From the Taipei Times, we have an economist J. Bradley Delong (Berkeley) writing: Three cures for three crises.
The third mode is like the second: A bursting bubble or bad news about future productivity or interest rates drives the fall in asset prices. But the fall is larger. Easing monetary policy won't solve this kind of crisis, because even moderately lower interest rates cannot boost asset prices enough to restore the financial system to solvency.
When this happens, governments have two options. First, they can simply nationalize the broken financial system and have the Treasury sort things out -- and reprivatize the functioning and solvent parts as rapidly as possible. Government is not the best form of organization of a financial system in the long term, and even in the short term it is not very good. It is merely the best organization available.
The second option is simply inflation. Yes, the financial system is insolvent, but it has nominal liabilities and either it or its borrowers have some real assets. Print enough money and boost the price level enough, and the insolvency problem goes away without the risks entailed by putting the government in the investment and commercial banking business.
The inflation may be severe, implying massive unjust redistributions and at least a temporary grave degradation in the price system's capacity to guide resource allocation. But even this is almost surely better than a depression.
Let me state it upfront. These economists are full of shit.
Before we talk about why they are full of shit, let me state the general position. In order to understand macro, you must first understand micro i.e. you need to understand how nuts and bolts work before you can start talking about rocket engines.
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 credit has been flowing into commodities. Oil at more than $100; wheat prices up 46% in two months. Food and fuel prices are already rising steeply.
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!
Thursday, February 28, 2008
Tuesday, February 26, 2008
Instantaneous Contradiction
From Colorado Springs: Upscale homes have upper hand.
Colorado Springs’ upscale housing market remains fit, even as it’s gotten fat.
A slowdown in sales, which mirrors what’s happened nationally, has swelled the inventory of $1 million-and-up homes on the market to a more than four-year supply, according to one estimate.
Fit market? Four year supply?
Is cognitive dissonance dead?
Colorado Springs’ upscale housing market remains fit, even as it’s gotten fat.
A slowdown in sales, which mirrors what’s happened nationally, has swelled the inventory of $1 million-and-up homes on the market to a more than four-year supply, according to one estimate.
Fit market? Four year supply?
Is cognitive dissonance dead?
Monday, February 25, 2008
Till Death Do Us Part
From the Chicago Tribune: This house was a steal.
The new buyers of a rundown graystone on the South Side showed up Jan. 9 to look at the house they won at a foreclosure auction. They took the plywood off the front door and went inside to make sure the utilities had been shut off. Then they called the police.
Sitting upright in the corner of a bedroom off the kitchen was a human skeleton in a red tracksuit. Next to him lay a dead dog. Neighbors told police the corpse was almost certainly Randy Johnson, a middle-age man who lived alone in the North Kenwood house.
The cause of Johnson's death has not yet been determined, but it is just one of the mysteries about 4578 S. Oakenwald Ave. Somehow, Johnson's house was transferred three times to new owners without anyone noticing he was inside. It's a story involving forged deeds, a corrupt title company and a South Side family that has been under investigation for mortgage fraud.
Left holding the bag is Countrywide Home Loans, the nation's largest mortgage lender and a company whose practices are being scrutinized by the Illinois attorney general's office. Countrywide made mortgages of $450,000 on the property. Now it is likely to lose it all because it financed the sale of a home whose rightful owner was in no condition to sell.
Meanwhile the New York Post writes: LET 'EM EAT KOBE STEAK. (yeah! All their front-page articles are all-caps.)
While foreclosed homeowners across America pack cartons of belongings this weekend, a band of junk-mortgage bankers is checking into a lavish Aspen, Colo., lodge to celebrate and dine on $105 steaks - with junk king Countrywide picking up the tab.
The handpicked guests, who'll stay in rooms starting at $750 a night, begin their long weekend with a party at Wolfgang Puck's famed new Spago restaurant at the lodge, where Kobe steak is $105, and Kabocha pumpkin flan is $54.
Death and Taxes? Maybe we should add Fraud to that list!
The new buyers of a rundown graystone on the South Side showed up Jan. 9 to look at the house they won at a foreclosure auction. They took the plywood off the front door and went inside to make sure the utilities had been shut off. Then they called the police.
Sitting upright in the corner of a bedroom off the kitchen was a human skeleton in a red tracksuit. Next to him lay a dead dog. Neighbors told police the corpse was almost certainly Randy Johnson, a middle-age man who lived alone in the North Kenwood house.
The cause of Johnson's death has not yet been determined, but it is just one of the mysteries about 4578 S. Oakenwald Ave. Somehow, Johnson's house was transferred three times to new owners without anyone noticing he was inside. It's a story involving forged deeds, a corrupt title company and a South Side family that has been under investigation for mortgage fraud.
Left holding the bag is Countrywide Home Loans, the nation's largest mortgage lender and a company whose practices are being scrutinized by the Illinois attorney general's office. Countrywide made mortgages of $450,000 on the property. Now it is likely to lose it all because it financed the sale of a home whose rightful owner was in no condition to sell.
Meanwhile the New York Post writes: LET 'EM EAT KOBE STEAK. (yeah! All their front-page articles are all-caps.)
While foreclosed homeowners across America pack cartons of belongings this weekend, a band of junk-mortgage bankers is checking into a lavish Aspen, Colo., lodge to celebrate and dine on $105 steaks - with junk king Countrywide picking up the tab.
The handpicked guests, who'll stay in rooms starting at $750 a night, begin their long weekend with a party at Wolfgang Puck's famed new Spago restaurant at the lodge, where Kobe steak is $105, and Kabocha pumpkin flan is $54.
Death and Taxes? Maybe we should add Fraud to that list!
Desperado
From the Chronicle-Telegram: “I’ll do anything to sell this house”.
The idea seemed simple enough.
Buy a foreclosed home through a sheriff’s sale at a below-market price; fix it up and then resell it making a small profit. It’s called flipping.
Gary Cahill of Elyria knew the plan wouldn’t net him millions, but he and his wife, Janice, were eager to start a new hobby.
I don't know about y'all now but all my hobbies lose me money. They give me a hell of a lot of pleasure but they don't make me any money. Isn't that what a hobby is supposed to do?
“It’s not like this is my only house. I have four mortgage payments to pay plus my business to run,” he said. “I don’t know how long I can keep this up."
Until the Big Bad Bankers take it away, baby, until the Big Bad Bankers take it ALL away.
“It’s not as easy as those television shows would make it seem,” said Cahill.
Television lied? Get out!!!
The idea seemed simple enough.
Buy a foreclosed home through a sheriff’s sale at a below-market price; fix it up and then resell it making a small profit. It’s called flipping.
Gary Cahill of Elyria knew the plan wouldn’t net him millions, but he and his wife, Janice, were eager to start a new hobby.
I don't know about y'all now but all my hobbies lose me money. They give me a hell of a lot of pleasure but they don't make me any money. Isn't that what a hobby is supposed to do?
“It’s not like this is my only house. I have four mortgage payments to pay plus my business to run,” he said. “I don’t know how long I can keep this up."
Until the Big Bad Bankers take it away, baby, until the Big Bad Bankers take it ALL away.
“It’s not as easy as those television shows would make it seem,” said Cahill.
Television lied? Get out!!!
Sunday, February 24, 2008
Appetite for Destruction
From ABC News: Even Celebrities Hurt by Housing Slump.
Even Hollywood's rich and famous can't avoid the housing downturn that's sweeping the nation. In Los Angeles, only 4,430 homes were sold in December, down 48% from the previous year. And prices fell 11% to an average $470,000.
Hollywood's rich and famous, of course, are supposed to be immune from Economic Laws just like they are immune from Gravity and Aging.
Young rocker Avril Lavigne has had to reduce the price on her five-bedroom, six-bath house in Beverly Hills from $6.9 million to $5.8 million.
Former Guns N' Roses guitarist Slash (also known as Saul Hudson) feels he overpaid for his Spanish-style Hollywood Hills home, which has a pool, a separate gym and stunning views. He bought the house in January 2006 for $6.2 million. He sold it last December for $5.7 million. Slash is suing his former real estate agent, claiming the house was neither as big nor as private as the agent claimed. The case is ongoing in California Superior Court.
Where do we go? Where do we go now? Where do we go?
Even Hollywood's rich and famous can't avoid the housing downturn that's sweeping the nation. In Los Angeles, only 4,430 homes were sold in December, down 48% from the previous year. And prices fell 11% to an average $470,000.
Hollywood's rich and famous, of course, are supposed to be immune from Economic Laws just like they are immune from Gravity and Aging.
Young rocker Avril Lavigne has had to reduce the price on her five-bedroom, six-bath house in Beverly Hills from $6.9 million to $5.8 million.
Former Guns N' Roses guitarist Slash (also known as Saul Hudson) feels he overpaid for his Spanish-style Hollywood Hills home, which has a pool, a separate gym and stunning views. He bought the house in January 2006 for $6.2 million. He sold it last December for $5.7 million. Slash is suing his former real estate agent, claiming the house was neither as big nor as private as the agent claimed. The case is ongoing in California Superior Court.
Where do we go? Where do we go now? Where do we go?
Thursday, February 21, 2008
Ain't it Grande?
From Philly.com: A family's struggle against great debt.
Anthony and Lisa Grande's house stands out in their Levittown neighborhood.
"It's the big house," Lisa said when giving directions.
The Grandes borrowed more than $100,000 - much of it on credit cards - to double its size four years ago because they wanted enough room for their five children and did not want to move.
But now, the Grandes are fighting to stay there, having repeatedly fallen behind on their mortgage payments, which climbed from $1,841 to $2,487.
When they refinanced in January 2004 from a $113,906 fixed-rate mortgage into a $220,500 adjustable-rate mortgage to pay off credit-card and other debt, they were told - like millions of others - that they could refinance before the interest rate jumped.
Then Anthony's health fell apart, his plans to start a business foundered, and another refinancing did not come through.
"To be quite honest, we were probably foolish also," Lisa said.
Lisa recalled a carpenter on their roof during construction stamping a broom and saying so many people went bankrupt expanding their homes. "I knew it then. It's like he cursed us."
It is hard for the Grandes to grasp how they got to their current state from where they were in early 2003.
That's when Anthony lost his job as the general manager of a used-car dealership because the business closed. He figured it was a good chance to expand the house because he wanted "a place for the kids to come home to."
To pay for the additions, the Grandes used a $40,000 bank loan and credit cards.
In January 2004, they did what millions of Americans did during the housing boom to cope with ballooning credit-card debt: they refinanced, though they didn't get enough to pay off their credit cards.
The new loan - with no income verification, according to Anthony - increased their monthly payment from $950 to $1,841. The introductory interest rate was 7.75 percent for two years.
Anthony's plans for a partnership did not work, so he decided to open his own lot on Route 13 in Levittown and sank in $65,000.
Legal fees and drug-rehabilitation expenses mounted for Anthony's son from a previous marriage, reaching $84,000, Anthony said.
Despite the refinancing in January 2004, the Grandes still had $118,628 of debt on 24 credit cards, according to a bankruptcy filing in October 2005.
"We probably lost track," Lisa said of the number of credit-card checks they used. "They just kept sending us checks."
Last fall, Anthony was granted disability benefits. His monthly benefit is $1,147, less than he used to earn in a week. "I was always a go-getter," Anthony said. "I just feel so whooped."
The whole affair has shattered Anthony's sense of himself. "I was always hustling. I always worked. Now I can't do anything. I feel like a jerk," he said.
We should first amuse ourselves by the thought of the Grandes doing an "expansion". Not to mention that they are mucho grande themselves. And of course, they live in the "big" house.
Any more "grandes" in there and we'd be looking at an ad for Starbucks.
Now, on with the show.
This is like the jackpot of bad decision making.
Expanding your house and taking on debt while you're out a job? 24 credit cards? Lost track of checks? $100K+ in consumer debt? Son in rehab? Opening a used car dealership? Disability?
And the carpenter put a malocchio!
This is like a bad melodramatic 19th-century Italian opera.
In January 2006, the interest rate jumped to more than 10 percent and the payment to $2,220. Six months later, it was up to $2,487, and with Anthony's health problems keeping him out of work, they fell behind.
Pennsylvania's Homeowners Emergency Mortgage Assistance Program helped them get caught up in August 2006. But after spending too much for Christmas in 2006, they fell behind again early last year.
Yeah, the "Emergency Mortgage Assistance". But it was Christmas. What could they do, les pauvres petites?
Lisa, 45, said it's been incredibly hard dealing with Option One. "You could never talk to the same person, and then whoever you had next tried to get more out of you," Lisa said. She recalled how one service representative told her: "I don't want to hear your hard luck story. I want a check."
Oooh, nasty, babykins. Isn't that just nasty?
Tell you what Lisa, honey! Go have a canoli. After that Oprah will bring your some tea and cookies, and give you a day at the spa. Everything will work out just fine.
Anthony and Lisa Grande's house stands out in their Levittown neighborhood.
"It's the big house," Lisa said when giving directions.
The Grandes borrowed more than $100,000 - much of it on credit cards - to double its size four years ago because they wanted enough room for their five children and did not want to move.
But now, the Grandes are fighting to stay there, having repeatedly fallen behind on their mortgage payments, which climbed from $1,841 to $2,487.
When they refinanced in January 2004 from a $113,906 fixed-rate mortgage into a $220,500 adjustable-rate mortgage to pay off credit-card and other debt, they were told - like millions of others - that they could refinance before the interest rate jumped.
Then Anthony's health fell apart, his plans to start a business foundered, and another refinancing did not come through.
"To be quite honest, we were probably foolish also," Lisa said.
Lisa recalled a carpenter on their roof during construction stamping a broom and saying so many people went bankrupt expanding their homes. "I knew it then. It's like he cursed us."
It is hard for the Grandes to grasp how they got to their current state from where they were in early 2003.
That's when Anthony lost his job as the general manager of a used-car dealership because the business closed. He figured it was a good chance to expand the house because he wanted "a place for the kids to come home to."
To pay for the additions, the Grandes used a $40,000 bank loan and credit cards.
In January 2004, they did what millions of Americans did during the housing boom to cope with ballooning credit-card debt: they refinanced, though they didn't get enough to pay off their credit cards.
The new loan - with no income verification, according to Anthony - increased their monthly payment from $950 to $1,841. The introductory interest rate was 7.75 percent for two years.
Anthony's plans for a partnership did not work, so he decided to open his own lot on Route 13 in Levittown and sank in $65,000.
Legal fees and drug-rehabilitation expenses mounted for Anthony's son from a previous marriage, reaching $84,000, Anthony said.
Despite the refinancing in January 2004, the Grandes still had $118,628 of debt on 24 credit cards, according to a bankruptcy filing in October 2005.
"We probably lost track," Lisa said of the number of credit-card checks they used. "They just kept sending us checks."
Last fall, Anthony was granted disability benefits. His monthly benefit is $1,147, less than he used to earn in a week. "I was always a go-getter," Anthony said. "I just feel so whooped."
The whole affair has shattered Anthony's sense of himself. "I was always hustling. I always worked. Now I can't do anything. I feel like a jerk," he said.
We should first amuse ourselves by the thought of the Grandes doing an "expansion". Not to mention that they are mucho grande themselves. And of course, they live in the "big" house.
Any more "grandes" in there and we'd be looking at an ad for Starbucks.
Now, on with the show.
This is like the jackpot of bad decision making.
Expanding your house and taking on debt while you're out a job? 24 credit cards? Lost track of checks? $100K+ in consumer debt? Son in rehab? Opening a used car dealership? Disability?
And the carpenter put a malocchio!
This is like a bad melodramatic 19th-century Italian opera.
In January 2006, the interest rate jumped to more than 10 percent and the payment to $2,220. Six months later, it was up to $2,487, and with Anthony's health problems keeping him out of work, they fell behind.
Pennsylvania's Homeowners Emergency Mortgage Assistance Program helped them get caught up in August 2006. But after spending too much for Christmas in 2006, they fell behind again early last year.
Yeah, the "Emergency Mortgage Assistance". But it was Christmas. What could they do, les pauvres petites?
Lisa, 45, said it's been incredibly hard dealing with Option One. "You could never talk to the same person, and then whoever you had next tried to get more out of you," Lisa said. She recalled how one service representative told her: "I don't want to hear your hard luck story. I want a check."
Oooh, nasty, babykins. Isn't that just nasty?
Tell you what Lisa, honey! Go have a canoli. After that Oprah will bring your some tea and cookies, and give you a day at the spa. Everything will work out just fine.
Wednesday, February 20, 2008
HELOC Hell
From Reuters: Sharper Image files for Chapter 11 bankruptcy.
Retailer Sharper Image Corp has filed for Chapter 11 bankruptcy protection, citing declining sales, three straight years of losses and litigation involving its Ionic Breeze air purifiers.
The San Francisco-based company filed for protection late Tuesday in U.S. bankruptcy court in Wilmington, Delaware. Sharper Image said it had $251.5 million in assets and $199 million in debt as of January 31, according to the filing. Cash on hand totaled about $700,000.
Its shares plunged 92 cents, or 64 percent, to 52 cents on Nasdaq.
"Sharper Image is in a severe liquidity crisis," Chief Financial Officer Rebecca Roedell said in a separate filing.
She said the company has suffered from increased competition, narrowing margins, litigation, lower consumer and market confidence, tighter credit from suppliers, and poorly performing stores.
No more HELOC. No more Sharper Image.
Consumer crap at larcenious prices.
Can Brookstone be far behind?
Retailer Sharper Image Corp has filed for Chapter 11 bankruptcy protection, citing declining sales, three straight years of losses and litigation involving its Ionic Breeze air purifiers.
The San Francisco-based company filed for protection late Tuesday in U.S. bankruptcy court in Wilmington, Delaware. Sharper Image said it had $251.5 million in assets and $199 million in debt as of January 31, according to the filing. Cash on hand totaled about $700,000.
Its shares plunged 92 cents, or 64 percent, to 52 cents on Nasdaq.
"Sharper Image is in a severe liquidity crisis," Chief Financial Officer Rebecca Roedell said in a separate filing.
She said the company has suffered from increased competition, narrowing margins, litigation, lower consumer and market confidence, tighter credit from suppliers, and poorly performing stores.
No more HELOC. No more Sharper Image.
Consumer crap at larcenious prices.
Can Brookstone be far behind?
Tuesday, February 19, 2008
WWF
From Reuters: US mortgage rates post record daily move.
The average rate on a 30-year U.S. mortgage with no upfront points jumped 3/8 percentage point on Tuesday to 6-5/8 percent, in the biggest one-day move in the ten years that BestInfo Inc. has tracked the rates.
A 75 basis point move in a bond market is the equivalent of an atomic bomb being casually tossed into the fray.
Body Slam!
The average rate on a 30-year U.S. mortgage with no upfront points jumped 3/8 percentage point on Tuesday to 6-5/8 percent, in the biggest one-day move in the ten years that BestInfo Inc. has tracked the rates.
A 75 basis point move in a bond market is the equivalent of an atomic bomb being casually tossed into the fray.
Body Slam!
First Man Down, How Many to Go?
From NBC in San Francisco: Vallejo On Brink Of Bankruptcy.
The city of Vallejo is on the brink of becoming the first California city ever to declare bankruptcy, City Council members said Tuesday.
Vallejo may run out of cash as early as March, council member Stephanie Gomes said.
"Not only that, but now we have 20 police and fire employees retiring because they are afraid of not getting their payouts," Gomes said. "That means we have another few million dollars in payouts that we had not expected. So the situation is quite dire."
Gomes said the situation has been building for more than a decade.
"This has been happening for quite a while. For 15 years the city council has been putting Band-Aids on the problem. (It has been) extending contracts and deferring payments for public safety to the next years as a way of balancing the current budget."
This is the norm not the exception. There is no way all those pensions are going to get paid. The pensioners are pretty much screwed.
The city of Vallejo is on the brink of becoming the first California city ever to declare bankruptcy, City Council members said Tuesday.
Vallejo may run out of cash as early as March, council member Stephanie Gomes said.
"Not only that, but now we have 20 police and fire employees retiring because they are afraid of not getting their payouts," Gomes said. "That means we have another few million dollars in payouts that we had not expected. So the situation is quite dire."
Gomes said the situation has been building for more than a decade.
"This has been happening for quite a while. For 15 years the city council has been putting Band-Aids on the problem. (It has been) extending contracts and deferring payments for public safety to the next years as a way of balancing the current budget."
This is the norm not the exception. There is no way all those pensions are going to get paid. The pensioners are pretty much screwed.
Monday, February 18, 2008
How many Ph.D.'s does it take?
From the Modesto Bee: Housing sales continue steep fall.
One, the drop in prices and interest rates means a buyer could more easily afford a median priced house, based on a 30-year fixed mortgage with a 10 percent down payment, Lewis said.
"Local people can now qualify to buy that same home," he said.
One does not, in general, "qualify" for a house. All you need to do is pay the owner money.
That's how capitalism works. You don't have to "qualify" for anything. Just bring money and preferably lots of it. You'll "qualify" for everything with the right amount of dough. They'll even take dollars!
Presumably one may "qualify" or "not qualify" for a mortgage but a house is not a degree. Only in the Land of the McCrapBox populated with McMillionaires would a house be a "qualification".
One, the drop in prices and interest rates means a buyer could more easily afford a median priced house, based on a 30-year fixed mortgage with a 10 percent down payment, Lewis said.
"Local people can now qualify to buy that same home," he said.
One does not, in general, "qualify" for a house. All you need to do is pay the owner money.
That's how capitalism works. You don't have to "qualify" for anything. Just bring money and preferably lots of it. You'll "qualify" for everything with the right amount of dough. They'll even take dollars!
Presumably one may "qualify" or "not qualify" for a mortgage but a house is not a degree. Only in the Land of the McCrapBox populated with McMillionaires would a house be a "qualification".
Homeless not Helpless
From USA Today: Some homeless turn to foreclosed homes.
The nation's foreclosure crisis has led to a painful irony for homeless people: On any given night they are outnumbered in some cities by vacant houses. Some street people are taking advantage of the opportunity by becoming squatters.
Foreclosed homes often have an advantage over boarded-up and dilapidated houses that have been abandoned because of rundown conditions: Sometimes the heat, lights and water are still working.
"That's what you call convenient," said James Bertan, 41, an ex-convict and self-described "bando," or someone who lives in abandoned houses.
There you go; that takes care of the homeless "problem".
They're probably eating and living better than the "home moaners" who are currently forced to eat ramen. Hey! but at least they have stainless steel appliances and granite countertops!!!
The nation's foreclosure crisis has led to a painful irony for homeless people: On any given night they are outnumbered in some cities by vacant houses. Some street people are taking advantage of the opportunity by becoming squatters.
Foreclosed homes often have an advantage over boarded-up and dilapidated houses that have been abandoned because of rundown conditions: Sometimes the heat, lights and water are still working.
"That's what you call convenient," said James Bertan, 41, an ex-convict and self-described "bando," or someone who lives in abandoned houses.
There you go; that takes care of the homeless "problem".
They're probably eating and living better than the "home moaners" who are currently forced to eat ramen. Hey! but at least they have stainless steel appliances and granite countertops!!!
Sunday, February 17, 2008
Friday, February 15, 2008
Downbeat Downpayment
From the San Jose Mercury News: From bad to 'worst' for Santa Clara County home sales.
For the first time since the housing downturn began in late 2005, housing prices in Santa Clara County dropped last month compared with a year earlier. And, in the aftermath of the credit crunch that sent rates for large mortgages soaring and Silicon Valley home sales sliding, fewer homes sold in January than during any month in 20 years.
Despite excellent credit and no debts other than the home loan she planned to get, the biggest challenge she faced was actually securing that jumbo mortgage.
"Basically every mortgage company says I'm their dream client," said Abramowitz, a management consultant who saved for years to amass a 20 percent down payment for a home in the $1 million range. But right after she agreed to buy the five-bedroom house late last month, the stock market took a steep dive, and lenders began saying her down payment wasn't high enough. "Suddenly everyone was going, '45 percent down.' "
45%!!!
Vampire. Garlic. Stake. Heart.
For the first time since the housing downturn began in late 2005, housing prices in Santa Clara County dropped last month compared with a year earlier. And, in the aftermath of the credit crunch that sent rates for large mortgages soaring and Silicon Valley home sales sliding, fewer homes sold in January than during any month in 20 years.
Despite excellent credit and no debts other than the home loan she planned to get, the biggest challenge she faced was actually securing that jumbo mortgage.
"Basically every mortgage company says I'm their dream client," said Abramowitz, a management consultant who saved for years to amass a 20 percent down payment for a home in the $1 million range. But right after she agreed to buy the five-bedroom house late last month, the stock market took a steep dive, and lenders began saying her down payment wasn't high enough. "Suddenly everyone was going, '45 percent down.' "
45%!!!
Vampire. Garlic. Stake. Heart.
The Audacity of Hope
The Hartford Courant reports: Mortgage Relief Plan Leaves Lots Of Pain.
A new, highly touted state program designed to aid first-time homeowners facing exploding mortgage costs has such strict standards that the vast majority of those seeking help don't qualify — a stark reality for financially troubled Connecticut residents looking for a mortgage bailout.
More than 1,000 homeowners have flooded the Connecticut Housing Finance Authority with calls as they sought to qualify for the new loans, which were announced in November and funded by $50 million in state bond money.
The loans are intended to help people refinance adjustable-rate mortgages at fixed rates.
But so far, eight weeks into the program, only 25 loans have been approved. At one of the three mortgage lenders participating, more than 300 inquiries resulted in just three loan approvals.
MISSION ACCOMPLISHED!!!
A new, highly touted state program designed to aid first-time homeowners facing exploding mortgage costs has such strict standards that the vast majority of those seeking help don't qualify — a stark reality for financially troubled Connecticut residents looking for a mortgage bailout.
More than 1,000 homeowners have flooded the Connecticut Housing Finance Authority with calls as they sought to qualify for the new loans, which were announced in November and funded by $50 million in state bond money.
The loans are intended to help people refinance adjustable-rate mortgages at fixed rates.
But so far, eight weeks into the program, only 25 loans have been approved. At one of the three mortgage lenders participating, more than 300 inquiries resulted in just three loan approvals.
MISSION ACCOMPLISHED!!!
Thursday, February 14, 2008
La Muerta
We regret to inform the readers of this blog that Goldilocks was shot this morning. The footage was captured on national television. She was declared dead around 10:15am.
Various members of Congress have called for an investigation into the nature of her death. No further details are known.
Various members of Congress have called for an investigation into the nature of her death. No further details are known.
Nose Candy
From the Houston Chronicle: Growers' profits wilt.
Valentine's Day is the one day in the middle of the winter when everyone wants roses, and the 150 laborers on this 35-acre rose plantation are working overtime to sell American customers fresh, fragrant flowers.
But for all the bustle and fuss of the peak season, growers in Colombia, the world's second-largest exporter of cut flowers, say they are being squeezed.
Prices for flowers remain flat. The falling value of the U.S. dollar has turned profits into losses. Several farms have closed, laying off thousands of employees. And a trade deal that would give Colombian flowers permanent duty-free entry into the United States may be rejected by the U.S. Congress.
"The business has always faced difficulties, but never more than now," said Augusto Solano, president of the Colombian Association of Flower Exporters, a trade group in Bogotá.
Part of the problem is heavy reliance on the United States, where nearly six of every 10 flowers sold are imported from Colombia.
Amid an economic slowdown, the U.S. dollar has lost more than one-third of its value against the Colombian peso.
Guess it's time to go back to your original cash crop, Colombia!
Valentine's Day is the one day in the middle of the winter when everyone wants roses, and the 150 laborers on this 35-acre rose plantation are working overtime to sell American customers fresh, fragrant flowers.
But for all the bustle and fuss of the peak season, growers in Colombia, the world's second-largest exporter of cut flowers, say they are being squeezed.
Prices for flowers remain flat. The falling value of the U.S. dollar has turned profits into losses. Several farms have closed, laying off thousands of employees. And a trade deal that would give Colombian flowers permanent duty-free entry into the United States may be rejected by the U.S. Congress.
"The business has always faced difficulties, but never more than now," said Augusto Solano, president of the Colombian Association of Flower Exporters, a trade group in Bogotá.
Part of the problem is heavy reliance on the United States, where nearly six of every 10 flowers sold are imported from Colombia.
Amid an economic slowdown, the U.S. dollar has lost more than one-third of its value against the Colombian peso.
Guess it's time to go back to your original cash crop, Colombia!
Credit Enhancement
UBS is offering super-duper bonds.
"Many investors are reluctant to buy MBS backed by Alt-A collateral including super senior paper, as they fear credit losses," UBS analysts wrote.
In a hypothetical super duper triple-A deal, the bonds have twice the credit enhancement of the super senior triple-A bond and four times the credit support of the straight triple-A bond. After running the structure through hypothetical scenarios, UBS determined that the super duper senior Alt-A hybrids offer great value relative to prime jumbo super senior hybrids and agency hybrids, and virtually eliminate the credit component.
Super duper senior Alt-A hybrids?
Mamma mia!
How about the Itsy-Bitsy-Teenie-Weenie-Yellow-Polka-Dot-Bikini-Shrinking-Mortgage-Collateral bonds? Is there any market for those?
And if you actually want to eliminate the credit component, as opposed to "virtually" eliminate the credit component, couldn't you just stick with US T-bonds?
"Many investors are reluctant to buy MBS backed by Alt-A collateral including super senior paper, as they fear credit losses," UBS analysts wrote.
In a hypothetical super duper triple-A deal, the bonds have twice the credit enhancement of the super senior triple-A bond and four times the credit support of the straight triple-A bond. After running the structure through hypothetical scenarios, UBS determined that the super duper senior Alt-A hybrids offer great value relative to prime jumbo super senior hybrids and agency hybrids, and virtually eliminate the credit component.
Super duper senior Alt-A hybrids?
Mamma mia!
How about the Itsy-Bitsy-Teenie-Weenie-Yellow-Polka-Dot-Bikini-Shrinking-Mortgage-Collateral bonds? Is there any market for those?
And if you actually want to eliminate the credit component, as opposed to "virtually" eliminate the credit component, couldn't you just stick with US T-bonds?
Stake Through Vampire's Heart. News at 11.
From South Florida: BankUnited blacklists 191 condo projects.
Interested buyers looking for mortgages to buy units in Miami's Opera Tower, Everglades on the Bay or Four Ambassadors shouldn't bother approaching BankUnited. The Miami-based bank has included them on a list of 191 condo projects it won't write loans for.
The Business Journal obtained a list of "non-permissible" projects used internally at BankUnited and updated as of Jan. 14. Most of the forbidden properties were in Miami and were added at the last update. It wasn't clear who at the bank wrote the list, but the author stated a reason for almost every project declared off-limits.
Declining market value was the biggest culprit, followed by high investor concentration -- as much as 70 percent in one case. BankUnited also cited numerous foreclosures, delinquent homeowners association dues, structural-based litigation and the bank's existing exposure in the buildings.
Interested buyers looking for mortgages to buy units in Miami's Opera Tower, Everglades on the Bay or Four Ambassadors shouldn't bother approaching BankUnited. The Miami-based bank has included them on a list of 191 condo projects it won't write loans for.
The Business Journal obtained a list of "non-permissible" projects used internally at BankUnited and updated as of Jan. 14. Most of the forbidden properties were in Miami and were added at the last update. It wasn't clear who at the bank wrote the list, but the author stated a reason for almost every project declared off-limits.
Declining market value was the biggest culprit, followed by high investor concentration -- as much as 70 percent in one case. BankUnited also cited numerous foreclosures, delinquent homeowners association dues, structural-based litigation and the bank's existing exposure in the buildings.
Wednesday, February 13, 2008
Profound Ignorance
From Reuters: Depression risk might force U.S. to buy assets.
Fear that a hobbled banking sector may set off another Great Depression could force the U.S. government and Federal Reserve to take the unprecedented step of buying a broad range of assets, including stocks, according to one of the most bearish market analysts.
That extreme scenario, which would aim to stave off deflation and stabilize the economy, is evolving as the base case for Bernard Connolly, global strategist at Banque AIG in London.
"Avoiding a depression is, unfortunately, going to have to involve either a large, quasi-permanent increase in the budget deficit -- preferably tax cuts -- or restoring overvaluation of equity prices," Connolly said on Monday.
"If conventional monetary policy is not enough to produce that result, the government may have to buy equities, financed by the Fed," Connolly said.
Let's say the obvious thing first. Mr. Connolly is a complete and utter fool.
That's right! I'm claiming that the global strategist of Banque AIG who worked for the EU quite literally doesn't understand elementary finance.
Let us avoid all the legal nitpicking about having to get Congressional permission and all that jazz, and let's stick to just the economics.
The short reason for why something like this can't work is that there isn't enough money to do so. You are talking about assets that are a significant fraction of World GDP.
So just "print the money" you say?
That would send the dollar into a tailspin; furious capital flight à l'Argentina; and long bond rates soaring to unheard heights.
This is turn would cause more foreclosures, cause a complete meltdown of the global financial system, and morph into a Financial Mad Max scenario.
You won't need land or gold then; you will need guns. And ammo. Lots of ammo.
Is this "possible"? Certainly.
In the same way that you might read in tomorrow's news about a homicidal killer on a unicycle who decapitated exactly 17 children while nibbling on a decomposing rabbit.
It's definitely "possible".
However if you think it is "likely", I suggest you send your resumé to Banque AIG pronto!
Fear that a hobbled banking sector may set off another Great Depression could force the U.S. government and Federal Reserve to take the unprecedented step of buying a broad range of assets, including stocks, according to one of the most bearish market analysts.
That extreme scenario, which would aim to stave off deflation and stabilize the economy, is evolving as the base case for Bernard Connolly, global strategist at Banque AIG in London.
"Avoiding a depression is, unfortunately, going to have to involve either a large, quasi-permanent increase in the budget deficit -- preferably tax cuts -- or restoring overvaluation of equity prices," Connolly said on Monday.
"If conventional monetary policy is not enough to produce that result, the government may have to buy equities, financed by the Fed," Connolly said.
Let's say the obvious thing first. Mr. Connolly is a complete and utter fool.
That's right! I'm claiming that the global strategist of Banque AIG who worked for the EU quite literally doesn't understand elementary finance.
Let us avoid all the legal nitpicking about having to get Congressional permission and all that jazz, and let's stick to just the economics.
The short reason for why something like this can't work is that there isn't enough money to do so. You are talking about assets that are a significant fraction of World GDP.
So just "print the money" you say?
That would send the dollar into a tailspin; furious capital flight à l'Argentina; and long bond rates soaring to unheard heights.
This is turn would cause more foreclosures, cause a complete meltdown of the global financial system, and morph into a Financial Mad Max scenario.
You won't need land or gold then; you will need guns. And ammo. Lots of ammo.
Is this "possible"? Certainly.
In the same way that you might read in tomorrow's news about a homicidal killer on a unicycle who decapitated exactly 17 children while nibbling on a decomposing rabbit.
It's definitely "possible".
However if you think it is "likely", I suggest you send your resumé to Banque AIG pronto!
Tuesday, February 12, 2008
"The Worst is Just Beginning"
The blog's first YouTube video features the Spinning Jenny who having been bitch-slapped by the Invisible Hand is spinning downwards again.
Guess it's not "all contained", huh? And what happened to the "strongest economy in my lifetime"? Morphed into the worst in a few months. That's not very strong, innit?!?
On a side note, worst poker player EVER. The buzzwords, the shifty eyes, the stutter. You couldn't do a worse bluffjob if you tried.
Asswipery
From All the Asswipe That's Fit to Print: Mortgage Crisis Spreads Past Subprime Loans..
The credit crisis is no longer just a subprime mortgage problem.
Word, son, word.
Home prices in the North Las Vegas neighborhood of Brenda Harris, a technology analyst at a casino company, have fallen 20 percent to 30 percent. The builder who sold her a new three-bedroom home on Pink Flamingos Place for about $392,000 in 2006 is now listing similar properties for $314,000. A larger house a block down from Ms. Harris was recently listed online for $310,000.
But Ms. Harris does not want to leave her home. She estimates that she has spent close to $40,000 on her property, about half for a down payment and much of the rest on a deck and landscaping.
“I’m not behind in my payments, but I’m trying to prevent getting behind,” Ms. Harris said. “I don’t want to ruin my credit.”
In addition to the declining value of her home, Ms. Harris, 53, will soon be hit with a sharply higher house payment. She has an option adjustable-rate mortgage, a loan that allows borrowers to pay less than the interest and principal due every month. The unpaid interest gets added to the principal balance. She is making the minimum monthly payments due on her loan, about $2,400.
But she knows she will not be able to pay the $3,400 needed to cover her interest and principal, which she will be required to pay once her loan balance reaches 115 percent of her starting balance. And under the terms of her loan, which was made by Countrywide Financial, she would have to pay a prepayment penalty of about $40,000 if she chose to refinance or sell her home before May 2009.
She said that she now wishes she had taken a traditional fixed-rate loan when she bought the home.
Let's see:
She can't afford a traditional loan that covers income and principal.
However, she wishes she had taken a traditional loan.
Even accounting for the difference in interest rates (miniscule), she can't afford it. Hence, it is not possible.
Somewhere out there the world's smallest violin is playing a sad melody for this woman's "dreams"!
The credit crisis is no longer just a subprime mortgage problem.
Word, son, word.
Home prices in the North Las Vegas neighborhood of Brenda Harris, a technology analyst at a casino company, have fallen 20 percent to 30 percent. The builder who sold her a new three-bedroom home on Pink Flamingos Place for about $392,000 in 2006 is now listing similar properties for $314,000. A larger house a block down from Ms. Harris was recently listed online for $310,000.
But Ms. Harris does not want to leave her home. She estimates that she has spent close to $40,000 on her property, about half for a down payment and much of the rest on a deck and landscaping.
“I’m not behind in my payments, but I’m trying to prevent getting behind,” Ms. Harris said. “I don’t want to ruin my credit.”
In addition to the declining value of her home, Ms. Harris, 53, will soon be hit with a sharply higher house payment. She has an option adjustable-rate mortgage, a loan that allows borrowers to pay less than the interest and principal due every month. The unpaid interest gets added to the principal balance. She is making the minimum monthly payments due on her loan, about $2,400.
But she knows she will not be able to pay the $3,400 needed to cover her interest and principal, which she will be required to pay once her loan balance reaches 115 percent of her starting balance. And under the terms of her loan, which was made by Countrywide Financial, she would have to pay a prepayment penalty of about $40,000 if she chose to refinance or sell her home before May 2009.
She said that she now wishes she had taken a traditional fixed-rate loan when she bought the home.
Let's see:
She can't afford a traditional loan that covers income and principal.
However, she wishes she had taken a traditional loan.
Even accounting for the difference in interest rates (miniscule), she can't afford it. Hence, it is not possible.
Somewhere out there the world's smallest violin is playing a sad melody for this woman's "dreams"!
Saturday, February 09, 2008
FIRE Economy to the Rescue
From Wate: Suspicious fire destroys Knox County home.
An abandoned house went up in flames in the early hours of Friday morning.
Firefighters say the home had not been occupied for several years and that electrical service had been disconnected.
From Daily News: Suspicious fire burns Westwood home.
A fire that roared through a Weatherbee Drive home yesterday afternoon, requiring the efforts of crews from six area towns to extinguish, is being labeled suspicious. The 28 year-old son of the homeowners was arrested for arson.
From Toledo: Suspicious fire damages North Toledo home
A suspicious fire damaged a two-story wood frame house in North Toledo early Wednesday, authorities said.
Firefighters were called to 447 West Manhattan Blvd. about 1:50 a.m. and found heavy fire in a dining room, authorities said. No one was home at the time of the fire.
Firefighters said there was a strong odor of gasoline inside the home prompting them to call Toledo fire investigator Mike Smith to the scene.
From Jackson, TN: Fire destroys vacant building in Trenton.
A fire in Trenton on Friday night destroyed a vacant building that had once housed a car dealership and a bus station.
From Yakima, WA: Suspicious Fire Devours Wapato House.
Fire devoured a house in Wapato, and firefighters think it’s arson. It happened late Monday night on Acacia Lane.
An abandoned garage and mobile home caught fire and lit up in flames.
Firefighters say the fire is suspicious in nature. They say it is the second or third time they have responded to that area in the past year, to put out other fires that were ruled arson.
From Lubbock, TX: Fifth blaze since late December ruled arson by investigators.
A Central Lubbock neighborhood was marred by arson Wednesday night for the fifth time in a little more than a month.
And fire investigators don't have much to go on, despite a $1,000 reward being offered for information leading to an arrest.
Looks like the FIRE economy is going gangbusters!
An abandoned house went up in flames in the early hours of Friday morning.
Firefighters say the home had not been occupied for several years and that electrical service had been disconnected.
From Daily News: Suspicious fire burns Westwood home.
A fire that roared through a Weatherbee Drive home yesterday afternoon, requiring the efforts of crews from six area towns to extinguish, is being labeled suspicious. The 28 year-old son of the homeowners was arrested for arson.
From Toledo: Suspicious fire damages North Toledo home
A suspicious fire damaged a two-story wood frame house in North Toledo early Wednesday, authorities said.
Firefighters were called to 447 West Manhattan Blvd. about 1:50 a.m. and found heavy fire in a dining room, authorities said. No one was home at the time of the fire.
Firefighters said there was a strong odor of gasoline inside the home prompting them to call Toledo fire investigator Mike Smith to the scene.
From Jackson, TN: Fire destroys vacant building in Trenton.
A fire in Trenton on Friday night destroyed a vacant building that had once housed a car dealership and a bus station.
From Yakima, WA: Suspicious Fire Devours Wapato House.
Fire devoured a house in Wapato, and firefighters think it’s arson. It happened late Monday night on Acacia Lane.
An abandoned garage and mobile home caught fire and lit up in flames.
Firefighters say the fire is suspicious in nature. They say it is the second or third time they have responded to that area in the past year, to put out other fires that were ruled arson.
From Lubbock, TX: Fifth blaze since late December ruled arson by investigators.
A Central Lubbock neighborhood was marred by arson Wednesday night for the fifth time in a little more than a month.
And fire investigators don't have much to go on, despite a $1,000 reward being offered for information leading to an arrest.
Looks like the FIRE economy is going gangbusters!
Bait and Switch
From Yahoo!: A Credit Card You Want to Toss.
Credit-card issuers have drawn fire for jacking up interest rates on cardholders who aren't behind on payments, but whose credit score has fallen for another reason. Now, some consumers complain, Bank of America is hiking rates based on no apparent deterioration in their credit scores at all.
The major credit-card lender in mid-January sent letters notifying some responsible cardholders that it would more than double their rates to as high as 28%, without giving an explanation for the increase, according to copies of five letters obtained by BusinessWeek. Fine print at the end of the letter -- headed "Important Amendment to Your Credit Card Agreement" -- advised calling an 800-number for the reason, but consumers who called say they were unable to get a clear answer. "No one could give me an explanation," says Eric Fresch, a Huron (Ohio) engineer who is on time with his Bank of America card payments and knows of no decline in the status of his overall credit.
Analysts also say they are surprised by the magnitude of the rate raises Bank of America is imposing on affected cardholders. Michael Jordan, 25, a software developer who lives in Higganum, Conn., says he received a letter from Bank of America in late January advising him that his card rate would rise from 9.99% to 24.99%. The software developer, who earns $80,000 per year, says he was "shocked" because his payments had been on time and his credit score hadn't changed in the last year. In fact, Jordan says, he has only $4,500 in overall outstanding credit-card debt on two cards and that, on the Bank of America card in question, he had paid down his balance to $3,000 from $3,700 last August.
Firstly, the rates are going up because that's what happens in a "credit crunch". However, individuals do not care about the "larger macroeconomic picture". They care about what happens to them.
From the "micro" perspective, they are morons.
Why would you be at the mercy of an industry where in sharp contrast with all the principles of contract law, all rules can be changed retroactively and unilaterally?
However, that's what credit cards do, and legally!
However, people take on debt voluntarily, and the credit cards change the rules on them once they are in no position to negotiate. What's not to understand?
For this, one must call the sheeple for what they are -- imbecilic retarded morons.
Credit-card issuers have drawn fire for jacking up interest rates on cardholders who aren't behind on payments, but whose credit score has fallen for another reason. Now, some consumers complain, Bank of America is hiking rates based on no apparent deterioration in their credit scores at all.
The major credit-card lender in mid-January sent letters notifying some responsible cardholders that it would more than double their rates to as high as 28%, without giving an explanation for the increase, according to copies of five letters obtained by BusinessWeek. Fine print at the end of the letter -- headed "Important Amendment to Your Credit Card Agreement" -- advised calling an 800-number for the reason, but consumers who called say they were unable to get a clear answer. "No one could give me an explanation," says Eric Fresch, a Huron (Ohio) engineer who is on time with his Bank of America card payments and knows of no decline in the status of his overall credit.
Analysts also say they are surprised by the magnitude of the rate raises Bank of America is imposing on affected cardholders. Michael Jordan, 25, a software developer who lives in Higganum, Conn., says he received a letter from Bank of America in late January advising him that his card rate would rise from 9.99% to 24.99%. The software developer, who earns $80,000 per year, says he was "shocked" because his payments had been on time and his credit score hadn't changed in the last year. In fact, Jordan says, he has only $4,500 in overall outstanding credit-card debt on two cards and that, on the Bank of America card in question, he had paid down his balance to $3,000 from $3,700 last August.
Firstly, the rates are going up because that's what happens in a "credit crunch". However, individuals do not care about the "larger macroeconomic picture". They care about what happens to them.
From the "micro" perspective, they are morons.
Why would you be at the mercy of an industry where in sharp contrast with all the principles of contract law, all rules can be changed retroactively and unilaterally?
However, that's what credit cards do, and legally!
However, people take on debt voluntarily, and the credit cards change the rules on them once they are in no position to negotiate. What's not to understand?
For this, one must call the sheeple for what they are -- imbecilic retarded morons.
Friday, February 08, 2008
The Economics of Pop Culture
From CNN Finance: The economics of Britney Spears.
In the days after the Britney Spears soap opera rode a police-escorted gurney to its apex, celeb-mag sales spiked, traffic jammed gossip Web sites, tabloid TV ratings rose and paparazzi photo prices surged.
For a growing number of people and businesses, Britney's saga is about money: every time she sinks to new lows, cash flows. And these days, no one is above the fray.
Any time a magazine can boost newsstand sales past its average, the revenue is booked nearly entirely as profit, Harrington said: "People prints 2.5 million copies and sells about an average of 1.5 million. If they have an issue that sells 2 million, the extra half million goes to the bottom line."
Yep, any time you boost the average, it flows to the bottom line. Most importantly, it flows to the CEO's bonus.
Spears is just one of many stars driving the growing multibillion dollar celebrity news industry. But the Spears story in particular, with a new twist nearly every week, has become a very profitable sub-sector unto itself.
"Britney is the most bankable celebrity out there right now, and she has been for the past year," said Francois Navarre, founder of the paparazzi agency X17.
X17, which owns the infamous picture of a bald Spears taken in February, has a team of photographers tracking her at all times. "For us, she's the star No. 1," Navarre said.
On the flipside, the Spears story isn't making money for everyone. There are costs involved, too. For instance, the increased scrutiny puts a burden on Los Angeles civil service units, which have to keep Spears safe and public spaces uncluttered.
The L.A. Police Department wouldn't estimate the extra costs Spears generates. Her ambulance incident last week was handled by officers already on duty. The fire department said it was considering charging Spears for the ambulance ride, but did not disclose how much.
Oldest rule of capitalism: privatize the profits; socialize the losses.
Now that she's back in focus for offstage drama, her music is an afterthought. And at some point, most industry experts agree, the public will grow tired of the Spears story.
That doesn't mean the economy that sprouted around her will wilt.
"If it's not Britney, then it'll be Lindsay or Paris or some other person we haven't heard of yet," Smith said.
BINGO!!!
Nobody gives a crap about her, or Princess Diana, or Anna-Nicole Smith, or Lindsay Lohan, or Paris Hilton, or Amy Winehouse. They are only as good as they generate controversy and sales. If not, new candidates will arise. If none arise, new candidates will be created.
Does anyone in their right mind genuinely believe anything Ann Coulter says? She will say anything to generate "controversy" because the controversy fuels sales. That's all that matters.
I'm quite surprised to see this so nakedly in print. I guess the sheeple don't read CNNfn.
They are basically disposable which is the job of pop culture. It takes an extraordinary amount of foolishness not to see the flow of money.
In the days after the Britney Spears soap opera rode a police-escorted gurney to its apex, celeb-mag sales spiked, traffic jammed gossip Web sites, tabloid TV ratings rose and paparazzi photo prices surged.
For a growing number of people and businesses, Britney's saga is about money: every time she sinks to new lows, cash flows. And these days, no one is above the fray.
Any time a magazine can boost newsstand sales past its average, the revenue is booked nearly entirely as profit, Harrington said: "People prints 2.5 million copies and sells about an average of 1.5 million. If they have an issue that sells 2 million, the extra half million goes to the bottom line."
Yep, any time you boost the average, it flows to the bottom line. Most importantly, it flows to the CEO's bonus.
Spears is just one of many stars driving the growing multibillion dollar celebrity news industry. But the Spears story in particular, with a new twist nearly every week, has become a very profitable sub-sector unto itself.
"Britney is the most bankable celebrity out there right now, and she has been for the past year," said Francois Navarre, founder of the paparazzi agency X17.
X17, which owns the infamous picture of a bald Spears taken in February, has a team of photographers tracking her at all times. "For us, she's the star No. 1," Navarre said.
On the flipside, the Spears story isn't making money for everyone. There are costs involved, too. For instance, the increased scrutiny puts a burden on Los Angeles civil service units, which have to keep Spears safe and public spaces uncluttered.
The L.A. Police Department wouldn't estimate the extra costs Spears generates. Her ambulance incident last week was handled by officers already on duty. The fire department said it was considering charging Spears for the ambulance ride, but did not disclose how much.
Oldest rule of capitalism: privatize the profits; socialize the losses.
Now that she's back in focus for offstage drama, her music is an afterthought. And at some point, most industry experts agree, the public will grow tired of the Spears story.
That doesn't mean the economy that sprouted around her will wilt.
"If it's not Britney, then it'll be Lindsay or Paris or some other person we haven't heard of yet," Smith said.
BINGO!!!
Nobody gives a crap about her, or Princess Diana, or Anna-Nicole Smith, or Lindsay Lohan, or Paris Hilton, or Amy Winehouse. They are only as good as they generate controversy and sales. If not, new candidates will arise. If none arise, new candidates will be created.
Does anyone in their right mind genuinely believe anything Ann Coulter says? She will say anything to generate "controversy" because the controversy fuels sales. That's all that matters.
I'm quite surprised to see this so nakedly in print. I guess the sheeple don't read CNNfn.
They are basically disposable which is the job of pop culture. It takes an extraordinary amount of foolishness not to see the flow of money.
Thursday, February 07, 2008
Top Ten
... bullshit "professions" enabled by the housing bubble. (If you haven't heard of them, don't worry. They won't be around for long.)
10. aromatherapy
9. house staging
8. feng shui "expert"
7. scrapbooking
6. make-your-own-candleshop
5. yoga studio
4. doggie spas
3. koi pond "experts", koi breeders, etc.
2. sign twirlers
And the top candidate:
1. life coach.
10. aromatherapy
9. house staging
8. feng shui "expert"
7. scrapbooking
6. make-your-own-candleshop
5. yoga studio
4. doggie spas
3. koi pond "experts", koi breeders, etc.
2. sign twirlers
And the top candidate:
1. life coach.
Wednesday, February 06, 2008
Mixed Metaphors
From Bloomberg: Toll Has Seventh Straight Drop in Quarterly Revenue.
``It's like driving the Titanic, things don't turn on a dime,'' said Dave Crossman, an analyst at Kirr Marbach & Co. in Columbus, Indiana.
When the going gets tough, the weak must go to their desks to mix their metaphors in a now half-empty glass. However, make sure you don't bite the hand that rocks the cradle.
Where was I going with that?
Oh, this is as much fun as shooting monkeys in a barrel.
``It's like driving the Titanic, things don't turn on a dime,'' said Dave Crossman, an analyst at Kirr Marbach & Co. in Columbus, Indiana.
When the going gets tough, the weak must go to their desks to mix their metaphors in a now half-empty glass. However, make sure you don't bite the hand that rocks the cradle.
Where was I going with that?
Oh, this is as much fun as shooting monkeys in a barrel.
Tuesday, February 05, 2008
Bank Reserves
(Source: Federal Reserve.)If that graph doesn't scare the bleepin' bejeesus out of you, nothing will!
Bling Bling
From CBS5: Auto Loan Defaults Newest Financial Meltdown.
According to Power Information Network, 1.85 of the 9.6 million customers in 2006 who leased or financed a new car were subprime borrowers or consumers with weak credit.
Vivian Snyder has strong credit and is not classified as subprime, but she is one of many consumers who can't afford the car she leased. Snyder drives a brand new convertible BMW with a MSRP listed at approximately $100,000.
Most consumers can't afford it, and neither can Vivian. That's because the monthly lease payment is $1,300. It eats up half her income which is a $2,500 disability check.
But, it's bling, baby, bling!
She got it at BMW of Fremont without showing a drivers license, pay stub, or any proof of income.
How did this happen? Apparently, her income was inflated by nearly 150%.
Vivian has only a few options. She can plead with the finance company to release her from the lease or have the car repossessed, losing her good credit and a $30,000 down payment which consisted of her entire retirement savings.
She cashed out her "entire" retirement for a depreciating object; a glorified metal cage that gets you from Point A to Point B. Even if the income were not inflated, this is lunacy. The people who can afford a $100K car don't need financing; if you need financing, you can't afford a $100K car.
It's really freakin' extraordinary, isn't it? This is basic decision making. Cashing retirement for bling car = bad.
There is something really really wrong with people, and all that this bubble has done is reveal the rot underneath that was always present.
But, it's all good, baby, it's all good!
According to Power Information Network, 1.85 of the 9.6 million customers in 2006 who leased or financed a new car were subprime borrowers or consumers with weak credit.
Vivian Snyder has strong credit and is not classified as subprime, but she is one of many consumers who can't afford the car she leased. Snyder drives a brand new convertible BMW with a MSRP listed at approximately $100,000.
Most consumers can't afford it, and neither can Vivian. That's because the monthly lease payment is $1,300. It eats up half her income which is a $2,500 disability check.
But, it's bling, baby, bling!
She got it at BMW of Fremont without showing a drivers license, pay stub, or any proof of income.
How did this happen? Apparently, her income was inflated by nearly 150%.
Vivian has only a few options. She can plead with the finance company to release her from the lease or have the car repossessed, losing her good credit and a $30,000 down payment which consisted of her entire retirement savings.
She cashed out her "entire" retirement for a depreciating object; a glorified metal cage that gets you from Point A to Point B. Even if the income were not inflated, this is lunacy. The people who can afford a $100K car don't need financing; if you need financing, you can't afford a $100K car.
It's really freakin' extraordinary, isn't it? This is basic decision making. Cashing retirement for bling car = bad.
There is something really really wrong with people, and all that this bubble has done is reveal the rot underneath that was always present.
But, it's all good, baby, it's all good!
Pissing in a Thunder$torm
From the Washington Post: Housing Crisis Casts a Cloud Over Sun Belt.
Formerly booming Sun Belt cities are the epicenters of this economic downturn. Many economists believe that the likes of Phoenix, Las Vegas, Miami and San Diego are already in recession.
Within these regions, the pain is concentrated among people who overextended themselves on mortgage debt to take advantage of housing prices that seemingly did nothing but rise. Because many of those people are facing massive debt, the tax rebates of $500 to $600 per person contemplated by Congress would offer little solace.
"We're in so deep that it doesn't seem like anything will help," said Rebekah Ao, 33, a pregnant homemaker who lives in a new four-bedroom home in Avondale with her husband, Otto, a truck driver. The Aos, with $50,000 in income, owe a total of $607,000 on mortgages for two houses they bought since they moved to the Phoenix area about two years ago.
Of course, nothing will help. You've borrowed more than 12X income.
3X is the limit if, I don't know, you want to eat or some such.
And there's a bun in the oven too. Maybe you can put the placenta on the barbeque! That'll save you a trip to McD's. I've heard it's quite delicious.
Within these regions, the pain is concentrated among people who overextended themselves on mortgage debt to take advantage of housing prices that seemingly did nothing but rise. Because many of those people are facing massive debt, the tax rebates of $500 to $600 per person contemplated by Congress would offer little solace.
Rival stimulus plans being considered in Congress promise a cash infusion of as much as $1,200 per couple and $300 per child.
Whatever. This is all grandstanding.
Pissing in front of the Niagara Falls, and saying, "Mine is bigger."
Formerly booming Sun Belt cities are the epicenters of this economic downturn. Many economists believe that the likes of Phoenix, Las Vegas, Miami and San Diego are already in recession.
Within these regions, the pain is concentrated among people who overextended themselves on mortgage debt to take advantage of housing prices that seemingly did nothing but rise. Because many of those people are facing massive debt, the tax rebates of $500 to $600 per person contemplated by Congress would offer little solace.
"We're in so deep that it doesn't seem like anything will help," said Rebekah Ao, 33, a pregnant homemaker who lives in a new four-bedroom home in Avondale with her husband, Otto, a truck driver. The Aos, with $50,000 in income, owe a total of $607,000 on mortgages for two houses they bought since they moved to the Phoenix area about two years ago.
Of course, nothing will help. You've borrowed more than 12X income.
3X is the limit if, I don't know, you want to eat or some such.
And there's a bun in the oven too. Maybe you can put the placenta on the barbeque! That'll save you a trip to McD's. I've heard it's quite delicious.
Within these regions, the pain is concentrated among people who overextended themselves on mortgage debt to take advantage of housing prices that seemingly did nothing but rise. Because many of those people are facing massive debt, the tax rebates of $500 to $600 per person contemplated by Congress would offer little solace.
Rival stimulus plans being considered in Congress promise a cash infusion of as much as $1,200 per couple and $300 per child.
Whatever. This is all grandstanding.
Pissing in front of the Niagara Falls, and saying, "Mine is bigger."
$cared $hitle$$
From the New York Times: Economy Fitful, Americans Start to Pay as They Go.
For more than half a century, Americans have proved staggeringly resourceful at finding new ways to spend money.
For the 34 million households who took money out of their homes over the last four years by refinancing or borrowing against their equity — roughly one-third of the nation — the savings rate was running at a negative 13 percent in the middle of 2006, according to Moody’s Economy.com. That means they were borrowing heavily against their assets to finance their day-to-day lives.
By late last year, the savings rate for this group had improved, but just to negative 7 percent and mostly because tightened standards made loans harder to get.
Only in America would a change in savings rate from -13% to -7% be viewed as a "good thing".
Fran Barbaro has an M.B.A. and a résumé of computer industry jobs with salaries reaching $150,000 a year. She used to have a stock portfolio worth about $1 million. She hung original art on the walls of her three-bedroom house in Boston.
But divorce, illness and motherhood drained her savings. Her home is worth less than she owes, and she owes another $200,000 to credit card companies, banks and tax collectors.
Ms. Barbaro, 50, said she knew she was living beyond her means. But her house demanded work. Her two boys needed after-school programs running $25,000 a year. Medical bills multiplied.
“These were simple day-to-day expenses,” she said. “The money was always there.”
Until it wasn’t. Her take-home pay is $5,200 a month, but her debt payments reach $4,400.
Ms. Barbaro has rented out her house while negotiating to lower her mortgage. She has moved to an apartment, where her sons sleep in the lone bedroom while she sleeps on a pull-out sofa.
“It’s the worst,” Ms. Barbaro said. “How do you salvage what you have and hopefully go back?”
You don't. You're screwed, bee-yatch!
“People have come to view credit as savings,” said Michelle Jones, a vice president at the Consumer Credit Counseling Service of Greater Atlanta.
And this, of course, is the problem. When did the debit side of the balance sheet be seen as a "good thing"?
For more than half a century, Americans have proved staggeringly resourceful at finding new ways to spend money.
For the 34 million households who took money out of their homes over the last four years by refinancing or borrowing against their equity — roughly one-third of the nation — the savings rate was running at a negative 13 percent in the middle of 2006, according to Moody’s Economy.com. That means they were borrowing heavily against their assets to finance their day-to-day lives.
By late last year, the savings rate for this group had improved, but just to negative 7 percent and mostly because tightened standards made loans harder to get.
Only in America would a change in savings rate from -13% to -7% be viewed as a "good thing".
Fran Barbaro has an M.B.A. and a résumé of computer industry jobs with salaries reaching $150,000 a year. She used to have a stock portfolio worth about $1 million. She hung original art on the walls of her three-bedroom house in Boston.
But divorce, illness and motherhood drained her savings. Her home is worth less than she owes, and she owes another $200,000 to credit card companies, banks and tax collectors.
Ms. Barbaro, 50, said she knew she was living beyond her means. But her house demanded work. Her two boys needed after-school programs running $25,000 a year. Medical bills multiplied.
“These were simple day-to-day expenses,” she said. “The money was always there.”
Until it wasn’t. Her take-home pay is $5,200 a month, but her debt payments reach $4,400.
Ms. Barbaro has rented out her house while negotiating to lower her mortgage. She has moved to an apartment, where her sons sleep in the lone bedroom while she sleeps on a pull-out sofa.
“It’s the worst,” Ms. Barbaro said. “How do you salvage what you have and hopefully go back?”
You don't. You're screwed, bee-yatch!
“People have come to view credit as savings,” said Michelle Jones, a vice president at the Consumer Credit Counseling Service of Greater Atlanta.
And this, of course, is the problem. When did the debit side of the balance sheet be seen as a "good thing"?
Sunday, February 03, 2008
Money v/s Money Substitutes
From the NC Times: Lenders freeze equity lines in response to tumbling property values.
Several banks issued statements this week saying they were temporarily suspending withdrawals from open home equity lines out of concern that borrowers could owe more than the house is worth.
Historic declines in property values have stripped many local homeowners of their safety nets as lenders freeze lines of credit ---- even on people who are current on their mortgage payments.
Those lines are drying up as Countrywide Financial announced Thursday that it has cut off 122,000 borrowers from pulling any more equity out of their homes. Wells Fargo, Washington Mutual and JPMorgan Chase released statements Friday saying they have also started halting equity lines because of tumbling home values but declined to provide numbers of suspended equity lines.
The Home ATM™ is closed. Thank you, come again!
"It's an emotional hardship," said Patti Lien of Menifee. "We kept our credit good. We've done everything right, and this is what we get because Countrywide made all these crappy loans."
The Home ATM™ is closed. Thank you, come again!
"It really wreaked havoc for me," said Dan Holbrook, a Fallbrook homeowner. Working in the real estate industry, he is often paid in lump sums.
At the end of the year, Holbrook paid off his equity line with a $50,000 payment. Four days later, Bank of America froze his equity line, he said.
"I'm scrambling right now," he said. "It has created a tremendous amount of stress because that was money to live on for me."
The Home ATM™ is closed. Thank you, come again!
Holbrook, a real estate consultant, said most people view such loans as emergency-only money. That is how he viewed it until the housing market slowed, he said.
"A lot of people figured these equity lines were safety nets," he said. "The problem is many of us are on a high-wire act right now. And you think the net is there, and you fall and it's not."
The Home ATM™ is closed. Thank you, come again!
Lien said she knew of the language, but thought it only applied to homeowners who encountered credit problems and did not know an external factor such as declining property values could put a stop to the loan.
"It's a hardship. It's money that we thought was there and it's not," she said. "We didn't go on a cruise, we didn't buy new cars but we're still suffering because of others."
The Home ATM™ is closed. Thank you, come again!
Several banks issued statements this week saying they were temporarily suspending withdrawals from open home equity lines out of concern that borrowers could owe more than the house is worth.
Historic declines in property values have stripped many local homeowners of their safety nets as lenders freeze lines of credit ---- even on people who are current on their mortgage payments.
Those lines are drying up as Countrywide Financial announced Thursday that it has cut off 122,000 borrowers from pulling any more equity out of their homes. Wells Fargo, Washington Mutual and JPMorgan Chase released statements Friday saying they have also started halting equity lines because of tumbling home values but declined to provide numbers of suspended equity lines.
The Home ATM™ is closed. Thank you, come again!
"It's an emotional hardship," said Patti Lien of Menifee. "We kept our credit good. We've done everything right, and this is what we get because Countrywide made all these crappy loans."
The Home ATM™ is closed. Thank you, come again!
"It really wreaked havoc for me," said Dan Holbrook, a Fallbrook homeowner. Working in the real estate industry, he is often paid in lump sums.
At the end of the year, Holbrook paid off his equity line with a $50,000 payment. Four days later, Bank of America froze his equity line, he said.
"I'm scrambling right now," he said. "It has created a tremendous amount of stress because that was money to live on for me."
The Home ATM™ is closed. Thank you, come again!
Holbrook, a real estate consultant, said most people view such loans as emergency-only money. That is how he viewed it until the housing market slowed, he said.
"A lot of people figured these equity lines were safety nets," he said. "The problem is many of us are on a high-wire act right now. And you think the net is there, and you fall and it's not."
The Home ATM™ is closed. Thank you, come again!
Lien said she knew of the language, but thought it only applied to homeowners who encountered credit problems and did not know an external factor such as declining property values could put a stop to the loan.
"It's a hardship. It's money that we thought was there and it's not," she said. "We didn't go on a cruise, we didn't buy new cars but we're still suffering because of others."
The Home ATM™ is closed. Thank you, come again!
Wednesday, January 30, 2008
You Ain't Nothin' but a FIRE economy!
From Reuters: U.K. Hometrack House Prices Fall for a Fourth Month.
In London, new home prices are now lower than they were a year ago, according to a report by SmartNewHomes.com published today.
U.K. home prices probably won't pick up until mid-2009, according to Instant Access Group, the country's biggest property investment club.
Try 2013, bee-yatch! At the very earliest.
You can't run an economy on FIRE alone. You need some meat to roast.
Cheerio and pip pip!
In London, new home prices are now lower than they were a year ago, according to a report by SmartNewHomes.com published today.
U.K. home prices probably won't pick up until mid-2009, according to Instant Access Group, the country's biggest property investment club.
Try 2013, bee-yatch! At the very earliest.
You can't run an economy on FIRE alone. You need some meat to roast.
Cheerio and pip pip!
The Power of Fees
From Fox: Queens Housing Advocates at Front Line of Mortgage Crisis.
Consider one of her clients, a babysitter with a stated income of $10,000, who obtained two mortgages on two properties with a combined value over $1 million. The broker who approved the mortgages told the babysitter the purchases would pay for themselves if she used rent from one property to pay the mortgage on the other.
Foxy lady!
"Stated" income: $10K.
Controlled Property: $1M
Leverage: 100X
Entertainment? PRICELESS!
For everything else, there's credit!
Consider one of her clients, a babysitter with a stated income of $10,000, who obtained two mortgages on two properties with a combined value over $1 million. The broker who approved the mortgages told the babysitter the purchases would pay for themselves if she used rent from one property to pay the mortgage on the other.
Foxy lady!
"Stated" income: $10K.
Controlled Property: $1M
Leverage: 100X
Entertainment? PRICELESS!
For everything else, there's credit!
Snow Job
Reuters gives us: Harsh winter raises specter of "Chinese stagflation".
Freak snow and a global downturn are posing a harsher challenge to China's economy than expected, threatening the country with a spike in inflation just as growth slows.
Economists say inflation, which many thought had peaked late last year, is set to rebound to an 11-year high of at least 7 percent after snow and ice snarled food deliveries.
It couldn't possibly be the currency peg, could it?
How absurd would it be that the Chinese (and the Indians) are increasing the money supply to keep their currency devalued against the dollar?
Naah, that could never happen. Not in this universe anyway. They are all saints.
It must be the snow.
Snow me, baby, snow me!
Freak snow and a global downturn are posing a harsher challenge to China's economy than expected, threatening the country with a spike in inflation just as growth slows.
Economists say inflation, which many thought had peaked late last year, is set to rebound to an 11-year high of at least 7 percent after snow and ice snarled food deliveries.
It couldn't possibly be the currency peg, could it?
How absurd would it be that the Chinese (and the Indians) are increasing the money supply to keep their currency devalued against the dollar?
Naah, that could never happen. Not in this universe anyway. They are all saints.
It must be the snow.
Snow me, baby, snow me!
Thursday, January 24, 2008
Wednesday, January 23, 2008
Bull the other one?
A reader sends in a BBC article: Indian investors despair as shares fall.
No one had expected the impact from falls in regional markets to be so pronounced in India.
Some were even targeting the new statue of a bull placed outside the Exchange - saying it was inauspicious.
"Ever since the authorities here put the bull up outside the exchange, we've had bad luck," said Kaushik Vyas, a day trader in Mumbai.
"The gods are punishing us for our arrogance . We put up a bull and no bear? Did we think we could tempt the fates like this? We have to bring the bull down."
Yeah, maybe they should bring the "bull" down!
No one had expected the impact from falls in regional markets to be so pronounced in India.
Some were even targeting the new statue of a bull placed outside the Exchange - saying it was inauspicious.
"Ever since the authorities here put the bull up outside the exchange, we've had bad luck," said Kaushik Vyas, a day trader in Mumbai.
"The gods are punishing us for our arrogance . We put up a bull and no bear? Did we think we could tempt the fates like this? We have to bring the bull down."
Yeah, maybe they should bring the "bull" down!
Sunday, January 20, 2008
Yeah, Baby!
From the Orange County Business Journal: Closing Costs.
With radio ads still pitching potential borrowers, Wesley Hoaglund, owner of Lenox Financial Mortgage Corp. in Irvine, is hoping to survive a market where the number of home loans being made is about half of what it was a year ago.
Lenox hasn’t seen many foreclosures, Hoaglund said. But it recently foreclosed on a Moreno Valley home for which the borrower didn’t even make the first payment, he said.
Yeah, baby! Now, that's the money shot right there!
The house that initially sold for $460,000 has been declining in value and was last listed at $250,000, he said. After paying real estate agent fees, the house could bring a loss of about $150,000, he said.”
$150K loss on a single transaction within a month. Sweet!
Mortgage brokers—middlemen who generate loans funded by banks and other financiers—have seen a big chunk of their business go away in the past year. Some wonder if they’ll survive the downturn.
With brains like that, how could you possibly not survive?
With radio ads still pitching potential borrowers, Wesley Hoaglund, owner of Lenox Financial Mortgage Corp. in Irvine, is hoping to survive a market where the number of home loans being made is about half of what it was a year ago.
Lenox hasn’t seen many foreclosures, Hoaglund said. But it recently foreclosed on a Moreno Valley home for which the borrower didn’t even make the first payment, he said.
Yeah, baby! Now, that's the money shot right there!
The house that initially sold for $460,000 has been declining in value and was last listed at $250,000, he said. After paying real estate agent fees, the house could bring a loss of about $150,000, he said.”
$150K loss on a single transaction within a month. Sweet!
Mortgage brokers—middlemen who generate loans funded by banks and other financiers—have seen a big chunk of their business go away in the past year. Some wonder if they’ll survive the downturn.
With brains like that, how could you possibly not survive?
Saturday, January 19, 2008
Sweet Sufferin' Suicide
From the AP: Mortgage Company Exec Jumps to Death.
An executive of a collapsed subprime mortgage lender jumped to his death from a bridge Friday, shortly after his wife's body was found inside their New Jersey home, authorities said.
The deaths of Walter Buczynski, 59, and his wife, Marci, 37 — the parents of two boys — were being investigated as a murder-suicide, according to the Burlington County Prosecutor's Office
About 20 minutes after her body was found, officers from the Delaware River and Bay Authority Police Department received reports that a man — later identified as Walter Buczynski — had parked his car on Delaware Memorial Bridge and jumped from the span.
And Forbes reports: Fieldstone Seeks to Pay $1M in Bonuses.
Collapsed subprime lender Fieldstone Mortgage Co. wants to pay a skeleton staff of workers, including its CEO, about $1.1 million in bonuses so the company can wind-down its lending operations and go out of business.
Among the employees receiving biggest bankruptcy bonuses: CEO Michael J. Sonnenfeld; Vice President Walter Buczynski and Chief Information Officer John Camp will each receive $99,999. Another 20 or so employees would divvy up the remaining bonus payments.
Guess $100K wasn't good enough for him. Oh well!
An executive of a collapsed subprime mortgage lender jumped to his death from a bridge Friday, shortly after his wife's body was found inside their New Jersey home, authorities said.
The deaths of Walter Buczynski, 59, and his wife, Marci, 37 — the parents of two boys — were being investigated as a murder-suicide, according to the Burlington County Prosecutor's Office
About 20 minutes after her body was found, officers from the Delaware River and Bay Authority Police Department received reports that a man — later identified as Walter Buczynski — had parked his car on Delaware Memorial Bridge and jumped from the span.
And Forbes reports: Fieldstone Seeks to Pay $1M in Bonuses.
Collapsed subprime lender Fieldstone Mortgage Co. wants to pay a skeleton staff of workers, including its CEO, about $1.1 million in bonuses so the company can wind-down its lending operations and go out of business.
Among the employees receiving biggest bankruptcy bonuses: CEO Michael J. Sonnenfeld; Vice President Walter Buczynski and Chief Information Officer John Camp will each receive $99,999. Another 20 or so employees would divvy up the remaining bonus payments.
Guess $100K wasn't good enough for him. Oh well!
Friday, January 18, 2008
A Short Summary
I offer a short succint summary of our current economic problems (and contrary to common opinion, it's worldwide not US-centric.)
There is too much debt in the system. It cannot be repaid. The Powers-That-Be cannot redirect "fresh money" to the correct channels. Hence, it must be defaulted upon.
Thank you. That will be all!
There is too much debt in the system. It cannot be repaid. The Powers-That-Be cannot redirect "fresh money" to the correct channels. Hence, it must be defaulted upon.
Thank you. That will be all!
Texan Barbecue
From Yahoo!: Texas justice charged in arson case.
A Texas Supreme Court justice was indicted Thursday on suspicion of tampering with evidence in a fire that destroyed his home, a blaze the judge's wife is accused of setting, their attorney said.
Justice David Medina and his wife, Francisca, have denied involvement in the June fire, which caused nearly $1 million in damage, attorney Terry Yates said.
Quis custodiet ipsos custodes?
A Texas Supreme Court justice was indicted Thursday on suspicion of tampering with evidence in a fire that destroyed his home, a blaze the judge's wife is accused of setting, their attorney said.
Justice David Medina and his wife, Francisca, have denied involvement in the June fire, which caused nearly $1 million in damage, attorney Terry Yates said.
Quis custodiet ipsos custodes?
Planetary Misalignment
From the Santa Barbara Independent: Blankenship Stops Building, Blames Loan Crisis and Permit Process.
With some bitterness, condo developer John Blankenship declared to the City of Santa Barbara’s Planning Commission that he would not stand before them again. After 37 years in the business, Blankenship said that he was defeated not only by a declining market and the subprime loan crisis, but by a city permitting process that prevented him from profiting on his projects. It is the city’s loss, he added, because for the past couple of years Blankenship Construction has been one of the few still creating condos in the $600,000-$700,000 range — middle-class workforce housing, just like the city said it needs.
$700,000 is "middle-class" housing?!?
On what planet?
Uranus?
With some bitterness, condo developer John Blankenship declared to the City of Santa Barbara’s Planning Commission that he would not stand before them again. After 37 years in the business, Blankenship said that he was defeated not only by a declining market and the subprime loan crisis, but by a city permitting process that prevented him from profiting on his projects. It is the city’s loss, he added, because for the past couple of years Blankenship Construction has been one of the few still creating condos in the $600,000-$700,000 range — middle-class workforce housing, just like the city said it needs.
$700,000 is "middle-class" housing?!?
On what planet?
Uranus?
Thursday, January 17, 2008
Golden Showers
What do you do when the one of the most-respected Central Bankers (and no, it's not Greenie) pisses all over your parade?
From Reuters: Volcker chides Fed for "bubbles".
Former Federal Reserve Chairman Paul Volcker thinks the U.S. central bank is to blame for allowing bubbles to inflate asset markets, and says that current Fed chief Ben Bernanke is in a tough spot.
"Too many bubbles have been going on for too long ... The Fed is not really in control of the situation," the Times quoted Volcker as saying, in clear criticism of both Bernanke and his predecessor Alan Greenspan.
From Reuters: Volcker chides Fed for "bubbles".
Former Federal Reserve Chairman Paul Volcker thinks the U.S. central bank is to blame for allowing bubbles to inflate asset markets, and says that current Fed chief Ben Bernanke is in a tough spot.
"Too many bubbles have been going on for too long ... The Fed is not really in control of the situation," the Times quoted Volcker as saying, in clear criticism of both Bernanke and his predecessor Alan Greenspan.
Tuesday, January 15, 2008
Glasnost?
From the WSJ: Fed to Show New Openness On Outlook.
Federal Reserve Chairman Ben Bernanke, responding to criticism that the central bank has sent confusing messages about interest rates in recent months, has decided to speak more forcefully and more often about the outlook for the nation's economy.
How about a different kind of openness?
A Hunks of the Federal Reserve calendar, perchance?
Federal Reserve Chairman Ben Bernanke, responding to criticism that the central bank has sent confusing messages about interest rates in recent months, has decided to speak more forcefully and more often about the outlook for the nation's economy.
How about a different kind of openness?
A Hunks of the Federal Reserve calendar, perchance?
Monday, January 14, 2008
Monday Morning Slap-down
From the newspaper equivalent of a triply used toilet-paper, Gretchen Morgenson writes: Cruel Jokes, and No One Is Laughing.
For the record, I like Gretchen Morgenson. To use the vernacular, she's aiiight in my book but sometimes in the interest of intellectual honesty, we have to "slap the bitch around" to put some economic sense in her. At least of the variety that Adam Smith might understand.
WHAT do banks call it when a troubled borrower abandons her home, sending them the keys?
“Jingle mail.”
“As difficult as the rescue prospects are for subprime borrowers, they are even worse for most pay-option A.R.M. borrowers,” said Michael D. Calhoun, president of the Center for Responsible Lending, a consumer advocacy group. “Three-quarters of pay-option borrowers are making the minimum payment based on 2 to 3 percent interest typically. The payment shock is so huge that a refinance is virtually impossible.”
Consider this as more evidence that we are moving into financial waters that we haven’t had to navigate in quite some time — if ever. Because other housing downturns were not national in scope and did not involve mortgages that had been pooled, sliced up and sold to investors around the globe, it is almost impossible to predict how long the turmoil will last or how financiers, regulators, municipalities and homeowners will manage its fallout.
BUT it is possible to get a feel for what is happening on the ground from a new survey of 2,400 real estate agents sponsored by Inside Mortgage Finance Publications. The survey taps into the outlook of people who see troubled borrowers firsthand, when they try to sell their homes before foreclosure occurs.
For example, agents participating in the survey confirmed what many borrowers say: that loan servicers are downright unresponsive. This is especially true when distressed owners try to sell their homes before being put through the trials of foreclosure. When they sell at a price that is lower than the outstanding mortgage debt, that is known as a short sale.
Asked how servicers could streamline such sales, one said: “Allow you to go directly to the loss mitigation department without having to speak or argue with eight people before they finally give in and transfer you.” Another said: “Respond to offers within five business days — they are killing the market by taking upwards of three months to respond to an offer.”
Lady, here's how it works.
All businesses exist to make money. THE END.
If you can't understand this, you should not write for the Business Section.
A bank will take a short sale if it believes that taking a loss "now" is better than running through the full gamut of a legal foreclosure process, and taking a loss "later", or if the loss "now" is smaller than the loss "later".
In other words, there is no God-given right to a short sale. Just a cold-blooded business decision.
Are you still with me, woman?
Now, a "loan origination" department is different from a "loan mitigation" department. Call it bureaucracy, or call it specialization of talent; this is the norm, and it's here to stay.
Charlie Chaplin could get away with criticism in an earlier age, but woman! I knew Charlie Chaplin, and you're no Charlie Chaplin.
Anyhoo, unless there is strong "evidence" of distress, there is no logical evidence for the "loan mitigation" department to conclude that they even need to bother to do a short sale. In fact, it seems to me that there isn't even evidence that they need pick up the phone.
Or in other words that even your peanut-sized brain may understand, a claim of distress is not the same as distress just like a claim of a crime is not the same as a crime.
In order to "claim" that you are distressed, you must actually be not only be distressed but show some evidence of being distressed like missing a payment or something. Losing your job would help. Being freshly divorced would help better. That kinda thing.
In the absence of this evidence, all the bank's poor employees see is some metaphorical hot air coming across the phone, and since they are in the business of "loan mitigation" not mind-reading, there's not a whole lot they can do.
Are you still with me, wise woman?
Now these "loan mitigation" employees, are precisely that. They want to see how much their employer can get back out of the deadbeats who borrowed the money, and you can't argue about the "deadbeats" part since they want to pay back less than owed hence giving the short sale its eponymous name.
Anyway, to that end, they need to look at the collateral.
Since they are specialized in "loan mitigation" and not "house appraisal", and they are not granted your superior intellect on economic matters, they will have to rely on some appraisal of the collateral. Unfortunately, the collateral has declined in value, and may decline further.
Now, not being the Pulitzer-prize winning intellectual giants that you are, they may ask for evidence about the collateral. This brings us back to an appraisal process to see how the collateral looks "now", and the market situations "now" as opposed to when the loan was made so they may need the services of an "appraiser".
Unfortunately, "appraisers" don't work for free which brings us back to point one about whether this cost is worth it or not. Also, if there are thousands of cases involved, it just becomes a business decision to lose the least amount of money, in which case you have to pick and choose your battles.
Are you still with me, my sweet bee-yatch?
Onwards and upwards then!
Lastly, no bank in their right mind is just going to let their lendees walk with a short sale. They are going to sue them for their assets, or garnish their wages; or the least of all leasts, put a ding on their credit scores.
Sometimes all of the above.
After all, borrowing money is not a God-given right contrary to what they taught you in your liberal-arts program.
So they are going to ask more than a few inconvenient questions to the borrowers, and ask for evidence, and work through the legal system, and all of this takes time. Sometimes it may be "upwards of three months" to work through this stuff.
Oh! the shocker!
Don't like it, bee-yatch?
Here's a shocker suggestion that you should write about in your next column:
"Don't borrow money!"
For the record, I like Gretchen Morgenson. To use the vernacular, she's aiiight in my book but sometimes in the interest of intellectual honesty, we have to "slap the bitch around" to put some economic sense in her. At least of the variety that Adam Smith might understand.
WHAT do banks call it when a troubled borrower abandons her home, sending them the keys?
“Jingle mail.”
“As difficult as the rescue prospects are for subprime borrowers, they are even worse for most pay-option A.R.M. borrowers,” said Michael D. Calhoun, president of the Center for Responsible Lending, a consumer advocacy group. “Three-quarters of pay-option borrowers are making the minimum payment based on 2 to 3 percent interest typically. The payment shock is so huge that a refinance is virtually impossible.”
Consider this as more evidence that we are moving into financial waters that we haven’t had to navigate in quite some time — if ever. Because other housing downturns were not national in scope and did not involve mortgages that had been pooled, sliced up and sold to investors around the globe, it is almost impossible to predict how long the turmoil will last or how financiers, regulators, municipalities and homeowners will manage its fallout.
BUT it is possible to get a feel for what is happening on the ground from a new survey of 2,400 real estate agents sponsored by Inside Mortgage Finance Publications. The survey taps into the outlook of people who see troubled borrowers firsthand, when they try to sell their homes before foreclosure occurs.
For example, agents participating in the survey confirmed what many borrowers say: that loan servicers are downright unresponsive. This is especially true when distressed owners try to sell their homes before being put through the trials of foreclosure. When they sell at a price that is lower than the outstanding mortgage debt, that is known as a short sale.
Asked how servicers could streamline such sales, one said: “Allow you to go directly to the loss mitigation department without having to speak or argue with eight people before they finally give in and transfer you.” Another said: “Respond to offers within five business days — they are killing the market by taking upwards of three months to respond to an offer.”
Lady, here's how it works.
All businesses exist to make money. THE END.
If you can't understand this, you should not write for the Business Section.
A bank will take a short sale if it believes that taking a loss "now" is better than running through the full gamut of a legal foreclosure process, and taking a loss "later", or if the loss "now" is smaller than the loss "later".
In other words, there is no God-given right to a short sale. Just a cold-blooded business decision.
Are you still with me, woman?
Now, a "loan origination" department is different from a "loan mitigation" department. Call it bureaucracy, or call it specialization of talent; this is the norm, and it's here to stay.
Charlie Chaplin could get away with criticism in an earlier age, but woman! I knew Charlie Chaplin, and you're no Charlie Chaplin.
Anyhoo, unless there is strong "evidence" of distress, there is no logical evidence for the "loan mitigation" department to conclude that they even need to bother to do a short sale. In fact, it seems to me that there isn't even evidence that they need pick up the phone.
Or in other words that even your peanut-sized brain may understand, a claim of distress is not the same as distress just like a claim of a crime is not the same as a crime.
In order to "claim" that you are distressed, you must actually be not only be distressed but show some evidence of being distressed like missing a payment or something. Losing your job would help. Being freshly divorced would help better. That kinda thing.
In the absence of this evidence, all the bank's poor employees see is some metaphorical hot air coming across the phone, and since they are in the business of "loan mitigation" not mind-reading, there's not a whole lot they can do.
Are you still with me, wise woman?
Now these "loan mitigation" employees, are precisely that. They want to see how much their employer can get back out of the deadbeats who borrowed the money, and you can't argue about the "deadbeats" part since they want to pay back less than owed hence giving the short sale its eponymous name.
Anyway, to that end, they need to look at the collateral.
Since they are specialized in "loan mitigation" and not "house appraisal", and they are not granted your superior intellect on economic matters, they will have to rely on some appraisal of the collateral. Unfortunately, the collateral has declined in value, and may decline further.
Now, not being the Pulitzer-prize winning intellectual giants that you are, they may ask for evidence about the collateral. This brings us back to an appraisal process to see how the collateral looks "now", and the market situations "now" as opposed to when the loan was made so they may need the services of an "appraiser".
Unfortunately, "appraisers" don't work for free which brings us back to point one about whether this cost is worth it or not. Also, if there are thousands of cases involved, it just becomes a business decision to lose the least amount of money, in which case you have to pick and choose your battles.
Are you still with me, my sweet bee-yatch?
Onwards and upwards then!
Lastly, no bank in their right mind is just going to let their lendees walk with a short sale. They are going to sue them for their assets, or garnish their wages; or the least of all leasts, put a ding on their credit scores.
Sometimes all of the above.
After all, borrowing money is not a God-given right contrary to what they taught you in your liberal-arts program.
So they are going to ask more than a few inconvenient questions to the borrowers, and ask for evidence, and work through the legal system, and all of this takes time. Sometimes it may be "upwards of three months" to work through this stuff.
Oh! the shocker!
Don't like it, bee-yatch?
Here's a shocker suggestion that you should write about in your next column:
"Don't borrow money!"
Friday, January 11, 2008
Daily Mash
From the Daily Mash: Estate Agents Will Starve To Death After House Price Crash Says Upbeat Report.
WORRIED homeowners were cheered last night as economists revealed that next year's house price collapse will lead to widespread starvation and prostitution among Britain's estate agents.
The upbeat report says the entire profession will be on the streets begging for food by next August, apart from those who manage to get jobs as sex whores by lying about their previous occupation.
Bill McKay, 56, a homeowner, said: "When I'm looking around a house I don't need some dick in a lilac shirt telling me 'this is the en-suite bathroom'. I can see it's the en-suite bathroom. It's got a great big fucking bath in it.
"I can also tell the difference between a desirable upscale property in a sought after location and a rat-infested bedsit with a brothel on one side and a crack house on the other. Do you think I'm blind, or just stupid?"
Professor Wayne Hayes, the Van Hoogstraten chair of prices at the House Institute, said: "Great news, the pin-striped tit-cockers are all going to starve to death. Slowly."
WORRIED homeowners were cheered last night as economists revealed that next year's house price collapse will lead to widespread starvation and prostitution among Britain's estate agents.
The upbeat report says the entire profession will be on the streets begging for food by next August, apart from those who manage to get jobs as sex whores by lying about their previous occupation.
Bill McKay, 56, a homeowner, said: "When I'm looking around a house I don't need some dick in a lilac shirt telling me 'this is the en-suite bathroom'. I can see it's the en-suite bathroom. It's got a great big fucking bath in it."I can also tell the difference between a desirable upscale property in a sought after location and a rat-infested bedsit with a brothel on one side and a crack house on the other. Do you think I'm blind, or just stupid?"
Professor Wayne Hayes, the Van Hoogstraten chair of prices at the House Institute, said: "Great news, the pin-striped tit-cockers are all going to starve to death. Slowly."
Thursday, January 10, 2008
Amazing Grace
From Merced, we have Foreclosure Story Comes Full Circle.
One man, Mark Gallegos, offered to tell me his whole story on the record. We sat in his living room and he told me how he had taken out several home equity loans to start a new business, the business failed and he couldn't make his mortgage payments.
Apparently the Gallegos' last-minute prayers weren't answered.
Their house was sold at a public auction a couple months after I wrote about them, and they moved out shortly after. They left behind two messages. In the driveway they spray-painted the dates they had lived there: 7/7/73 - 10/10/07 and the phrase "Gallegos Lived Here!". In the kitchen they wrote a small piece of graffiti: "This house was loved and lost by the grace of God by the Gallegos family be kind to it."
Before I go all Richard Dawkins over this sorry punk's ass, let us first observe the word "several home equity loans".
Let's see.
They lived there for 34 years; yet the house was not paid off; and they took out "several" HELOC's. Then they graffiti'd the crap out of the house.
The reporter failed to ask even the most basic of questions.
Who else wants to give them the Joshua Tree Treatment(TM)? We can take turns.
One man, Mark Gallegos, offered to tell me his whole story on the record. We sat in his living room and he told me how he had taken out several home equity loans to start a new business, the business failed and he couldn't make his mortgage payments.
Apparently the Gallegos' last-minute prayers weren't answered.
Their house was sold at a public auction a couple months after I wrote about them, and they moved out shortly after. They left behind two messages. In the driveway they spray-painted the dates they had lived there: 7/7/73 - 10/10/07 and the phrase "Gallegos Lived Here!". In the kitchen they wrote a small piece of graffiti: "This house was loved and lost by the grace of God by the Gallegos family be kind to it."
Before I go all Richard Dawkins over this sorry punk's ass, let us first observe the word "several home equity loans".
Let's see.
They lived there for 34 years; yet the house was not paid off; and they took out "several" HELOC's. Then they graffiti'd the crap out of the house.
The reporter failed to ask even the most basic of questions.
Who else wants to give them the Joshua Tree Treatment(TM)? We can take turns.
Real Insight
From a broker's mouth via Rocky Mountain News: Metro home prices drop 2%.
Beverly Meade, a broker with RE/MAX Avenues, saw a condo near Lowry with structural damage advertised for $11,000.
"If you have money, it is a good time to buy," Meade said. "If you are in foreclosure, you are not in a position to benefit from today's market."
Gee, really?!?
Thanks for the advice, Captain Obvious!
Beverly Meade, a broker with RE/MAX Avenues, saw a condo near Lowry with structural damage advertised for $11,000.
"If you have money, it is a good time to buy," Meade said. "If you are in foreclosure, you are not in a position to benefit from today's market."
Gee, really?!?
Thanks for the advice, Captain Obvious!
Positivitiy
So I was told, instead of being "negative", why don't you say something positive about journalism and economics.
Fine.
I offer you my three rules of how to read any economics story in the press (everything from the Economist to the New York Times.)
Instead of asking if something is true, you should ask:
Is the story even remotely plausible?
If yes, whose interests are being advanced by the story?
Why did the press print this story, and not something else?
The answer to the last question can frequently be reduced to the trivial, "it's in the news". The answer to the second question is rarely trivial, if ever.
For example, when Buffett (whom I admire, and who's as honest as is possible in the business world) calls financial derivatives: "weapons of mass destruction", I don't run around like a headless chicken.
The three answers are:
Yes.
Because fearful people buy insurance, and Buffett is in the business of selling insurance (in this case, "reinsurance", but let's not quibble.)
Because he is well respected.
Please note Mr. Buffett's self-interest. I don't think anyone ever hands out gold nuggets for free.
Fine.
I offer you my three rules of how to read any economics story in the press (everything from the Economist to the New York Times.)
Instead of asking if something is true, you should ask:
The answer to the last question can frequently be reduced to the trivial, "it's in the news". The answer to the second question is rarely trivial, if ever.
For example, when Buffett (whom I admire, and who's as honest as is possible in the business world) calls financial derivatives: "weapons of mass destruction", I don't run around like a headless chicken.
The three answers are:
Please note Mr. Buffett's self-interest. I don't think anyone ever hands out gold nuggets for free.
Tuesday, January 08, 2008
Suckfest in Sacramento
From the Sacramento Bee: Bob Shallit: Midtown loft developer feels confident units priced to sell.
Lots of developers are putting up "loft" housing in the downtown-midtown area. But Jeff Kraft says his 42-unit condo project at 1600 H St. is the real deal.
Prices range from $213,000 for a 395-square-foot studio to $699,000 for a two-bedroom, two-bath, 1,249-square-foot unit.
$700K in Sacramento?!?
For a condo??!!??
Bwahahahahhahahhahahahhahahh!!!!!
Forgive me, I'm trying my level best not to pee while I laugh this hard.
Sometimes a movie line says it best:
Teen 1: Eat me!
Teen 2: Eat me, raw!
Lots of developers are putting up "loft" housing in the downtown-midtown area. But Jeff Kraft says his 42-unit condo project at 1600 H St. is the real deal.
Prices range from $213,000 for a 395-square-foot studio to $699,000 for a two-bedroom, two-bath, 1,249-square-foot unit.
$700K in Sacramento?!?
For a condo??!!??
Bwahahahahhahahhahahahhahahh!!!!!
Forgive me, I'm trying my level best not to pee while I laugh this hard.
Sometimes a movie line says it best:
Teen 1: Eat me!
Teen 2: Eat me, raw!
Monday, January 07, 2008
The Invisible Hand's Invisible Bitch-slap
From the Wall Street Journal: Text of Paulson Remarks.
After years of unsustainable price appreciation and lax lending practices, a housing correction was inevitable and necessary.
Ooh, ooh, ooh, the Spinning Jenny is spinning downwards.
Welcome to Planet Reality(TM), Mr. Paulson!
After years of unsustainable price appreciation and lax lending practices, a housing correction was inevitable and necessary.
Ooh, ooh, ooh, the Spinning Jenny is spinning downwards.
Welcome to Planet Reality(TM), Mr. Paulson!
Equivalency
From the Times Online: UK living standards outstrip US.
LIVING standards in Britain are set to rise above those in America for the first time since the 19th century, according to a report by the respected Oxford Economics consultancy.
The calculations suggest that, measured by gross domestic product per capita, Britain can now hold its head up high in the economic stakes after more than a century of playing second fiddle to the Americans.
It says that GDP per head in Britain will be £23,500 this year, compared with £23,250 in America, reflecting not only the strength of the pound against the dollar but also the UK economy’s record run of growth and rising incomes going back to the early 1990s.
I know that these newspapers exist to go rah-rah-rah now that the Empire has gone bust but these people are morons.
What matters is not GDP/capita but how much that GDP/capita will buy you. In short, purchasing power.
After all, you can't eat pounds any more than you can eat dollars or eat gold. What matters is what you can buy with it, and it is a generally well known fact that things are priced much higher in the UK than they are in the US. Typically, they are somewhere between 1.5X and 2X more expensive, and hence, I'm willing to bet that the average UK family is far worse off than the average US family.
Eat that!
LIVING standards in Britain are set to rise above those in America for the first time since the 19th century, according to a report by the respected Oxford Economics consultancy.
The calculations suggest that, measured by gross domestic product per capita, Britain can now hold its head up high in the economic stakes after more than a century of playing second fiddle to the Americans.
It says that GDP per head in Britain will be £23,500 this year, compared with £23,250 in America, reflecting not only the strength of the pound against the dollar but also the UK economy’s record run of growth and rising incomes going back to the early 1990s.
I know that these newspapers exist to go rah-rah-rah now that the Empire has gone bust but these people are morons.
What matters is not GDP/capita but how much that GDP/capita will buy you. In short, purchasing power.
After all, you can't eat pounds any more than you can eat dollars or eat gold. What matters is what you can buy with it, and it is a generally well known fact that things are priced much higher in the UK than they are in the US. Typically, they are somewhere between 1.5X and 2X more expensive, and hence, I'm willing to bet that the average UK family is far worse off than the average US family.
Eat that!
Saturday, January 05, 2008
How long before hip-hop gets here?
From the AP: `Subprime' Is Linguists' Word of Year.
Even the American Dialect Society knows how risky home mortgages are these days. The group of wordsmiths chose "subprime" as 2007's Word of the Year at its annual convention Friday..
Word, son, word.†
† For 2008, I nominate 'systemic risk'.
Even the American Dialect Society knows how risky home mortgages are these days. The group of wordsmiths chose "subprime" as 2007's Word of the Year at its annual convention Friday..
Word, son, word.†
† For 2008, I nominate 'systemic risk'.
Rapid Revisionism
We've met this chicken-hearted chickenshit before: David Lereah, former Chief Economist of the NAR. He wrote a book. Please note the revisions.
Time for some more revisions, babykins!
Time for some more revisions, babykins!
Friday, December 28, 2007
What if..
From the normally somewhat sane voice of Floyd Norris at the New York Times: Credit Crisis? Just Wait for a Replay.
What if it’s not just subprime?
Gee golly gosh, Floyd! I don't know.
Someone might actually have to do some investigative journalism on it. Who knows there may be all this data being analyzed on blogs and shit because there sure as teenage fuckery isn't any analysis in the MSM. And you might have to get off your ass and do some homework or something.
What if it’s not just subprime?
Gee golly gosh, Floyd! I don't know.
Someone might actually have to do some investigative journalism on it. Who knows there may be all this data being analyzed on blogs and shit because there sure as teenage fuckery isn't any analysis in the MSM. And you might have to get off your ass and do some homework or something.
Thursday, December 27, 2007
Spread it!
Commercial paper is short-term (between 30 days and nine months.)A2/P2 is lower-rated paper (as opposed to GE/Microsoft/Coke, etc.)
Fed can't do jack-motherfuckin'-shit about the spread unless they want to get into the commercial lending business themselves (and that would just about crash the dollar outright!) Please note the spread is far higher than 9/11!
We're dealing with a solvency crisis (hence, a confidence crisis.) Nobody wants to lend to anybody else because who knows where the bodies are buried?
Once again, for your sanity and mine, this is not a "liquidity crisis". The lack of liquidity is a symptom not a cause.
Tuesday, December 25, 2007
Spirit of the Season
"You're thinking of this bank all wrong. As if they had the money back in a safe. The money's not here. Your money's in a super senior synthetic tranche hedged with a CDS on Joe's house...right next to yours. Supported by the excess spread from the Kennedy house, and Mrs. Macklin's house, and a hundred others. Why, you're lending the Orange County's Firemens' Retirement Fund the money to short builders commercial paper, and then, they're all going to pay it back to you as best they can."
Monday, December 24, 2007
Holiday Cheer
From Reuters: One in Five Expect to Borrow to Heat Homes This Winter.
For perhaps as many as 27 million American adults, keeping warm this winter will mean borrowing money and 20 million will use credit cards to be able to afford their heating bills, according to a CreditCards.com poll.
Nearly 12 percent of Americans say they will need to borrow money to pay winter heating bills; 9 percent will need to use credit cards to be able to afford their heating bills.
Happy Holidays, everyone. Stay warm!
For perhaps as many as 27 million American adults, keeping warm this winter will mean borrowing money and 20 million will use credit cards to be able to afford their heating bills, according to a CreditCards.com poll.
Nearly 12 percent of Americans say they will need to borrow money to pay winter heating bills; 9 percent will need to use credit cards to be able to afford their heating bills.
Happy Holidays, everyone. Stay warm!
Sunday, December 23, 2007
Hooverville, here we come!
From Yahoo! News: Tent city in suburbs is cost of home crisis.
ONTARIO, California (Reuters) - Between railroad tracks and beneath the roar of departing planes sits "tent city," a terminus for homeless people. It is not, as might be expected, in a blighted city center, but in the once-booming suburbia of Southern California.
The noisy, dusty camp sprang up in July with 20 residents and now numbers 200 people, including several children, growing as this region east of Los Angeles has been hit by the U.S. housing crisis.
The unraveling of the region known as the Inland Empire reads like a 21st century version of "The Grapes of Wrath," John Steinbeck's novel about families driven from their lands by the Great Depression.
As more families throw in the towel and head to foreclosure here and across the nation, the social costs of collapse are adding up in the form of higher rates of homelessness, crime and even disease.
Maryanne Hernandez bought her dream house in San Bernardino in 2003 and now risks losing it after falling four months behind on mortgage payments.
"It's not just us. It's all over," said Hernandez, who lives in a neighborhood where most families are struggling to meet payments and many have lost their homes.
She has noticed an increase in crime since the foreclosures started. Her house was robbed, her kids' bikes were stolen and she worries about what type of message empty houses send.
But it is not just homeowners who are hit by the foreclosure wave. People who rent now find themselves in a tighter, more expensive market as demand rises from families who lost homes, said Jean Beil, senior vice president for programs and services at Catholic Charities USA.
"Folks who would have been in a house before are now in an apartment and folks that would have been in an apartment, now can't afford it," said Beil. "It has a trickle-down effect."
It's all good though. Hooray for downward mobility!
ONTARIO, California (Reuters) - Between railroad tracks and beneath the roar of departing planes sits "tent city," a terminus for homeless people. It is not, as might be expected, in a blighted city center, but in the once-booming suburbia of Southern California.
The noisy, dusty camp sprang up in July with 20 residents and now numbers 200 people, including several children, growing as this region east of Los Angeles has been hit by the U.S. housing crisis.
The unraveling of the region known as the Inland Empire reads like a 21st century version of "The Grapes of Wrath," John Steinbeck's novel about families driven from their lands by the Great Depression.
As more families throw in the towel and head to foreclosure here and across the nation, the social costs of collapse are adding up in the form of higher rates of homelessness, crime and even disease.
Maryanne Hernandez bought her dream house in San Bernardino in 2003 and now risks losing it after falling four months behind on mortgage payments.
"It's not just us. It's all over," said Hernandez, who lives in a neighborhood where most families are struggling to meet payments and many have lost their homes.
She has noticed an increase in crime since the foreclosures started. Her house was robbed, her kids' bikes were stolen and she worries about what type of message empty houses send.
But it is not just homeowners who are hit by the foreclosure wave. People who rent now find themselves in a tighter, more expensive market as demand rises from families who lost homes, said Jean Beil, senior vice president for programs and services at Catholic Charities USA.
"Folks who would have been in a house before are now in an apartment and folks that would have been in an apartment, now can't afford it," said Beil. "It has a trickle-down effect."
It's all good though. Hooray for downward mobility!
Friday, December 21, 2007
God Shave the Queen!
From the Times: London house price fall of 6.8% in past month stokes economy fears.
House prices in London have fallen by an average of £28,000 in the past month, as the capital sets the pace of an accelerating property downturn, a leading survey reports today.
Rightmove, the property website that tracks asking prices for homes across the market, says that prices tumbled by £20,000 a week in affluent Kensington and Chelsea – and by more than £10,000 a week in inner-city Hackney.
The company’s data shows that house prices fell by 3.2 per cent across the country, and by 6.8 per cent in London, over the month to the middle of December.
6.8% in a month is a fuckload of a fall, boys and girls.
I thought London was special. Prices never go down in Chelsea, Kensington and Wimbledon. While the Yanks were stupid enough to make sub-prime loans in Cleveland, they were the financially savvy ones, and because of that they were going to be the financial capital of the world (along with Dubai), and New York was in trouble, and the Brits were going to buy up most of Manhattan.
What happened instead, huh?
House prices in London have fallen by an average of £28,000 in the past month, as the capital sets the pace of an accelerating property downturn, a leading survey reports today.
Rightmove, the property website that tracks asking prices for homes across the market, says that prices tumbled by £20,000 a week in affluent Kensington and Chelsea – and by more than £10,000 a week in inner-city Hackney.
The company’s data shows that house prices fell by 3.2 per cent across the country, and by 6.8 per cent in London, over the month to the middle of December.
6.8% in a month is a fuckload of a fall, boys and girls.
I thought London was special. Prices never go down in Chelsea, Kensington and Wimbledon. While the Yanks were stupid enough to make sub-prime loans in Cleveland, they were the financially savvy ones, and because of that they were going to be the financial capital of the world (along with Dubai), and New York was in trouble, and the Brits were going to buy up most of Manhattan.
What happened instead, huh?
Spinning Jenny
The LA Times interviewed the Secretary of the Treasury, a Mr. Paulson: "These are not normal times".
Henry Paulson: The key is to get the balance right and not go so far that you cut off credit and make the situation worse. The Fed has also been looking at disclosure. I think when you look at the mortgage area, it's almost a caricature of what you see in other areas. You've got pages and pages of disclosure, which doesn't mean you're getting the people good information that they can understand. It's sort of, "Everybody cover their rear end," protect themselves legally. But, I've made the case several times, with all the disclosure there should be one simple page signed by the lender and the borrower that says, "Your monthly payment is x and it could be as high as y in a couple of years." The Fed I know has done some real consumer research on this.
Did the Fed do any research as to what happens when the consumer can't even afford the initial x? Or was that not part of the "real consumer research"?
I'm no lawyer but in that situation I don't think it's called "Disclosure". It's referred to as an "Adverse Action Notice".
Of course, that does run into the "cut off credit" part.
Back to the drawing board, Mr. Secretary!
Henry Paulson: The key is to get the balance right and not go so far that you cut off credit and make the situation worse. The Fed has also been looking at disclosure. I think when you look at the mortgage area, it's almost a caricature of what you see in other areas. You've got pages and pages of disclosure, which doesn't mean you're getting the people good information that they can understand. It's sort of, "Everybody cover their rear end," protect themselves legally. But, I've made the case several times, with all the disclosure there should be one simple page signed by the lender and the borrower that says, "Your monthly payment is x and it could be as high as y in a couple of years." The Fed I know has done some real consumer research on this.
Did the Fed do any research as to what happens when the consumer can't even afford the initial x? Or was that not part of the "real consumer research"?
I'm no lawyer but in that situation I don't think it's called "Disclosure". It's referred to as an "Adverse Action Notice".
Of course, that does run into the "cut off credit" part.
Back to the drawing board, Mr. Secretary!
Thursday, December 20, 2007
Jingle Mail, Jingle Mail, Jingle All the Way...
From the Wall Street Journal: Now, Even Borrowers With Good Credit Pose Risks.
Kenneth Lewis acted far ahead of the competition in 2001, when he got Bank of America out of the business of issuing subprime mortgages. While profit margins on these loans to risky borrowers seemed tempting, the bank's chief executive believed the default risks were too hefty to justify.
So what is Mr. Lewis worrying about today? In an interview last week with Wall Street Journal editors, he expressed concern that even borrowers with strong credit scores might turn out to be default risks if housing prices keep tumbling. In other words, what is being portrayed as a credit-quality problem with the riskiest 20% of the mortgage market could spread to a much wider cross-section of home loans.
"There's been a change in social attitudes toward default," Mr. Lewis says. Bankers typically have believed that cash-strapped borrowers would fall behind on their credit cards, car payments and other debts -- but would regard mortgage defaults as calamities to be avoided at all costs. That isn't always so anymore, he says.
"We're seeing people who are current on their credit cards but are defaulting on their mortgages," Mr. Lewis says. "I'm astonished that people would walk away from their homes." The clear implication: At least a few cash-strapped borrowers now believe bailing out on a house is one of the easier ways to get their finances back under control.
Such behavior was highlighted in a page-one Journal article this week about the housing quagmire in Corona, Calif. One couple bought a home for $557,000 in 2004 and then refinanced it for increasing amounts as property prices soared, eventually ending up with an $835,000 mortgage -- and extra cash for personal expenses. The couple then bought a cheaper home in Texas and stopped making payments on the Corona home in June. As the countdown to foreclosure continues, it looks increasingly likely lenders will be stuck with that house.
First off, from a rational economic point of view, mailing back the key is absolutely the "correct" thing to do. It is somebody else's problem; in this case, the MBS holder's. They took on the risk, loaned these people the money. If it didn't work out, so sad, too bad...
Secondly, doesn't Mr. Lewis realize that value is perceived by how much effort it takes to achieve something? How useful is "good credit" when any fool gets two to three credit card offers two weeks out of bankruptcy?
By comparison, a "renter" has to all but subject him/herself to an anal probe. In most places, they have to get a credit check, two letters of reference, put up a deposit in escrow, and pay the first month's rent.
If people have no skin in the game, they will walk away. One doesn't have to be Warren Buffett to figure this one out.
The blunt truth is any mortgage product that didn't involve a hefty downpayment is doomed to fail. Period. It's all about skin in the game. No amount of tap dancing around this subject will work.
Lastly, it is critical to keep in mind the role of psychology in these things. If it becomes socially acceptable to go to a party and say, "I mailed in the keys to the bank. Hah hah hah!", the banks are doomed. Flat out, doomed. There's not a power in the world (including the central banks) that can rescue them. Social acceptibility is the ultimate arbiter of many a behavior, and if everyone's doing it, there's no stigma attached to it.
(And just for the record, I'm willing to bet that this is the scenario that will come to pass. Why? It was socially acceptable in the early-to-mid-90's, and it will be again.)
Incidentally, that story up there was in yesterday's Journal. The couple pulled out the "phantom equity", bought a brand new Lexus and a SUV, and a house in Texas (most probably in cash.)
Why?
You can't go after a house in Texas in bankruptcy, and you certainly can't go after a fully-paid one. You also can't go after a car (because a car is considered the modern equivalent of a "horse" which cannot be repossessed in Texas!) The lender is pretty much screwed. This particular couple has played the system like a Stradivarius.
Welcome to Planet Reality(TM), Mr. Lewis. We hope you will enjoy your stay.
Kenneth Lewis acted far ahead of the competition in 2001, when he got Bank of America out of the business of issuing subprime mortgages. While profit margins on these loans to risky borrowers seemed tempting, the bank's chief executive believed the default risks were too hefty to justify.
So what is Mr. Lewis worrying about today? In an interview last week with Wall Street Journal editors, he expressed concern that even borrowers with strong credit scores might turn out to be default risks if housing prices keep tumbling. In other words, what is being portrayed as a credit-quality problem with the riskiest 20% of the mortgage market could spread to a much wider cross-section of home loans.
"There's been a change in social attitudes toward default," Mr. Lewis says. Bankers typically have believed that cash-strapped borrowers would fall behind on their credit cards, car payments and other debts -- but would regard mortgage defaults as calamities to be avoided at all costs. That isn't always so anymore, he says.
"We're seeing people who are current on their credit cards but are defaulting on their mortgages," Mr. Lewis says. "I'm astonished that people would walk away from their homes." The clear implication: At least a few cash-strapped borrowers now believe bailing out on a house is one of the easier ways to get their finances back under control.
Such behavior was highlighted in a page-one Journal article this week about the housing quagmire in Corona, Calif. One couple bought a home for $557,000 in 2004 and then refinanced it for increasing amounts as property prices soared, eventually ending up with an $835,000 mortgage -- and extra cash for personal expenses. The couple then bought a cheaper home in Texas and stopped making payments on the Corona home in June. As the countdown to foreclosure continues, it looks increasingly likely lenders will be stuck with that house.
First off, from a rational economic point of view, mailing back the key is absolutely the "correct" thing to do. It is somebody else's problem; in this case, the MBS holder's. They took on the risk, loaned these people the money. If it didn't work out, so sad, too bad...
Secondly, doesn't Mr. Lewis realize that value is perceived by how much effort it takes to achieve something? How useful is "good credit" when any fool gets two to three credit card offers two weeks out of bankruptcy?
By comparison, a "renter" has to all but subject him/herself to an anal probe. In most places, they have to get a credit check, two letters of reference, put up a deposit in escrow, and pay the first month's rent.
If people have no skin in the game, they will walk away. One doesn't have to be Warren Buffett to figure this one out.
The blunt truth is any mortgage product that didn't involve a hefty downpayment is doomed to fail. Period. It's all about skin in the game. No amount of tap dancing around this subject will work.
Lastly, it is critical to keep in mind the role of psychology in these things. If it becomes socially acceptable to go to a party and say, "I mailed in the keys to the bank. Hah hah hah!", the banks are doomed. Flat out, doomed. There's not a power in the world (including the central banks) that can rescue them. Social acceptibility is the ultimate arbiter of many a behavior, and if everyone's doing it, there's no stigma attached to it.
(And just for the record, I'm willing to bet that this is the scenario that will come to pass. Why? It was socially acceptable in the early-to-mid-90's, and it will be again.)
Incidentally, that story up there was in yesterday's Journal. The couple pulled out the "phantom equity", bought a brand new Lexus and a SUV, and a house in Texas (most probably in cash.)
Why?
You can't go after a house in Texas in bankruptcy, and you certainly can't go after a fully-paid one. You also can't go after a car (because a car is considered the modern equivalent of a "horse" which cannot be repossessed in Texas!) The lender is pretty much screwed. This particular couple has played the system like a Stradivarius.
Welcome to Planet Reality(TM), Mr. Lewis. We hope you will enjoy your stay.
Wednesday, December 19, 2007
"Build it, they will come"
From the Tampa Tribune: Empty Storefronts Filled With Hope And Promise.
Although Channelside Drive, the Arts District and the Franklin Street corridor have begun to show some retail stirrings after years of stagnation and promises, few would agree that downtown Tampa has yet to show its potential as a vibrant urban center for shopping, dining and entertainment.
Retail expert Lee Nelson, a senior associate at CB Richard Ellis in Tampa, said restaurants and shops will "flock" to the newly built space. But it will take years - not months - for the vacancies to be filled.
"Retailers have to have customers," she said. "Until those condos are full of people, the retail will not come. Then it will be vibrant and exciting."
Yes, "then" it will be vibrant and exciting. Meanwhile, you expect the people to come there on what exactly? Faith?
New York's Fifth Avenue, London's Oxford Street and Chicago's Magnificent Mile have nothing to fear from downtown Tampa.
I would think not! Has this guy ever even walked down either of the three? Places like these don't just arise overnight, and they sure as hell don't arise due to some "marketing plan".
Same goes for all the cities planning "art districts". You can't plan these things!
Enjoy the Section 8 in a few years!
Although Channelside Drive, the Arts District and the Franklin Street corridor have begun to show some retail stirrings after years of stagnation and promises, few would agree that downtown Tampa has yet to show its potential as a vibrant urban center for shopping, dining and entertainment.
Retail expert Lee Nelson, a senior associate at CB Richard Ellis in Tampa, said restaurants and shops will "flock" to the newly built space. But it will take years - not months - for the vacancies to be filled.
"Retailers have to have customers," she said. "Until those condos are full of people, the retail will not come. Then it will be vibrant and exciting."
Yes, "then" it will be vibrant and exciting. Meanwhile, you expect the people to come there on what exactly? Faith?
New York's Fifth Avenue, London's Oxford Street and Chicago's Magnificent Mile have nothing to fear from downtown Tampa.
I would think not! Has this guy ever even walked down either of the three? Places like these don't just arise overnight, and they sure as hell don't arise due to some "marketing plan".
Same goes for all the cities planning "art districts". You can't plan these things!
Enjoy the Section 8 in a few years!
Tuesday, December 18, 2007
Sheer Brilliance
From the Boston Herald: Realtors face tough reality.
“If sales are down, revenue is down,” said Ruth Pino, a Carlson GMAC branch executive in Gloucester.
Quick! Nobel Committee, give this woman the Prize!
“If sales are down, revenue is down,” said Ruth Pino, a Carlson GMAC branch executive in Gloucester.
Quick! Nobel Committee, give this woman the Prize!
Comment puis-je dire?
From the Lower Hudson online: Lots of blame to go around in subprime mortgage crisis.
For months Marie Chantale Joseph and her husband, Daniel, have been unsuccessfully trying to refinance their home before their interest rate spikes in April.
Already, Daniel, a taxi driver, is working 18 hours a day and on weekends to pay the approximately $4,800 a month they owe, and Marie, a babysitter, works as many hours as she can.
"In my country it is different. No one can come and take your home away from you," said Marie Chantale, who must pay about $8,000 a month beginning in April, or lose her home to foreclosure. "Here, if they know you don't know what you are doing, they take advantage of you."
Firstly, the idea that Haiti is more ethical than the US is absurd. We're talking about literally the poorest nation in the Western Hemisphere which also has the dubious distinction of being a failed state.
Secondly, we're talking about a baby-sitter and a cab-driver buying a $500,000 house with monthly payments of $8,000.
Let me repeat that for emphasis: a baby-sitter and a cab-driver with $8,000 monthly payments. (That's $96,000 a year for 30 years, or roughly $3 million!)
Here's the "much esteemed" Federal Reserve's Survey of Consumer Finances, (PDF link) where you can figure out for yourself that even a family in the top 5% of incomes cannot possibly make those payments. They would literally be scraping by, and hope to God and cross their hearts that nothing goes wrong.
Ponder that! No fuckups for 30 straight years -- no medical problems, no unexpected expenses, no recessions, no layoffs, absolute perfection for 30 years.
What is easier to believe?
That they had no clue of what they were doing, or they were gaming the system, and after the shit hits the fan, they fuck off back to Haiti?
You can decide that for yourself!
For months Marie Chantale Joseph and her husband, Daniel, have been unsuccessfully trying to refinance their home before their interest rate spikes in April.
Already, Daniel, a taxi driver, is working 18 hours a day and on weekends to pay the approximately $4,800 a month they owe, and Marie, a babysitter, works as many hours as she can.
"In my country it is different. No one can come and take your home away from you," said Marie Chantale, who must pay about $8,000 a month beginning in April, or lose her home to foreclosure. "Here, if they know you don't know what you are doing, they take advantage of you."
Firstly, the idea that Haiti is more ethical than the US is absurd. We're talking about literally the poorest nation in the Western Hemisphere which also has the dubious distinction of being a failed state.
Secondly, we're talking about a baby-sitter and a cab-driver buying a $500,000 house with monthly payments of $8,000.
Let me repeat that for emphasis: a baby-sitter and a cab-driver with $8,000 monthly payments. (That's $96,000 a year for 30 years, or roughly $3 million!)
Here's the "much esteemed" Federal Reserve's Survey of Consumer Finances, (PDF link) where you can figure out for yourself that even a family in the top 5% of incomes cannot possibly make those payments. They would literally be scraping by, and hope to God and cross their hearts that nothing goes wrong.
Ponder that! No fuckups for 30 straight years -- no medical problems, no unexpected expenses, no recessions, no layoffs, absolute perfection for 30 years.
What is easier to believe?
That they had no clue of what they were doing, or they were gaming the system, and after the shit hits the fan, they fuck off back to Haiti?
You can decide that for yourself!
Monday, December 17, 2007
Liquidity v/s Solvency
We seem to be hearing a lot about the "liquidity crisis". However, this is fundamentally a "solvency crisis".
Here's the situation in a nutshell:
Money was loaned in copious quantities on the basis of highly inflated appraisals of questionable collateral. Then the system leveraged the motherfuckin'-crap (to use a technical term) out of an already highly leveraged position. The money was spent and is not coming back.
Please show me how "printing money" can reverse anything.
Let's review the above in terms that we can all understand:
You sell cars. I buy two with counterfeit cash. Your suppliers balk and refuse to replenish your inventory. Meanwhile, I've sold the cars, and blown the money on booze and hookers.
What are you gonna do? Possibly have me arrested but you're still out the cars and the cash.
Now add the above stated leverage, and you will see the problem.
Here's the situation in a nutshell:
Money was loaned in copious quantities on the basis of highly inflated appraisals of questionable collateral. Then the system leveraged the motherfuckin'-crap (to use a technical term) out of an already highly leveraged position. The money was spent and is not coming back.
Please show me how "printing money" can reverse anything.
Let's review the above in terms that we can all understand:
You sell cars. I buy two with counterfeit cash. Your suppliers balk and refuse to replenish your inventory. Meanwhile, I've sold the cars, and blown the money on booze and hookers.
What are you gonna do? Possibly have me arrested but you're still out the cars and the cash.
Now add the above stated leverage, and you will see the problem.
Thursday, December 13, 2007
Have you heard of ...
... Bankhaus Herstatt?
You will, kids, you will. This is like déjà vu, all over again!
You will, kids, you will. This is like déjà vu, all over again!
Monday, December 10, 2007
Swiss Cheese
Once again, the Wall Street Journal reports: UBS Gains Two New Investors, Writes Down $10 Billion.
UBS AG Monday said that two strategic foreign investors committed to inject capital worth 13 billion Swiss francs ($11.5 billion) as part of a broader move to strengthen capital as the Swiss bank announced a further $10 billion in write-downs on subprime holdings.
The bank said it was now possible that it will record a net loss for the full year.
UBS is issuing mandatory convertible notes worth 13 billion francs for these investments, which will pay a coupon of 9%.
Beyond the investments from these two parties, UBS plans to sell treasury shares and replace its 2007 cash dividend with a stock dividend, boosting capital by 6.4 billion francs.
9% while 3-month Treasuries are barely yielding 3%!
That's like going down the pawn-shop to borrow from Fat Tony.
And a stock dividend is less than worthless.
Before the stock dividend, each investor owns a certain fraction of the company. After the dividend, ta-daa, they own the same fraction.
It's like your mom cutting a cake into two pieces, and saying, "Now you have double the cake."
Watch out,suckers er, UBS investors!
UBS AG Monday said that two strategic foreign investors committed to inject capital worth 13 billion Swiss francs ($11.5 billion) as part of a broader move to strengthen capital as the Swiss bank announced a further $10 billion in write-downs on subprime holdings.
The bank said it was now possible that it will record a net loss for the full year.
UBS is issuing mandatory convertible notes worth 13 billion francs for these investments, which will pay a coupon of 9%.
Beyond the investments from these two parties, UBS plans to sell treasury shares and replace its 2007 cash dividend with a stock dividend, boosting capital by 6.4 billion francs.
9% while 3-month Treasuries are barely yielding 3%!
That's like going down the pawn-shop to borrow from Fat Tony.
And a stock dividend is less than worthless.
Before the stock dividend, each investor owns a certain fraction of the company. After the dividend, ta-daa, they own the same fraction.
It's like your mom cutting a cake into two pieces, and saying, "Now you have double the cake."
Watch out,
Saturday, December 08, 2007
Dow (Corning) Deflation
Well, the Wall Street Journal has done it again: Evidence Grows That Consumers Are Pulling Back.
The latest sign that growth in consumer spending, the mainstay of the U.S. economy, is slowing? A nip and tuck in spending on cosmetic surgery.
The slowdown was a hot topic at the meeting of the American Society of Plastic Surgeons in Baltimore this fall. One breast-implant maker sees hints of a slowdown in demand.
Well, looks like Bubbles and Jiggles are going to go down after all (and not that way either, you perverts!)
And who needs AAA-rated bonds when you have double-D's?
Russ Meyer, come back. America needs you!
The latest sign that growth in consumer spending, the mainstay of the U.S. economy, is slowing? A nip and tuck in spending on cosmetic surgery.
The slowdown was a hot topic at the meeting of the American Society of Plastic Surgeons in Baltimore this fall. One breast-implant maker sees hints of a slowdown in demand.
Well, looks like Bubbles and Jiggles are going to go down after all (and not that way either, you perverts!)
And who needs AAA-rated bonds when you have double-D's?
Russ Meyer, come back. America needs you!
Tuesday, December 04, 2007
House Prices and Foreclosures
(Source: Boston Fed.)
This is data just for Massachussetts.
There are two ways to interpret this graph:
The rise in prices predicts foreclosures. It suggests that people bought houses they couldn't really afford on their incomes.
The second is that if you look at prices, they didn't hit the 0% growth mark until after foreclosures had taken off. That suggests that people were buying houses with the implicit assumption of rising prices.
Both, of course, are familiar to people who have been following this mania.
Saturday, December 01, 2007
Beer Bingo
Truly a venerable tradition if ever there was one!The rules are simple.
You have to swill one gulp of beer each time one of the words in the above Alphabet Soup is mentioned in the press. If you don't know what the word means, and you admit it, you have to take three gulps. If challenged to explain, and you fail, you must down what's left in the glass.
Of course, this will mean that you will frequently be liquored up before breakfast but that's probably the only reasonable way to deal with the bollix-ed cock-up clusterfuck that is the US Economy.
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