45-15.4=0

That's the latest fantasy budget proposal. it is getting hard to keep track. This one from the Governors office. Facing a deficit of $45b he is proposing $15.4 billion in spending cuts. The rest? well there's this idea that the citizens will vote for a 1.5% increase in the sales tax and other increases. Oh and that sales tax on goods? Well apparently they found a lawyer who imagines that aplies to goods AND SERVICES. Good luck with that as well.

Mien Gott I Am a Misean!

Over on the Calculated Risk Blog Counterpointer read my comment:

Not to worry. i plan on owning and operating a for profit chain of reeducation camps. State funded and to big to fail of course. And at graduation rather than robes, everyone wears a tarp.

For mustard seeds this one is a doozy. Here's where he went with that bit of inspiration:

Rob Dawg's Misean Institute Local 401.

Core curriculum : Term One

1. Household Balance Sheets : An Introduction to Penury

2. How Wall St Ate Your Retirement

3. How to Spot Financial Advisory Fraud : The Mouth Moves

4. Mid-term Debate : Keynes, Friedman And how to Hose the Future

5. Rethinking Grandchildren : Basic Costings

6. Survival Mandarin, Part 1

7. Zen and the Art of Hummer Maintenance

8. Fieldtrip to the Fed : BYO Small Arms

9. Why Dark Pool Trading is Not Your Friend

10. Countdown to a COMEX Bust : Probabilistic Modeling and You

11. U6 and the New Leisure Society

12. End of Term Asssignment : Where did the TARP Funds Go?

Term 2 : Applied Course TBA

Rob Dawg's Misean Institute Local 401:

Semester II : Applied Curriculum - Building on the Lessons of Semester I

1. Do You Look Good In Orange? A Wall Streeter's Guide to Gitmo

2. Living With Gruel : An Update

3. Introduction to the New Nutrition : Squirrels And Their Many Uses

4. Super UNsize Me : Homilies on CDSs

5. Tort Refresher : The Value of the Paper It's Written On

6. Mid-term Roundtable : Squashing the Long Bond Yield, a Discussion with Guest Experts Dryfly, Bondgirl, and Jansen.

7. Applied Baltic Dry Studies : Term Paper The Long Trail from the ASX to US Manufacturing

8. Poverty in Context : Comparing North Carolina and Sierra Leone After the Rebellions

9. And Not a Drop to Pump : Oil Supply Distortions and the Case of Georgia

10. We are All Iceland Now : Historical Perspectives on Iceland, the Pound, and the Swiss Collapse of 2009

11. The Fundamentals of the Bailout Are Strong : TARPs, TALFs and Why Five-letter Acronyms are an Excellent Short Position

12. Final Paper : It Could Never Happen Here. Discuss.

Semester 3 : Working Professionals' Core Course, tba.

Rob Dawg's Misean Institute Local 401

Semester Three : Applying All We Have Learned

1. Do You Look Good In Orange II? Rectal Care and Maintenance in Challenging Environments

2. Guest VC Commentator : Neutron Bernie from the US Virgin Islands on Booking and Busting $50b, "You have to start from zero to get back to zero".

3. Headline Writers Are Morons : Bloomberg Edition. Discuss.

4. The IMF Is Back In Business : Streamlined Conditionality and the New Endocolonialism, with Brad Setser

5. The Anglos do the Slavs, Again : The Eastern European Bust of 2008

6. Mid-term Debate : The Austrian School and the Psychopathology Of Market Fundamentalism, Deflation Case Studies

7. To Build a Better Oligarchy, an American View

8. State Failure: When the State Is Your State, A Presentation from the Center for Budget and Policy Priorities, with Q&A and vodka cash-bar

9. Introductory Air Movements and Convoy Behavior : Looking Out For Ourselves And Applied Tinfoil Techniques

10. Tamade! Ni Shuo Shenme!?? Further Guidance on Cross-cultural Negotiation Tactics.

11. Spontaneously Arising Leadership : So the Syndicalists Had a Point?

12. Term paper : How It Will Never Happen Again. Open Discussion.

The Curriculum Board makes no undertakings that course Participants will either learn or activate the learning imparted. Past returns are no guarantee of future results.

You have been duly warned...
----
Enjoy. Leave praise in the comments.

The Original Meaning

The scribes have confirmed this joyous occasion. The days are no longer getting shorter. The Earth will indeed be reborn and not slip into that dark night.

Wishing everyone a solemn Alban Arthan as we honor the souls of the trees we sacrifice then deify in our living rooms. Hang the revered kerm-oak, drink the blessed wassail. "Yule" feel so much better. The Norse had the right idea taking 12 days for Jole.

Oh and for all you recent religion adoptees a translation: Christmas, Christmas Trees, holly, sacramental wine and the 12 days of Christmas.

Changing the name makes little difference; Merry Christmas.


Al Gore has a special message for you.

Bountiful Season

Riverpunk'd

Just a quick post while I get the ever growing MAXfest organized.

California Municipal bonds are getting slammed. Here's a new one:
Rio Elementary
So what? A poorly performing school district needs money. Well look at the details.
Maturity 9/1/2028
RIO CALIF ELEM SCH DIST CMNTY
Coupon 5.120%
Yield 11.000%
Price $53.07
Call date 9/1/2012
Call Price $102.00

The reason they need the money? They built a shiny new poly-million dollar school and administrative complex to support Riverpark. Gee, ya think this is gonna end well? And as a side note; 11% double tax free is a more than 19% taxable equivalent.

The New Zero Down

Hat tip Akubi.

Remember how well 0% down worked for housing? Let's try it again this time with public works.

From McClatchy:

States, for instance, usually must provide a 20 percent match to receive federal money for transportation projects. Now, though, state officials and others are trying to get the requirement waived for a stimulus bill. And with more than 40 states projecting budget deficits in the next two years, that request is finding sympathy on Capitol Hill.

Any guesses which types of "transportation" projects will get pushed with 100% funding. Yup, the least justified, otherwise known as transit boondoggles. Just ask Boulder about their light rail. Their Regional Transportation District announced the cost to build the system by its 2017 deadline would be $7.9 billion -- up from $4.7 billion. Skyrocketing prices for materials and declining revenue from RTD's 1 cent sales tax were blamed. Don't you love it? Declining revenues blamed for cost over runs.

$41.8 Billion and Counting

Unfreakin' believable. This is how Prop 13 was first passed.

The Democrats circumvented Republicans through a number of novel maneuvers that take advantage of the legal difference difference between taxes and fees and skirt the need for a two-thirds vote of the Legislature, which is normally required for tax hikes. A two-thirds vote would require some Republican support, but GOP lawmakers have vowed not to raise taxes. On the floors of the Senate and Assembly, Republicans said the Democrats showed contempt for voters and an unprecedented subversion of California's Constitution.

LATimes has the rest.

Let me tell you what's going to happen. Within two weeks an initiative will be circulating that amends the Constitution to reclassify "fees" as taxes and it will pass with 85% approval. That's an ungovernable situation but that won't matter bu then.

Falling knives.

Ventura County:
2007: 516 $521,250
2008: 729 $355,000 -31.90%

31.90% year over year. Who in their right mind bought in Nov 2006? We know the people who couldn't afford $630,000 a year previous. DQNews has the details.

$166,250 over 12 months. Worse, the median home is smaller. $13,000 per month is more than $400 per day in lost equity in addition to payments of at least $200 per day. Just what does $600/day buy you? The world renowned Ojai Valley Spa is only $300/night.

Falling knives.

Ventura 516 729 41.30% $521,250 $355,000 -31.90%

Smoking Gun

NEW YORK, Dec 16 (Reuters) - Maurice "Hank" Greenberg, former American International Group (AIG.N: Quote, Profile, Research, Stock Buzz) boss, has questioned whether the troubled insurance company sold securities to the Federal Reserve Bank of New York fund at a higher price than they were marked on the insurer's books.

See the Reuters article.
The money is gone.

$40 bu-bu-bu-billion

And it turns out it wasn't only people who have been caught naked as the tide goes out. The next 18 months are now looking at a $40b deficit. That's now officially in my likely default territory. I wasn't expecting these dire 2009-2010 numbers until May when the tax receipts are counted. Not that this bad news has had the slightest impact on our dear leaders in Sacramento.

"But the cuts would be so deep as to be politically lethal even for (lawmakers) who think they are in districts that are safe."

This from SFGate story:
Budget crisis may lead to $40 billion deficit

Matthew Yi, Chronicle Sacramento Bureau
Sunday, December 14, 2008
(12-14) 04:00 PST Sacramento --

California is bleeding so much money that without a sweeping fix, the state's budget deficit will reach an unprecedented $40 billion in the next 18 months, a huge gap that many officials agree can't be bridged without increasing tax revenue.

But Republican state lawmakers, ...

But what? Do I have to spell it out? The Republicans don't want to accept any new taxes until the cuts are made first. This because they know that any new money would go where the Democrats want not to balancing the budget.

And belated congratulations to Tony Strickland for earning the local State Senate seat. The repercussions will be national.

$40 billion is more than $1100 per person and we know that by the time we exempt the children and the poor and the illegals there won't be many left to bleed.

Californicated

California November revenue $1.3 billion below estimate
Wed Dec 10, 2008 9:22am EST
By Jim Christie

SAN FRANCISCO (Reuters) - California's general fund revenues in November were $1.3 billion, or 18.5 percent, below expectations, suggesting the government of the most populous U.S. state could run out of money as early as February, State Controller John Chiang said on Tuesday.

The government of California, the world's eighth-largest economy, must contend with a $28 billion combined shortfall for the remainder of its current fiscal year and its next fiscal year, which runs from July.

Read the rest of the obituary at Reuters.

Understand this is an unexpected revenue shortfall below the already downward revised projections that were leading to a $28 billion deficit. Wait until they see what a -30% stock market will do to their income tax coffers.

Blog note: there's nothing wrong with your screen. The snow is my global warming indicator in anticipation of a massive coldfront sweeping down on SoCal. We could get snow.

The Gnome of Berkeley

Long time readers know I have little tolerance for ivory tower liberals. Actually I have little tolerance for ivory tower conservatives as well but they at least have kept their numbers under control. However in the spirit of the blind squirrel credit is due Robert Reich for his comments on Populist Backlash. Normally Reich spends his days bemoaning inequality and suggesting ways for government to impose equality of the lowest common denominator. Handicapper General, Diana Moon Glampers would blanche at some of his ideas for imposing equality. He then spends the rest of his time attempting to rewrite the history of the Clinton Administration with emphasis on his influence on their tremendous economic successes. Despite the obvious intellectual burden of these pursuits he has managed to find the time to either plagarize from the archives of EN or stumble upon the now blindingly obvious:

These Americans aren't revolutionaries. To the contrary, they're deeply conservative. They've worked hard, but their hard work hasn't paid off. Some have tried to save, only to see their savings disappear. They're worried about the future and about their kids' futures. They never expected anything like this.

This is the angry soil in which populist backlashes can take root.

Indeed. Of course he has it all backwards with respect to solutions; more government and more debt but at least he admits that the more debt and more government to date has been ineffective. That brings up the thing that bugs me most about Keynesians. No matter the size of the failure they will always fall back on the excuse that no matter what was done if only a little more had been attempted then it would have succeeded. And that is my prediction for these bailouts.

Signs of Winter

Mountain High is a SoCal ski area about 90 minutes from Los Angeles. In years past these season tickets would sell out in hours. That was then.

Obamster Gives Us the News

more animals

Putting Out Fires With Gasoline

A little weekend Rock Blogging:

See these arrows so green
I can sell off a thousand points
Colder than the pits
It's been so long

And we've been putting out fire
With gasoline

See these arrows so red
Red like jungle burning bright
Those who feel me near
Pull the blinds and change their minds
It's been so long

Still this pulsing market
A plague I call a heartbeat
Just be still with me
You wouldn't believe what I've been thru
You've been so long
Well it's been so long

And we've been putting out the fire with gasoline
Putting out the fire
With gasoline

See these tears so blue
A busted short that can never mend
These tears can never dry
A judgement made can never bend
...

Bonds, Gamed Bonds

Nice chart courtesy INO.com

Hopefully by now readers know bubble when they see one. This one however is going to be particularly damaging when it pops. It isn't so much that long bond holders are going to get screwed, no the real problem is that the US won't be able to borrow long for generations.

And who do we know that needs to borrow? California, New Jersey Mionnesota and oh yes,.. home buyers.

Tesla v. Tesla

Nikola Tesla versus Tesla Motors that is.

The sordid details of Tesla Motors hat in hand is at the NYTimes.

The company is requesting $400 million in low-interest federal loans as part of the $25 billion loan package for the auto industry passed by Congress last year.
The program is intended to encourage automakers to improve fuel efficiency, but should it be used for a purpose like this, as the 2008 Bailout of Very, Very High-Net-Worth Individuals Who Invested in Tesla Motors Act? Can you conceive any way that federal dollars could be put at greater risk — and for no equity in return, keep in mind — to benefit fewer people?

I just imagine their namesake rolling in his grave at the idea of becoming a vassal of the government.

Extra-Constitutionality

Governor: The powers given to the governor include the coordination of the state emergency plan and programs to mitigate the effects of an emergency, and authority to suspend statutes, commandeer private property and personnel, and cooperate with federal agencies (Cal. Gov’t Code §8565 et seq.). The governor has
complete authority over agencies and the right to exercise police power (Cal. Gov’t Code §8627 et seq.). Also, the governor may make expenditures “from any fund legally available” to deal with emergencies and accept services, equipment, and
supplies (Cal. Gov’t Code §8645 et seq.). Additional powers of the governor in a state of emergency are enumerated in the statute (Cal. Gov’t Code §8654). During state of war emergency the governor exercises complete authority over all agencies and the right to designate all police powers in designated areas. (Cal. Gov’t Code §8620)

Schwarzenegger declares emergency
SACRAMENTO, Calif. (AP) -- Gov. Arnold Schwarzenegger declared a fiscal emergency Monday and called lawmakers into a special session to address California's $11.2 billion deficit.

The state's revenue gap is expected to hit $28 billion over the next 19 months without bold action. The emergency declaration authorizes the governor and lawmakers to change the existing budget within 45 days.

The state is likely to run out of cash in February.

Got that? Some weird new power called "fiscal emergency." That's covered by Prop 58:

...the Governor may issue a proclamation declaring a fiscal emergency and shall thereupon cause the Legislature to assemble in special session for this purpose. The proclamation shall identify the nature of the fiscal emergency and shall be submitted by the Governor to the Legislature, accompanied by proposed legislation to address the fiscal emergency.
(2) If the Legislature fails to pass and send to the Governor a bill or bills to address the fiscal emergency by the 45th day following the issuance of the proclamation, the Legislature may not act on any other bill, nor may the Legislature adjourn for a joint recess, until that bill or those bills have been passed and sent to the Governor.
(3) A bill addressing the fiscal emergency declared pursuant to this section shall contain a statement to that effect.

Okay, so they can't pass any extra stuff. BFD. Here's where it gets interesting:

...the Legislature may not send to the Governor for consideration, nor may the Governor sign into law, a budget bill that would appropriate from the General Fund, for that fiscal year, a total amount that, when combined with all appropriations from
the General Fund for that fiscal year made as of the date of the budget bill's passage, and the amount of any General Fund moneys transferred to the Budget Stabilization Account for that fiscal year pursuant to Section 20 of Article XVI, exceeds General Fund revenues for that fiscal year estimated as of the date of the budget bill's passage. That estimate of General Fund revenues shall be set forth in the budget bill passed by the Legislature.

Any bets that part gets ignored? Really. Now that the Governor has declared a fiscal emergency; no more bills that cost money. Yeah, right. Silly Constitutional stuff is for other people not our fine Legislature.

Tanta Passes

Tanta, indefatigable blooger of CR infamy has lost her battle with cancer. Please visit CR and leave a thought.

A garage fire displaced 20 people from an Oxnard home and early this morning, authorities said.

The fire was reported about 1:30 a.m. in a home in the 4700 block of Reeder Avenue.

When firefighters arrived, they found the home filled with smoke and the attached garage engulfed in flames, the Oxnard Fire Department reported in a prepared statement.

All 20 residents of the home were able to get out on their own. Eight of them, including five children under the age of 7, were transported to St. John’s Regional Medical Center in Oxnard with symptoms of smoke inhalation.
----
Anybody thinking a collapse in the new home construction market means we won't have enough houses?

Greg Swann Just Can't Stop

Screaming Opportunity! Greg Swann is at it again. This time he lays hands, declares the Phoenix market stable and it is now a good time to buy and hold.
Ubiquicert™:

I prepared a spreadsheet on a typical $100,000 property. This is a real property, really for sale right now for $100,000. I took the closing costs as a discount from the seller, but the property is in a subdivision with a community pool, so the HOA fee is fairly high. We’re getting a home in a booming, freeway-convenient suburb — built in 2002, stucco walls, all-tile roof, 1,614sf, 3 bedrooms, 2 baths, 2-car garage on a 7,032sf lot....
How does the home pencil out? Before taxes (and ignoring any accelerated depreciation), the home should throw off around $1,300 a year in positive cash flow. After taxes, you’ll be closer to $1,800 a year. That’s not the riches of Croesus, but the property should pay for all of its costs the entire time you own it. Even assuming our relatively anemic 4% appreciation rate, your initial $30,000 investment could grow to around $58,000 in eight years.

And if you assume the reality of -4% per month like earlier this year? Even 8 years of only -4% per year and you'll need to bring a check to the closing.

There's a reason he's selling these and not buying them for himself.

Greg Swann Just Can't Help Himself

There's arrogant certitude and then there's Greg. Check out his latest bit of hubris:

When will the Phoenix real estate market finally hit bottom?

Believe it or not, I can answer that question with a high degree of precision: When the number of homes being added to the available inventory each month is generally lower than the number of homes sold each month.
...
Buy and hold? No problem. Profit on resale? Don’t bet on it, not for a while.

Got that? He still thinks it is a good time to buy!

Read Exurban Nation Then Run The Story

The backlog of autos at the Ports of Long Beach and Los Angeles have been making the news. Readers here have heard the same is happening at Port of Hueneme (why-knee-me). Obviously the local fishwrap has been scouring the blogs because they've finally gotten around to reporting. Ventura County Star:

The Port of Hueneme has built a substantial business as a West Coast destination for several auto manufacturers, with about 254,000 vehicles rolled off ships every year.

However, the port has suffered along with the auto industry. Imports fell 26 percent in the first quarter of the new fiscal year that began July 1, declining to 39,106 from 53,120 for the same quarter the previous year.

The vehicles Global Auto processes include Hyundai, Kia, GM and Saab.

Wait until ships are turned away and things get real interesting.

They Didn't Get The Memo

Custom Spanish Style Equestrian Estate In Malibu!
Year Built 2001
Sq Footage 3,878

Yet another WTF moment. Horse paddocks in the boonies aren't $5m. The current owners are paying taxes on a long ago purchase far below $1m and the listing describes a bullsh¡t 2001 construction date.

Let's just rename Malibu, South Oxnard and get on with the recession shall we?

Saw this Coming

I've got mixed reactions to this one. Daily Mail.

Recording a verdict of suicide, Deputy Central Hampshire Simon Burge said Mr Phyall had killed himself in a bid to 'make a statement'.

He said: 'The scene was clearly an appalling one.

'In the 15 years I have been sitting as deputy coroner it is the most bizarre case I have seen.

'Mr Phyall had thought through how he was going to commit suicide very carefully - he went to a great deal of trouble to rig up the chainsaw knowing full well the result would be fatal.

'It was death in the most dramatic way imaginable.

'I find he did so to draw attention to the injustice he felt at being asked to move out of his flat.'

And to think I was reluctant to send strongly worded letters to bad tenants. Regardless, the question remains as to just how clever a tenant who didn't want to leave was. Too clever... wait for it... by half? [groan]

World's Smartest Investor

It is easy to swoop down on the injured. For that I apologize. In my defense I've been critical of Buffet's insurance and banking decisions for a long time. What happened today?

Buffet has been very wrong for two years and in the last few months have burst the cult of personality bubble.

Banks are bad investments.
Re-insurers are bad investments.
And...
Home builders are bad investments.

Remember however; the unspoken caveat. "Just now."

Happy Daze

Events have been driving outlook here for far longer than I would have wished. I wanted to peek my head out in October and see my shadow. No luck. Worse,every time I turn around another dope slap moment knocks me back. This time it was my local FedEX. Great place; nearby, parking, competent staff. I stopped in without enough info to pre-delivery pick up a package the web told me was sitting there. Normally they'd be too busy to look without the tracking number. Toady; dead. D-e-a-d. The only people to come in were looking for jobs. They were told there was no season hiring. The counter guy implied that was best case. This time of year a week before Thanksgiving it should have been a Chinese fire drill with packages bulging out into the lobby. D-e-a-d.

I'm posting on the local fishwrap website concerning the latest Dataquick report:

"Posted by greengamer: Bought my house in January of '07 for $525k. Just checked the estimated value, $410k."

Not bloody likely. Zillow has been consistently 10-20% too high for more than a year. $525k in Jan ''07 was a tad below the median. The new median is $375k so you are looking at $350k maybe.

" I'm not happy. 28 years old and living check to check to pay for this house."

And? No, seriously, AND? Did you file a police report about the gun that was held to your head when you bought 6 months after the bubble burst?

"Has nothing to do with getting into a loan that wasn't right for me."

Sure it does. 20 month default is a sure sign you got the wrong loan.

"It has to do with this horrible economy."

Sniff. No, it has to do with irresponsible borrowing and lending. Unless you were making $200k/yr as a commission salesperson both you and your lender were irresponsible. Don't blame your taking an option on home price appreciation gamble on either the casino or dealer.

"I work in the sales department and commissions are my sole source of income. Someone buy something already!!!"

Wht? Your $200k/yr commissionsare cut in half and you can't meet an 80% $430k at a fixed 6.1% mortgage? Your whine doesn't even come close to passing the sniff test for credibility.

Tell you what. I'll help. Here's what we'll do. You post your 2006 income taxes and the page of the loan application where you claimed you income for 2006. If the latter is larger you can go to prison for loan fraud. If they match I'll contribute to bailing you out.

I'm pissed.

Evolution and Intelligent Design

If God had saved the dinosaurs we'd have never gotten mammals.

The Congress is playing God with the auto industry. Sadly we already know how this plays out. Britain in the 1970s tried with predictable results. Funny thing is the US has a vibrant and successful auto industry. It just isn't in Detroit or owned by Americans. Speaking of Americans:

And gosh. Who owns Land rover and Jaguar? Doesn't that tell you that there is a possible happy ending to Ford and GM?

Changes for Casey

Itsallgod™. A few "vitamins, a few shots of green "juice" and a new wardrobe. We've already noted the lifestyle, body and hair changes. No wonder the marriage failed. At least now Casey... ummm. Katrina has figured out how to get someone to clean out his/her pool.

Channeling Tanta

While Tanta is hopefully recovering someone has to keep kicking away with the pink bunny slippers of certitude.

"Poor Gretchen" is at it again.

A Rescue Plan Without Taxpayer Money
By GRETCHEN MORGENSON
Published: November 15, 2008
HELLO, taxpayers. Worried about the fate of the $350 billion that the government has asked you to fork over so far to help rescue financiers from themselves?

Ubiquicert:

One interesting idea was conceived by two veteran investment managers, Thomas H. Patrick, co-founder of New Vernon Capital, and Mac Taylor, a principal of the Verum Capital Group.

They propose refinancing all $1.1 trillion of the loans in securitization pools that are still performing but that may soon face punishing interest rate resets. Homeowners whose loans are in these pools would receive newly issued loans with fixed interest rates, currently 6.14 percent, and 30-year terms. Under this plan, Fannie Mae and Freddie Mac would issue debt to pay off the outstanding principal on the loans and then guarantee the new ones.

Voilà: Investors who own the underlying interests in the mortgages would be fully repaid and the securitizations would be closed out.

----
All I can say is "Poor Gretchen."
Expanding commentary:
First, it should be obvious that Patrick & Taylor are talking their book.

Second, if the loans are "performing" what is the problem? The problem is that they won't be performing and will need to be marked down. That's why they are desperate to get rid of them while still performing at performing prices.

Third, the theory of Net Present Value (NPV). If you have $1.1 trillion of soon to be prevailing rate mortgages and propose replacing them with below fixed prime borrower loans what is the hit to their value. Verum Capital Group is implying that the default rate reduction will balance out the effective NPV reduction. Fine, why involve Fannie & Freddie? Do it yourself dammit.

Fourth, F&F have already admitted to needed essentially perpetual life support. They can't issue new debt.


CR & Tanta on their world blogging tour.

The OC Ain't So Stoopid

Lanser on Real Estate has an interesting poll. Orange County is infamous for its parts in the historic housing bubble and while the OC Register was asleep at the switch they are playing catch-up. Here's the poll they are running:
"Tell Obama, ‘Best fix for real estate is …’


* Cheaper mortgages
76 10% of all votes
* Getting lenders to lend
64 8% of all votes
* Tax credits for 1st-time buyers
32 4% of all votes
* Foreclosure moratorium
33 4% of all votes
* Get overall economy healthy
132 18% of all votes
* Zippo. Market needs to fix itself.
416 55% of all votes

Total Votes: 753 Started: November 10, 2008
----

Everything comes with a cost. I've yet to see any evidence that benefits of meddling exceed the costs.

WTF Were They Thinking?

View Larger Map
This is the neighborhood that is burning. The firefighters can't even triage in these conditions. High density stick housing surrounded on all three sides by fire terrain. Of course it was going to burn.

Billion Dollar Fire

The Montecito fire is still being whipped by 40-50 mph gusts.

"I saw $15 million in houses burn, without a doubt," Santa Barbara evacuee Tom Bain said. "They were just blowing up. It was really, intensely hot."

Image and quote Ventura Star.
And why such an expensive fire? Here, look at the typical zillow values in the neighborhood currently burning:

Clue

The bald man, in the marketplace with a TARP.

He did it.

CalPERS Drip Drip Drip...

Rather than admit that they are as screwed as the rest of California CalPERS has decided to go the full Clinton and dribble the bad news out until we die of boredom. Here is today's tidbit:

This $3.2 billion reduction represents a 35 percent decline in market value of the CalPERS housing portfolio.

Now the "housing portfolio" was less than 5 percent of the entire asset base but come on, 35%?

Casey's Goldbug Bites Back

So just how has Goldspring been doing since Casey was bragging about hiz mad investing skillz? Closed below 1.8¢ today. His 2.2 million shares were worth $132,000 in August and are worth $39,000 today. The Midas touch in reverse.

California Deficit Now $27.8 Billion

Finally, the truth. The California Legislative Analysts Office just discovered what EN readers have known since May. California is screwed. Excerpt:

State Faces $27.8 Billion Shortfall. We concur with the administration’s assessment that the state’s struggling economy signals a major reduction in expected revenues. Combined with rising state expenses, we project that the state will need $27.8 billion in budget solutions over the next 20 months.

Long–Term Outlook Similarly Bleak. The state’s revenue collapse is so dramatic and the underlying economic factors are so weak that we forecast huge budget shortfalls through 2013–14 absent corrective action. From 2010–11 through 2013–14, we project annual shortfalls that are consistently in the range of $22 billion, as shown below.

HTML Overview

September revenue data, for example, revealed a major shortfall in estimated payments for both the personal income tax (–10 percent) and corporate tax (–22 percent). The weakness in estimated payments, along with a $200 million shortfall in September sales and use tax receipts, resulted in revenues from the “Big 3” taxes falling almost $1 billion short of budget estimates for the month.

$28.7 billion is $800 per person. There just isn't any more money to grab and unemployment will be solidly over 8% by the end of the year.

Call the COPs

COPs are "certificates of participation." Some agencies call them revenue anticipation notes or some such. The idea is to get money upfront when you have identified a revenue stream. They aren't necessarially bad but what's going on in Riverside County is pure abuse.

The COPs are being issued to refinance the county's 2007 series B auction rate certificates and to fund a cash funded reserve fund. The certificates were originally issued in 2007 to finance a portion of an 800 MHz public safety radio communications system and to refinance outstanding 1997 COPs. The COPs are secured by lease payments made by the county for use and occupancy of the County Administrative Center and several facilities financed with the 1997 COPs. Once completed, the project may be substituted into the lease. Lease provisions are standard and typical of California leases, including two years of rental interruption insurance. To date, the project is proceeding on budget.

Got that? Rolling over 11 year old debt and adding to a cash reserve fund. What would Suze Orman say?

The quote from a Marketwatch article last month announcing a Fitch downgrade. I expect wholesale California multi notch downgrades by the time the Legislature finishes their emergency session.

96 Days Until the Election

Yes, you read that right. March 3rd 2009. And it is shaping up to be a doozy. First up will be the "proposal" to raise the sales tax by 1.5% for three years to "balance" the budget. As the wish list for the ballot rolls in I'll post updates but this one alone has got to go down in history as the hail mary desperation play of all time.

Fishwrap

Coupla related stories from the local birdcage liner:
Daily newspapers see sharp 4.6 percent drop in circulation

By Anick Jesdanun, AP business writer
Thursday, October 30, 2008

NEW YORK — Circulation at the nation's daily newspapers is falling faster than anticipated this year as readers continue their migration to the Internet and papers narrow their distribution to cut costs.

And:
Star reduces workforce

Updated 04:30 p.m., November 6, 2008

We streamlined the organization to counteract the effects of the current economic downturn and its impact on our advertising revenue," Cogswell said.

Analysis:
Gee, I'll have to bring my immense cognitive skills to this one. Falling circulation and falling advertising revenue. Shame that there was that firewall between the reportage and advertising otherwise the paper could have realized that auto and real estate ads are not a sustainable business model. Truth be told we get both The Star and the LA Times. Mrs. Dawg is a wicked coupon clipper and I love the weekly Fry's ad.

Severe

CBSNews has an interview with Alan Greenspan:

The former Fed chairman said early data for October show the GDP in a severe contraction that could top a 3 percent annual rate of decline.

I keep looking for even some evidence that the rate of implosion isn't accelerating.

Ventura County CA $598,000

OFHEO has the new conforming mortgage rates for November. $598,000 is 80% of $747,500. The home price slinky is about to snap back with a vengeance. Jumbo mortgages are too expensive so unless you are putting a lot down $598,000 won't buy most of the houses here.

Enjoy the slinky outfit as you toast Franklin Bank of Houston and Security Pacific (Los Angeles) on this BFF (Bank Failure Friday).

Arnie Shakes Down the Elderly

Prop 13 under attack and services that the elderly use. nothing escapes his grip.

What Is It About 8800?

Decisions, decisions and the market indecision. There is no good news. None, I've looked for it. The closest we've got to good news is that oil prices are fairly valued. Unfortunately that has the perverse effect in suppressing new vehicle demand as substitution to higher mileage vehicles is less beneficial. As to the stock market; P/E is again overvalued as the E denominator gets crushed. We had a brief foray below 8800 only to return and then a brief foray to well above only to return. Will we walk this ledge for a while? That's been my guess but now Iadd that I see no viable upside only downside.

USSA

Obama's plan.

Alright Already Obama 354

I've said elsewhere that we'll know with Pennsylvania and Virginia. Penn is must win for McCain and too close to call is enough to cinch it for the Big O with the Big Mo. Virginia just needs to go McCain by any margin. That means we are likely to have the election called 8:05 Pacific. Senate +6, House +24. America 0. The graphic is pretty close to my call from Electoral-Vote.