reposted response to hc's great post on the last thread...
hc @ 11:25
While I'm of the same mind about the motivations behind the FASB rules and guidance and am also a current renter waiting for a more solid bottom in housing prices, I come to some different conclusions than you. I'm definitely still trying to get my head around all of this, so I'm sure some of this is wrong.
- as long as unemployment and REAL economic activity are depressed, consumers will be working to reduce their debt levels. thus, while this may be an inducement for banks to lend more freely, I'm not sure their will be the same appetite for debt from the customers.
- if the banks start stashing all their REOs in Level III for the long term - they will tank the housing market. after all, these are accounting for something like 40% of existing sales.
- not sure if the HELOC ATM can be opened again if LTV ratios continue to rise based on the V continuing to deteriorate (see above point)
- not sure this will affect the default rates on credit cards, which is the big issue in that market. yes, if might make existing CC ABSs look better on the balance sheet, but I don't see the CC companies aggressively extending new credit to a faltering consumer or consumers looking to lever back up with doubts about their jobs and asset values (points 1 and 2)
Just lots of moving parts and unintended consequences. Time will tell.
How in the heck can you think there will be a recovery later this year? Household debt-to-income is at levels never before seen.
No way will personal consumption pick up until household debt-to-income gets chopped in half.
Gosh, do you think?
The lights go on slowly.
Possible BFF candidate:
"WSB Financial Group, the parent company of Bremerton-based Westsound Bank, said in a regulatory filing Friday that there is "substantial doubt" about its ability to continue operating the bank.
The beleaguered bank, hard hit by massive construction lending losses, said in its annual report that, as a result of "steep losses" in 2007 and 2008, it may not be able to keep the bank open.
It also placed blame on enforcement action from the Federal Deposit Insurance Corp. (FDIC) that has limited its ability to increase deposits. It has been operating under a cease-and-desist order since last year.
The company revealed in its filing that the FDIC has found the bank to be in non-compliance in some areas of its enforcement agreement. In particular it found the bank had violated consumer banking laws, according to the annual report."
http://seattle.bizjournals.com/seattle/stories/2009/03/30/daily65.html
With CRE imploding upon itself, where will all this new found money be spent?
More Bla Bla Bla
We never recovered from the dot.CON bust. Sure it felt like a recovery for a period while the majority were impoverishing themselves with debt, but we are now collectively much worse off.
It's time to stop digging a deeper hole!
No way will personal consumption pick up until household debt-to-income gets chopped in half.
Haven't you heard the savings rate is up, up, up?
/sarcasm
Ken (hoocouldanode), this comment system is way better than JS kit. Cheers!
Ken (hoocouldanode), this comment system is way better than JS kit. Cheers!
I agree, but Post-It notes taped to my monitor were better than JS-Kit.
Old news for those of us here. Nobody knows what will drag us out of this recession. I suppose the economy will stop shrinking about the time that durable goods actually need to be replaced. But that could be years and would hardly constitute "growth."
What this guy didn't say, or didn't care to think: three more years of downward direction, and this country will flip its lid.
This is true. Consumer spending is not bottoming IMO. People are having credit lines cut, reduced etc. I wouldn't call the last two months a recovery but whatever it was it will fail. Auto sales may have bottomed but the new baseline will still wreck havoc on the remaining auto makers.
KEN +1 enjoy the new system.
Right on the mark Angry Saver...no growth, just borrowing, and more borrowing and more borrowing.
Go through some of the sheets, some people refied their property 10 time in one year!
Non-receivership FDIC actions:
"Federal regulators are ratcheting up pressure on beleaguered Venture Bank of Lacey, giving it 60 days to raise more capital or sell itself.
In a four-page directive that was made public Friday, the Federal Deposit Insurance Corp. (FDIC) warned the Washington bank that if it doesn’t sell enough voting shares or “obligations” to boost its capital levels, it will have to merge or sell itself to another bank.
Venture has until the middle of April to make changes following the directive, which was issued to the bank on Feb. 13.
Venture Bank has been hard hit by its soured investments in mortgage giants Fannie Mae and Freddie Mac, a loss to the bank that has totaled $41.6 million.
The bank has 18 branches and $1.2 billion in assets. Bank officials were not immediately available for comment.
Venture was warned by the FDIC last November that it was undercapitalized and was told to submit a plan to correct that status within 45 days.
The bank submitted a plan to regulators at the end of December, but the FDIC called the plan “unacceptable,” according to the regulatory order made public Friday.
Venture also ran into trouble when it reported at the end of December in its regular condition report to regulators that it was “adequately capitalized.” The FDIC and the Washington Department of Financial Institutions, the state regulator, disagreed, calling the bank “undercapitalized due to significant concerns regarding the reliability of the bank’s financial statements,” according to the regulatory order.
The FDIC points out that Venture’s condition continues to deteriorate and management has “not demonstrated the ability to return the bank to a safe and sound position,”
http://seattle.bizjournals.com/seattle/stories/2009/03/23/daily61.html?s...
Requiring a merger or sale; that sounds a lot like the WaMu scenario; this might explain why we're seeing fewer receiverships that we've been expecting.
re: disney
Don't forget that own of their crown jewels, ESPN, is on the hook for billions in multi-year television contracts with almost every single major sports league. Also, read a story that predicted work stoppages for both the NBA and NFL during the next two years because the labor and revenue contracts are so out of whack with reality.
All you who wonder where to put your money in this environment, you'll find that virtually every idea is wrong.
It's like gambling, the only way to win is to not play. Anyone with an opinion of which game is Vegas has the best odds is simply saying which game will lose you the least or the slowest.
Like the lottery winner paraded out on the local news, or watching the final table at the WSOP, you'll be tempted by those who are lucky enough to win. It's very exciting to interview those on the sidelines who simply were able to keep what they have.
Breaking even is winning when everything else is gambling. No one makes money off you if you don't play. If you do play, you first have to pay the salaries of those who run the game before you get your cut.
Basel Too good point feeling even better.
Why can't smart people get it straight?
There will be no reversal of Bernanke's global pump-priming and money-printing until well after any recovery is underway, not before. There is no real plan or intent to reverse quantitative easing, and by definition it can't be reversed without catastrophe.
It's beyond Bernanke's control, anyway. He's inspired the rest of the world to go along with his experiment, and all the nasty mutant economic lifeforms it creates.
Why can't smart people get it straight?
There will be no reversal of Bernanke's global pump-priming and money-printing until well after any recovery is underway, not before. There is no real plan or intent to reverse quantitative easing, and by definition it can't be reversed without catastrophe.
It's beyond Bernanke's control, anyway. He's inspired the rest of the world to go along with his experiment, and all the nasty mutant economic lifeforms it creates.
wow, look at all the companies still have to report 4th qtr #s.
http://www.bloomberg.com/apps/ecal?date=20090407&strtpt=1&endpt=50&c=US
test
Funds from the Troubled Asset Relief Program are only replacing lost capital, not increasing it. When might they end?
Another way: Bondholders and stockholders have eschewed fundamentals and based investment decisions based on taxpayer funding by fraudulent government intervention. When might that end?
The wealth effect is largely a confidence effect. We don't necessarily need to restore all of the paper wealth to get consumers spending again. We do, however, need to restore confidence that the system works, that it makes sense to plan and to budget, that there are such things as rules and laws and that these rules and laws don't change overnight subject to some pre-textual exigency (i.e. the Fed's section 13(3) powers).
Here is an example of a potential confidence-builder:
Fund Operator Merkin Charged With Civil Fraud
http://www.reuters.com/article/newsOne/idUSTRE53548420090406
"New York Attorney General Andrew Cuomo did not accuse Merkin of knowing about Madoff's massive Ponzi fraud, but said in his lawsuit that Merkin ignored irregularities and other glaring red flags related to Madoff's investments."
If that became the standard for prosecution -- that the accused ignored irregularities and glaring red flags -- we could spend the next year watching scores of Wall Street executives face indictments. This would presumably open the door to new management and a new attitude on Wall Street. What we need now are executives in the mold of Wick Simmons, the widely-admired CEO who steered Prudential out of scandal in the early nineties. No one expects the banks to be run by saints (certainly Simmons had his detractors), but there needs to be a restored confidence that investing is a businessman's risk and that the economy is not a fool's paradise strewn with financial land mines.
Did anyone else notice that CR ranked #31 on the list of the "top 200 blogs"?
Second only to Krugman in the 'business' category.
http://www.wikio.com/blogs/top
Hoocoodanode? Awesome.
Mr. Altman's spot-on analysis shows why the talk of bottoms is worthless.
Recovery now means the slowing of the 2nd derivative of GDP growth. If GDP isn't falling as fast, we must be recovering! Hurrah!
Anyone who believes we will see GDP growth this year or next year is delusional.
"This time there is still too much excess inventory"
Nice summary CR. I like especially how you found a new twist on the hoary "This time it's different!"
The crop of blue chips stocks are dwindling. I fear for those Fidelity Fund type buyers.
My tag line: What a sham!
Here's the skinny.
Over the last few years it has become a personal goal/crusade to make the words wall street, finance and sham synonymous. My latest Google search of the words finance & sham returned 1,140,000 hits. Hoocouldanode!
The longest journey starts with a single step!
Behold the power of the internet!
Bob Dobbs,
Great story on your blog. Been there, had the anxiety attacks, watched the axe...
That was well written. It really brought back crappy memories. Layoffs suck in so many different ways.
All those buying guns and gold are going to start shooting themselves....GLOD is sinking fast.
Does this mean I can laugh at people who use the term "generational bottom" when talking about the stock market?
foreclosures starting to hit my neighborhood.
this is just beginning.
"Don't forget that one of their crown jewels, ESPN, is on the hook for billions in multi-year television contracts with almost every single major sports league."
And with big auto and many others slashing ad budgets, they and GE are in a world of hurt. I predict that the next super bowl will lose money for the broadcaster.
Shnaps
Which bloogers does Obama want us to ignore?
“Part of the reason we don’t spend a lot of time looking at blogs,” he said, “is because if you haven’t looked at it very carefully, then you may be under the impression that somehow there’s a clean answer one way or another — well, you just nationalize all the banks, or you just leave them alone and they’ll be fine.” - BHO
http://www.calculatedriskblog.com/2009/03/obama-another-750-billion-need...
Even if we hit bottom people are delusion about the recovery. Obama is betting on 3-4% growth. I'll say 1%.
Yes, the recovery will be sluggish. I have said for sometime expect -1 to +1% growth for 2010-2011.
Average Joe, there isn't really any way not to play. If you have any money at all, you have to put it somewhere. The mattres is "somewhere". So is an FDIC-insured account. Life is risk. Some risks might be better than others, but there is no way not to play.
"And with big auto and many others slashing ad budgets, they and GE are in a world of hurt. I predict that the next super bowl will lose money for the broadcaster."
Cavs/Spurs Championship would be a ratings killer. Of course I am sure the refs will make it LA/Boston again. Are the Knicks even IN the playoffs?
I wonder if Cramer will go back to any colleges? I fear kids with their parents will be waiting with pitchforks.
I assure you that the boomers are definitely the bottom of the generational ladder. More assholes than elbows.
blackhalo. No knicks
"My latest Google search of the words finance & sham returned 1,140,000 hits. Hoocouldanode!"
As far as who might lead us out in recovery, Google is doing interesting things.
CVS Added to Google Health Pharmacies
http://www.pcmag.com/article2/0,2817,2344488,00.asp
BTW - I love this new commenting system!!!
Right on the mark Angry Saver...no growth, just borrowing, and more borrowing and more borrowing. ~Shill
I like to say that we were the same as the Japanese except they saved for the last 15 years and bit the bullet and we borrowed and heloc'd our way to temporary property...
The chickens are coming home to roost....
crispy&cole, thanks to Ken - and it will only get better!
best wishes.
CR
It seems you are holding onto hope that this will not be a prolonged depression even when all indications say it will.
"Also, in a typical cycle, residential investment (mostly new home construction and home improvement) leads the economy out of a recession."
If this is the "conventional wisdom", why not follow it to it's logical conclusion? That the recovery is a long way off.
Geithner said it best:
"Just as an example, you know, if you had to sell your home tomorrow, in a world where nobody could get a mortgage to buy your home, you’d have to sell at an enormously low price. "
Why don't you even entertain the idea that this will come to pass? You don't have to believe that it's the most likely outcome, but you would be a fool to dismiss it as a possibility.
External debt : real GDP(not the artificial number they pull from their ass) indicates that this crisis will include a currency crisis of some sort, and as a likely result the government will fail to continue it's financing of the nations housing markets.
The writing is on the wall, put on you glasses and start reading.
Well, there is a silver lining. Consumers will have much lower expenses. Between the reductions in mortgage cost, gas prices, and less of a tendency to spend frivolously to impress others, balance sheets can get better pretty fast when unemployment drops back to more normal levels.
Cash Only
this is not a depression its a slow meltdown and reversal over the past 25 years.
Droll,
I agree. There are so many people in the "investment" business that need to be paid. They used to pay themselves out of the false profits. Now that those are gone, they'll pay themselves out of the fact that we are forced to participate in some way. Since so many have refused, the powers that be are paying them with our future taxes and/or inflationary dollars.
Even those who try their darndest to step aside, wlll find that through tax policy and false incentives, that they are forced to play.
The anger will continue to grow.
It's like the entire country was living and working in vegas. Even if you didn't sit down at the table, you'll find your financial health depended upon on those who did. Trust me though, those who sat at the tables didn't fund the hotels and jobs of others by being winners.
Wallstreet was worse than Madoff. See Madoff paid a huge staff to do nothing, paid rent on his business building, bought mansions and lived a high life style but he didn't also lose money in the market.
What can you say about huge fund managers that paid the same size staff, lived the same high life style, AND ALSO LOST MONEY IN THE MARKET!!!!
Another Madoff conspirator (it wasn't a conspiracy) gets slapped with a civil fraud suit: http://www.reuters.com/article/businessNews/idUSTRE53548420090406
Don't count on it. The ones buying Gold as well as Brass, will prosper, the rest...are in the way as they are to stupid to see what is coming,.....so be it.
My wife and I are older than the boomers. I was born in the 30s. We heard stories about the GD when we were children, and it's interesting that people think it has come around again. The generation before us that lived through the GD as adults could be hard-bitten, cautious, careful.They were survivors. But in other ways they were very different from the present generations. Think of the 60s and you'll understand some of the reasons.
Whenever I read about WWII I think about the young people of all nations who didn't make it. What could they have contributed to the world? Let's hope another generation of young people isn't squandered the way that one was.
Last years highest paid CEO. I believe his company crashed pretty hard last year. Wonder what hed did to deserve that absurd sum. Vote in the cash reserve poll as well and shake your head at the bottom callers.
http://money.cnn.com/2009/04/05/news/top_ceo_pay/index.htm
"if you had to sell your home tomorrow, in a world where nobody could get a mortgage to buy your home, you’d have to sell at an enormously low price." - Geithner
Yeah, I'm thinking, MY view of enormously low and Timmy's are two entirely different things. 2.5 to 3X income seems reasonable to me. Somehow, I do not think Timmy was thinking <2.5. But, he is looking through banker colored glasses.
Shill
I think we agree. The US will never get significant growth without a large increase in inflation. Productivity gains will slow because of housing and aging.
Tim waiting for 2012
I didn't say it was a depression, although it arguably is, especially if we had real GDP numbers. I said the indications point towards it becoming a depression.
This long, deep cycle where a supernova of leveraging created the last illusion of wealth (as big players exited) may lead the way of Spain's demise (overborrowing despite new world PMs), France's financial crisis which lead to the Revolution and Bonaparte, Germany's fall with debt, war, and hyperinflation going hand in hand.
There can be no healing or restoration of true economic wealth creation based on the present system. TPTB will try to preserve it at all costs, and shift its focus on different parts of the globe to prey on the next rich field, while the USA's shall lie fallow for a long season with all attending turmoil.
Currency, stocks, bonds will gyrate. PMs will gyrate. But the best store of recoverable value in the deep long cycles has always been PMs. Hopefully you are averaging in since AU was $300.
Cycle: New discovery (new world), frontier land and natural resource colonization, basic infrastructure build (canals and railroads, highways), technical inventions and physical products (guilds), heavy industry, light industry, design based globalizing, wage arbitrage, financial innovations leading to increased leverage, speculation. Speculation on existing industries, equities, commodities,corporate debt, sovereign debt. Final leg down has deep capture of gov't by financial elite destroying oversight and regulation, manifold leveraging of geriatric industry, deep rooted and systemic financial fraud, ultimately leading to speculation upon entire tax base of country i.e. land and structures. Crash leads to manipulation of sovereign bonds and currency. Currency destroyed as proxy for goods and services which cannot keep up with demands of usurious interest and state expenditure. Middle class financially ruined. Price stability and full employment generationally lost. Discord and discontent. Uprising. Revolution or war. Destruction of excess capacity with usury driven out of the system. Restart.
Feedback effects still ramping, with U-6 UE now a leading indicator for continuing records in consumer loan default rates...
the optimistic scenario: the answer is: not soon
I actually give credence to the generational behavior theory. Maybe I like the thought of a generation of heroes. We need it.
http://www.fourthturning.com/html/exploring_history.html
Hmmm............"BIS Admits $190 Billion Silver Fraud"
...."the physical silver investor market annual demand is about $1.3 -$2 billion per year! And yet, they sold $100 billion in new paper silver in the span of 2 years, which is over 50 times as much paper silver as exists in the world annual physical silver investment market!"
http://news.silverseek.com/GoldIsMoney/1239035223.php
"Water rights are the most valuable commodity in the west."
...........Water rights are over-issued in most counties statewide. Clark County has tried to rob other counties of them as well. There's nothing quite like clean clear water 140' below you.
Just an observation about that roughly 20 year boomer span - they coasted on their parents having experienced the Great Depression and winning a global war, and they expect to coast on the labor of their children and grandchildren.
In between their youth and their dotage, they are the generation that were in charge when America was run into the ground, under a draft dodger and an alcoholic cokehead - and yes, that 16 year period does a remarkable job of summing up the accomplishments of that generation, encompassing any number of extremes - poor white boy and patrician child of New England wealth, from one of the most intelligent men to be elected president to one of the most, um, average.
Ducking their civic duty while always doing their best to retain all the advantages of their position - like this classic line 'I decided to accept the draft in spite of my beliefs for one reason: to maintain my political viability within the system.' http://www.urbin.net/EWW/polyticks/bc-rotc.html
And of course, it worked, didn't it? Clinton neither served in the military, nor did he have the courage of whatever convictions he was espousing to keep himself from service.
As for Bush's 40 year brush with youthful indiscretion and how the adults kept him from hurting himself until he managed to get into office as the torturer in chief, the less said the better. But he certainly enjoyed the drugs part of the boomer's favorite trio ensemble.
This is a world spanning economic collapse, and the boomers are only a part of it, obviously. But they are getting old just at the time that the horn of plenty is running out, which is the sort of cruel justice that happens to those that simply expected to enjoy their dominance to their dying days, without having to do anything for it but be born.
There is likely a rock opera in the boomer's tragic tale, right? With live concert footage, and the director's cut, and the deluxe box set.
Pavil--So nice to read someone express a true sense of loss for those "who didn't make it."
The new commenting system:
- it is a vast improvement
-one suggestion: a bit less blue space at the end of each comment would put more comments on each screen and therefore require less scrolling.
http://www.marketwatch.com/news/story/Panic-tears-heart-system-Feds/stor...
Panic tears at the heart of the system, Fed's Warsh says
Economic policymakers have had to act forcefully to stem the Panic of 2008, but it's not always clear whether their actions have helped or hurt, a top Federal Reserve official said Monday. Calling the current economic slump a "recession" doesn't do it justice, said Fed Gov. Kevin Warsh. "The depth and severity of this downturn are due, I believe, to a more profound panic phenomenon." The good news from Warsh: "This panic is showing meaningful signs of abating." The bad news from Warsh: "I am decidedly uncomfortable forecasting a sharp and determined resumption of growth in the coming quarters."
blackhalo
Any market is dictated by supply and demand. Using the price : income metric in an absolute sense makes no sense. Without widespread financing, there is simply a lack of savings to support housing prices even with price : income of 1. Of course if you use average income metrics and a very large portion of the population has no income, that will support the price : income number somewhat.
Pavel- The drums always beat.
The Drum
"Mr. Scott"
[John Scott][1]
The Cambridge Intelligencer (August 3, 1793)[2]
By the Late Mr. Scott, the Quaker.
I hate that drum's discordant sound,
Parading round, and round, and round:
To thoughtless youth it pleasure yields,
And lures from cities and from fields,
To sell their liberty for charms
Of tawdry lace and glitt'ring arms;
And when Ambition's voice commands,
To fight and fall in foreign lands.
I hate that drum's discordant sound,
Parading round, and round, and round:
To me it talks of ravaged plains,
And burning towns and ruin'd swains,
And mangled limbs, and dying groans,
And widow's tears, and orphans moans,
And all that Misery's hand bestows,
To fill a catalogue of woes.
@Pavel
Innocence must feed the furnace of greed
These hearts were woven of human joys and cares,
Washed marvellously with sorrow, swift to mirth.
The years had given them kindness. Dawn was theirs,
And sunset, and the colours of the earth.
These had seen movement, and heard music; known
Slumber and waking; loved; gone proudly friended;
Felt the quick stir of wonder; sat alone;
Touched flowers and furs and cheeks. All this is ended.
There are waters blown by changing winds to laughter
And lit by the rich skies, all day. And after,
Frost, with a gesture, stays the waves that dance
And wandering loveliness. He leaves a white
Unbroken glory, a gathered radiance,
A width, a shining peace, under the night.
"There is likely a rock opera in the boomer's tragic tale, right?"
Nope - It's The End. Time to pick up your empty popcorn box, empty soda container, lift your derriere off the seat and walk out. Fantasy is over - time to quit whining and go to work. There is no more Mommy, Anonymous!
"This Boomer" has prepared and paid for his share - Time for YOU to now "buck up", pick up the pieces and do the same. The Show's Over! Pretty easy concept, right?.......
wally, that's what made js kit difficult to read...the white blue breaks caused to much noise for the eyes. scrolling is super easy (unless your on a pda) especially with no threading
The boomers won't have paid for their crimes in this lifetime. It's times like this that I wish there was an afterlife.
More on FDIC hypocrisy...
http://zerohedge.blogspot.com/2009/04/exposing-utter-hypocrisy-of-fdic-a...
We've been misbehavin' since the mid sixties.
That's a lot of sinnin' to make up for.
Another bearish signal is despite the fact that Oil is above its January range we have not met the old January highs in energy stocks and the XLE, There is less money chasing fewer stocks than just a few month ago.
The boomers won't have paid for their crimes in this lifetime. It's times like this that I wish there was an afterlife.
That's right:
This recession is going to last right in to the afterlife and beyond.
"This panic is showing meaningful signs of abating."
No, those "signs" are actually morphing to gritty determination to the inevitable crash with a rising degree of outright anger and the desire for justice. All the "fat-cats" will one day be in for a RUDE AWAKENING - and there will be a WHOLE LOT of anger left over for them.
Yes, the recovery will be sluggish. I have said for sometime expect -1 to +1% growth for 2010-2011.
That's what I'd forecast, but the real indicator of growth will be a reduction of non-public debt/gdp. How meaningful was strong gdp during the bubble?
"This panic is showing meaningful signs of abating."
These things are very bipolar and come in waves of terror and relief.
Remember what they said about the Great Depression:
"Everybody thought it was over, but it had only just begun."
"generational buy" ?????
Fred Flinstone is still waiting for Wilma's necklace of rocks to go back to the value where he bought them
http://www.reuters.com/article/ousiv/idUSTRE53537D20090406
Soros says U.S. banks "basically insolvent"
Thanks, Ken, this thing already works way better than js-kit. If you do another test cycle, I'd be happy to try to break it.
chainsaw @ 910:
Thanks for your response chainsaw.
Here's what I see:
- On consumer appetite: It's very illogical as a consumer to still want to spend wantonly in these times, but that's exactly what I'm still seeing. Believe it or not, at least NE region where I live, restaurants are still packed, malls ditto (even hard to find parking). Children's activity classes, like swimming, summer camps, music classes, PAID, are not showing one iota in more openings. I hear parents negotiate about having a payment plan on a $120 class (for the whole 3 month) fee with the teachers (payment plan on $120 dollars?!?!); but never even occurred to them to maybe NOT join the absolutely optional class. Or "poor parent"s complaining about why toddler's class photos are so expensive, how economy is so bad, but then turn around and order the most expensive package available ($200+ on stupid photos)!!! And I'm the one with the job and the savings and I'm running scared buying the cheapest option!!
It seems to me that Americans are much more willing to run themselves into the ground than you or I think. I see people who simply exhaust one avenue of credit, and move on to the next, and just keep chugging their spending. Until they complete run themselves aground, then they keep grinding still. Not one behavioral change have occurred.
With this observation, I would submit that there's still plenty of people who'll gorge themselves with debt if just given the next chance.
"consumers will be working to reduce their debt levels" seems to be a fantasy based on what I see.
"- if the banks start stashing all their REOs in Level III for the long term - they will tank the housing market. after all, these are accounting for something like 40% of existing sales. "
Valid point. Sales of REO is likely to go down on REO pricing to model change alone. However, I also supect that there'll be more and looser lending, esp at the margins and at the LTV level, as there's more leeway to mark to model on new loans and the new assets. This makes more expensive houses more available to the common borrower.
Also, another flipside is also that the banks'll hold back REO formation by not chasing after NODS aggressively, slowing down foreclosure process, etc; because they can mark those to 2007. We can observe the foreclosure rate in the next few months and I'm betting a marked decrease.
"- not sure if the HELOC ATM can be opened again if LTV ratios continue to rise based on the V continuing to deteriorate (see above point)"
V won't deteriorate in the "model" world. Market deteriorate is irrelevant. i.e. if the banks use a 5 year average "Valuation" of a house, then many houses are not upside down, suddently many HELOC loans, first to higher credit people, then to more people, will start again.
- on Credit card, see my #1 about the consumers I see. I've seen increased solicitation to open new accounts or transfer balance for me and my wife. There's definitely movement to "improve" the default rate by throwing more credit at the problem. I think if you offer it, they will come. The doomsday can be postponed for a lot longer if you have a willing consumer.
Thanks, I think we're not done yet. There may yet be another re-flation in the short term. Successful or not I can't tell, as both forces are awesome in strength.
Economically for me though, this is depressing, as I cannot rent forever. If the govt makes it a 20 year process, then (1) renting for 20 years is a losing proposition; but (2) buying in any of the 20 years is also a losing proposition. I think that's the point of these policies, to make it such that everyone must pay.
I love the use of "panic" to imply that it's all just a kooky confidence issue.
"Whenever I read about WWII I think about the young people of all nations who didn't make it. What could they have contributed to the world? Let's hope another generation of young people isn't squandered the way that one was.Pavel Chichikov"
Like your daddys and mamas, who actually started the friggin WWII, not to mention your grandmamas and daddys who started the WWI, not to mention countless generations before, fighting continuosly wars after wars after wars. So quit the shit about "squandered generations", you fuckers were no better (or worse) than the current younger ones...
Also, I want to add that I have a very reliable indicator into the "J2P" (My mom in law and her friends was talking about it) mentality, and I can tell you for sure that, at least in the NE, you're going to see a surge in people buying houses, because the interest rate (30 yrs fixed) is now so low, and the 8K rebate is indeed causing a change in behavior.
So I won't be surprised if this surge runs for a few months.
Soros says U.S. banks "basically insolvent"
The word "banks" is kind of redundant in this statement.
Read somewhere that total foreclosures forecast for this real estate cycle is about 1 million+ in California alone. the second bit of info is that approximately 1/4 million of those forecast went through foreclosures in 07 to 08. so we still have 3/4 million homes in california to go through foreclosures by the end of this RE cycle.
Is this info correct?
Any links to this data?
If this is true, it means another 2-3 years of heavy foreclosures in California. How will it effect the prices? prices are already halved. will they really go to quarter?
any comments?
You mean synergistic leveraging of outsourced, out of the box, debt financed growth services didn't work?
Does this mean we have to go back to actually making things?
"No, those "signs" are actually morphing to gritty determination to the inevitable crash with a rising degree of outright anger and the desire for justice. All the "fat-cats" will one day be in for a RUDE AWAKENING - and there will be a WHOLE LOT of anger left over for them."
You're fairly conservative. I'm fairly liberal. But -- AMEN. AMEN. AMEN.
Ford, through its finance arm Ford Motor Credit, used $1 billion in cash to buy back $2.2 billion of debt at 47 cents on the dollar, and $1.1 billion in cash to purchase $3.4 billion of unsecured notes.
who were the holder's who accepted this deal!
If F got Government money last fall, $4Bil , i thought.... then that's a DIRECT subsidy to the debt holders.
I love the use of "panic" to imply that it's all just a kooky confidence issue.
Confidence is everything when your economy is a confidence game.
I love the use of "panic" to imply that it's all just a kooky confidence issue.
Confidence is everything when your economy is a confidence game.
Confidence is a necessary requirement for Ponzi propagation.
No confidence == no ponzi.
Now get with the program and buy a $1000/sq ft. Do it for the children.
hc -
I'm hoping you're wrong... I'm in the NE, renting and running out of patience. I really, really resent the punishment of the responsible to fund the foolish and corrupt. I can't say your analysis is not correct - I hear the talk of a strong RE market around Boston this season as well - but I hope enough people aren't fooled... I need a back yard for growing kids but don't want to commit financial suicide.
Regards,
Pitch
Vietnam, Cambodia, Laos, Chile, Grenada, Panama, Iraq II (Iraq I was at least international, and in response to Kuwait being invaded), Afghanistan (though also open to reasonable discussion in terms of being a failed state - after the CIA helped the Afghanis kick the Soviets out), most of Central America, Somalia - just a few places off the top of my head where America misbehaved during my lifetime.
Confidence is a necessary requirement for Ponzi propagation.
No confidence == no ponzi.
Yep. The whole idea is to pass off promises of future payment that can never be made as current viable wealth.
Hence all the focus on confidence in our economy.
The fact that prominent economists still seem to focus exclusively on demand side drivers such as confidence just goes to show how deeply rooted the sickness is.
Pitch:
I feel your pain too. But in my area, there's a definite bounce. The lower rates is also allowing more people to refi out of an ARM.
Plus there's still a whole surplus of "investors" who will get a loan to buy a home for renting purpose. I suddenly see a lot of these "foreclosure wannabees" in this area. In my opinion, these investors are too early and too amateurish -- their cost estimates and rent estimates work out to barely positive; and they even count on RE increases in the next 5-7 years. But my goal isn't to "prove them" right or wrong. The point is, these "investors" are having an effect to crowd the market and slowing down the price decline.
I see no proof this is going to be over soon. So my question on rent or buy, which loses less money, still stands.
hc,
I too worry about the fall of home prices being long and drawn out. Meanwhile, I have to console my wife (who is crying her eyes out about having sold our home), even though we have profited enormously by selling.
But I have conviction that there is much further to fall, especially in the prime neighborhoods. And I look at the government's failed actions to date, and I am even more confident.
I'm more worried about them bankrupting the country than I am about them succeeding at propping up silly house prices.
ShortCourage
I love the use of "panic" to imply that it's all just a kooky confidence issue.
pan·ic n. - A sudden, overpowering terror, often affecting many people at once.
The panic meme surfaced during the Indymac and WaMu runs last year. While it was true that banks runs hastened both banks' failures, both banks would have failed had depositors simply rationally drawn down their accounts to the FDIC limit. Keeping your deposits at insured levels is not what I would call a panic move.
Funny how these people can easily see irrational panic today, but during the bubble they called it a new paradigm.
New thread Bill Moyers Journal: William Black Interview
I did my part for the economy yesterday. We went to Lowes and I bought a power inverter. Even bought the made in USA model. You hook it to a 12 volt car battery and instant power for a light, recharge cell, run a laptop whatever. I want is the coffee pot to work and a light to read by. I am going to buy a solar power 12 volt charger and life will be good.
You know why?
Cause this sucker is really trully going down. NS
Sorry, that Anonymous at 10:58 was me.
I too worry about the fall of home prices being long and drawn out. Meanwhile, I have to console my wife (who is crying her eyes out about having sold our home), even though we have profited enormously by selling.
You know Short, too many people criticize women in particular for being emotionally attached to a home, but I don't. There's something good and healthy about wanting to lay down roots, buy a plot of land, and make it your own. Not only does it give one psychological relief knowing you have stability, but it makes one want to invest in one's community. This is especially true for families with children, of course. It angers me that not only have regular people had their wealth stolen from them, they've also had these dreams stolen from them. I believe most people don't want to be rich; they just want to be comfortable. TPTB won't even allow us that.
Here's what Altman is really saying:
All you who were hoping for single payer (or even public option) healthcare--forget it.
And Altman is no American Enterprise Institute Republican. He's a major player in the Democratic Party and a bud of Bill Clinton, Rubin and Jason Furman.
At least he's blunt about it. Banks are more important than people.
hc,
(BTW - enjoying this dialogue)
We're in the Triangle Area of NC (Durham, Raleigh, Chapel Hell). We've seen some anecdotal evidence of the economy impacting people here in real ways. My wife speaking to another mom of a boy in my son's 6th grade class about a camp this summer. Seemed the $80 cost was too much for them this year. Conversation ended with tears and my wife feeling terrible about even suggesting the camp. Enrollments at said school down significantly for next year - it's a private, Christian school with moderate cost. Personally know 2 families who have lost primary breadwinner's employment in last 6 months and having difficult time finding work. Brother is a university professor, being asked to teach more units for his base salary (pretty low to begin with), he used to augment his base salary by teaching additional units at $3K each. So he basically just got a $6K drop in pay by being told he now has to teach 6 units instead of 8 to make his base. Certainly not a conclusive sample, but that's what we're seeing.
Housing market here has been very resilient - we didn't have a huge runup, but it seems very soft this season. Especially in the $500K+ range. Wife keeps asking if now is the time, but I'm cautioning patience. We've been renting a nice home for 14 months after we sold ours. Lease goes thru June, and I'll probably try to negotiate a more favorable 12 month renewal unless something great pops up in the next couple months. I believe a lot of people will decide to rent rather than sell into this market - so there should be more rental supply / lower rents. In fact, I'm seeing a lot more "For Rent" signs up around here.
I listened to the Mark Mayo conf. call this morning (thanks CR). The accounting guy on the call (Bob something or other) kept pointing out that the mark to fantasy guidelines only apply to securities, not straight loans. So, the industry will have to reanimate the securitization market in order for this (FASB nonsense) to generate vast amounts of new lending. I'm not sure they are going to be able to put Humpty together again before Timmy and the Bearded Wonder are crushed under the collapsing mountain of govt debt they are so eagerly piling up.
but I've been amazed at how far this has already gone, so what do I know?
Test from my iPhone.
Wicked slow typing.
Gonna hafta wait 4 4G I guess.
Vikas
Breaking news: Due to Congress struggling to fill their campaign chests, the Democrat and Republican Parties agreed to consolidation; The Wall Street Bank Party. CEO Lloyd Blankfein of Goldman Sach will chair The Wall Street Party at a $1.00 per year. Blankfein expressed satisfaction that the country is headed on the right track and less confusion at the voting booths during election years. Secretary of Treasury Geithner delivered as promised and attached an addendum onto PPIP; mandatory direct deposit of taxpayer contributions to Goldman Sachs.
"All you who were hoping for single payer (or even public option) healthcare--forget it."
That is a shame. Getting healthcare costs off of the backs of US corps and workers, makes U.S. labor more competitive with labor in countries with subsidized healthcare. Probably the single greatest action to help the USA recover. If the same $$$ was thrown at just outright buying HC insurance from lowest bidding, existing providers, for the for citizens as has been thrown at the banks, it is my opinion that the economy would well staged for recovery. Plus, we would have something to show for it at the end.
Also, Knowing that both junior and grandma are taken care of medically, would result in a lot less fear, and engender more discretionary spending.
Did anyone see that both Obama and Pelosi are starting to take the 2nd amendment a little more seriously? If the Dems steal that Republican tent pole, it may be over the 'Pubs.
http://www.newsweek.com/id/191414
"New thread Bill Moyers Journal: William Black Interview "
I hope Black shows up on the Daily Show.
"Hence all the focus on confidence in our economy."
Without trust, how can you have investment and lending? You will not get liquidity until trust is re-established. Regan, said "trust, but verify." Too bad Timmy G, if forgetting the verify part.
Crispy, I waited 21 months for my 'short the S&P 500 with everything that I had plus borrowed money' bet to pay off.
But pay off it did.
I am happy to wait, and expect that I will have to, before my January purchases of UNWPX, GDX, and SLW pay off as gold rockets to $4,000-$6,000 per ounce.
Patience, sir. But, such is no more than two-to-three years away.