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As of the third week in September, Crisp, Cole, their companies, family members, employees and associates have defaulted on at least 94 properties. Payments are late on $58.76 million worth of home loans.
Bakersfield is a crappy little armpit of a town in the middle of nowhere. The whole city isn't worth $58 million.
Now widely acclaimed reformist icon Vaclav Havel agrees:
For dozens of years, the international community has been arguing over how it should reform the United Nations so that it can better secure civic and human dignity in the face of conflicts such as those now taking place in Burma or Darfur, Sudan. It is not the innocent victims of repression who are losing their dignity, but rather the international community, whose failure to act means watching helplessly as the victims are consigned to their fate.
The world's dictators, of course, know exactly what to make of the international community's failure of will and inability to coordinate effective measures. How else can they explain it than as a complete confirmation of the status quo and of their own ability to act with impunity?
What's not obvious is why the CPI differs so greatly from actual inflation.
Well, here's your answer. Spend a few hours at ShadowStats, where economist John Williams has made a career of dissecting the CPI methodology.
The dollar declined to a record low of $1.4190 per euro and last traded at $1.4185 at 7:33 a.m. in New York, setting a record for a seventh day, from $1.4153 yesterday.
"The U.S. economic outlook is pointing to the dollar falling further," said Daragh Maher, senior currency strategist at Calyon in London. "There's reluctance to buy the dollar even though the dollar is looking undervalued."
The New York Board of Trade's dollar index fell to 78.134, the weakest since the index began in 1973. The Fed's trade- weighted index comparing the dollar with major currencies fell on Sept. 25 to the lowest since its inception in 1971.
Bush and the Republican Congress spent like drunken Democrats. Greenspan and Bernanke turned on the printing presses and fired up the helicopters. What other outcome could you possibly have expected? And there's plenty more to come. Get your disco shoes out of the attic.
Sell stocks? Hell no! Stocks are going up in nominal terms. Everything is going up in nominal terms.
UPDATE: OK, when I say "everything" is going up, that's a slight exaggeration. Bonds aren't going up. And of course home prices aren't going up. That would be just silly.
Homebuyers are being encouraged to lie on their mortgage applications to take out loans they cannot afford, according to an investigation.
Some mortgage brokers have encouraged desperate borrowers with poor credit records to claim they earn almost double their true income on loan forms
As Karl Marx said, "History repeats itself, first as tragedy, second as farce." We have the tragedy thing going on pretty well here in the U.S., and, as Monty Python and Little Britain can attest, England can hold its own in farce.
CPI's Lie on Household Inflation Doesn't Wash: John F. Wasik
I told you so!
The reality is that we have deflation in some sectors (technology, some consumer goods) due to technological advances, manufacturing productivity, and cheap imports. These sectors are overweighted in the CPI. We have inflation in most other sectors, any sector that involves humans, land, energy, or government (food, transportation, taxes, housing, and any services that can't be outsourced to India or China). These sectors are underweighted in the CPI (and especially so in the "core CPI").
And the deflationary effect of cheap imports is now finished, thanks to Ben Bernanke murdering the dollar.
Think about it. If there's no inflation, why were families able to buy a home on one income a generation ago, while today families struggle to get by on two incomes?
Now aren't you glad you've been buying gold for the past two years?
The true measure of a career is to be able to be content, even proud, that you succeeded through your own endeavors without leaving a trail of casualties in your wake.-Alan Greenspan
OK, I got it, how about an analogy:
The true measure of love is to not saw your wife's head off.-O.J. Simpson
A 27.6% price drop over the next five years in San Francisco. A 31.7% drop in Miami. Roughly 20% drops in most other big cities.
If wages and rents keep up with inflation over the next five years, those 20% to 30% price drops might make home prices almost reasonable again. House prices at 3x income and PITI = rent? What a wonderful world.
How are you feeling now, Alfonso Rey?
But read the whole thing anyway.
You’re lying to yourself if you think we still have real GDP growth in this country.
I challenge you to find one measure of wealth OTHER THAN THE DOLLAR which shows the US economy as worth more now than in 2001. If I wanted to buy our country it would cost me 30% fewer euros today than it did in 2001, it would cost me less bars of gold, less barrels of oil, less ounces of copper, less btu’s of natural gas, less cubic feet of lumber, less of almost anything that has intrinsic value. Yet you keep reporting GDP growth, why? Because your quick fix is to effectively print more money so that in dollar units everything is getting more “valuable”. But guess what, to the 95% of the world that doesn’t use dollars the true value of the US economy has been shrinking, rapidly.
It’s like a company doing a 5 for 4 reverse stock split every year and claiming to have 20% eps growth, you haven’t changed the earnings just the units those earnings are measured in. The rest of the world is telling you our country is worth less by massively selling our currency and you still naively think we’re growing value - I feel like I’m at a gathering of the flat earth society or in Zimbabwenomics 101.
I always thought Google was evil and Yahoo was just stupid. Now it looks like Yahoo is evil too.
Here's the story.
UPDATE: There may be a less sinister explanation, such as a search engine optimization (SEO) attack by someone who may or may not be affiliated with Countrywide (thanks Twist for the info). Or this may be a pure technical bug and a sign of complete incompetence in Yahoo's new "Panama" technology. Nevertheless, Yahoo has been notified and hasn't fixed it.
Ron Paul: It just looks like we may well come to a '79-'80. Do you anticipate that there's a possibility that we will face a crisis of the dollar such as we had in '79 and '80?
Ben Bernanke: The Federal Reserve is committed to maintaining low and stable inflation and I'm very confident we will be able to do that.
Thanks to Loucos for the tip.
UPDATE: Ron Paul from yesterday's hearing:
“I want to follow up on the discussion about moral hazard. I think we have a very narrow understanding about what moral hazard really is. Because I think moral hazard begins at the very moment that we create artificially low interest rates which we constantly do. And this is the reason people make mistakes. It isn’t because human nature causes us to make all these mistakes, but there is a normal reaction when interest rates are low that there will be overinvestment and malinvestment, excessive debt, and then there are consequences from this. My question is going to be around the subject of how can it ever be morally justifiable to deliberately depreciate the value of our currency?”
In other news, shoppers at Venezuela's markets continue to find bare shelves. In addition to shortages of milk, bread, and other staples, it's now difficult to find chicken, beef, or vegetables.
Now Iggy claims that his son's rape spree and subsequent guilty pleas were all part of a conspiracy by dark forces who wanted to deny him the mayor's office.
Iggy's conspiracy web site is here.
"Raise prices," he said. "Buyers aren’t buying because they think you’re going to lower prices again. There’s interest but there’s fear. Raise prices 3-4 percent. And quit giving discounts.”
Fast forward all the way to September 2007:
The sale is part of a nationwide effort by Red Bank, N.J.-based Hovnanian Enterprises to shore up its sales during a major market slump. The company has cut prices by more than 20 percent in prime markets and shaved more than 10 percent off the price of some Triad properties.
"I've been here for eight years, and I'll be honest with you," said Richelle Smart, an area sales and marketing manager for K. Hovnanian Homes.
"We've never offered anything like this."
Last month, the largest ever international survey of cancer survival rates showed that in the U.S., women have a 63% chance of living at least five years after diagnosis, and men have a 66% chance -- the highest survival rates in the world. These figures reflect the care available to all Americans, not just those with private health coverage. In Great Britain, which has had a government-run universal health-care system for half a century, the figures were 53% for women and 45% for men, near the bottom of the 23 countries surveyed.
A 2006 study in the journal Respiratory Medicine showed that lung cancer patients in the U.S. have the best chance of surviving five years -- about 16%. Patients in Austria and France fare almost as well, and patients in the United Kingdom do much worse with only 5% living five years. A report released in May from the Commonwealth Fund showed that women in the U.S. are more likely to get a PAP test every two years than women in Australia, Canada, New Zealand and the U.K., where health insurance is guaranteed by the government. In the U.S. 85% of women ages 25-64 have regular PAP smears, compared with 58% in the U.K.
The same is true for mammograms. In the U.S., 84% of women ages 50-64 get them regularly, a higher percentage than in Australia, Canada or New Zealand, and far higher than the 63% of women in the U.K. The high rate of screening in the U.S. reflects access as well as educational efforts by the American Cancer Society and others.
Maybe the whole idea behind HillaryCare is to fix Social Security by killing people before they grow old enough to get benefits.
In a withering critique of his fellow Republicans, former Federal Reserve Chairman Alan Greenspan says in his memoir that the party to which he has belonged all his life deserved to lose power last year for forsaking its small-government principles.
In "The Age of Turbulence: Adventures in a New World," published by Penguin Press, Mr. Greenspan criticizes both congressional Republicans and President George W. Bush for abandoning fiscal discipline.
The book is scheduled for public release Monday. The Wall Street Journal bought a copy at a bookstore in the New York area.
Mr. Greenspan, who calls himself a "lifelong libertarian Republican," writes that he advised the White House to veto some bills to curb "out-of-control" spending while the Republicans controlled Congress. He says President Bush's failure to do so "was a major mistake." Republicans in Congress, he writes, "swapped principle for power. They ended up with neither. They deserved to lose."
Yes, the Republicans were stupid and destructively reckless. But Greenspan, supposedly a brilliant man, was still destructively reckless. And the fallout from Greenspan's easy-credit policies will likely be far more severe than the damage caused by Republican spending.
If you still need a reason to buy gold, take a look at this chart.
It's true that gold offers no yield, while cash and bonds do. But if you think that 4.5% or 5% nominal interest is enough to compensate you for what's happening to the dollar, well, good luck to you.
Bernanke is between a rock and a hard place. If he holds rates firm, we'll have a severe consumer recession. If he cuts rates, the dollar decline will likely accelerate, with consequences possibly far more dire than a recession.
So, Bernanke, are you a Volcker, who restored faith in the dollar after the Carter years, or a Greenspan, the serial bubble creator. We'll know next week.
Here's a profanity-laced tirade from Karl Denninger. Yes, he has trouble pronouncing "Bernackie," and yes, it's a bit silly to extrapolate a daily FX move into a 50% loss for the year. Denninger may be hysterical, but he's not far off the truth:
Today, a new red NOTICE!!! NOTICE!!! NOTICE!!! in the Countrywide window caught my eye.
Going out of business sale on office furniture? A "wanted" poster for Angelo Mozilo? No such luck. The notice says that this office, the only Countrywide office in San Francisco, is not a processing center, so if you drop off your mortgage payment on the due date, you won't be credited until a day or two later.
Why is this such good news for Countrywide? It means at least a few people are still trying to pay their loans! That's surprising, given the garbage loans Countrywide is known for. On the other hand, if people are showing up at the office on the due date instead of mailing the check or paying online a few days early, it's not exactly a good sign for the borrowers' financial health. It looks like they are one paycheck or one ARM reset away from delinquency.
Nice customer service though. Drop off your mortgage check at their office when it's due, and they'll delay it a day or two so they can hit you with a big late fee. As if it would be so difficult to have one clerk with one computer in the office to record the payment. As if those desk jockeys are too busy writing new mortgages, right?
To quote from Joshua:
A strange game. The only winning move is not to play.
Max out your 401(k). Don't buy a new car. Don't buy more house than you can afford (in fact, don't buy any house for a few more years!). Live on 75% of your after-tax income.
Your grandparents, and probably your parents, lived this way. What makes you different? You really want to be eating dog food in your old age?
Californian Chris Romero's biggest worry two years ago was missing out on the action. He had his eye on a $200,000, two-bedroom condo in a project called La Jolla Real in Rosarito. But by the time the then-Diamond Bar resident was ready to commit, the developer had raised the pre-construction price to $250,000.
Instead of folding, Romero doubled down, handing over a $120,000 down payment to lock up two units -- one for $238,000, the other for $270,000 -- before prices increased again. The retiree and his wife reckoned they'd sell the cheaper one just prior to closing and use the profit to help finance the other."The market was booming," said Romero, 60.
No more. With the development nearing completion, he's finding buyers scarce and competition fierce. Rosarito is littered with so-called "resale" units whose owners are looking to unload them. Romero is offering a $5,000 bonus to anyone who can bring him a buyer. His $290,000 asking price is "negotiable." And he's willing to provide financing.
Btw, Sr. Varones assures me that including the word "cum" in the first line of a post is a surefire way to increase readership.
Bruce Murphy PC is currently investigating Countrywide Financial Corp. (“Countrywide” or the “Company”) for potential violations of the Employee Retirement Income Security Act of 1974 (“ERISA”). The investigation focuses on investments in Countrywide stock by the Countrywide Financial Corp. 401(k) Savings and Investment Plan (the “Plan”).
Countrywide said it expects the current turmoil to reduce its mortgage lending next year by 25% from this year's level. In a letter to employees, the Calabasas, Calif., company's Chief Executive Officer Angelo Mozilo called the current down cycle in mortgages "the most severe in the contemporary history of our industry."
Bruce Murphy PC’s investigation involves concerns that Countrywide and other administrators of the Plan may have breached their ERISA-mandated fiduciary duties of loyalty and prudence to participants and beneficiaries of the Plan. A breach may have occurred if the fiduciaries failed to manage the assets of the Plan prudently and loyally by investing the assets in Company stock when it was no longer a prudent investment for participants’ retirement savings.
If you are a member of the Countrywide Financial Corp. 401(k) Savings and Investment Plan and purchased or held Countrywide stock in the Plan, you may contact email@example.com
At first, I didn't think this was a good case. As employees have control over the investments in their 401(k)s, companies don't have a lot of liability for them.
But then look at this, from the Department of Labor:
There are other ways to limit potential liability. Some plans, such as most 401(k) or profit-sharing plans, can be set up to give participants control over the investments in their accounts. For participants to have control, they must be given the opportunity to choose from a broad range of investment alternatives. Under Labor Department regulations, there must be at least three different investment options so that employees can diversify investments within an investment category, such as through a mutual fund, and diversify among the investment alternatives offered. In addition, participants must be given sufficient information to make informed decisions about the options offered under the plan. Participants also must be allowed to give investment instructions at least once a quarter, and perhaps more often if the investment option is extremely volatile.
So if management knew CFC was a turd (if, say, the CEO was dumping hundreds of millions of dollars in stock), but didn't tell employees that CFC was a turd, that would be a violation of ERISA.
So, Countrywide employees, give Bruce a call. It can't hurt.
"Housing affordability" has long been a goal for politicians of all political stripes. The solutions have ranged from the creation of monstrous government departments (HUD, FHA) to quasi-government companies (Fannie Mae, Freddie Mac). More recently, the solution has been "creative financing," including no money down, no documentation, and pay-option ARMs.
So what have these "housing affordability" efforts done to housing affordability? Before all this, families used to be able to buy a house with a single median-income earner and a 30-year, fixed-rate mortgage. Now, families struggle to afford a house even with two incomes. And it's worst in the states with the loosest lending standards.
The law of unintended consequences. Learn it. Know it. Live it.
How did the banks do? $200,000 loss on the first house (plus auction fees and other expenses), almost $300,000 loss on the second. For good measure, Davey's mom just had a house auctioned for another $300,000 bank loss.
30%-40%, and larger, bank losses are going to become commonplace. Loans were made on inflated appraisals, and real estate values are plummeting in many areas.
This is why I am so comfortable being short Countrywide. Their real estate owned portfolio is now $2.5 billion, up 18% in one month. And we are still very, very early in the foreclosure cycle. Countrywide will eventually have to dump all that property for considerably less than the current asking price. Best case: enough horrible loans default to put Countrywide in bankruptcy. Worst case: Countrywide survives this but continues under a much less attractive business model. No more stupid hedge funds to buy their high-margin product. Return to normal lending standards and Countrywide might be worth $10 - $20 per share.
UPDATE: Herb Greenberg says it's even worse. The new iPod Touch is like the iPhone without the $2000 phone contract!
My pics of these bitter folks on a happier day here.
"Our whole place in the industry would have changed dramatically because we would have arbitrarily made a decision that was contrary to what everything appeared to be," he said. Among other problems, mortgage brokers would have stopped offering the company high-grade or prime mortgages if it would not also accept lower-quality sub-primes.
Countrywide suggests that mortgage pricing and underwriting standards during the housing boom were set by the most aggressive -- that is, least rigorous -- lenders, and that it was all but powerless to impose its own standards.
Of course, throwing all lending standards out the window as his competitors did also allowed Mozilo to post big numbers, drive the stock into the 40's, and cash out hundreds of millions of dollars for himself while leaving shareholders and employees holding the bag.
Listen to him on NPR or, if you think that'll poison your mind, check out an earlier article in the WSJ ($).
Big layoffs at Countrywide?
Once upon a time you dressed so fine
You threw the bums a dime in your prime, didn't you?
People'd call, say, "Beware doll, you're bound to fall"
You thought they were all kiddin' you
You used to laugh about
Everybody that was hangin' out
Now you don't talk so loud
Now you don't seem so proud
About having to be scrounging for your next meal.
In March 2006, they reached what they thought were final terms for the [$54,000] loan: $5,000 down, a 7.75 percent interest rate, fixed for two years and then adjustable for the remaining 28 years, with a cap of 14.75 percent.
The $429 mortgage payments would be higher than they expected, but still within their budget -- equal to less than one week of Steve's salary with CVS. Plus, it was still cheaper than their $700-a-month rent in a suburb of Boston.
Then, on April 20, two weeks before the May 3 closing date, they said they got mortgage documents in the mail with a letter that said they should sign all the papers and return them as soon as possible.
But they quickly noticed the final contract listed a higher interest rate of 12.125 percent, with a cap of 19.125 percent. That pushed the monthly mortgage payments up more than $200 to $692 a month.
"We both said, 'Oh my God!' and started reading page by page," recalled Steve Love.
They called Countrywide and talked to several representatives who told them "that the fluctuating market went up and investors had asked for a higher percentage rate on the loans, and this was the best they could do," he said.
... the couple said they discussed a workout program with the Countrywide representatives that included either reducing their monthly payment or working out a new loan, but each time they were told no and that they had to make their monthly payment or risk losing their home.
"Their view is, 'Pay up or die,'" Donna Love said.
19% is the best loan available at the height of the easy-money bubble in 2006 for a small loan with 10% down and solid income? I don't think so. Countrywide is a bunch of lying loan sharks out to squeeze every penny they can out of the working class.
HT: Calculated Risk.
Countrywide Financial Corp named Jess Lederman as chief risk officer on Tuesday, as the largest U.S. mortgage lender confronts a slumping housing market.Ha! So the guy responsible for the promotion of ARMs, option ARMs, and other bad products that are now cratering in CFC's portfolio is now the guy in charge of "risk."
Lederman joined Countrywide in 2005, and was most recently managing director of products and pricing.
You can't say the Ooompa Loompa doesn't have an ironic sense of humor!
HT: Housing Panic.
A pregnant woman has been told that her baby will be taken from her at birth because she is deemed capable of "emotional abuse", even though psychiatrists treating her say there is no evidence to suggest that she will harm her child in any way.
Many viewers of pornography find the facial to be the most satisfying, arousing, erotic and exciting portion of the film. Accordingly, many seasoned porn viewers specifically fast-forward to this portion of the film.
Over the last 18 months, the Egglestons have watched one house after another on their street, Gardenview Drive, end up foreclosed and vacant. Although lawns are still tidy and empty homes are not boarded up and stripped as they are in inner-city Cleveland, the Egglestons say Maple Heights no longer feels safe after dark. Nor do they have the confidence they had when they moved in a decade ago that this is the ideal place to raise their 6-year-old twin girls, Sydney and Shelby.
The Countrywide-specific stuff starts on the second page:
If foreclosures ultimately harm underlying property values and cause losses to both lender and borrower, why are they still so prevalent?
“Some lenders understand; others don’t,” Mr. Seifert says. “Countrywide doesn’t.” Out of 120 recent mortgages cases with Countrywide, Mr. Seifert says, 15 have resulted in work-out deals, only two of which he said were “very good.”
One of those loans belonged to Audrey Sweet, a Maple Heights resident and a first-time home buyer who borrowed $118,000 from Countrywide in late 2004 without putting any money down. Because of Mrs. Sweet’s poor credit history and lack of assets, the adjustable loan’s rate was 10.25 percent, but she says she was told that if the couple “just proved themselves,” they could quickly refinance at a lower rate.
Mrs. Sweet says Countrywide advised her that the monthly property tax bill would be $100, but it turned out to be $230 and the Sweets quickly fell behind. Countrywide stepped in and paid $3,493 in back taxes in March 2007, and the next month raised the Sweets’ monthly mortgage bill to $1,713 from $1,055.
For a page dedicated to this portfolio, visit Zeke's Porch.
"Something's wrong here,'' Leamer wrote in a paper presented to a conference in Jackson Hole, Wyoming, attended by Chairman Ben S. Bernanke and other Fed officials. "Housing is the most important sector in our economic recessions, and any attempt to control the business cycle needs to focus especially on residential investment.''
Housing is vulnerable to ``persistent'' trends that, once under way, are difficult to restrain, Leamer wrote. The Fed ought to have raised interest rates more aggressively to head off the "bubble'' in home prices that grew from 2003 to 2005 and should have lowered rates by now, he said.
Leamer said in an interview today at Jackson Hole that some former "hot markets,'' such as pockets of California, may see declines of 30 percent to 40 percent.
He added that there's "very little possibility that a rate cut would make much of a difference'' at this point. "Once the wave has peaked and is crashing, there is not much that can be done to quiet the waters.''
A bigger economic upheaval, Mr. Levy says, "isn't about foreclosures," which are making the headlines now, "it's about the spending behavior of those who aren't going to lose homes but have seen their wealth evaporate." Either they don't have as much home equity to borrow against, he says, or they are afraid to spend as they watch the value of their home decline.
Making matters worse, he says, the first baby boomers turn 62 years old next year. They will be retiring soon and may want to sell their homes to downsize. As long as home prices remain at such lofty levels, California could have a hard time recruiting replacements who like the idea of homeownership, especially first-time buyers. "That's where this hits the economy," Mr. Levy says. "It will be hard to attract new people and firms to the state," which has seen a slow net migration in recent years.
Why should non-Californians care about the California housing market, especially when the S&P/Case-Shiller Home Price Index shows year-over-year increases in such cities as Charlotte, N.C., Portland, Ore., and Seattle? Because the Golden State accounts for 13% of the country's gross domestic product -- or the total value of all goods and services produced -- nearly double the No. 2 contributor, New York. That means that what happens in California, home to such growth industries as high-tech, biotech, venture capital and film, doesn't necessarily stay in California. The impact of slow economic growth, or even recession, in the state will ripple through the rest of the country.