti government to meet the obligation in order to save face in the international debt markets.
The credit ratings agency Standard & Poor's cut the group's rating to "speculative default" last week after previously judging the group's debt to be investment grade, or a solid investment choice.
Oil yah? We hardly knew ye.
Monday, December 22, 2008
It's a Light-Fingered Christmas
The venereal New York Times reports: As Economy Dips, Arrests for Shoplifting Soar.
Police departments across the country say that shoplifting arrests are 10 percent to 20 percent higher this year than last. The problem is probably even greater than arrest records indicate since shoplifters are often banned from stores rather than arrested.
“More people are desperate economically, retailers are operating with leaner staffs and police forces are cutting back or being told to deprioritize shoplifting calls,” said Paul Jones, the vice president of asset protection for the Retail Industry Leaders Association.
Compounding the problem, stores are more reluctant to stop suspicious customers because they fear scaring away much-needed business. And retailers are increasingly trying to save money by hiring seasonal workers who, security experts say, are themselves more likely to commit fraud or theft and are less practiced at catching shoplifters than full-time employees are.
Police departments across the country say that shoplifting arrests are 10 percent to 20 percent higher this year than last. The problem is probably even greater than arrest records indicate since shoplifters are often banned from stores rather than arrested.
“More people are desperate economically, retailers are operating with leaner staffs and police forces are cutting back or being told to deprioritize shoplifting calls,” said Paul Jones, the vice president of asset protection for the Retail Industry Leaders Association.
Compounding the problem, stores are more reluctant to stop suspicious customers because they fear scaring away much-needed business. And retailers are increasingly trying to save money by hiring seasonal workers who, security experts say, are themselves more likely to commit fraud or theft and are less practiced at catching shoplifters than full-time employees are.
Academia Schmackademia
US News reports: Tufts, Yeshiva, New York Law School, and Harvard Hurt by Madoff.
The Bernard Madoff story has clawed its way into college news, with Tufts, Yeshiva, and New York Law School funds tied to Ascot Partners, a Florida hedge fund with nearly all its $1.8 billion invested with Madoff.
Yeshiva is by far the worst off, reporting it likely lost $110 million of its endowment to the giant Ponzi scheme, which is about 8 percent of its assets.
Tufts has also reported it lost $20 million through Ascot Partners, and New York Law School reports similarly large losses. The loss is 2 percent of the university's endowment and officials say they are participating in the investigation and will attempt to recover the losses.
A number of Harvard Medical School researchers, meanwhile, have lost their grants, thanks to ties to Madoff's firm. All grants from the Florida-based Picower Foundation, which was funding millions in diabetes and medical research, were cut off after the foundation—which has a nearly $952 million portfolio—announced it would close its doors because of Madoff-related losses.
"Experience keeps a dear school but fools will learn in no other."
- Benjamin Franklin
The Bernard Madoff story has clawed its way into college news, with Tufts, Yeshiva, and New York Law School funds tied to Ascot Partners, a Florida hedge fund with nearly all its $1.8 billion invested with Madoff.
Yeshiva is by far the worst off, reporting it likely lost $110 million of its endowment to the giant Ponzi scheme, which is about 8 percent of its assets.
Tufts has also reported it lost $20 million through Ascot Partners, and New York Law School reports similarly large losses. The loss is 2 percent of the university's endowment and officials say they are participating in the investigation and will attempt to recover the losses.
A number of Harvard Medical School researchers, meanwhile, have lost their grants, thanks to ties to Madoff's firm. All grants from the Florida-based Picower Foundation, which was funding millions in diabetes and medical research, were cut off after the foundation—which has a nearly $952 million portfolio—announced it would close its doors because of Madoff-related losses.
"Experience keeps a dear school but fools will learn in no other."
- Benjamin Franklin
The Big One Hits SF
From SFGate: S.F. office space rent drops 22%.
San Francisco office rents dropped 22 percent during the fourth quarter from the previous year, the largest decline in seven years, as the shrinking financial services industry flooded downtown with empty space.
The average price for Class A space in the Financial District sank to $41.34 per square foot in the fourth quarter, down from $53.14 a year ago, according to a preliminary report by brokerage firm Colliers International. It was the biggest drop since the fourth quarter of 2001, when rents declined 49 percent following the dot-com implosion and Sept. 11 attacks.
But SF is special. Prices go up forever. They are not making any more land. Buy now before you are priced out forever.
San Francisco office rents dropped 22 percent during the fourth quarter from the previous year, the largest decline in seven years, as the shrinking financial services industry flooded downtown with empty space.
The average price for Class A space in the Financial District sank to $41.34 per square foot in the fourth quarter, down from $53.14 a year ago, according to a preliminary report by brokerage firm Colliers International. It was the biggest drop since the fourth quarter of 2001, when rents declined 49 percent following the dot-com implosion and Sept. 11 attacks.
But SF is special. Prices go up forever. They are not making any more land. Buy now before you are priced out forever.
Death, Where is Thy Sting?
The Times, UK reports: HSBC banker found hanged in five-star hotel suite.
An HSBC banker has been found hanged at a five-star hotel, after apparently committing suicide.
Christen Schnor, 49, was found by a hotel worker hanging by a belt in the closet of his £500-a-night suite at the Jumeirah Carlton Tower hotel in Knightsbridge, West London. A note was found by his naked body.
An HSBC banker has been found hanged at a five-star hotel, after apparently committing suicide.
Christen Schnor, 49, was found by a hotel worker hanging by a belt in the closet of his £500-a-night suite at the Jumeirah Carlton Tower hotel in Knightsbridge, West London. A note was found by his naked body.
Friday, December 19, 2008
Les pommes frites
Yahoo! reports: Belgian government collapses over Fortis affair.
Belgium's government collapsed on Friday after a top court found signs that it had sought to sway a legal ruling on the future of stricken bank Fortis.
Leterme has been under pressure to quit over accusations that his office had sought to influence an appeal court ruling that last week froze the break-up of financial group Fortis.
Leterme has denied influencing the appeal court, although he acknowledged that one of his officials contacted the husband of one of the judges several times.
Fortis was carved up by the Dutch, Belgian and Luxembourg governments with France's BNP Paribas buying the Belgian operations after an 11.2 billion euro ($16.1 billion) cash injection failed to calm investor concerns over its health.
The row reignited speculation the 178-year-old country could break up.
Belgium's government collapsed on Friday after a top court found signs that it had sought to sway a legal ruling on the future of stricken bank Fortis.
Leterme has been under pressure to quit over accusations that his office had sought to influence an appeal court ruling that last week froze the break-up of financial group Fortis.
Leterme has denied influencing the appeal court, although he acknowledged that one of his officials contacted the husband of one of the judges several times.
Fortis was carved up by the Dutch, Belgian and Luxembourg governments with France's BNP Paribas buying the Belgian operations after an 11.2 billion euro ($16.1 billion) cash injection failed to calm investor concerns over its health.
The row reignited speculation the 178-year-old country could break up.
Thursday, December 18, 2008
QC Standards
What "quality" due-diligence looks like.
(Courtesy: Fairfield Greenwich Group.)
ROTFLMAO.
(Courtesy: Fairfield Greenwich Group.)ROTFLMAO.
Emerald City Enema
AM New York reports: Manhattan home sales plunge.
With Manhattan real estate prices now estimated to be down by as much as 20 percent since the summer, New Yorkers may sense an opportunity to buy in.
In fact, the current edition of the Federal Reserve Board’s Beige Book – an economic snapshot of various regions released eight times a year – paints a picture of a plummeting market.
“Transaction activity has dropped off noticeably, and there has been a large increase in the number of listings,” says the report, released earlier this month.
The beige book findings are based on an analysis by real estate appraisal firm Miller Samuel.
“It’s basically our observation that something that contracts today is selling for 20 percent less than something that was contracted for this summer,” said Jonathan Miller, the company’s president.
He attributed the drop to a lack of available credit and the implosion on Wall Street, which has left many without year-end bonuses.
Lockhart Steele, the founder of the real estate Web site curbed.com, said 20 percent might even be too low.
“Behind the scenes, brokers are whispering even scarier numbers, like 30 or 40 percent,” he said.
Hasta luego, suckahs!
With Manhattan real estate prices now estimated to be down by as much as 20 percent since the summer, New Yorkers may sense an opportunity to buy in.
In fact, the current edition of the Federal Reserve Board’s Beige Book – an economic snapshot of various regions released eight times a year – paints a picture of a plummeting market.
“Transaction activity has dropped off noticeably, and there has been a large increase in the number of listings,” says the report, released earlier this month.
The beige book findings are based on an analysis by real estate appraisal firm Miller Samuel.
“It’s basically our observation that something that contracts today is selling for 20 percent less than something that was contracted for this summer,” said Jonathan Miller, the company’s president.
He attributed the drop to a lack of available credit and the implosion on Wall Street, which has left many without year-end bonuses.
Lockhart Steele, the founder of the real estate Web site curbed.com, said 20 percent might even be too low.
“Behind the scenes, brokers are whispering even scarier numbers, like 30 or 40 percent,” he said.
Hasta luego, suckahs!
The Spirit of the Season
CNN reports: Sign of the times: Stolen Christmas trees.
With the economy tanking, it may not be a surprise that nuisance crimes like petty theft and vandalism are on the rise. But even police departments are scratching their heads over the latest hot loot: Christmas trees.
In recent weeks, police across the country have seen an uptick in the theft of trees from commercial lots.
In Baytown, Tex., cops caught a man earlier this month trying to take several holiday trees off a lot. In Portland, Ore., police nabbed a man last week dragging a stolen tree down the street around 3 a.m. Officials in Hillsborough County, Fla., are investigating a Christmas tree crime spree, with more than 20 stolen from one lot owner alone. In that instance, 14 Fraser firs were swiped in the middle of the night on December 2; another eight were stolen about a week later. Dan Parker, who has owned the site for more than 50 years, says no trees were stolen from his site last year. In fact, the last time Parker had pilferers was when 40 were stolen in 1978 -- during a similar economic downturn.
"People shouldn't be stealing Christmas trees, because Christmas has a real good meaning," he says.
BWAHAHHAHAHAHAHHAHAHAHHAHHHHHHHH!!!
With the economy tanking, it may not be a surprise that nuisance crimes like petty theft and vandalism are on the rise. But even police departments are scratching their heads over the latest hot loot: Christmas trees.
In recent weeks, police across the country have seen an uptick in the theft of trees from commercial lots.
In Baytown, Tex., cops caught a man earlier this month trying to take several holiday trees off a lot. In Portland, Ore., police nabbed a man last week dragging a stolen tree down the street around 3 a.m. Officials in Hillsborough County, Fla., are investigating a Christmas tree crime spree, with more than 20 stolen from one lot owner alone. In that instance, 14 Fraser firs were swiped in the middle of the night on December 2; another eight were stolen about a week later. Dan Parker, who has owned the site for more than 50 years, says no trees were stolen from his site last year. In fact, the last time Parker had pilferers was when 40 were stolen in 1978 -- during a similar economic downturn.
"People shouldn't be stealing Christmas trees, because Christmas has a real good meaning," he says.
BWAHAHHAHAHAHAHHAHAHAHHAHHHHHHHH!!!
Wednesday, December 17, 2008
For Chrysler's Sake!
CBS reports: Chrysler to shut assembly lines for at least a month.
Chrysler LLC, awaiting word on a federal bailout, said Wednesday it will idle all of its 30 plants for at least a month in an effort to bring output closer in line with plunging demand for new cars and trucks.
The privately held carmaker said it will shut its assembly lines at the end of Friday's shift and keep them closed through at least Jan. 19, extending a holiday shutdown that was already put in place.
Separately, Ford Motor Co. announced that it will shut down most of its North American assembly plants for an extra week in January, according to the Associated Press.
Automakers typically close their factories for a couple of weeks over the two weeks during holidays and often, as in Ford's case, target specific plants for even longer idle periods to keep a lid on inventory during times of slack demand. Yet Chrysler's move to idle its entire operation for at least a month reflects just how dire the situation is in Detroit.
Happy holidays!
Chrysler LLC, awaiting word on a federal bailout, said Wednesday it will idle all of its 30 plants for at least a month in an effort to bring output closer in line with plunging demand for new cars and trucks.
The privately held carmaker said it will shut its assembly lines at the end of Friday's shift and keep them closed through at least Jan. 19, extending a holiday shutdown that was already put in place.
Separately, Ford Motor Co. announced that it will shut down most of its North American assembly plants for an extra week in January, according to the Associated Press.
Automakers typically close their factories for a couple of weeks over the two weeks during holidays and often, as in Ford's case, target specific plants for even longer idle periods to keep a lid on inventory during times of slack demand. Yet Chrysler's move to idle its entire operation for at least a month reflects just how dire the situation is in Detroit.
Happy holidays!
Tuesday, December 16, 2008
Credit Crunch Hits Heaven!
From the Times of India: Now, meltdown hits pilgrimages.
Even the gods have been impacted by the global financial crisis and its effect on the Indian economy.
Government and private buses from Bangalore to the Tirupati shrine in Andhra Pradesh and the Ayyappa temple in Sabarimala in Kerala do not have many takers these days, forcing operators to reduce the number of trips.
Right now, it is the main pilgrim season in Sabarimala (November to January), about 750 km from Bangalore. But both government and private operators say business is dull on this sector too.
Maybe Indra can call Congress for a Heavenly Bailout?
Should he go to DC on Airavata, or in an American car?
Even the gods have been impacted by the global financial crisis and its effect on the Indian economy.
Government and private buses from Bangalore to the Tirupati shrine in Andhra Pradesh and the Ayyappa temple in Sabarimala in Kerala do not have many takers these days, forcing operators to reduce the number of trips.
Right now, it is the main pilgrim season in Sabarimala (November to January), about 750 km from Bangalore. But both government and private operators say business is dull on this sector too.
Maybe Indra can call Congress for a Heavenly Bailout?
Should he go to DC on Airavata, or in an American car?
Monday, December 15, 2008
Breaking News
From Unconfirmed Sources: Bernard Madoff appointed Commissioner of Social Security Administration.
Bernard Madoff, a certified-expert in ponzi schemes, has been appointed as Commissioner of the Social Security Administration. The bipartisan consensus on the Hill is that Mr. Madoff would make a great Commissioner.
"My strategy was working so long as the Federal Reserve and the government were able to keep the inflationary bubble going, and I was able to get more and more dollars of a lesser value deposited into my accounts. The only thing I was really lacking was a printing press in my office," said Commissioner Madoff.
"We all know the way the government and the Federal Reserve work, and the entire Social Securityscam system," said Congresswoman Nancy Pelosi. "So long as Mr. Madoff has the full support of the government's printing press, he will be able to manage Social Security accounts with expertise."
Next! Madoff explains "fractional-reserve banking".
Bernard Madoff, a certified-expert in ponzi schemes, has been appointed as Commissioner of the Social Security Administration. The bipartisan consensus on the Hill is that Mr. Madoff would make a great Commissioner.
"My strategy was working so long as the Federal Reserve and the government were able to keep the inflationary bubble going, and I was able to get more and more dollars of a lesser value deposited into my accounts. The only thing I was really lacking was a printing press in my office," said Commissioner Madoff.
"We all know the way the government and the Federal Reserve work, and the entire Social Security
Next! Madoff explains "fractional-reserve banking".
Saturday, December 13, 2008
Sweet Sufferin' Suicide
From the Milwaukee Journal: Man who killed self in standoff faced foreclosure, court records show.
A Jackson man who killed himself after a five-hour standoff with police at his wife's Fredonia home was "a very angry man" who was going through a divorce and, along with his wife, had just been foreclosed on the day before, court records show.
Max Bishop, 33, who ran a car-customizing shop, shot himself in the head with a sawed-off shotgun shortly before 9 p.m.
Happiness is a warm gun.
A Jackson man who killed himself after a five-hour standoff with police at his wife's Fredonia home was "a very angry man" who was going through a divorce and, along with his wife, had just been foreclosed on the day before, court records show.
Max Bishop, 33, who ran a car-customizing shop, shot himself in the head with a sawed-off shotgun shortly before 9 p.m.
Happiness is a warm gun.
Friday, December 12, 2008
Ecuatorial Bellyslash
From Bloomberg: Correa Defaults on Ecuador Bonds, Seeks Restructuring.
Ecuadorean President Rafael Correa halted payment on foreign bonds he calls “illegal” and “illegitimate,” putting the South American country in default for a second time in a decade.
The government won’t make a $30.6 million interest payment by Dec. 15, when a monthlong grace period expires, Correa told reporters in his office in Guayaquil. The $510 million bonds due in 2012 plunged to 23 cents on the dollar from 31 yesterday and 97.5 cents three months ago.
“I have given the order that interest payments not be made,” Correa said. “The country is in default.”
As if anyone didn't expect that!
The only interesting question is how many Italian pensioners got screwed. Every time the Lat-Am bonds default, the Italian pensioners take it doggy-style.
Whenever there's a Lat-Am default, the Italian banks are there behind it. And they've sold the crap to the unsuspecting pensioners.
Every fuckin' decade. Like a perfectly crafted Swiss time piece.
You think they might have figured it out by now?
Ecuadorean President Rafael Correa halted payment on foreign bonds he calls “illegal” and “illegitimate,” putting the South American country in default for a second time in a decade.
The government won’t make a $30.6 million interest payment by Dec. 15, when a monthlong grace period expires, Correa told reporters in his office in Guayaquil. The $510 million bonds due in 2012 plunged to 23 cents on the dollar from 31 yesterday and 97.5 cents three months ago.
“I have given the order that interest payments not be made,” Correa said. “The country is in default.”
As if anyone didn't expect that!
The only interesting question is how many Italian pensioners got screwed. Every time the Lat-Am bonds default, the Italian pensioners take it doggy-style.
Whenever there's a Lat-Am default, the Italian banks are there behind it. And they've sold the crap to the unsuspecting pensioners.
Every fuckin' decade. Like a perfectly crafted Swiss time piece.
You think they might have figured it out by now?
What if you threw a party, and nobody showed up?
From the Financial Times: The US is on sale - but no one’s really buying.
No, we’re not talking about Treasuries, since that would be patently untrue. No, this is about the fabled US consumer - (s)he who contributes more than 70 per cent to the country’s GDP, and roughly 20 per cent to global GDP, according to Merrill Lynch data.
And the US consumer has gone on a buying strike, little moved by a national proliferation of deep discounting, buy-one-get-one free offers and “the holidays”.
Data released by the Commerce Department on Friday showed sales at US retailers fell for a fifth straight month in November, the longest decline in at least 16 year.
Why buy today when it will be cheaper tomorrow?†
†Oh, and that's called deflation, in case you missed it the first seventeen times.
No, we’re not talking about Treasuries, since that would be patently untrue. No, this is about the fabled US consumer - (s)he who contributes more than 70 per cent to the country’s GDP, and roughly 20 per cent to global GDP, according to Merrill Lynch data.
And the US consumer has gone on a buying strike, little moved by a national proliferation of deep discounting, buy-one-get-one free offers and “the holidays”.
Data released by the Commerce Department on Friday showed sales at US retailers fell for a fifth straight month in November, the longest decline in at least 16 year.
Why buy today when it will be cheaper tomorrow?†
†Oh, and that's called deflation, in case you missed it the first seventeen times.
Thursday, December 11, 2008
The Crystal Clear Crystal Ball
From Creditflux.com: CDS may be triggered by autos czar, says Bank of America.
A US autos czar may trigger credit default swap contracts, says Bank of America. Analysts posit that the result may depend on the exact wording of a potential bailout package and the process is likely to be determined through Isda. Based on the wording of the recent draft bill, there are two potential triggers for autos CDS: bankruptcy and modified restructuring credit events.
From Creditflux.com: Autos bailout bill unlikely to trigger CDS contracts, says Bank of America.
Bank of America analysts suggested yesterday that the new draft of the autos bailout bill is unlikely to trigger credit default swap contracts, and of orphaning LCDS contracts.
It's good to have complete clarity in these situations.
A US autos czar may trigger credit default swap contracts, says Bank of America. Analysts posit that the result may depend on the exact wording of a potential bailout package and the process is likely to be determined through Isda. Based on the wording of the recent draft bill, there are two potential triggers for autos CDS: bankruptcy and modified restructuring credit events.
From Creditflux.com: Autos bailout bill unlikely to trigger CDS contracts, says Bank of America.
Bank of America analysts suggested yesterday that the new draft of the autos bailout bill is unlikely to trigger credit default swap contracts, and of orphaning LCDS contracts.
It's good to have complete clarity in these situations.
Wednesday, December 10, 2008
$hitti cancels the choo-choo train
From Bloomberg: Citi Derails Holiday Toy-Train Show in Credit Crunch.
Dec. 9 (Bloomberg) -- Citigroup Inc., the bank that's eliminating 52,000 jobs after getting a $45 billion government bailout, canceled its sponsorship of a New York holiday toy-train exhibit visited by more than 125,000 people a year.
Dunham Studios, the Pottersville, New York-based operator of the 750-square-foot model railroad, was notified of Citigroup's decision last month, co-owner Clarke Dunham said in an interview. That means the free show that first went on display in 1987 at the Citigroup Center lobby may reach the end of the line on Jan. 2 unless another sponsor steps up or the bank reconsiders, he said. It also means Citigroup will save about $240,000.
"The difficult decision to discontinue this sponsorship was part of Citi's ongoing expense-reduction efforts," Citigroup said in an e-mailed statement. Chief Executive Officer Vikram Pandit, 51, announced on Nov. 21 that he wants to cut costs by about $2 billion per quarter starting next year.
Dec. 9 (Bloomberg) -- Citigroup Inc., the bank that's eliminating 52,000 jobs after getting a $45 billion government bailout, canceled its sponsorship of a New York holiday toy-train exhibit visited by more than 125,000 people a year.
Dunham Studios, the Pottersville, New York-based operator of the 750-square-foot model railroad, was notified of Citigroup's decision last month, co-owner Clarke Dunham said in an interview. That means the free show that first went on display in 1987 at the Citigroup Center lobby may reach the end of the line on Jan. 2 unless another sponsor steps up or the bank reconsiders, he said. It also means Citigroup will save about $240,000.
"The difficult decision to discontinue this sponsorship was part of Citi's ongoing expense-reduction efforts," Citigroup said in an e-mailed statement. Chief Executive Officer Vikram Pandit, 51, announced on Nov. 21 that he wants to cut costs by about $2 billion per quarter starting next year.
Tuesday, December 09, 2008
"C'est tout dire!"
Lehman Brothers has asked a judge to approve the sale of a French investment-banking unit to Banque Nomura France for €1, Bloomberg reported on Tuesday.
Banque Nomura was the only bidder. Lehman was “unable to find an alternate solution or buyer,” according to the filing.
Banque Nomura was the only bidder. Lehman was “unable to find an alternate solution or buyer,” according to the filing.
The Crackheads at Chrysler
From their front page:
If I were begging for a bailout, I'd have the common sense to not put something so sensationally stupid on the front page.
If I were begging for a bailout, I'd have the common sense to not put something so sensationally stupid on the front page.
How to Stimulate the Economy
From Yahoo! UK: 'Oh Oh! I Have An £84m Overdraft'.
Kaylie Coomber, from Highnam, near Gloucester, could not believe her eyes when she received a letter from Alliance and Leicester informing her of the considerable change in her financial circumstances.
Miss Coomber works at the National Star college for severely disabled teenagers and young people near Cheltenham.
The 20-year-old said she had previously phoned the bank asking them to extend her overdraft to £250 in the run up to Christmas.
She said: "I rang them up three days ago to ask if they could extend my overdraft by £50.
"I needed the overdraft because of the time - it's just before Christmas and I have to pay my car tax and MOT.
''But I was totally staggered when they then sent me a letter saying 'We are pleased to confirm that we have arranged an overdraft limit of £84,480,090.00 on your account.
"I knew they had obviously made a mistake - but I ran to the cashpoint as I want to see if I was one of the richest people in the country, sadly I wasn't."
Miss Coomber said that while she could not stop laughing when she got the letter, the bank did not find it quite so amusing.
"When I phoned the bank to tell them about it they didn't apologise or find it funny," she explained. "I am a bit disappointed I am not going to get my £84m overdraft."
A spokesman for Alliance and Leicester apologised for "any inconvenience or upset" caused to Miss Coomber and confirmed it was an "unfortunate" one-off incident.
Kaylie Coomber, from Highnam, near Gloucester, could not believe her eyes when she received a letter from Alliance and Leicester informing her of the considerable change in her financial circumstances.
Miss Coomber works at the National Star college for severely disabled teenagers and young people near Cheltenham.
The 20-year-old said she had previously phoned the bank asking them to extend her overdraft to £250 in the run up to Christmas.
She said: "I rang them up three days ago to ask if they could extend my overdraft by £50.
"I needed the overdraft because of the time - it's just before Christmas and I have to pay my car tax and MOT.
''But I was totally staggered when they then sent me a letter saying 'We are pleased to confirm that we have arranged an overdraft limit of £84,480,090.00 on your account.
"I knew they had obviously made a mistake - but I ran to the cashpoint as I want to see if I was one of the richest people in the country, sadly I wasn't."
Miss Coomber said that while she could not stop laughing when she got the letter, the bank did not find it quite so amusing.
"When I phoned the bank to tell them about it they didn't apologise or find it funny," she explained. "I am a bit disappointed I am not going to get my £84m overdraft."
A spokesman for Alliance and Leicester apologised for "any inconvenience or upset" caused to Miss Coomber and confirmed it was an "unfortunate" one-off incident.
The Pinnacle of Pointlessness
From Wealth magazine (yeah, you heard that right!): The strong will survive the hedge fund crisis.
With the credit crisis ravaging the investment banking industry there have been grim predictions for the future of the hedge fund business.
There is no doubt some changes will have to be made for the hedge fund model to adapt to the new world order. But, at a time when the investment banking industry has all but disappeared, the situation in the hedge fund world is not as disastrous as it could have been.
So the strong will survive, and the weak will fail?
Isn't this fuckin' obvious? Do we need a Ph.D. in journalism to figure this out?
Sorry, but what exactly is the point of this article?
With the credit crisis ravaging the investment banking industry there have been grim predictions for the future of the hedge fund business.
There is no doubt some changes will have to be made for the hedge fund model to adapt to the new world order. But, at a time when the investment banking industry has all but disappeared, the situation in the hedge fund world is not as disastrous as it could have been.
So the strong will survive, and the weak will fail?
Isn't this fuckin' obvious? Do we need a Ph.D. in journalism to figure this out?
Sorry, but what exactly is the point of this article?
Monday, December 08, 2008
More Backpedaling
From the venereal and diseased New York Times: Obama Warns of Further Economic Pain.
Saying that the United States economy was likely to worsen before it improves, President-elect Barack Obama on Sunday pledged to pursue a recovery plan “equal to the task ahead,” including the creation of a vast public-works program not just built around bridge and highway projects, but on creating “green jobs” and disseminating new technologies.
Even if the current economic crisis looks nothing like the Great Depression, Mr. Obama said, “This is a big problem, and it’s going to get worse.”
I thought once the Messiah™ was elected, it was going to be all roses and rainbows and dancing white ponies.
What happened?
Saying that the United States economy was likely to worsen before it improves, President-elect Barack Obama on Sunday pledged to pursue a recovery plan “equal to the task ahead,” including the creation of a vast public-works program not just built around bridge and highway projects, but on creating “green jobs” and disseminating new technologies.
Even if the current economic crisis looks nothing like the Great Depression, Mr. Obama said, “This is a big problem, and it’s going to get worse.”
I thought once the Messiah™ was elected, it was going to be all roses and rainbows and dancing white ponies.
What happened?
Chicago Choo- Choo
Bloomberg reports: Tribune’s Cubs Bids Said to Be Less Than $1 Billion.
The bids Tribune Co. received for the Chicago Cubs baseball team ranged from $850 million to $950 million and should decline now that the parent company is in bankruptcy, a person with knowledge of the process said.
The bids Tribune Co. received for the Chicago Cubs baseball team ranged from $850 million to $950 million and should decline now that the parent company is in bankruptcy, a person with knowledge of the process said.
The New Grapes of Wrath
The LA Times reports: A guide for the newly poor.
If you're eating three meals today and have a roof over your head, you've probably never heard of the 211 service.
It's like 411 or 911, except you use it when you're in such financial distress that you don't have enough money for food or perhaps even for a place to live.
In this economic climate, those conditions can arise alarmingly quickly.
"We have households that six months ago made $70,000, $80,000," said Michael Flood, chief executive of the Los Angeles Regional Food Bank, "and then the bottom falls out."
Denial is common. Michelle Vu took a call from a woman in Hollywood who had lost her job, leading to the eventual loss of her home. For the last four nights the woman had slept in her car.
"I told her about shelters where I could possibly find a place for her," Vu said. "She said she didn't want that because shelters are for people who are homeless."
It's not exactly fuckin' Ma Joad and the Grapes of Wrath, is it now? You can call 211.
Wonder whether Ma Joad (that tarty bitch!) would've called 211.
And Rose, Rose of Sharon, after having lost Rosemary's Baby, wonder if she would've breastfed the hungry man, or said, "Hey dude, you'd better call 211."
Yo, don't go. Don't be a bo. Call 211.
If you're eating three meals today and have a roof over your head, you've probably never heard of the 211 service.
It's like 411 or 911, except you use it when you're in such financial distress that you don't have enough money for food or perhaps even for a place to live.
In this economic climate, those conditions can arise alarmingly quickly.
"We have households that six months ago made $70,000, $80,000," said Michael Flood, chief executive of the Los Angeles Regional Food Bank, "and then the bottom falls out."
Denial is common. Michelle Vu took a call from a woman in Hollywood who had lost her job, leading to the eventual loss of her home. For the last four nights the woman had slept in her car.
"I told her about shelters where I could possibly find a place for her," Vu said. "She said she didn't want that because shelters are for people who are homeless."
It's not exactly fuckin' Ma Joad and the Grapes of Wrath, is it now? You can call 211.
Wonder whether Ma Joad (that tarty bitch!) would've called 211.
And Rose, Rose of Sharon, after having lost Rosemary's Baby, wonder if she would've breastfed the hungry man, or said, "Hey dude, you'd better call 211."
Yo, don't go. Don't be a bo. Call 211.
Sunday, December 07, 2008
Harry Potter News
New book: Harry Potter and the Cash-Strapped Oil Prince starring Prince Alla-walla-willa-wonka-we-need-money-for-weed.
Buy now before you are priced out forever!
Buy now before you are priced out forever!
Saturday, December 06, 2008
The Competition
Ding! Ding! Ding!
“In this corner, weighing in at one-hundred seventy-three pounds, a pointy-headed know-it-all Economic Poindexter and "expert" on the GRRRRRRRRRREEAAAAT DEPRESSSSSION, BEN BER-NANNNNNN-KEEEEE”
“And in this corner, his opponent, weighing in at two tons, having been in training for twenty-five years and with a team of decades of irresponsible monetary policy, the elephant in the room, GREAT DEPRESSION REEEEE-DUUUUUX”
LLLLettts Get Ready to RUMMMMMBBBLLLLE!
“In this corner, weighing in at one-hundred seventy-three pounds, a pointy-headed know-it-all Economic Poindexter and "expert" on the GRRRRRRRRRREEAAAAT DEPRESSSSSION, BEN BER-NANNNNNN-KEEEEE”
“And in this corner, his opponent, weighing in at two tons, having been in training for twenty-five years and with a team of decades of irresponsible monetary policy, the elephant in the room, GREAT DEPRESSION REEEEE-DUUUUUX”
LLLLettts Get Ready to RUMMMMMBBBLLLLE!
Friday, December 05, 2008
Swiss Cheese
Reuters reports: Bank Julius Baer CEO dies unexpectedly.
Alex Widmer, the chief executive of Bank Julius Baer (BAER.VX: Quote, Profile, Research) and a well respected figure in Swiss private banking, has died unexpectedly at the age of 52, the bank said.
A source told Reuters he had been informed by close friends of Widmer's family that the banker had committed suicide.
Alex Widmer, the chief executive of Bank Julius Baer (BAER.VX: Quote, Profile, Research) and a well respected figure in Swiss private banking, has died unexpectedly at the age of 52, the bank said.
A source told Reuters he had been informed by close friends of Widmer's family that the banker had committed suicide.
The Goobernator Strikes Back
Bloomberg reports: California May Pay With IOUs for Second Time Since Depression.
California, the world’s eighth largest economy, may pay vendors with IOUs for only the second time since the Great Depression, State Finance Director Mike Genest said.
Governor Arnold Schwarzenegger warned that he may issue the warrants, which are a promise to pay with interest, to suppliers and contractors as the seizure in credit markets may make it too costly to borrow.
The warrants would be given to landscapers, carpet cleaners, construction firms, food services companies and other state vendors. They would pay an interest rate of as much as 5 percent, based on state law.
This is technically a form of default.
If the true cost of borrowing in the free market is 10% and you're paying them with 5% warrants, you're basically playing a rigged game.
If the contractors try to sell the warrants on the free market, and sure enough, a market will open up for these securities, they will be discounted by precisely the amount needed so that the warrants yield the free market rate. Basically, the contractors will be stiffed by roughly 5% (given above assumptions.)
Of course, the said people might not be too happy about that, and might just stiff you in other (unseen) ways.
Let us know whether that works out for you!
California, the world’s eighth largest economy, may pay vendors with IOUs for only the second time since the Great Depression, State Finance Director Mike Genest said.
Governor Arnold Schwarzenegger warned that he may issue the warrants, which are a promise to pay with interest, to suppliers and contractors as the seizure in credit markets may make it too costly to borrow.
The warrants would be given to landscapers, carpet cleaners, construction firms, food services companies and other state vendors. They would pay an interest rate of as much as 5 percent, based on state law.
This is technically a form of default.
If the true cost of borrowing in the free market is 10% and you're paying them with 5% warrants, you're basically playing a rigged game.
If the contractors try to sell the warrants on the free market, and sure enough, a market will open up for these securities, they will be discounted by precisely the amount needed so that the warrants yield the free market rate. Basically, the contractors will be stiffed by roughly 5% (given above assumptions.)
Of course, the said people might not be too happy about that, and might just stiff you in other (unseen) ways.
Let us know whether that works out for you!
Thursday, December 04, 2008
Noo Yawk, Schmoo Yawk
From the St. Petersburg Times: Fla. called No. 1 in mortgage fraud.
A national report released Tuesday said Florida leads the nation in mortgage fraud.
New York and California, eat your hearts out!
A national report released Tuesday said Florida leads the nation in mortgage fraud.
New York and California, eat your hearts out!
Do I Smell Capitulation?
From Yahoo!: Bernanke: more action needed to cut foreclosures
Federal Reserve Chairman Ben Bernanke called on the government Thursday to ramp up efforts to stem soaring home foreclosures, which are feeding into the country's deep economic troubles.
Fielding questions after his speech, Bernanke didn't foresee government intervention specifically aimed at boosting sagging home prices.
"I don't think we would be either willing or able to target house prices. I think that would probably be an impossible thing to do given the size of the national housing market," Bernanke said.
Bazooka Ben gave up already? Pak-pak-pak-pak-pakkak!
Federal Reserve Chairman Ben Bernanke called on the government Thursday to ramp up efforts to stem soaring home foreclosures, which are feeding into the country's deep economic troubles.
Fielding questions after his speech, Bernanke didn't foresee government intervention specifically aimed at boosting sagging home prices.
"I don't think we would be either willing or able to target house prices. I think that would probably be an impossible thing to do given the size of the national housing market," Bernanke said.
Bazooka Ben gave up already? Pak-pak-pak-pak-pakkak!
No Poon in Poona?
From the venereal New York Times: Recession Trickles to India.
After years of being blamed for job losses in America and elsewhere, India’s high-tech companies and outsourcing firms are going through a downturn of their own. The global slowdown is forcing them to reduce hiring, freeze salaries, postpone new investments and lay off thousands of software programmers and call center operators.
While some industry insiders insist the global crisis will actually benefit companies here, as Western businesses seek to cut costs by moving jobs overseas, right now the sector is suddenly gripped by an unfamiliar sense of uncertainty.
In a country where most marriages are arranged by parents, the downturn has even taken a toll on the matrimonial prospects of those in technology outsourcing. “Because there is no job guarantees for I.T. people, for the last six months brides’ families have not been accepting grooms from this background,” said Jagadeesh Angadi, a matchmaker in Bangalore.
Can the US Treasury provide a "wedding" bailout?
After years of being blamed for job losses in America and elsewhere, India’s high-tech companies and outsourcing firms are going through a downturn of their own. The global slowdown is forcing them to reduce hiring, freeze salaries, postpone new investments and lay off thousands of software programmers and call center operators.
While some industry insiders insist the global crisis will actually benefit companies here, as Western businesses seek to cut costs by moving jobs overseas, right now the sector is suddenly gripped by an unfamiliar sense of uncertainty.
In a country where most marriages are arranged by parents, the downturn has even taken a toll on the matrimonial prospects of those in technology outsourcing. “Because there is no job guarantees for I.T. people, for the last six months brides’ families have not been accepting grooms from this background,” said Jagadeesh Angadi, a matchmaker in Bangalore.
Can the US Treasury provide a "wedding" bailout?
Wednesday, December 03, 2008
Take me down to Emerald City ...
... where the grass is green and the girls are pretty
Oh, won't you pleaaaaaase take me home?
From the NY Daily News: Late bills soaring in city: Debts rise on credit cards, auto loans.
Credit card and auto loan delinquencies are surging in the city.
In fact, by the end of next year, the number of New Yorkers expected to be at least 90 days behind on their credit card bills is projected to jump 45%, execs from credit bureau TransUnion told the Daily News.
That would mark the highest percentage of significantly past due credit card bills in at least five years.
In addition, the number of New Yorkers more than 60 days late on their car bills is expected to soar 22% increase.
The picture will be even grimmer for mortgages.
While approximately 1% of New Yorkers will be late paying their credit cards and auto loans, more than 6% of New Yorkers will be at least 60 days late on their home loan payments by the end of next year - a jump of two-thirds, according to TransUnion in an announcement set for today.
That would mark the highest level of city mortgage delinquencies in 16 years.
New York, Number One, we always Number One!
Oh, won't you pleaaaaaase take me home?
From the NY Daily News: Late bills soaring in city: Debts rise on credit cards, auto loans.
Credit card and auto loan delinquencies are surging in the city.
In fact, by the end of next year, the number of New Yorkers expected to be at least 90 days behind on their credit card bills is projected to jump 45%, execs from credit bureau TransUnion told the Daily News.
That would mark the highest percentage of significantly past due credit card bills in at least five years.
In addition, the number of New Yorkers more than 60 days late on their car bills is expected to soar 22% increase.
The picture will be even grimmer for mortgages.
While approximately 1% of New Yorkers will be late paying their credit cards and auto loans, more than 6% of New Yorkers will be at least 60 days late on their home loan payments by the end of next year - a jump of two-thirds, according to TransUnion in an announcement set for today.
That would mark the highest level of city mortgage delinquencies in 16 years.
New York, Number One, we always Number One!
Tuesday, December 02, 2008
Good Morning, Sunshine
The BBC reports: California 'faces budget crisis'.
The governor of California, Arnold Schwarzenegger, has declared a fiscal emergency, amid fears the state could run out of cash by early next year.
He has ordered lawmakers to hold a special session to tackle the $11.2bn (£7.5bn) deficit in California, one of the world's biggest economies.
Governor Schwarzenegger on Monday invoked powers allowing him to declare a fiscal emergency as the new state legislature was sworn in.
"Without immediate action, our state is headed for a fiscal disaster," Mr Schwarzenegger said, saying that the current $11.2bn shortfall could swell to "a staggering $28bn" over the next 18 months.
The governor of California, Arnold Schwarzenegger, has declared a fiscal emergency, amid fears the state could run out of cash by early next year.
He has ordered lawmakers to hold a special session to tackle the $11.2bn (£7.5bn) deficit in California, one of the world's biggest economies.
Governor Schwarzenegger on Monday invoked powers allowing him to declare a fiscal emergency as the new state legislature was sworn in.
"Without immediate action, our state is headed for a fiscal disaster," Mr Schwarzenegger said, saying that the current $11.2bn shortfall could swell to "a staggering $28bn" over the next 18 months.
Monday, December 01, 2008
Shrinking Away
From New York magazine: Patient Shrink! Therapists Worried.
Strapped patients are starting to give up their shrink sessions. “A lot of my patients are very anxious about the possibility of giving up their therapy,” says Alan Schwartz, a Chelsea psychiatrist. “Some of them are now going to internists for their meds. They are doing their best to maintain some sense of calm.” Harold Levinson, who specializes in anxiety disorders, says a fifth of his patients have put therapy on hold—at a bad time. “Not only are people under financial pressure,” he says, “but this is holiday season, when depression is at a high.” Stephen Josephson, a psychologist at Cornell and Columbia who has lost 10 percent of his patients, says he’s seeing “more severe symptoms, including suicidality.” There’s already some fee negotiation and spacing out of sessions. “But you don’t want to give therapy for free,” says Levinson. “It distorts the process.”
Deflation = more pain in paradise.
Strapped patients are starting to give up their shrink sessions. “A lot of my patients are very anxious about the possibility of giving up their therapy,” says Alan Schwartz, a Chelsea psychiatrist. “Some of them are now going to internists for their meds. They are doing their best to maintain some sense of calm.” Harold Levinson, who specializes in anxiety disorders, says a fifth of his patients have put therapy on hold—at a bad time. “Not only are people under financial pressure,” he says, “but this is holiday season, when depression is at a high.” Stephen Josephson, a psychologist at Cornell and Columbia who has lost 10 percent of his patients, says he’s seeing “more severe symptoms, including suicidality.” There’s already some fee negotiation and spacing out of sessions. “But you don’t want to give therapy for free,” says Levinson. “It distorts the process.”
Deflation = more pain in paradise.
Sunday, November 30, 2008
The Great Void
From SFGate: Airports almost empty day before Thanksgiving.
Bay Area airports were eerily empty for much of what traditionally has been among the busiest travel days of the year.
Traditions appeared to die a swifter death this year than many a turkey. Travel costs money, something a lot of people don't have right now.
"There's nobody here," said Deborah Vainieri, who was waiting at San Francisco International Airport with her husband, Humberto, for a flight to Portland.
In a plot to beat the crowds, the Vainieris had arrived at the airport four hours early. They walked right up to the check-in machine and were done in less than a minute. Then, at 1:02 p.m., they walked to the main Terminal 3 security line and found themselves all alone.
There was nobody in line ahead of them, not a single person.
"Now what do we do?" said Humberto. "We have four hours to kill."
Welcome to deflation, folks!
Bay Area airports were eerily empty for much of what traditionally has been among the busiest travel days of the year.
Traditions appeared to die a swifter death this year than many a turkey. Travel costs money, something a lot of people don't have right now.
"There's nobody here," said Deborah Vainieri, who was waiting at San Francisco International Airport with her husband, Humberto, for a flight to Portland.
In a plot to beat the crowds, the Vainieris had arrived at the airport four hours early. They walked right up to the check-in machine and were done in less than a minute. Then, at 1:02 p.m., they walked to the main Terminal 3 security line and found themselves all alone.
There was nobody in line ahead of them, not a single person.
"Now what do we do?" said Humberto. "We have four hours to kill."
Welcome to deflation, folks!
Hooking for Hannukah
From Yahoo!: Meltdown fallout: some parents rethink toy-buying.
In a season that inspires earnest letters about toys, one notable batch is being sent not by kids to Santa's workshop but by parents to the executive suites of real-world toy makers.
The message: Please, in these days of economic angst, cut back on marketing your products directly to our children.
The letter-writing initiative was launched by the Boston-based Campaign for a Commercial-Free Childhood, which says roughly 1,400 of its members and supporters have contacted 24 leading toy companies and retailers to express concern about ads aimed at kids.
LOL. Yeah, this is reaaaaaaaaaaaally going to work.
"Parents have trouble saying no," said Allison Pugh, a University of Virginia sociology professor. She says parents often buy toys to avoid guilt and ensure their children feel in sync with school classmates.
"Even under circumstances of dire financial straits, that's the last thing parents give up," said Pugh. "They'll contain their own buying for themselves before they'll make their child feel different at school."
Amanda Almodovar says she encounters such families in her work as an elementary school social worker in Alamance County, N.C., where homelessness and unemployment are rising.
"I try to tell them, worry about your home, your heating bill -- but they're the ones who have to look into children's faces, the children saying 'I want this, I want that.'"
"I had one parent who said she'd prostitute herself to get what her child wants," Almodovar said. "It's heartbreaking. They feel inadequate as parents.
Well, don't just stand there! Get down on your knees for a warm meal.
In a season that inspires earnest letters about toys, one notable batch is being sent not by kids to Santa's workshop but by parents to the executive suites of real-world toy makers.
The message: Please, in these days of economic angst, cut back on marketing your products directly to our children.
The letter-writing initiative was launched by the Boston-based Campaign for a Commercial-Free Childhood, which says roughly 1,400 of its members and supporters have contacted 24 leading toy companies and retailers to express concern about ads aimed at kids.
LOL. Yeah, this is reaaaaaaaaaaaally going to work.
"Parents have trouble saying no," said Allison Pugh, a University of Virginia sociology professor. She says parents often buy toys to avoid guilt and ensure their children feel in sync with school classmates.
"Even under circumstances of dire financial straits, that's the last thing parents give up," said Pugh. "They'll contain their own buying for themselves before they'll make their child feel different at school."
Amanda Almodovar says she encounters such families in her work as an elementary school social worker in Alamance County, N.C., where homelessness and unemployment are rising.
"I try to tell them, worry about your home, your heating bill -- but they're the ones who have to look into children's faces, the children saying 'I want this, I want that.'"
"I had one parent who said she'd prostitute herself to get what her child wants," Almodovar said. "It's heartbreaking. They feel inadequate as parents.
Well, don't just stand there! Get down on your knees for a warm meal.
Saturday, November 29, 2008
Those Magnificent Men in their Missionary Machines
From the San Diego Union Tribune: Over-indebted to credit.
Matt Sauer, a young, single mortgage broker, planned to get rich quick after graduating from college. By age 28, he owned properties in Pacific Beach, Las Vegas and Florida.
Today, the houses are underwater – meaning mortgage debt exceeds market value – and Sauer's dreams of quitting his job to become a Christian missionary are on hold because of his financial obligations.
“Like the Bible says: 'The borrower is the servant to the lender,' ” Sauer said. “I am enslaved.”
Looks like the missionary position is over. It's time for doggie-style!
Matt Sauer, a young, single mortgage broker, planned to get rich quick after graduating from college. By age 28, he owned properties in Pacific Beach, Las Vegas and Florida.
Today, the houses are underwater – meaning mortgage debt exceeds market value – and Sauer's dreams of quitting his job to become a Christian missionary are on hold because of his financial obligations.
“Like the Bible says: 'The borrower is the servant to the lender,' ” Sauer said. “I am enslaved.”
Looks like the missionary position is over. It's time for doggie-style!
Tuesday, November 25, 2008
Sunday, November 23, 2008
The Cracks are Showin'
These articles are illegal in California. It's called Prop. 13 or some such.
From SFGate: Why buy a house? Behold, one of the biggest myths of the American Dream.
Amid the assault of economic horror stories of late -- entire towns collapsing, 750-home megadevelopments sitting vacant, the most severe downturn in new-home construction in four billion years, Marc Jacobs forced to cancel both the gold-dipped male strippers and his entire Christmas party -- I happened across a fascinating tidbit of blasphemous wisdom from an economist whose name I forget and whose article vanished into my brainpan almost instantly, but who dared to reiterate a grand and forbidden truth.
It's this: Owning your own home is, for the most part, just a little bit insane.
Wait, no, that's not exactly right. His comment was more along the lines of: The hard fact is, at any given time, no more than about 50 percent of the American population should own their own homes, at the very most. Everyone else should rent. Or live in a van.
It just makes more sense. He argued that any more than 50 percent ownership -- the current rate is about 85 percent for married couples with kids and 70 percent for everyone overall -- is fiscally irrational, actually does more harm than good to the economy, and that millions of Americans who own right now would've been far better off never buying at all (and not merely because all the foreclosures and lending debacles).
Could it be true? That maybe a large part of our current housing woes are at least somewhat attributable to this borderline pathological need so many of us have to go into massive debt for the majority of our adult lives, just so you can have your own little box to destroy or rearrange or paint any color you want, so long as it's beige or gray or creamy eggshell white? Could be, could be.
Just before lightning struck him dead on the spot for daring to question one of the Great American Commandments, the economist concluded that that maybe this housing meltdown will, among other upheavals, teach millions of Americans a radical new truth: that buying a house is no more a prerequisite to achieving the American Dream than is, say, opening your own steakhouse or marrying a porn star or hoarding piles of stock in GM.
Actually, as a lifetime city dweller/renter myself, I've heard it for years; renting is often better than buying. That when you sit down and crunch the numbers and factor in all the taxes and dues and interest rates, maintenance fees and termites and cracked foundations and busted appliances and the cost of that new sewage line, well, owning is far more of a hassle and a burden and a lifetime o' stress than most people ever imagine.
And why don't we imagine it? Why is owning a home still considered such a prize, such a cornerstone of what it means to be a victorious American? Simple: because that's what we're taught.
It's tattooed into our psyches from birth that a successful society absolutely depends on community, nesting, home ownership to survive and flourish. It's one of the three Grand Directives of Socioeconomic Health, right after getting married and having kids (or, if you're feeling cynical, you add: Get divorce, sell house, resent kids, die alone in Florida. Gosh, you're bitter).
Follow these directives well, good citizen, and get your reward, straight from the government and the approving church down the street. Tax incentives, write-offs, free credit, equity buildup, blessings from God himself. Choose to rent for your whole life and move around a bit and never breed? You get nothing, sinner.
It's true. To defy any of these rules of "healthy" society is not only punishable by banishment from the Garden of Normalcy, but it's widely considered just a bit ... immoral. Live together without marriage? A sin. Birth control? Still a sin (such a cute one, too). Renting instead of buying? OK, not technically a sin, but to never feel a need to buy a home because you enjoy being fluid and experimental and transitory? Sure. Something is clearly wrong with you. Better go live on a commune in Marin, hippie.
I can't count how many friends I've known over the years who say they absolutely love living in the city, but as soon as they get married and/or have a child, something clicks and their eyes get that look, and suddenly they decide they must move to suburban Ohio because, you know, "that's where we can afford to buy a house." See? Pathological.
(Of course, there are many other very important factors at play: space for the kids, tolerable schools, lower taxes, safer neighborhoods, fewer bullet casings and used condoms in the sidewalk, and so on. I get it. But this only explains the need to get out of the City. It still doesn't explain the urge to buy.)
Here's the new wisdom: Social demographics are changing. Family dynamics are shifting. The new data reveals that we are an increasingly fluid, itinerant culture, no longer nearly as rooted to specific towns and neighborhoods as we were 50 years ago. The swell, rose-colored Norman Rockwell image of Americana, all porch swings and free parking and kids riding Big Wheels on the sidewalk next to neighbors who've lived on the street since the Eisenhower administration? Fading fast, if it ever really existed at all.
It's not easy to unpack. It's not easy to see the new perspective. For one thing, homes can be tremendously cool. I imagine designing your own to be the most gratifying form of self-expression, while providing a vital connection to place.
What's more, renting goes directly against our capitalist ethos. People like to own stuff, Americans especially so. Especially Americans who still have a sense of entitlement like no other species on the planet today except maybe Saudi sheiks and celebrity Chihuahuas and Mary J. Blige.
I've often felt the pull myself, have noticed that significant part of me that admires beautiful architecture and design, and often wants very much to invest in a beautiful space of my own and have the freedom to do with it what I want, some sort of gorgeous Dwell magazine fantasia that requires about three million and a revolving account at Roche Bobois. Someday, someday.
But it's certainly worth reconsidering. It's worth pondering that, in this time of tremendous upheaval and mandatory change, maybe we've been thinking about our identity, about the required ingredients for the American Dream, all wrong. And maybe owning a home, right along with buying an American car, is one of the great myths that's overdue for a revolution.
Batten down the hatches, bee-yatches. This ship be goin' down!
From SFGate: Why buy a house? Behold, one of the biggest myths of the American Dream.
Amid the assault of economic horror stories of late -- entire towns collapsing, 750-home megadevelopments sitting vacant, the most severe downturn in new-home construction in four billion years, Marc Jacobs forced to cancel both the gold-dipped male strippers and his entire Christmas party -- I happened across a fascinating tidbit of blasphemous wisdom from an economist whose name I forget and whose article vanished into my brainpan almost instantly, but who dared to reiterate a grand and forbidden truth.
It's this: Owning your own home is, for the most part, just a little bit insane.
Wait, no, that's not exactly right. His comment was more along the lines of: The hard fact is, at any given time, no more than about 50 percent of the American population should own their own homes, at the very most. Everyone else should rent. Or live in a van.
It just makes more sense. He argued that any more than 50 percent ownership -- the current rate is about 85 percent for married couples with kids and 70 percent for everyone overall -- is fiscally irrational, actually does more harm than good to the economy, and that millions of Americans who own right now would've been far better off never buying at all (and not merely because all the foreclosures and lending debacles).
Could it be true? That maybe a large part of our current housing woes are at least somewhat attributable to this borderline pathological need so many of us have to go into massive debt for the majority of our adult lives, just so you can have your own little box to destroy or rearrange or paint any color you want, so long as it's beige or gray or creamy eggshell white? Could be, could be.
Just before lightning struck him dead on the spot for daring to question one of the Great American Commandments, the economist concluded that that maybe this housing meltdown will, among other upheavals, teach millions of Americans a radical new truth: that buying a house is no more a prerequisite to achieving the American Dream than is, say, opening your own steakhouse or marrying a porn star or hoarding piles of stock in GM.
Actually, as a lifetime city dweller/renter myself, I've heard it for years; renting is often better than buying. That when you sit down and crunch the numbers and factor in all the taxes and dues and interest rates, maintenance fees and termites and cracked foundations and busted appliances and the cost of that new sewage line, well, owning is far more of a hassle and a burden and a lifetime o' stress than most people ever imagine.
And why don't we imagine it? Why is owning a home still considered such a prize, such a cornerstone of what it means to be a victorious American? Simple: because that's what we're taught.
It's tattooed into our psyches from birth that a successful society absolutely depends on community, nesting, home ownership to survive and flourish. It's one of the three Grand Directives of Socioeconomic Health, right after getting married and having kids (or, if you're feeling cynical, you add: Get divorce, sell house, resent kids, die alone in Florida. Gosh, you're bitter).
Follow these directives well, good citizen, and get your reward, straight from the government and the approving church down the street. Tax incentives, write-offs, free credit, equity buildup, blessings from God himself. Choose to rent for your whole life and move around a bit and never breed? You get nothing, sinner.
It's true. To defy any of these rules of "healthy" society is not only punishable by banishment from the Garden of Normalcy, but it's widely considered just a bit ... immoral. Live together without marriage? A sin. Birth control? Still a sin (such a cute one, too). Renting instead of buying? OK, not technically a sin, but to never feel a need to buy a home because you enjoy being fluid and experimental and transitory? Sure. Something is clearly wrong with you. Better go live on a commune in Marin, hippie.
I can't count how many friends I've known over the years who say they absolutely love living in the city, but as soon as they get married and/or have a child, something clicks and their eyes get that look, and suddenly they decide they must move to suburban Ohio because, you know, "that's where we can afford to buy a house." See? Pathological.
(Of course, there are many other very important factors at play: space for the kids, tolerable schools, lower taxes, safer neighborhoods, fewer bullet casings and used condoms in the sidewalk, and so on. I get it. But this only explains the need to get out of the City. It still doesn't explain the urge to buy.)
Here's the new wisdom: Social demographics are changing. Family dynamics are shifting. The new data reveals that we are an increasingly fluid, itinerant culture, no longer nearly as rooted to specific towns and neighborhoods as we were 50 years ago. The swell, rose-colored Norman Rockwell image of Americana, all porch swings and free parking and kids riding Big Wheels on the sidewalk next to neighbors who've lived on the street since the Eisenhower administration? Fading fast, if it ever really existed at all.
It's not easy to unpack. It's not easy to see the new perspective. For one thing, homes can be tremendously cool. I imagine designing your own to be the most gratifying form of self-expression, while providing a vital connection to place.
What's more, renting goes directly against our capitalist ethos. People like to own stuff, Americans especially so. Especially Americans who still have a sense of entitlement like no other species on the planet today except maybe Saudi sheiks and celebrity Chihuahuas and Mary J. Blige.
I've often felt the pull myself, have noticed that significant part of me that admires beautiful architecture and design, and often wants very much to invest in a beautiful space of my own and have the freedom to do with it what I want, some sort of gorgeous Dwell magazine fantasia that requires about three million and a revolving account at Roche Bobois. Someday, someday.
But it's certainly worth reconsidering. It's worth pondering that, in this time of tremendous upheaval and mandatory change, maybe we've been thinking about our identity, about the required ingredients for the American Dream, all wrong. And maybe owning a home, right along with buying an American car, is one of the great myths that's overdue for a revolution.
Batten down the hatches, bee-yatches. This ship be goin' down!
Saturday, November 22, 2008
In which the EE quotes Impressive Statistics™...
From Business Week: Every Stock Mutual Fund Has Lost Money in 2008, Except One.
Out of the 11,585 U.S. and international stock mutual funds tracked by Morningstar Inc., 11,584 have lost money in 2008, according to fund data through Nov. 20.
In other words, just one fund hasn’t lost money this year—and that is the APX Mid Cap Growth Fund, which was flat through Thursday’s close. That’s right, folks, its return—or lack thereof—is a mere zero thus far in 2008.
So long, buy-n-hold DCA-into-401(k) lemmings!
Out of the 11,585 U.S. and international stock mutual funds tracked by Morningstar Inc., 11,584 have lost money in 2008, according to fund data through Nov. 20.
In other words, just one fund hasn’t lost money this year—and that is the APX Mid Cap Growth Fund, which was flat through Thursday’s close. That’s right, folks, its return—or lack thereof—is a mere zero thus far in 2008.
So long, buy-n-hold DCA-into-401(k) lemmings!
In which the Brain Surgeons™ weigh in...
From the LA Times: Surge in unemployment puts California's Inland Empire in tailspin.
State numbers released Friday show the Riverside, San Bernardino and Ontario area is now suffering from its highest unemployment rate in 13 years at 9.5% in October -- 3 percentage points higher than the national rate and 1.3 points higher than the state's rate of 8.2%.
Joblessness in the Inland Empire grew by 61,500 in the year from October 2007 to October 2008 -- a 54.1% increase amounting to a total of 175,100 people out of work, according to the California Employment Development Department.
A large chunk of those unemployed came from the construction industry, which shed 15,500 jobs, or 14.1% of its workforce, over the 12-month span. Manufacturing was responsible for 7,600 lost jobs, a 6.5% decline, and retail lost 5,800 jobs, a 3.3% drop.
"You see less people at the restaurants and carwashes," said Riverside Mayor Ronald Loveridge. "There is real pain almost everywhere you turn. My daughter is a counselor at Riverside Community College and she told me she met a [student] whose house was up for foreclosure. Her last resort would have been to move in with her parents, but their home is up for foreclosure.."
Wonder if the [student] was studying `economics'.
State numbers released Friday show the Riverside, San Bernardino and Ontario area is now suffering from its highest unemployment rate in 13 years at 9.5% in October -- 3 percentage points higher than the national rate and 1.3 points higher than the state's rate of 8.2%.
Joblessness in the Inland Empire grew by 61,500 in the year from October 2007 to October 2008 -- a 54.1% increase amounting to a total of 175,100 people out of work, according to the California Employment Development Department.
A large chunk of those unemployed came from the construction industry, which shed 15,500 jobs, or 14.1% of its workforce, over the 12-month span. Manufacturing was responsible for 7,600 lost jobs, a 6.5% decline, and retail lost 5,800 jobs, a 3.3% drop.
"You see less people at the restaurants and carwashes," said Riverside Mayor Ronald Loveridge. "There is real pain almost everywhere you turn. My daughter is a counselor at Riverside Community College and she told me she met a [student] whose house was up for foreclosure. Her last resort would have been to move in with her parents, but their home is up for foreclosure.."
Wonder if the [student] was studying `economics'.
Friday, November 21, 2008
Sunday, November 16, 2008
Each day, in every way...
Ever hear something new that kinda scares and shocks you economically?
No, the EE is not talking about the bailout.
During the absurd bubble, there actually existed humans who sold their services as baby-name consultants.
Jeebus! you can't make this stuff up.
No, the EE is not talking about the bailout.
During the absurd bubble, there actually existed humans who sold their services as baby-name consultants.
Jeebus! you can't make this stuff up.
Saturday, November 15, 2008
Bitter Bailout's Bailout Bitter
From the Canadian Press: Howe Sound Brewery toasts tough times by launching 'Bailout Bitter' beer.
A private micro-brewery in British Columbia is toasting the current economic downturn by launching a special brand of recession-style beer.
Howe Sound Brewery says it is now making "Bailout Bitter," its most bitter-tasting brew named in honour of the government bailouts of the financial sector that have taken place globally, underscoring the severity of current economic crisis.
Calling it "bitter ale for bitter times," the brewery said the new beer will cost less than its other brands.
For instance, a pint of Bailout Bitter will sell for $5.50, or about $1 less per glass, at the company's restaurant and brew pub, located in Squamish, B.C., about an hour drive north of Vancouver.
A private micro-brewery in British Columbia is toasting the current economic downturn by launching a special brand of recession-style beer.
Howe Sound Brewery says it is now making "Bailout Bitter," its most bitter-tasting brew named in honour of the government bailouts of the financial sector that have taken place globally, underscoring the severity of current economic crisis.
Calling it "bitter ale for bitter times," the brewery said the new beer will cost less than its other brands.
For instance, a pint of Bailout Bitter will sell for $5.50, or about $1 less per glass, at the company's restaurant and brew pub, located in Squamish, B.C., about an hour drive north of Vancouver.
Friday, November 14, 2008
Wednesday, November 12, 2008
Change of status
Through absolutely no fault of management, and because of the Perfect Storm™, this blog has lost its ability to pay lucrative bonuses to its executives. The blog has received approval to become a bank holding company.
This will allow the blog access to the Fed discount window, the TARP, and all other future money printing operations.
This blog has not and will not ever invest in auto companies.
Ghana needs a Cash-'n-Carry
From Leveraged Sellout (who else?): Ghana unveils $14 economic stimulus plan.
Accra, Ghana—To help their countries weather the current financial storm, nations such as the United States and China have created large economic stimulus packages of $700B and $586B, respectively. And now the The Republic of Ghana will be joining their ranks with a newly approved plan of a staggering $14.
The package, which amounts to approximately 10% of Ghana’s GDP, will focus on increasing consumer spending but also target infrastructure through tax breaks, primarily on purchases of donkeys for transportation, as well as shovels, plows, and other equipment on the cutting edge of Ghanaian farming technology.
“This is a bold move,” said Kwame Armah-Attoh, a locally-based economist at Citigroup, referring to the sheer magnitude of the stimulus package vs. the present size of the economy. “Very aggressive,” he added, swatting away a swarm of flies from his face.
“We are set on keeping The Ghanaian Dream alive,” said President John Kufuor, likening his project to the New Deal. Kufuor was confident that the $14, less than a vodka-soda at The Gansevoort Hotel, would breathe life into his country’s economy and catapult it into G20: “From the dust,” he insisted grandly and without irony, “Ghana will emerge an economic powerhouse.”
Accra, Ghana—To help their countries weather the current financial storm, nations such as the United States and China have created large economic stimulus packages of $700B and $586B, respectively. And now the The Republic of Ghana will be joining their ranks with a newly approved plan of a staggering $14.
The package, which amounts to approximately 10% of Ghana’s GDP, will focus on increasing consumer spending but also target infrastructure through tax breaks, primarily on purchases of donkeys for transportation, as well as shovels, plows, and other equipment on the cutting edge of Ghanaian farming technology.
“This is a bold move,” said Kwame Armah-Attoh, a locally-based economist at Citigroup, referring to the sheer magnitude of the stimulus package vs. the present size of the economy. “Very aggressive,” he added, swatting away a swarm of flies from his face.
“We are set on keeping The Ghanaian Dream alive,” said President John Kufuor, likening his project to the New Deal. Kufuor was confident that the $14, less than a vodka-soda at The Gansevoort Hotel, would breathe life into his country’s economy and catapult it into G20: “From the dust,” he insisted grandly and without irony, “Ghana will emerge an economic powerhouse.”
USA #1
From Barrons: Uncle Sam's Credit Line Running Out?
The yield curve and credit-default swaps tell the same story: The U.S. can't borrow trillions without paying a price.
WHAT ONCE WAS UNTHINKABLE has come to pass this year: massive bailouts by the Treasury and the Federal Reserve, with the extension of billions of the taxpayers' and the central bank's credit in so many new and untested schemes that you can't tell your acronyms or abbreviations without a scorecard.
Even more unbelievable is that some of the recipients of staggering sums are coming back for a second round. Or that the queue of petitioners grows by the day.
But what happens if the requests begin to strain the credit line of the world's most creditworthy borrower, the U.S. government itself? Unthinkable?
It may finally be catching up with Uncle Sam. That's what the yield curve may be whispering. But some economists are too deaf, or dumb, to get it.
The yield curve simply is the graph of Treasury yields of increasing maturities, starting from one-month bills to 30-year bonds. The slope of the line typically is ascending -- positive in math terms -- because investors would want more to tie up their money for longer periods, all else being equal. Which it never is.
If they expect yields to rise in the future, they'll want a bigger premium to commit to longer maturities. Otherwise, they'd rather stay short and wait for more generous yields later on. Conversely, if they think rates will fall, investors will want to lock in today's yields for a longer period.
The Treasury yield curve -- from two to 10 years, which is how the bond market tracks it -- has rarely been steeper. The spread is up to 250 basis points (2.5 percentage points, a level matched only in the past quarter century in 2002 and 1992, at the trough of economic cycles.
Based on a simplistic reading of that history and the Cliff Notes version of theory, one economist whose main area of expertise is to get quoted by reporters even less knowledgeable than he, asserts such a steep yield curve typically reflects investors' anticipation of economic recovery. Never mind that the yield curve has steepened as the economy has worsened and prospects for recovery have diminished. Like the Bourbons, the French royal family up to the Revolution, he learns nothing and forgets nothing.
The steepening of the Treasury yield curve has been accompanied by an increase in the cost of insuring against default by the U.S. Treasury. It may come as a shock, but there are credit-default swaps on the U.S. government and they have become more expensive -- in tandem with an increase in the spread between two- and 10-year notes.
Cutting through the technical jargon, the yield curve and the credit-default swaps market both indicate the markets are exacting a greater cost to lend to Uncle Sam. And it's not because of anticipated recovery, which would reduce, not increase, the cost of insuring Treasury debt against default.
Of course, the EE questions the sanity of the people buying the default swaps. When Uncle Sam defaults (which he will one way or the other), you actually expect your counterparty to pay up?
Good luck and good night!
The yield curve and credit-default swaps tell the same story: The U.S. can't borrow trillions without paying a price.
WHAT ONCE WAS UNTHINKABLE has come to pass this year: massive bailouts by the Treasury and the Federal Reserve, with the extension of billions of the taxpayers' and the central bank's credit in so many new and untested schemes that you can't tell your acronyms or abbreviations without a scorecard.
Even more unbelievable is that some of the recipients of staggering sums are coming back for a second round. Or that the queue of petitioners grows by the day.
But what happens if the requests begin to strain the credit line of the world's most creditworthy borrower, the U.S. government itself? Unthinkable?
It may finally be catching up with Uncle Sam. That's what the yield curve may be whispering. But some economists are too deaf, or dumb, to get it.
The yield curve simply is the graph of Treasury yields of increasing maturities, starting from one-month bills to 30-year bonds. The slope of the line typically is ascending -- positive in math terms -- because investors would want more to tie up their money for longer periods, all else being equal. Which it never is.
If they expect yields to rise in the future, they'll want a bigger premium to commit to longer maturities. Otherwise, they'd rather stay short and wait for more generous yields later on. Conversely, if they think rates will fall, investors will want to lock in today's yields for a longer period.
The Treasury yield curve -- from two to 10 years, which is how the bond market tracks it -- has rarely been steeper. The spread is up to 250 basis points (2.5 percentage points, a level matched only in the past quarter century in 2002 and 1992, at the trough of economic cycles.
Based on a simplistic reading of that history and the Cliff Notes version of theory, one economist whose main area of expertise is to get quoted by reporters even less knowledgeable than he, asserts such a steep yield curve typically reflects investors' anticipation of economic recovery. Never mind that the yield curve has steepened as the economy has worsened and prospects for recovery have diminished. Like the Bourbons, the French royal family up to the Revolution, he learns nothing and forgets nothing.
The steepening of the Treasury yield curve has been accompanied by an increase in the cost of insuring against default by the U.S. Treasury. It may come as a shock, but there are credit-default swaps on the U.S. government and they have become more expensive -- in tandem with an increase in the spread between two- and 10-year notes.
Cutting through the technical jargon, the yield curve and the credit-default swaps market both indicate the markets are exacting a greater cost to lend to Uncle Sam. And it's not because of anticipated recovery, which would reduce, not increase, the cost of insuring Treasury debt against default.
Of course, the EE questions the sanity of the people buying the default swaps. When Uncle Sam defaults (which he will one way or the other), you actually expect your counterparty to pay up?
Good luck and good night!
Tuesday, November 11, 2008
"The rich are different from you and me..."
They go bankrupt faster. Then they call their buddies for a bailout paid by the taxpayers.
From the AP: Exclusive Yellowstone Club files for bankruptcy.
The Yellowstone Club, an exclusive mountain retreat for the ultra-rich, said it filed for bankruptcy Monday after failing to secure new financing — underscoring that even the elite can't escape the country's current economic troubles.
Spokesman Bill Keegan said the club filed for Chapter 11 protection in federal bankruptcy court in Montana. The move came just two months after the club announced an ambitious expansion plan through a partnership with the Arizona-based Discovery Land Company.
The gated, millionaires-only club on 13,400 acres in Montana's Gallatin Mountains boasts a private ski hill and golf course. Opened in 1999, it counts former Vice President Dan Quayle and Microsoft co-founder Bill Gates among its 340 members.
From the AP: Exclusive Yellowstone Club files for bankruptcy.
The Yellowstone Club, an exclusive mountain retreat for the ultra-rich, said it filed for bankruptcy Monday after failing to secure new financing — underscoring that even the elite can't escape the country's current economic troubles.
Spokesman Bill Keegan said the club filed for Chapter 11 protection in federal bankruptcy court in Montana. The move came just two months after the club announced an ambitious expansion plan through a partnership with the Arizona-based Discovery Land Company.
The gated, millionaires-only club on 13,400 acres in Montana's Gallatin Mountains boasts a private ski hill and golf course. Opened in 1999, it counts former Vice President Dan Quayle and Microsoft co-founder Bill Gates among its 340 members.
Fore!!! ........... closed
Nothing like a good golf metaphor to tee off the evening with. Beats swinging clichés around like so many reporters but then they don't exactly have little birdies to tip them off about these things.
From the San Diego Union Tribune: Fallbrook club's closing is one sad story.
In the San Diego golf community, the country club equivalent right now is the Golf Club of California.
Opened six years ago, the Golf Club would seemingly have everything a well-to-do, golf-loving member could want. Among the spacious housing development that is Sycamore Ranch, north of Highway 76, it sits on a bucolic piece of land dotted with old-growth oaks and sycamores. The 17,000-square-foot, mission-style clubhouse rivals most in the area for understated and comfortable elegance. The members take enormous pride in their demanding, imaginative layout, which includes a par-3 hole with a bunker in the middle of the green.
This is what they call the albatross.
Ten days ago, the Golf Club of California closed. In an e-mail sent at 3:20 a.m. on Oct. 30, General Manager Kay McLaughlin, representing her family's Korean ownership group, informed members that Halloween would be the last day the club would be available for play. Member dues were suspended as of Nov. 1. Lockers were to be cleared out immediately.
Looks like the bogey man got there for Halloween.
“Coming to work each day, it breaks my heart for us to be closed,” McLaughlin said. “I am the saddest one here.”
Now, that's just par for the course!
From the San Diego Union Tribune: Fallbrook club's closing is one sad story.
In the San Diego golf community, the country club equivalent right now is the Golf Club of California.
Opened six years ago, the Golf Club would seemingly have everything a well-to-do, golf-loving member could want. Among the spacious housing development that is Sycamore Ranch, north of Highway 76, it sits on a bucolic piece of land dotted with old-growth oaks and sycamores. The 17,000-square-foot, mission-style clubhouse rivals most in the area for understated and comfortable elegance. The members take enormous pride in their demanding, imaginative layout, which includes a par-3 hole with a bunker in the middle of the green.
This is what they call the albatross.
Ten days ago, the Golf Club of California closed. In an e-mail sent at 3:20 a.m. on Oct. 30, General Manager Kay McLaughlin, representing her family's Korean ownership group, informed members that Halloween would be the last day the club would be available for play. Member dues were suspended as of Nov. 1. Lockers were to be cleared out immediately.
Looks like the bogey man got there for Halloween.
“Coming to work each day, it breaks my heart for us to be closed,” McLaughlin said. “I am the saddest one here.”
Now, that's just par for the course!
In which the EE explains some fundamental misconceptions...
From the Naples News: Fort Myers home resales up in October, prices keep falling.
Home resales in the Fort Myers area rose for the 10th month in a row in October.
Meanwhile, values continued to fall in a market that’s plagued by foreclosures.
The median price fell to $119,000 last month _ 22.6 percent lower than it was in 2003. The median price is the price at which half the homes sell for more and half for less.
Denny Grimes, president of Denny Grimes & Co., a real estate based in Fort Myers, said continue to fall too because there are still so many homes on the market. He doesn’t see an end to the trend any time soon.
“Are we close to the bottom now? We are not close to the bottom with the level of inventory we see,” Grimes said.
But it’s got to stop somewhere.
“It can’t go down to free,” Grimes said.
Actually, Denny, it can. There is no "law of nature" that things can't be free. It all comes back to demand and supply, those old bugaboos.
If nobody wants something, its price may not only be free but negative (as in you have to pay to get rid of it.) There is absolutely nothing stopping this.
The point is that in this boom, homes were built in absurd places that nobody wanted to live in. With population growth, they will get filled in, say ten years, but what happens between now and then?
The idea that housing is immune to the rock-solid laws of demand and supply is absurd. There are literally thousands upon thousands of houses in Detroit and Cleveland being offered for $1. Yep, $1. More than you pay for your daily coffee. More than it costs me for my subway ride. And there are absolutely no takers.
So not only can they go to zero, given the situation, they will be going to zero.
Home resales in the Fort Myers area rose for the 10th month in a row in October.
Meanwhile, values continued to fall in a market that’s plagued by foreclosures.
The median price fell to $119,000 last month _ 22.6 percent lower than it was in 2003. The median price is the price at which half the homes sell for more and half for less.
Denny Grimes, president of Denny Grimes & Co., a real estate based in Fort Myers, said continue to fall too because there are still so many homes on the market. He doesn’t see an end to the trend any time soon.
“Are we close to the bottom now? We are not close to the bottom with the level of inventory we see,” Grimes said.
But it’s got to stop somewhere.
“It can’t go down to free,” Grimes said.
Actually, Denny, it can. There is no "law of nature" that things can't be free. It all comes back to demand and supply, those old bugaboos.
If nobody wants something, its price may not only be free but negative (as in you have to pay to get rid of it.) There is absolutely nothing stopping this.
The point is that in this boom, homes were built in absurd places that nobody wanted to live in. With population growth, they will get filled in, say ten years, but what happens between now and then?
The idea that housing is immune to the rock-solid laws of demand and supply is absurd. There are literally thousands upon thousands of houses in Detroit and Cleveland being offered for $1. Yep, $1. More than you pay for your daily coffee. More than it costs me for my subway ride. And there are absolutely no takers.
So not only can they go to zero, given the situation, they will be going to zero.
Monday, November 10, 2008
Burnt Coffee
From Yahoo!: Starbucks 4Q profit drops 97 pct on closure costs.
Fewer U.S. customers and venti-sized costs for closing poorly performing stores led to lower sales and profit in the fourth quarter at Starbucks Corp., the company said Monday.
Seattle-based Starbucks said profit fell 97 percent to $5.4 million, or a penny a share, from $158.5 million, or 21 cents per share, a year earlier. The coffee retailer earned 10 cents per share when the costs from closing about 600 stores in the U.S. and 61 locations in Australia are excluded.
Maybe they should approach the US Treasury for a bailout?!?
Fewer U.S. customers and venti-sized costs for closing poorly performing stores led to lower sales and profit in the fourth quarter at Starbucks Corp., the company said Monday.
Seattle-based Starbucks said profit fell 97 percent to $5.4 million, or a penny a share, from $158.5 million, or 21 cents per share, a year earlier. The coffee retailer earned 10 cents per share when the costs from closing about 600 stores in the U.S. and 61 locations in Australia are excluded.
Maybe they should approach the US Treasury for a bailout?!?
MSM + Sheep = Shearing
On Aug 9th, the EE gave some uncontroversial advice.
Now, the LA Times chimes in with: Gift card holders may be out of luck in retail bankruptcies.
On Wall Street, lawmakers are talking about how "toxic debt" threatens banks and lending. Out on Main Street, shoppers better start thinking about "toxic" gift cards from companies that could go bankrupt. They won't be worth the plastic they are printed on.
There's a new realization that holding a gift card from a troubled retailer is like having a bank account without FDIC insurance.
Fo' shizzle, y'all, they always be behind the curve; that's why they be sheep.
Now, the LA Times chimes in with: Gift card holders may be out of luck in retail bankruptcies.
On Wall Street, lawmakers are talking about how "toxic debt" threatens banks and lending. Out on Main Street, shoppers better start thinking about "toxic" gift cards from companies that could go bankrupt. They won't be worth the plastic they are printed on.
There's a new realization that holding a gift card from a troubled retailer is like having a bank account without FDIC insurance.
Fo' shizzle, y'all, they always be behind the curve; that's why they be sheep.
Sunday, November 09, 2008
Backpedaling
From some podunk paper: Economists say Obama's plans might help economy, but not overnight.
President-elect Barack Obama has been upfront in saying that the economic troubles won't be resolved within the next year. So he may avoid quick fixes and offer calm.
Fuckin' kill me before I die laughing over the fools. He's gonna offer "calm"?!?!?
Yeah, "calm" will sure pay the bills, won't it now?
O Sweet Baby Jeebus, verily, you play irony with the fools while you teach the wolves to shear the sheep raw.
BWAHAHAHHAHAHAHHHHHHHHHHHHHHHH!!!
It only took three days to backpedal?!? Lawd, this is funny.
It all comes back to Mencken, my friends!
Democracy is the worship of jackals by jackasses.
President-elect Barack Obama has been upfront in saying that the economic troubles won't be resolved within the next year. So he may avoid quick fixes and offer calm.
Fuckin' kill me before I die laughing over the fools. He's gonna offer "calm"?!?!?
Yeah, "calm" will sure pay the bills, won't it now?
O Sweet Baby Jeebus, verily, you play irony with the fools while you teach the wolves to shear the sheep raw.
BWAHAHAHHAHAHAHHHHHHHHHHHHHHHH!!!
It only took three days to backpedal?!? Lawd, this is funny.
It all comes back to Mencken, my friends!
Democracy is the worship of jackals by jackasses.
Sharpest Analysis on Oil
From Bloomberg, Caroline Baum writes: World Is `Drowning in Oil' (Again) After Drought.
She is the smartest economic reporter the EE knows, and the only one he takes seriously (even if we differ which is rare.)
Three months ago, the world was running out of oil.
Seriously. I kid you not. Everywhere you turned, you heard whispers that the day of petroleum reckoning was at hand.
Now there's too much oil, prodding OPEC to cut production targets for the first time in two years. Last week, the Organization of Petroleum Exporting Countries, confronted with the halving of oil prices since July, announced a 1.5 million barrel-a-day cut in output.
All speculative bubbles have a kernel of truth behind them to justify their existence. This time around it was China and India. These emerging Asian giants were gobbling up all the commodities the world could produce to fuel their rapid industrialization.
It wasn't that the story was untrue; it was old. Growing global demand probably was the reason for the gradual rise in oil prices from $20 a barrel to $40 earlier in the decade, and even to $60 by mid-2005.
It was the moon shot to $147 that took on a life, and a litany, of its own. Emerging nations didn't start gobbling up crude, coal and copper all of a sudden in the middle of 2007.
Yet analysts on TV and in print told us with a straight face that the doubling in oil prices from July 2007 to July 2008 was a result of fundamental demand, not speculative buying or investors, including pension funds, ``diversifying'' into ``alternative investments'' in search of ``uncorrelated returns.'' (It sounds a lot better than admitting you got suckered into buying what was going up and are now stuck with a pile of stuff that no one wants.)
``It happens in every market,'' says Michael Aronstein, president of Marketfield Asset Management in New York. ``Once it goes up an enormous amount, creating unfathomable wealth for the fortunate participants, someone makes an ex-post case as to why we are only at a beginning and it's not too late to get in.''
This advice is ``generally formulated by someone who has a vested interest in selling the stuff,'' he says.
Like the world of fashion, trends in markets come and go. Oil is a limited, albeit vast, resource. At some point in the future, we probably will run out of petroleum, at least as we know it.
Man's ingenuity is equally vast. When the time comes, given all the tax incentives that will be thrown in the direction of alternative energy, I have full confidence the world will not return to travel by horse and buggy.
The silliness that accompanies speculative bubbles isn't to be outdone by what passes for economic analysis. It's just over three months since commodities began their sharp, swift descent, and already the nonsense is starting: Lower oil prices are going to boost consumer demand.
Whoa! The price of oil (and other raw materials) is falling because of a cutback in demand, both actual and expected. Expressed as a graph, the demand curve for oil has shifted back, to the left. Consumers demand less energy (gasoline, heating oil) at any given price than they did before.
To say that lower prices will stimulate demand, a widely held misconception, confuses a movement along the demand curve (lower price, higher quantity) with a shift back in the curve (lower price, lower quantity).
Why this is such a hard concept to understand, I'm not sure. People imbue oil prices with all kinds of mystical powers. They see a falling price and treat it as a cause, not an effect.
Brilliant, simply brilliant!
She is the smartest economic reporter the EE knows, and the only one he takes seriously (even if we differ which is rare.)
Three months ago, the world was running out of oil.
Seriously. I kid you not. Everywhere you turned, you heard whispers that the day of petroleum reckoning was at hand.
Now there's too much oil, prodding OPEC to cut production targets for the first time in two years. Last week, the Organization of Petroleum Exporting Countries, confronted with the halving of oil prices since July, announced a 1.5 million barrel-a-day cut in output.
All speculative bubbles have a kernel of truth behind them to justify their existence. This time around it was China and India. These emerging Asian giants were gobbling up all the commodities the world could produce to fuel their rapid industrialization.
It wasn't that the story was untrue; it was old. Growing global demand probably was the reason for the gradual rise in oil prices from $20 a barrel to $40 earlier in the decade, and even to $60 by mid-2005.
It was the moon shot to $147 that took on a life, and a litany, of its own. Emerging nations didn't start gobbling up crude, coal and copper all of a sudden in the middle of 2007.
Yet analysts on TV and in print told us with a straight face that the doubling in oil prices from July 2007 to July 2008 was a result of fundamental demand, not speculative buying or investors, including pension funds, ``diversifying'' into ``alternative investments'' in search of ``uncorrelated returns.'' (It sounds a lot better than admitting you got suckered into buying what was going up and are now stuck with a pile of stuff that no one wants.)
``It happens in every market,'' says Michael Aronstein, president of Marketfield Asset Management in New York. ``Once it goes up an enormous amount, creating unfathomable wealth for the fortunate participants, someone makes an ex-post case as to why we are only at a beginning and it's not too late to get in.''
This advice is ``generally formulated by someone who has a vested interest in selling the stuff,'' he says.
Like the world of fashion, trends in markets come and go. Oil is a limited, albeit vast, resource. At some point in the future, we probably will run out of petroleum, at least as we know it.
Man's ingenuity is equally vast. When the time comes, given all the tax incentives that will be thrown in the direction of alternative energy, I have full confidence the world will not return to travel by horse and buggy.
The silliness that accompanies speculative bubbles isn't to be outdone by what passes for economic analysis. It's just over three months since commodities began their sharp, swift descent, and already the nonsense is starting: Lower oil prices are going to boost consumer demand.
Whoa! The price of oil (and other raw materials) is falling because of a cutback in demand, both actual and expected. Expressed as a graph, the demand curve for oil has shifted back, to the left. Consumers demand less energy (gasoline, heating oil) at any given price than they did before.
To say that lower prices will stimulate demand, a widely held misconception, confuses a movement along the demand curve (lower price, higher quantity) with a shift back in the curve (lower price, lower quantity).
Why this is such a hard concept to understand, I'm not sure. People imbue oil prices with all kinds of mystical powers. They see a falling price and treat it as a cause, not an effect.
Brilliant, simply brilliant!
Government Fried Rice (for everyone)
From Yahoo!: China announces $586 billion stimulus plan.
China announced a $586 billion stimulus package Sunday in its biggest move to stop the global financial crisis from hitting the world's fourth-largest economy.
Everyone's busy stimulating everyone else. (Stimulate me, baby!)
But nothing's working.
Could it possibly be, horror of all horrors, the fundamentals?
China announced a $586 billion stimulus package Sunday in its biggest move to stop the global financial crisis from hitting the world's fourth-largest economy.
Everyone's busy stimulating everyone else. (Stimulate me, baby!)
But nothing's working.
Could it possibly be, horror of all horrors, the fundamentals?
The Old Lady Bends Over
From all the News That's Biased to Print™, the venereal New York Times: A Downturn Begins.
EVEN though the average price for a Manhattan apartment, at $1.5 million, is higher than it was a year ago, some New York neighborhoods have already started to feel the downward tug that has wrenched the housing market elsewhere in the nation.
Please note the "positive" spin first.
Then comes the reality:
Median prices in Harlem and East Harlem were down nearly 20 percent.
Midtown East and Turtle Bay dropped 18.6 percent. Midtown West and Hell’s Kitchen dropped 8 percent.
Other neighborhoods that experienced price drops include the Lower East Side and the East Village, where median prices fell 5.5 percent; and Carnegie Hill, where co-op prices decreased 7.2 percent. Median prices in Hamilton Heights and Morningside Heights dropped 30.
Another sign that the market has slowed significantly is the marked drop in sales, decreasing 24 percent in Manhattan.
One of the best indicators of "shorting" something is when you see price increases on slowing volume. That means there are fewer and fewer transactions taking place at higher and higher prices indicating a steep decline ahead.
Watch out below, Big Apple.
EVEN though the average price for a Manhattan apartment, at $1.5 million, is higher than it was a year ago, some New York neighborhoods have already started to feel the downward tug that has wrenched the housing market elsewhere in the nation.
Please note the "positive" spin first.
Then comes the reality:
Median prices in Harlem and East Harlem were down nearly 20 percent.
Midtown East and Turtle Bay dropped 18.6 percent. Midtown West and Hell’s Kitchen dropped 8 percent.
Other neighborhoods that experienced price drops include the Lower East Side and the East Village, where median prices fell 5.5 percent; and Carnegie Hill, where co-op prices decreased 7.2 percent. Median prices in Hamilton Heights and Morningside Heights dropped 30.
Another sign that the market has slowed significantly is the marked drop in sales, decreasing 24 percent in Manhattan.
One of the best indicators of "shorting" something is when you see price increases on slowing volume. That means there are fewer and fewer transactions taking place at higher and higher prices indicating a steep decline ahead.
Watch out below, Big Apple.
Saturday, November 08, 2008
F-art Lending
From New York magazine: Own a Francis Bacon? We’ll Pay You $$!
One art-world business is booming: collectors looking to borrow against works they own, especially before the fall sales threaten to lower values. “We’ve been contacted by lots of people who are feeling some sort of margin call,” says Sotheby’s CEO, Bill Ruprecht. Other lenders have virtually stopped lending against art recently, but Ruprecht says Sotheby’s is still “very comfortable” doing so. (At 2007’s end, the auction house had $176.4 million loaned out; by the middle of this year, it was $212 million.) Tobias Meyer, who runs the contemporary-art department, says he’s also seeing more “consignment advances”—sellers agreeing to put their art on the block and getting some money up front. But he’s also finding owners disappointed by their holdings’ worth. “Just because we sold a great, rare $80 million Francis Bacon, everyone with a Bacon thinks theirs is worth $40 million,” he says. “It doesn’t work that way.”
Further evidence that the credit flowed into just about every asset class (not that the people reading this needed convincing.)
And the recent art auctions were "disappointing" with 44% not meeting their "reserve price".
To Sotheby's, good luck getting any of that "very comfortable" money back before two decades.
BWAHAHAHHAHAHAHHHHHHHHHHHHHHHHH!!!
One art-world business is booming: collectors looking to borrow against works they own, especially before the fall sales threaten to lower values. “We’ve been contacted by lots of people who are feeling some sort of margin call,” says Sotheby’s CEO, Bill Ruprecht. Other lenders have virtually stopped lending against art recently, but Ruprecht says Sotheby’s is still “very comfortable” doing so. (At 2007’s end, the auction house had $176.4 million loaned out; by the middle of this year, it was $212 million.) Tobias Meyer, who runs the contemporary-art department, says he’s also seeing more “consignment advances”—sellers agreeing to put their art on the block and getting some money up front. But he’s also finding owners disappointed by their holdings’ worth. “Just because we sold a great, rare $80 million Francis Bacon, everyone with a Bacon thinks theirs is worth $40 million,” he says. “It doesn’t work that way.”
Further evidence that the credit flowed into just about every asset class (not that the people reading this needed convincing.)
And the recent art auctions were "disappointing" with 44% not meeting their "reserve price".
To Sotheby's, good luck getting any of that "very comfortable" money back before two decades.
BWAHAHAHHAHAHAHHHHHHHHHHHHHHHHH!!!
Smart, huh?
From Bloomberg: GMAC Leaves Individuals Holding Car Lender's Junk.
GMAC LLC may leave thousands of individuals on the hook for about $15 billion of junk-rated debt unless the auto and home lender finds a way to pay its bills.
GMAC, the largest lender to car dealers of General Motors Corp., issued more than $25 billion of debt called SmartNotes over the past decade to retail investors. While GMAC has paid off the debts as they matured, five straight unprofitable quarters raised doubt about GMAC's survival, and SmartNotes due in July 2020 have lost about three-quarters of their value.
``An investment like this is totally unsuitable for the retail investor,'' said Sean Egan, president of Egan-Jones Ratings Co. in Haverford, Pennsylvania, who rates GMAC bonds junk, or below investment grade. ``You're selling it to the widows and orphans who think of GMAC as being this strong, long- standing corporation when the reality is far from that.''
Shear those sheep, baby!
GMAC LLC may leave thousands of individuals on the hook for about $15 billion of junk-rated debt unless the auto and home lender finds a way to pay its bills.
GMAC, the largest lender to car dealers of General Motors Corp., issued more than $25 billion of debt called SmartNotes over the past decade to retail investors. While GMAC has paid off the debts as they matured, five straight unprofitable quarters raised doubt about GMAC's survival, and SmartNotes due in July 2020 have lost about three-quarters of their value.
``An investment like this is totally unsuitable for the retail investor,'' said Sean Egan, president of Egan-Jones Ratings Co. in Haverford, Pennsylvania, who rates GMAC bonds junk, or below investment grade. ``You're selling it to the widows and orphans who think of GMAC as being this strong, long- standing corporation when the reality is far from that.''
Shear those sheep, baby!
Calling it like...
From Reuters: Steep food price increases on way: experts.
U.S. food prices will rise by at least 7 percent in 2009 because of higher feed costs for chickens, hogs and cattle, said a group of food-industry economists on Thursday.
Let's see.
Food-industry economists = National Association of Realtors™. The same people who couldn't see the commodities bubble are now going to give us advice on the future? Who hasn't seen this one before? Raise your hand.
"We've been losing money for more than a year," said Bill Roenigk, economist for the Chicken Council, who said producers intend to cut production by as much as 12 percent. "We need to recover these feed costs."
Yes, and the EE needs a diamond tiara. Doesn't mean it's going to happen now, does it?
The "cost-of-production" theory of value was soundly debunked even before the 20th century rolled around. We're now in the 21st in case you didn't notice.
Nobody cares what it cost you to produce. Only thing that matters is whether people will buy it or not, and what price will they pay.
During a teleconference, economists from the National Chicken Council and the consultancy Farm Econ said food inflation could be 7 percent-8 percent.
This is naïve extrapolation a.k.a. driving by looking in the rearview mirror.
In case you haven't noticed, the "hyperconsumer" economy turbo-charged on credit just got taken out behind the woodshed, and was shot like a diseased dog.
Simple straightforward prediction:
demand destruction = lower prices = price deflation.
U.S. food prices will rise by at least 7 percent in 2009 because of higher feed costs for chickens, hogs and cattle, said a group of food-industry economists on Thursday.
Let's see.
Food-industry economists = National Association of Realtors™. The same people who couldn't see the commodities bubble are now going to give us advice on the future? Who hasn't seen this one before? Raise your hand.
"We've been losing money for more than a year," said Bill Roenigk, economist for the Chicken Council, who said producers intend to cut production by as much as 12 percent. "We need to recover these feed costs."
Yes, and the EE needs a diamond tiara. Doesn't mean it's going to happen now, does it?
The "cost-of-production" theory of value was soundly debunked even before the 20th century rolled around. We're now in the 21st in case you didn't notice.
Nobody cares what it cost you to produce. Only thing that matters is whether people will buy it or not, and what price will they pay.
During a teleconference, economists from the National Chicken Council and the consultancy Farm Econ said food inflation could be 7 percent-8 percent.
This is naïve extrapolation a.k.a. driving by looking in the rearview mirror.
In case you haven't noticed, the "hyperconsumer" economy turbo-charged on credit just got taken out behind the woodshed, and was shot like a diseased dog.
Simple straightforward prediction:
Thursday, November 06, 2008
Jump, you Fuckers!
From the WSJ: His Job at Bear Gone, Mr. Fox Chose Suicide.
The meltdown of Bear Stearns Cos. in March marked the collapse of the modern securities industry, and the careers of some on Wall Street.
The financial crisis also claimed the life of a veteran Bear Stearns manager.
Barry Fox, a research supervisor who worked for nine years at the brokerage firm, took a drug overdose and then jumped from his 29th-floor apartment the evening in May after he learned he wouldn't be hired by J.P. Morgan Chase & Co., which was about to buy his firm. A coroner recently confirmed in an autopsy report that the death was a suicide.
Mr. Fox was devastated by the implosion of Bear Stearns and the financial hit he was likely to face, says Fred Philippi, his longtime companion. After several personal setbacks, "this Bear Stearns thing happened to be the last straw that broke his spirit," Mr. Philippi said in an interview.
...
The meltdown has also taken a more hidden toll, helping to push Mr. Fox and a handful of Wall Streeters over the edge. For instance, in early October, an unemployed financial manager in Los Angeles murdered his family before taking his own life, saying in a note to police that economic hardship drove him to despair. And about two weeks later, a Chicago futures trader fatally shot himself after reportedly sustaining big losses in his personal portfolio.
And that's why, boys and girls, you should learn to recognize the "obvious" signs of a bubble, and not get involved even if you are employed in the industry that's in the bubble and are raking in the dough yourself.
That they'd rather be dead than "less rich", and have no doubt that these people weren't exactly destined for the dole queue is mind-bending. What it says about America's collective self-delusion about money and status is even more disturbing.
The saddest part is that you can haul yourself down to your library (or internet these days), pull up a newspaper after the Panic of 1837 or the Great Panic of 1907, and you'd get a functionally equivalent story. You could change the names but you probably even wouldn't need to change the streets in New York and Chicago!
No wonder some of us consider filing Edith Wharton under "realism" in literature.
It was a freakin' bubble, the largest freakin' Asset Bubble in World History™ incorporating EVERY possible asset class that the EE can think of (and probably even some more), and it's not coming back.
EVER. (or at least not till two generations pass by.)
You may find it hard to recognize this because we've been sitting embedded inside this Mega-Bubble™ since 1983 but it has firmly ended. The entire world's FIRE economy worked by rolling debt into larger sums of debt at lower cost all the way down from 18% to 1%. The party is over.
Either you pay back the debt, or you default directly, or you default via govt. interference by fiat-inflation. All three roads lead to the abolishment of the debt. There are no other roads possible.
Until everybody firmly grasps this, we're pretty much screwed. Or to put it more poetically:
The beatings will continue until morale improves.
Tuesday, November 04, 2008
Spitting Image : Bring back the 80's!
One of my all-time favorite shows in the late 80's and early 90's.
Well, Maggie's long gone but classics are timeless!
Well, Maggie's long gone but classics are timeless!
Ford to Ford : Drop Dead
From Reuters: Ford Oct U.S. vehicle sales off adj. 31.9 pct.
You can read the article if you want. There's a table and stuff but the headline pretty much sums it up.
Maybe they can get a bailout. Or hold a prayer vigil.
Wait! They tried both.
Speaking of bailouts, the EE has lost track of the bailout situation. Anybody care to provide an update?
Who's doing what to whom how many times now?
You can read the article if you want. There's a table and stuff but the headline pretty much sums it up.
Maybe they can get a bailout. Or hold a prayer vigil.
Wait! They tried both.
Speaking of bailouts, the EE has lost track of the bailout situation. Anybody care to provide an update?
Who's doing what to whom how many times now?
Monday, November 03, 2008
Good for Nothing
From Bloomberg: Lehman Good-for-Retirement Notes Worth Pennies for UBS Clients.
UBS AG, Switzerland's largest bank, faces dozens of claims in the U.S. from clients who bought ``100 percent principal protected notes'' issued by Lehman Brothers Holdings Inc. that are now almost worthless.
Lehman's Sept. 15 bankruptcy leaves holders of the notes waiting in line with other senior unsecured creditors for what's left of their money. Notes with full principal protection are trading at 10 cents to 14 cents on the dollar, according to New York-based SecondMarket, which provides a marketplace for securities that are illiquid, or barely trade.
UBS AG, Switzerland's largest bank, faces dozens of claims in the U.S. from clients who bought ``100 percent principal protected notes'' issued by Lehman Brothers Holdings Inc. that are now almost worthless.
Lehman's Sept. 15 bankruptcy leaves holders of the notes waiting in line with other senior unsecured creditors for what's left of their money. Notes with full principal protection are trading at 10 cents to 14 cents on the dollar, according to New York-based SecondMarket, which provides a marketplace for securities that are illiquid, or barely trade.
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