Thursday, July 31, 2008

2 of 5

"What we expected and deserve:"

"What we are getting:"

Adolescent fantasies aside I am referring to the FASB ruling on off balance sheet accounting. From Bloomberg Jul 30:
FASB Postpones Off-Balance-Sheet Rule for a Year (Update1)
By Jody Shenn and Ian Katz

July 30 (Bloomberg) -- The Financial Accounting Standards Board postponed a measure, opposed by Citigroup Inc. and the securities industry, forcing banks to bring off-balance-sheet assets such as mortgages and credit-card receivables back onto their books.
The Securities Industry and Financial Markets Association and the American Securitization Forum complained that the changes, which could affect as much as $11 trillion of off-balance-sheet entities, may make companies appear short of capital to regulators and lenders.
The ``abrupt consolidation'' of off-balance-sheet structures ``is likely to swell the balance sheets of the affected entities.''
Many lenders made profits in the run-up to the subprime- mortgage crisis by selling pools of loans to off-balance-sheet trusts known as qualified special purpose entities, or QSPEs, which repackaged the pools into mortgage-backed securities. Some banks then sold those securities to other off-balance-sheet vehicles they sponsored, such as so-called asset-backed commercial paper conduits.
The off-balance-sheet entities are ``orphan trusts'' that represent ``securitization gone wild,'' he said.

Securitization gone wild? We can do that:

Unlike the FASB this time the mud being thrown isn't obscuring what is going on.

Wednesday, July 30, 2008


The best part of this disagreement is that within a year or 6 quarters at longest we'll see without question whether this time will be sticky like every time before or whether this time is different in this one respect.
- Rob Dawg | Sunday, August 27, 2006 at 20:03

For the record the “Silent Spring” is Q2 ‘06 so technically includes June but as I’ve been predicting this is not a symetrical retracement. The subheads read “falling off a cliff” and ballooning inventories and such. Every time I read another “I had no idea it would unravel so quickly” comment I feel vindicated. Next symptom; “FSBO, priced for quick sale.” I called the top of the market Oct 6th, 2005 shortly after breakfast but never said why. That’s when my $9/hr housekeeper from Nicaragua (8hrs every other week, green card) told me about her new house in Oxnard.
- Rob Dawg | January 24th, 2006 at 9:33 am

Here is the Los Angeles Case-Shiller for June (credit Westside Bubble):

Stickiness was all the last times. this time is different. Time has vindicated my position.

Tuesday, July 29, 2008

5.8 Chino Hills

This is what happens 70 miles west of the epicenter of a 5.8 earthquake. In the next aisle over they were cleaning up from a couple jars of spagetti sauce that committed suicide.

This is the autonomous report. Only 5.4 but given the depth an upgrade is likely. The 5.8 is the newswire number not that it matter that much at this point.

The only thing to worry about is aftershocks. There is a 5-10% chance of a larger quake in the next few days. The dreaded unzipping of the SoCal fault network.

Monday, July 28, 2008

Worst and Worster

Watcha lookin' at Carl?

Visit the Bakersfield Californian for the answer.
Cole, now 61, had been convicted of a crime against nature for engaging in oral sex with an 18-year-old man by a Moore County, North Carolina jury In 1988, administrative hearing and criminal court records show.

Cole was the victim’s principal, and the incident took place in his office at Big Oak Christian School, according to hearing records.

Let's keep the replies subtle and mature. Personally I'm not going after the sexual nature but the power abuse. If this is what he did with his charges imagine what he does to his real estate clients here in Ventura County.

Merrill-y We Roll Along

Merrill Lynch has just sold $30 billion of face value mortgage products for $6.7b after listing as recently as last month these same products on their books at $11b+. Terrible, terrible news and in conjunction with a 20% stock dilution and subordination for stockholders. But not to worry, all the important people were tipped off as Merrill was lower and losing all day. Trading on insider information? Hoocoodanode?

Sunday, July 27, 2008

Lease for Less

The local fish wrap is onto a big story and they don't even know it. you see the story is in the classified section for new cars. The Volvo C70 5T is a nice car. How much should a decent car cost? Forget that, how much should it lease for? Try $459/month. With $3,053 due at signing. The MSRP? Starting at $41,235. Freakin' insane. Are people actually doing this?
If I were to drive a Volvo I'd grab the V70-R on cars dot com. $10,495.

The point is what happened to new home sales then home resales and CRE has spread to transportation. The incredible demand destruction for moter fuel had me confused. The 2.4% decline was too much too fast for simple price pressure response. No, the consumer has stopped consuming. Everything.

LA Times Gives Up

And not a decade too soon.

The future of the Los Angeles Times, in print and online, rests in our ability to meet the needs of our readers and deliver news and information that is unique, far-reaching and indispensable. In-depth journalism remains our hallmark and we are committed to that mission in the face of economic challenges to our industry and our nation as a whole.

Translation; the blogosphere is eating our lunch. Alright, not just the blogosphere. I think I''ll coin a new term; The Immediate Media Cloud. The IMC for short.

Our website just recorded its biggest month ever in June with 115 million page views, a 50% increase over last year.

Translation; our paid circulation is plummeting.

Couldn't happen to a more arrogant company. Well it can and will but Microsoft is years from this kind of realization. Just like it took a decade after the Chandler family got out of the newpaper business before the Times imploded Gates' departure will eventually result in the dissolution of Mr. Softie.

And how does the LA Times plan on meeting this future?:
I deeply regret to report we will be reducing the size of our editorial staff, both print and Web, by a total of 150 positions, and reducing the number of pages we publish each week, by about 15%.
[emphasis mine]
Would you like some collar stays to go with your new spats sir?

Saturday, July 26, 2008

Repost from Feb 03, 2006

Nota Bene: Apparently there exist unbelievers in the audience. For their benefit this backgrounder from two and a half years ago, long before it was chic to blog about the bubble.
Thumbing through my copy of "The Necronomicon" (at midnight by the light of a black flame), it warns that the consequences of bringing the housing market back from the dead will be far more dangerous than letting it rot in the stygian depths to which it has fallen. The extent of those depths in the dark days ahead will not be known until the spectre of Cthulu awakens and (re)posses those things most dear to the doomed minions souls. Namely the holy speed boat, the most reverent Harley-Davidson, those objects of all desire the SUV, RV and ATV. Only then when all hope is lost and the scavengers are finished picking the bodies on the bloody battlefield clean of all that is valuable will the lamentations of the children, resigned to public schools and community college be heard. Only then as the wives cry out to the darkness, "Maui, Cancun wherefor art thou" will the true nature of the beast variously known to mere humans as the House ATM, the great equity withdrawl, the very HELOC himself so powerful that he is CAPITALIZED be revealed as a vampire sucking the lifeblood of guilty and innocent alike. Listen now, quiet, in the distance. The sound, the smell, the desperation. Those who thought an easy death, bankruptcy itself will be denied. No one gets off that easy. The laws of the gods of light and dark are no match for the US courts system. Ameriquest will eat their livers every dawn and peck out their eyes every sunset only to keep them barely alive to feed again on the morrow. And at night, where will they sleep? Not in their own beds, that's for sure.

More Nice Seattle

By request expressing curiosity about my photography hobby and a candid portrait.

Friday, July 25, 2008

Obama Psalma

The Obama is my candidate; I shall not want.
He maketh me to lie down in eco-green pastures:
He leadeth we all from across the still waters.
He restoreth my equity:
He leadeth me in the paths of progressiveness in Hope's name' sake.

Yea, though I walk through the valley of the shadow of Bush,
I will fear no Republican: For momentum art with me;
Thy internet donations and thy media, they support me.
Thou preparest an election before me in the presence of mine enemies;
Thou annointest my head with ever cheaper oil; My proposals runneth over.

Surely wealth redistribution and socialism shall follow me all the days of my life,
and I will dwell in the House of Hope forever.
For a far better take see this link courtesy of neigbor "w."

Thursday, July 24, 2008

I Like Seattle

Seattle Hubris

Man is dey eva gonna git whacked. Click the pictures for a larger view.

Seattle is starting to exhibit the classic signs of a boom bust where special circumstances let them sail right over the edge. Look at the cranes. What are they building? When will they come on line? Who will invest? ENers know the reason. And in honor of anointed future president Obama's speech this morning; Ich ein ist ENers.
Gavshire Hathaway writes on Calculated risk:
I'm sitting here in Seattle, and I'm starting to see all kinds of signs that the CRE collapse is coming. From out my window I can count about 20 cranes building office buildings and condos.

Gav is right. The first crack was when the massive 13 acre family owned downtown redevelopment fell apart this spring. The lots were amassed over decades and were collectivized June of 2007. We all know what happened to lending the next month.
Seattle Times has it.
Those pesky bloggers picked it up.
And CNN Money runs the obituary July 22, 2008.

Being the last person to drink the kool-aid means getting to digest the sediment.

Blog Note: I took those pictures last month on vacation to the region. As the most excellent RE advisor Bawldguy repeatedly harps; there ain't no substitute for feet on the ground.

Wednesday, July 23, 2008

Federal Bailout Bill

"I felt a great disturbance in the Markets, as if millions of mortgagees cried out in joy and were suddenly rescued."
―Obi-Ben Bernanke

Rob Dawg says: wealth redistribution.

Anybody got more to add?

Monday, July 21, 2008

Gentleman Squyre

The nice FarBelowMarket team has this gem:
UGLY golf course condo GORGEOUS equity HIGH rents!
286 Castellana, Palm Desert, CA, 92260 United States $289,000

Golfer's Dream More Than $100,000 below market....DESPERATE SELLER!

This unit is in a great location in the club, right on the course. It's in good condition, but ugly as sin. Needs cosmetics only. If you have an eye for design THIS ONE IS A NO BRAINER.

Look at the comps!!!! Two model matches on the same street sold over $400k. Incredible golf at one of the finest country clubs- $100k under market. ****RENTS GOING FOR $3500 to $4500 per month furnished*****
Pictures show actual unit and also a model match to show what it could look like. This model match is renting for $4500/mo furnished.....insane!
Type Bed Full Bath Square Footage
Condo 3 2 1584

However pay no attention to the beautifl view above, check out the glamorous interior:

You can see the opportunity, I mean $3500-$4500 per month? Who wouldn't? Here's the pathetice competition who will be vying for those desirable renters:

On Craigslist:

So there it is... oh wait. sorry. The price, well the second one owing to its obvious defects is available Aug 1st for the princely sum of $2395. Probably because of those extra 1700 square feet and tedious pool to clean. Oh wait, included.

Close It, Close It, Close It

Mervyn's used to advertise with the line "open, open, open..." as a desperate consumer peered in the window. In retrospect that seems a pretty pathetic segment to market to. Then again Mervyn's is in trouble because their debt window was closed on their fingers. What goes around comes around. Looking forward to the 90% off sales. Better than thrift stores. Went to the Linen'N'Things in Moorpark yesterday on the way back from the secure housing bunker. They are closing many, many stores. this particular gem was only a few years old, an anchor bookending a Target.

Neutron Strip Malls.

Sunday, July 20, 2008

Skinny People In Trouble?

We saw yesterday at Lou's place and NPR the sad story of the hungry hippos and her mom. Now today the ever entertaining if rarely accurate Gretchen Morgenson in the ever myopic forest and trees Given a Shovel, Americans Dig Deeper Into Debt via NY Times has a piece on "Diane" and her personal finance troubles.

Once again we are confronted with the same stated versus revealed preferences issue. The LA Times got bit by this on Thursday when Peter Hong reported on the "Return of The Flippers." Poor Peter was handed a story of greed, deceit and financial ruin only to run with a front page ad for a fake NRU type scam. Worse for the old stream media they haven't even gotten around to the real story yet while OCRenter has the real story.
But this isn't about that. No, this is about bad habits. The hungry hippos are on effin' food stamps! Look at them, complaining about the price of freakin' groceries. Don't give me no glandular problem or other excuses. Those are potato chips and fried chicken rolling in waves offa momma and baby.

And Diane. Please, give up smoking and YooHoos before bitchin' 'bout your other problems.

Think these young ladies are complaining about the price of Moon Pies?

Saturday, July 19, 2008

Worthless Field Poll

Useless as...

What if they did a survey and the results were so impossible the entire organization is called into question? Nothing at least as long as the "results" conform to the agenda of the commissioners of the poll.
Field Research Corporation of San Francisco, CA has just released an energy and transportation paper (small pdf file). In this comes the surprising result:
"Many motorists are employing a variety of gas saving measures, such as driving less (78%), buying lower
grades of gasoline (67%), and using their more fuel efficient vehicle (59%). Smaller proportions also say they are carpooling more (28%), employees are taking jobs closer to their home or moving closer to their worksite (28%) or adjusting work hours so they are not commuting to the worksite as often (25%). Others report having replaced a car or truck with a more fuel-efficient vehicle (27%), and 17% say they are using public transportation more."

Wow, 17%. Too bad less than 2% of all passenger trips in the State are on public transportation. If 17% of those surveyed used transit even once more ridership would more than double which isn't possible given schedules and capacity constraints.

There's an important lesson here. Stated preference and revealed preference are vastly different animals when there is a perception of acceptable behavioral conduct. People are saying they are using more transit because they've been brainwashed into thinking it is the right thing to do. It also pretty much kills the chances of high speed rail actually passing no matter what their field polls show.

Friday, July 18, 2008

A Bad Penny Returns

Can you believe it? Under investigation, run out of his own town, hundreds of millions of dollars of damge in his wake and now he's here.
" Carl Cole"

Now he's an eco-pro, ecobroker whatever those are. Vist ole Carl here. Tell him you are still watching.

Thursday, July 17, 2008

No Limits Ladies

One of the advantages of having poor morals is that I get to publish stuff too racy for real blogs. (Hat Tip, you know who you are).

End of Lease

As seen on Craigslist.
2005 Volvo S60 2.5Turbo with 39,000 miles. - $15000

Let's see 3000 miles over the 3 year lease maximum at $0.25 per mile $750 and counting. Wanna bet the dealer is offering him a really low turn in valuation? The cracks in the facade of wealth are widening.

Wednesday, July 16, 2008

Danger Will Robinson

Sometimes all the stars align. Sometimes when they align it turns out you are on the sundiving ship for a "Disaster Area" concert. This is one such case.
" Wells Fargo"

Was that clear enough? Now don't get me wrong. Wells Fargo isn't a candidate for receivership. This is more a case of a good bank about to walk into blades of their own construction.

From Marketwatch:
"Wells Fargo continued to strengthen its franchise during the second quarter," said President and CEO John Stumpf. ... We were able to lend more to current customers where we believed it was prudent and properly priced. We grew core deposits while reducing funding costs. ... We also continued to benefit from opportunities in this environment to gain new business and customers through selective acquisitions. ... We're still affected by the weak economy, but we believe we're one of the best positioned in financial services to grow through this adversity and to build an even stronger company for our team members, customers, communities and shareholders."

Financial Performance
"Wells Fargo continued to profitably build its franchise this quarter, at a time when many in our industry are primarily focused on fixing rather than growing their companies," said Chief Financial Officer Howard Atkins.

Anybody else uncomfortable with a strategy of aggressive market share capture? Anybody remember Angelo Mozilo's prognostications about Countrywide's grabbing market share?

But that's not all. no, in one of those undeniable gottcha moments guess who endorsed Wells Fargo? That's right Booyah!

Spank That Bottom

Now that prices have rolled back to 2003 levels no doubt the pollyannas will be out in force with the happy talk. My response; you peek out your bottom, I'm gonna spank it.

DQNews for Ventura 2007 vs 2008:
886 vs 767 -13.4%

A little perspective. At 767 homes per month it would take 370 months to cycle through the entire stock. More than a 30 year mortgage.

And what if you took advantage of the 10% drop in prices last June to buy the median house. How'd that work out sport?
$582,000 vs $420,000 -27.80%

A little perspective. The median home lost 31¢ per minute, $18.50 per hour, $444 per day every minute, every hour, every day in addition to paying PITI.

And just in case you get the wrong idea that this is what happened to people who bought last year:

My reply is this is what really happened:

Tuesday, July 15, 2008

It's A Recession, Get Over It

Reading all the blogs you'd think it was the end times. It's a recession and it needn't even be deep or exceptionally long. Of course every single public action to date has made things worse but that's a different issue.

The latest problem that concerns me is small commercial lending. It may have stopped. That would be very, very bad. Lots of that debt is revolving credit and funds ongoing operations. We start seeing the smalls forced to chose between taxes and employee paychecks and the jobless rate goes parabolic. It already looks pretty bad in California but that's off a low level.

If that trend goes national later this year we may look back on Dow 9600 as the good old days.

Confirmation Tuesday

Han Sang down 3.5%
US DJIA futures off 129 pre-open
No bounce Monday

Sure we've been in a recession since about October but nobody important cared. That is about to change as the dirty money changers and their vassals in the halls of governance are poised to be hurt in the only place that really matters to them; the wallet.