More Job Losses = Greater Foreclosures
“We’re about to have a big problem. Foreclosures were bad last year? It’s going to get worse.”
-Morris A. Davis, a real estate expert at the University of Wisconsin.
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This is a theme I have been hammering on for some time: As more people lose their jobs, we will see increasing foreclosures, adding further stress to banks’ already ugly balance sheets.
As the New York Times notes, the number of prime mortgages that were “delinquent at least 90 days, were in foreclosure or had deteriorated to the point that the lender took possession of the home” jumped enormously as job losses accelerated. Over the period when BLS was reporting 500k plus job losses a month, from November’08 to February ‘09, the numbers of distressed properties “increased more than 473,000, exceeding 1.5 million.” Total loan value = more than $224 billion. (Sources: The Times, First American CoreLogic).
Thus, even if the recession ended tomorrow, the US will still have another 500k – one million foreclosures. And if the recession continues for another 6 months to a year, well, you do the math. (Hint: About 2 – 3 X as many)
Excerpt:
“In the latest phase of the nation’s real estate disaster, the locus of trouble has shifted from subprime loans — those extended to home buyers with troubled credit — to the far more numerous prime loans issued to those with decent financial histories.
With many economists anticipating that the unemployment rate will rise into the double digits from its current 8.9 percent, foreclosures are expected to accelerate. That could exacerbate bank losses, adding pressure to the financial system and the broader economy. . .
Economists refer to the current surge of foreclosures as the third wave, distinct from the initial spike when speculators gave up property because of plunging real estate prices, and the secondary shock, when borrowers’ introductory interest rates expired and were reset higher.”
Note that these foreclosures are not the exotic no money down I/O ARMs from the early phase of the housing collapse. Rather, these are “modest borrowers whose loans fit their income.”
A few last data points to consider (as of February 2009):
• Foreclosure rates among prime borrowers have been growing fastest in states with higher unemployment.
• Economy.com expects mortgage defaults in 2009 caused by unemployment to double, from 29% in 2008 to 60% in 2009;
• Prime mortgages that are distressed (90 days delinquent, foreclosure, REO) are greater than 1.5 million;
• Alt-A loans — those given to people with slightly tainted credit — rose to 836,000.
• Subprime mortgages that were “distressed” reached 1.65 million;
• From February 2008 to Feb 2009, total dollar value of distressed mortgages increased 60% in dollar terms;
• More than four million loans worth $717 billion were “distressed” in February.
All told, that’s about 4 million problem mortgages out there. My guess is half go into foreclosure. So far, the Obama admin aid to homeowners have seen less than 55,000 mortgages modified.
What this means, for those of you still paying attention, is that we will see lower RE prices, more bank stress, a lot more distressed sales, and no normalization of RE markets for some time.
The best you can hope for is some “stabilization” — if you consider 60% or more of all existing home sales (and many new home sales) to be distressed sales, foreclosures or bank owned properties — as “stable.”
I got your real estate bottom right here . . .
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click for larger graphic
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Source:
Job Losses Push Safer Mortgages to Foreclosure
PETER S. GOODMAN and JACK HEALY
NYT May 24, 2009 http://www.nytimes.com/2009/05/25/business/economy/25foreclose.html
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May 25th, 2009 at 8:28 am
I like the 3 wave foreclosure paradigm:
Now, will there be a Wave 4, and what is going to cause it?
May 25th, 2009 at 9:00 am
wave 4- people able to afford their homes turn them back to the bank because they realize it will be decades of paying their mortgage before the loan balance is lower than the value-
best to walk away and regroup for a purchase later at a lower price- banks and lending institutions will relax their policies re “deeds in lieu of foreclosure” to let these people purchase again- to move the inventory of bank owned homes-
not particularly efficient but a good likelihood it may play out this way
May 25th, 2009 at 9:14 am
Even states seemingly removed from the real estate bubble are seeing foreclosures accelerate as the recession grinds on.
In Minnesota, three of every five people seeking foreclosure counseling now have a prime loan, according to the nonprofit Minnesota Home Ownership Center.
May 25th, 2009 at 9:17 am
I watched the explanation of the GM dealerships closings this morning. We all know that this is 18% of the dealerships. What was interesting is that they plan to close 40% of existing dealerships by this time next year.
May 25th, 2009 at 9:18 am
B wondered:
Now, will there be a Wave 4, and what is going to cause it?
reply:
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Real people losing real homes is as bad as it gets. At least bargain hunters are buying old distressed real estate, implying a market will exist for new distressed real estate. All this means is that the real estate bottom won’t be formed the best foreclosures have been uncovered and sold. Logically, this won’t be until mid 2010 at the earliest. And probably not until the Spring 2011 selling season.
Commercial foreclosures will be wave 3.5. The too big to fail theory has kept many large non performing loans on the books, with the hope something will happen soon. Recognition of losses, bankruptcies, and distressed commercial sales is next and probably before 12/09. Banks will stop waiting.
May 25th, 2009 at 9:20 am
Foreclosurers will be moving upscale.
If Obama really wanted to help “the people” he should pass/grant a tax holiday on 401K and IRA deductions effective Jan 09. Folks are going to need all the help and every dollar they can get.
May 25th, 2009 at 9:26 am
Call me ahab- Agree w/ your wave 4 prediction. When I read the articles about $200,000 homes in the Phoenix area going for $80-$100M, my initial thought was, the neighbors that paid $200,000 and are current are screwed. Must make for some interesting block parties.
May 25th, 2009 at 9:29 am
Bruce in Tn Says:
May 25th, 2009 at 9:17 am
I watched the explanation of the GM dealerships closings this morning. We all know that this is 18%
comment:
————–
They still don’t get it. In my newspaper, Malibus and Impalas were discounted about 25% and selling for maybe $17,000, more or less. Escalades were marked down 16% to $61,000. ?????
I wish the employees well, but resale value on these cars and others from GM and Chrysler drops to $0.00 the day after the government guaranteed warranty expires if GM and/or Chrysler no longer exists.
May 25th, 2009 at 9:33 am
Emmm, could wave 4 be brought about by increasing property taxes due to insolvent local governments? I realize in and of itself, the cost is not onerous, but with increasing water, power, garbage, gas prices…all these things may make people continue to think downsizing is the way to go..the people who still are current will be charged more by government to live in those homes….revenue must come from somewhere.
May 25th, 2009 at 9:40 am
> Now, will there be a Wave 4, and what is going to cause it?
Wave 4 = China cancels America’s credit card
http://bit.ly/GjVKd
Interest rates go up sooner and faster and things really get fugly !
May 25th, 2009 at 9:44 am
larster Says:
May 25th, 2009 at 9:26 am
Call me ahab- Agree w/ your wave 4 prediction. When I read the articles about $200,000 homes in the Phoenix area going for $80-$100M, my initial thought was, the neighbors that paid $200,000 and are current are screwed. Must make for some interesting block parties.
reply:
————–
In about 2 or 3 years, the massive inflation that will occur from all of the stimulus being applied today will bring those homes back to their original value before distressed sales. During inflation, it’s good to own things of value, remember. Real estate is included. While the meaning of ‘value’ will be debated, who cares.
Wait … Wave 4: Massive injections of stimulus today will create massive inflation in 2011 or 2012. Interest rates will return to Volcker’s era 16% in an effort to lower inflation, which will include $200 oil (I’m not kidding). This crunch will crash real estate, and everything else, again. The severe recession that results from 16% interest rates will create a new severe recession. Stimulus will not be available for this one since it will be the current stimulus that caused those troubles.
Regulators might pretend to be stupid and ignore $200 oil and the cost-push inflation it causes, claiming the price is a reflection of supply and demand and not inflation. Their logic will be ‘cost push inflation, rather than monetary inflation, is OK and will slow the economy as well as 16% interest rates,’ thus abdicating their legal responsibilities using fantasy economic logic.
May 25th, 2009 at 9:45 am
And of course in regards to your question, the owners of commercial real estate as they go belly up, could begin a wave 4…and their employees as they are less able to fund their homes..
May 25th, 2009 at 9:57 am
@km4:
You know, we’ve all followed that story about China. It appears they are still buying debt but only the short term variety. That is exactly what I’ve done in regards to cd’s the last 18 months or so. And what are they thinking when they do that? They give up a little yield when they cut down the time, but are not trapped with a 10 year that is worth much less in a rising environment. Now why would they do that?
I think the final answer is that they really ARE planning to leave the dollar as their medium of international business exchange and when things are in place and the short term treasuries expire, then there will be NO more purchases of our debt by China.
At least that seems the most logical way to look at it, I think..
May 25th, 2009 at 9:57 am
The end of Wave 4: (perhaps 2015)
A Republican will be elected President since Democrats will be blamed for the coming double recession. A Republican Congress will also return. They will find an enemy somewhere and declare a patriotic war. This new war will create jobs.
May 25th, 2009 at 10:03 am
I said
The end of Wave 4: (perhaps 2015)
Using proper arithmetic
The end of Wave 4: (perhaps 2016)
May 25th, 2009 at 10:05 am
@ Bruce in Tn
Yes I know and you bring up a most excellent point i.e. ARE they planning to leave the dollar as their medium of international business exchange …. then there will be NO more purchases of our debt by China.
And of course they know they’re holding sword of damocles over the Obama and the US economy.
The bigger question is what is going to be the quid quo pro ?
May 25th, 2009 at 10:08 am
> And of course they know they’re holding sword of damocles over the Obama and the US economy.
Crouching Tiger, Hidden Dragon
May 25th, 2009 at 10:10 am
Waves yet to come/finish breaking:
1. The rest of Alt-A;
2. Option ARM (which will spawn the major portion of the CC default wave);
3. Commercial RE;
4. CC defaults.
Keep in mind: This is like a rip tide — each wave piles on the one preceding it. All hell breaks loose once the tide turns.
_____________________
dead hobo:
They won’t have to look far to find an enemy — by then we’ll be a pariah. The neighbors don’t like it much when you take a dump in the village well.
May 25th, 2009 at 10:20 am
Fun facts about mortgages:
A 1% increase in rate (5% to 6%) translates to an 11% increase in monthly payment (30 yr.)
To pay down 20% of the principle takes about 12 years on a 30 yr.
Now, couple that with the fact that, at least in my area, most sheriff sales get stayed or postponed for months and months ( hoping for miracles I guess). Two things become clear to me: 1) the “distressed sale” inventory is just going to keep rising , and 2) It doesn’t make financial sense for the two million who will be foreclosed on to continue making mortgage payments.
We should probably keep this to ourselves.
May 25th, 2009 at 10:28 am
Wave 4?
Things will stay chronically bad for the next 2 1/2 years (but it won’t be enough to actually tip us over the edge)…Somehow we’ll muddle along…
It’ll be VERY HARD for some, DIFFICULT BUT MANAGEABLE for others…Some will basically fare OK…
The MSM will be reluctant to blame anything on the “shining hero” that they helped usher into the Oval Office…Thus, it will be a “never ending” propaganda campaign designed to keep people from going out of their minds as long as possible…
By 2012 there will STILL appear to be no end in sight…
“Hope & Change” will have been long forgotten (in fact, it has already been replaced by “green shoots”)
“Green Shoots” may have sounded nice (and many consider “green shoots” to mean “Hope”)…
The problem is…A green shoot is a THING (which can wither and die, or get dug up)…Whereas “HOPE” is intangible, it’s harder to destroy…People will have HOPE in the darkest of moments, whereas when a green shoot dies, they “lose” HOPE…
By 2012, we’ll be on roughly the 3rd generation of “green shoots”…Many won’t believe in them anymore (or the people who are promising them)…
At that point, they will turn to other things…(Many will turn to “themselves” – realizing that it is every man & woman for themself)…Others will band together and form their own small groups…
Then there will be something on the horizon…The IDEAS about the prophecies of December 21, 2012…
It’s NOT going to be like the ‘milennium bug’…People basically felt ‘prosperous’ during 1999, so the idea that there was going to be chaos on Dec 31, 1999 was shrugged off more as a reason to throw a big party…This is going to be DIFFERENT…
People, as 2012 approaches, and the global economy stays bad, are going to feel more and more insecure…They will do what EVERY species does when they’re afraid…THEY’LL HOARDE…The system will not be able to handle HOARDING on a massive scale like that (think those TV images you see in towns that a hurricane is bearing down on)…Store shelves are empty, if they’re closed, there will be looting…It’ll start slow, but then it will grow in size and scale…At some point, people may even decide to say “screw it”, and not even work anymore (or not pay their bills)…
I’m going to predict that there is a fairly high probability between July 2012 and December 2012 that the gears of economics (and economic activity), grind to a dangerously SLOW pace…
Maybe I’m totally wrong here…Trust me, I DON’T WANT TO BE RIGHT!
Am I crazy though to consider something like that as an outlier? Is it too far fetched?
May 25th, 2009 at 10:30 am
The essence of the problem in housing is the imbalance of supply vs demand. People have to live somewhere, but the over-building during the boom to feed the speculators (credit the Fed for that) that no longer are speculatin’ means that housing prices should decline to a market-clearing point where supply just meets demand for houses as homes, and not as speculuative investments.
The board is correct in its observation that the end-game here is war, if for no other reason than the only hope of saving the dollar will be to force our trading partners to accept dollars for oil at the point of a nuclear-tipped warhead.
@BnT, just had a bunch of short-term CD’s mature. Since I’m aiming to stay mostly cash (with a little gold and oil in there as hedge against Armageddon), what’s the best short-term rate you’ve seen?
May 25th, 2009 at 10:31 am
@km4
“The bigger question is what is going to be the quid quo pro ?”
Greater East Asian Co-Prosperity Sphere? Taiwan?
Look on the bright side: maybe they’ll reign in N. Korea for free.
May 25th, 2009 at 10:36 am
Dead Hobo,
I don’t think the Republicans will need to manufacture an enemy, nor will it take 4-6 years to get to war.
Check the news: Starbucks on Upper East Side bombed (an IRA type warning in the middle of the night–blood comes later, first spread fear)
North Korea successfully explodes something nuclear
Pakistan unravelling at rapid clip.
Global instability and deep economic crisis are old friends. We are already on the brink.
May 25th, 2009 at 10:38 am
Curmudgeon:
I do all my investing with Schwab. I have been buying callable 36 month cd’s at 3.5%…but I have been holding off lately with the increase in rates. Of course, with Schwab, they will give you a little less than the best going rate since they must get their vig off the top, but right now I just don’t want to lose money, and have been satisfied with this plan.
The traders on the site have my respect..in this environment with this massive government distortion and on the other hand the massive deleveraging, it just seems wise for someone like me to patiently wait.
I expect rates to be considerably higher in two weeks, with the latest increase in rates…
May 25th, 2009 at 10:44 am
Stands to reason…if you have no savings and lose your job, you can’t pay your mortgage.
Also, one are that propped up prices was summer and vacation homes…how ar ethings in the Hamptons?
http://www.bloomberg.com/apps/news?pid=20603037&sid=apbLGZzGvHkQ&refer=home
The number of unsold homes in the Hamptons rose 15 percent to a record 1,673 in the first quarter from a year earlier, according to data compiled by New York-based appraiser Miller Samuel Inc. Sales have declined the most in the 27 years that broker Town & Country Real Estate has kept records for the Long Island beach towns about 100 miles east of Manhattan.
The inventory of Hamptons’ homes would take 34 months to sell at the current pace, Miller Samuel reported, or more than three times the 9.8 months’ supply of existing homes in the U.S. as tracked by the National Association of Realtors.
May 25th, 2009 at 10:44 am
As for foreclosures, Call me Ahab wins the cigar, IMO.
I live in an upscale community. Bought in 2004. Ooops. Today: formerly highly paid spouse is down to 40% of last year’s pay (lucky to have job!). This is equal to mortgage + recently DOUBLED property tax. Unsustainable? Y’think?
Of course, our hefty 25% down payment is gone because we are 30% down from purchase price.
I am open with the neighbors, who are clearly incredulous. It is starting to sink in. Will take another year or so to be fully understood (about the same amount of time as it will take to foreclose on us).
Am I projecting, or will 2010 be the crunch year?
May 25th, 2009 at 10:44 am
Marie Antoinette I think the quid quo pro will be a global currency because there is already tangible movement afoot ( China, Russia, Brazil, Japan ? , others ) and rest of world is sick and tired of perpetuating careless U.S. monetary and fiscal policies that makes America’s standard of living superficially inflated !
Most Americans had better start making the gradual adjustment that the party since Reagan in the 1980’s where deficits did not matter is over and there will be a leveling of the global playing field.
May 25th, 2009 at 10:51 am
@Marie Antoinette
Agreed…
And wait until the Russians make a move back to reclaim dominance in Eastern Europe…
Big O can’t even figure out what to do with GITMO detainees…
- Ahmadinejad will use every “stall” tactic he can to get his enrichment program online
- Jong Il is detonating nukes to see what the “policy” response will be (NOTHING)
- Putin sees this weakness and is waiting to make his own move
All the ROW sees now is a weakened ‘flip-flopping’ America…We can even free ship captains from pirate attacks without debate and consternation…
May 25th, 2009 at 10:57 am
@BnT…waiting to shoot until you can see the whites of their eyes…a sound strategy for investing or fighting. Thanks for info….I hadn’t noticed that rates had gotten so high. Can’t see the trees for the forest sometimes, I suppose.
And though I too respect the traders here, I’m not one. I’m just trying to keep the principal more or less intact…keeping my powder dry, for the end-game.
May 25th, 2009 at 11:08 am
Speaker Pelosi dodges human rights on China visit
SHANGHAI – U.S. House Speaker Nancy Pelosi, long a fierce critic of Beijing, toured China’s financial capital on Monday on a visit focused on environmental issues rather than human rights
During a 1991 visit to Beijing, the Democrat from California unfurled a banner that read “To those who died for democracy in China” in the square. Years later, she attempted to present human rights petitions to then-visiting President Hu Jintao. When Tibetans staged protests against Chinese rule last year, Pelosi visited their exiled spiritual leader, the Dalai Lama.
Hmmm in 1991 the USA was the BIG DOG just ramping into careless U.S. monetary and fiscal policies and a standard of living that was the envy of the world.
How times have changed….
May 25th, 2009 at 11:29 am
I’m with ahab: http://www.ritholtz.com/blog/2009/05/job-losses-foreclosures/#comment-175657
Those who can keep up with their debt obligations (morts, CCs, etc.), but just barely, and see themselves slipping further and further underwater, will start to see defaulting as the rational choice. Heck it’s already happening, but will move upscale as this progresses.
When so many others are doing it (defaulting) the stigma is lessened and you can start to feel like the sucker if you’re hanging on while others wipe the slate clean and move on. If you don’t then in 5 years or so you’ll still be trying to climb out of the hole while those who defaulted start to build equity and savings. This psychology will take hold among many, many more people, even those who never would have thought of doing so in a normal world.
May 25th, 2009 at 11:32 am
If you want to talk Global (In)Stability, get your head out of Wall Street. Start with Barnett:
http://www.worldpoliticsreview.com/article.aspx?id=3805
http://thomaspmbarnett.com/weblog/2009/05/how_egypt_stays_egypt.html
– — – — –
The nations of the world are _not_ gearing up for war. The groups that fund warriors by proxy (Bin Laden et al) are also feeling the global loss of demand and cutting back their support to those operations. More desperate villagers will turn to piracy or the equivalent, but real war, and real terrorism will hunker down until the economy starts to turn up.
The second coming of WWII will _NOT_ save our (or anyone’s) economy.
May 25th, 2009 at 11:44 am
http://www.mercurynews.com/topstories/ci_12445652?nclick_check=1
Obama: N. Korea ‘recklessly challenging’ the world
“In his statement before cameras and microphones arrayed in the White House Rose Garden at mid-morning, he noted that the latest tests had also been denounced by China and Russia and had drawn the scorn of many around the world. Pyongyang’s actions “have flown in the face of U.N. resolutions” and had deepened its isolation, he said, “inviting stronger international pressure.”
I think I agree with jnutley above…this statement by the president is pretty shallow, I think. If there is any one nation that isn’t worried about isolation or international pressure, it is North Korea…duh.
And he could have said,”Since we owe our firstborn children to China already, and since North Korea is in their backyard, and since China proved in the Korean War that they are not ready to let the West have too great a hand in their sphere of influence, I think I’ll just shut up and wait until I see how the Chinese are reacting to this before I have anything of importance to say on this incident.”
May 25th, 2009 at 11:47 am
I agree that each of the “Waves” is spread over a longer period, especially with so many holding off on foreclosure right now. If that changes and all that real estate hits the market at once things could change quickly. If we take a simplistic homeowner view that:
Budget = income – expenses.
The first wave was caused not by budget but by speculative flipping. The second by interest expense increases swamping income, and then the third by job loss: income disappearing. All of these will continue as we continue to wind down.
A fourth wave? I like the earlier idea of tax increases driving people from their homes. This has been happening for decades with seniors living on fixed incomes. Fortunately many were rescued by rising prices and could sell to more affordable housing, and it was and not really an issue.
Now it is an issue. And the idea of a fourth wave caused by people walking away, particularly seniors makes some sense. Taxes and maintenance expenses on housing continue to escalate while values drop.
There is a growing tension between government, particularly state and local, and the locals caused by the drastic drop in gov receipts, and their need to continue their employment and spending levels. It’s a cinch real estate taxes are not going down. Government has been at the trough gorging on the good times, and the cold shower is not going to end well. Many were already teetering on BK.
Perhaps a last component is the death of the concept of single family suburban homes. Community living, taking on boarders, family generations returning to a single dwelling.
May 25th, 2009 at 11:49 am
@jnutley
Great then…problem solved!
So if “economic turmoil” is the new prescription for world peace, why are we bothering to bail out financial instutions (and everyone else for that matter)?
Be careful, if things start to get prosperous again, the world will go to war over resources, right?
May 25th, 2009 at 11:55 am
One question is, will the rising foreclosures, combined with CRE defaults, be enough to send the SPX back to the 700 level? Or is it all just “better than expected”.
May 25th, 2009 at 11:56 am
@usphoenix
Your last paragraph, in all likelihood, was very correct…
People will basically “move back in together”…That is basically how Europe has survived with high single digit or double digit inflation for years…
Generations of families sharing the same dwelling, etc.
It’s simple, and quite frankly PAINLESS…The only “catch” all along in this country is that there existed a sort of “cultural bias” AGAINST the idea…In Europe, there is no bias, or stigma whatsoever…
It’s considered NORMAL…
May 25th, 2009 at 12:01 pm
@DL
You don’t need THAT to send the SPX back to 700…
All you need is one or two more “earnings seasons” to get pasted in the scrapbook…
This market only got called up on the hope that “operating earnings” would meet a rebound in demand at some fixed point in the future…
MM’s are still forecasting for $55-$60 earnings in 2010…
When the #’s come in in the $30-40 range they’ll have to start adjusting downward…(unless some GREEN TREES start forming from the GREEN SHOOTS
May 25th, 2009 at 12:04 pm
Throw in already bloated inventories and this summer is the last chance to sell, before a big price chunk gets lopped off the high end. Market inventories are as high as 41 months in Century City on the Westside of Los Angeles. With Prime, Alt-A and ARMs getting ready to blow, real estate is in for a world of hurt.
http://www.westsideremeltdown.blogspot.com
May 25th, 2009 at 12:15 pm
[...] light of Friday’s BankUnited Failure, and our earlier post on rising foreclosures, here is an updated version of a chart I ran previously from Ron Griess of The Chart Store, showing [...]
May 25th, 2009 at 12:21 pm
What does the flattening out of the curve of subprime mortgages in trouble indicate?
Have they ALL gone into default?
May 25th, 2009 at 12:26 pm
to keep things simple:
for you that missed/overlooked Oliver Stone’s other message in “Wall Street”:
All warfare is based on deception. Hence, when able to attack, we must seem unable; when using our forces, we must seem inactive; when we are near, we must make the enemy believe we are far away; when far away, we must make him believe we are near. Hold out baits to entice the enemy. Feign disorder, and crush him.
- Sun Tzu, the Art of War
http://www.military-quotes.com/Sun-Tzu.htm
He who wishes to fight must first count the cost. When you engage in actual fighting, if victory is long in coming, then men’s weapons will grow dull and their ardor will be dampened. If you lay siege to a town, you will exhaust your strength. Again, if the campaign is protracted, the resources of the State will not be equal to the strain. Now, when your weapons are dulled, your ardor dampened, your strength exhausted and your treasure spent, other chieftains will spring up to take advantage of your extremity. Then no man, however wise, will be able to avert the consequences that must ensue… In war, then, let your great object be victory, not lengthy campaigns.
-Sun Tzu, the Art of War
May 25th, 2009 at 12:26 pm
Have they ALL gone into default?
essentially, yes. they were only about fifth of the market at their peak anyway, less than that if you strip out alt-A.
May 25th, 2009 at 12:32 pm
[...] Schuldnern sollen mit ihren Hypozahlungen in Verzug sein (siehe Chart). Weitere Infos bei Big Picture. (Trackback)Tag it: Artikel kommentieren | Zu Favoriten hinzufügen (0) | [...]
May 25th, 2009 at 12:37 pm
I believe it will take the following to stop the landslide:
Someone has to create 15 Million US based jobs over the next 3-6 months in the private sector that only require an 8th grade education, pay $50-60K per year and have full benefits and can’t be outsourced.
I worry that I’m too optimistic..
May 25th, 2009 at 12:37 pm
“In war, then, let your great object be victory, not lengthy campaigns.”
Good thing we adhered to that premise in Iraq and Afghanistan…where it seems the whole point of the exercise was a long, tortuous grind leading to nowhere. Had victory been our object, Iraq would now be our 51st state, or at minimum, a colony. It was never about victory. It was always about W’s existential doubt: “Do I exist as commander-in-chief if I am not commanding troops in battle? What if they aren’t dying in sufficient numbers? Will I finally prove myself a man if I go to Iraq and do what my daddy (wisely) refused?”
And we would have declared victory over the impassable, indefensible and mostly uninhabitable eastern provinces of Afghanistan and left, except for the drones, which are far cheaper and easier and more effective than either manned aircraft or boots on the ground at inflicting damage and thereby imposing our will, so far as a thing in such a place is possible.
May 25th, 2009 at 12:39 pm
So much gleaming positivity here. Maybe there’s an upcoming bubble in happy pills…
May 25th, 2009 at 12:47 pm
@CTB
They just slapped a 99% tax on “happy pills”
May 25th, 2009 at 12:55 pm
[...] not just the poor, but everyone will be without a home and without a job. The financial crisis will finally allow us to complete the cycle already set into gear by the same [...]
May 25th, 2009 at 1:01 pm
The following is an excerpt of an essay found here: http://www.aynrand.org/site/News2?page=NewsArticle&id=23387&news_iv_ctrl=1021
What We Owe Our Soldiers
By Alex Epstein
Every Memorial Day, we pay tribute to the American men and women who have died in combat. With speeches and solemn ceremonies, we recognize their courage and valor. But one fact goes unacknowledged in our Memorial Day tributes: all too many of our soldiers have died unnecessarily–because they were sent to fight for a purpose other than America’s freedom.
The proper purpose of a government is to protect its citizens’ lives and freedom against the initiation of force by criminals at home and aggressors abroad. The American government has a sacred responsibility to recognize the individual value of every one of its citizens’ lives, and thus to do everything possible to protect the rights of each to life, liberty, property, and the pursuit of happiness. This absolutely includes our soldiers.
Soldiers are not sacrificial objects; they are full-fledged Americans with the same moral right as the rest of us to the pursuit of their own goals, their own dreams, their own happiness. Rational soldiers enjoy much of the work of military service, take pride in their ability to do it superlatively, and gain profound satisfaction in protecting the freedom of every American, including their own freedom.
May 25th, 2009 at 1:02 pm
It is downright funeral here. Look on the bright side, I am sure there is one. The ECRI, who are usually right, has forecast that we are on the cusp of a growth cycle. If you want to find positive things you can. Otherwise I’ll soon have to start freebasing prozac.
May 25th, 2009 at 1:07 pm
[...] That subprime problem isn’t a subprime problem anymore Jump to Comments CNBC and Rick Santelli’s list of losers grows. How many poor people can be in prime? [...]
May 25th, 2009 at 1:16 pm
Bush did it with the Iraq war…
War is a racket. It always has been. It is possibly the oldest, easily the most profitable, surely the most vicious. It is the only one international in scope. It is the only one in which the profits are reckoned in dollars and the losses in lives. A racket is best described, I believe, as something that is not what it seems to the majority of the people. Only a small ‘inside’ group knows what it is about. It is conducted for the benefit of the very few, at the expense of the very many. Out of war a few people make huge fortunes.”
- U.S. Marine Major General Smedley Darlington Butler, one of only 19 people to be twice awarded the Medal of Honor,
Obama is doing it with the 19 too big too fail banks
The US financial ponzi scheme is a racket…..Obama and his Wall St bought and paid for economic team have put all their chips on the Banking Oligarchs. It is conducted for the benefit of the very few ( The 19 too big to fail banks ) at the expense of the very many ( the American taxpayers). Obama’s objective with his Wall St bought and paid for economic team is to pump up great chunks of the Big Shitpile that’s essentially worthless unless the peak real estate values of the bubble can be miraculously restored.
This will fail because America and Americans are swimming in debt
http://www.usdebtclock.org/
Most Americans had better start making the gradual adjustment that the party since Reagan in the 1980’s where deficits did not matter is over and there will be a leveling of the global playing field.
And I suggest that most should be recalibrating their American dream
May 25th, 2009 at 1:21 pm
Wave IV = Continuation of I to III (unemployment & interest rate resetting into ~ 2013-14?), plus CRE and also the “wealthy” snapping up bargains in AZ and elsewhere that turns into an expense and not an investment.
Real Estate is an expense for most and not an investment (speculative) as American history has proven with plenty of bust, except for the financial industry who loan money and have interest income. Oops, I forgot, a few of them F’d up, so I guess only the local Gov’t has income from property taxes, and the smarter banksters and CRE investors still getting interest/rent for the next ~decade.
As the saying goes, stop paying the property tax and see who really owns the rights to the “investment” property,
and stop the upkeep to further devalue the property.
Eventually property values will meet the downward moving target of personal income which may have a correlation with unemployment levels and lopsided income distribution. But don’t tell that to a neoclassic economist who believes reality has to fit theory, and if not then reality is the farce.
May 25th, 2009 at 1:42 pm
So you’re saying everything isn’t perfect?
May 25th, 2009 at 1:45 pm
thetanman:
I’ll give you a happy little website, and you can put it on your favorites:
cnbc.com
You’re welcome..
May 25th, 2009 at 1:59 pm
With tax revenues dropping, I’ve got to think that layoffs at least at the state and local level will lead to wave 4 though it will probably be muted. The feds can print, the rest can’t. Just look at the turmoil Arnold is going through
May 25th, 2009 at 2:05 pm
“As more people lose their jobs, we will see increasing foreclosures, adding further stress to banks’ already ugly balance sheets.”
Whocoodanode?
- Tim Geithner
May 25th, 2009 at 2:07 pm
I’m not sure the exact timing, but FAZ will rise from the ashes sometime this year.
May 25th, 2009 at 2:09 pm
@Cursive
Yeah…I’ll betcha it does a “double”!
It’ll go from $1 to $2…
May 25th, 2009 at 2:19 pm
Well, it closed Friday at about $5.50. I think it can easily double from here in the next month. However, I also believe this thing will see at least $50 again this year. You do the math….(disclaimer: this is not stock trading advice and nobody should ever trade this devil child of an investment).
May 25th, 2009 at 2:38 pm
@Cursive
I’m sure someone will make some money with it (and someone else will lose)…
Just like a prognostication I read on Bloomberg News today…Some analyst was suggesting a 50% percent chance that OPEC would do a production cut…
Really? Wow, that’s handy advice!
Here…I’ll give you a 50-50 chance that when I flip this coin It’ll wind up “heads”…Now pay me my 2% for my sound advice
May 25th, 2009 at 2:42 pm
thetanman http://www.ritholtz.com/blog/2009/05/job-losses-foreclosures/comment-page-1/#comment-175720
I’m betting that their model does a great job of forecasting recoveries from cyclical, inventory driven recessions of the sort that we’ve seen post WWII. But not so much this one. We’ve been over and over the differences we’re dealing with here: debt bubble bursting causing immense deflation effects, economy broken structurally, job market broken, etc.
They may see a “recovery” as defined by a GDP bump, but it won’t really be meaningful to the markets or anything else in the longer run. What did it mean in the last downturn?
And I also am wary of them fundamentally based on the fact that they still think that we could have avoided a recession with the application of more stimulus last spring.
From their website http://www.businesscycle.com/ :
“In January 2008, we recognized that “a self-reinforcing downturn has already begun. If allowed to continue, it will amount to the vicious cycle known as a business cycle recession.” At the time, we explained why “prompt stimulus to boost consumer spending can avert a recession. But time is truly of the essence – the stimulus is needed in a matter of weeks, not months.”
When our warning went unheeded, we declared in March 2008 that we had entered a “recession of choice.”
Their Keynesian bent leaves me feeling queasy. This thing was coming down, no matter what. More stimulus would have just propped it up a little longer (maybe) and made the drop more dramatic, if anything.
Recession of choice indeed. Reminds me of those who still are braying that this is all just a lack of consumer confidence brought on by the negativity in the media. What a load of crap.
May 25th, 2009 at 2:50 pm
@Cursive
How could it possibly go to $50?
If all the financial stocks went to ZERO overnight that would be a 100% move (x3 = 300%)
300% of $5.50 is a $16.50 move…
May 25th, 2009 at 2:50 pm
US PHX,
I think you’re on the right track. Now, if one adds in “Always Low Prices” and their Cost to the social fabric/manufacturing sector of the United States, one might see that “Free Trade” was a chimera to obsfuscate the Growing Costs of the ever growing #’s of Rules & Regs + Deficits, promulgated, by Policy, from WDC.
this: “there will be a leveling of the global playing field.”–km4, above, has been the, openly espoused, Plan. see: http://www.trilateral.org/about.htm and their favored cohorts: http://www.cfr.org/
These two Groups have been Responsible, look at their Rosters, for the majority of Actions of every Administration, at least, since ‘77.
The CFR’s, publicly acknowledged, History stretches back much further, and their Members have riddled the Federal Gov’t/FedRes, at the minimum, for a Long Time.
As background to the Simple Story: The American People have been Set-up to be Set-up, to be Taken Down.
I’m, only, too, Sorry that that Story doesn’t qualify as being: “All the News that’s Fit to Print”.
The only thing Incompetent, about what has transpired, are those that believe We got here due to “Incompetence”.
and, for you that missed/overlooked Oliver Stone’s other message in “Wall Street”:
All warfare is based on deception. Hence, when able to attack, we must seem unable; when using our forces, we must seem inactive; when we are near, we must make the enemy believe we are far away; when far away, we must make him believe we are near. Hold out baits to entice the enemy. Feign disorder, and crush him.
- Sun Tzu, the Art of War
just know that, going forward, 10% will be OK, no matter what happens, 30% are, already, Lost, how the remaining 60% Act/Re-Act will prove the Tale to be Told about the here and Now.
and, note: this Is abbreviated..have fun, or ask Q:s, as always, you’re free to choose..
May 25th, 2009 at 2:56 pm
@onlooker
More stimulus in 2008 would have likely ended up in the hands of Bear, Lehman, & Merrill Lynch…
They all went bust (or were otherwise taken over)…
Same for this years “bailouts”…All the companies are going to end up bust anyway…Half of these banks that take TARP are going to go bust, Chrysler will go bust, AGAIN, GM will go bust (after they go bust this time)…
It’s all just pouring $$ down the drain…
May 25th, 2009 at 3:07 pm
Wave 4:
Hope someone didn’t already say this, I didn’t read all the comments:
Wave 4 can begin very soon and it will be the AltA and Option ARMS that cause it. Those recasts have hardly started. According to the schedule I have the massive resets with these begin next year and continue all the way until the end of 2011. My understanding is that on many of these loans they will recast before the original recast date when the mortgage balance reaches 110-120% of the original loan balance. Due to all the goofy payment schemes of negative am and the like, I have to imagine there is a very large amount of people that might be making interest only payments but right on the edge of the loan reset as a result of depreciation. As unemployment driven foreclosures continue this will not happen by choice, it’s just the way the contracts are written.
I’m thinking at this point that most speculators have exited this market however so as Barry’s #2 and 3 continue apace when Wave 4 hits it will feed on itself. We should also remember that based on the things in place for the banks, they don’t have incentive to lend, they can make money without hardly lifting a finger.
This is also just another fine example of the credit deflation we are currently living through. It’s only the start though. I won’t even mention the tax aspect of all of this. I have to question, for example, how long people in some of the Philly suburbs such as West Chester, Malvern, or Wayne continue to watch home prices drop while paying 20k plus per year in property taxes, especially when they do not have children attending any public school.
Wave 5 should occur when the idea of QE completely blows up in the Fed’s face. This pushes up rates and chokes off any possible recovery in housing.
Everything moves in 3’s or 5’s so I had to give a 5th.
May 25th, 2009 at 3:12 pm
It’s also worth noting the following with regards to RE:
MEW 2006 Q2: >$200 billion
MEW 2008 Q2: ~$9.5 billion
Lets also not forget the mental toll it takes on folks when they lose money on a home, especially at a time when the stock portfolio probably just took a bath to the tune of – 40%. This changes spending habits, etc.
May 25th, 2009 at 3:20 pm
@cvienne 2:50
It compounds daily, so it’s not a linear calculation.
May 25th, 2009 at 3:20 pm
As Tanta said some time ago: “We are all subprime now.”
IMHO, Dead Hobo seems to be firing on all cylinders.
I think the Chinese are constrained by the fact they have no place else to go with their surpluses
http://ftalphaville.ft.com/blog/2009/05/25/56194/china-stuck-in-dollar-trap/?source=rss
While the US is crap, everyone else is worse.
Some wars are profitable. NAM wasn’t and neither was W’s. While I hated what he did in 2000 (I think he regretted it, too), I always admired James Baker’s competence; we made a small profit on Desert Storm.
Last night I ran across this speech, which sounded reasonable, though rambling.
http://www.institutionaladvisors.com/pdf/090515-Great_Depressions_Are_So_Methodical-2.pdf
Links to some q&a audio with him here. Somewhat interesting. He generally feels as most here do, but, based on the histories of past depressions, he doesn’t really expect inflation to take hold for a long time. He expects a bump up in treasury rates for about a year and then for them to settle down. Not sure if I agree on that as, historically, the Fed never printed this much money.
http://www.institutionaladvisors.com/whats-new.htm
May 25th, 2009 at 3:26 pm
@Cursive
I understand that aspect…It would have to be a pretty large directional move (with a lot of volatility), extending for a pretty long timeframe for it to work its way back to $50 I’d imagine…
I’m too lazy to run scenarios on it
May 25th, 2009 at 3:34 pm
@tanman,
you seem to be intelligent judging by your posts the last few weeks. You also seem to know money managers based on your mention of discussing things with hedge fund managers so I have to ask:
Is the goal of an investor to “find something positive”
Looking for positives last year would have made you positively broke.
There are always positives if someone looks hard enough. One of the greatest positives emerging IMHO is the personal savings rate increase. It was long overdue and though it will cause problems short term, it was needed.
As an investor, or a money manager, I think it is far more prudent to understand the bad news even though it’s more fun to find good news. Maybe you can set me straight on this.
Also, any forecast of global growth isn’t using a model that accounts for credit deflation so I’m skeptical of anything like that. I’ve never seen any model that factors in credit deflation like we could see.
Last, is any of this really bad news?? Isn’t it just…. reality?
May 25th, 2009 at 3:37 pm
@cvienne
Too lazy, also. But, if we did do such an analysis, look at RIFIN. That’s the underlying index. I watched SKF go from $300+ to $87 and back to $300+ the past 6 months. This is not a stock market, it is a casino and anyone with money in the game is at the roulette wheel. The wiser among us have withdrawn from the table. For anyone else crazy enough to still be in the casino, place your bets on red or black…
May 25th, 2009 at 3:39 pm
@ben22
The EARTH SUCKS Ben!
And it’s a good thing too…If it didn’t, we’d all go flying off into outer space…..
May 25th, 2009 at 3:41 pm
Aargh! Lost my last post. It’ll probably re-appear later….I may not.
I wasn’t able to raise my flag this morning becuase of the rain, but wanted to echo what so many on hear have said about our fine men and women, past and present, who have served this country. I and my family greatly appreciate your service. Thank you. Happy Memorial Day!
May 25th, 2009 at 3:42 pm
where the heck is Franklin when you need him?
May 25th, 2009 at 3:47 pm
Looks like the Russky’s won’t be worth fighting. Maybe they’ll start a war to distract their citizens.
May 25th, 2009 at 3:47 pm
Whoops. Forgot the link
http://www.chron.com/disp/story.mpl/front/6440144.html
May 25th, 2009 at 3:50 pm
@Wes
If you want, I’ll play the role of Franklin for the rest of the afternoon and talk about “green shoots” and you all can but the BEAT DOWN on me…
OK…here’s a BETTER THAN EXPECTED…
May 25 (Bloomberg) — Canada’s Finance Minister Jim Flaherty said the country’s federal deficit will be “substantially” greater than originally forecast in January.
Flaherty spoke to reporters in Chelsea, Quebec.
greater means better, right? Therefore: “Better than expected”
May 25th, 2009 at 4:01 pm
@cv -
I asked the other night why everyone got so riled by F411. BnTn said it was because he was the father of Rosemary’s baby. If I remember who the father was correctly, it was the devil. Sign of devil – 666.
Next, I go buy a liter of Johny Black and it rings up as 66.36 – hmmm (inflation).
I spent the next couple of days studying Elliott Wave and reading about some numbers guy named Fibonaci and came up with some new insights into where the market goes from here.
OK, follow me now (I can’t), 666 was the SP500 low. 6 6 3 6 is 50% fib retracement and recovery between the 2 and 4th data point. Oh shoot I don’t remember is the 5th wave up or down – hep me Ben22 , for the depressive bunch I’m callin’ 333 and for the optimistic bunch 999.
PE = 10% at bear bottom. $33 Sp earnings = 333 majic
May 25th, 2009 at 4:43 pm
onlooker,
Thanks for your reply. The ECRI claims that there was an indicator that failed to turn upward during the GD, but is now climbing. It does seem implausible that they have the Rosetta stone of economic indicators, infallible for all these decades. We have such a huge bubble, and just be able to Houdini our way out of it, does seem even more far fetched. Please excuse my attempt at a ray of sunshine.
Have you read or listened to Bob Hoye? That H-S on the $TRAN does look ominous.
May 25th, 2009 at 5:04 pm
ben22,
Thanks. I did know a MM years ago-I’ll tell you his naked put odyssey one day, and a hedge fund manager. The MM lost $850k in one day and survived, although he was a little perturbed. The hedge fund manager was great at trading his own account but returned about 15% after expenses from ‘03-’06. So not bozos, but not Soroses either. And yes, if there one thing I know, hope is the worst investment strategy known. Just throwing some things out there. Look at it this way, if anyone on here reads something by the ECRI, they’ll know a lot more about them than they otherwise would. I’ll go sit in the corner now.
May 25th, 2009 at 5:45 pm
@tanman,
ok., I was curious, reading as if you had entered the Green Shoots zone, which I was a little confused about based on recent remarks on $TRAN. In any event, nobody puts tanman in the corner, or Karen for that matter.
@Wes,
I’m last person to ask when it comes to wave analysis, just a novice here and I’d probably tell you something wrong. Though I have probably put a good 75 hours into in the last two months, it’s not nearly enough. Until I can see the stuff without having to go back to the book constantly I’m just a novice.
AT would be a much better person to ask than me. He’s made some unreal calls the last 12 months, several times I’ve seen him calls short term tops or bottoms almost to the decimal. Also, I’d sign up for his e-mail if you really want to get into it.
If you are really interested in it I’d suggest you also purchase Frost & Prechter, Elliot Wave Principle. It’s the bible of wave and it is very easy to read. The key with wave is getting the “count” correct, for example, prechter’s call back in Feb to cover shorts (see the video’s section for all his calls since 10/07) was based on a wave 2 rally but as part of a Primary wave count, and as you go further you’ll see there are several counts that are always at work:
1. Supermillennium
2. Millenium
3. Submillenium
4. Grand Supercycle
5. Supercycle
6. Cycle
7. Primary
8. Intermediate
9. Minor
10. Minute
11. Minuette
12. Subminuette
13. Micro
14. Submicro
15. Miniscule
From page 28 of the book:
It is important to understand that these names and labels refer to specifically identifiable degress of waves. By using a nomenclature, an analyst can identify precisely the position of a wave in the overall progression of the stock market, much as longitude and latitude are used to identify a geographical location.
Now Prechter, as far as I know, remains very bearish which can be seen in the videos, however, I think there are 9 different wave counts going right now, all of which lead to different outcomes of course. As Barry wisely notes in the video section, he was wrong the whole bull mkt of the 90’s. As with anything, there is no perfect answer to where the market goes next. I have a bearish stance but I never fall in love with any one investment thesis and that’s why I was long early this year. When I’m wrong that’s what stops are for. Risk management is something I think I can do much better than 99% of fund managers out there. Make money, and keep money, that’s my only goal.
My interest in wave started with my obsession with phi. I have read many books on phi and spent a few years now learning about it so I think it has helped a lot with me catching on to wave.
I’m sure AT will tell you, it will take a real effort to get any good at wave counting.
May 25th, 2009 at 7:02 pm
@thetanman:
Sorry if I was catty. People who know me say I can disembowel people I don’t like with my tongue. Sorry. Doesn’t happen often. I come here to learn and am thankful there are bright professionals willing to share.
May 25th, 2009 at 7:12 pm
http://en.rian.ru/world/20090323/120689432.html
China ready to discuss new reserve currency at G20 summit
BEIJING, March 23 (RIA Novosti) – China is ready to discuss Russia’s proposal of a new global reserve currency as an alternative to the U.S. dollar at the G20 summit in London, a vice governor of the country’s Central Bank said on Monday.
..I did read something this weekend that said that China was trapped having to buy treasuries (once again)….well, again, for us folks who probably were conceived in Missouri….maybe I am not fully convinced of that….20 years ago it was unthinkable that GM would go BK….
May 25th, 2009 at 7:21 pm
Bruce,
In order to spark some debate, is the idea of a one world currency not a biblical prophecy?
May 25th, 2009 at 7:27 pm
…after the Amero
May 25th, 2009 at 7:30 pm
@Bruce
It can’t be very tasty to disembowel people with your tongue :-p
May 25th, 2009 at 7:32 pm
@cv – ooooh dude
May 25th, 2009 at 7:34 pm
Bruce in Tn Says: May 25th, 2009 at 7:12 pm
http://en.rian.ru/world/20090323/120689432.html
China ready to discuss new reserve currency at G20 summit
**********************************
Gee who called it…what do I win
km4 Says: May 25th, 2009 at 10:44 am
Marie Antoinette I think the quid quo pro will be a global currency because there is already tangible movement afoot ( China, Russia, Brazil, Japan ? , others ) and rest of world is sick and tired of perpetuating careless U.S. monetary and fiscal policies that makes America’s standard of living superficially inflated !
Most Americans had better start making the gradual adjustment that the party since Reagan in the 1980’s where deficits did not matter is over and there will be a leveling of the global playing field.
May 25th, 2009 at 7:38 pm
Wes,
I just realized you asked a question about Wave 5.
Wave 5 can be up or down, it’s the 2 and 4 waves that are counter to the trend.
Other simple rules:
Wave 3 is never the shortest wave
Wave 2 never moves beyond the start of Wave 1
Wave 4 never enters the price territory of Wave 1
May 25th, 2009 at 7:38 pm
@km4 –
…average down, better than getting nut’n honey
May 25th, 2009 at 7:39 pm
@ben22 –
thanks man, sounds like you are ready to take off the training wheels
May 25th, 2009 at 7:42 pm
@km4
As we all ponder the “post deficit” era, let us consider our blessings…
Carl Spackler, CADDYSHACK
“So I jump ship in Hong Kong and make my way over to Tibet, and I get on as a looper at a course over in the Himalayas. A looper, you know, a caddy, a looper, a jock. So, I tell them I’m a pro jock, and who do you think they give me? The Dalai Lama, himself. Twelfth son of the Lama. The flowing robes, the grace, bald. striking. So, I’m on the first tee with him. I give him the driver. He hauls off and whacks one – big hitter, the Lama – long, into a ten-thousand foot crevice, right at the base of this glacier. And do you know what the Lama says? Gunga galunga gunga – gunga galunga. So we finish the eighteenth and he’s gonna stiff me. And I say, “Hey, Lama, hey, how about a little something, you know, for the effort, you know.” And he says, “Oh, uh, there won’t be any money, but when you die, on your deathbed, you will receive total consiousness.”
So I got that goin’ for me, which is nice…
May 25th, 2009 at 7:48 pm
@cv,
funny.
remember what “gunga”/ganga”/”ganja” was the other day at Barrys’ place – green shoots..
…on your death bed you will receive total consciousness……as you spend your very last cent….priceless
May 25th, 2009 at 7:48 pm
@ Wes Schott – I’m mostly out our rigged stock market and into low interest safe yields. I take my much better ‘calculated risks’ consulting for select software startups where I get stock options + retainer fee !
@ cvienne – most excellent vignette !
May 25th, 2009 at 7:50 pm
@km4,
sorry, I refering to a prior post re. a world currency – not investmenr advise
he, he deflation first. inflation second
watch out for a change in phase
May 25th, 2009 at 7:52 pm
@km4 -
…congrats on the stock options + fees
May 25th, 2009 at 8:03 pm
@km4
The “best” vignette was from yesterday…but these things get lost over a holiday weekend…
Here’s a REPRISE…
BEING THERE, 1979
President “Bobby”: Mr. Gardner, do you agree with Ben, or do you think that we can stimulate growth through temporary incentives?
[Long pause]
Chance the Gardener: As long as the roots are not severed, all is well. And all will be well in the garden.
President “Bobby”: In the garden.
Chance the Gardener: Yes. In the garden, growth has it seasons. First comes spring and summer, but then we have fall and winter. And then we get spring and summer again.
President “Bobby”: Spring and summer.
Chance the Gardener: Yes.
President “Bobby”: Then fall and winter.
Chance the Gardener: Yes.
Benjamin Rand: I think what our insightful young friend is saying is that we welcome the inevitable seasons of nature, but we’re upset by the seasons of our economy.
Chance the Gardener: Yes! There will be growth in the spring!
Benjamin Rand: Hmm!
Chance the Gardener: Hmm!
President “Bobby”: Hm. Well, Mr. Gardner, I must admit that is one of the most refreshing and optimistic statements I’ve heard in a very, very long time.
[Benjamin Rand applauds]
President “Bobby”: I admire your good, solid sense. That’s precisely what we lack on Capitol Hill.
—
OPEN THE TRADING DESKS! CALL YOUR BROKERS!
May 25th, 2009 at 8:08 pm
Wes Schott @ 7:50
re. km4@7:48
that was your comment re. world currencies and with a happy face.
you are the winner – i just don’t think anybody is handing out any booty on this blogsite
i’m talkin’ to myself?
May 25th, 2009 at 8:11 pm
cv@ 8:04
really good one
“Ben Rand”
you know where this going don’t you…Ayn and Helicopter…classic tug of war
May 25th, 2009 at 8:12 pm
But unemployment is a “lagging” indicator…LOL Think happy thoughts, glimmers of hope, green shoots and mustard seeds, comrade.
May 25th, 2009 at 8:17 pm
Pat G@8:12 –
lagging indicator for the “financial” economy – leading indicator for the “real” economy – mark-to-market, baby
May 25th, 2009 at 8:26 pm
Bruce: “BEIJING, March 23 (RIA Novosti) – China is ready to discuss Russia’s proposal of a new global reserve currency as an alternative to the U.S. dollar at the G20 summit in London, a vice governor of the country’s Central Bank said on Monday.”
Don’t know if that’s gonna do much. Read in the Euro press a couple of days ago that they are pretty fed up with the Chinese. They’ve been going out of their way to get the Chinese to attend trade meetings and all that happens it that the Chinese want to export to them while keeping restrictions on Euro exports. With the current conditions, that doesn’t go over too well.
May 25th, 2009 at 8:32 pm
@Mike in Nola
I tend to agree with what you’re nodding at here…
The Chinese like to think they have us completely over a barrel…
While there is more than a little truth to that, in this world EVERYBODY HAS EVERYBODY ELSE OVER A BARREL…
It’s one “big-a**ed” Mexican standoff…
May 25th, 2009 at 8:38 pm
Mike in Nola @8:26
beggar thy neighbor policy?
still can’t parse that sentance very well
China competes w/euroland (read Germany) since the good ‘ol USA has “rebalanced its portfolio” – manufacturing for money flipping
how to reverse this trend is the funadamental question (although, it is good to be King – worlds’ reserve currency) – alt reality, China replaces US who replaced UK….
May 25th, 2009 at 8:48 pm
@cv –
you are correct sir, but….it is good to be King
the times may be a changin’ – but, that is very long range (at least a week or two, he, he)
Russia has shifted their currency reserves away from USD to euro – 50 – 40 to 40-50, aprox, plus 10% of other currency and other “things”
May 25th, 2009 at 8:53 pm
The can’t buy US oil companies ( although doing fine in South America, Iran, Africa ) and other strategic businesses but they can buy pieces our USA sports i.e. Chinese Investment Group Buys Stake 15 percent of Cavaliers to help spread to the ever-expanding Chinese market.
Once again the global currency movement is already afoot and smarter Americans had better start making an adjustment because the days of returning to ‘normal economy’ after a recession are over !
May 25th, 2009 at 9:10 pm
…the line was drawn in the sand at the 1st try big try – Unocal
May 25th, 2009 at 9:15 pm
Yes I know Wes but that was when America was still full of hubris…and Oil & Gas was my first career
May 25th, 2009 at 9:22 pm
Wes Schott @ 8:17 pm
That is what these cheerleaders seem incapable of disciphering. If the consumer is 70% of GDP and unemployment is a “leading” indicator for the economy than it’s only going to get worse. Printing our way out of this than, is not the answer.
May 25th, 2009 at 9:25 pm
[...] Ritholz explains. May 25th, 2009 | Category: Uncategorized | Leave a [...]
May 25th, 2009 at 9:34 pm
Problem with the global currency talk is there is no alternative put forth.
Europe is in the toilet worse than us; Germany is having to prop up Eastern and Southern Europe and Ireland. Spain, Ireland and the UK had worse housing bubbles that we did.
Yen: not worth talkng about.
Renmimbi: not convertble and they are about to chang that.
Yeah, the dollar will eventually displace, but it ain’t gonna happen for a couple of years at least. In the meantime, the next liquidity crisis (and there will be one) will have lots of people running for treasuries again.
May 25th, 2009 at 9:40 pm
Pat G. Says at 9:22 pm
Spot on !
May 25th, 2009 at 9:47 pm
Oops: not good typing in bed in the dark. Meant to say Renminbi is not convertible and they are not about to change that.
May 25th, 2009 at 9:48 pm
Wes,
PROC’s bid for Unocal had little to do with OIL.
see: http://clusty.com/search?input-form=clusty-simple&v%3Asources=webplus&query=China+Unocal+rare+earths
May 25th, 2009 at 10:11 pm
MEH @9:48
…btw, just back from the park and spotted roseate spoonbills…quite cool, there are not usually there, looked young….
…Unocal had the rights to develop resources in a part of the world that was in China’s “perceived” and geographic domain….strategic fit, that’s all…convert $ to oil reserves…before it is too late
although the US touts free trade, global, markets, internationalism, etc…when push comes to shove, no freakin’ way – Dubal Ports World and your brother, too….
May 25th, 2009 at 10:11 pm
hoffer-
intriguing about Union Oil- I seem to learn something new from you almost every day-
hope everyone had a great Memorial Day- you think I would have gone down to the National Mall- since that is where I live- but- once you been down there a million times- well . . .
tomorrow a new day- keep hoping for the policies that take the pain now- so we can start clean and push on to greener pastures- maybe one day soon- who knows . . .
May 25th, 2009 at 10:30 pm
MEH@9:48
good stuff – rare earths – China controls 97%!
We are in deep doo doo
Long commodities, short dollar, no?
May 25th, 2009 at 10:38 pm
Wes,
Re: short dollar.
I hope for you that’s just a trade.
If the dollar was going to collapse now, and everyone knew it, which a lot of people are claiming, then everyone would have already sold.
Dollar denominated debt, which btw, is everywhere, is being put out by restructuring, payoff or default at a faster rate than new dollars are being created. As a result, it increases the value of the existing supply of dollars.
It’s often not best to run with the herd, take note of the dollar bear posts here, and everywhere. Running with the herd only gets you trampled.
May 25th, 2009 at 10:41 pm
Wes,
like this: http://www.sms.si.edu/irlspec/Ajaia_ajaia.htm ?
also, I hear you about the Indonesian Oil play v. Unocal, but that wasn’t the cake, just the frosting..
it really was the ‘rare earths’ component. w/o them, everyday 21st C. ‘necessities’, (sp)iPhones, Ceramics, Optics, IT components–as examples–go back to being found in Jules Verne books, only..
see: http://clusty.com/search?input-form=clusty-simple&v%3Asources=webplus&query=rare+earths+in+ceramics 4 starters..
as an aside, are you a member of Ducks Unlimited?
May 25th, 2009 at 10:50 pm
b22-
you definitely have a point re dollar- however- I am a believer in things occurring that are unsuspected- if key players show a defection from the dollar either though removing a peg to the $ or possibly an alternate currency- then you could see the $ decelerate pretty rapidly regardless of the other dynamics in play
May 25th, 2009 at 10:50 pm
ben22@ 10:38 -
I’ve been short USD for quite awhile – years
Did you see the Zero Hedges posted inverted pyramid showing that the money supply was 10% of liquidity and the credit markets (shadow banks) provided 60-70%?
I agree, there is no way Helicopter Ben can keep up with the carnage.
May 25th, 2009 at 10:53 pm
ahab,
I’m not sure I understand what you are getting at. Isn’t that exactly what people are expecting?
May 25th, 2009 at 10:55 pm
MEH@10:41
yes, those are the pink cuties
i don’t know what “rare earths”: Unocal could contirbute to China’s collection, expecially if they control 97%.
So, prey tell, what were they after – making a point about globalization? or, exchanging paper for physical?
May 25th, 2009 at 11:00 pm
wes,
I just read it. You might want to read again. Seems Tyler’s thesis revolves around a transfer out of dollars and into Euro’s. For my money, I wouldn’t make a bet on that any time soon.
It was a good post by him, fully supports my credit deflation thesis.
May 25th, 2009 at 11:05 pm
b22-
there has been much talk about the $ strengthening- at least short term- which sounds reasonable due to worldwide deleveraging however- an event is possible where the $ could crash regardless of short term dynamics- the most devastating of which is China floating their currency- or a defection from the dollar to close trades on the int’l market
May 25th, 2009 at 11:10 pm
Wes,
“Rare Earths, or “Green Elements,” are critical to enabling and furthering the many green energy technologies, high tech applications and defense systems on which our nation’s economy, security and future depend. We refer to these as “Rare Earth Dependent Technologies” because they cannot be produced without Rare Earth materials.
Currently, Rare Earth Dependent Technologies are nearly 100% reliant on Chinese-sourced materials. While in recent years China has managed to supply the entire world’s demand for Rare Earths, a dramatic shift is beginning to take place. As global requirements for Rare Earths continue to grow considerably (fueled primarily by the development and deployment of green energy technologies like hybrid vehicles, energy efficient lighting and wind power), China’s own domestic use of its resources is also soaring—with internal consumption presently at about 60% of production and rising rapidly.
The best plan for ensuring the future security of America’s Rare Earth Dependent Technologies is developing a strong domestic Rare Earth industry based on the responsible use of our own strategic reserves.
Fortunately, the U.S. has one of the world’s largest and richest Rare Earth deposits at Molycorp Minerals’ facility in Mountain Pass, California. At Mountain Pass we are producing a variety of Green Elements and plans are in place to bring the facility back into full production. With appropriate federal assistance for research, development and capital costs, Molycorp Minerals is prepared to move forward to reestablish domestic manufacturing capacity on an expedited basis…”
http://www.molycorp.com/
molycorp, sub. of unocal, last major US-based source of critical material known as ‘rare earths’..
remember, it is never, especially today, about ‘money’, it’s, always, about the ability to produce.
the USG’s shutdown of that takeover bid was, actually, a heartening sign that there are, still, some, in that body, that are thinking.
~~
ahab,
you make a good point, the max. Risk in re: U$D is to the d-side..
May 25th, 2009 at 11:25 pm
ahab,
I think the “event” you are getting at would start from within, which is massive disillusionment from people here towards the USD. That case has been in place for years so I see your argument. That said, most people here, and overseas do not understand we have a debt based money system.
just my opinion but China has some 2T in reserves, clearly they had a lack of “plan B” and to me they have very little wiggle room, at least in the next couple of years, to dump the dollar. Can China even afford a dollar collapse, I think no.
The pyramid in TD’s post is being supported by basically no cash. The pressure to have a slice of the “power money” will endure for some time is my prediction.
Let us also not forget that Timmy presented plans not long ago for derivative margin or reserves. This may in fact reduce the derivative market, but wouldn’t that also increase the demand for the capital at the bottom of the pyramid? In an attempt to keep control any plans like these would only be introduced very slowly, prolonging the day of the dollar collapse.
At the end of the day, right now, all the bigger parts of the pyramid are on life support, keeping the USD in demand.
I have no doubt the $ will go the way of all fiat eventually, which of course is to 0, but I think that day is years away.
May 25th, 2009 at 11:29 pm
Ben22: you sound like you Hugh Hendry. You know, the one who said only monkeys pick bottoms.
http://www.ft.com/cms/s/0/c88c798a-398d-11de-b82d-00144feabdc0.html
May 25th, 2009 at 11:32 pm
I’m a dollar bear over the next 12+ months.
Interestingly, the futures market shows DX at the same level in March of 2010 (DXH10)
as it is now.
May 25th, 2009 at 11:35 pm
Wierd, that link only seems to work if you click it from this google page.
http://news.google.com/news?um=1&ned=us&hl=en&q=hugh+hendry+bonds
otherwise FT says you have to subscribe to read it. But, he says pretty much what Ben is saying.
May 25th, 2009 at 11:39 pm
Here’s how I think it will work. The next bubble is government finance and immigration. Open borders so that the debt is spread among a larger number of younger people. What happens without immigration can be seen in Russia and eastern Europe. Attrition and young people fleeing to the West are gutting Eastern Europe’s population. The Baltic states are dying, and Bulgaria, Hungary, and Romania’s young are fleeing leaving the elderly in their wake. I went to Poland and older people are treated abysmally-as though they were antiquated millstones as the ponzi glitz of the West beckons. The West absolutely need some one to help pay for our vast and rapidly growing older population and the bailouts. The seasoned citizens, like my 84 year old parents, will pay for the bailouts but so will the much younger immigrants. My father has consumed several hundred thousand $ of health care in the last year, and my mother several times that. Many multiples of what she paid in. The present boomers health is not going to be nearly as good. My older brother died of a heart attack several years ago, and my older sister has diabetes. Health care will have to be rationed. So we are trying to bridge the gap until we can get 2-3 billion Asians borrowing like madmen and madwomen. China has its own demographic clock ticking, as its population looks like it will stagnate about 2050 or so. They’ve got to kick the economy in gear now. They cannot tolerate growth lagging for any significant period of time or their population will be too old. Then they will have to get people from India or Africa or just fade away. We will have the Amero, or something like it, and present Americans standard of living will fall toward the first & second generation immigrant average, while their standard of living will rise to meet the falling average. And we will do our best to turn Asian into model Americans. History has shown time and again that we will ride this ponzi horse into the dust.
May 25th, 2009 at 11:49 pm
thetanman @ 11:39
Young, hard-working immigrants would be good for the economy (regardless of what one might think about the cultural consequences).
The trick is to get only those that are young and hard-working, and to keep out the sick, the lazy, and the elderly (unless they have money).
May 25th, 2009 at 11:53 pm
@thetanman@11:39
….the most personal thoughts that you have shared, or at least, that I have seen
where are you based?
I believe that the European and UK banks did the highly levereaged loan securitization thingy based upon assumed Eastern Europe growth
May 25th, 2009 at 11:54 pm
DL @11:49
are you an old person like me?
May 25th, 2009 at 11:58 pm
WS @ 11:54
Depends what you mean.
May 26th, 2009 at 12:00 am
…just like currencies – it is all relative.
May 26th, 2009 at 12:01 am
WS @ 11:54
The point in my 11:49 post is that our economy will not benefit if poverty-stricken 70 year-old people flood in here from foreign countries. I believe that we do benefit from the young Mexicans that come over to work, although I don’t favor giving them legal status.
May 26th, 2009 at 12:04 am
how much immigrant labor does it take to keep the SS sand Medicare Systems out of default on their promises?
I have not run the numbers, but….
I doubt that they add up
May 26th, 2009 at 12:11 am
WS @ 12:04
Medicare is completely hopeless. No way the government can deliver anything approaching what they’ve promised. Immigration or not.
As for Medicare, the government will have to make it available only to people below a certain income level, maybe its 50K/yr, maybe it’s 30K/yr, I don’t know.
And on top of that, perhaps the government will disqualify anyone who has significant assets, even apart from income.
May 26th, 2009 at 12:16 am
DL@12:04 –
That is a scary outcome
I am goin’ off grid now!
tired, long weekend, too old
May 26th, 2009 at 2:36 am
All this talk about “rare earths” — getting late in the thread……
http://www.youtube.com/watch?v=QZsppOw2Mxk
May 26th, 2009 at 2:36 am
Put my hand on a dollar bill, and the dollar bill flew away……
So, topical
May 26th, 2009 at 2:40 am
Wes,
Western Europe, with the cooperation of the Eastern Europeans themselves, helped blast the East’s ability to sustain even a Belorussian standard of living. So now the young flee West to the UK, Germany and France. Portugal has a huge number of Ukrainians. Estonia, once a model country, swoons as its uber ponzi economy implodes and the young pull up stakes for London, a favorite destination. Italians used to have Europe’s highest birthrate, now they have the lowest. What happens to Asian populations in Europe? Their birth rates fall faster than the death rate. Japan will have to do something soon or its population will rapidly melt away in a negative compounding spiral. Eventually the demographic transition will grip most of the globe. What then? Romania, Russia and Bulgaria have shown that once through the demographic transition, a falling standard of living will actually suppress birth rates further and increase death rates. Even Mexico has begun its demographic transition as birth rates have drastically fallen. China is where Europe was in the 70s. Many centuries hence, the World should have a lot less people, and many languages will go the way of Latin. Basically humans are living contrary to the way they evolved. Anyway strayed there a little bit, but demographic trends are fascinating.
I am based in Auburn Alabama but lived for a time in Egypt as a young man. The Egyptians are such sweet people, but they kept asking me if I was Israeli. My first day there 5 of them jumped me and thrashed the hell out of me. After that I was one of them. One time I was racing to get away from some kids that were trying to steal my bike and I hit a donkey turd and totally wiped out. I was skinned from head to toe and had manure in most of my wounds. Out of nowhere, dozens of people appeared with dirty rags to help me. I told them thanks (shukeron), but no( le). I even had a half English, half Egyptian girlfriend. Those were the days’.
May 26th, 2009 at 6:30 am
Prices are being kept artificially high by $1.25 trillion in purchases of MBS by the FED to keep rates ultra low as well as a tax credit. So we have a whole new generation of buyers in too expensive homes if it wasn’t for low debt service costs. Many buyers are FHA (~40% in CA) with very low equity. They won’t be able to move for any reason for a very long time without a short sale or foreclosure.
What happens when interest rates return to historic norms and the tax credit is removed?
Wave 4.
May 26th, 2009 at 7:05 am
[...] More Job Losses = Greater Foreclosures (May 25, 2009) [...]
July 6th, 2009 at 7:25 am
[...] point is the absurdly foolish Green Shoots compost. As we have detailed since this nonsense first started spreading earlier this year, the data simply did not support the notion of a 2nd half recovery. [...]