Friday, October 31, 2008

Gordo California

And the news from 17% of the US economy:
State officials are expected to formally announce today that the gap between spending and revenues in the budget for the current fiscal year has reached at least $10 billion, and may reach $25 billion by the end of the next fiscal year.

SacBee story.
What was that about government led infrastructure spending cushioning the recession? Be sure to read the comments where most people "get it."

[blogger is acting up, sexy construction worker picture soon]

Wednesday, October 29, 2008

'Nuff Said?

Petroleum Supplies

EIA weekly petroleum supplies report available.
Gasoline prices down year over year.
Demand destruction and inventory jumps.

Supplies for all are in the normal trading bands after some extended periods far below normal.

Looks like the Middle East countries will have to find a new export in great demand in the west. I have a suggestion.


If we are going to be forced to look at the horrific blowoff we are being set up for the least they could do is flash some skin to keep us distracted.

Do we muddle along, grinding mild daily losses, sell the news at 2:15 ET or get one more rate drop generated CNBCgasm?

Don't ask for any rational analysis. These markets defy rationality. Nobody seems worried that the markets are so unstable they can move 11% in 2 hours. Melt up/melt down it doesn't matter. Well it does matter as hedge funds have survived a few more weeks to do even more damage. I think the set up is a mirror of Casey's first collapse. Keep up appearances until the Enron moment.

Monday, October 27, 2008

Mondays market is hard to face,

Tuesdays market is full of disgrace,

Wednesdays market is full of woe,

Thursdays market has no gains to show,

Fridays market is tanking not giving,

Saturdays market steals much of your living,

And the market that is open on the Sabbath day

Is volatile and wild, and full of dismay.

Everything seems to be about markets. This is not because markets are either news or of immediate importance but rather because it is easy to report. The fourth estate is lazy and ill equipped to discern what is important never mind present events appropriately. Will we settle "down" as futures indicate around 8200 or will we "recover" to circa 8800? Doesn't much matter, either one is a temporary stop over. At this point the cheerleaders want a definitive bottom so they can "back up the truck." Of course by that they mean sell you stocks that somebody (they) have for sale. S'okay for them, they get a commission in both directions making their positions naturally advantaged. That's the same reason the best housing deals go to realitters. There won't be a bottom until everyone knows you don't want to own real estate... errr... I mean stocks. I mean both. And the longer this plays out the longer it will persist (another reason they push to definitive bottom meme). There's a wave of imminent retirees from the Boomer Generation and at 7000 instead of 14,000 they'll be selling twice as much to pay for their lifestyle.

Friday, October 24, 2008

Another Ripple Effect

I love Lobster.

Tough... or do I mean tender?
Industry experts say their biggest concern is what will happen in late November when about 40 per cent of Atlantic Canada's lobsters are landed off the southwestern coast of Nova Scotia.
"We're a month away from our big landing season and with the constant barrage of negative news on the economy ... consumer confidence is being destroyed daily," said Morrow.
"It's feeding on itself. ... People are becoming very careful about how they spend their money."

Lobstermen are still paying for diesel and insurance and credit.


But what do I know? Walruses belong in the water regardless. Like I said, it seems too soon but this looks like the at least 8200 next step we discussed. And still no homebuilders bankrupt.

A reminder:

NYSE Announces Fourth-Quarter 2008 Circuit-Breaker Levels
NEW YORK , September 30, 2008 -- The New York Stock Exchange will implement new circuit-breaker collar trigger levels for fourth-quarter 2008 effective Wednesday, October 1, 2008.

Circuit-breaker points represent the thresholds at which trading is halted marketwide for single-day declines in the Dow Jones Industrial Average (DJIA). Circuit-breaker levels are set quarterly as 10, 20 and 30-percent of the DJIA average closing values of the previous month, rounded to the nearest 50 points.

In fourth-quarter 2008, the 10, 20 and 30-percent decline levels, respectively, in the DJIA will be as follows:

Level 1 Halt
A 1,100-point drop in the DJIA before 2 p.m. will halt trading for one hour; for 30 minutes if between 2 p.m. and 2:30 p.m.; and have no effect if at 2:30 p.m. or later unless there is a level 2 halt.

Level 2 Halt
A 2,200-point drop in the DJIA before 1:00 p.m. will halt trading for two hours; for one hour if between 1:00 p.m. and 2:00 p.m.; and for the remainder of the day if at 2:00 p.m. or later.

Level 3 Halt
A 3,350-point drop will halt trading for the remainder of the day regardless of when the decline occurs.

Thursday, October 23, 2008

Expo Line Jumps Through Hoops

The long suffering Exposition Light Rail line for West Los Angeles has hit yet another snag.
It is potentially a huge setback for the Expo Line Construction Authority. If Koss' ruling stands, completing the needed environmental studies and building the two bridges -- with elevators -- could cost $18 million and delay the opening of the line one to three years, said Richard Thorpe, the chief executive of the authority.

The entire story at the LATimes.

It is no secret I am no fan of passenger rail in any form. It is always some form of slow, expensive, and disruptive. Still, this time a bad rail line is be obstructed by even worse urban myths.

This is the Northeastern University stop for the Boston MBTA Green Line. Thousands of students in various states of inebriation, sleep deprivation, hurry cross daily. Like has happened for decades.

At grade crossings and social justice appeals are an unfortunate consequence of transportation planners ignoring their duty of providing effective transportation choices.


From a surprizing source we have this interesting article about homeownership in a deflationary asset environment. From CNBC of all places:
About 12 million U.S. homeowners owe more than their homes are worth, compared with 6.6 million at the end of last year and slightly more than 3 million at the close of 2006, said Mark Zandi, chief economist at Moody's

"At the root it's 'the' problem," said Zandi. "If you're going to put your finger on the one thing that's gotten us into this fiasco, it's the fact that millions of homeowners are under water on their homes."

Money quote:
Nationwide, for those who purchased U.S. homes since the beginning of 2003, nearly one in three now have negative equity.

Nearly half of buyers who purchased in 2006 are under water.

Despite tighter credit and underwriting for home loans this year, Steve Berg, a managing director at research firm LPS Applied Analytics, said mortgages originated in 2008 were on par or trending worse than those originated last year or in 2006.
[emphasis added]
Got that? We are not working through the bad loan crisis we are still ramping up to a higher peak.

Wednesday, October 22, 2008

Ojai Too High

2259 McNell Rd, Ojai, CA
Price: $5,800,000
SQ. FT.: 4,730
$/SQ. FT.: $1,226
LOT SIZE: 1.86 Acres

Wow, luxury living at its finest. And only $5.8m. Quite a payday for the current owners who paid in May 02, 2001: $1,057,500. Get over it. It's just Ojai not Shangri-La. Will we see 2001 prices again? Oh yes.


Federal Reserve Board
Release Date: October 22, 2008

For release at 10:00 a.m. EDT
The Federal Reserve Board on Wednesday announced that it will alter the formula used to determine the interest rate paid to depository institutions on excess balances.

Previously, the rate on excess balances had been set as the lowest federal funds rate target established by the Federal Open Market Committee (FOMC) in effect during the reserve maintenance period minus 75 basis points. Under the new formula, the rate on excess balances will be set equal to the lowest FOMC target rate in effect during the reserve maintenance period less 35 basis points. This change will become effective for the maintenance periods beginning Thursday, October 23.

The Board judged that a narrower spread between the target funds rate and the rate on excess balances at this time would help foster trading in the funds market at rates closer to the target rate. The Board will continue to evaluate the appropriate setting of the rate on excess balances in light of evolving market conditions and make further adjustments as needed.

The "Prime Rate" is 3% plus the Fed Funds Rate. By paying the banks more for their undeployed deposits the Fed has managed to give the banks an extra 40bps margin. As long as FFR and Prime are tied lowering the FFR doesn't give the banks any additional margin when lending at prime. Conversely what should happen (but won't) is that "Prime" should narrow to FFR plus 2.5% to give businesses and retail borrowers a break. IMO that would take some pressure off the impairment of HELOCs and lines of credit and thus actually help the banks but what do I know?

CalPERS Watch

CalPERS lost 20 percent of its value from July 1 to October 10, according to the report, "(h)owever, we are still eight months away from the end of the fiscal year and the markets still have time to turn around."
SacBee article here.
Eight months for the markets to turn? WTF are they thinking? CRE loan defaults are projected to triple. CalPERS is going to find itself owning empty strip malls.

The picture? No meaning, just with news this bad anything to distract the proles.

Is $23.9 Billion a Lot?

October 22, 2008

Wells Fargo Merger on Track for 4th Quarter 2008 Close

Businesses Remain Well Positioned and Committed To Serving Customers

I didn't know you could stack steaming piles that high.

Tuesday, October 21, 2008

Who's Next?

Good morning. Looks like Circuit City shorted out before Best Buy and they are choosing the Mervyn's/Linens'n'Things model for dissolution.
Reuters article.
The company's advisers are trying to line up additional financing but so far lenders have shown little interest, the paper said.

"The management team, board of directors, and its strategic financial advisers are conducting a comprehensive review of all aspects of our business to determine the best methods of accelerating our turnaround," Circuit City spokesman Bill Cimino told the paper without giving details of the plans.

Let the Mauling of America commence. Yes we need half the retail space we have but the potential danger is in serial failure. How'd you like to be Best Buy? At first blush you are losing a competitor but what about selling this holiday season into the teeth of a recession with CC going through the 25%-60%-90% final sale clearance cycle? And let us not forget the problem of real estate. You remember, real estate. These stores who aggressively expanded have very high cost basises that don't go away just because they close a store. In the cases where the own the footprint they'll be forced to mark to market and undoubtably trigger loan covenants. They in turn will take down strip owners and often municipalities who also invested in the hopes of covering their costs of infrastructure with sles and property taxes. Oooops. And just like CSI and CSI: Miami and CSI:NY there's even a theme song. No, not "Who's Next?" rather "The Song Remains the Same."

Monday, October 20, 2008

Death to Muni

CA 9/1/2037 LOS ANGELES CALIF CMNTY DEV AG A3 BBB+ RADIAN 6.490 9.750 68.69 9/1/2017 100.00

WTF is that crap Dawg? That crap is a muni bond offering. California, maturity 2037, agency, ratings and insurance, and the "numbers." Supposedly 6.49% the price is $68.69 so the true yield is 9.75% tax free. [The last two numbers are call date and price.] In California 9.75% double tax free is like 15% equivalent in the highest brackets. This probably won't happen. There's got to be an option for the issuing agency to decline.

The repercussions are interesting. We lose the short term impetus of the municipal debt for infrastructure trade but we take that from general economic health long term. In this specific case I fully expect the Community Redevelopment District to take the usurious terms and do even less harm than if they had gotten more money. Talk about unexpected consequences. Comm Dev Dists are the anthesis of rational public expenditures. Planners with daddies' credit card.

Sunday, October 19, 2008

It's All Bushes Fault

Even that stalwart bastion of liberalism is beginning to question the meme. And for good reason. With a new liberal leader's election all but assured they need to do some serious regrouping lest he be blamed for any lingering effects. Don't get me wrong, there's a lot to be laid at the feet of GW but let's go back a bit more shall we?

Building Flawed American Dreams

Mr. Cisneros, 61, had a foot in a number of those worlds. Despite his qualms, he encouraged the unprepared to buy homes — part of a broad national trend with dire economic consequences.

He reflects often on his role in the debacle, he says, which has changed homeownership from something that secured a place in the middle class to something that is ejecting people from it. “I’ve been waiting for someone to put all the blame at my doorstep,” he says lightly, but with a bit of worry, too.

Long engaging story even if tainted by the contributions by "Poor Gretchen" of CR infamy.
It took a lot more than one administration leaving the tiller untended. It also took an administration to steer the boat towards the abyss.

Saturday, October 18, 2008

Another Breadcrumb

Yawn. Longtime readers have heard this before. The string of economic disasters were discussed here long ago. What got laughed at a year ago is mainstream thought today. This morning's disaster is water rates going up because of municipal borrowing rates exploding. And while the article is ignorant of the "other shoe" at least we are making progress.
But with Metropolitan Water District of Southern California's short-term loan interest rates shooting through the roof, and the shaky economy's effect on municipal bonds and investments unknown, another hurdle has risen.

The district that supplies most of Southern California with water has managed so far to deal with the flux in the budget by cutting back on capital costs. But that could change.

"If this whole situation blows up, all bets are off," Brian Thomas, Metropolitan's chief financial officer told the Ventura County Association of Water Agencies on Thursday at its monthly meeting.

The challenge Metropolitan and other public agencies face is how their debt will be managed in the short- and long-term, and how much access they will have to credit.

The article lamely parrots the water districts' claims:
He said water rates are expected to rise, but that's because of the increasing challenges of delivery, energy and lack of water coming from Northern California — not the credit crunch.

Capital costs is code for developer subsidies and cash advances. Well guess what's happened to that revenue stream? Dead. So higher waters rates for bad borrowing practices to subsidize abd development practices. Instead of paying double the California taxpayer is going to be paying 4x for the privilege of having a clueless cadre of urban planners degrade their quality of life.

Expensive Developer Subsidies and Pandering

Again "w" beats me to a story I was following.
Ventura's investments in trouble
Ventura stands to lose up to $10 million of taxpayer money from soured investments in the banking industry — the only city in Ventura County facing such risks.

The meltdown on Wall Street has directly jeopardized $10 million of Ventura's $160 million investment portfolio. The money comes from various sources, including reserve funds, savings for capital projects and millions held in trust to secure loans.

City finance officials remain uncertain what they will recover from two five-year, $5 million corporate notes the city holds in Lehman Brothers Holdings Inc. and Washington Mutual, which both failed last month.

"It's impossible to know at this time," city Chief Financial Officer Jay Panzica said.

Ventura also owns $28 million of notes in other companies, including J.P. Morgan, Goldman Sachs and Morgan Stanley.

And unbelievably:
City to consider rise in retirement benefits
The upgrade allows a sworn firefighter to retire at age 55 with a pension equal to 3 percent of his or her last year's pay multiplied by years of service. If a firefighter began work at age 25 and retired at 55, that would be 3 percent times 30 years — or a lifetime pension equaling 90 percent of the final-year salary.

My brain hurts but at least I have one.

Friday, October 17, 2008

Laugh While You Can

I'll change this post date to Oct 17th 7:02 AM in honor of Casey's latest misadventure. Looks like he's about to purge the Haterz™ again. And again, feel free to post here anything you wish. This post will stick at the top for a day and we'll see how it goes. Have fun and for heaven's sake don't keep it clean and civil. ;-)

Thursday, October 16, 2008

Riverpark Update

Back to Riverpark. The implosion is really picking up steam and this one is typical. The usual story; bought new Dec 2006 for $580,500. Back to the bank Aug 2008 for a $378,020 outstanding balance. Looks very much like a first reset default eh? An 18 month old house with a $200,000 loss. $11,000 per month. And why didn't somebody want it for $378,020 on thte courthouse steps? That's the kicker and why Riverpark is doomed. 2008 Property Tax: $10,784. $900/month. Every month, month in and month out.
3093 Orleans Dr
Oxnard, CA 93036
Price: $399,900
SQ. FT.: 2,302
$/SQ. FT.: $174
NEIGHBORHOOD: El Rio / Nyeland Acres

Ojai Dreamin'

"W" [hat tip] points us to the local fishwrap which is just a smorgasbord of epicaricacy. Read it and giggle. Be sure to also read the comments full of derision. One tidbit from the article:
That's not comforting to Susannah Abel-Crombie. She put her five-bedroom, three-bath, 2,600-square-foot home in Ojai on the market two years ago for about $839,000. She since has lowered the price to $719,000.

"I could drop it to $600,000," she said. "I don't think that will make much difference. People aren't buying. I think everyone's holding their breath and waiting. It's frustrating."

Abel-Crombie takes solace in knowing that home values are also declining in North Carolina, where she plans to move with her family. She hopes to pay cash for a house there.

Lucky for us there's enough information to track down her listing and get a bigger laugh.
Realtor dot com

The truth is in the sales history/tax rolls as well as the neighborhood. This is a "bump up" house in an otherwise single story neighborhood. She bought for $170k in 1988 and looks to have upgraded in 2004-5. IOW way over improved for the area. The tax man values it at $500k and she's wishing for $720k and even understands on some level that $600k is too much. Without the $720k she can't get a free house in South Carolina. There's a clever marketing strategy. Not.

People like this are starting to piss me off. Two effin' years on the market? Lady there aren't any fish in that barrel. My favorite comment is from a smart guy named Smashy_Crashy:
Just to put things in perspective the CAR thought the median price in 2008 would be $553,000 at their forecast in October of 2007. It will end 2008 below $400,000.

Testify brother.

Wednesday, October 15, 2008

Missed Opportunity

Realtor dot com.Listing Price History Date Price
Apr 02, 2007 $344,000
Apr 28, 2007 $329,900
July 21, 2007 $309,000
July 21, 2008 $299,000

Gee ya think they missed the last lifeboat?
Sales History: Date Price
Jan 19, 2001 $120,000

So, this sweet deal is costing the nice owner $800/month to sit there. But that's not all. This boat anchor is also losing $3000 per month as confirmed by the lack of sales. That's a lot of real money.

I predict this and others like it will sell for less than $100,000 before we see the bottom.

Tuesday, October 14, 2008

The Last Gasps of a Failtard

Wow, who thought is would take so long? Tomorrow is tax day for his 2007 filing. He's burning his mom's seed money for Goldspring. 30% losses plus expenses. The picture is Benoit's™ awesome massive focused effort. Bubba is waiting. Is this the last Casey post? Not hardly. There's the trial and sentencing phase still to go.

Bonus Marches

Everybody has been talking about the Great depression. Mostly about how to avoid another one. Uncle Ben Bernanke is supposedly an expert on the 1928-1941 period. Unfortunately that means he is supremely qualified to fight the last depression not the next one. And true to form that's exactly what has happened.

I'm not going to lecture on the period. What would be the point? We can't even explain Disco in the 70s. Howinthehell could we explain a worldwide social and economic upheaval 80 years ago? I do want to bring up one aspect that shows some interesting compare and contrasts with today. The picture and title refer to a series of events in the spring and summer of 1932. In conversations I was surprised to discover how very few people knew just how close we were to a socialist overthrow of the Federal government. In a rare instance of encyclopaedic responsibility even wikipedia manages to cover much of the facts. Apparently there must not be an editor of the article diligently scouring the content for any hint of badthink. Doubleplusgood for us. Excerpt:
In 1924, over-riding President Calvin Coolidge's veto, Congress legislated compensation for veterans to recognise their war-time suffering: receive a dollar for each day of domestic service, to a maximum of $500; and $1.25 for each day of overseas service, to a maximum of $625. Amounts owed of $50 or less were immediately paid; greater sums were issued as certificates of service maturing in 20 years.
Some 3,662,374 military service certificates were issued, with a face value of $3.638 billion dollars. Congress established a trust fund to receive 20 annual payments of $112 million that, with interest, would finance the $3.638 billion dollars owed to the veterans in 1945. Meanwhile, veterans could borrow up to 22.50 per cent of the certificate's face value from the fund, but, in 1931, because of the Great Economic Depression, Congress increased the loan value to 50 per cent of the certificate's face value, yet, by April of 1932, loans amounting to $1.248 billion dollars had been paid, leaving a $2.36-billion-dollar deficit. Although there was Congressional support for the immediate redemption (payment) of the military service certificates, President Hoover and Republican congressmen opposed that, because it would negatively affect the Federal Government's budget and Depression-relief programmes. Meanwhile, veterans organisations pressed the Federal Government to allow the early redemption of their military service certificates.

Imagine that. The people rising up in protest over tricky Federal financing that denied them their promised benefits. I mention this because of what the protests wrought. Roosevelt instituted work programs that dispersed the working age population to remote locations like Central California and Hoover Dam and Tennessee Valley. The idea was to keep them out of the cities, the public works projects were secondary. Chairman Mao learned the lesson and used his far more brutal progrom for the same ends.

We really really don't want to keep trying to replicate the solutions that almost failed 80 years ago.

Monday, October 13, 2008

Still 8800

Wow, +586 as I type. Still not enough to change my view. We are trading on a ledge of 8800 with some incredible volatility. We went down past my 8600-9000 on Friday. We are currently above the same 9000 right now.

Seriously whack. What makes the components of the Dow 30 worth 6% more than on Friday? No, really. This is catching a falling knife while standing in an acid shower. We've entered a period of wild desperation gambling. We barely touched historical multiples yet the meme has morphed into one of an historical buying opportunity.

Fearless prediction:
"Dead cats bounce. Once."

Saturday, October 11, 2008

Step 13a sub-para 11 of the NWO

Fannie, Freddie to Buy $40 Billion a Month of Troubled Assets

By Dawn Kopecki

Oct. 11 (Bloomberg) -- Federal regulators directed Fannie Mae and Freddie Mac to start purchasing $40 billion a month of underperforming mortgage bonds as the Bush administration expands its options to buy troubled financial assets and resuscitate the U.S. economy, according to three people briefed about the plan.

That's Saturday Oct 11th. Personally I don't want my regulators working weekends. It sends the wrong message like maybe there's something wrong with the world financial system. "Contained" means M-F with Wednesday afternoons for business meetings in an informal setting (golf).

Fannie and Freddie began notifying bond traders last week that each company needs to buy $20 billion a month in mostly subprime, Alt-A and non-performing prime mortgage securities, according to the people, who asked not to be identified because the plans are confidential. The purchases would be separate from the U.S. Treasury's $700 billion Troubled Asset Relief Program.

Okay. Show of hands. How many of you feel the need to be buying non-perfoming mortgage securities? Twas as I suspected.

Too tough? Alright then, sophomore civics question. Careful, there's going to be a revolution at the end of the semester and this might count towards your final conviction or acquittal. Question, where in the Constitution and any of its myriad bastard children does it say the directives of Federal Regulators (FHA) are confidential?

The Federal Housing Finance Agency, which placed the two companies in conservatorship on Sept. 7, directed them last month to start increasing their purchases of loans and mortgage-backed securities as the Treasury seeks to absorb underperforming and illiquid assets from financial companies.

``For now, they're under conservatorship and they have to be used to keep the flow of capital going to the housing market,'' former Treasury Secretary Lawrence Summers said in an interview on Bloomberg Television's ``Conversations with Judy Woodruff.'' ``They're important to maintaining the flow of government finance'' and need to be used actively, he said.

Ohhhh, "government finance." Let's look at the FHA mission statement:
• Contribute to building and preserving healthy neighborhoods and communities;

• Maintain and expand homeownership, rental housing and healthcare opportunities;

• Stabilize credit markets in times of economic disruption;

• Operate with a high degree of public and fiscal accountability; and

• Recognize and value its customers, staff, constituents and partners.

Well I take it back. There it is; "Stabilize credit markets in times of economic disruption." I'm thinking the authors of the Interstate Commerce Clause could learn from these people.

Adding underperforming assets to Fannie and Freddie's combined $1.52 trillion mortgage portfolios would come at a time when the two mortgage-finance companies already hold as much as $210 billion of bad debt that may be eligible itself for the Treasury's relief program, their regulator said Oct. 5.

Is anyone else feeling a little "Through the Looking Glass" here? They need to load up on bad debt so they can get assistance that would otherwise go to bad debt instead?

A spokesman for Washington-based Fannie, Brian Faith, and Doug Duvall at McLean, Virginia-based Freddie wouldn't comment.

I can only hope you all put down your beverage before reading that the spokesperson for Fannie is name Faith.

Overall Goal

Neither Fannie nor Freddie has turned a profit in the past year, accumulating $14.9 billion in combined quarterly losses, largely related to bad subprime and Alt-A mortgage assets.

FHFA spokeswoman Stefanie Mullin declined to comment on the details of the program. Treasury spokeswoman Jennifer Zuccarelli wasn't immediately available to comment.

Yet more evidence of the folly of weekend regulation.

``The overall goal of the program will be to contribute greater stability and liquidity in the mortgage market, which should enhance consumers' access to mortgage financing and ultimately result in reduced mortgage interest rates,'' FHFA Director James Lockhart said in a Sept. 19 statement.

Sept 19th? They were planning on hitting the Treasury $700b two weeks before it was passed?

Subprime loans were given to borrowers with poor or limited credit records or high debt burdens. Alt-A loans were made to borrowers who wanted atypical terms such as proof-of-income waivers, without sufficient compensating attributes. About 35 percent of subprime loans in non-agency mortgage securities are at least 60 days late, while 15 percent of Alt-A loans are, according to a Sept. 9 report by FTN Financial Capital Markets.

The phrase "cascade tripwire" comes to mind.


Non-agency, or private-label, bonds are issued by banks and don't carry guarantees by Fannie, Freddie or government-agency Ginnie Mae. Freddie held about $207 billion in non-agency debt in its $760.9 billion portfolio as of August, according to its latest monthly volume summary. Fannie had about $104 billion of such securities in its $759.9 billion portfolio in August.

It isn't bad enough that we've guaranteed F&F despite the explicit disavowal of liability but now we are actively seeking new liability.

Regulators initially restricted Fannie and Freddie's growth when they seized control of the government-sponsored enterprises Sept. 7. To ``promote stability'' and lower mortgage costs to borrowers, Treasury Secretary Henry Paulson said the two would be allowed to ``modestly increase'' their mortgage portfolios to as much as $1.7 trillion through the end of next year and said they would no longer be run ``to maximize shareholder returns.''

Read above where there are no shareholders and no profit for at least two years. Apparently some goals are more equal than others.

Less than two weeks later, Fannie and Freddie were told to ramp up their mortgage bond purchases as the financial crisis deepened and credit activity came to near standstill.

By whom?

Fannie and Freddie which own or guarantee almost half of the $12 trillion U.S. home loan market, were given access to $200 billion in emergency Treasury financing as part of their rescue package. The companies may also be able to sell their bad debt to the Treasury through its $700 billion financial-rescue program signed into law Oct. 3.

FHFA has said the companies plan to release third-quarter results next month as scheduled. Analysts surveyed by Bloomberg project losses for both Fannie and Freddie at least through 2009.

Shall we hold our breath?

To contact the reporter on this story: Dawn Kopecki in Washington at

A Pox On Both Your Houses

These two mountain retreats are within blocks of each other. Let's run the numbers first:

House #1:
1765 Twin Lakes Dr
Wrightwood, CA 92397
Price: $xxx,xxx
SQ. FT.: 576
$/SQ. FT.: $259
LOT SIZE: 5,100 Sq. Ft.

House #2:
1272 Edna St
Wrightwood, CA 92397
Price: $xxx,xxx
SQ. FT.: 775
$/SQ. FT.: $310
LOT SIZE: 3,800 Sq. Ft.
TYPE: Single family
STYLE: Other
The secret is exposed partially when you notice the house on the tiny lot (#2) is $310/sf. Let's move on to the sales history:

House #1:
Sales History
Date Price Appreciation
Oct 13, 1998 $60,000
Jun 11, 2003 $129,000 17.9%/yr
Jun 02, 2006 $225,000 20.6%/yr

Take advantage of this price of a short sale!!!!!!!!!!!!!!This cabin is a little gem. Refurbished natural wood. One bedroom plus unpermitted loft for children. Laundry room inside. Economical gas insert in ceramic tiled fireplace. Unique wood storage shed designed to accomodate snow load. Huge private lot with beautiful trees and fencing; older concrete house foundation on lot. Good vacation getaway, ski rental cabin, or rental. Room to build a new house beside this one on lot.

House #2:
Sales History
Date Price Appreciation
Aug 01, 1990 $125,000
Sep 10, 1993 $105,000 -5.5%/yr
Aug 09, 2002 $108,000 0.3%/yr
Sep 24, 2004 $174,500 25.3%/yr
Charming Mountain Cottage!
What the Owner Loves: Minutes from Mt. High Ski Resort Extremely cute inside and out

House #1 is pricing towards reality. Probably because they bought Jun '06. House #2 saw the previous owner realize $60k in 24 months and thinks that is about right. Priced to sit.

This is where we are now. Wishing prices and needs prices and neither even remotely in line with market prices. $259/ft? $310/sf? We have a long way to go. Talk to me when we are near replacement costs $110/sf or lower. Have fun looking at those price histories. Wow.

Friday, October 10, 2008

California Shortfall

⇒ Compared to September 2007, General Fund revenue in
September 2008 was down by $465 million (-4.4%).
Corporate taxes were below estimate by $485 million
(-21.0%), and personal income taxes were below last
September by $26 million (-0.5%). Sales taxes were $71.7
million greater (3.5%) than last year. The total for the three
largest taxes was below 2007 levels by $440 million (-4.4%).

The PDF report is here.
Biggest takeawy in my opinion:
"⇒ Quarterly estimated corporate taxes in
September were extremely weak, 26%
below last September."

As predicted here it took two weeks to break the budget agreement. Expect some weekend emergency meetings in Sacramento.

In just 12 more days... Thursday and the Dow will be at 0.

Today might be Capitulation Friday for a confluence of disparate issues:

• Fearless leader speaks
• Lehman settlement
• Bank Failure Friday?
• Insurance Implosion Friday?
• GE and futures guide lower. It looks like international events echo.
• My favorite. This is a long weekend. Who would want to be long over a long weekend and then have to explain that decision to clients? It just isn't a defensible position.

Thursday, October 09, 2008

Dow 10k, 9k. 8k, ...

Sept 26th 11,143
Oct 3rd 10,325
Oct 8th 9k+
Oct 9th close 8,572 pending settlement.

This might be capitulation if tomorrow does not reverse.

'Bout freakin' time! I've been waiting for more than two freakin' years for the markets to agree with me.

Time to buy? I don't know yet. The signals I follow don't flash the moment the trends reverse.

Measure "R" and the Whiners

Los Angeles is crazy. Gee, that's a shocking and unexpected proclamation eh? No this time it is a "jump the shark" moment in public transportation. LA is pushing Measure "R" a half cent sales tax increase to fund transit. That's another half cent BTW. Props A&C already have combined a half cent. This pushes LAs sales tax to 8.75%. Buy comparison neighboring Ventura sports a 7.25% rate. I said "buy" not "by" because that's what's happening. How would you like to be a car dealership near that border? 1.5% is more than dealers are making these days. But forget the elementary economics. Look at the lame politics being employed. Hit up the taxpayers for an amount 4x the total farebox revenue? Dumb. Look, it's a mess but public transit needs pubic subsidy. We can talk about "needs" versus "deserves" another time for now unpaid and un-payable bills are accumulating. It has taken all of two weeks for the lie that is the California State budget to be revealed for what it was. As warned here last month actual revenues have fallen off a cliff. Worse is the exploding gap twixt projections. "But Dawg, this is a transit post." Fine but remember that 4/5ths of transit expenditures are public funds.

Measure "R" is about mostly maintaining service. I know, I know theproponents are all about making things better wrt congestion but these same proponents are claiming without "R" massive service cuts will occur immediately. I guess both sides can play at the spite game.

As long as reasonable and justified user fees are not part of the solution it should come as no surprise that voters will likewise consider Meas R to be unreasonable and unjustified. Measure "R" will lose by a majority 58% to 42% but 66% is needed to pass. Here's why the beleagured taxpay will balk:

2007 fares accounted for 23% of operating revenue. 17% of total budget. $293,878,777 per year and the amount requested in “R” is 30 years $40b or approximately 4 times as much. Call the current farebox 25%, use that as a baseline and raise 25% from fare and 75% from taxes. Problem? Well I have a problem. Maintaining that ratio would mean a doubling of fares. Besides doubling fares is likely to only increase revenue 60-70%. Things should have never been allowed to get this disconnected service/cost. Now that we are here there is a very real threat of a voter revolt that will cut of their noses to spite themselves. To keep the taxpayer paying it is necessary to raise fares as much as possible until ridership and elasticity are stretched and then go to the taxpayer.

Wednesday, October 08, 2008


Hanky Paulson stuttered and stumbled through a press conference designed to instill confidence. Smartest guy in the room my ass. He talked the talk but clearly isn't able to walk the walk. His mouth moved in all the right ways; transparency, accountability, resolution. BFD, he's had chances for that over the past 3 years and passed on all of them. Zero for everything is not a record to support.

Tuesday, October 07, 2008

Tight Buns

Credit is tight, the political race is not. No doubt any rise in the markets will be reported as a success of government intervention and anticipation of an Obama administration.

Monday, October 06, 2008

Six Sigma

Six sigma, black swan, whatever. Abnormal is the new normal.

Say it is so Joe

Joe cool deserves some notice:
joecool329 on October 5, 2008 said:
I wrote my last post for the haters because frankly I think Casey is beyond hope or redemption at this point. That being said I wish the “haters” would go away because this story won’t end well at all-not by a long shot.

Agreed. The endgame was laid out a long time ago. I can only hope that by documenting the events truthfully the innocent can be protected.

The ones who were well intentioned realized long ago that Casey just wouldn’t listen. I want to politely challenge the haters as a collective group to go away. Please stop the enabling of the fraudster by posting on his blog. For myself, this is the last post in spite of what I said earlier. Just back off and let the slide continue. Anything that could have been done already has been done. At this point the train wreck is no fun to see.

Again, bravo. Notice all my recent comments are of the "what did mom say?" variety. Casey doesn't see it but there really won't be time to make peace when events overcome desires.

To his credit Rob Dawg has mostly ignored him in the year since IAFF and the whole Australian/Galina/Duane Le Gate/LossMit fiasco. Good on you Rob truly. While I wish you had remained in permanent ignore mode, I can reasonably understand why there have been 1-2 posts about Casey on EN.

Why thank you again. You see it correctly. The few recent Casey posts were merely paperwork. I expect a few more as we close out a sad footnote to the ongoing economic events.

I fear the worst for Casey’s family at this point since collective grief could cause finger pointing and the worst sort of recriminations. As for Casey I couldn’t care less if he wastes his life then he’ll pay not only in this life but eternity. IMHO we are close to the “Final Days”. Let the comments dry up. Let everyone go back to their own reality. This is a macabre version of the “Truman Show” or “EDTV”. Maybe something good will happen. I hope so but doubt it.

We all fear for those around him. He's shown absolute indifference at best to anyone within his blast radius and fallout zone. I'm just sounding the horn warning everyone about the impending blast. Don't expect me to go into the radiation zone to rescue those who ignore the warnings.

Dow 10k

We won't know the extent of the damage or whether the heat shield is intact until we separate.

Friday, October 03, 2008


405 pages of pork to choke a glutton. The best and brightest doing their best and brightest work. Let's cut through the crap.

Problem: Lenders are losing money on bad loans and their financially engineered offspring.

Solution: The Fed will buy those loans for a price that is higher than the banks are currently losing money on. The Fed will make money with this plan.

Analysis: Uhhhh yeah. Any questions?

Thursday, October 02, 2008

Credit Freeze

California hasn't paid some health care providers since June. 85 freakin' days without a budget. Talk about bad timing. Now the credit markets are "frozen." Well, not really frozen so much as demanding market rates for California exposed debt instruments. Anybody here ready to lend the Poway School District some money in anticipation of them getting paid back but the State and then paying you? Thought not.

A useful peek behind the curtain is on the Stone & Youngberg web site. This audience is smart enough to figure out the meaning. In the anticipation that Young Specuvestor™ will read as well; California is hated by the lending community. Don't pay any attention to the ratings. California is paying junk rates for short terms.

From the LATimes, "Credit crunch puts California governments in a corner":

Credit crunch puts California governments in a corner

State and municipal payrolls may be unmet and services cut if debt markets don't loosen up soon, leaders warn.

By Marc Lifsher, Los Angeles Times Staff Writer

October 2, 2008

With credit markets all but paralyzed and state and local governments unable to borrow money, California officials joined calls Thursday for quick approval of a financial bailout plan working its way through Congress.

The warnings were stark, including suggestions that operating funds to pay state workers, teachers or even healthcare workers could dry up in the weeks ahead.

"It is daunting that California, the eighth-largest economy in the world, cannot obtain financing in the normal course of its business to bridge our annual lag between expenditures and revenues," Gov. Arnold Schwarzenegger wrote in a letter to the state's congressional delegation in Washington.

California is swiftly running out of time to float $7 billion worth of short-term debt needed to pay workers and bills as early as next month, state Treasurer Bill Lockyer warned in his own letter.

"This isn't just a gridlock in Washington problem or a Wall Street financial problem, there are real-life impacts on local school districts, on providing healthcare for the aged and on and on," he said.

The threat of a prolonged cash crunch has leaders of the main state workers union alarmed, said Jim Zamora, a spokesman for the Service Employees International Union Local 1000, which represents 95,000 people....
In the meantime, local governments, school districts and public agencies are shying away from selling bonds because of a lack of buyers or demands that they pay extremely high interest rates.
"All we know is that we can't do it today, we couldn't do it yesterday, and we couldn't do it for the last week and a half," he said.

According to a trade publication, the Bond Buyer, at least five public agencies in California are having trouble finding buyers for their municipal debt, known as munis.

Read the article for some juicy quotes. Storm's a' comin'.

God will help me to forgive him

I was going to title this "Nigel Grows a Pair" but...

I'm wondering if maybe some Haterz tracked down the address or maybe even a phone call from law enforcement or family put the fear in Nigel and his SO. Talk amongst yourselves will I get the story.