With the market turmoil and people actually selling-off last week, I feared reality and rationality had set in and I would be stuck with this bridge forever. But today on minmal good news the markets are back to the races - up 3% - and I think I have a lock on getting this sucker sold. If I look around I might even have two or three other bridges laying around to off-laod. Let me know if you are interested.
There is a reason no one is lending to builders - shhh, don't tell the government no one is buying other than those taking advantage of the tax credit
If you have a "viable" building project as a home builder, the government has a loan for you. I am not certain what they define as "viable" but I am pretty sure they have set the bar pretty damn low. I am thinking viable simply means the houses will stand once they are built. The point being, of course, that in the housing arena "build it and they will come" is not a good motto to live buy, even if the government is willing to lend you the money. It is a loan, after all. Yet I am sure some builders in desperation will take it thinking that by the time they finish construction there will be someone around to buy what they are building. As the author of Calculated Risk points out, however, they would be ignoring the existing inventory - not to mention the shadow inventory, as in all those people who wanted to sell, or banks with REO who wanted to sell, but who have been holding off waiting for the market to stabilize or improve. I have seen a lot of new houses hitting the market this year in my area, undoubtedly due to the economy (reportedly) doing better. We will see how much better housing is now the housing tax credit is gone and most other stimulus wanes in the third and fourth quarter of this year. Personally, my house just appraised for 5% less than 9 months ago. Go figure.
http://www.calculatedriskblog.com/2010/05/housing-production-credit-crisis.html
Disclosures: None.
Thursday, May 27, 2010
Wednesday, May 26, 2010
DOW 13,000
I read a couple of months ago that some fund manager at a fund overseeing billions of dollars predicted the DOW at 13,000 by year end. (By the way, the book "DOW 30,000 by 2008" is still in stock at Amazon if you rush.) Today I read one who said the "U.S. economy is on solid footing" and another who said he was "scratching his head" on why the market is doing so poorly the past couple of weeks. Both of these individuals also work for companies managing billions of dollars, one tens of billions. And so . . . I am scratching my own head, and a few other things.
Either these fund managers are idiots who cannot be trusted with balancing their own check books or they are (perhaps) puffing a lot to keep their clients investing and the commissions coming. Either way they are serving no purpose to society in general as they are truly ignoring reality. There are plenty of reasons the market is down of late - most of which have been around for years and are getting worse, not better. Just ask those in Greece and Spain. Austerity is our future.
http://www.bloomberg.com/apps/news?pid=20601010&sid=a10kjBAhN1q4
Disclosures: None
Either these fund managers are idiots who cannot be trusted with balancing their own check books or they are (perhaps) puffing a lot to keep their clients investing and the commissions coming. Either way they are serving no purpose to society in general as they are truly ignoring reality. There are plenty of reasons the market is down of late - most of which have been around for years and are getting worse, not better. Just ask those in Greece and Spain. Austerity is our future.
http://www.bloomberg.com/apps/news?pid=20601010&sid=a10kjBAhN1q4
Disclosures: None
Sunday, May 23, 2010
You Ask Me - Things Ain't Lookin' So Good
I will not spend a lot of time repeating what I am linking here from Bloomberg, but the bottom line is that corporate bonds are selling at spreads last seen when Lehman went under. Lots of jitters in Europe.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aU1fAD2hZxd4&pos=4
I tend to think the austerity measures will not work and the EU 3% cap on public debt versus GDP is toast. Governments need to spend some money in financial crisis so caps on spending should go by the way side - though I am the first to note that government support needs to be coupled with taking down and dismantling some companies, debt restructuring and such. We need to spend the money wisely. In any event, the PIIGS are on the spit.
Not the least of the problems in the EU is the new inability of companies there to raise capital. Seems no one is buying. Everyone is hunkered down.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aOMbAJVBGXhU&pos=7
Now this is a case where fear feeds on fear because no one wants to be left holding the bag, so folks will exit the markets before logic dictates simply because they expect others to exit before logic dictates. They want to be the first to the door, not the last. And so this spiral builds upon itself.
Generations Lost
I will have more to say about this in time, but I just want to note that I am totally ashamed that I have lived the generation where we undoubtedly will, for the first time in centuries, leave the next generation worse off. There has been increasing talk in the press lately how for the first time in hundreds of years we may leave the next generation worse off than us. This takes many forms. First, due to fast food, prepared food and our inability to cook food at home, kids today are expected to live shorter lives than us. Now medical science at great cost could avoid this, but the point is that our kids will grow up less healthy than us, largely due to diet and exercise. It is no secret that kids are more obese than ever and this is in no small part due to diets. And I have to wonder to what extent our population growth may be to blame. What are now increasingly large corporate farms are growing our food - vegetables, fruit and meat - on a massive scale using new chemicals and technologies. Call me crazy but I suspect from a nutritional perspective this is not ideal. Time will tell.
Second, on the financial front, we have royally screwed our children and grandchildren and for that I am ashamed. Our debt load in the U.S. and most industrialized countries is incredible, both on a corporate and individual level. In the U.S., when you hear stats, pay attention on whether they include unfunded Social Security and Medicare obligations. If they do not, ignore them. If they do, you will realize there is no way we can fund these obligations - especially with the current economic conditions. No question but that Social Security and Medicare will either disappear or be wholly revamped lower in the next 10-20 years. Two words to the wise: (1) don't bank on Social Security or Medicare being there when you retire and (2) plan for your kids and grand kids to have to endure what we have built.
Disclosures: None.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aU1fAD2hZxd4&pos=4
I tend to think the austerity measures will not work and the EU 3% cap on public debt versus GDP is toast. Governments need to spend some money in financial crisis so caps on spending should go by the way side - though I am the first to note that government support needs to be coupled with taking down and dismantling some companies, debt restructuring and such. We need to spend the money wisely. In any event, the PIIGS are on the spit.
Not the least of the problems in the EU is the new inability of companies there to raise capital. Seems no one is buying. Everyone is hunkered down.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aOMbAJVBGXhU&pos=7
Now this is a case where fear feeds on fear because no one wants to be left holding the bag, so folks will exit the markets before logic dictates simply because they expect others to exit before logic dictates. They want to be the first to the door, not the last. And so this spiral builds upon itself.
Generations Lost
I will have more to say about this in time, but I just want to note that I am totally ashamed that I have lived the generation where we undoubtedly will, for the first time in centuries, leave the next generation worse off. There has been increasing talk in the press lately how for the first time in hundreds of years we may leave the next generation worse off than us. This takes many forms. First, due to fast food, prepared food and our inability to cook food at home, kids today are expected to live shorter lives than us. Now medical science at great cost could avoid this, but the point is that our kids will grow up less healthy than us, largely due to diet and exercise. It is no secret that kids are more obese than ever and this is in no small part due to diets. And I have to wonder to what extent our population growth may be to blame. What are now increasingly large corporate farms are growing our food - vegetables, fruit and meat - on a massive scale using new chemicals and technologies. Call me crazy but I suspect from a nutritional perspective this is not ideal. Time will tell.
Second, on the financial front, we have royally screwed our children and grandchildren and for that I am ashamed. Our debt load in the U.S. and most industrialized countries is incredible, both on a corporate and individual level. In the U.S., when you hear stats, pay attention on whether they include unfunded Social Security and Medicare obligations. If they do not, ignore them. If they do, you will realize there is no way we can fund these obligations - especially with the current economic conditions. No question but that Social Security and Medicare will either disappear or be wholly revamped lower in the next 10-20 years. Two words to the wise: (1) don't bank on Social Security or Medicare being there when you retire and (2) plan for your kids and grand kids to have to endure what we have built.
Disclosures: None.
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