board77

The economy. The thread, well... to the Ranger team.

Don't boggle my mind with choices, 'kay?

Lidless wrote:

The market is desperate for any good news right now and will pounce and react on it. A couple of upbeat reports and "a government report on retail sales for February wasn't as bad as many analysts had feared". Basically an "I got an E not an F" week. That doesn't qualify as stabilization.

Wait until the exporters and international companies with foreign receipts start reporting. With USD having appreciated by around 30-40% against GBP, EUR and most other currencies in the last six months, all those foreign sales won't be worth so much. Against that, companies with their manufacturing and other overheads overseas will have seen their costs slashed as a result. It'll be a mixed bag, but a significant one.

Stabilization will only happen when the money starts to circulate more freely - when banks start to lend to each other and others with more ease - where the counterparty risk is deemed to be lower than where it is right now. The Fed rate is just about as low as it can get, making it easier and discouraging saving (ie, spend now!).

This will be a long haul recovery. Economies are like 747s - huge inertia which makes them slow to turn, slow to start up, and right now three of the four engines have lost power.

That recovery will be a long haul is true. Last year the turbulence was in the housing market. This year the turbulence will be in the commercial real estate market. It's not over.

Cenedril_Gildinaur wrote:

This year the turbulence will be in the commercial real estate market.

Speaking of...
Corporate meltdown leaves renters in limbo

Quote:

It wasn’t until early March that Krause and other residents learned why the complex – the alluringly named Alante at the Islands — was rapidly going to seed. The property owner, Irvine, Calif.-based Bethany Holdings Group, had abandoned the complex and a dozen other large rental properties in the greater Phoenix area after defaulting on hundreds of millions of dollars in loans.

...

The Bethany Group meltdown highlights how few protections exist for renters caught in the foreclosure crisis. That’s a situation that some experts say is becoming much more common.

“People were paying attention to the single family resident market, the 100 percent, no-down loans,” said West Coast real estate investor and broker Virgil Hobbs, who is bidding on some of the distressed Bethany properties on behalf of clients. “And then beyond that wave is the commercial market, which is what you’re now seeing now."

It was fears of this sort of thing that made me buy a house despite believing property values would fall. Not at all sure it was the right choice, but done is done.

If you purchased in the second half of 2008, then even if the value continues to fall you made the right choice. You purchased after most of the fall, and now you have land on which you could grow food.

Housing prices in my neighborhood have fallen since we purchased in October, but not by a whole lot and since my mortgage now equals my rent before (and that's including the property tax and the insurance in the "mortgage now" price) I feel like I'm doing well in the middle of the collapse.

Now if you purchased when everyone was saying "of course prices won't fall", then I'd be worried.

Senator Bernie Sanders, Independent of Vermont, is one of the few people who actually is proposing we do something about the current situation other than pointing fingers and going to angry faux tea parties. Here is his statement about putting a limit on high credit card rates:

Quote:

There is a huge sense of outrage in our country today at what Wall Street has done through greed, recklessness, and, likely, illegal behavior. The "Masters of the Universe" have plunged our nation, and much of the world, into a deep recession which has caused millions of Americans to lose their jobs, their homes, their savings, and their hope for the future. To fully understand the cause of this fiasco, I have introduced legislation calling for a thorough investigation of the financial meltdown and the prosecution of those CEOs who might be guilty of illegal behavior. The culture of greed, fraud, and excessive speculation must come to an end.

As I talk to Vermonters about this crisis, one of the great frustrations that I hear is that while taxpayers are spending hundreds of billions of dollars bailing out major financial institutions, and while these big banks are getting near-zero interest rate loans from the Fed, these very same financial institutions are now charging Americans 20 percent or 30 percent interest rates on their credit cards. In fact, one-third of all credit card holders in this country are now paying interest rates above 20 percent and as high as 41 percent -- more than double what they paid in interest in 1990. Recently, some major institutions, such as Bank of America, have informed responsible cardholders that their interest rates would be doubled to as high as 28 percent, without offering any explanation or excuse why the increase was taking place.

Let's be clear. What Wall Street and credit card companies are doing is really not much different from what gangsters and loan sharks do who make predatory loans. While the bankers wear three-piece suits and don't break the kneecaps of those who can't pay back, they still are destroying people's lives.

The Bible has a term for this practice. It's called usury. In The Divine Comedy, Dante Alighieri's epic poem, there was a special place reserved in the Seventh Circle of Hell for sinners who charged people usurious interest rates.

Today, we don't need the hellfire and pitchforks, we don't need the rivers of boiling blood, but we do need a national usury law.

We need a national law because state laws no longer work. States used to protect consumers from predatory lenders, but strong state usury laws were obliterated by a 1978 U.S. Supreme Court decision. Justices allowed national banks to charge whatever interest rate they wanted if they moved to a state without an interest rate cap. So major credit card issuers moved to places such as South Dakota and Delaware that don't have usury laws.

That is why I have introduced legislation to require any lender in this country to cap all interest rates on consumer loans at 15 percent, including credit cards. Why did I select 15 percent as the appropriate rate to deal with the usury that is going on in this country? The reason is that 15 percent is the maximum that Congress imposed on credit union loans almost 30 years ago when it amended the Federal Credit Union Act. That approach has worked! Under current law, credit unions are allowed to charge higher interest rates only if their regulator, the National Credit Union Administration (NCUA), determines that it is necessary to maintain the safety and soundness of these institutions. Right now, while most credit unions charge lower rates, the NCUA allows credit unions to charge an interest rate as high as 18 percent.

Unlike their counterparts at the big banks, credit unions are not lining up for hundreds of billions in bailouts. In fact, they're doing quite well. They are responding to the credit needs of the small businesses in their communities and to individuals. They have not only survived this regulation, but also they are functioning exactly the way they are supposed to function. In my view, the rules that have worked well for credit unions for decades can work for all financial institutions.

Former Senator Al D'Amato in 1991 offered an amendment to cap credit card interest rates at 14 percent. The amendment passed the Senate by a vote of 74 to 19, but never became law. Now is the time to return to that debate. Now is the time to protect a struggling middle class and pass legislation to put a cap on interest rates.

CG wrote:

If you purchased in the second half of 2008, then even if the value continues to fall you made the right choice. You purchased after most of the fall, and now you have land on which you could grow food.

March '08. A little earlier than I'd have chosen to in retrospect, but pretty close. Asking prices around here are actually still about what they were then, though I doubt many sellers are getting what they expect. The volume of unoccupied, unsold houses is definitely higher than it was.

I also chose to borrow from a small, local credit union that assured me they'd stayed away from the subprime business. They're still around and doing fine (as far as I can tell), but probably all they'll get for their foresight is denied bailout money.

Joining in actual effort which goes beyond finger poining is House of Representatives Speaker Nancy Pelosi. She is going to attempt to recover money paid to AIG executives after they took $170 billion in taxpayers money because they nearly drove the company into the ground.

Statement from Speaker Pelosi:

Quote:

While American workers see their wages decline and face record job losses, it is unconscionable that AIG, which is receiving more than $170 billion in government assistance, would permit such extravagant executive compensation practices without any accountability to the taxpayer.

I have asked Chairman Barney Frank of the House Financial Services Committee to examine options that are legally available to recover taxpayer funds of companies that abuse the privilege of taxpayer assistance.

I call upon the executives at AIG to right the wrong they have done to American taxpayers, who are footing the bill for the most expensive government rescue in history. They should renounce the bonuses and refuse the excessive retention pay they previously agreed to.

Congress, working with the Obama Administration, has put in place tough executive compensation and responsibility measures to ensure that taxpayers are protected and we will continue to take all action necessary to ensure transparency and accountability.

The big thing we keep hearing about AIG is that "they are too big to fail". So lets break them up.

and this on the same subject from ABC News

Quote:

Key House Democrat: AIG "Trying to Play the American People for Fools"
March 15, 2009 11:24 AM

ABC News' Matt Jaffe reports:

Rep. Elijah Cummings, D-Maryland, a member of the Joint Economic Committee, today renewed his calls for AIG CEO Edward Liddy to resign after the company said it will move forward with paying out $121 million in bonuses for senior executives.

"For months, I have been calling on Edward Liddy to step down from his position leading AIG, and I loudly and clearly renew that call today," Cummings said Sunday in a paper statement. "Mr. Liddy has repeatedly taken billions of hard-earned tax dollars from the American people—many of whom have lost their homes, their savings, and their jobs—and then slapped those people in the face with that very money. Mr. Liddy continues to display reckless and irresponsible behavior at the helm of this company, and we simply cannot afford to accept it any longer."

Cummings first called for Liddy to resign in November. Today the Maryland Democrat accused AIG of "trying to play the American people for fools."

"AIG has been trying to play the American people for fools by giving nearly $1 billion in bonuses by the name of ‘retention payments,’—including to employees at the FP unit whose reckless behavior drove the company into the ground," Cummings stated. "Any credibility that could have been given to Mr. Liddy’s argument that these payments are necessary to retain top talent was completely destroyed in last month’s 10-K filing when AIG itself disclosed that nearly $60 million of those retention payments are going to employees who will be terminated."

Cummings, who also sits on the House Oversight and Government Reform Committee, emphasized that "something is terribly wrong with this picture."

"These payments are nothing but a reward for obvious failure, and it is an egregious offense to have the American taxpayers foot the bill," he said. "Something is terribly wrong with this picture, and the reckless behavior at AIG must stop immediately."

Dave_LF wrote:

CG wrote:

If you purchased in the second half of 2008, then even if the value continues to fall you made the right choice. You purchased after most of the fall, and now you have land on which you could grow food.

March '08. A little earlier than I'd have chosen to in retrospect, but pretty close. Asking prices around here are actually still about what they were then, though I doubt many sellers are getting what they expect. The volume of unoccupied, unsold houses is definitely higher than it was.

I also chose to borrow from a small, local credit union that assured me they'd stayed away from the subprime business. They're still around and doing fine (as far as I can tell), but probably all they'll get for their foresight is denied bailout money.

Ain't that the truth.

I waited until after the bubble popped, only purchased as much house as I could afford, scoured the market for the best deal I could find, haven't missed any mortgage payments (and am in no danger of doing so). Where's my bailout?

Seen on a bumper sticker: honk if you're paying my mortgage

CG, do you think real estate prices are going to fall in the non-bubble areas? Like Denver.

Bernie's got guts, I'll give him that. On the off-chance the idea gains traction, I hope he's got a good bodyguard too.

Hm. Denver. I needed to do some research before I could answer that one. I don't know everything yet.

According to what I can find, it appears that housing prices are indeed in decline in and around Denver, and that while the bubble wasn't as severe there as it was in other places it was there.

10321 W. 59th Ave, originally purchased $194,000, 2005, currently listed $55,000
10236 W. 59th Place, originally purchased $179,000, 2006, currently listed $68,900
10356 w. 59th Place, originally purchased $179,000, 2005, just sold $100,000
10371 W. 59th Ave, originally purchased $194,000, 2005, just sold $70,000
10229 W. 59th Ave. originally purchased $194,000, 2005, just sold $103,000
10356 W. 59th Place, originally purchased $179,000, 2005, just sold $75,000

In general, there has been housing price inflation almost everywhere, and as a result there is now housing price deflation almost everywhere. Some places are pretty immune, such as a property my father owns in New Mexico - not even close to a service road, purchased many decades ago by his mom because everyone was investing there on the off chance that there might be uranium under the ground. It's an empty barren desert miles from the nearest small town, and its value has held pretty steady at $2000 the entire time.

The higher the initial value, the greater the chances there's been a bubble. The greater the concentration of people the greater the chances there's been a bubble. If you want to know if any given area has had one, a good tool would be to go to Zillow and look at the historic charts and see how the value today compares to the value in early 2007, early 2004, and 2000. Most places have.

Dave

I have a feeling that Sen. Sanders looks al lways before crossing the street.

One of the big problems here is that we are still stuck in the finger pointing stage and everyone pointing only wants to look at the problem from their own idealogical perspective. We have some folks who care more about the survival and success of their own particular idealogy than they do about the nation and the economic health of the American people.

This is why we need a very authoritative investigation into the economic mess so that we can identify all the causes and craft solutions to meet them. The only institution that can do that is our government.

Thanks CG. We're on the west side by Boulder (University town, NIST-NOAA, NREL, vibrant enterpreneurial community in biotech/renewable energy) and it hasn't dropped here. The town can't grow due to greenbelts etc. However, I think just the sheer mess is going to cause a 20-30% drop here. Denver's got some bubble neighborhoods, out east by the airport, where there was some homebuilders churning out houses.

I don't know if property is going to be bad or good. Are we in for deflation? Hyperinflation? If hyperinflation, will property values be hurt by high interest rates? I'm not sure property is a good investment now, in either scenario.

You want to stimulate outrage? Read this:

http://www.nytimes.com/2009/03/15/nyreg ... gewanted=1" target="_blank

ellienor wrote:

Thanks CG. We're on the west side by Boulder (University town, NIST-NOAA, NREL, vibrant enterpreneurial community in biotech/renewable energy) and it hasn't dropped here. The town can't grow due to greenbelts etc. However, I think just the sheer mess is going to cause a 20-30% drop here. Denver's got some bubble neighborhoods, out east by the airport, where there was some homebuilders churning out houses.

I don't know if property is going to be bad or good. Are we in for deflation? Hyperinflation? If hyperinflation, will property values be hurt by high interest rates? I'm not sure property is a good investment now, in either scenario.

Property depends on what you want to do with it. Don't count on it to be a money maker, but do count on it to be a money saver now that the bubble has deflated. If you're going to live in it and plant a garden, this is an excellent time to buy overall (local conditions may vary).

We're not headed to deflation. While we've had a very brief respite in late 2008 where we briefly had deflation, all policymakers have a phobia of deflation. On these charts you can see the very brief dip in the M3 money supply.

The phobia of deflation leads to keeping interest rates artifically low. They appear to hope for another bubble to rescue us from these economic doldrums by creating the illusion of prosperity.

Currently we have low rates combined with low prices, so it is overall a good time to purchase a home.

If hard inflation hits then buying now will be very good because after it hits you can pay for your entire mortgage (purchased at pre-inflation prices) with one week's pay (post-inflation money). Make sure you get a fixed rate.

There is a potential for hyperinflation, but even I don't think our leaders are that foolish. On the other hand many times I say "even they're not that foolish" I am proven wrong.

Installment three of accurate and precise predictions.

Peter Schiff

http://www.youtube.com/watch?v=LfascZSTU4o

http://www.youtube.com/watch?v=2I0QN-FYkpw

http://www.youtube.com/watch?v=60CLQse27p8

http://www.youtube.com/watch?v=sDh3FNuwrTc

There are indeed stupidly low interest rates, but you've got to have a lot of equity in your home (20% after they've depreciated you 20-30% in anticipation of a further drop -- this is what we have going on in our market here). We were quoted 4 and 7/8. Yikes, that's low. If that can't prop up prices, I can't imagine what can.

CG - your first two "installments" were useless. In total and in part, they were useless because they failed to support your contention.

But giving you the benefit of the doubt, I clicked onto one here. What I found was a video from Youtube in which the announcer prefaces introducing Mr. Schiff by saying that lots of people are predicting a recession is on the way. That is in the introduction for heavens sake. But somehow, someway you ignore that and want to think of this Mr. Schiff as the Oracle at Delphi because you want to think he is one of you.

Mr. Schiff is not unique.

Keep in mind that at the time he made these statements, and others who were not Austrians agreed and were making the same, that parts of the nation were already in a recession and it was growing. When the Glass-Steagall Act was largely repealed in the late 1990's those who voted against it predicted that large unregulated financial institutions would upset the delicate balance in our economy. And the derivative market, and all its attendant problems followed. Noted commentator and writer Kevin Phillips has talked and written in detail through this decade about the danger of switching from a manufacturing based economy to a financial services based economy that was alargely unregulated.

Making these "predictions" if that is what you want to call them in 2006 means so little that it is inconsequential.

Ross Perot told the nation back in 1992 what would happen if we failed to protect American industries and jobs. Now that was a prediction that came true.

Warren Buffet wrote a famous letter in 2002 - five years before the meltdown was on the minds of most where he blasted the risky derivatives market

Quote:

"Charlie and I believe Berkshire should be a fortress of financial strength."
"We try to be alert to any sort of mega-catastrophe risk, and that posture may make us unduly appreciative about the burgeoning quantities of long-term derivatives contracts and the massive amount of uncollateralized receivables that are growing alongside. In our view, however, derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal."

The sad thing about derivatives is that some of the very people who helped create them urged that they be regulated by the various government agencies but that was overruled by Ayn Rand devotee Alan Greenspan who believed in the libertarian all powerful self regulating market.

http://www.nytimes.com/2008/10/09/busin ... nspan.html" target="_blank" target="_blank



The politician who is the errand boy for the Austrians - Congressman Ron Paul of Texas, the beloved icon of the libertarians, made his predictions in 2002 and fell flat on his face.

I wonder how these Austrian economists are on predicting winning lottery ticket numbers?