California's drought in historical perspective

The real takeaway is the early growth years of 1910-30 when we got a terribly distorted picture of expected precipitation.

Vaca '14

The picture I am having processed to thank my host.

Schedule Aug 2-14

A little family traveling.

Solvency is so 2000s.

From DSNews:

The Federal Housing Finance Agency (FHFA) put out the call on Thursday for public comment regarding the draft of requirements that would apply to private mortgage insurance companies that insure mortgage loans owned or guaranteed by Fannie Mae and Freddie Mac.
The two GSE’s are required by their charters to maintain utilize risk mitigation techniques for loans that they purchase or securitize that have a loan to value ration greater than 80 percent. Obtaining private mortgage insurance is one of the main tactics employed by the enterprises to limit exposure, imposing a minimum set of standard eligibility requirements for an outside insurance company to meet.
The FHFA has mandated that the enterprises revisit and strengthen their eligibility requirements in the wake of the financial crisis. The agency has opened the issue for public comment and invited stakeholders input into the final regulations.
"Mortgage insurance counterparties must be able to fulfill their intended role of providing private capital, even in adverse market conditions," said FHFA Director Mel Watt.  "FHFA's Strategic Plan calls on Fannie Mae and Freddie Mac to strengthen the requirements for private mortgage insurance companies that do business with them in order to reduce Fannie Mae's and Freddie Mac's overall risk exposure and protect taxpayers."
The updated financial requirements call for a new risk based framework to ensure that approved insurance carriers have a sufficient amount of liquid assets to pay claims should the need arise.

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 On the news MJIC Investment Corp, [MTG] fell 10%. 

This actually represents and attempt to get back to sustainable lending standards.  And look at the results; swimming naked companies everywhere. 

Stars & Stripes Forever

Big data, big issues

Chicago Tribune reports: The smooth, perforated sheaths of metal are decorative, but their job is to protect and conceal a system of data-collection sensors that will measure air quality, light intensity, sound volume, heat, precipitation and wind. The sensors will also count people by measuring wireless signals on mobile devices. ... Berman... said the list was limited to "nonpersonal" data because the city is still working on a privacy and security policy to govern the protection and confidentiality of any data that the system may collect in the future. Berman expects she and Emanuel will agree on a final version of the document by the end of July.

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Trust me. I'm from the government.

Chimera Worth Trillions

Gallup issued a report Monday showing that a decisive majority of Americans-62 percent- say that social media has no influence on their purchasing decisions. A meager 5 percent said that social media had a great deal of influence on their purchasing decisions. This comes on the heels of another study showing that brand engagement has been plummeting on Facebook over the last year, and that the company is debating charging people to promote their content . ----- Social media and synergy value yet again proven ephemeral.

Executive Overreach

The [SCOTUS] said [24 Jun 2014] that the Environmental Protection Agency lacks authority in some cases to force companies to evaluate ways to reduce carbon dioxide emissions. This rule applies when a company needs a permit to expand facilities or build new ones that would increase overall pollution. Carbon dioxide is the chief gas linked to global warming.
The decision does not affect EPA proposals for first-time national standards for new and existing power plants. The most recent proposal aims at a 30 percent reduction in greenhouse gas emissions by 2030, but won’t take effect for at least another two years.

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I honestly have no idea why the Obama administration has taken this path. 

Housing Looking Toppy

Inflection points are notorious to predict and impossible not to see in retrospect. Looks more and more like It is that time again. Remember August 2006? Yes, eight long years ago. Here's what I wrote:

Inflection Point Aug 2006

 Nothing like disaster staring you personally in the face to sharpen the mind and narrow focus to the important facts. These things are “brainers.” The problem is so many people sleepwalking or in denial. It is important to remember that housing is priced at the margins. That’s also why the bubble won’t be as injurious to the general economy as some here believe. Imagine getting a letter in the mail saying you won a million dollars. Next day you get another letter saying a mistake was made, you only won $400,000. Did you just lose $600,000? Only if you went out the night before spent it all (MEW). [Calculations below.] I’m not too worried about the coming and needed recession even if it is late and thereby harder than necessary. The jobs that will be lost are largely parasitical and not ultimately productive nor are they the jobs we wish to have created in a modern economy. Obsolete jobs are best cleared out. A recession will ease our crushing immigration pressures here in California as well. Schools are already talking about closing buildinngs, saving billions. Lower taxes, less crowded schools; what’s not to like? Maybe the national psyche can find enough breathing space to heal as well.

More at the link.  

Back to 2014.  Are we any better now?  Yes.  Much, much better.  Back then there weren't many paying attention.  Back then the blogosphere was lonely.  Back then there were very few who ever dare suggest a plateau never mind a massive decline.  I took no end of respectful dissent for suggesting "stickiness" was a thing of the past. 

Okay, on to the data.  

First, the Zero Hedge observation:

The Great Bifurcation continues apace.  As usual California leads the way. 

Second, Dataquick and the the American Community Survey (JCHS):

The typical monthly mortgage payment that California buyers committed themselves to paying last month was $1,523, up from $1,496 the month before and up from $1,157 a year earlier. ~ DQ

 JCHS ~ The recent deterioration in rental affordability comes after a decade of lost ground. The share of cost-burdened renters increased by a stunning 12 percentage points between 2000 and 2010, the largest jump in any decade dating back at least to 1960. The cumulative increase in the incidence of housing cost burdens is astounding. In 1960, about one in four renters paid more than 30 percent of income for housing. Today, one in two are cost burdened. Even in 1980, following two decades of worsening affordability, the cost-burdened share of renters was just above a third.

Prices, both rent and purchase need to come down to come back in line.  Higher wages, lower prices, lower interest rates, transfer rates.  Any guesses as to the mix that gets us back in balance?  I'll post mine after a bit. 

RWR Ten Years On

February 6, 1911 - June 5, 2004

Spend a few minutes at the Reagan Foundation. 

WASS CA files

From Fox and Hounds a guest post from George Runner of the FTB:

California consumers currently pay 71 cents per gallon in taxes every time they fill up their tanks. That’s the highest gas tax rate in the country. The average American pays less—about 50 cents per gallon. That translates into hundreds of dollars a year in higher taxes for Californians.
Adding insult to injury, Californians are double taxed for gas. Sales tax is calculated after excise taxes have already been added.

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Why is it that dedicated revenue streams ultimately devolve into wealth transfers? 

Ponzi Reversal

It's usually the home builder perpetrates the Ponzi scheme.  At least this time they are the victim.

Sacramento Bee:
Court papers show his second largest creditor is Jack Sweigart, owner of Sacramento homebuilder JTS Communities, who loaned him $19.9 million. Sweigart couldn’t be reached for comment.

His second largest creditor is the Cemo Family Charitable Foundation, which has already sued Wannakuwatte for $7.1 million. The foundation is led by Sacramento real estate executive Sammy Cemo.

...

Prosecutors said Wannakuwatte conned investors and banks to loan money to his medical-supply business, International Manufacturing Group, by claiming he had $100 million worth of contracts to sell latex gloves to veterans hospitals. In fact, his contracts with those hospitals came to just $25,000 a year.

U.S. Attorney Benjamin Wagner said last month that the Wannakuwatte case is “very possibly” the largest Ponzi scheme in the region’s history.

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Seems to me the more government involvement in an economic sector the more opportunity for mischief. 

100k Comments

"You wanna know how I lost my virginity? Well, so do I." (h/t Veronica Mars)

There's a bunch of parasites just itching for my 100,000th comment on HCN.  If they weren't so intent on insult and misrepresentation I would have less than half that. 

How long should I make them wait? 

All Your Data Are Belonging To US (as in the FedGov)

Washington Examiner excerpt:

Earlier this year, Cordray tried to assuage concerned lawmakers during a Jan. 28 hearing of Hensarling's panel, saying repeatedly the database will only contain “aggregate” information with no personal identifiers.
But under the April register notice, the database expansion means it will include a host of data points, including a mortgage owner’s name, address, Social Security number, all credit card and other loan information and account balances.
The database will also encompass a mortgage holder’s entire credit history, including delinquent payments, late payments, minimum payments, high account balances and credit scores, according to the notice.
The two agencies will also assemble “household demographic data,” including racial and ethnic data, gender, marital status, religion, education, employment history, military status, household composition, the number of wage earners and a family’s total wealth and assets.

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FedGov got your back... and your front and your sides and your data.  The master control program (MCP) will encompass some 95% of all outstanding mortgages.  Now you know why the 1% are paying all cash. 

New Employment Record?

Next week's BEA report is expected to tout an all time high in civilian employment. Here are two graphs to keep in mind while digesting that tidbit.

Total hours worked per working age adult.

FTE estimate.  Employment plus 1/2 part time for economic reasons. 

Late Spring

Funny how we never hear much about things like the second latest Washington D.C. cherry blossom bloom this year 

Year	Green Color in Buds	Florets Visible	Extension of Florets	Peduncle Elongation	Puffy White	Peak Bloom
2014	3/16	3/23	3/31	4/4	4/7	4/10
2013	3/11	3/17	3/26	3/31	4/4	4/9
2012	2/29	3/8	3/12	3/14	3/15	3/20
2011	2/28	3/9	3/16	3/19	3/22	3/29
2010	3/14	3/19	3/21	3/23	3/26	3/31
2009	3/8	3/12	3/18	3/23	3/27	4/1
2008	2/19	3/11	3/17	3/19	3/24	3/29
2007	3/5	3/20	3/25	3/27	3/28	4/1
2006	2/28	3/13	3/14	3/16	3/22	3/30
2005	3/7	3/22	3/31	4/3	4/4	4/9
2004	3/4	3/12	3/15	3/22	3/27	3/31
2003	3/17	3/23	3/25	3/27	3/29	4/2
2002	3/7	3/14	3/18	3/20	3/27	4/2
2001	2/26	3/11	3/20	3/25	3/30	4/6
2000	2/29	3/8	3/9	3/10	3/14	3/17
1999	3/16	3/22	3/26	3/30	4/1	4/5
1998	2/13	3/1	3/8	3/10	3/23	3/27
1997	2/21	3/2	3/10	3/13	3/20	3/26
1996	2/29	3/15	3/18	3/25	3/30	4/4
1995	3/8	3/17	3/20	3/22	3/27	4/2
1994	3/8	3/20	3/25	3/29	4/1	4/5
1993	3/15	3/22	3/28	4/2	4/5	4/11
1992	3/7	3/15	3/23	3/31	4/1	4/5

or the snowstorm in SoCal last week:

or all the ice still on Lake Superior over Memorial Day.

Flips Failing Again

What was old is still old.  This time it is paying too much on the purchase and still expecting a profit.

1619 Linnet Rd Wrightwood, CA 92397

  

May 22, 2014	Price Changed	$194,900	—
Apr 23, 2014	Price Changed	$209,900	—
Mar 19, 2014	Listed (Active)	$229,900	—
Dec 12, 2013	Delisted (Withdrawn)		—
Dec 03, 2013	Listed (Active)		—
Nov 25, 2013	Sold (Public Records) This home was foreclosed and bank-owned.	$221,790	—
Dec 01, 1989	Sold (Public Records)	$116,500	—	Public Records

  -----

Six months of no interest.  Smallish, ordinary, expensive.  Seems even low interest rates are no longer enough. 

Mian and Sufi Aren't Even Sloppy

Sebastian of HCN posting repute has become a believer in these two.  Even Calculated Risk has promoted them to sidebar status.  Me?  Not so much.  Here is a recent example:

Mian and Sufi have done what CR has never done.  Produced a graph that doesn't start at zero without a note to that effect.  Here it is:

Pretty damming of the growing inequality trend eh?  Not when redrawn with the zero:

And how about those choices?  First quintile versus third quintile.  Well obviously you don't pick or include the fourth or fifth cohorts.  They never had any assets by themselves.  And including them with the middle 20% would flatten the curve M&S are seeking to draw.  Same thing for not using the top two segments in the wealthy numerator.  It too would drag down the inequality curve. 

Sure, keep reading M&S just don't trust them. 

So Many Face Palms

Federal dollars will no longer be available to fund a day laborer site in Thousand Oaks, so the City Council will be asked Tuesday night to have general fund money cover the bill.
For 11 years, the city has been qualified to use Community Development Block Grant money for expenses at the site on Royal Oaks Avenue.
Work by the city’s contractor to coordinate activities at the site was classified as code enforcement, which aligned the work with construction work and other improvements in Old Town West. It was “complementary actions to address deterioration in the neighborhood,” according to a report prepared for the council.
With the improvement work now complete, the federal Department of Housing and Urban Development has alerted the city that as of June 30, it can no longer use the block grant money.
City staff is asking the council to approve $36,000 for July 1 through Dec. 31. The money will pay for a contract with Cyrus Urban Inter-Church Sustainability of Oxnard, a faith-based, nonprofit that monitors activities at the day laborer site.

Peak CRE

More evidence that we are getting ahead of demand.

1 WTC tenant looking to halve its commitment

The China Center, the first private-sector tenant to sign on for office space at One World Trade Center, is negotiating to halve its commitment there, according to sources familiar with the organization's real-estate decision making.
The downsizing would bring the group, which aims to give Chinese businesses a foothold in the city by providing them with offices and other amenities like conference and dining space, to about 100,000 square feet.
The firm's decision to slash its space comes after news that the owners of One World Trade Center, a partnership between the Port Authority of New York and New Jersey and the Durst Organization, were slashing asking rents in the 1,776-foot tall, more than 3 million-square-foot tower, due to a lack of demand. The Wall Street Journal reported Tuesday that the landlord reduced rental rates to $69 per square foot from $75 per square foot at the tower, which cost a record $3.9 billion to build.

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It may be worthwhile to note this is on the heels of recent Chinese industrial spying kerfuffle.  Still.  Look at those numbers.  Insane.