patrick.net

When we look back and see how much of our resources have been devoted to “vacation homes” it’ll turn our stomachs.

No kidding. I live in a small university town of 15000 people. When i came here like 8 years back, houses i saw were very old. Now, many of them have given way for expensive condos. Mostly as 2nd home or who knows 10th home for speculators. The median income for the town is around 28K and median price is around 280K. One of my friend started a restraunt here last year and he couldn't get a bid from any of the developers in town to get his interiors done. They were making so much money, they didn't even want to look at 150k work.

Another concept for people to wrap their heads around.

There's a big difference between being able to qualify for a mortgage, and actually being able to afford it.

Here's an interesting note from NRO on the fact that the liberals can't complain about the Fed since they are the ones who wanted one.

http://article.nationalreview.com/?q=NDNmMWFlMTZmNDdiYzRkZTk5NjY2ZTY0YWExYjNkMjY=

sa,

Good point. With all that's been wasted on homes that barely see two weeks a year of actual use I'd forgotten about all the misallocated labor? All just to feed someones' vanity.

O.K I just came up with the definition of a vacation home!

"If you can't pee off the back porch without getting complaints, it ain't a vacation home, alright?" (It's a trophy home)

Enough already!

two weeks sounds just about right. 6-8 football games.

The fact the market continues to rise on bad news just amazes me.

Here is my prediction:

In 6 weeks time (May 21) the Dow will drop below 11,500.
By years end it will drop Below 10,000.

FED has been coming comes up with something, everytime DOW is around 12K. I don't know why they are so aggressive with equity prices.

Just today:

Google laying off 300.

ATA Airlines Bankrupt and shut, more airlines to follow.

CIT Group, one of the largest private student lenders, announces it is stopping student lending as of today.

Mortgage Rates creeping up, at 5.88% 30 FRM today.

Story in Reuters about homes being worth less than their copper pipes.

Fed players indicated a Bear collapse would have led to total finanical system meltdown.

Employment report expectations dismal, anticipated increase to 5% unemployed.

And yet, the stock market is climbing. Some might argue ugly has already been priced in; as transparency and unknowns become knowns confidence flows back in. I don't think so.

I completely agree Duke, we will be well below 10,000 Dow by end calendar year. Unless of course christmas season 2008 saves us all! The next holiday should be one for the books. Figure another 20% minimum median national RE price decline, another 15% off the stock market, maybe another 10% USD currency drop thrown in.

Public is already "reeling" from the whammy of equity and housing decline to date, along with soaring prices. Imagine what folks will be feeling when we finally hit those bottom numbers. Yikes.

We are witnessing nothing less than the most drastic standing of living decline in US history.

I don’t know why they are so aggressive with equity prices.

To avoid cascading margin calls. All types of portfolios have been used as collateral. So a rapid decline in the value of the collateral can start a vicious circle pretty soon. For the same reason, Bernanke is appealing Congress to do something to stop the decline in house prices.

This is the problem with asset bubbles and their destruction.

SIBA,

When things were blowing up in housing, fed came out and said things were contained. What i am trying to understand was, it didn't appear that fed was panicking when housing was deflating. They have been very agressive when the results started to show up in equities. If they understood the problem correctly, it should have been other way around.

US is the world's 4th largest exporter of rice, after Thailand, Vietnam, India. However, recently Vietnam has put a ban on rice export due to shortage of supply internally, and India is having a serious crop failure.

The US ranks only 4th in rice export not because of supply constraints but because of competition from the other exporters. Most of the American rice is grown in California. If we don't have wacky weather leading to crop failure like India and Vietnam, this could be a very profitable year for American rice farmers because they can essentially charge whatever they want.

Just after the 30% rice hike about a week ago, there will be another co-ordinated 30% price hike on rice in China next month.

Maybe we should stop thinking about buying a home, and pay more attention to Williamson Act land that is not being utilized for agriculture. Perhaps I can hire a few Latinos to grow rice for me :-)

NVR,

Dow may not end up much lower because the massive printing action is about to start.

You ain't seen nothing yet when it comes to inflation. So far we are able to export our USD overseas, particularly to developing countries in Asia that are exchanging their work and raw materials for work, and eventually, food. When that link breaks, all the USD will come home to roost, plus the helicopter action of the Congress, not BB alone. So far it is only the beginning of monetary reflation, not at full scale yet. When we get to fiscal stimulus, that will be one hell of a reflationary effort.

I keep telling you, all we need do is band together with Canada, Brazil, Argentina, and Australia and form "OFEC" - the organization of food exporting countries.

Maybe we should stop thinking about buying a home, and pay more attention to Williamson Act land that is not being utilized for agriculture.

Good idea. I doubt grains are easy to grow in small scales though.

Perhaps I can hire a few Latinos to grow rice for me

Guest worker program is essential!

You ain’t seen nothing yet when it comes to inflation.

I am still not sure if the correction in gold price has completed. :(

I keep telling you, all we need do is band together with Canada, Brazil, Argentina, and Australia and form “OFEC” - the organization of food exporting countries.

I love that idea.

But how can the OFEC export food to non-OFEC countries without oil?

Rice is still going strong:

http://quotes.ino.com/chart/?s=CBOT_RR.K08&v=d6

Again, futures investing is very risky.

easy, load those empty tankers with food for the trip home.

Yes! We will offer them a Food-for-Oil program. :)

OFEC could simply dictate some fractional parity between a barrel of oil and a bushel of wheat. Any tin-pot dictator we don't like....let them eat oil.

let them eat oil

LOL!

Oil is the new cake! :lol:

Working out a fractional parity between oil and wheat could take several forms AND it would de-couple any fiat currency effects.

For example, say a barrel of oil is X gallons and Y pounds. A bushel of wheat is W gallons and Z pounds. We could set fractional parity as A (X/W) or as B (Y/Z). And if anyone complains, we could point out that crude oil REALLY MEANS crude oil, as opposed to the finished product of wheat. Crude oil is pulled out of the ground for free after extraction costs. Wheat on the other hand requires BLUE GOLD (R), lots of farm labor, and processing along with the intellectual property value of the wheat strains.

Working out a fractional parity between oil and wheat could take several forms AND it would de-couple any fiat currency effects.

Free Market can work that out in fractions of a second.

What "free market"? Last time I checked we didn't have such a thing.

Too bad. :(

Well, we can at least worship it. ;)

I'll bet you all my gold that we can go without oil a lot longer than they can go without wheat, rice and corn. Fix the price... OFEC is a brilliant idea!

Hey guys, let's not get ahead of ourselves yet.

Food cannot not easily monopolized until...we can come up with some kind of biological weapon that can wipe out other people's crops but not ours.

sa :
What i am trying to understand was, it didn’t appear that fed was panicking when housing was deflating. They have been very agressive when the results started to show up in equities. If they understood the problem correctly, it should have been other way around.

Because the Fed doesn't care about the home prices at all. Say, if the home prices go to zero, but bank's collateral is protected by Govt. would Mr. Bernanke care about loanowners ? Fat chance. They are "banking" on the Congress to do exactly that for them. Which the congress is trying hard to do.

The Fed cannot go out and buy all the houses. But they can accept all the MBS sh1t they can, and they did exactly that.

The Fed is banker's personal bitch. It doesn't care about savers, not does it care about debtors. It only cares about banks. All types of banks - now it seems.

OO, other less-fortunate places do not have the same fertile land. They can surely try growing rice in a desert.

I think we will hit Peak Food though. LOL.

If other places were on par with U.S. agriculture techniques, we wouldn't be exporting as much as we are today.

NPR's Fresh Air program today is highly recommended to all interested in what caused this financial mess (for one, McCain's top economic advisor, Phil Graham's legislature that deregulated derivatives). Great interview on our "shadow financial system"

"Our Confusing Economy, Explained":

Perplexed by the U.S. economy? You're not alone. Law professor Michael Greenberger joins Fresh Air to explain the sub-prime mortgage crisis, credit defaults, the shaky future of other types of loans and what we can expect from the U.S. financial markets.

http://www.npr.org/templates/story/story.php?storyId=89338743

Hey, I am just trying to figure out if I need to bring my swim trunks to the housewarming party. We are invited… right?

Of course. I was already thinking of that. But I'll need to subscribe a couple of the tougher of this lot to act as bouncers in case any of the Zillow-psychos show up to rumble.

There are a lot of pools (as opposed to hot tubs) where we're looking now, though. So you know it's not Mill Valley so much anymore.

from the Fresh Air interview: student loans, auto loans, credit cards, private equity firms "have all essentially followed the same template (as the subprime lending ways). it's as if a bunch of las vegas bookies started taking bets and never bothered to write them down or record them."

I have to say I agree with Duke's prediction of 11,500 by May 21st.

Randy, I am sure you already know this, but I am still gonna repeat anyway.

Propertyshark has quite a bit of time lag on recording and doesn't always record HELOC or second loans. However, county records do. You can search by names to see if someone is taking out a second loan or a HELOC on the current home. You can just use online recorder search to get an initial result. Then if you are nosy enough about the report, you can always pay up.

Sometimes the seller has "hidden" financial skeletons in the closet that may not be fully revealed by propertyshark. And a HELOC lender can prevent the house from going into a short sale in which the HELOC lender will be left with zilch.

Hmm… more like Deliverance.

You mean like this trio?

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2006/05/18/DIRTBIKE.TMP

There is definitely a part of the hills where you can go too far back and you end up back in the Wild Wild West.

The Fed cannot go out and buy all the houses. But they can accept all the MBS sh1t they can, and they did exactly that.
I was wondering what Stuck was all fired up about, and then I realized it's Thursday. Time for the latest H.4.1 report from Uncle Ben and company. No helicopters (they actually sold about $40 billion in Treasuries) but what's this? Securities Lent to Dealers, Term Facility -- let the great Treasury swap meet begin. The $64 billion question: how good are the ratings on that high quality MBS collateral? Oh, and $6 billion went out the "regular" discount window and another $5 billion went to non-depositories. All and all another fine week; less than $600 billion of Treauries are now left.

There is definitely a part of the hills where you can go too far back and you end up back in the Wild Wild West.

Wrong turn! It was a tragedy.

Perhaps one should not go above 500 ft MSL in the Bay Area.

What is the projected burn rate for $600M? $100M a month?

I thought it was $600B.

$600M is like a sushi dinner to the Fed.

Duke Says:
The fact the market continues to rise on bad news just amazes me. Here is my prediction:
In 6 weeks time (May 21) the Dow will drop below 11,500. By years end it will drop Below 10,000.

DOW 10K? That sounds like really bad news, which should make the market go up, no? :-)

Back in grad school we had a professor who used to call investing, "following the bouncing lines"
According to him, you can look at events like the great depression and count on them to repeat themselves. As many here have come to call it, I think we are in the 'dead-cat' bounce.
Many are arguing that the Fed has effectively put a floor under the market. And since the market was pricing in a posssible meltdown and now they only have to price in only a recession.
Umm. No.
The Fed is blunting the worst of a rapid over shoot.
Congress is going to make the decline bi-modal with the stimulus.
But the truth is the fundamentlas stink.
There is a real destruction of the perceived wealth of credit and debt obligations. Mix in some leverging and you have a recipe for contraction. It is true that, to the extent we can, we will export some of this. But a correctly working market represents the strength of the underlying assets. Much as Thailand had no financial reserves for any market down-turn, neither do our banks and 'shadow banking' institutions. And the Fed is not large enough to cover the shortfall. In fact, only a co-ordinated effort of Central Banks can cue what ails the US.
So as for the market as the information stands today: if it growls like a bear, fishes like a bear, and eats honey like a bear. Its a bear.