patrick.net

Peter,

I was just teasing you earlier. Little did I know the truth.

http://query.nytimes.com/gst/fullpage.html?sec=health&res=9E02E0D91438F93BA35757C0A9629C8B63

Most would be even more surprised to learn that if the sushi has not been frozen, it is illegal to serve it in the United States.

Most would be even more surprised to learn that if the sushi has not been frozen, it is illegal to serve it in the United States.

Still, people should be allowed to eat the flesh off a live fish if they so choose to.

There are sushi restaurants in Ohio. That still doesn’t make it right. Some things just don’t go with some other things.

Randy, remember the deep-fryer you suggested a while back? ;)

All we need is a few good justices to overturn Wickard v. Filburn, 317 U.S. 111 (1942).

Commerce should be left to the market to regulate itself. The government should merely enforce the integrity and transparency of the market.

Peter,
My most memorable gastronomic life moment was a slice of abalone on the boat. The diver (with permit) surfaced and sliced without even bothering to drop flippers or tank. Still moving, transcendent. There's a Haiku in there someplace.

Ohio seafood; "Hey Cletus throw some more catfish in with those ears of corn you are boiling."

My most memorable gastronomic life moment was a slice of abalone on the boat.

Ooh, abalone, my favorite. It is in season!

I like it raw. It IS transcendental.

Good food WILL bring world peace.

IMO the government has no business in regulating food. For example, people should be allowed to eat blowfish. It is their responsibility to understand the risks.

And when a nationalistic supremacist group opens a free kitchen in an ethnic neighborhood offering all the fugu you can eat?...

And when a nationalistic supremacist group opens a free kitchen in an ethnic neighborhood offering all the fugu you can eat?

Sushi Nazi?

BTW, I am not saying that negligent food providers should not be held accountable. This has everything to do with the integrity of the food industry.

When my parents were young you could still go down to the bay and gather abalone at low tide with just a tire iron.

My dad's "poor us in the Depression" stories generally began "we couldn't afford chicken so all we could eat was abalone", at which point I generally would burst out laughing.

I predict.... the securitization money train is too lucrative to be derailed. Obviously, the current system is not working as (this current crisis demonstrates) there are too many areas for fraud to take hold. The current securitization food chain: buyer->appraiser->mortgage broker->real estate agent->warehouse lender->Wall Street->sucker needs to be massively overhauled to restore investor confidence. Basically, a lot of "pork" will be taken out of the lower end of the food chain, costs will be cut, and the overall quality of the loans will increase (quality referring to the ability to characterize the loan and accurately price risk). I think banks are the most likely candidates so subsume many of the functions in the food chain and rebuild trust in the marketplace. In five years time, I believe the REIC will have changed dramatically.

I still think the "fraud" aspect of the current crisis is getting underreported in the MSM, and I'm not just talking about JoeSixPack overstating income or a predatory lender going after old folks. I am talking about the untold damage done by Casey Serin type "investors" (how many "primary" residences can you own?) and overinflated homes being sold to straw buyers who do a first payment default (with "cash proceeds" being distributed to all parties involved). These are the practices that inflated home values, caused many folks to stretch beyond their means, and manufactured untold "equity" for FBers to tap. The real muckraking journalists covering this scene are in the blogosphere. I have been reading ocrenter's blog for over 6 months, and it always makes the hair on the back of my head stand on end. When you start handing out free money, a line forms rather quickly.
Forget the "Housing: American Nightmare" magazine cover. I predict (once the dust settles and people finally process what has happend), we will see a Time magazine cover with Casey Serin and a title like "The man who brought down Bear Stearns".

Some Chinese restaurants serve 4-5 small abalones (farmed) for under $20.

My dad’s “poor us in the Depression” stories generally began “we couldn’t afford chicken so all we could eat was abalone”, at which point I generally would burst out laughing.

In the very very old days, lobsters were fed to employees so much that one group actually had in their contract "no lobsters".

How times have changed.

Update on Collateral:

I am being told that the Fed accepted three types of securities in these repos: safe Treasuries, agency (GSEs) debt and mortgage backed securities (MBS) guaranteed by Fannie and Freddie. These latter are not subject to credit risk given the guarantee; but can still technically default if the underlying assets are impaired. Still, there are still anomalies in this use of guaranteed MBS in repos: the rate at which the Fed accepted these MBS was apparently the same as the rate at which it acccepted safer Treasuries and Agency debt. This, in turn, implied that mostly MBS were offered and used in the repos; especially on Friday all submitted and accepted securities were MBS and in the last intervention the average rates on this MBS repos was below the Fed Funds rate. Even today about half of the accepted collateral was MBS. See Kevin Drum for more details.
http://www.rgemonitor.com/blog/roubini/

August 12, 2007
FRIDAY'S LIQUIDITY EVENT....On Friday, as part of an effort to inject liquidity into the banking system, the Fed bought several billion dollars worth of mortgage-backed securities. Brad DeLong called this "unusual," but left hanging the question of just how unusual it was.

Stephen Spear, a professor of economics at Carnegie Mellon University, emails to say that he spoke with a friend of his at the Fed who confirmed that the Fed's action was unusual, "but not tremendously so." I thought it was an interesting email, so with his permission, here it is.

--------------------------------------------------------------------------------

Here's what I've been told by a colleague at the Fed:

First a minor point: Most of the open market operations that the Fed does (including Friday's) are short-term collateralized loans and not outright purchases of securities. Friday's loans were all overnight (well, over the weekend, actually, maturing on Monday). So the Fed is technically not buying anything; it's been making short-term loans of cash against collateral.

The Fed accepts three categories of collateral for these loans. One is Treasury securities, another is other government agency securities, and the third is mortgage-backed securities that are federally guaranteed. Because they are federally guaranteed, the mortgage-backed securities the Fed accepts are (obviously) the very best.

Typically the interest rate on these short-term loans varies slightly depending on the type of collateral offered by the borrower. Treasuries get the lowest rate; mortgage-backed securities the highest. (The details of the last 25 OMOs, including the rates for each type of security, are available here.)

What was unusual about Friday (other than the size of the operation) is that the Fed announced it would lend against all three types of collateral at the same rate.

To quote my Fed colleague on this: "I'm not sure why we did this. I think the idea was that given the size of the operation we did not want to risk disrupting the Treasuries markets, but there may have been other motivations. ["Other motivations"? Hmmm. –ed] The expectation was that borrowers would primarily use mortgage-backed securities, since these have the lowest opportunity cost to the borrower."

On the web page above, you will see that for Friday's operations, under collateral type it just says "mortgage-backed." What this means is that mortgage-backed securities or any better securities were allowed as collateral — in other words, all three types were acceptable. Apparently, the media misinterpreted this as saying that the Fed was only accepting mortgage-backed securities, which led to the headlines about the Fed buying these things up.

So, the bottom line is that the Fed's actions on Friday were unusual, but not tremendously so. It did three OMOs instead of the usual one. The quantity of reserves lent out was larger than normal, and the way collateral was handled was slightly unusual. But the general operating procedure, including the type of collateral accepted, was completely standard. It would seem that the media is trying to make the story a lot more sensational than it truly is.
http://www.washingtonmonthly.com/archives/individual/2007_08/011861.php

DennisN :

My grandmother was telling me stories that people in 50s who could not afford meat had to buy caviar and crab meat which was cheaper and thought of as "second rate" food.

Last time I saw caviar in duty free shop in Paris - 850 euro for 50g.

Err ... That was in 50s in Russia, if I did not make it clear :)

My grandmother was telling me stories that people in 50s who could not afford meat had to buy caviar and crab meat which was cheaper and thought of as “second rate” food.

The Sunday brunch at the Half Moon Bay Ritz Carlton has all-you-can-eat (domestic) caviar. The quality of the roe is actually quite passable.

Last time I saw caviar in duty free shop in Paris - 850 euro for 50g.

I think you can still get Caspian Osetra for under $80/oz. Just two 2-3 years ago I could get them for $40/oz.

We have a caviar price bubble!

Peter P,

I think what I saw was Caspian Beluga from Iran. IIRC there were even pricier cans on the display but I can't remember the exact price.

Maybe Peter P will become our very own Casey Serin of the exotic seafood market!

Flip that sushi!

EBGuy,
Your link to ocrenter's blog no workie.

Fresh sushi for me
Flip the H E L O C
And buy cold flounder

Peter P caviar
Visions swirl of full plates now
Smile as you eat it

What do they call doggerel haiku?

Flopku?

EBGuy,

I agree. The entire, massive "food chain" was founded on people that had failed at everything else in life! Realtors that "washed out" at whatever and appraise-whores (that are basically failed realtors). Based on their "abilities" they created a multi-trillion dollar nightmare.

I hope when the go about re-tooling the REIC they take these clowns out of the securitization decision making process.

For anyone in the energy industry has there been any talk of pebble bed reactors or thermal depolymerization? From an outsiders view these look like good technologies to exploit, but, being an outsider I may be wrong.

Your link to ocrenter’s blog no workie.
Try this link for ocrenter's blog: http://bubbletracking.blogspot.com

Speaking of TV, I caught ABC's Nightline last Thursday and Friday. On Thursday they had a fluff piece on "Briny Breezes" in FL (see Ben's blog for color commentary) -- where trailer park residents had been offered buyouts at ~$1 million per spot. The deal fell though, but the piece was along the lines of "what price for paradise" (some residents were relieved that they could stay). While on camera, the trailer park board president took another call from a developer (we're not dead, yet). Oh Ted Koppel, where have you gone....
Friday's piece was a bit better as they interviewed an agent whose office specializes in foreclosures (in San Diego, I believe). Did a funny montage of the agent pointing out all the foreclosures on a street and then going inside to check some out. Nice high end places -- in one kitchen they left the granite but took all the fixtures, appliances and the stainless steel hood.... nice. About the only good news the agent could profer was percentage-wise, the 90's crash was worse (so far)... but in absolute numbers, they are getting overwhelmed.
On an unrelated note, Surfer-Xs boomer rants have spoiled any chance of me enjoying a showing of "Monterey Pop" on PBS. Jimmie Hendrick lighting his guitar on fire and smashing to bits seemed to become a metaphor for the current housing crash and don't even get me started on Janis Joplin's rendition of "Ball and Chain".

EB Guy,
I like how the Feds couldn't care less about documented cases of alleged mortgage fraud.

The guy who bought my SJ home was represented by a buyer's agent/mortgage broker scam guy who specialized in Spanish-speaking clients. He secured a 103% mortgage (of unknown to me terms) to "help out" his client. I'll bet that whole deal is a crock. I feel bad about it but I'm clean: as seller I had little choice in selling it to the best offer.

some residents were relieved that they could stay
Here in Boise the RE market isn't as crazy, but it is sad that so many of the trailer parks here are being sold to SFH developers. A lot of the old-timers in those parks are really between a rock and a hard place.

Just bought some investment property in the midwest. With 25% down on a 30 year fixed mortgage, all costs are covered. I have been waiting way too long for this bubble to burst. The "numbers" might not make sense in California, but they do make sense in other parts of the country--if you look hard enough.

I have a warning about Money Market Funds. They hold a lot of dangerous asset backed commercial paper. Typically they hold 50 to 70%. This is dangerous when the assets backing the commercial paper is mortgages. Each money market fund is different. So find out what is in yours.

For better security, buy Treasuries through Treasuries Direct

ABCP (asset-backed commercial paper)

With some of these ABCP conduits, a certain opaque nature exists surrounding the nonstandard methods of reporting or the standard definitions of certain asset types. So, one's not always sure exactly what type of collateral exists inside the conduit.

"ABCP has grown very dramatically in the past 15 years or so, and no investor has ever lost money. Hopefully, cool heads will prevail, as most money-market funds hold 50% to 75% ABCP, and banks or financial institutions are obligated to support nondefaulted -- and in some cases even defaulted -- assets in the conduits. So, implications for the financial system are large."

Money-market dark matter?

The moral of the story? As we get further down the road, I think we'll discover that some money-market funds owned commercial paper issued by a conduit whose assets may not be up to snuff. So folks with a lot of assets in money-market funds might want to double-check that they know what's in them.

Bottom line: The upcoming weeks should be pregnant with indications of more trouble throughout the whole financial-engineering world. More than a few outfits may discover that the triple-A pieces of paper they thought were worth 100 cents on the dollar are worth only, say, something in the 70s. That will make for a lot of heartache.

http://articles.moneycentral.msn.com/Investing/ContrarianChronicles/CreditProblemsAreTooBigForTheFedsToFix.aspx?page= 2

If money market funds break the $1 mark then the liquidity will drain superfast. This could spiral out of control a lot faster than I guessed as next summer.

Slightly OT, but we are always saying (and I agree) that all this easy credit has dried up and NINJA/subprime type loans are not out there anymore. So why am I still seeing ads on TV and Yahoo! homepage (among other websites) with promises of "$400,000 for $1299/month" etc?

Just a ruse to poach my info for some house salesman's/mortgage salesman's Rolodex? I tried to fill out a few of the online apps, but they eventually ask for info I don't ever give out over The Internetz--so, mystery not solved.

Any explanations?

jeffolie,

on the topic of money-market funds, any thoughts on these guys: thereserve.com.
Today, they have posted a soothing message on their front page, saying they have no
DIRECT (my emphasis) exposure to ABS or MBS.

If course, that does not mean they have no INDIRECT exposure. Any thoughts?
I'm not picking on this particular fund, just noting that they provide good rates and I have been thinking about using them.

Is it not outright fraud by FEDERAL RESERVE that a 300 point jump in the Dow is normal but a 300 point dip is viewed as a cataclysmic event that requires intervention!

I haven't really changed in my prediction: five to ten more years of stagnation amongst prices in The Fortress. With inflation at 3-4%, it will take about 10 years to get back to the CA long term appreciation rate of 6% (or 3%+inflation).

The one thing that could shorten it up would be a recession, which I am starting to think looks more and more likely in 2009. President Hillary Clinton would like to take her recession early, like most Presidents, and we are likely to get the usual post-War recession. Add to that the risk that China will slow down after the Olympics and it is starting to like a distinct possibility. If there is a recession and accompanying jobs slowdown, I think home prices in SF and silicon valley will drop 10-20%, shortening the whole cycle by five years or so.

Having said that, the Silicon Valley looks stronger than ever. VMWare just priced at $3 over the top of their range, creating 100 newly minted millionaires in Palo Alto. I know at least three people like that this year alone. A real recession would probably slow down tech spending, but it would still not be as bad as 2001 and home prices barely budged then.

I think in the next couple of months we will see continuous liquidity injections by the Fed and international central banks. That will have a calming effect on the stock markets, but ultimately the low-quality derivatives will continue to crumble. The fires at mortgage brokers will soon spread to hedge funds and investment houses like Citi and Lynch. I think it is already smouldering underground like a coal fire, but nothing has yet forced a massive mark-to-market (and perhaps nothing can).

Liquidity injections will be violins on the deck of the Titanic---it will be a calm and orderly rush to the exits until the great ship finally snaps in half. Then we'll see a recession in 2009. It will be a small one and we'll inflate our way out of it, but the dollar will weaken as a consequence. Wall Street balance sheets will erode as offshoring is suddenly less lucrative than it was in 2006... either that or China just outright eats the difference and shares in our mini-recession.

I can only speak about the area I'm in which is somewhat removed from-- and less valuable than the B.A. But the market here is literally going to s***. I am not exaggerating.

My husband and I drove through a nearby golf-course community that's supposed to be very upscale (think a tract-home development full of McMansions). There's this one main street that winds through the neighborhood and there have got to be at least 9 homes for sale-- over half of them bank owned. The poor folks who are trying to sell to avoid foreclosure don't stand a chance. The FB's are trying to sell their 3500sqft albatross at $950k while the 4000sqft bank owned one down the street is up for $700k. Poor schmucks.

And that is literally just the tip of the iceberg. I expect pain. Lots and lots of pain.

Oh, another thing. The banks here are baffling the hell out of me. We are getting a glut of bank owned homes and the banks are just sitting on these things. I do think they are overwhelmed but some of what's going on makes no sense.

For example: my husband's best friend's sister (got that?) is going through a divorce and has to sell the house. They owe $450k on it and had it up for $550k-- no bites. Fairly quickly they lowered to $450k- no bites. One of those "we buy property" came in and offered $350k and the sister was so tired of all the B.S. she put the offer into the bank just to see if they would take it. Since then she got another offer on the house (though I don't know how much). The bank is just sitting on these offers and doing nothing. In fact they're indicating they might force it into foreclosure. WTF?

Isn't that totally nonsensical? According to what I've heard on the news it costs $80k when a house goes into foreclosure-- the fees being picked up by the bank and the city. And after the house goes through the foreclosure process the house will still probably sell way low what the outstanding loan amount was anyway. So what's the point? Why would the bank do something that is likely to cost them more money in the long run? I would think it would make more sense to take an offer now and just get it off the books.

But I guess common sense left this market a long time ago.

Once foreclosures really start to hit en masse the cost for the banks to process them will rise, at least for a while. (a) The system will be increasingly overloaded, so the time to process will increase and the cost of processors will rise; (b) law firms will start to capitalize on all the FBs by hawking their "foreclosure assistance" services. For example, a foreclosure can sometimes be seriously slowed down -- often by a year or two -- by strategically filing for bankruptcy. I expect there to be a spike in bankruptcy filings which are intended merely as stalling tactics on foreclosure hearings. The FBs will think they can withdraw their petition for bankruptcy once prices go back up and they can sell their home and get out of it all.

In other words, don't think the stickiness is over yet. We're likely to see some more stair-steps on the way down. Goddamnit.

The foreclosure/fire sale situation SQT reports is disconcerting, but evidence the bears here got it right. I can't figure out if the situation is as bad in Oz, I don't get the impression of streets full of for sale signs, and supposedly the % of subprime-type loans is much lower. Apart from carry trade issues, I don't know what will happen here in the next 12-24 months.

One recent article on my blogspot points to the difficulties developers have selling new stock on the outer fringes, for isolation reasons, and that new house sales have dipped very low in recent years. So much for 'supply/demand - release more land' arguments...

The Opposition leader has proposed putting $500M into subsidised rentals if he gets elected, but that to me is just the tip of the iceberg of a solution, and not a very good one overall, but they don't want to upset the voters who want their house values to continue climbing, or mum and dad investors who need an assured pool of desperate tenants, etc.

BTW, take note, if you're visiting Oz, the correct response to being apprehended by a police officer on being pulled over or similar is "getawoollydogupya, officer", which is a friendly greeting indicating willingness to co-operate. Not many visitors are aware of this...