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FAB said: As a predicted a few years back things will REALLY start to get ugly in SF when all the TICs start to implode when they can not be refinanced…
Do you think there are a lot of "old school" TICs out there sharing a mortgage? I would imagine most people these days have the new fangled "fractionalized TIC loans". Personally, my bets are on the old timers (and probably some speculators) who are converting to TICs to get out of the rental business. Eventually, TIC inventory starts to grow, and for these folks, there is no turning back. They will price to move their inventory. I suppose the other scenario is that the condo towers will put "pricing pressure" on the TICs from above. Really curious to see how the Ess Eff market eventually implodes (maybe the old fashioned with with foreclosures?)

EBGuy,

Oh I have no doubt! But what an incredible turn of events? We've gone from "everyone qualifies" to "you're on your own"! Some of these people are going to go from having multiple loans with WaMu or Citi to making their payments to a retired teamster selling his 3/2?

I still believe there is potential for lease options but it's too soon to say for sure.

I personally won't write off America. People here (including FB's) are much more resilient than given credit for.

I personally won’t write off America.

Because America (the continent) includes Canada.

1 Singapore dollar = 0.689655 U.S. dollars

With continued Fed interventions, which of the following currencies will perform best?

AUD, EUR, CAD, SGD, SFR

Peter P,

I'll go with Swiss franc. Pretty stable. Should rise with SFR carry trade unwind. Can purchase easily with ETF (FXF) on the American exchange.

I’ll go with Swiss franc. Pretty stable. Should rise with SFR carry trade unwind. Can purchase easily with ETF (FXF) on the American exchange.

Thanks.

Are there signs that carry trades (both SFR and JPY based) are unwinding?

GM to Take $39 Billion Charge for Deferred Taxes

A few billion here, $39 billion there... pretty soon we're talkin' about real money.

Peter,

No. No sign. What I hear is 'certain to unwind - no timetable'. Won't happen until players exhaust liquidity or are insolvent.

GMAC Attack!

It can be difficult to keep in mind that no matter how complicated this gnarly mess gets it's all simply the result of lending out more than the homes were ever worth. Oh, then add leverage.

Had homes (as AG hoped) continued to appreciate would this have derailed anyway... as people failed to keep up with their payments? If borrowers were able to stay in step with their reset payments would prices have simply leveled off? Was fraud so widespread it was bound to have an impact? Was any of this real?

Another thought. JPY is tracking the dollar, so not much use for devaluation hedge. You'd have to be looking for that unwind and be patient.

The franc looks pretty good for both.

I like the currencies I could see myself using if/when I leave the USA. Those would be Canadian and/or Euro. Of course, my gold will be accepted globally so that is the preferred money these days!

Duke,

"Innovation" in the field of finance is usually a sign of bad things to come :-)

Another thought. JPY is tracking the dollar, so not much use for devaluation hedge. You’d have to be looking for that unwind and be patient.

So... what do you think about the AUD/JPY "carry trade" ? :)

Hedging and income at the same time?

Not investment advice

Silver still looks attractive because it is not as high-flying as gold. I still like gold though.

Which would you prefer: Canadian currency or Canadian stocks?

FAB,

That place on Clay Street reminds me of when I was looking in '94. Owned by a bank that just wants to get rid of it. In a year or so there will be nice places 'For Sale By Creditor'.

Peter P:

I like AUD and have a position in FXA. It will be affected when the carry trade unwinds. But it's also a currency of a country that has lot of "stuff". The stuff keeps getting more and more valuable as we approach ZIRP.

I like AUD and have a position in FXA.

I have FXA too. However, I think they are charging too much. :(

I like country with more stuff than people. Canada and Australia.

I am not very optimistic about UK. China has too many people.

People = Liability

Or... people = resource consumers :D

Is it wrong for me to WANT a massive downturn, a prolonged recession during which people can't make payments on their debt, cut back on discretionary spending, fear for their jobs and struggle to hang on to their dwindling assets?

For the past 5-10 years, I've lived on extremely modest means, I haven't been able to buy a house in this ridiculous market, but instead I've learned to enjoy the simple things. I'm not a conspicuous consumer, I don't buy the latest gadgets (my 3 yr-old MP3 player and cell phone are working just fine, thank you), and I try to ride my bike or use public transit instead of shelling out $3.50 for gas. All the while, I've looked at those around me with envy (yes, I'll admit it), knowing that as soon as my education is complete (next year I'll be board-certified in psychiatry), I can join the ranks of the privileged.

Now, for the first time, I'm looking around me and I'm GLAD I don't have what others have. I'm no financial expert, but it seems like the ride down will be prolonged and painful. And since, in a very real economic sense, I'm already there, I'm ready to just carry on with life as usual. And as a psychiatrist, I have no fear that there won't be a need for my services for many, many years to come.

Is it wrong for me to WANT...

It is not wrong to want anything.

StevenB :

Welcome to the dark side of Schadenfreude !

On a serious note, most of my dear friends are homeowners. They bought the house to live in, not to flip. The bought mostly out of fear of being priced out. I hope they will be OK, and I think they will survive the downturn.

But there are a few acquaintances whose smugness was too much to take. Some of the conversations I have had with them will live forever in my memory. They were proud of winning the bidding war, had figured out the economy, considered zestimates as dicted by God himself, worshiped Greenspan as his only prophet and were "set for life". The naysayers were ridiculed as jealous losers.

I would have loved to met them for lunch now, but since they are not of the type to admit mistakes, there is not much point.

This is what happens where you are the bearer of bad news.

http://tinyurl.com/2j7un8

THE analyst whose downgrade of US investment bank Citigroup sparked a broad stock market sell-off last week said she has received several death threats stemming from her research, the Times of London said.

I have just been reading the posts about Bill Gross.

A few years ago he seemed to be an upstanding, ethical guy. About 2 years ago, I sensed he turned to the dark side. It's amazing what can happen to people who love fame, power and money too much. He should have retired at the top of his game - goodness knows he had enough money to do so. He himself was aware of the housing problems but somehow let himself get snarled up into this loan mess.

He is tarnishing his reputation even more now with his inappropriate requests. It is almost as if he has made a deal with the devil.

USD is falling like a stone now!

sorry, I meant US Peso.

RBA raised target cash rate by 0.25%.

AUD on the path to parity! Which currency is the next to parity with us? NZD?

I think Yen is about to move very soon, because oil is causing inflation spike in Japan. If BOJ raises interest rate, that will be the beginning of the end.

Why don't all the banks just put their money in AAPL and GOOG? They never go down, and in a couple of months they'd double their money to start lending to anyone with a beating heart again! Like the annoying ad on radio - this is the biggest no-brainer in the history of mankind. Also, I heard GOOG and AAPL are nice people too.

coretexity wrote:
Like the annoying ad on radio - this is the biggest no-brainer in the history of mankind.
LOL! I kept hearing that on radio and could stop wondering what it was referring to: the loan or the borrower?

# hugel Says:
re: the biggest no-brainer in the history of mankind.

wondering what it was referring to: the loan or the borrower?

Nominate this for "Best of Patrick.net"

SP

StevenB,
Board-certified psychiatry? That was so unexpected. I tend to think of many people attracted to that field as wanting to learn how to identify certain conditions, (envy, entitlement) understand their conseqences, then learn how to get past them to a more heathy existence. It sounds like you are learning how to identify conditions but you accept them in yourself, and that is just really interesting to me. As not-a-physchiatrist I can't say what that all means. However, as an armchair economist I can say that people may need your services more then ever (assuming you help them not only identify their pain but get past it?) but they will not be able to afford it. As Maslow would say, until food, clothing, shelter and safety needs are met people will not be heading down a lot of other paths towards self actualization. Sessions on the couch are a pretty easy choice for elimination when eviction and hunger are in play.
I sincerely wish you the best of luck on 'joining the ranks of the priveleged' - especially since you of all people must know it does not come from fancy homes and, presumably, thess then 3 year old cell phones and mp3 players.

StevenB,

I think seeing and wanting nice things is fine, but if you find yourself becoming bitter or disparaging of what you have it's time to re-evaluate yourself. I have two friends with young children who have suddenly developed life threatening illnesses, They'd give their big houses and everything they have to have healthy kids. Always try to keep perspective on what's important and what actually makes you happy. A hint- a few of my friends in those big houses are miserable, and a few are so financially strapped they have trouble sleeping.

OO,

I believe the correct term is 'dollarette'.

SFWoman,

Dollarette, that;s a good one. Same taste, less filling?

"wanting nice things is fine"

I must have fallen head first into the *SP "not wanting to trade my dollarettes for YOUR cr@p mode"? But then how did BMW's #'s turn out so sweet? Last hurrah?

DinOR,
BMW's numbers look good only if they don't do their own financing. :)

StevenB Says:

> Is it wrong for me to WANT a massive downturn,
> a prolonged recession during which people can’t
> make payments on their debt, cut back on discretionary
> spending, fear for their jobs and struggle to hang on to
> their dwindling assets?

It is wrong to want bad things to happen to others (but I think that most of us struggle with this and it would hard NOT to be happy if some people (like the “my neg am loan helped me by big rims and a loud stereo guy”) went BK…

> For the past 5-10 years, I’ve lived on extremely modest
> means, I haven’t been able to buy a house in this ridiculous
> market, but instead I’ve learned to enjoy the simple things

If you look around you will see that the really happy people focus on the simple things. It took me a long time to figure this out and as a poor kid growing up around rich kids I was always focused on getting new stuff and would by new stuff just because a new product came out. Now I only get something new if I really “need” it…

P.S. There was an interesting quote in the NY Times recently that said “Bling is for wannabes. Suits are for funerals”…

I don't follow the company (so I don't have a dog in the fight) but it just seemed that their sales were strong across the board. Bimmers, motorcycles and even Rolls were strong.

"but I think that most of us struggle with this"

Yes we do. I'm not sure HOW.. to feel about this?

www.housingdoom.com

First post is "Preview of Housing Armageddon"

(All those little gavels represent foreclosures in a trendy neighborhood in PHX) The HOME of big rims and loud stereos!

OO :

Fleckenstein at MSN coined another great term. He is proposing to rename USD to "xera".

Thanks to the suggestion put forth by a reader of my daily column, I have come up with the new name for our currency. Henceforth, it shall be called the xera. That's a combination of Xerox, for the piece of Xerox paper that it is; lira, which in the past was one of the world's chronically weak currencies; and, most importantly, the fact that it sounds like zero. That is ultimately where the xera is headed.