Wednesday January 28 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Financial Firms Need $1 Trillion More in Equity, Rajpal Says - (www.bloomberg.com) Financial companies must receive another $1 trillion of equity capital before stocks can stage a sustained recovery, said Amit Rajpal, an asset manager at London- based hedge fund firm Marshall Wace LLP. Governments will have to provide the money by buying common shares to restore confidence and encourage private investors to step back in, said Hong Kong-based Rajpal, who manages the Marshall Wace Global Financials Fund. The world’s largest financial institutions have raised more than $920 billion to boost capital eroded by $1 trillion of asset writedowns and credit losses since the credit crisis began, according to data compiled by Bloomberg. The 354-member MSCI World Financials Index plummeted 58 percent in the past year, the worst-performing group on the MSCI World Index. “You’ve got weakness in credit, a very thin capital position; there’s no way to actively value these stocks until you get the right amount of capital in these businesses,” Rajpal said in an interview Jan. 20. “Until the governments see the light and provide common equity to these institutions, I don’t see financial stocks turning around.”

It Could Come to This (www.silverbearcafe.com) - The recession is worse than we are being told and its social consequences could be explosive. There is something oddly muted about current discussion of our economic difficulties. The Government fears we may have to wait until the second half of the year for an upturn. The Opposition warns that counter-recessionary measures may mean higher taxes in future. We should be so lucky. Doubtless those in charge of our destiny are wary of sparking panic. Hence their reassurances that whatever we face, it won't be anything like the 1930s. On this, at least, they're right. Things could be far worse. Today, a frozen credit market and impending deflationary spiral are combined with unprecedented global imbalances. The predicament this creates will not be dissolved by fiscal stimuli, debt guarantees and quantitative easing. Such measures may however make things worse. The US cannot run a deficit big enough to keep its people in work. Attempting to do this will doubtless prompt increasingly impoverished but ever more indebted Americans to demand protectionism. This seems likely to prompt competitive devaluation and the disintegration of the global economic system. In a worst-case scenario, strikes, riots and looting could all occur – forcing the Government to impose martial law. In such a world, Britain's debt will leave our country particularly disadvantaged, as sterling's slide is already indicating. UK bonds are likely to become unsaleable long before their American equivalents. If our public finances collapse, the IMF is unlikely to be in any position to rescue us. The Government may find itself obliged to default on pensions and benefits, ravage public services and resort to hyperinflation to dissipate its liabilities. This could make the middle classes as disaffected as the workless. Our society is no longer cohesive enough to accept whatever share-out of pain authority dictates. Strikes, riots and looting could all occur. Martial law may be required, as Britain loses, perhaps for ever, its standing as a serious world player.

Pound Sinks As Britain Teeters On Edge Of Bankruptcy - (Mish at globaleconomicanalysis.blogspot.com) The British Pound has imploded on fears of bank nationalization and Prime Minister Gordon Brown’s plan to give the Bank of England unprecedented powers to buy securities. This chart paints the not so pretty picture. That is not a surprise to me. January 22, 2008: Global Decoupling Myth Shattered In Equity Selloff. Kiss goodbye the idea that the UK would decouple from the US credit crunch. The technical picture of the British Pound is weak. There has been a major trendline break, the 50EMA seems to be rolling over, and there is a big cross under the 50EMA. A pullback to the 200EMA seems likely. There is a good chance the entire runup from the April 2006 low is retraced. We got that retrace and then some. Dollar bulls were right much of 2008, especially against the Pound. The UK is one country hell bent on outdueling Bernanke and the US in foolish activity. Pound At Lowest Level Versus Dollar Since 1985: Bloomberg is reporting Pound Falls to Lowest Versus Dollar Since 1985 on Bank Concern. The pound fell to its weakest level against the dollar since Margaret Thatcher was U.K. prime minister and dropped to a record against the yen for a second day on speculation the government will nationalize banks. “The U.K.’s imploding,” said Jonathan Gencher, Toronto- based director of currency sales at BMO Capital Markets, a unit of Canada’s fourth-largest bank. “You have all the concern about the financial sector and which banks are going to be nationalized. You have expectations that the Bank of England is going to be moving toward zero interest rates. That’s weighing on the pound.” Sterling dropped as much as 2.2 percent to $1.3622, the lowest level since September 1985, before trading at $1.3740 at 1:43 p.m. in New York, Against the yen, the pound fell 2.8 percent to 121.59 after reaching the all-time low of 119.42. The pound fell 1.1 percent to 93.61 pence against the euro. The Bank of England will lower its benchmark rate by a half-percentage point to 1 percent at its Feb. 5 meeting, according to the median forecast of 28 economists surveyed by Bloomberg News. Bank of England May Start Buying Assets: In news that rightfully should sink the pound, King Says BOE May Start Buying Assets Within Weeks Bank of England Governor Mervyn King said officials may start buying assets in the next weeks to loosen credit markets as the lowest interest rates since 1694 fail to avert a “marked” recession.

If the state can't save us, we need a licence to print our own money - (www.guardian.co.uk) It bypasses greedy banks. It recharges local economies. It's time to think seriously about an alternative currency. In Russell Hoban's novel Riddley Walker, the descendants of nuclear holocaust survivors seek amid the rubble the key to recovering their lost civilisation. They end up believing that the answer is to re-invent the atom bomb. I was reminded of this when I read the government's new plans to save us from the credit crunch. It intends - at gobsmacking public expense - to persuade the banks to start lending again, at levels similar to those of 2007. Isn't this what caused the problem in the first place? Are insane levels of lending really the solution to a crisis caused by insane levels of lending? Yes, I know that without money there's no business, and without business there are no jobs. I also know that most of the money in circulation is issued, through fractional reserve banking, in the form of debt. This means that you can't solve one problem (a lack of money) without causing another (a mountain of debt). There must be a better way than this.

Tim Geithner, Makes Me Wonder - (thelastgoodidea.blogspot.com) How can a guy who had the kind of experience and net worth that Mr. Geithner has, be using Turbo Tax to do his taxes? We're not talking about some guy who lives in a $200,000 house with his wife, 2 kids and a dog filing a plain vanilla tax return. This guy was short $34,000 in Social Security and Medicare withholding for his staff. $34,000 in withholding for his staff. $34,000 in withholding. The median household income in this country is only little over $50,000. The guy makes who $50,000 isn't subject to $34,000 in Social Security and Medicare withholding. I am guessing that a guy with those kinds of resources (7 or 8 figure net worth) does not have a plain vanilla tax return. This is a man with vast experience in banking, wealth management and financial services. I guess I could buy where someone could forget to do that withholding, but I can't buy that he trusted his tax return to a piece of computer software. I have to wonder why he was being so cheap or perhaps it is something else. A good accountant couldn't have run him more than grand to do his taxes, which have to be far more than basic tax returns ordinary Americans fill out every spring. Yet he resorts to a $75 piece of software to fill out the year’s most important paperwork. The wife and I make a nice living, but we still pay a couple hundred bucks for an accountant to do our taxes. I really have to question the wisdom of have a Federal Reserve Board Chairmen who does his taxes with Turbo Tax. In my eyes, he's either foolish, naive or just plain dumb at best. I don't think that those are qualities that I want to see in a person who is being elevated to the job of Federal Reserve Chairmen. At worst, he's a bold faced tax cheat.

Bailouts and handouts are not a cure - (www.mpnnow.com) A recent letter to the editor of the Daily Messenger expressed the opinion that if common sense could solve 21st-century problems, economics would be taught in seventh grade rather than in graduate school. “As problems become more complex, common sense is, all too often, misleading,” the writer concluded. As a matter of fact, economics is taught in seventh grade. According to the state Education Department Web site, “Economics is one of the five NYS learning standards for social studies. It is a key component of building financial literacy instruction throughout pre-kindergarten – grade 12 education.” The introduction to the state core curriculum document includes this offering by shamed former Federal Reserve Chairman Alan Greenspan: “Improving basic financial education at the elementary and secondary school level is essential to providing a foundation for financial literacy that can help prevent younger people from making poor financial decisions that can take years to overcome.” (Greenspan, incidentally, is not a free market economist, though he once pretended to be.) No, the problem is not that common sense is misleading; it is that the economic policies our leaders have implemented are fallacious and shortsighted. It is neither common sense nor sound economic principle for a central banking authority, i.e. the Federal Reserve System, to manipulate the nation’s money supply; it is neither common sense nor sound economic principle for lenders to grant risky loans to achieve social objectives; it is neither common sense nor sound economic principle to bail out entities that deserve to fail. If we’re teaching otherwise in our schools, it’s any wonder we’re in deep trouble.

California Budget Crisis About to Affect People’s Everyday Lives (www.thetrumpet.com) - Ten days remain before California will begin defaulting on its obligations. California is in crisis. Lawmakers can’t agree on how to balance the budget. And the truth is that there is no easy solution. Painful decisions will have to be made. And no matter what politicians decide, it is clear that the good times are over for the Golden State. “Our state faces the most challenging budget in its history,” Gov. Arnold Schwarzenegger warned. “The combined effect of our structural deficit and the dramatic decline in revenues … have produced a two-year deficit of … nearly half of our projected 2009-2010 revenues” (emphasis mine throughout). By some estimates, California’s current expenditures through fiscal year 2010 will reach $145 billion. And state revenue will only be around $100 billion—a massive $45 billion shortfall. And that is if the economy doesn’t deteriorate more than expected, and if the state doesn’t get hit with another wave of unprecedented lightning storms, fires, drought, or other natural disasters. Lawmakers are at loggerheads over how the state is to cover expenses. The state is spending so much money that Governor Schwarzenegger could fire every single California civil servant and still not come close to balancing the budget! Even if he also fired the other 149,000 legislative aides and people who work for the state’s courts or university systems (people not directly under the state’s control), he still couldn’t eliminate the deficit. Lawmakers are spending so much money that California could become a state without employees and still not balance its books.


OTHER STORIES:

Mortgage default notices up 121% over year ago (www.ml-implode.com) - "Notices of home-loan default in San Diego County spiked by 121 percent in December, dampening hopes that the housing market dec...
the hummers are back (www.ml-implode.com) - And now that mortgage rates are at record lows, mortgage lenders are hiring again while scores of borrowers inquire about refinance opportunities. Meanwhile, homebuilders are trying to lower rates via government subsidies to spark new home sales and dump their stagnating inventories on unsuspecting buyers. On top of that, U.S. Representative Al Green introduced legislation this week to bring back seller-financed down payment assistance, despite the fact that the risky loans could sink the overworked FHA
Housing Pain Spreads into Multifamily Sector, NAHB Says (www.ml-implode.com)
Inland Foreclosure Sales Drive Calif. Housing: Report (www.ml-implode.com)
Chutzpah, thy name is Chrysler (www.ml-implode.com)
Northern Rock staff awarded 10% bonus - (www.ml-implode.com)
Economists say housing market to fall 29% - (www.lvrj.com)
The Mattress Savings Plan - (optionarmageddon.ml-implode.com)
Latest housing market trends show no signs of recovery - (www.hip-consultant.co.uk)
Buying A New House? You Better Be Careful - (www.nuwireinvestor.com)
Builders' confidence hits another low - (www.marketwatch.com)
San Diego default notices up 121% over year ago - (www.signonsandiego.com)
SoCal Prices Plunge Even Lower - (www.seekingalpha.com)
Mortgage Collateral Bears an Interest Rate Risk - (www.seekingalpha.com)
$8.5 Trillion Spent and No Relief in Sight - (dividendinc.blogspot.com)
Tax Policy and Housing - (www.irvinehousingblog.com)
Assessor seeks to cut valuations in Chicago as house values fall - (www.suntimes.com)
Bay Area rental market gives tenants an edge - (www.sfgate.com)

Bitter Bailout Beer - (www.blogspot.com)
What A Hangover - (ashizashiz.blogspot.com)
Short selling not behind British banking stock rout, regulator says - (www.chicagotribune.com)
Hedge funds’ $400bn withdrawals hit - (www.ft.com)
December home sales in California fall 38% from a year earlier – (www.latimes.com)
Intel to Shutter Five Older Plants by End of 2009 - (www.bloomberg.com)
Nokia profit slumps 69% as sales drop 19% - (www.marketwatch.com)
Toyota moves into first place - (www.ft.com)
Williams-Sonoma Will Cut 1,400 Jobs After Sales Slump - (www.bloomberg.com)
Losses Widen at United, American - (www.washingtonpost.com)
Sony Expects $3 Billion Loss - (www.nytimes.com)
GE Sags as Investors Bet Immelt Will Cede Dividend or Rating - (www.bloomberg.com)