Guest yobob1 Posted July 9, 2004 Report Share Posted July 9, 2004 While housing and real estate in general are perceived to have achieved the nirvana of a "permanently higher plateau" (Fisher?), all good stoolies know that current prices have been mania driven initiated by the artificial insemination of interest rates that are obviously well below what conditions would indicate. The resulting economic juggernaut triumverate of construction, sales and finance has been the driving force behind the economic "recovery", such as it is, over the last 3+ years. It is so reminiscent of the techie's extrapolations of 1999. In order to believe those extrapolations one had to assume that every Chinese and India citizen was going to own a minimum of 2 PCs, a Palm Pilot and 2 cell phones with color video on demand. They of course forgot that most of these people don't have electricity, let alone running water or sanitation and barely enough food to keep going. In other words you have to ignore the realities of saturation and income supported demand. IMO, we have surpassed natural saturation levels by allowing the finance system to finance a large body of totally unqualified borrowers. But I think the well is running dry in that area, which leaves the system dependent on the speculators. The "house flippers", the "get rich quick with our proven system" folks, and those buying units for rentals. These are the ones leveraged to the hilt and likely saddled with every known version of the "free" mortgage in order to keep their monthly payments below their income. IMO it's a game of musical chairs with 10 players and one chair with the needle of the Victrola perilously close to the center of the vinyl. The real estate gurus insist that any price declines will be slow due to the glacial speed of real estate transactions and foreclosure procedures. If my suspicions are well founded, I believe the real estate market could crash much quicker than anyone imagines. The combination of the truly unqualified going belly up, buying of way too much house in relation to income, the inability of the finaciers to cover their defaults by reselling into the "hot" markets created by their own largesse' and the speculators all rushing the door at the same time has set up a very good possibility of large rapid price declines. "The risks seem so obvious that it astounds me that more professionals in the real estate and banking sectors are not expressing worry in public," says Eric Janszen, managing director Osborn Capital LLC. "I know many who do privately, and I have friends that work for investment banks who tell me in confidence that they are very concerned about what they call the 'credit bubble.'" The credit bubble is an effervescent symptom of something else fizzing in our national psyche, and that is a strong sense of entitlement. We're a nation of people who feel they should have it all now, regardless of the cost, and we have a lending community willing to give it to us, for as much as we are willing to go into debt. As suggested in earlier installments, Americans are carrying at least 25 percent more debt than they did twenty five years ago, and 40 percent of that debt is now on an adjustable rate, for both credit cards and housing. Further, the ability to leverage more has created a "Star Wars" escalation in demand for luxury, and therefore in housing costs, where buyers insist that even the most modest new homes be outfitted with granite countertops, jetted tubs, and other image-rich accoutrements. Home sizes have doubled over the last two generations, even while families have shrunk by an entire person (3.14 persons in 1970 VS 2.62 in 2000, according to the U.S. Census.) Who's paying for these McMansions, and what will happen to them if energy costs or job losses makes such large homes unsustainable? Perfect Storm Gathers Wind .....What's scaring Reed, he says, is that time and time again, he is seeing loans approved that have him raising his eyebrows. "One just came back across my desk - this got approved? The borrower had good credit, but his ratios are 69." That means the borrower's payment is 69 percent of his gross income. That's a far cry from the days when lenders started to sweat when borrowers got near 36 percent including credit card debt.......... ........Florida appraiser Jack Conner says he believes Greenspan promoted ARMs to the public in order to support the banks' margins. "As the rates creep up, there will be a real squeeze on these folks," he worries. "As debt grows an the public goes back to the piggy bank to get some more of that equity fix, the rates will be up, so it follows that refis will be at higher rates and higher monthly payments until the tide turns and we appraisers start to show 'declining' as a check box under 'values.' ..... ........Conner predicts a real meltdown. "Values will begin a real decline," forecasts Conner, "and it will be sell, sell, sell. Folks who have used their heads and not tapped their equity see values plummeting and banks will have record numbers of foreclosed properties on the market in all sectors. Noone does anything, waiting for the bottom. Banks begin to fail, Freddie Mac goes under, FNMA totters. It could make the Savings and Loan debacle of the 1980s seem tame, and this one everyone will feel. Standby for the regulators to get heavily involved in the lending process again. The party is just about over and we are in for one hell of a hangover." ..... ........."As for how bad it will get, my bet is on 30-percent declines in all the hot markets, i.e., both coasts and miscellaneous high-tech centers in the middle. This assumes that the Fannie and Freddie hedge funds don't bring down the entire system when the cycle goes into reverse. (As an economist, I cannot possibly see how Fannie and Freddie can be fully hedged when 1) they directly or indirectly guarantee more debt than the U.S. Treasury, 2) they are leveraged many times more than the commercial banks, and 3) the only conceivable counterparties for Fannie's and Freddie's derivatives (JP Morgan, Merrill, Citi, etc.) would logically be on the same side of the book as Fannie and Freddie.) If the systemic risk that Fannie and Freddie have created comes true, then I have no idea how bad housing will get. "It would be catastrophic." Fannie and Freddie Hit the Fan Link to comment Share on other sites More sharing options...
Lock Limit Down Posted July 9, 2004 Report Share Posted July 9, 2004 Yobob Again Great stuff. Many thanks for your efforts. Hi ho silver! +13 GEs staement "the best economy weve seen in years" in conjunction with a spoos buying frenzy warrants caution today. They are getting sooooo desperate. How do these criminals look at themselves in the mirror every morning? Link to comment Share on other sites More sharing options...
Hiding Bear Posted July 9, 2004 Report Share Posted July 9, 2004 This is the second time that the Realty Times has told the truth in two weeks. Does Homeland Security know the truth is geting out? The illusion of the GSEs is that they can hedge market risk when they are already bigger than the US Treasury market. There are so many MMFs stuffed with their paper that its going to be a real mess when the housing market blows up. Unfortunately I think in addition to GSEs debt holders getting a "haircut" on thier money, US taxpayers will pay up for their mistakes. I don't believe what GE says about the economy being better than ever or some other such nonsense. The CNBS channel of GE is the biggest self promoting piece of ** that exists. Shorting futures @1114.75. The Russian bank crisis continues: Depositors' Jitters Increasing as Some Russian Banks Close Good trading. Link to comment Share on other sites More sharing options...
Guest yobob1 Posted July 9, 2004 Report Share Posted July 9, 2004 GE Boner Uncle Bucky snapshot Oil at $40 PMs: Gold has recovered the minor Asian declines in London, platinum and palladium tagging along as silver continues it's ascent. It would appear for now that silver has taken the lead position. While we will never know until we can look back, at some point silver wil become unresponsive to the paper games and physical demand will trump paper. Is this what we are beginning to see? IMO the first breakout to the $8.50 level was a severe warning shot accross the bow of paper meisters. I remains to be seen if they learned anything from it. I am test running the Enigma Browser. I'm not sure if this is truly a break away from IE or a remake. Anyone know? Some of the prompts make me believe that IE is still at work here, but overall it seems considerably snappier than IE and far less prone to lock-ups. Suggestions, endorsements, flames? Link to comment Share on other sites More sharing options...
Lock Limit Down Posted July 9, 2004 Report Share Posted July 9, 2004 HB Just be careful The market doesn't care what you believe. They are desperate. GE's statement at this juncture is more stick saving opportunism as we sit on the edge of the abyss. We are about due for one of those wire to wire up days with scam week upon us. Remain vigilant as 990n has been active since this well planned 630am attack on put holders and the shorts. I am afraid of my own shadow when standing in front maintenance of power. Link to comment Share on other sites More sharing options...
Guest yobob1 Posted July 9, 2004 Report Share Posted July 9, 2004 I hate to say this since my very short term instincts usually burn me, but I suspect the GE boner won't last long. At least Europe isn't overly excited about it. BWTFDIK Obvious deflation: Buffett, who is the world's second richest person, put himself up for auction on eBay Inc.'s (EBAY: Research, Estimates) Web site. The winning bidder, whose name was not disclosed, will be able to invite seven friends to have lunch with Buffett. This year's price, $202,100, was lower than the $250,100 that a New York investment firm paid for the lunch last year. And I'll bet the poor shmuck gets stuck with the tab too! No free lunch Link to comment Share on other sites More sharing options...
Guest yobob1 Posted July 9, 2004 Report Share Posted July 9, 2004 What have we become that allows us to accept this from our government Shattered "I don't know what happened. Suddenly bullets were everywhere. We had just ordered the announcements since Haidar was supposed to get married tomorrow," declared Mahmoud Jassem, the driver's cousin, who wanted to stay there in spite of his wound. American soldiers often open fire on vehicles that happen to be near their convoys and numerous incidents of this type had already been reported, however, this time the event took place in front of the Mansour, an establishment frequented by Western journalists, who arrived on the scene right away. "I was just arriving at the Hotel. "I saw it all. The Humvees were driving very fast and crashed into the Toyota. And the American soldier really fired on the driver and his passenger in cold blood. It's really a crime," relates Taher, a CBS television driver, still shattered. Five minutes later, two of the four Humvees, but not the one involved in the shooting, return to the scene. The GIs tried to prevent the television teams from filming the car, threatening to fire on them. They also went to see the hotel's parking guards. "The soldiers made up all sorts of stories, even that a grenade had been thrown at them from the hotel and that they had had casualties. Everybody knows that's not possible," one of them declared. They left a few minutes later when several Iraqi police cars arrived on the scene. At the scene, the Iraqi police hide their hostility towards the American soldiers badly. "These dogs, these sons of whores..." could be heard as they spoke among themselves. They in their turn had to endure insults from the family when several members arrived on the scene. Baghdad Blunder "in Cold Blood" Link to comment Share on other sites More sharing options...
machinehead Posted July 9, 2004 Report Share Posted July 9, 2004 Hi ho silver! +13 Silver talks. Paper walks. It's over, Magoo. You're just an old cartoon character. The younger generation doesn't even know who you are. They will replace you with Japanese anime. The 2004 high for Dec. silver is $8.35. If silver moves above that level, "Point of Recognition" will be an understatement. We will be off to the bloody races like the hounds of hell with firecrackers tied to their tails. Link to comment Share on other sites More sharing options...
machinehead Posted July 9, 2004 Report Share Posted July 9, 2004 What have we become that allows us to accept this from our government serfs without the evil income tax, gov't could not afford to mess around in foreign countries this way Link to comment Share on other sites More sharing options...
DrStool Posted July 9, 2004 Report Share Posted July 9, 2004 Stoolwethers Update 1 year charts with cycle projections and intermediate targets. C JPM FNM GE GM WMT PG MMM MSFT INTC CSCO DELL AMZN IBM EBAY Today's Stoolwethers update. Take a subscribatory and download 'em RIGHT NOW! 30 Day Intro Subscribatory. Just $16.99! Get In RIGHT NOW! Link to comment Share on other sites More sharing options...
DrStool Posted July 9, 2004 Report Share Posted July 9, 2004 Your Golden Stool, including short and long term updated charts and price targets, is loaded. Even if you are not a goldbug, you should check out the Golden Stool. It's in your Anals daily. Take a subscribatory and download the Golden Stool RIGHT NOW! 30 Day Intro Subscribatory. Just $16.99! Get In RIGHT NOW!? Link to comment Share on other sites More sharing options...
Guest Posted July 9, 2004 Report Share Posted July 9, 2004 Link to comment Share on other sites More sharing options...
Hiding Bear Posted July 9, 2004 Report Share Posted July 9, 2004 HB Just be careful The market doesn't care what you believe. They are desperate. GE's statement at this juncture is more stick saving opportunism as we sit on the edge of the abyss. We are about due for one of those wire to wire up days with scam week upon us. Remain vigilant as 990n has been active since this well planned 630am attack on put holders and the shorts. I am afraid of my own shadow when standing in front maintenance of power. Thanks for the warning and yes I know scam week is coming. GE's year over year "earnings" gain were more than accounted for by tax reductions. You might remember me mentioning last year that I believe that Congress approved some "giveaway" and unnecessary tax reductions and credits for big business. Well GE is a big beneficiary of this. I assume they will be supporting their favorite politicians this year, which may well be in both parties. Link to comment Share on other sites More sharing options...
Guest Posted July 9, 2004 Report Share Posted July 9, 2004 Dollar Mixed, Gold Up in Europe The Associated Press Published: Jul 9, 2004 LONDON (AP) - The U.S. dollar was mixed Friday morning against other major currencies in European trading. Gold prices also were higher. The euro was quoted at $1.2387, down from $1.2393 late Thursday. Other dollar rates compared with late rates Thursday included: 108.38 Japanese yen, down from 108.72; 1.2269 Swiss francs, up from 1.2240, and 1.3185 Canadian dollars, up from 1.3162. The British pound was quoted at $1.8516, down from $1.8563. Gold dealers in London set a recommended price of $406.60 bid per troy ounce at midmorning, up from $405.75 late Thursday. In Zurich the bid was $406.00, up from $405.95. Gold rose $5.30 in Hong Kong to $406.35. Silver opened in London at $6.39 bid per troy ounce, up from $6.36. AP-ES-07-09-04 0712EDT http://ap.tbo.com/ap/breaking/MGB01XL7GWD.html Link to comment Share on other sites More sharing options...
Butterfield 8 Posted July 9, 2004 Report Share Posted July 9, 2004 Doc - getting a computer freeze when I go into subscription sites - any problem there? Link to comment Share on other sites More sharing options...
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