Friday, August 31, 2007

Housing bailout

I've been watching Bloomberg TV on the President's speach on the housing mortgage bailout. (Yea... they won't call it that.) In my opinion, this is a non-starter.

Oh, they'll start the program, throw money into it, and save a few FB's. But let's put this into perspective.

Last year ziprealty never broke 1 million homes for sale. Now, I know they've added more "territory" to their listing, but go look at their national inventory. But today there is 1,365,705 homes 08:21am PDT. They'll try to save 80,000. Ok, 80,000 people who were idiots but are staying in their home can have loan forgiveness from their banks and not be taxed for it. Now the other 400,000 additional homes? And only 100,000 can be explained away that ziprealty expanded territory...

So this is curious. It only helps loss mitigation. I'm actually ok with that. Why? It effectively lowers the price of homes out there!

Not to mention, this is a FHA bailout. Exactly what does a FHA bailout mean for California? Yep. Exactly NOTHING! What does it do for people who inflated their income with fraud? You got it, NOTHING! Ski lodges at Mammoth? NOTHING! And how does this help the credit markets? Bwaaa ha ha!

Got popcorn?

Tuesday, August 28, 2007

Home Prices Post Steepest Drop in 20 Years

Yes, that was the title on the front page of Yahoo! Finance. :)

U.S. home prices fell 3.2 percent in the second quarter, the steepest rate of decline since Standard & Poor's began its nationwide housing index in 1987, the research group said Tuesday.

The decline in home prices around the nation shows no evidence of a market recovery anytime soon, one of the architects of the index said.

MacroMarkets LLC Chief Economist Robert Shiller said the declining residential real estate market "shows no signs of slowing down."

later in the article:

The median price of a home sold last month slid to $230,200, down by 0.6 percent from the median price a year ago. It marked the 12th consecutive month that home prices have declined, a record stretch.

The rest notes how the problem is still spreading.

In some ways this is just more of the same... what we expected. On the other... its driving it in that this isn't a short term problem. 12 months of national should start to wake people up. But don't think this is even close to being done.

Got popcorn?

Sunday, August 26, 2007

Temp labor demand down: WSJ

" Add another item to the economic worry list: Employers are shedding temporary workers.

Temporary employment, long a buffer that gives companies flexibility, has fallen each of the past six months, and in July was down nearly 2% from the start of the year, according to the Bureau of Labor Statistics. U.S. revenue at Manpower Inc., the world's second-largest staffing firm after Adecco Group, dropped almost 9% in the second quarter, as demand fell.

In case it doesn't fit on one line, I've split it into three:

but the most interesting bit:
" The Background: Use of temps is often viewed as a leading indicator for the overall job market, as companies cut temps before full-time workers on their payrolls.

If you have an online subscription to the WSJ its worth a read. It goes into how this is a slow drop in temp demand and is not a severe drop as happened in the last recessions.

But don't miss two of the last three paragraphs. I'll only paste one to keep within "fair use" guidelines:

Because the temp and overall job markets haven't tracked closely in recent months, the weakness in temp hiring could be a false indicator. "Nobody has ever seen this type of a pause in temp employment growth," Mr. Camden said. "This is just an unusual array of numbers...In general when you've had a long flat period, it's followed either by a sharp increase or a sharp decrease."

To me it implies we are about at the sharp decrease. I honestly thought we would ease our way into this recession. Instead, we seem bound and determined to hit the wall as fast as we can.

Got popcorn?

Monday, August 20, 2007

Real Estate Emotions August Update

A review of the investment emotions:

1. Optimism
2. Excitement
3. Thrill
4. Euphoria (market price peak) Peaked in late 2005/early 2006
5. Anxiety (I'm a long term investor, not a speculator.)
6. Denial (Reached in October of 2006 until mid-May of 2007)
****7. Fear (Reached in mid-May of 2007). *****Current state****
8. Desperation Predicted to start in mid-October/November/December 2007
9. Panic: Early mid 2008 looks to be the start. Exactly when? Depends on the credit markets.
10 Capitulation Could it be summer 2008 2009?
11 Despondency (start of market price bottom)
12 Depression (end of market price bottom) Not over before summer 2011, probably later.
13 Hope (hey, this investment has picked up off its bottom)
14 Relief (Its almost what I paid for it...)
15 Optimism (cycle starts again)

Basically, I'm shocked at how much people can be in denial. While prices drop in FEAR, its during Capitualation through Despondency that we see the greatest price drop slope.

Conclusion: The "buying window" keeps shifting to the right. Disagree with the window? Let's chat in 2009, shall we? Most of the slide is because there just seem to be so many ready "knife catchers." They are starting to come out of the wood work. For homes they cannot afford! Sigh... patience. Patience.

I do think the current mortgage freeze up could accelerate things... but then I realize how far we have to go... I'm not happy we arrived where we are. Personally, I *really* like the idea of loans capped at $417,000 plus the down payment. ;)

Now to see if Fannie Mae canceling their August bond auction means anything. We won't know for months... but that could have me, for the first time, pulling my timeline back to the left! (Quick and abrupt market correction.)

Got popcorn?

Thursday, August 16, 2007

Don't worry, its contained.


The quote:
"A Bank of America hedge fund Thursday offered $250-$300 million of municipal bonds for sale, pushing secondary market prices lower, according to sources familiar with the list."

later in the article:
"A far bigger worry is the risk that tender-option-bond programs now will unwind their positions, financial analysts say. This could damage muni bond prices because the programs are so large and because they all tend to act in unison.

Tender-option-bond programs were often fat money-makers until the summer subprime mortgage debacle forced a brutal reassessment of risk and sent investors scurrying to Treasurys."

Ok... lets see...
Muni's are now dropping in price as they were overvalued as a side effect of investments that are tied to sub-prime bonds.

Oh... so contained. This didn't raise any hairs on the back of my neck... oh no... This isn't done. Not even close. What other hedge funds are going to have no choice but to duck and run?

Got popcorn?

Wednesday, August 15, 2007

Realtors at the mall

On the housing bubble blog a thread went into how a realtor is now working retail to make ends meet. So the question is, if you saw someone that you knew had once been a realtor; now working the register/counter/food court, what would you say to them? What are the most likely places you'll find them in 2008?

2nd part of this new "fun series." What wacky headlines do you expect to see in the papers in 2008?

Got popcorn?

Sunday, August 12, 2007

Iron Auger part Deux

Ladies and gentlemen, I welcome you to the next edition of Iron Auger.

Today we have a "journalist" trying to paint the blogger world in the worst light. He thinks that by belittling us that we can be made irrelevant. He takes are schadenfreude as evil without noting which idiots we're laughing at.

Well tonight we have strapped to the table George (see attached link). He thinks he's being helpful putting us down? I don't think so!

I call forth, barrel of yogurt! That's right, 42 gallons of fun to clean the mind. Let's start the show.

because my links never quite work:

FYI, this series is meant in fun. But the REIC is pulling out all the stops to discredit those that are spreading the truth. I do not advocate any punishment against any member of the REIC. I've just lost my patience with their BS and the BS of their stooges in the media.

We express are schadenfreude at those who committed fraud, so exhibited greed and yet for some reason expect our pity. Its not there. You borrowed against your home for toys... well that was a loan; pay up. When we bears buy, we'll buy when its possible for a middle class schmuck to keep the home, without refinancing! We've done without for years and just cannot understand how irresponsible people can be considered adults. LIVE WITHIN YOUR MEANS!

If you ever bothered to listen to anyone who survived the great depression, you would know people brought this onto themselves.

Ok, enough serious, back to the event!

Folks, we're going to have to bring out the foot pump to get it all in. :) Oh, he's squirming, but we still have 38 gallons to go!

Got popcorn?

Saturday, August 11, 2007

News is spreading fast

One of our pilots in today's meeting (yes, I had to work Saturday) was talking about the FED's cash infusions and related issues. Of course my ears perked up. Then he talked about "you haven't seen nothing yet in the mortgage problems." But what shocked me is that on his own he did a Fibonacci sequence analysis and was speaking to a rather filled room about the upcoming "34% to 65% price declines in housing."

I introduced myself and we traded e-mails.

He now has a list of my "first hit" housing bubble sites:

and since he's looking to buy in San Diego:

Ventura Country:

I kept the number of links low (sorry if I missed your site), but one doesn't want to scare away the newbies. ;)

And my favorite local site:

Oh, he found Ben's blog on his own. Finally, after years, the best of the bloggers have gotten the news out! (Note: I'm not counted among them. I'm just proud to not be a sheeple!)

Got popcorn?

Friday, August 10, 2007

A long term proposal to fix the market

We know we're in trouble and there will be a drop. How do we keep the market sane in the recovery?


1. Entry level. That's FHA. It won't change (even if I want it too).
2. Mid level. 20% down. 10% down with insurance if your FICO is good. That's how it was a decade ago and it worked well.
3. Jumbo. Should be back to 20% down + the last year (or two) of appreciation as the minimum down payment. Its how it was in the 1970's. (No link, but all the "grey hairs" at work talk about this.)
4. Super-Jumbo. Congrats. You're rich. Pay cash or margin your stocks. Let's face it, if you're buying super-jumbo your stock broker greets you with a cup of coffee and a muffin whenever you stop by his office. He'll happily work with you on a loan package to ease your cash flow with your portfolio as collateral. That's how it used to be and should be again.

BTW, I love Buffet's old quote: "Wall Street is the only place that people ride to work in a Rolls Royce to get advice from those who take the subway." (Small correction in quote thanks to D.A.)

Edit: Saw the scariest begger on my jog this morning. (The path goes under a bridge where homeless sometimes sleep.) He was well kept, obviously trying to groom himself as best he could. His polo shirt (fabric had that polo texture even) was dirty, but not yet frayed... He was also wearing a tie, nice slacks, and had practical "work casual" black shoes on that weren't too old. In other words, he looked like an out of work engineer! Yikes!

Got popcorn?

Thursday, August 09, 2007

ECB Injects $130 Billion to Ease Jittery Markets

Fair use quote:
Mounting fears that the U.S. subprime crisis is spreading to Europe prompted the European Central Bank to loan €94.841 billion ($130.2 billion) in emergency funds to European banks this morning, the first time it has taken this type of action since just after the terrorist attacks of Sept. 11, 2001.

Concern that European banks face growing losses on investments linked to U.S. mortgages shot the euro zone's overnight borrowing rates to 4.7% today, their highest since October 2001 and well above the ECB's benchmark financing rate of 4%.

Basically, the ECB is going to dump every penny they need to keep rates down at 4%.

I'm thinking the new "implode-o-meter" hedge fund meter is going to ratchet up quickly.

This is getting scary. I'm having trouble taking any positive spin seriously. Normally I'm polite and patient; lately I just snicker when J6P goes pro-RE. Am I the only one who feels like a neutron financial bomb has already gone off? Its like walking in the world of the dead; they just do not realize they're in trouble. When some people talk I have to restrain myself from grabbing them and shaking while shouting "Do the math, that cannot happen!"

One of the goals I'm failing at on this blog is to provide job flow information. Alas, my rumor mill has dried up. Its almost like the prospects out there are too scary to contemplate.

For example, Amgen is looking to lay off up in Thousand oaks; this was the front page of the dead tree LA times this morning. Zero mention about their new buildings in Colorado. The fact is they need the best and brightest to develop new medicines. For what they can pay, those people expect to buy matching Volvo's (per the LA times article) and other toys; you cannot do that and live in Thousand Oaks. Besides, they need to cut just to provide parking! (The LA Times article noted they have hired valets to stack park cars.) Whiskey Tango Foxtrot? Something is wrong when hiring valets is cheaper than building parking.

I know Northrop, Lockheed, and Raytheon are moving people out of state; but is it only a trickle? Boeing? Defense groups are laying off. They talk about how the 787 has borrowed 1,000+ engineers from defense programs, but the reality is that most of those engineers either took the Seattle/Wichita/travel job or were to be laid off too. The one exception is their satellite group.

It looks like I'll know something more about job migration in November. Yes... 90 to 120 days from today... It seems all of the defense contractors are waiting for the new fiscal year before announcing anything.

Got popcorn?

Wednesday, August 08, 2007

Iron Auger: NAR predicts 1% decline in home sales

I'm starting a new series here on my blog. In the best tradition of "Iron Chef," we're going to have Iron Auger. If you've been reading the HBB and Auger Inn's posts or NnvMrtgebrkr's continuation, you'll understand. Otherwise you'll just think I'm sick.

The rules? Someone says something so stupid that they deserve a painful anal probe; thus they are "selected" to be a contestant on Iron Auger. Just like Iron Chef, there will standard and visiting Iron Augers.

I need suggestions for the Iron Augers. ;) Have fun with that. Of course the chief Iron Auger will be: JOSHUA TREE! We'll also see speckled trout, barrel cactus, and the barrel of yogurt as common Iron Augers. But what other one's should there be?

Now today's Iron Auger:
"With the population growing, the demand for homes isn't going away it's just being delayed," Lawrence Yun, NAR's senior economist, said in a statement. "More buyers, and cutbacks in new construction, will eventually draw down the inventory levels and support future price appreciation, but general gains will be modest next year. Serious buyers today have a long-term view of housing as an investment -- speculators have left the market."

(In the Iron chef tone, spotlights highlight barrel of Yogurt, speckled trout but finally focus on...)

I call forth, JOSHUA TREE!

Got popcorn?

Sunday, August 05, 2007

No name U-hauls?

Its pretty typical on my weekend jog to go by four to six U-hauls. So that inspired me to finally update my U-haul index and the results showed less pressure out of state than a year ago. Huh? By the way, I have zero evidence if these are moving people in or out of state. But there is a new trend: no name moving trucks! Since its been one year since I first did a quick U-haul index, its time to update that too!

The old U-haul index:

This weekend there are five name brand self moving trucks parked along my jogging route (U-haul, Ryder). Since its August, that probably isn't an indicator. But I also went by six "no-name" moving trucks. Some old (one obviously ex-Ryder), some pretty new. Anyone heard anything of this trend? I've seen the "no-name" moving trucks two weekends in a row... It could be that the drivers moved into the neighborhood (cheaper apartments three blocks away...)?

Now for the U-haul directionality index
a redux of:

90277 to Austin: $1,236 return $536. The year ago was $6,439 Return: $575. So the HUGE premium to Austin is tapering off. The Austin to Redondo beach is similar to a year ago.

90277 to Phoenix: $456 return $352 a year ago: $670 Return: $131

90277 to Spokane, WA: $3,875 return $1,137 a year ago: $4,845 Return:$199

90277 to Las Vegas: $381 return $379: year ago $638 Return: $226

1) The premium to leave the state is dropping. Is this due to less demand or a more efficient truck return system? I do not know.

2) In the case of Las Vegas, the premium is gone! The $2 difference is probably for the higher rent at the south bay truck pick up location.

Note: I picked the largest truck for pickup on a Saturday (8/11/2007) just as I did a year ago. Yes, this does maximize the directionality premium. But that's what I want, to see if there is a strong directionality premium.

The results were not as I expected. I expected premiums to be higher to get out of state. Does this imply fewer jobs in other states? Are the no-name companies driving down U-haul rates? Has U-haul restructured to get their trucks in/out of an area more efficiently? For $3,875, you can make quite a profit off a moving truck with a hired driver to Spokane. Does anyone have a good u-haul index blog link?

Got popcorn?

Friday, August 03, 2007

Bond turmoil worse than Internet bubble: Bear CFO

this quote by the Yahoo editor stuck out:
"Bond market turmoil sending investors fleeing from risk may be a worse predicament than the 1980s stock market fall and Internet bubble burst, Bear Stearns Chief Financial Officer Sam Molinaro said on Friday.

DJIA now down over 200.

I'm sure this will be all the talk of the HBB soon.

Got popcorn?

edit: These stock market oscillations fit in with my recession model even though they really worry me. As long as the market stays above (DJIA ~12,500) this summer. Note: I'm fudging. Its ok to have a crash in mid-September+ per my estimates. We don't have to be strict about the Autumn equinox on September 23rd. But if a world wide stock market crash happens in the next 5 to 6 weeks... I'll be really worried. That is *not* in line with my predictions. If the crash happens in October... all according to plan. ;) Market now down (DJIA -250 at 13,185) pretty quickly...