Friday January 16 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Jim Rogers: Bad decisions should be punished, not rewarded - (www.youtube.com) Great video by the great Jim Rogers. Great explanation of how bankruptcy should work and why it would be the best option for many companies and banks.

Harbinger Capital imposes limits on withdrawals - (www.ft.com) Harbinger Capital, the activist US hedge fund headed by Philip Falcone that shot to fame in 2007 with a lucrative bet against subprime mortgages, joined the list of funds restricting withdrawals for investors a day before the end of last year, according to two investors. Harbinger’s main fund rose almost 43 per cent in the first six months of last year but lost all its profits and ended the year down 27.1 per cent. After redemptions and losses, the fund now manages about $6bn, one investor said, down from a peak of almost $20bn last summer.

Empty Nesters Find Empty Nest Eggs - Plan B for retirees who counted on home equity - (www.insidebayarea.com) The safety net is almost gone, the nest egg is cracking. Many Americans have recently found themselves changing retirement plans after losing a substantial amount of home equity as the housing market and the overall U.S. economy struggle. These folks face years of living on fixed incomes from pensions, 401(k)s or IRAs, and Social Security, but don't have the time to recover their losses. Homeowners who've tapped their home equity, then spent it like yellow-and-blue Monopoly money, find themselves with no more funds to extract. Some have been laid off, relinquished their homes in a foreclosure, or lost pensions after their employers' businesses failed. Ideas of a comfy retirement full of relaxation and travel have been abandoned. The good news is about 30 percent of homeowners have no mortgage at all. So even though their properties are probably worth less now than a few years ago, these people can tap into that equity cushion if necessary. The bad news, however, is that about one in six with a mortgage now owe the bank more than their homes are worth, according to Moody's economy.com. Most of these are property owners who purchased their homes within the past few years, or refinanced their properties and siphoned off too much equity. Knowing that, it's time for Americans to explore other options other than relying on home equity as a fail-safe, especially if they have no other retirement investments or savings. Options include downsizing their homes, selling assets, postponing retirement by working longer, and signing up for a reverse mortgage. These decisions require heavy thought because each has its challenges and risks. Keep on working: Choices have been difficult for Ken King, 61, who once planned to retire in his early to mid-60s. The value of his home has dropped $70,000, so he's scrapped plans to sell the five-bedroom house and downsize, because the savings won't be substantial enough to make it a smart move. He's also seen his 401(k) lose value. So, King, a credit counselor in Sheboygan, Wis., says he will likely work into his early 70s to compensate. "This is something I wouldn't have considered even thinking about 1½ years ago," said King, adding that priorities have changed this year among those he counsels. "A year ago, we were talking to people about what they need to do just to make it," King said. "Now we're talking to people about what they have to do to survive."

Hard times come to Las Vegas after 20-year boom - (www.sfgate.com) is not just a place people are born and live. Las Vegas is an enterprise. It is a deal people enter, a set of givens agreed upon: More is better. Biggest is best. To live in Las Vegas is to stake your future on this enterprise - for better or worse. For the past 20 years, it has been for better. The unemployment rate was minuscule. Gleaming new casinos were built on "old" casinos like so many sandcastles on a beach. Hundreds of neat stucco houses promised a palm tree or a pool or both for nearly everyone with a paycheck. In Las Vegas, average people are versed in the statistics that impress relatives from back East and testify to the success of this enterprise: 39 million visitors, almost 140,000 hotel rooms, 10 new schools a year. It was a place that not only believed its own hype, but depended on it. And so, it has been a shock as, quietly and slowly, everything has changed. Like many U.S. cities, Las Vegas is watching its economy reel. Home values have plummeted. Foreclosures have exploded. Unemployment is the highest it's been in at least 20 years. For the first time in decades, the population has stopped growing. Casino projects are on hold. Planes full of free-spending tourists are landing with less frequency. Long the embodiment of American confidence, the city is now in limbo. In Las Vegas, the economic mess is also an identity crisis. "Jackpot Town!" the headline read. And above it was the smiling face of Jesse Grice. He was just 27, six years into his career as an Elvis impersonator. A young Elvis Presley. A fit, fresh, gold lame Elvis, on the cover of Time Magazine. As he tells it now, even then in November 1998, he could not believe his luck. He'd loved this town since he was a teenager in Dallas, when his father, a salesman, sold enough Tropicana orange juice to win a trip to Sin City, then returned with tales of the fantasy land in the desert.

Reform plan raises fears of Bank secrecy - (www.telegraph.co.uk) The Government is set to throw out the 165-year old law that obliges the Bank to publish a weekly account of its balance sheet – a move that will allow it theoretically to embark covertly on so-called quantitative easing. The Banking Bill, which is currently passing through Parliament, abolishes a key section of the law laid down by Robert Peel's Government in 1844 which originally granted the Bank the sole right to print UK money. The ostensible reason for the reform, which means the Bank will not have to print details of its own accounts and the amount of notes and coins flowing through the UK economy, is to allow the Bank more power to overhaul troubled financial institutions in the future, under its Special Resolution Authority. My, it appears the time is "a quarter past destroy-the-pound o'clock"... Note, however, that this article misses the huge point that the Fed did essentially the same thing by eliminating M3 money supply reporting all together in 2006 (at the same time they picked Bernanke, whose one-trick gig was advocating quantitative easing. Incidentally, you can now get the data from here for free or Shadowstats, by subscription.) So, basically, both the world's leading central banks will now be opting not to report on a timely basis (or at all) key aspects of what they are doing regarding quantitative easing (back-door money printing).

Rich turning to gold bars for safety - (www.telegraph.co.uk) Merrill Lynch has revealed that some of its richest clients are so alarmed by the state of the financial system and signs of political instability around the world that they are now insisting on the purchase of gold bars, shunning derivatives or "paper" proxies.

Who does the appraisal, and how much they're paid, matter - (www.latimes.com) When you apply for a mortgage to buy or refinance a house, should you be concerned that your appraiser is being paid much less -- maybe just half -- of the $300 to $600 you're charged on your settlement sheet? Should you know who pockets the rest or that cut-rate fees are too low to attract the most experienced, highly trained appraisers? Should you care that the appraiser might be pushed to come up with a number so fast -- almost overnight in some cases -- that he or she doesn't have the time to do a proper inspection and accurate evaluation of comparable properties, pending sales contracts and local market trends? All these questions are at the core of a swirling controversy created by the release of new appraisal standards by Fannie Mae and Freddie Mac, the giant mortgage investors. The "home valuation code of conduct," issued by the companies' federal regulator in late December, is under attack by the very industry it purports to protect -- real estate appraisers. It's virtually certain to turn into a political issue in the new Congress and may be the subject of a federal court suit. The code of conduct, now scheduled to take effect May 1, is the end product of a settlement involving New York Atty. Gen. Andrew M. Cuomo, the Federal Housing Finance Agency and the two congressionally chartered mortgage companies the agency oversees. The settlement came after Cuomo threatened Fannie and Freddie with an investigation aimed at ferreting out alleged appraisal overvaluations and evidence of illicit pressure on appraisers to "hit the numbers" needed to close loans. As part of the deal, the two companies and their federal regulator agreed to create standards to ensure that appraisals are accurate and insulated from pressure -- whether from lenders, mortgage brokers, realty agents or third-party appraisal management companies. But four of the largest appraisal organizations, including the Appraisal Institute and the American Society of Appraisers, issued a joint statement charging that the code will force lenders to shift their valuation assignments to third-party appraisal management companies, abandoning the traditional system of using local appraisers selected by mortgage loan officers. The code bans brokers, who originate a substantial share of new mortgages, from any involvement in selecting appraisers.

Service Union Chief Met With Blagojevich - WSJ.com - (online.wsj.com) Andy Stern, head of the nation's fastest-growing labor union, met with Illinois Gov. Rod Blagojevich last fall around the time that federal prosecutors allege the governor was discussing ways to sell the Senate seat vacated by President-elect Barack Obama for a lucrative union position. Mr. Stern, president of the 1.9-million-member Service Employees International Union, met with Gov. Blagojevich on Nov. 3, the day before Mr. Obama was elected. Tom Balanoff, who is head of SEIU in Illinois, also attended the meeting. Mr. Balanoff was previously identified as an unnamed SEIU official in a complaint brought by the U.S. attorney's office against the governor. This is the first indication that Mr. Stern had met with the Illinois governor during the period under investigation. The meeting was reported Tuesday night by the Associated Press, which said it reviewed a copy of Mr. Blagojevich's official calendar. The governor, who was arrested on Dec. 9 on federal corruption charges, has previously denied any wrongdoing. Lucio Guerrero, Mr. Blagojevich's spokesman, said he wasn't familiar with the Nov. 3 meeting and couldn't comment on it. Michelle Ringuette, an SEIU spokeswoman, declined to provide any details of the Nov. 3 meeting. "Our commitment from the beginning has been to respect the U.S. attorney's investigation and refrain from public comment on the specifics, and we will honor that policy," she said. "As we have previously stated, no one at SEIU has been accused of any wrongdoing." Mr. Stern didn't return a phone call seeking comment. Ray Quintanilla, a spokesman for the SEIU Illinois state council, also declined to comment on the meeting, citing the continuing investigation.

Americans Worry about Empty Nest Egg Business Wire Find ... - (www.businesswire.com) While some Americans worry about having an empty nest, a growing number are losing sleep over having an empty nest egg. More than 30-percent of American workers say the fear of outliving their savings is keeping them up at night1. They aren't alone. The Principal Financial Group([R]) and other retirement industry leaders are meeting in Washington, DC May 14, 2008 to discuss ways Americans can turn their nest eggs into an income for life. Renee Schaaf, vice president, Retirement and Investor Services at the Principal Financial Group, will join other industry experts in discussing Completing the Retirement Equation: Making Savings Last a Lifetime. "It's easy to understand why Americans are worried. They have taken on more and more of the responsibility for saving for retirement. They also have the responsibility for managing that savings so it lasts as long as they do," said Schaaf. "That's a much more complicated task. They need simple tools and plenty of education. This conference brings together some of the best minds in the country. Together, we can help Americans achieve and maintain retirement security."



OTHER STORIES:

Big names wait in wings for end to IPO drought - (www.ft.com) Trying to raise money in the public equity markets has, for most of the past 18 months, been very challenging. Those hoping for an end to the drought – which spread even as Visa staged the largest ever float by a US company with a $17.9bn offering last March – are likely to be disappointed. With equity markets still displaying heightened volatility, and as scandal and woe in the financial and corporate worlds continue to dominate the news, companies have decided to put any plans to go public on ice. EDITOR’S CHOICE
Downturn hits rates of debt recovery - (www.ft.com) Investors face the prospect of much steeper losses on the debts of distressed companies in the credit crunch than in previous downturns. The combination of the severity of the downturn and the complex way corporate debts were structured in the credit boom is reducing rates of recovery of funds invested in companies that default.EDITOR’S CHOICE
Obama promises to overhaul Tarp - (www.ft.com)
A Plan to Jump-Start Economy With No Instruction Manual - (www.nytimes.com)
Consumers find it harder to get, keep credit - (www.chicagotribune.com)
Germany set to extend fund for rescue - (www.ft.com) The German government has agreed to take stakes in any large industrial companies facing insolvency because of credit shortages, according to leaders of chancellor Angela Merkel’s Christian Democratic Union. Ms Merkel, whose government will on Monday adopt a two-year, €50bn ($67bn, £44bn) fiscal package, the largest stimulus in Europe since the start of the financial crisis, said measures would include a €100bn “Germany fund” that would issue credit guarantees to help cash-starved businesses raise debt.
No Longer Doctor Doom. Now He's Doctor Death. - (ashizashiz.blogspot.com)

How Far Could Manhattan Real Estate Fall? - (blogs.wsj.com)
Economics is stunted by groupthink - (economix.blogs.nytimes.com)
Oversight Panel Blasts Bailout's Lack of Accountability - (www.bloomberg.com)
Mortgage Payments Should Be Lower Than Rents - (www.seekingalpha.com)
England interest rates cut to lowest since 1694 - (not a typo) - (finance.yahoo.com)
What you need to know about interest rates - (www.guardian.co.uk)

Debt-To-Income Ratios: The Forgotten Variable - (www.irvinehousingblog.com)
Knowing when to get in, and out - (www.latimes.com)
Unintended consequences and history - (www.prudentbear.com)
Why Does Your Devalued House Have Such a High Tax Rate? - (www.time.com)
Geithner Preparing Overhaul Of Bailout - (www.washingtonpost.com)
Banks and the Avalanche of Deflation - (news.morningstar.com)
Redefining Rich and Poor In a Shrinking Global Economy - (www.seekingalpha.com)
Peter Schiff predicts doom of dollar - (www.youtube.com) A conversation about Obama's economic stimulus package - (www.charlierose.com