patrick.net

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. :)

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

Well, I agree. What was I thinking...

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

Doh! Should have bought more yesterday.

GCJ8 is now at 987.

The yen is dragging down the entire Asia Pacific.

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

Ditto. I'm no PC language Nazi, but "Gay Area" sounds an awful lot like "Jew York", or "Niggertown". If you want to debate the pros/cons of certain groups, fine. But let's keep it reasonably civil, and without the nasty labels, shall we?

notice a trend ?
You mean like two consecutive months of 3+% drops in the C/S BA Home Price Index? Or Nov 08 futures trading at 159.40 (which means dropping home prices 1.4% per month -- I would hate to misprice a home in that market). Thankfully the dropoff (according to one, yes one, contract) will moderate to 155 in Nov 2012 (but please don't forget inflation!) Hey, is that gloomy enough for you Stuck? :-)
Looks like REO fever is about to set in over in some condo developments in Fortress Ess Eff, too. Oh yes, it will be a long hot summer (even in the City).

Thanks for the topic, Peter. Looks like I'm too late to contribute much as Malcolm pretty much stated my positions for me --minus the invading Iran & N. Korea bit. The Iranian hardliners & Communists are doing a far better job at undermining their own authority and economies than any brute-force invasion would. In fact, an invasion would merely create a "rally against the foreign invaders" mentality even among the opposition groups (yes, other countries view us as *foreigners* --shocking, I know!).

Yen just broke 100.

Time to....party?

You're probably right Harm. I am a believer in the notion that if you make an example of someone or a country others tend to fall in line. I think the reason N Korea and Iran seem to be behaving is because they really do believe we are willing and able to decapitate their governments. We may not be good at occupying a country (or maybe we are, I am skeptical of the constant negative news) but our military capability is one which no one can deny is able to topple any government in the world within a day.

TOB said:
manufacturing and export industries.
we don’t have any of either.

Here is a list of the top 30 or so US Manufacturing Export categories reported in the US Gov trade report for January. The total numbers were about 50 billion dollars in January of 2008.

Civilian aircraft
Industrial engines
Telecommunications equipment
Semiconductors
Drilling & oilfield equipment
Railway transportation equipment
Engines-civilian aircraft
Business machines and equipment
Specialized mining
Generators, accessories
Industrial machines, other
Textile, sewing machines
Marine engines, parts
Commercial vessels, other
Wood, glass, plastic
Parts-civilian aircraft
Vessels, excluding scrap
Spacecraft, excluding military
Excavating machinery
Pulp and paper machinery
Photo, service industry machinery
Food, tobacco machinery
Agricultural machinery, equipment
Laboratory testing instruments
Metalworking machine tools
Computers
Materials handling equipment
Electric apparatus
Nonfarm tractors and parts
Medicinal equipment
Measuring, testing, control instruments
Computer accessories
Automotive vehicles, parts, engines

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.

@siba,

What do you mean? Job losses are already happening - Yahoo we all know about, there are rumors about Google layoffs/hiring freezes, and the Bay Area unemployment rate has crept up. Also, jumbo rates are hard to get for under 7% these days, and jumbos are what matter to most in the BA (the new conforming limits aside).

I think the reason N Korea and Iran seem to be behaving is because they really do believe we are willing and able to decapitate their governments.

I would think the North Korean government would be more concerned about China right now. China is about fed up with them. With China's millions of troups and thousands of nukes, they could roll over N. Korea in a few hours, line up the power elite against a wall, and gut-rape them with bayonets.

skibum Says:
Job losses are already happening

The "job losses" that have happened so far are peanuts compared to the 2001 and 1992 recessions. It actually got so bad that the MSM no longer even reported layoffs as big news!

there are rumors about Google layoffs/hiring freezes,

BTW, the rumored Google (future) layoffs are only stemming from the Doubleclick merger - it is a very significant change from the past two years and an ominous portent for the future, but in terms of actual pain experienced, it is minor (and yet to happen)

SP,

Thanks for taking the time to compile that. Like a lot of people we tend to buy into the notion that 'nothing' is mfr'd in this country any more. Even though I follow CAT, DE Manitowok Crane etc. it's always under the assumption that they're simply die-hards.

Randy H once challenged the myth and said that the mfr. base has actually grown since the 70's, but had extreme difficulty convincing anyone?

"lost my appetite for trading up"

Couldn't eat another morsel thanks! OO, I don't know in your case if that was as much a function of age as it "troubled waters" but my guess is that a lot of us have?

Over the last few days (and on other blogs) I've challenged people as to why any of us (even in our 40's) would seriously consider becoming a white knight and salvaging the high end market? Why? We'd only be downsizing in a few years any way. I feel these ranks will swell and the market for those homes will wane as huge swath decides it's simply not worth the bother. We'll be on to other things.

Peter P... your precious gold finally surpassed $1,000 an ounce

So in a current analogy....how would you feel about President McCain putting Ron Paul in as IRS Commissioner?

skibum :

What SP said. The job situation is kind of stagnant now. Not too much hiring going on, but also no massive lay-offs. YET. The operative word is YET.

Ditto with rates. Hovering around/below 7. The operative word is same - YET.

The CPI numbers come out tomorrow. No matter what manipulation happens, it's obvious to most folks that price inflation is raging. So rates cannot go down. No one knows when, but they can suddenly start shooting up.

Why ? The hedge funds that speculated on the MBS are going belly up. BR has a post today on that. So no one will be left to push down the risk premiums. I have been waiting for them to go over 8% for such a long time now that it feels forever.

but our military capability is one which no one can deny is able to topple any government in the world within a day

True. We still have a first-rate military, and I'm not against using it against credible threats (operative word being "credible"). But I also think that it's too easy easy to fall into the trap of 'when all you have is a hammer, every problem looks like a nail'.

I fear the economy is going to grind to a halt next quarter. Alot of people are reading the gloomy articles every day and cutting down their spending. We're already seeing the signs of it in retail. As that slowdown trickles through, all the companies that supply retail will start to slow down. That's when you'll start to see the serious layoffs.

I expect big semiconductor players (AMAT, LAM, NVL) will start to get hit HARD in June-July. Granted, that's a small slice, just happens to be the one I'm most familiar with. I would expect other industries to show similar trends.

We KNOW this is coming. The question is what is going to get us out of it? We'll be taking hits from all sides.

I think the reason N Korea and Iran seem to be behaving is because they really do believe we are willing and able to decapitate their governments

Don't forget Libya. Thier leader became amazingly cooperative aftter Saddam was pulled from that hole.

Randy H once challenged the myth and said that the mfr. base has actually grown since the 70’s, but had extreme difficulty convincing anyone?

Including me. Ok, I get that automation, digital revolution, robotics, etc. have greatly increased the efficiency of manufacturing and hugely reduced the number of workers employed at it. But riddle me this: if we're *still* such a giant manufacturing powerhouse, why are so many common manufactured goods in the U.S. and abroad not American made? Even if it's Robbie the Robot and not Rosie the Riveter making the stuff, you don't see much "Made in the USA" on anything these days (barring software, military/aerospace & entertainment).

Just when you thought government bailout proposals couldn't get any worse:

Congress Considers $15,000 Rebate Checks For All Home Buyers

Let me know when they start giving away free ponies.

From Harm's link:

"If we can convince buyers to come back to the marketplace and buy these houses, then the houses aren't vacant.

What a turd. The houses are not going to stay vacant. Left alone , the new occupants will just pay a lower price for them. Even so, wouldn't a buyer of a new house leave thier old residence "vacant?"

Congress Considers $15,000 Rebate Checks For All Home Buyers

Over 40% of existing homes come into second/investment homes category. They probably want to push that to 60%.

What a joke.

The Foreclosure Prevention Act of 2008, which would offer $4 billion to cities to rehab or knock down foreclosed properties.

Great. Politically connected builders can have thier unsold inventory bought and demolished by localities. All at a "fair" price, of course.

HARM,

I'll see if I can't entice Randy H to chime in but as you'd suspect he had ample data to back his claim. I think it's more a matter of mfr. shift than a mfr. exodus.

True, most of the things we as consumers come in contact with on a daily basis aren't mfr. locally but I don't know anybody that grew up saying they wanted to work in a plastic cup factory? I think most appliances are still made here as well. Kind of inefficient to ship.

Peter P… your precious gold finally surpassed $1,000 an ounce

Yes, April Gold futures finally breached $1000. There is much shyness in the market though.

I am looking at the 5-min bar chart right now and it is off a bit from the peak.

sa,

Exactly. (Even if they ARE right in Las Vegas/PHX etc!) I will say though (and I can't believe it myself) but I'm more inclined to agree w/ Harry Reid. Kill the problem at the source. Let local meth addicts take care of the stripping and let the CAT do the rest. Let the banks tally their losses.

Let's git' r' done.

Hmmmm...if I were FDR.

FDR had a problem in that the Republicans at the time were an isolationist party.

FDR should have put more emphasis on a draft for the Army and Navy, and thereby downplayed the CCC, WPA, and their ilk. Similarly with defense engineering and procurement. Had the P-51 been available even one year earlier we wouldn't have sustained such horrendous bomber losses over Germany. Our troups in the Pacific suffered because there weren't enough M1 Garands to go around and they had to keep using the 1903 Springfield until late in 1943. Had our search radars been produced in more quantity AND integrated into CINCPAC command structure, the Pearl Harbor raid might have turned into the Battle of Midway for the Japanese a year earlier.

If FDR had supported Billy Mitchell and Leo Szilard/Albert Einstein from the get-go, WWII might have ended two years earlier.

So in a current analogy….how would you feel about President McCain putting Ron Paul in as IRS Commissioner?

Or Treasury Secretary. :)

Ron Paul for any post would be fine by me. And how about a new cabinet position: Housing Czar. Patrick, Ben Jones or Robert Shiller would all be fine choices.

Hillary could put in L A-Y....;)

By the way, whatever happened to HUD? Is it still around as a cabinet-level position?

RE: Housing Czar.

Why not David Lereah? ;)

Wow, these guys have sure been quiet lately....
www.hud.gov/about/index.cfm

I thought HUD was one of those departments that Dubya dissolved.