April 20 (Bloomberg) The Office of Financial Stability today released data showing conclusively that the economy has stabilized. The new Undersecretary proudly stated that since his arrival the new training wheels he pioneered the use of has significantly reduced the wobble found in earlier editions of the economy. When questioned, he responded "We got hope that this change will have benificial results for all of America. Now, the economy will maintain traction and course on the sidewalk of Mainstreet USA."

I just found a SoCal duplex in the bottom of my Cracker Jack box!!!

Ken wants to take some of the thrill away from CR loitering ...

5500 sq ft, so this is going at about $148/sq ft. That number should send shivers through the spine of a lot of CA homeowners.

" iceman (member) wrote on Mon, 04/20/2009 - 10:59am.

5500 sq ft, so this is going at about $148/sq ft. That number should send shivers through the spine of a lot of CA homeowners. "

You've got to factor in the size and overall price. A house 1/3 that size might well go for more per square foot, even in that market.

There's a growing realization that the big houses are white elephants, unless you need a frat house or rest home. I think that's priced in.

420 on 4/20.

Is there a triple-witching day for weed?

Goat herder, if you are in CA, prices have already gone whoosh past 2005 numbers. You could easily be underwater even if you paid cash for the improvements.

If you are only mildly underwater, you might find that the rate is so much lower for refi that you should take a smaller refi and make up the difference in cash. For example, $550k house, $500k loan, house now worth $480k. If you could get a $480k refi at 2% less than your current interest rate, do it. Pay the $20 of cash, you'll get it back in about 2 years.

If the house appraises for $300k now, I sure wouldn't plunk down $200k in cash to pay down the loan and refi.

After seeing the GS move, maybe they're going to put the write down into the bucket month, and hope to sell at a profit in the next fiscal year. That would work very well if there weren't any other bidders.

sbarrkum:

The source site is highly problematic.

Gist is probably correct, but don't buy the whole set of numbers or specifics that a leaked copy.

Plenty of fodder on that in earliest morning thread.

Many, many 5000 to 7000 sf homes in Palm Beach, FL are selling for under $100/sf.

Palm Beach?

Probably former Madoff customers ....

It's weird where I am in LA. There seems to be an area bounded by Mullholland Dr, Highland Ave, the 10, and the Pacific ocean that is protected by a powerdul Reality Distortion Field. Lots of commercial/residential vacancies and the RE market has all but ground to a halt. Yet restaurants are busy, RE prices are stuck in 2007, rents are stuck at last years rates, and buyers/sellers/LL's still think this little speed bump is gonna go away soon. Even the "investor" in Jim the Realtors ABC piece was from LA. Mind Boggling...

bearly said on last thread:

"Just look at all the ultras. They approach ZERO over time. Check out YTD on FAZ & FAS, both ~60% DOWN."

this is so whack. most of these ETFs look like scams when you consider their charts compared to what they supposedly follow. seems like a way to divert selling pressure that would surely hit individual stocks by injecting ever increasing amounts of ultra shares into the market. eventually supply and demand for the shares takes over as an oversupply of shares develops.

>homedad43 Mon, 04/20/2009 - 2:23pm.

Thanks I'll have look at the morning threads.

....totally OT........

It was related inside our bar here that an "older unnamed country western singer" that is CLOSELY associated with Farm-Aid, was going to perform a concert here at Sheri's Ranch (a publicly traded local brothel). He turned down the gig when found he couldn't bring his "herbal remedies" onto the property. He said he'd LOVE to perform there. I'd even volunteer as Security for a free Pancho & Lefty concert!

It's a beautiful house.

might work as a front for meth-cooking lab ...

Sell in May and go away. Seems like the smart money is getting a jump on things.

OT,
Next economic report is Thursday's Initial Claims. Of course, we get more earnings in the mean time.

Category Apr 11 Apr 4 Mar 28 Mar 21 Mar 14
Initial Claims 610K 663K 674K 657K 644K
4-Wk Moving Avg 651K 660K 658K 650K 650K
Continued Benefits 6022K 5850K 5745K 5567K
4-Wk Moving Avg 5796K 5648K 5501K 5333K

There's finally some movement RE where we're at, but the trick is that those that sell are only on the market for a fairly short period of time. Once it's been there for more than a month, then it's going to sit and sit and sit. I know of about 5 houses in my immediate town that are now sitting empty.

Also, most houses selling tend to lower price range, below $200k.

Large older house up the road - on market since last summer - is going to auction block next month. Circa 1900 farmhouse with several acres still next to it and they haven't been able to move it at $425k.

Won't be buying, but I'll be there...

homedad43 (member) wrote on Mon, 04/20/2009 - 2:40pm.
I know of about 5 houses in my immediate town that are now sitting empty.

Five???

consider yourself blessed ....

Foreclosure moratorium was lifted just in time for spring selling season. Normal sellers trying to sell in this market with pent up foreclosures being added to inventory are screwed. Thank you USSA.

"JBR, west LA is pretty much the castle keep of the LA RE market. It's the greatest concentration of wealth in the LA area, and is next to the ocean"

Oh, I know, I've lived here for quite some time It still boggles the mind... the same forces that are taking down other areas are getting underway here. If one chooses to look, the evidence is there. It's the pervasive sense of denial that blows my mind. I'm in the top 5% income-wise in this area, and I wouldn't touch overpriced RE with a 10 foot pole.

CNBC commentators are so frumpy when the market is down, jumping for joy and cheer leading when the market is up. It's amusing to watch.

giskard wrote on Mon, 04/20/2009 - 2:52pm.
i love the current marketwatch investor alert:

Marketwatch has degenerated into a site fit strictly for comic relief ...

Elmer Fudd wrote on Mon, 04/20/2009 - 2:56pm.
frazier, lift that mug off the canvas

Currently Elmo has Frazier in an arm bar. Frazier not realizing the rules of MMA is stunned and bleeding.

" blackhat (member) wrote on Mon, 04/20/2009 - 2:24pm.

have to say it:

Why does Elmo hate America?

--bh"

He's from France-

" homedad43 (member) wrote on Mon, 04/20/2009 - 2:41pm.

BSR:

"publicly traded local brothel"?

How do they pay dividends?

homedad43"

A piece at a time?

Is this called "Trading Losses"? Best off-load those assests. I am sure some banks are now kicking themselves for not being aggressive up front instead of waiting for a turn around.

Jumpy day, huh?

I dont understand the move in crude.... Iran and Isreal mincing words again......

I am sure some banks are now kicking themselves for not being aggressive up front instead of waiting for a turn around. ~Barley

I have a buddy who is foreclosing on a property he bought in Santa Monica to flip. He bought it for 900K. He got behind. He hustled and found a short buyer for 715K.

CFC told him to pound sand.

Its now going full FC. It wont get near the seven fifteen he had lined up...

He thinks its kinda fitting / funny. So do I...

It's going to be really disappointing if we see a severe recession and never get a single circuit breaker on the way.

PPT to the rescue ?

The government plans to release the results of it's stress tests of the 19 largest banks on May 4. There is considerable uncertainty about the level of detail that they will release. They are afraid that if they let out specific information about banks which "fail" the tests, then it would actually undermine confidence in those institutions. While the Administration has said that there will be no "failures" per se, those that are shown to be undercapitalized will have six months to raise additional capital from the private sector. If they are unable to, then the government will provide the funds. One of the big questions is if "passing" will be based on the baseline economic scenario, or upon the "more adverse" scenario. If it is based on the baseline, then the whole exercise is just a monumental waste of time. After all, if you look at your personal budget and then assume that a magic pink pony that poops platinum arrives on your door step, then you should be able to meet your bills. The baseline scenario is sort of like that, it is based on an extremely rosy economic scenario. Even the "more adverse" case might not be adverse enough. The official position though is that this is a pass fail test that no one will fail. Well if that is the case, it is not much of a test! If only very general aggregate numbers are released, there will be very little credibility left for the Treasury with the markets, the public and with Congress. As one un-named administration source said in the New York times last week, "the purpose of these tests is to prevent panic, not cause it". That is a refreshing blast of honesty, since they were originally sold as a tool to determine just how solvent the banking system really is.

There are UNCONFIRMED leaks of what the tests show, including this one from http://turnerradionetwork.blogspot.com/. (there is much doubt about this source)

"The Turner Radio Network has obtained the stress test results. They are very bad. The most salient points from the stress tests appear below.

1) Of the top nineteen (19) banks in the nation, sixteen (16) are already technically insolvent.

2) Of the 16 banks that are already technically insolvent, not even one can withstand any disruption of cash flow at all or any further deterioration in non-paying loans.

3) If any two of the 16 insolvent banks go under, they will totally wipe out all remaining FDIC insurance funding.

4) Of the top 19 banks in the nation, the top five (5) largest banks are under capitalized so dangerously, there is serious doubt about their ability to continue as ongoing businesses.

5) Five large U.S. banks have credit exposure related to their derivatives trading that exceeds their capital, with four in particular - JPMorgan Chase, Goldman Sachs, HSBC Bank America and Citibank - taking especially large risks.

6) Bank of America`s total credit exposure to derivatives was 179 percent of its risk-based capital; Citibank`s was 278 percent; JPMorgan Chase`s, 382 percent; and HSBC America`s, 550 percent. It gets even worse: Goldman Sachs began reporting as a commercial bank, revealing an alarming total credit exposure of 1,056 percent, or more than ten times its capital!

7) Not only are there serious questions about whether or not JPMorgan Chase, Goldman Sachs,Citibank, Wells Fargo, Sun Trust Bank, HSBC Bank USA, can continue in business, more than 1,800 regional and smaller institutions are at risk of failure despite government bailouts!

The debt crisis is much greater than the government has reported. The FDIC`s "Problem List" of troubled banks includes 252 institutions with assets of $159 billion. 1,816 banks and thrifts are at risk of failure, with total assets of $4.67 trillion, compared to 1,568 institutions, with $2.32 trillion in total assets in prior quarter. "

We have NO IDEA OF HOW ACCURATE THIS REPORT IS, but it is out there in the market and may be one of the reasons the market and especially the financials are down as much as they are today. We would note that it is illegal to reveal the results of a bank exam, so whoever gave this info to Turner could be in big trouble. Presumably, the Secretary of the Treasury would be exempt from that if the results were openly released.

If indeed 16 of the top 19 are insolvent using the baseline scenario, then the economy is in big trouble. This report would seem to be in direct conflict with the expressed desire of many of the largest banks, including Goldman Sachs (GS) and J.P. Morgan (JPM) to get out from under the TARP as soon as possible. It would at first blush also contradict the stream of better than expected earnings coming from the big banks, but only at first blush. The quality of the earnings at the banks has been exceptionally poor, even if the overall levels have surprised to the upside.

For example, both Bank of America (BAC) and Citigroup (C) reported multi billion dollar gains from marking their liabilities (but not their assets) to market. In other words since their bonds are selling below par, they could theoretically go out and buy them back and make a profit. However, a bond will sell below par for one of two reasons, either because ambient interest rates have gone up, or because there is substantial doubt about the ability to repay. With the entire yield curve near record lows, it is clearly not the former. Also, most bonds come with covenants that say the bond can not be called (i.e. paid back) before a specific date and then only at a specified price, which is usually above par. If such theoretical profits" are the only thing that put you in the black, you are not in very good shape. Gee just think about how much money they would make if they declared bankruptcy!

However, we know that there have been huge declines in wealth. A good deal of that decline has most likely been borne by the banking system, for example through foreclosures. These losses are extremely large relative to the levels of bank capital. It seems likely that there is some truth to the report. If true, then we really do have no other real option than going the "Swedish route". Put the banks into receivership, clean them up, in the process wiping out the common and preferred shareholders. Bondholders would become the new shareholders and the banks would return to the private sector. Absent that we condemn ourselves to throwing endless federal dollars into financial black holes, zombie banks that are just barely alive and which will lead us to a Japanese style lost decade.

So much in long term CA real estate prices depends on net migration. If there is sustained outward migration, there is no price floor. If the population remains very nearly constant, prices will drop to 1996 levels and slowly recover.

Some outlying areas are so empty that homes there will soon hit the "Detroit Limit". I like this term. It's where the costs of selling a house (commission, unpaid property taxes, HOAs, any repairs) exceeds the money received from selling it. As you approach the Detroit Limit, owner and lender behavior becomes bizarre. People start claiming they don't own a home. Localities start trying to stick the most recent known owner with expenses. Almost any renter is accepted.

Borocco Mama wrote:

$800k stiil way too high. Should be more like $200k, and will be in 2 years.

So you've been to "Esco" ! LOL!

some investor guy (member) wrote on Mon, 04/20/2009 - 12:48pm.
Oil at $46 a barrel today. Last year, I forecast it would make it to $22-28 a barrel during 2009. I'm still expecting that to happen.

'splain pls??

'Now, the economy will maintain traction and course on the sidewalk of Mainstreet USA."'

He forgot to say: 'Going forward, at the end of the day', and he forgot to say it while standing in a bully pulpit. That's no way to undergo a sea change.

Dirk.......

You write for the rags. Tell 'em the Stress Test doesn't mean JACK. All us idiots out here know that UncleObama & TPTB run a rigged game and the rules don't matter - you just know not to get into the game. Pretty simple. There's been nothing more detrimental to the confidence of these times than the current administration - even when compared to the worst previous Prez of the century, Master Bush.

I'm guessing crashing through the lows of the day into the close isn't a bullish signal?

OT market chatter:

Interesting to see TBT show up in the top 3 block trades for dollar volume in Buying on Strength...

http://online.wsj.com/mdc/public/page/2_3022-mfgppl-moneyflow.html?mod=m...

Elmer Fudd,

On the brightside we're almost a quarter way through this part of the lost decade. Just 3/4 of the way to go. I don't feel better either.

"how the [****] you guys were so stupid and selfish idiots before it all started?"

That has been said at least every few generations since people could talk. About a hundred thousand years. Approx.

Don't the Germans say: 'Mann schlept sich durch'?

CK,

For some reason your question makes me think of "Waterworld" - when the tanker is going up in flames and the little girl asks, "So was this all part of your grand vision?"

Samdog, there were a few other streets with the same....

Crazy stuff...

As far as I know Turner is not all that reputable a source, however, that being said, the report "smells right". Some of the stuff Turner has gone with in the past is supposedly over the top and borderline white supremisist so I don't think you can treat the report as gospel, but given what else we know, I would not be surprised if it is correct at least in broad outline form.