Tuesday, January 6, 2009

Wednesday January 7 Housing and Economic stories

TOP STORIES:

SEC Said to Examine More Ponzi Schemes After Madoff - (www.bloomberg.com) They should start by investigating the US Government and the ponzi scheme called State and Federal pension funds and Social Security. These are truly the biggest ponzi schemes in the history of the world. U.S. regulators working to untangle Bernard Madoff’s alleged $50 billion Ponzi scheme are probing other money managers suspected of using similar tactics, two people with knowledge of the inquiries said. The U.S. Securities and Exchange Commission is pursuing at least one case in which investors may have been cheated out of as much as $1 billion, according to a person, who declined to name the manager and asked not to be identified because the probe isn’t public. Regulators may discover additional Ponzi arrangements as declining stock markets prompt investors to withdraw their cash and they question how their money is being managed. This week, the SEC said it halted what the agency described as a $23 million scam targeting Haitian-Americans, and said the Florida- based operators as recently as last month sought more investors.

Desperate Retailers Try Frantic Discounts and Giveaways - (www.nytimes.com) At a dealership on the outskirts of Miami, people who agree to buy one Dodge Ram truck can get a second truck or car — free. In 415 supermarkets across the East, customers who bring in a prescription can walk out with free antibiotics. And one clothing chain, not to be outdone, has started offering three suits for the price of one. An era of desperation marketing is at hand, with stores and automobile dealerships adopting virtually any tactic that might grab the attention of frightened consumers. After one of the worst holiday seasons in decades, businesses are doing whatever they can to clear their shelves and make way for spring merchandise. Sales of 50 percent off stopped capturing the attention of customers weeks ago, so stores are layering discounts on top of discounts, and trying to lure shoppers with promises of giveaways, bulk bargains and other gimmicks. “Retailers are trying everything in the book,” said C. Britt Beemer, chairman of America’s Research Group, a consumer research firm. “You’re seeing things like, ‘Buy one, get two free.’ That’s just unheard of, and the item you’re buying isn’t even full price.”

Obama Considers Major Expansion in Aid to Jobless - (www.nytimes.com) The Democratic economic recovery package may include expanded government-assisted health care insurance and unemployment compensation. President-elect Barack Obama and Congressional Democrats are considering major expansions of government-assisted health care insurance and unemployment compensation as they begin intensive work this week on a two-year economic recovery package. One proposal, as described by Democratic advisers, would extend unemployment compensation to part-time workers, an idea that Congressional Republicans have blocked in the past. Other policy changes would subsidize employers’ expenses for temporarily continuing health insurance coverage to laid-off and retired workers and their dependents, as mandated under a 22-year-old federal law known as Cobra, and allow workers who lose jobs that did not come with insurance benefits to be eligible, for the first time, to apply for Medicaid coverage.

The Irish Economy’s Rise Was Steep, and the Fall Was Fast - (www.nytimes.com) Everything, it seems, has grown worse here. The recession started earlier and its bite has been deeper. Housing prices have fallen by as much as 50 percent. Bank shares have plummeted by more than 90 percent. Unemployment is approaching 10 percent. The roots of Ireland’s fall date to more than 20 years ago, when a clutch of economists, politicians and civil servants put their heads together in this very pub and planted the philosophical seeds for the Irish economic miracle. Known widely as the “Doheny & Nesbitt School of Economics,” these beery musings soon became government policy that chopped taxes in half, sharply reduced import duties and embraced foreign investment — a radical transformation that gave birth to the Celtic Tiger and perhaps the most open and vibrant economy in Europe. But beyond the glow of this sudden efflorescence that made Ireland the fourth most-affluent country in the Organization for Economic Cooperation and Development, a housing bubble had begun to form. Low interest rates, a wave of inward immigration and a bank lending spree drove housing’s share of the economy to 14 percent, the highest in Europe, from 5 percent. Developers like Mr. Dunne became multimillionaires and — much like the hedge fund and private-equity elite in America — became visible public and cultural figures. They were living large in a country just coming to grips with its ability to show a little swagger. Ireland’s policy makers, like their counterparts in the United States and Britain, were seduced by record tax inflows and a full-employment economy. They paid little heed to the lonely voices that warned of the crash that finally came over the summer, when interest rates in Europe began to rise. Banks that had steered more than 60 percent of their loans toward property stopped lending, and asset values plummeted. “We have repeatedly warned that the government’s housing policy was extremely dangerous,” said John Fitz Gerald, an economist at the Economic and Social Research Institute, a leading policy center in Dublin, who has long urged that the government stanch housing demand by raising taxes. “You will now see unemployment going to 10 percent and we will experience a sharp drop in output.”

Microsoft Layoffs And Mortgage Walk Aways In Seattle - (www.geldpress.com) y some accounts, the Seattle housing market has held up very well during the last few years. Talk to any real estate agent or loan officer in Seattle, and they still seem completely oblivious to the reality of the collapsing bubble. But measuring objectively with actual data points tells a different story. The Case Shiller housing value index is one widely available objective method. The index values are measured off of the base of January 2000 prices, where all cities are given a value of 100. According to the index, Seattle housing peaked in July 2007, with a value of 192.30. This means that housing prices were 92% more expensive in July 2007 than they were in January 2000. The latest available index reading is from September 2008, with Seattle showing a value of 172.84. This corresponds to a greater than 10% housing price depreciation in Seattle in just over a year. April 2006 showed a Case Shiller index reading of 172.28, the closest point to the September 2008 data point. This means that that nearly everyone that purchased a Seattle home after April 2006 is now underwater.

Divorces Complicated By Housing Crash - (www.nytimes.com) Of course Marci wants her husband to buy her out. Then she can make more money than what they both know the house is worth. Nice try Marci. When Marci Needle and her husband began to contemplate divorce in June, they thought they had enough money to go their separate ways. They owned a million-dollar home near Atlanta and another in Jacksonville, Fla., as well as investment properties. Now the market for both houses has crashed, and the couple are left arguing about whether the homes are worth what they owe on them, and whether there are any assets left to divide, Ms. Needle said. “We’re really trying very hard to be amicable, but it puts a strain on us,” said Ms. Needle, the friction audible in her voice. “I want him to buy me out. It’s in everybody’s interest to settle quickly. That would be my only income. It’s been incredibly stressful.” Chalk up another victim for the crashing real estate market: the easy divorce. With nearly one in six homes worth less than the mortgage owed on it, according to Moody’s Economy.com, divorce lawyers and financial advisers around the country say the logistics of divorce have been turned around. “We used to fight about who gets to keep the house,” said Gary Nickelson, president of the American Academy of Matrimonial Lawyers. “Now we fight about who gets stuck with the dead cow.”

Krugman: Keep spending! - (optionarmageddon.ml-implode.com) As the Obama administration prepares its trillion-dollar “stimulus” package, economists like Paul Krugman are providing rationalizations for why such a package is necessary. In his column today, he expands his spend-anything-to-get-the-economy-going-again argument, excoriating indebted states and municipalities for cutting back. He makes it clear that his preferred solution would be for the Federal Government to take over state budget items currently facing cutbacks. Naturally, he says nothing about where this money is supposed to come from. Regular readers of this blog know there are only two places the money can come from: taxpayers or the printing press. His column deserves to be taken apart piece by piece: No modern American president would repeat the fiscal mistake of 1932, in which the federal government tried to balance its budget in the face of a severe recession. The Obama administration will put deficit concerns on hold while it fights the economic crisis. But even as Washington tries to rescue the economy, the nation will be reeling from the actions of 50 Herbert Hoovers — state governors who are slashing spending in a time of recession, often at the expense both of their most vulnerable constituents and of the nation’s economic future. Funny, I thought state cutbacks were driven by plummeting tax receipts. In New York State alone, 20% of the tax base disappeared when Wall Street imploded. Now, state governors aren’t stupid (not all of them, anyway). They’re cutting back because they have to — because they’re caught in a fiscal trap.


OTHER STORIES:

U.S. Debt Expected To Soar This Year - (www.washingtonpost.com)
Manufacturing Reports Show Depth of Global Downturn - (www.nytimes.com)
Governors Call for $1 Trillion Stimulus to Offset Budget Cuts - (www.washingtonpost.com)
Chrysler gets $4 billion U.S. government loan - (www.reuters.com)
Mnuchin, Paulson & Co. in Group Buying IndyMac Bank - (www.bloomberg.com)
Risk Mismanagement - (www.nytimes.com)
Former Sen. Fred Thompson on the Economy - (www.blip.tv)
USSR was better prepared for collapse than US - (www.energybulletin.net)
Dungeons and Dragons and Derivatives and DOOM - (ashizashiz.blogspot.com)

The Crash in Conventional Wisdom - (www.washingtonpost.com)
Bubble blindness - (krugman.blogs.nytimes.com)
The Year Of Banking Disastrously - (www.theherald.co.uk)
2009 Real Estate Forecast: Troubles Spread - (www.businessweek.com)
Housing market's woes could get worse - (msnbc.msn.com)
Boom, Bust, Repeat - (www.nytimes.com)
Skaters Jump In as Foreclosures Drain the Pool - (www.nytimes.com)
Silicon Valley Foreclosures vs. Resales - (www.viewfromsiliconvalley.com)

HUD's 2000 Announcement of $2.4 Trillion To Drive Prices Out Of Reach - (www.hud.gov)
Harry Dent Says Real Estate To Fall Much Further - (www.youtube.com)
21 Dumbest Moments in Business 2008 - (money.cnn.com)

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