Sunday, November 30, 2008

Tanta Passes

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

Wednesday, November 26, 2008

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?

Tuesday, November 25, 2008

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.
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.

Friday, November 21, 2008

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]

Wednesday, November 19, 2008

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.
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.

Tuesday, November 18, 2008

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?

Monday, November 17, 2008

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.

Sunday, November 16, 2008

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
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?

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.

Saturday, November 15, 2008

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.

Friday, November 14, 2008

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:

Thursday, November 13, 2008


The bald man, in the marketplace with a TARP.

He did it.

Wednesday, November 12, 2008

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%?

Tuesday, November 11, 2008

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.

Monday, November 10, 2008

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.

Saturday, November 08, 2008


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.

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.

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.

Friday, November 07, 2008


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).

Thursday, November 06, 2008

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.

Tuesday, November 04, 2008

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.

Sunday, November 02, 2008

Round Trip and Then Some

Our old friend Wrightwood 92397. But this one special. We knew it was coming but so soon? 1280 Irene St. We've seen the backstory before:

Dec 22, 2004 $155,000
Feb 22, 2006 $221,500
Jul 07, 2008 $102,000

And what makes this special? The price; $94, 900. Sub $100k has come to SoCal.

Mortgage Broke(r)

If casualties of the slumping economy are to be found anywhere, they'll be at the go-to place for small, quick-turn loans. Russell began noticing new faces coming through the door near the end of 2007.

One of the first was a man who came in with his fiancée. He explained that he'd been in the mortgage business but had fallen on hard times. They were on the verge of losing their house. He couldn't put his mortgage payment on his credit card, so he used it to buy new goods that he wanted to use as collateral for a loan.

Nelson Muntz said it best. Financial geniuses indeed. Rest of the article here.