patrick.net

I saw a headline this morning that the USA housing market is the worst its been in 100 years. My question after hearing this was "how bad was the housing market in 1908?" Didn't most people at the turn of the last century pay cash or at least have a large down payment? I mean really, I bet 1908 didn't have such a bad housing market. The US had a large amount of legal immigration and we were not yet involved in The Great War." The industrial revolution was humming, no?

I saw a headline this morning that the USA housing market is the worst its been in 100 years.

Did it mean worst in 100 years since record-keeping started 50 years ago?" ;)

Paul,

I do not remember all the details, but Galbraith's "Short History Of Financial Euphoria" mentions many property bubbles even from 19th century. All were fueled by borrowed money.

I need to get that book out and type some quotations. It would be wonderful to revise our knowledge of bubbles.

Try also Devil Take the Hindmost and of course Memoirs of Extraordinary Popular Delusions and the Madness of Crowds.

Speaking of bubbles...

My wife wants to buy some tulips. Do you guys know of a florist in the South Bay?

http://en.wikipedia.org/wiki/Panic_of_1907

Hetty Green and all that. "The stock market fell nearly 50% from it's peak in 1906."

Domestic policy: Just like today, I would let the banksters eat crow, but I would have supported government insuring deposits. I would not have fought the movement towards gold as a hedge since that is an infringment on someone's right to preserve their wealth. I also would have funded large public works projects since that is the basis for a successful free market economy. That's one with very good infrastructure openly available to the society.

Foreign policy: Trade policie and treaties only when there is a clear benefit to the American consumer and worker. I would have tried to stay neutral but Pearl Harbor would have happened anyway, so I'd have done all of that the same. I would have executed many more Nazis, and probably would have tried Hirohito as well, although that would have been a mistake.

If I were Kennedy, I would have invaded Cuba and confronted the Russians, therefore it is probably a good thing I am ineligible to run for President of the USA.

If I were Bush, Clinton, or Bush I would have invaded Iran, and N Korea, so again, it's probably just as well that I can't run.

Peter P Says:
March 12th, 2008 at 3:12 pm
"I saw a headline this morning that the USA housing market is the worst its been in 100 years.

Did it mean worst in 100 years since record-keeping started 50 years ago?” "

100 years ago, these bankers would have been lynched by pissed off depositors and investors.

Peter P Says:
March 12th, 2008 at 2:26 pm
"I think the bankers of this generation have learned their lesson. Till the next generation kids come along with their financial innovations, we won’t be seeing stupid lending.

I thought the speculators learned their lesson in 2000…"

The only thing they've learned is that if enough of them screw up to the point of being a threat to national security, then they will be bailed out, and they will still have jobs. They haven't learned shit, and things are going to implode despite any attempts to save the situation.

I like Malcolm. ;)

If I were Kennedy, I would have invaded Cuba and confronted the Russians, therefore it is probably a good thing I am ineligible to run for President of the USA.

That is not unreasonable. But Ronald confronted the Russians without bloodshed.

First post, I meant trade policies, but trade policy works also. :)

If I were Nixon, I would have cut tax drastically to combat stagflation. I would have legalized gold ownership right away.

Thanks man. I have to try to be honest even when looking back at what I would have done with the benefit of history. I would have treated the U2 downing as the first shot.

Reagan was brilliant, but he didn't have anything near the missile crisis to deal with. To me, if someone points a loaded gun at you, you have to believe they intend on shooting.

Of course I am referring to the Cuban U2 incident, and not the Powers incident over Russia.
That one was just one of those incidents that both sides now laugh about. Pretty funny in a way. "Uh, we were doing weather observations over Russia" ;)

If I were Lincoln I wouldn't have fought the succession of the southern states. This might have been a bad decision for the union and black people, but then again I probably wouldn't have taken a bullet to the head at the theater either.

secession, sorry :(

According to some theory, slavery in that form would have ended with or without the Civil War. But hindsight is always 20/20.

Actually I've been reading a lot of history books over the last dozen years, and hindsight is not generally 20/20. Each historian puts his "spin" on the events. It's actually hard to determine what exactly happened.

The South screwed up by firing on Ft. Sumter. If they had just let the Federals sit there, the Federals would have gotten bored in time and just left. The South handed Lincoln a causa bella on a silver platter.

Hire Tony Stark to build custom Iron Man suit and fight the Nazi's personally.

OB,

no need to throw around the term "Gay Area" using a device that was designed and invented there. Without your gay area friends, you wouldn't have such a nice little blog to spend half your day bitching to the world on.

With that said, yes, we are fucked.
For some reason people think that America in the 90's is somehow the universal constant "norm". While human history is filled with war, hunger, strife AND most of the world even now is in the same condition, it would appear that America in the 90's is the EXCEPTION. We have been nutting it here for the past 50's years people. That doesn't mean it's going to always stay that way. In fact, historically speaking, it's impressive it's lasted even this long.

TOB :

Let's take one thing at a time.

1. I don't believe bankers will be as stupid as they have been. Do you think otherwise ?

2. I did not say "lets concentrate on entertainment ...". I pointed out that these industries are doing OK. Just to put in perspective that - although banks have realized large losses, technology for example hasn't realized losses. Many companies have announced only slower growth. I specifically said, I would heavily concentrate on our manufacturing and export industries. Which means, I would try to start/increase activities/investments in these areas. We do export a few things - it's not "none". And although it would take a long time to (re)build these industries, I think that's the way to go in future.

I don't think I indicated that this was going to be easy and quick. Read again. I said This is going to be one painful process, but let’s remember that it’s not the end of the world.

3. About the current war, people dying and lives being ruined. I was not commenting out what's happening. I was providing my answer to the questions raised in the post - what should be done to revive the economy. If you have a different opinion or disagree with me, that's fine, I have no problem with that. But you can't blame me for not discussing the Iraq war, Bush's incompetence, Cheney's oil connections, Clinton's legacy and how much Spitzer paid for his blow jobs or even how Mozillo is evil. I agree that all these are problems, but that's not what the topic of the post was.

TOB, even as a conservative, I fail to comprehend your hostility towards gay people.

To me, divorce is the enemy against traditional family values.

makes me fucking sick that they think their fucking greed and self-serving bullshit is some kind of natural law.

There are right.

This is why I am a misanthropist.

how am i being hostile towards gay people?

You are not? Sorry then.

TOB :

I will try to dig up information - hard numbers - about our manufacturing industries. It's completely wrong to say that we don't have any.

Just yesterday, CR had an article about US Trade Deficit. The deficit ex-oil is very manageable. I am not trying to ignore the oil problem, I am just pointing that exports are doing fine. Here is what CR said

The ex-petroleum deficit is falling fairly rapidly, almost entirely because of weak imports (export growth is still strong).

That's just one man's opinion, but it's an educated opinion based on his/her research.

StuckInBA,

I've heard that if we were to adopt European mileage standards for our cars that we could rely entirely on domestic oil production (and balance our trade as well).

If someone has an observation about gay people they should be free to state it without the pc labels. I'm not for hostility, but I hate it when a topic is all of a sudden off limits because of sensitivity. Everyone here has some birth trait, ideology, or race issues that are routinely criticized here, so I don't think gay people should somehow be sheltered from it. As a group they have their faults and positive atributes like any other group does.

The Original Bankster Says:
March 12th, 2008 at 6:29 pm
StuckinBA,
"My entire generation trained for those jobs. no one did anything even remotely connected to manufacturing, unless they were planning on moving "

I got my bachelor's degree in production management because I noticed there were hardly any other people doing it. Not sure how useful that is in S Cali.

A key point would seem to be that our export markets will largely pop with us, our exports vis a vis a low dollar will not be our savior. Unfortunately.

Though we can asssume the average Chinese investor does not have the information flow we enjoy, and though the Chinese don't mess around with corporate white collar crime (human organs are plentiful and cheap there for good reason), I cannot fathom how the disappearance of the US consumer will not eliminate their soaring paper markets.

An unstable China scares me.

Asian markets currently tanking on lack of confidence in any long term effect of FED efforts....

"If someone has an observation about gay people they should be free to state it without the pc labels."

Righto. Just don't call me gay because I live in a certain area :)

Stay tuned today, this looks to be interesting.....

U.S. to Revamp Credit Rules, Drawing From Crisis Lessons
By Damian Paletta
Word Count: 1,608 | Companies Featured in This Article: Fannie Mae, Freddie Mac
WASHINGTON -- The nation's top economic policy makers plan to release today their broadest blueprint yet for avoiding a recurrence of the credit crunch now threatening the economy.

Amid the housing market's deepening slump, mounting defaults by cash-strapped homeowners and an upswing in foreclosures have made investors wary of mortgage-linked securities and have made those securities .

As someone over at CR observed, its possible we are looking at a change in the MBS rating system. One to Six diamonds.

FuzzyMath Says:
March 12th, 2008 at 6:58 pm
"“If someone has an observation about gay people they should be free to state it without the pc labels.”

Righto. Just don’t call me gay because I live in a certain area "

This site was started from the SF area. I hope that the contagion is only for people living in gay areas and can't spread by posting to a blog from a gay area.

An unstable China scares me.

Like US, all emerging countries are going to have a reckoning day of their own. And due to various reasons.

They will discover that they cannot depend on US consumer, and they will have to accept and adjust to that fact. It will be a painful lesson. But they will survive that lesson. Same as US will survive the lesson that you cannot borrow your way to riches.

They will also have to figure what to do with their currency. If history is any guide, their manipulations will be mistimed. They will unpeg from USD at the worst time - and will most likely be as smart as the central bankers who sold gold.

Longer term the problem is not the debt deflation or slowing economy. It's about the competition over limited resources. Oil, water and food. As the developing countries get richer (or less poorer) they will strive for a better diet than what they are getting now. Who has the surplus food ? No points for guessing that answer. In coming decades, I think US agriculture has a very bright future.

Is the glass half empty or half full? Folks we are out of water. You should be thankful you even have a cup and don't have to use your hands to drink.
Oh wait, you said FDR, not NVR. My bad (and a hat tip to our friend back East who, hands down, has had the best rants of the week).

Speaking of which, how many bullets does the Fed have left? Well, after the great Treasury/ non-agency MBS swap meet, it appears that the Fed will have about $300-$400 billion (thanks to interfluidity via CR) to tame the beast before they have to break out the printing press. I suppose it could happen covertly at first with the TSLF continually being rolled over each passing month while at the same time the collateral deteriorates (but its AAA rated, who would have thought?) and then the Fed decides not to issue margin calls (hey, they're making this up as they go along -- so why not?). Or others have speculated that the Fed would raise cash via bonds when they run low on funds. I will throw in the towel at that point and admit the the printing presses have been fired up. We are getting very close with the non-agency MBSes being accepted as collateral.

And folks (those of you who want to party like its 1999 or before), all Case-Shiller Home Price Indexes were at 100 on Jan 2000. As I pointed out before, Nov 2012 BA futures are trading at 155. Not the it means much, but I will side with NVR and say it would probably be catastrophic if we hit sub 100 on the Case-Shiller Index for the Bay Area (then again, I might actually have a shot at buying a real house with a garage and yard). But hey, what am I worried about? The schools in our area are experiencing increasing enrollment for kindergarten. Fortress East Bay crumbling, but not yet fallen.

EBGuy :

Has the Case-Schiller price index future values remained constant or you notice a trend ? There you have the answer.

I am not predicting a return to 1999 prices any time soon in BA. Till now BA has been sheltered from job losses. The interest rates have not gone over 7.

So what happens when interest rates go up ? Or job losses in Tech industry start happening ? I think we should all keep this in mind. All this is happening at mere 7% and 10% down payment requirement. That's all, That's all that has taken for the "demand" to evaporate and prices to drop this much. That's all. We ain't seen nothing yet.

I am no expert on East Bay. But from what I have gathered so far, I predict this. Before end of this year, you will see 2003 prices in many cities. Let's take Dublin. Below $300 per SQFT for a home less than 10yrs old - so a 2000 sqft home constructed after 1998 will sell for less than 600K. Precise prediction :-) How about that. Let's come back to this in Dec of this year.

I am more interested to see if Yen will break 100 tonight.

Honestly, nobody in the right state of mind and enough foresight should be looking at buying a house any time in the next few years. I am not worried about the falling price, I am more worried about the socio-economic changes (crime rate, tax change, industry reshuffle etc.) that will alter the rules of game for America. If your cost of entry is low, like myself, then just stay put. If I bought a house in the last 4-5 years in BA, I would not be able to sleep tight at night particularly if I had taken on a million-dollar loan being chained down to a high pay job that I could not afford to lose.

Keeping oneself and his resources as flexible as possible is of utmost importance to weather this perfect storm. When I first came to patrick.net, I was looking for an opportunity to trade up. As time goes by, I have almost completely lost my appetite for trading up as we tread troubled waters. I don't want to invest an extra dime in this area until I can get a clearer vision of what to come.

Peter P., I have a very good friend that runs a very special nursery in Watsonville.

Thanks bap! I will remember that next time I go down there. :)