From the LA Times: Beijing's Olympic building boom becomes a bust.
Reporting from Beijing -- "Empty," says Jack Rodman, an expert in distressed real estate, as he points from the window of his 40th-floor office toward a silver-skinned prism rising out of the Beijing skyline.
"Beautiful building, but not a single tenant.
Beijing went through a building boom before the 2008 Summer Olympics that filled a staid communist capital with angular architectural feats that grace the covers of glossy design magazines.
Now, six months after the Games ended, the city continues to dazzle by night, with neon and floodlights dancing across the skyline. By day, though, it is obvious that many are "see-through" buildings, to use the term coined during the Texas real estate bust of the 1980s.
By Rodman's calculations, 500 million square feet of commercial real estate has been developed in Beijing since 2006, more than all the office space in Manhattan. And that doesn't include huge projects developed by the government. He says 100 million square feet of office space is vacant -- a 14-year supply if it filled up at the same rate as in the best years, 2004 through '06, when about 7 million square feet a year was leased.
More capacity built just in 2006 than all the office space in Manhattan. Anybody see the problem?
Naturally, it goes without saying that there banking sector is kaput too.
Decouple that, bitches!
Saturday, February 28, 2009
Friday, February 27, 2009
Baltic Blowout
CBS Marketwatch: New Latvian prime minister faces economic crisis
President Valdis Zatlers named Valdis Dombrovskis as prime minister and asked him to form a new government, according to media reports on Thursday. Dombrovskis, a 37-year-old former finance minister, is from the centre-right party, New Era.
Following his nomination, Dombrovskis said that Latvia was "on the verge of bankruptcy" and would need to cut the budget by at least $1.27 billion or risk financial collapse, the BBC reported.
President Valdis Zatlers named Valdis Dombrovskis as prime minister and asked him to form a new government, according to media reports on Thursday. Dombrovskis, a 37-year-old former finance minister, is from the centre-right party, New Era.
Following his nomination, Dombrovskis said that Latvia was "on the verge of bankruptcy" and would need to cut the budget by at least $1.27 billion or risk financial collapse, the BBC reported.
Junky Punky Girlz!!!
The Telegraph reports: Moody's predicts default rate will exceed peaks hit in Great Depression.
In what will be seen by many as die-cast confirmation that the world economy is plummeting towards an economic and corporate implosion of unprecedented proportions, Moody's said it anticipated a tidal wave of defaults was approaching.
It said that in the coming months more than 15pc of speculative-grade bonds and loans - all but the most highly-rated - would default on their debts.
This peak is even higher than the peak reached in 1933, when bank after bank throughout America was collapsing, taking hoards of other companies with them. Back then, the default rate peaked at 15.4pc; moreover these companies were former investment grade issuers regarded as more reliable credit prospects than their contemporary counterparts.
Not that the EE would listen to Moody's, who are like the cheerleaders of this absurd credit boom, but it should be sobering to anyone willing to wade into the minefield that are corporate bonds particularly the junky punky ones.
Keep your powder dry. They can't bail out everyone.
In what will be seen by many as die-cast confirmation that the world economy is plummeting towards an economic and corporate implosion of unprecedented proportions, Moody's said it anticipated a tidal wave of defaults was approaching.
It said that in the coming months more than 15pc of speculative-grade bonds and loans - all but the most highly-rated - would default on their debts.
This peak is even higher than the peak reached in 1933, when bank after bank throughout America was collapsing, taking hoards of other companies with them. Back then, the default rate peaked at 15.4pc; moreover these companies were former investment grade issuers regarded as more reliable credit prospects than their contemporary counterparts.
Not that the EE would listen to Moody's, who are like the cheerleaders of this absurd credit boom, but it should be sobering to anyone willing to wade into the minefield that are corporate bonds particularly the junky punky ones.
Keep your powder dry. They can't bail out everyone.
Peeing on the Electric Fence
The AP reports: Ryanair could make passengers pay for toilets.
Is a toilet an optional extra when you're at 30,000 feet? Ryanair boss Michael O'Leary seems to think so — as his no-frills carrier plumbs new depths by thinking of charging customers to use the aircraft loo.
As always, O'Leary suggested a separate toilet free would lower ticket costs and make flying, somehow, easier for all. Nobody, even his own aides, seemed to be sure if he was serious or pursuing his well-documented penchant for making brazen declarations to win free advertising.
"One thing we have looked at in the past, and are looking at again, is the possibility of maybe putting a coin slot on the toilet door, so that people might have to actually spend a pound to `spend a penny' in future," O'Leary said, using a local euphemism for relieving one's self.
Do you need a Harvard MBA to realize that this is a terrible idea? How much additional money will you make compared to pissing people off (pardon the pun!)?
And just compare it to the damage that these irate passengers are likely to wreak, and this is Bastiat all over again. Ignore the unseen consequences in favor of the seen ones.
The first person who pees on the floor is likely to cause more damage both directly and indirectly (bad publicity) than all the revenue that you are likely to make from this move.
Dumb, dumb, dumb.
Is a toilet an optional extra when you're at 30,000 feet? Ryanair boss Michael O'Leary seems to think so — as his no-frills carrier plumbs new depths by thinking of charging customers to use the aircraft loo.
As always, O'Leary suggested a separate toilet free would lower ticket costs and make flying, somehow, easier for all. Nobody, even his own aides, seemed to be sure if he was serious or pursuing his well-documented penchant for making brazen declarations to win free advertising.
"One thing we have looked at in the past, and are looking at again, is the possibility of maybe putting a coin slot on the toilet door, so that people might have to actually spend a pound to `spend a penny' in future," O'Leary said, using a local euphemism for relieving one's self.
Do you need a Harvard MBA to realize that this is a terrible idea? How much additional money will you make compared to pissing people off (pardon the pun!)?
And just compare it to the damage that these irate passengers are likely to wreak, and this is Bastiat all over again. Ignore the unseen consequences in favor of the seen ones.
The first person who pees on the floor is likely to cause more damage both directly and indirectly (bad publicity) than all the revenue that you are likely to make from this move.
Dumb, dumb, dumb.
Those Bitter Jealous Renters
CNN reports: Boomers: 30% underwater.
What a turnaround for the American Dream!
According to a report released Wednesday, the real estate market bust and stock market declines have carved a huge chunk out of the assets of baby boomers.
So much home equity has been lost that 30% of boomers, aged 45 to 54, are underwater in their homes, according to "The Wealth of the Baby Boom Cohorts After the Collapse of the Housing Bubble. " The report, released by D.C.-based think tank the Center for Economic and Policy Research, also found that 18% of boomers aged 55 to 64 would owe money at close if they sold their homes.
The CEPR also found that people who were renting homes in 2004 will have more wealth in 2009 than those who were owners. That's true for all five wealth groups the study analyzed, from the poorest to the wealthiest.
BWAHAHAHHAHAHAHHAHAHAHHAHAHHHHHHHHHHHHHHHHHHH!!!
What a turnaround for the American Dream!
According to a report released Wednesday, the real estate market bust and stock market declines have carved a huge chunk out of the assets of baby boomers.
So much home equity has been lost that 30% of boomers, aged 45 to 54, are underwater in their homes, according to "The Wealth of the Baby Boom Cohorts After the Collapse of the Housing Bubble. " The report, released by D.C.-based think tank the Center for Economic and Policy Research, also found that 18% of boomers aged 55 to 64 would owe money at close if they sold their homes.
The CEPR also found that people who were renting homes in 2004 will have more wealth in 2009 than those who were owners. That's true for all five wealth groups the study analyzed, from the poorest to the wealthiest.
BWAHAHAHHAHAHAHHAHAHAHHAHAHHHHHHHHHHHHHHHHHHH!!!
Thursday, February 26, 2009
The Flower of Romance
The Washington Post reports: Market for Romance Goes From Bullish to Sheepish.
See the tall, gregarious young man in the Eighteenth Street Lounge, moving easily toward a group of receptive women as the floor vibrates with reggae music? He's dressed in a sharp Hugo Boss suit, and he knows that the minimum for a table is $240.
But he's not offering to buy the drinks. And the suit? He bought it a year ago, when he had a six-figure salary.
Dating in the time of the pink slip means feeling the squeeze of the drastically reduced paycheck, the sudden sting of the layoff. From investment bankers to real estate developers to construction workers, no job means no buying rounds of $15 martinis for a pretty woman and her girlfriends. No hosting parties in the bachelor loft. And often, no idea how to present one's new self on the dating market.
"It's been incredibly stressful for me," said Neil Welsh, 27, the guy in the suit, who until last year was marketing director for a booming real estate company. "I was so used to using my financial situation to leverage my dating."
For many affected by the recession, dating is the least of their worries. But the market crash has had a particular impact on young adults who developed their dating skills in fat times, the twentysomethings who spent lavishly to show that they could afford the finer things. Now, with national unemployment rates at 8.8 percent for people 25 to 34, they are looking for more creative ways to attract partners -- and reassessing what all that big spending really meant.
Alexandria native Niko Papademitriou, 27, became an investment banker with a Cleveland firm soon after he graduated from college. The money was steady enough for him to fly regularly to Manhattan to see his girlfriend and take her to upscale restaurants such as Bond Street and Cafe Gray.
"A large aspect of my life -- three out of the first five conversations that we had -- I told her, 'You're not going to see much of me in the next 15 years if we start dating, because I'm going to be making a lot of money.' " He thinks that worked in his favor, "not so much for the money, but for the drive. It's one of those things in men that women find attractive."
Since being laid off in November, he has moved back to Alexandria to live with his mother. He now takes the Chinatown bus -- for as little as $5 each way -- to visit his girlfriend. Round-trip airfare between Cleveland and New York City averages more than $200.
"It's definitely putting stress on our relationship," he said recently, sitting in an Old Town cafe. "It comes back to this whole manhood thing. Like, can you be the provider, not just for yourself but for others?"
It's been tough on his girlfriend, he said. "She knows that she needs to be this understanding, positive influence in my life. At the same time, there is a lot of fear on her part, knowing that my industry and the one that we had kind of mentally projected ourselves and our way of life on could be over, or at least on pause for a while."
Lindsey Schwalb, 22, of Arlington said the financial crunch has made men she knows more amenable to settling down. "People are looking for some form of stability. Instead of someone you have to impress monetarily, they want someone they can concentrate on spending quality time with."
Welsh said he is scaling back on dating costs while he builds a new business, an Internet marketing company.
"Now I'm more inclined to take a girl to a good ethnic restaurant," he said, whereas before, "I was constantly worried about being judged for how much money I was spending."
See the tall, gregarious young man in the Eighteenth Street Lounge, moving easily toward a group of receptive women as the floor vibrates with reggae music? He's dressed in a sharp Hugo Boss suit, and he knows that the minimum for a table is $240.
But he's not offering to buy the drinks. And the suit? He bought it a year ago, when he had a six-figure salary.
Dating in the time of the pink slip means feeling the squeeze of the drastically reduced paycheck, the sudden sting of the layoff. From investment bankers to real estate developers to construction workers, no job means no buying rounds of $15 martinis for a pretty woman and her girlfriends. No hosting parties in the bachelor loft. And often, no idea how to present one's new self on the dating market.
"It's been incredibly stressful for me," said Neil Welsh, 27, the guy in the suit, who until last year was marketing director for a booming real estate company. "I was so used to using my financial situation to leverage my dating."
For many affected by the recession, dating is the least of their worries. But the market crash has had a particular impact on young adults who developed their dating skills in fat times, the twentysomethings who spent lavishly to show that they could afford the finer things. Now, with national unemployment rates at 8.8 percent for people 25 to 34, they are looking for more creative ways to attract partners -- and reassessing what all that big spending really meant.
Alexandria native Niko Papademitriou, 27, became an investment banker with a Cleveland firm soon after he graduated from college. The money was steady enough for him to fly regularly to Manhattan to see his girlfriend and take her to upscale restaurants such as Bond Street and Cafe Gray.
"A large aspect of my life -- three out of the first five conversations that we had -- I told her, 'You're not going to see much of me in the next 15 years if we start dating, because I'm going to be making a lot of money.' " He thinks that worked in his favor, "not so much for the money, but for the drive. It's one of those things in men that women find attractive."
Since being laid off in November, he has moved back to Alexandria to live with his mother. He now takes the Chinatown bus -- for as little as $5 each way -- to visit his girlfriend. Round-trip airfare between Cleveland and New York City averages more than $200.
"It's definitely putting stress on our relationship," he said recently, sitting in an Old Town cafe. "It comes back to this whole manhood thing. Like, can you be the provider, not just for yourself but for others?"
It's been tough on his girlfriend, he said. "She knows that she needs to be this understanding, positive influence in my life. At the same time, there is a lot of fear on her part, knowing that my industry and the one that we had kind of mentally projected ourselves and our way of life on could be over, or at least on pause for a while."
Lindsey Schwalb, 22, of Arlington said the financial crunch has made men she knows more amenable to settling down. "People are looking for some form of stability. Instead of someone you have to impress monetarily, they want someone they can concentrate on spending quality time with."
Welsh said he is scaling back on dating costs while he builds a new business, an Internet marketing company.
"Now I'm more inclined to take a girl to a good ethnic restaurant," he said, whereas before, "I was constantly worried about being judged for how much money I was spending."
Tuesday, February 24, 2009
Adsense Nonsense
Crap that candy out, babe
Crap that candy out
Candy crappin' mama
Crap that candy out.
Wednesday, February 18, 2009
Long Division v/s the Candy Crappin' Unicorn™
Yahoo! reports: Obama unveils $75 billion mortgage relief plan.
President Barack Obama says his $75 billion plan to tackle "a crisis unlike any we've ever known" in home foreclosures is necessary to help save the economy.
Obama unveiled the plan in Arizona, hard-hit by the housing crunch. More expensive than expected, it aims to keep 9 million people from losing their homes.
$75B/9M = $8,333.33.
Assuming a $200K house, that means a principal reduction of 4%. It's even less for higher priced houses.
This is a waste of the piece of paper it was written on. And everyone's carryin' on as if the Candy-Crappin' Unicorn™ actually crapped out some candy.
FAIL!!!
President Barack Obama says his $75 billion plan to tackle "a crisis unlike any we've ever known" in home foreclosures is necessary to help save the economy.
Obama unveiled the plan in Arizona, hard-hit by the housing crunch. More expensive than expected, it aims to keep 9 million people from losing their homes.
$75B/9M = $8,333.33.
Assuming a $200K house, that means a principal reduction of 4%. It's even less for higher priced houses.
This is a waste of the piece of paper it was written on. And everyone's carryin' on as if the Candy-Crappin' Unicorn™ actually crapped out some candy.
FAIL!!!
Tuesday, February 17, 2009
The Toupee Files for Bankruptcy!
Reuters reports: Trump Entertainment files for bankruptcy.
Trump Entertainment Resorts Inc, the casino operator named for Donald Trump, filed for bankruptcy protection on Tuesday as recession and declining gambling revenues battered the company and its rivals.
The Chapter 11 filing marks the third plunge into bankruptcy for the company, which was created out of a restructuring in 2005.
Trump, a very public and flamboyant figure in an industry filled with colorful, headstrong executives, said the company represents less than 1 percent of his net worth, and that "my investment in it is worthless to me now."
BTW, it should be entertaining to note that his father (who built the famous "Trump" fortune) would be positively spinning in his grave.
Oh, and good luck to all the bozos living in all the various Trump Towers. Every single one of those corporations is probably in fuck-a-holic-pre-pubescent-bankruptcy.
Oh, and the EE doesn't own a tee-vee. So how does that phrase go again?
YOU'RE FIRED!!!
Trump Entertainment Resorts Inc, the casino operator named for Donald Trump, filed for bankruptcy protection on Tuesday as recession and declining gambling revenues battered the company and its rivals.
The Chapter 11 filing marks the third plunge into bankruptcy for the company, which was created out of a restructuring in 2005.
Trump, a very public and flamboyant figure in an industry filled with colorful, headstrong executives, said the company represents less than 1 percent of his net worth, and that "my investment in it is worthless to me now."
BTW, it should be entertaining to note that his father (who built the famous "Trump" fortune) would be positively spinning in his grave.
Oh, and good luck to all the bozos living in all the various Trump Towers. Every single one of those corporations is probably in fuck-a-holic-pre-pubescent-bankruptcy.
Oh, and the EE doesn't own a tee-vee. So how does that phrase go again?
YOU'RE FIRED!!!
Sunday, February 15, 2009
Setting Sun? Hai! Fucked Economy? Hai!
Bloomberg reports: Japan’s GDP Shrinks 12.7%, Most Since 1974 Oil Shock.
Japan’s economy shrank at an annual 12.7 percent pace last quarter, the most since the 1974 oil shock, amid an unprecedented collapse in exports and production.
Gross domestic product fell for a third straight quarter in the three months ended Dec. 31, the Cabinet Office said today in Tokyo. The median estimate of 26 economists surveyed by Bloomberg News was for an 11.6 percent contraction.
“The economy is in terrible shape and the scary part is that we’re likely to see a similar drop this quarter,” said Seiji Adachi, a senior economist at Deutsche Securities Inc. in Tokyo. “All we can do is wait for overseas demand to pick up.”
Yep, overseas demand will pick up any day now. Hai!
Keep waiting? Hai!
Wonderful to see global "decoupling" in action? Hai!
Japan’s economy shrank at an annual 12.7 percent pace last quarter, the most since the 1974 oil shock, amid an unprecedented collapse in exports and production.
Gross domestic product fell for a third straight quarter in the three months ended Dec. 31, the Cabinet Office said today in Tokyo. The median estimate of 26 economists surveyed by Bloomberg News was for an 11.6 percent contraction.
“The economy is in terrible shape and the scary part is that we’re likely to see a similar drop this quarter,” said Seiji Adachi, a senior economist at Deutsche Securities Inc. in Tokyo. “All we can do is wait for overseas demand to pick up.”
Yep, overseas demand will pick up any day now. Hai!
Keep waiting? Hai!
Wonderful to see global "decoupling" in action? Hai!
Saturday, February 14, 2009
Destination Bankruptcy
From the New York Times: Rainy Days in Paradise.
Destination clubs came into their own five years ago, as a growing number of affluent travelers sought all the advantages of a fancy second home without the inconvenience of upkeep or the monotony of going back to the same place year after year.
For a one-time deposit of $40,000 to more than $1.5 million — depending on how luxurious the accommodations and how long the stay — and annual dues of $3,000 to $100,000, club members would have access to an array of multimillion-dollar properties in prime resort locations —a stone farmhouse in Tuscany, an oceanfront villa in Costa Rica, a slopeside chalet in Aspen, Colo. Before they arrived, the club’s concierge would have stocked the refrigerator with the family’s favorite foods, arranged airport transfers, booked tee times or made restaurant reservations.
And for a while, the clubs thrived. Many used the hefty deposits and readily available credit to start building their collection of properties. Then, taking advantage of rapidly rising real estate prices, particularly in luxury markets, the clubs used their newly grown equity to take on more debt and acquire more homes. That, in turn, allowed them to lure more members with an increasing portfolio of destinations.
But when the economy fell apart, it largely took the destination clubs’ business model with it. Home values have dropped, new credit has dried up and membership sales have plummeted, leaving many of the clubs with more bills than income. Several have filed for bankruptcy. Some have asked members for special extra payments to help them survive. And others have made significant cuts in business expenses.
In late January, High Country Club, which was founded in 2005 and quickly grew to about 375 members, filed for Chapter 7 bankruptcy, listing hundreds of creditors and debt totaling about $25 million.
Smaller clubs, like the 140-member Portofino and the 150-member Lusso, with residences that averaged more than $3.5 million, also filed for bankruptcy last year. And the exclusive Yellowstone Club World, a collection of properties from Tim Blixseth, the developer of the elite Rocky Mountain ski and golf resort called the Yellowstone Club, never got off the ground.
Kasey D’Amato, a dermatology physician assistant from Los Angeles, who joined High Country Club last July, paid a $40,000 deposit and about $4,600 in annual dues in exchange for 19 nights of travel a year. She and her husband, Stephen, had two vacations planned — Easter weekend in Aspen and a May trip to the Turks and Caicos — when the club went under.
“They just canceled the reservations,” Ms. D’Amato said. Beyond the lost vacations, she added, “No one likes to lose that kind of money.”
So what exactly did these fools get for their money? The illusion of "owning" something and the future "promise" of a vacation?
A really quick calculation shows that these illusions are quite expensive.
Whether you're average Joe or a billionaire, there's only one "correct" way to do these things. Pay as you go. Get your money's worth NOW independent of whether you plan to spend $500 or $500K on a vacation.
Destination clubs came into their own five years ago, as a growing number of affluent travelers sought all the advantages of a fancy second home without the inconvenience of upkeep or the monotony of going back to the same place year after year.
For a one-time deposit of $40,000 to more than $1.5 million — depending on how luxurious the accommodations and how long the stay — and annual dues of $3,000 to $100,000, club members would have access to an array of multimillion-dollar properties in prime resort locations —a stone farmhouse in Tuscany, an oceanfront villa in Costa Rica, a slopeside chalet in Aspen, Colo. Before they arrived, the club’s concierge would have stocked the refrigerator with the family’s favorite foods, arranged airport transfers, booked tee times or made restaurant reservations.
And for a while, the clubs thrived. Many used the hefty deposits and readily available credit to start building their collection of properties. Then, taking advantage of rapidly rising real estate prices, particularly in luxury markets, the clubs used their newly grown equity to take on more debt and acquire more homes. That, in turn, allowed them to lure more members with an increasing portfolio of destinations.
But when the economy fell apart, it largely took the destination clubs’ business model with it. Home values have dropped, new credit has dried up and membership sales have plummeted, leaving many of the clubs with more bills than income. Several have filed for bankruptcy. Some have asked members for special extra payments to help them survive. And others have made significant cuts in business expenses.
In late January, High Country Club, which was founded in 2005 and quickly grew to about 375 members, filed for Chapter 7 bankruptcy, listing hundreds of creditors and debt totaling about $25 million.
Smaller clubs, like the 140-member Portofino and the 150-member Lusso, with residences that averaged more than $3.5 million, also filed for bankruptcy last year. And the exclusive Yellowstone Club World, a collection of properties from Tim Blixseth, the developer of the elite Rocky Mountain ski and golf resort called the Yellowstone Club, never got off the ground.
Kasey D’Amato, a dermatology physician assistant from Los Angeles, who joined High Country Club last July, paid a $40,000 deposit and about $4,600 in annual dues in exchange for 19 nights of travel a year. She and her husband, Stephen, had two vacations planned — Easter weekend in Aspen and a May trip to the Turks and Caicos — when the club went under.
“They just canceled the reservations,” Ms. D’Amato said. Beyond the lost vacations, she added, “No one likes to lose that kind of money.”
So what exactly did these fools get for their money? The illusion of "owning" something and the future "promise" of a vacation?
A really quick calculation shows that these illusions are quite expensive.
Whether you're average Joe or a billionaire, there's only one "correct" way to do these things. Pay as you go. Get your money's worth NOW independent of whether you plan to spend $500 or $500K on a vacation.
Friday, February 13, 2009
That Glitterin' Desert White Elephant
The New York Times reports: Laid-Off Foreigners Flee as Dubai Spirals Down.
Sofia, a 34-year-old Frenchwoman, moved here a year ago to take a job in advertising, so confident about Dubai’s fast-growing economy that she bought an apartment for almost $300,000 with a 15-year mortgage.
Now, like many of the foreign workers who make up 90 percent of the population here, she has been laid off and faces the prospect of being forced to leave this Persian Gulf city — or worse.
“I’m really scared of what could happen, because I bought property here,” said Sofia, who asked that her last name be withheld because she is still hunting for a new job. “If I can’t pay it off, I was told I could end up in debtors’ prison.”
With Dubai’s economy in free fall, newspapers have reported that more than 3,000 cars sit abandoned in the parking lot at the Dubai Airport, left by fleeing, debt-ridden foreigners (who could in fact be imprisoned if they failed to pay their bills). Some are said to have maxed-out credit cards inside and notes of apology taped to the windshield.
Some things are clear: real estate prices, which rose dramatically during Dubai’s six-year boom, have dropped 30 percent or more over the past two or three months in some parts of the city. Last week, Moody’s Investor’s Service announced that it might downgrade its ratings on six of Dubai’s most prominent state-owned companies, citing a deterioration in the economic outlook. So many used luxury cars are for sale , they are sometimes sold for 40 percent less than the asking price two months ago, car dealers say. Dubai’s roads, usually thick with traffic at this time of year, are now mostly clear.
For many foreigners, Dubai had seemed at first to be a refuge, relatively insulated from the panic that began hitting the rest of the world last autumn. The Persian Gulf is cushioned by vast oil and gas wealth, and some who lost jobs in New York and London began applying here.
But Dubai, unlike Abu Dhabi or nearby Qatar and Saudi Arabia, does not have its own oil, and had built its reputation on real estate, finance and tourism. Now, many expatriates here talk about Dubai as though it were a con game all along. Lurid rumors spread quickly: the Palm Jumeira, an artificial island that is one of this city’s trademark developments, is said to be sinking, and when you turn the faucets in the hotels built atop it, only cockroaches come out.
It should be reasonably obvious that you can't build an economy on RE and finance because that's a bit like saying you are going to build your economy on a Ponzi scheme. We all know how that works out.
You actually need to produce something the world wants. Tourism might be it but tourism is too dependent on disposable income (and loose credit = Ponzi) to run an economy off of.
Dubai is this cycle's Rockefeller Center and Pebble Beach all rolled into one. Since they have absolutely nothing to offer to the world, they are going to get annihilated economically.
Just like the seven-star Al Burj, Dubai is a seven-star fuck-up!
Sofia, a 34-year-old Frenchwoman, moved here a year ago to take a job in advertising, so confident about Dubai’s fast-growing economy that she bought an apartment for almost $300,000 with a 15-year mortgage.
Now, like many of the foreign workers who make up 90 percent of the population here, she has been laid off and faces the prospect of being forced to leave this Persian Gulf city — or worse.
“I’m really scared of what could happen, because I bought property here,” said Sofia, who asked that her last name be withheld because she is still hunting for a new job. “If I can’t pay it off, I was told I could end up in debtors’ prison.”
With Dubai’s economy in free fall, newspapers have reported that more than 3,000 cars sit abandoned in the parking lot at the Dubai Airport, left by fleeing, debt-ridden foreigners (who could in fact be imprisoned if they failed to pay their bills). Some are said to have maxed-out credit cards inside and notes of apology taped to the windshield.
Some things are clear: real estate prices, which rose dramatically during Dubai’s six-year boom, have dropped 30 percent or more over the past two or three months in some parts of the city. Last week, Moody’s Investor’s Service announced that it might downgrade its ratings on six of Dubai’s most prominent state-owned companies, citing a deterioration in the economic outlook. So many used luxury cars are for sale , they are sometimes sold for 40 percent less than the asking price two months ago, car dealers say. Dubai’s roads, usually thick with traffic at this time of year, are now mostly clear.
For many foreigners, Dubai had seemed at first to be a refuge, relatively insulated from the panic that began hitting the rest of the world last autumn. The Persian Gulf is cushioned by vast oil and gas wealth, and some who lost jobs in New York and London began applying here.
But Dubai, unlike Abu Dhabi or nearby Qatar and Saudi Arabia, does not have its own oil, and had built its reputation on real estate, finance and tourism. Now, many expatriates here talk about Dubai as though it were a con game all along. Lurid rumors spread quickly: the Palm Jumeira, an artificial island that is one of this city’s trademark developments, is said to be sinking, and when you turn the faucets in the hotels built atop it, only cockroaches come out.
It should be reasonably obvious that you can't build an economy on RE and finance because that's a bit like saying you are going to build your economy on a Ponzi scheme. We all know how that works out.
You actually need to produce something the world wants. Tourism might be it but tourism is too dependent on disposable income (and loose credit = Ponzi) to run an economy off of.
Dubai is this cycle's Rockefeller Center and Pebble Beach all rolled into one. Since they have absolutely nothing to offer to the world, they are going to get annihilated economically.
Just like the seven-star Al Burj, Dubai is a seven-star fuck-up!
That Japanese Obedience Clause
The Times Online reports: Panasonic orders staff to buy £1,000 in products.
Its electronic gadgetry is gathering dust on the shelves of high street stores, nobody is buying new fridges and the mountain of unsold plasma televisions is growing by the day.
However, in desperation, Panasonic has hit on the perfect counter-attack against the consumer slump: it has ordered every member of staff to go out and buy £1,000 of Panasonic products.
Large swathes of corporate Japan are expected to follow suit, either by directly commanding or indirectly “pressuring” employees to divert part of their salaries towards the goods that their employers produce.
Toyota has already tacitly applauded a “voluntary” scheme in which 2,200 of its top brass decided to buy new Toyota cars, and the president of Fujitsu recently e-mailed 100,000 staff and gently pointed out how nice it would be if “employee ownership rates” of Fujitsu PCs and mobile phones were a little higher.
A Panasonic spokesman said that because the “Buy Panasonic” request was made to management-level employees, the company did not expect refusal rates to be high.
The emergency directive, some Panasonic employees say, is a particularly cruel blow: the same 10,000 managers now being commanded to fork out for unwanted electronics were told two weeks ago that their salaries and bonuses would also be slashed.
Forcing your employees to snort your cocaine = FAIL.
Its electronic gadgetry is gathering dust on the shelves of high street stores, nobody is buying new fridges and the mountain of unsold plasma televisions is growing by the day.
However, in desperation, Panasonic has hit on the perfect counter-attack against the consumer slump: it has ordered every member of staff to go out and buy £1,000 of Panasonic products.
Large swathes of corporate Japan are expected to follow suit, either by directly commanding or indirectly “pressuring” employees to divert part of their salaries towards the goods that their employers produce.
Toyota has already tacitly applauded a “voluntary” scheme in which 2,200 of its top brass decided to buy new Toyota cars, and the president of Fujitsu recently e-mailed 100,000 staff and gently pointed out how nice it would be if “employee ownership rates” of Fujitsu PCs and mobile phones were a little higher.
A Panasonic spokesman said that because the “Buy Panasonic” request was made to management-level employees, the company did not expect refusal rates to be high.
The emergency directive, some Panasonic employees say, is a particularly cruel blow: the same 10,000 managers now being commanded to fork out for unwanted electronics were told two weeks ago that their salaries and bonuses would also be slashed.
Forcing your employees to snort your cocaine = FAIL.
Thursday, February 12, 2009
More Failure for the Candy-Crappin' Unicorn™
The New York Times reports: Metamorphosis at Caterpillar Over Jobs.
Another casualty of the stimulus package became apparent while we were waiting for the final language of the reconciled bill to appear online. It appears that Caterpillar won’t be hiring back any of those 22,000 laid-off workers because of the President’s $789 (Ed: sic) stimulus package, despite the fact that President Obama alluded to words by the company’s executive just earlier today touting the measure.
With the very familiar logo of Caterpillar looming around him at one of the company’s hard-hit plants in Peoria, Ill., President Obama publicly repeated the promise that Caterpillar’s chief executive officer, Jim Owens, might be able to rehire some of the people who were laid off — if the stimulus were passed.
But oops. After the president left, Mr. Owens not only did a turnabout on rehiring; he also suggested there may be even more layoffs. Although he said he continued to support the stimulus package, it wouldn’t result in a reversal of layoffs for anyone: “I think realistically no. The truth is we’re going to have more layoffs before we start hiring again.”
The Candy-Crappin' Unicorn™ has failed again!
Another casualty of the stimulus package became apparent while we were waiting for the final language of the reconciled bill to appear online. It appears that Caterpillar won’t be hiring back any of those 22,000 laid-off workers because of the President’s $789 (Ed: sic) stimulus package, despite the fact that President Obama alluded to words by the company’s executive just earlier today touting the measure.
With the very familiar logo of Caterpillar looming around him at one of the company’s hard-hit plants in Peoria, Ill., President Obama publicly repeated the promise that Caterpillar’s chief executive officer, Jim Owens, might be able to rehire some of the people who were laid off — if the stimulus were passed.
But oops. After the president left, Mr. Owens not only did a turnabout on rehiring; he also suggested there may be even more layoffs. Although he said he continued to support the stimulus package, it wouldn’t result in a reversal of layoffs for anyone: “I think realistically no. The truth is we’re going to have more layoffs before we start hiring again.”
The Candy-Crappin' Unicorn™ has failed again!
Bend Over Californicators, it's HICA time!
Bloomberg reports: California Lawmakers Reach ‘Framework’ on Budget Deal.
California Governor Arnold Schwarzenegger and legislative leaders are nearing an agreement to close a record budget deficit with tax and fee increases on items including gasoline and retail sales.
Under consideration are proposals to raise the state’s sales tax rate to 8.25 percent from 7.25 percent; increase the vehicle license fee to 1.15 percent from 0.65 percent of the value of the automobile; a 12-cent per-gallon excise tax on gasoline and a 0.25 percent surcharge on income taxes, according to a lawmaker briefed by party leaders who asked not to be identified because the presentation was confidential.
Raising taxes during a depression. That should work out well!
California Governor Arnold Schwarzenegger and legislative leaders are nearing an agreement to close a record budget deficit with tax and fee increases on items including gasoline and retail sales.
Under consideration are proposals to raise the state’s sales tax rate to 8.25 percent from 7.25 percent; increase the vehicle license fee to 1.15 percent from 0.65 percent of the value of the automobile; a 12-cent per-gallon excise tax on gasoline and a 0.25 percent surcharge on income taxes, according to a lawmaker briefed by party leaders who asked not to be identified because the presentation was confidential.
Raising taxes during a depression. That should work out well!
Catch me if you can ...
From Yahoo!: Calif. fraud suspect caught with $70,000 in boots.
A suspect in a nationwide mortgage fraud scheme who fled the country was caught at the Canadian border with $1 million in Swiss bank certificates and $70,000 stuffed in his cowboy boots, authorities said Wednesday.
Christopher J. Warren, 27, also was carrying four ounces of platinum valued at $1,420 an ounce when he was arrested early Wednesday while entering the United States at Buffalo, N.Y.
Court documents alleged they defrauded investors and mortgage companies of $100 million since 2006. The fraudulent deals involved 500 homes and condominiums in California, Florida, Nevada, Illinois, Colorado and Arizona, according to Internal Revenue Service affidavits.
Warren flew to Ireland on Feb. 3 on a chartered private jet, then traveled to Lebanon and Canada, acting U.S. Attorney Lawrence Brown said. Immigration officials were on the lookout for him when he took a taxi from Toronto to the border at Buffalo.
Authorities believe Warren also had brought to Lebanon $4 million to $5 million in gold, which he had shown some of the flight crew, but that has not been recovered, Brown said.
A suspect in a nationwide mortgage fraud scheme who fled the country was caught at the Canadian border with $1 million in Swiss bank certificates and $70,000 stuffed in his cowboy boots, authorities said Wednesday.
Christopher J. Warren, 27, also was carrying four ounces of platinum valued at $1,420 an ounce when he was arrested early Wednesday while entering the United States at Buffalo, N.Y.
Court documents alleged they defrauded investors and mortgage companies of $100 million since 2006. The fraudulent deals involved 500 homes and condominiums in California, Florida, Nevada, Illinois, Colorado and Arizona, according to Internal Revenue Service affidavits.
Warren flew to Ireland on Feb. 3 on a chartered private jet, then traveled to Lebanon and Canada, acting U.S. Attorney Lawrence Brown said. Immigration officials were on the lookout for him when he took a taxi from Toronto to the border at Buffalo.
Authorities believe Warren also had brought to Lebanon $4 million to $5 million in gold, which he had shown some of the flight crew, but that has not been recovered, Brown said.
The "D" Word Surfaces
The Independent reports: 'This is the worst recession for over 100 years'.
Britain is facing its worst financial crisis for more than a century, surpassing even the Great Depression of the 1930s, one of Gordon Brown's most senior ministers and confidants has admitted.
In an extraordinary admission about the severity of the economic downturn, Ed Balls even predicted that its effects would still be felt 15 years from now. The Schools Secretary's comments carry added weight because he is a former chief economic adviser to the Treasury and regarded as one of the Prime Ministers's closest allies.
Mr Balls said yesterday: "The reality is that this is becoming the most serious global recession for, I'm sure, over 100 years, as it will turn out."
He warned that events worldwide were moving at a "speed, pace and ferocity which none of us have seen before" and banks were losing cash on a "scale that nobody believed possible".
The minister stunned his audience at a Labour conference in Yorkshire by forecasting that times could be tougher than in the depression of the 1930s, when male unemployment in some cities reached 70 per cent.
Philip Hammond, the shadow Chief Secretary to the Treasury, said Mr Balls's predictions were "a staggering and very worrying admission from a cabinet minister and Gordon Brown's closest ally in the Treasury over the past 10 years". He added: "We are being told that not only are we facing the worst recession in 100 years, but that it will last for over a decade – far longer than Treasury forecasts predict."
Britain is facing its worst financial crisis for more than a century, surpassing even the Great Depression of the 1930s, one of Gordon Brown's most senior ministers and confidants has admitted.
In an extraordinary admission about the severity of the economic downturn, Ed Balls even predicted that its effects would still be felt 15 years from now. The Schools Secretary's comments carry added weight because he is a former chief economic adviser to the Treasury and regarded as one of the Prime Ministers's closest allies.
Mr Balls said yesterday: "The reality is that this is becoming the most serious global recession for, I'm sure, over 100 years, as it will turn out."
He warned that events worldwide were moving at a "speed, pace and ferocity which none of us have seen before" and banks were losing cash on a "scale that nobody believed possible".
The minister stunned his audience at a Labour conference in Yorkshire by forecasting that times could be tougher than in the depression of the 1930s, when male unemployment in some cities reached 70 per cent.
Philip Hammond, the shadow Chief Secretary to the Treasury, said Mr Balls's predictions were "a staggering and very worrying admission from a cabinet minister and Gordon Brown's closest ally in the Treasury over the past 10 years". He added: "We are being told that not only are we facing the worst recession in 100 years, but that it will last for over a decade – far longer than Treasury forecasts predict."
Wednesday, February 11, 2009
Shreddin' Time
Martin Wolf in the Financial Times asks the obvious questions: Why Obama’s new Tarp will fail to rescue the banks.
Has Barack Obama’s presidency already failed? In normal times, this would be a ludicrous question. But these are not normal times. They are times of great danger. Today, the new US administration can disown responsibility for its inheritance; tomorrow, it will own it. Today, it can offer solutions; tomorrow it will have become the problem. Today, it is in control of events; tomorrow, events will take control of it. Doing too little is now far riskier than doing too much. If he fails to act decisively, the president risks being overwhelmed, like his predecessor. The costs to the US and the world of another failed presidency do not bear contemplating.
The new plan seems to make sense if and only if the principal problem is illiquidity. Offering guarantees and buying some portion of the toxic assets, while limiting new capital injections to less than the $350bn left in the Tarp, cannot deal with the insolvency problem identified by informed observers. Indeed, any toxic asset purchase or guarantee programme must be an ineffective, inefficient and inequitable way to rescue inadequately capitalised financial institutions: ineffective, because the government must buy vast amounts of doubtful assets at excessive prices or provide over-generous guarantees, to render insolvent banks solvent; inefficient, because big capital injections or conversion of debt into equity are better ways to recapitalise banks; and inequitable, because big subsidies would go to failed institutions and private buyers of bad assets.
Why then is the administration making what appears to be a blunder? It may be that it is hoping for the best. But it also seems it has set itself the wrong question. It has not asked what needs to be done to be sure of a solution. It has asked itself, instead, what is the best it can do given three arbitrary, self-imposed constraints: no nationalisation; no losses for bondholders; and no more money from Congress. Yet why does a new administration, confronting a huge crisis, not try to change the terms of debate? This timidity is depressing. Trying to make up for this mistake by imposing pettifogging conditions on assisted institutions is more likely to compound the error than to reduce it.
Assume that the problem is insolvency and the modest market value of US commercial banks (about $400bn) derives from government support (see charts). Assume, too, that it is impossible to raise large amounts of private capital today. Then there has to be recapitalisation in one of the two ways indicated above. Both have disadvantages: government recapitalisation is a bail-out of creditors and involves temporary state administration; debt-for-equity swaps would damage bond markets, insurance companies and pension funds. But the choice is inescapable.
If Mr Geithner or Lawrence Summers, head of the national economic council, were advising the US as a foreign country, they would point this out, brutally. Dominique Strauss-Kahn, IMF managing director, said the same thing, very gently, in Malaysia last Saturday.
The correct advice remains the one the US gave the Japanese and others during the 1990s: admit reality, restructure banks and, above all, slay zombie institutions at once.
Looks like the Candy-Crappin' Unicorn™ has failed to crap out candy!
Has Barack Obama’s presidency already failed? In normal times, this would be a ludicrous question. But these are not normal times. They are times of great danger. Today, the new US administration can disown responsibility for its inheritance; tomorrow, it will own it. Today, it can offer solutions; tomorrow it will have become the problem. Today, it is in control of events; tomorrow, events will take control of it. Doing too little is now far riskier than doing too much. If he fails to act decisively, the president risks being overwhelmed, like his predecessor. The costs to the US and the world of another failed presidency do not bear contemplating.
The new plan seems to make sense if and only if the principal problem is illiquidity. Offering guarantees and buying some portion of the toxic assets, while limiting new capital injections to less than the $350bn left in the Tarp, cannot deal with the insolvency problem identified by informed observers. Indeed, any toxic asset purchase or guarantee programme must be an ineffective, inefficient and inequitable way to rescue inadequately capitalised financial institutions: ineffective, because the government must buy vast amounts of doubtful assets at excessive prices or provide over-generous guarantees, to render insolvent banks solvent; inefficient, because big capital injections or conversion of debt into equity are better ways to recapitalise banks; and inequitable, because big subsidies would go to failed institutions and private buyers of bad assets.
Why then is the administration making what appears to be a blunder? It may be that it is hoping for the best. But it also seems it has set itself the wrong question. It has not asked what needs to be done to be sure of a solution. It has asked itself, instead, what is the best it can do given three arbitrary, self-imposed constraints: no nationalisation; no losses for bondholders; and no more money from Congress. Yet why does a new administration, confronting a huge crisis, not try to change the terms of debate? This timidity is depressing. Trying to make up for this mistake by imposing pettifogging conditions on assisted institutions is more likely to compound the error than to reduce it.
Assume that the problem is insolvency and the modest market value of US commercial banks (about $400bn) derives from government support (see charts). Assume, too, that it is impossible to raise large amounts of private capital today. Then there has to be recapitalisation in one of the two ways indicated above. Both have disadvantages: government recapitalisation is a bail-out of creditors and involves temporary state administration; debt-for-equity swaps would damage bond markets, insurance companies and pension funds. But the choice is inescapable.
If Mr Geithner or Lawrence Summers, head of the national economic council, were advising the US as a foreign country, they would point this out, brutally. Dominique Strauss-Kahn, IMF managing director, said the same thing, very gently, in Malaysia last Saturday.
The correct advice remains the one the US gave the Japanese and others during the 1990s: admit reality, restructure banks and, above all, slay zombie institutions at once.
Looks like the Candy-Crappin' Unicorn™ has failed to crap out candy!
A Sane Voice (Halleluia!)
Charlie Munger opines in the Washington Post: How We Can Restore Confidence.
Our situation is dire. Moderate booms and busts are inevitable in free-market capitalism. But a boom-bust cycle as gross as the one that caused our present misery is dangerous, and recurrences should be prevented. The country is understandably depressed -- mired in issues involving fiscal stimulus, which is needed, and improvements in bank strength. A key question: Should we opt for even more pain now to gain a better future? For instance, should we create new controls to stamp out much sin and folly and thus dampen future booms? The answer is yes.
Sensible reform cannot avoid causing significant pain, which is worth enduring to gain extra safety and more exemplary conduct. And only when there is strong public revulsion, such as exists today, can legislators minimize the influence of powerful special interests enough to bring about needed revisions in law.
Many contributors to our over-the-top boom, which led to the gross bust, are known. They include insufficient controls over morality and prudence in banks and investment banks; undesirable conduct among investment banks; greatly expanded financial leverage, aided by direct or implied use of government credit; and extreme excess, sometimes amounting to fraud, in the promotion of consumer credit. Unsound accounting was widespread.
There was also great excess in highly leveraged speculation of all kinds. Perhaps real estate speculation did the most damage. But the new trading in derivative contracts involving corporate bonds took the prize. This system, in which completely unrelated entities bet trillions with virtually no regulation, created two things: a gambling facility that mimicked the 1920s "bucket shops" wherein bookie-customer types could bet on security prices, instead of horse races, with almost no one owning any securities, and, second, a large group of entities that had an intense desire that certain companies should fail. Croupier types pushed this system, assisted by academics who should have known better. Unfortunately, they convinced regulators that denizens of our financial system would use the new speculative opportunities without causing more harm than benefit.
Considering the huge profit potential of these activities, it may seem unlikely that any important opposition to reform would come from parties other than conventional, moneyed special interests. But many in academia, too, will resist. It is important that reform plans mix moral and accounting concepts with traditional economic concepts. Many economists take fierce pride in opposing that sort of mixed reasoning. But what these economists like to think about is functionally intertwined, in complex ways, with what they don't like to think about. Those who resist the wider thinking are acting as engineers would if they rounded pi from 3.14 to an even 3 to simplify their calculations. The result is a kind of willful ignorance that fails to understand much that is important.
Moreover, rationality in the current situation requires even more stretch in economic thinking. Public deliberations should include not only private morality and accounting issues but also issues of public morality, particularly with regard to taxation. The United States has long run large, concurrent trade and fiscal deficits while, to its own great advantage, issuing the main reserve currency of a deeply troubled and deeply interdependent world. That world now faces new risks from an expanding group of nations possessing nuclear weapons. And so the United States may now have a duty similar to the one that, in the danger that followed World War II, caused the Marshall Plan to be approved in a bipartisan consensus and rebuild a devastated Europe.
The consensus was grounded in Secretary of State George Marshall's concept of moral duty, supplemented by prudential considerations. The modern form of this duty would demand at least some increase in conventional taxes or the imposition of some new consumption taxes. In so doing, the needed and cheering economic message, "We will do what it takes," would get a corollary: "and without unacceptably devaluing our money." Surely the more complex message is more responsible, considering that, first, our practices of running twin deficits depend on drawing from reserves of trust that are not infinite and, second, the message of the corollary would not be widely believed unless it was accompanied by some new taxes.
The whole article is terrific and worth reading!
Our situation is dire. Moderate booms and busts are inevitable in free-market capitalism. But a boom-bust cycle as gross as the one that caused our present misery is dangerous, and recurrences should be prevented. The country is understandably depressed -- mired in issues involving fiscal stimulus, which is needed, and improvements in bank strength. A key question: Should we opt for even more pain now to gain a better future? For instance, should we create new controls to stamp out much sin and folly and thus dampen future booms? The answer is yes.
Sensible reform cannot avoid causing significant pain, which is worth enduring to gain extra safety and more exemplary conduct. And only when there is strong public revulsion, such as exists today, can legislators minimize the influence of powerful special interests enough to bring about needed revisions in law.
Many contributors to our over-the-top boom, which led to the gross bust, are known. They include insufficient controls over morality and prudence in banks and investment banks; undesirable conduct among investment banks; greatly expanded financial leverage, aided by direct or implied use of government credit; and extreme excess, sometimes amounting to fraud, in the promotion of consumer credit. Unsound accounting was widespread.
There was also great excess in highly leveraged speculation of all kinds. Perhaps real estate speculation did the most damage. But the new trading in derivative contracts involving corporate bonds took the prize. This system, in which completely unrelated entities bet trillions with virtually no regulation, created two things: a gambling facility that mimicked the 1920s "bucket shops" wherein bookie-customer types could bet on security prices, instead of horse races, with almost no one owning any securities, and, second, a large group of entities that had an intense desire that certain companies should fail. Croupier types pushed this system, assisted by academics who should have known better. Unfortunately, they convinced regulators that denizens of our financial system would use the new speculative opportunities without causing more harm than benefit.
Considering the huge profit potential of these activities, it may seem unlikely that any important opposition to reform would come from parties other than conventional, moneyed special interests. But many in academia, too, will resist. It is important that reform plans mix moral and accounting concepts with traditional economic concepts. Many economists take fierce pride in opposing that sort of mixed reasoning. But what these economists like to think about is functionally intertwined, in complex ways, with what they don't like to think about. Those who resist the wider thinking are acting as engineers would if they rounded pi from 3.14 to an even 3 to simplify their calculations. The result is a kind of willful ignorance that fails to understand much that is important.
Moreover, rationality in the current situation requires even more stretch in economic thinking. Public deliberations should include not only private morality and accounting issues but also issues of public morality, particularly with regard to taxation. The United States has long run large, concurrent trade and fiscal deficits while, to its own great advantage, issuing the main reserve currency of a deeply troubled and deeply interdependent world. That world now faces new risks from an expanding group of nations possessing nuclear weapons. And so the United States may now have a duty similar to the one that, in the danger that followed World War II, caused the Marshall Plan to be approved in a bipartisan consensus and rebuild a devastated Europe.
The consensus was grounded in Secretary of State George Marshall's concept of moral duty, supplemented by prudential considerations. The modern form of this duty would demand at least some increase in conventional taxes or the imposition of some new consumption taxes. In so doing, the needed and cheering economic message, "We will do what it takes," would get a corollary: "and without unacceptably devaluing our money." Surely the more complex message is more responsible, considering that, first, our practices of running twin deficits depend on drawing from reserves of trust that are not infinite and, second, the message of the corollary would not be widely believed unless it was accompanied by some new taxes.
The whole article is terrific and worth reading!
That Slippery Sliding Slope
Yahoo! reports: Bank of England says Britain in 'deep recession'.
The head of the Bank of England said Wednesday that Britain was in a "deep recession" that would require further easing of monetary policy, including expanding the money supply.
"The UK economy is in a deep recession," bank Governor Mervyn King said at a news conference, who also gave his clearest sign yet that the Bank of England was ready to in effect print money to get the economy going again.
First, they were in a "slowdown"; then a "recession"; now it's a "deep recession".
By the time, they acknowledge that it's a flat-out "depression", it will be over.
Oh, and the money printing will fail.
What would you do if you were a Briton and had considerable savings? Move it into some other currency, most likely, the Yen. Or commodities. Or even gold.
You can't force people to spend if they don't want to.
Dumb and dumber, that's the problem with the central bankers!
The head of the Bank of England said Wednesday that Britain was in a "deep recession" that would require further easing of monetary policy, including expanding the money supply.
"The UK economy is in a deep recession," bank Governor Mervyn King said at a news conference, who also gave his clearest sign yet that the Bank of England was ready to in effect print money to get the economy going again.
First, they were in a "slowdown"; then a "recession"; now it's a "deep recession".
By the time, they acknowledge that it's a flat-out "depression", it will be over.
Oh, and the money printing will fail.
What would you do if you were a Briton and had considerable savings? Move it into some other currency, most likely, the Yen. Or commodities. Or even gold.
You can't force people to spend if they don't want to.
Dumb and dumber, that's the problem with the central bankers!
Monday, February 09, 2009
Blame Canada!
From WTOP.com: Canadian bankruptcies soar 47 percent.
he number of Canadian consumers and businesses going bankrupt soared nearly 47 percent in December.
The Office of the Superintendent of Bankruptcy said Monday 8,299 individuals and businesses went bankrupt in December, up from 5,659 for December, 2007, a jump of 46.7 percent.
The latest numbers are a staggering sign of how quickly the Canadian economy has slowed.
The financial crisis and the global sell-off of commodities have hit the country hard since the summer. The country lost a record 129,000 jobs last month and central bank is predicting economic output will contract 4.8 percent in the first quarter.
he number of Canadian consumers and businesses going bankrupt soared nearly 47 percent in December.
The Office of the Superintendent of Bankruptcy said Monday 8,299 individuals and businesses went bankrupt in December, up from 5,659 for December, 2007, a jump of 46.7 percent.
The latest numbers are a staggering sign of how quickly the Canadian economy has slowed.
The financial crisis and the global sell-off of commodities have hit the country hard since the summer. The country lost a record 129,000 jobs last month and central bank is predicting economic output will contract 4.8 percent in the first quarter.
Tuesday, February 03, 2009
Readin', Ritin' and Retardness
From CNN: US Treasury set to lay out financial plan.
The U.S. Treasury Department will likely lay out its framework plan for strengthening banks and dealing with the financial crisis early next week, a Treasury official said Monday.
The Treasury is working with other government agencies to craft a plan that will allocate the second half of a $700 billion financial rescue fund and further bolster the banking sector while also supporting credit markets and providing relief from home foreclosures.
Problem : $40T
Response: $350M (+ $800M)
Conclusion: FAILURE
Thank you for playing, Geithy-boy. You fail in 'rithmetic.
BORING. NEXT.
The U.S. Treasury Department will likely lay out its framework plan for strengthening banks and dealing with the financial crisis early next week, a Treasury official said Monday.
The Treasury is working with other government agencies to craft a plan that will allocate the second half of a $700 billion financial rescue fund and further bolster the banking sector while also supporting credit markets and providing relief from home foreclosures.
Problem : $40T
Response: $350M (+ $800M)
Conclusion: FAILURE
Thank you for playing, Geithy-boy. You fail in 'rithmetic.
BORING. NEXT.
Sunday, February 01, 2009
The Bitchin' Bitch-Slap!
The WSJ has thrown down the gauntlet: Why Be a Nation of Mortgage Slaves?
Preventing foreclosures has become a top priority of politicians, economists and regulators. In fact, allowing foreclosures to happen has merit as a free-market solution to the crisis.
If the intent is to help homeowners, then foreclosure is undoubtedly the best solution. Household balance sheets have been destroyed by taking on too much debt via the purchase of inflated assets. With so little savings, a household with negative equity almost implies negative net worth. Walking away from the mortgage immediately repairs the balance sheet.
Credit may be damaged, but homeowners can rebuild it. And by renting something they can afford, instead of the McMansion they cannot, homeowners are most likely to have some money left over each month that they can save toward a down payment on a house they can eventually afford.
If the intent is to help the credit markets, then foreclosure is undoubtedly the best solution. The securitization model has proven to be flawed. Slicing loans horizontally into tranches created asset classes that have conflicting interests in a dissolution strategy of the same underlying asset. The holder of a senior tranche would be agreeable to modification, since his position is secured; the holder of a junior tranche would essentially be wiped out. The lower tranches are worthless but are still legally an encumbrance, hindering any type of sale or work-out effort.
Consider a property that sold for $500,000 at the peak, financed with a $400,000 first lien and an $80,000 second lien, which is now worth $300,000. The second lien is worthless, but the lien will remain as a cloud which complicates any modification effort by the senior lien holder. There is no incentive for the junior lien holder to voluntarily agree to a modification. Foreclosure would be the best and finite action. It wipes the slate clean.
What is the market telling us? Dataquick recently released December sales data for Southern California, once the hotbed of speculative excesses supported by nontraditional financing. Foreclosures now dominate sales. Prices are down. Sales volume is up. New home construction is down. These are beautiful textbook illustrations of supply and demand driving price and market equilibrium.
Finally, loan modification is not only ineffective, it is evil. Coercing borrowers to continue paying a mortgage on a home that is hopelessly overvalued and not informing them of alternatives is predatory lending.
The media should interview those who had been foreclosed upon. Do they feel sorry or relieved? Are they rebuilding their credit, not to mention their lives? Do they miss the pressure of having to make payments they cannot afford on a McMansion that belongs to the lender?
The intent of modification programs to date is to create a generation of mortgage slaves. Fortunately, mortgage slaves can free themselves via foreclosure, and the masses are choosing to do so.
Come out, come out whereever you are!
Preventing foreclosures has become a top priority of politicians, economists and regulators. In fact, allowing foreclosures to happen has merit as a free-market solution to the crisis.
If the intent is to help homeowners, then foreclosure is undoubtedly the best solution. Household balance sheets have been destroyed by taking on too much debt via the purchase of inflated assets. With so little savings, a household with negative equity almost implies negative net worth. Walking away from the mortgage immediately repairs the balance sheet.
Credit may be damaged, but homeowners can rebuild it. And by renting something they can afford, instead of the McMansion they cannot, homeowners are most likely to have some money left over each month that they can save toward a down payment on a house they can eventually afford.
If the intent is to help the credit markets, then foreclosure is undoubtedly the best solution. The securitization model has proven to be flawed. Slicing loans horizontally into tranches created asset classes that have conflicting interests in a dissolution strategy of the same underlying asset. The holder of a senior tranche would be agreeable to modification, since his position is secured; the holder of a junior tranche would essentially be wiped out. The lower tranches are worthless but are still legally an encumbrance, hindering any type of sale or work-out effort.
Consider a property that sold for $500,000 at the peak, financed with a $400,000 first lien and an $80,000 second lien, which is now worth $300,000. The second lien is worthless, but the lien will remain as a cloud which complicates any modification effort by the senior lien holder. There is no incentive for the junior lien holder to voluntarily agree to a modification. Foreclosure would be the best and finite action. It wipes the slate clean.
What is the market telling us? Dataquick recently released December sales data for Southern California, once the hotbed of speculative excesses supported by nontraditional financing. Foreclosures now dominate sales. Prices are down. Sales volume is up. New home construction is down. These are beautiful textbook illustrations of supply and demand driving price and market equilibrium.
Finally, loan modification is not only ineffective, it is evil. Coercing borrowers to continue paying a mortgage on a home that is hopelessly overvalued and not informing them of alternatives is predatory lending.
The media should interview those who had been foreclosed upon. Do they feel sorry or relieved? Are they rebuilding their credit, not to mention their lives? Do they miss the pressure of having to make payments they cannot afford on a McMansion that belongs to the lender?
The intent of modification programs to date is to create a generation of mortgage slaves. Fortunately, mortgage slaves can free themselves via foreclosure, and the masses are choosing to do so.
Come out, come out whereever you are!
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