Thursday July 29 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Crisis Awaits World’s Banks as Trillions Come Due - (www.nytimes.com) Millions of people with private sector retirement schemes are likely to see their pensions reduced by as much as 25 per cent after the Government announced plans to change the way they are calculated. Pensions minister Steve Webb said there were plans to link pension payments to a lower measure of inflation. The existing system links pension increases to the Retail Prices Index which includes housing costs such as mortgage interest payments. But the Government plans to link it to the Consumer Prices Index instead, which is typically lower. The move would reduce the burden on pension schemes and is expected to be introduced next year. It would be applied to all final salary pensions, as well as payments made by the Pension Protection Fund – a lifeboat fund for workers who have lost their pensions – and the Financial Assistance Scheme, a Government compensation scheme. It follows the Chancellor’s announcement in the emergency Budget that most public sector pensions would be linked to CPI, which will also potentially save the Government millions of pounds. Mr Webb said the same should be applied to occupational pension schemes. “The Government believes the CPI provides a more appropriate measure of pension recipients’ inflation experiences and is also consistent with the measure of inflation used by the Bank of England,” he explained.

Deutschland uber alles does not mean a trickledown recovery in EMU - (www.telegraph.co.uk) Jean-Claude Trichet, head of the European Central Bank, last week cited thisWirtschaftswunder as evidence of durable recovery in Europe. It is no such thing. The OECD's leading indicators for June rolled over in Italy and France, as well as China and India. The IMF expects Spain's economy to contract by 0.4pc this year. It has lowered its forecast for the eurozone from 1.5pc to 1.3pc in 2011. "Downside risks to the recovery have risen sharply," it said. The ECB is barely on speaking terms with the IMF – the "Inflation Maximizing Fund" as it was dubbed in a Bundesbank memo. "The IMF has not caught up to the reality in Europe," said ECB über-hawk Jürgen Stark on Friday. Beware, this is the same insular ECB that raised rates in July 2008 on the eve of the Lehman crisis when half of Europe was already in recession, mistaking the deflationary oil spike for an incipient 1970s inflation spiral. Can one ever trust their judgment again? Yes, Germany is on the cusp of EMU "outperformance", but that is more curse than cure for Club Med laggards. Germany is benefiting from a currency that is as misaligned as China's yuan, though this mercantilist advantage is disguised within Europe's monetary union. Crudely, Germany is doing to Spain, Italy, and increasingly France, what China has been doing to the rest of the world – but more so – by holding down its exchange rate.

Why the Bond Markets are Signalling a Depression - (www.telegraph.co.uk) Something potentially momentous has happened in financial markets in the past two months. Virtually unnoticed, the yield on long dated pan-European sovereign debt has slipped below that on equities. So what, you might say; that's what happens when shares go down and bonds go up. But in fact this reversal in the traditional relationship between bonds and equities is an extraordinarily unusual event. It's happened only three times in the past 50 years. Alarmingly, all three of those occasions have been in the past decade. What are markets trying to tell us? There are two ways of looking at the phenomenon. Either it is an aberration, and therefore a buy signal for stock markets, or much more worrying, it marks the final death knell for Europe's 60-year love affair with equities, and therefore the start of a generalised retreat from risk that will see the economy stagnate or worse for perhaps decades to come.

Detroit's Do-It-Yourselfers Provide City Services - (online.wsj.com) Although he retired long ago, Eddie Edwards has found work that keeps him busy for much of the year: staving off blight on his block. This summer, the 63-year-old Mr. Edwards is chopping down tall weeds in empty lots and cleaning the alleyways behind his home and across the street. He also routinely takes care of the street sweeping, using just a broom and dust pan. "It is time-consuming," says Mr. Edwards, who spent his professional life molding glass into windshields and tail lights for Chrysler. "But I don't have anything else to do." Across Detroit, do-it-yourselfers such as Mr. Edwards are rolling up their sleeves and opening up their wallets to provide basic services that the financially strapped city can no longer manage on its own, from boarding up vacant homes to mowing lawns to maintaining parks. In some areas, residents also partner with city agencies or look to philanthropies for help. "My cellphone is full of people" who do upkeep on their own, says Brad Dick, deputy director of Detroit's General Services Department. Many think they are going it alone, he says. "They're always shocked they're not the only one." To serve an area of roughly 140 square miles, the city has 106 grass cutters, but also contracts with three vendors to mow vacant lots twice a year. If not for individual residents stepping in, Mr. Dick says, the city would be in much worse shape.

Price plunges on Sandra Bullock's former house - (www.ocregister.com) The asking price on the oceanfront Sunset Beach house that Sandra Bullock and Jesse James shared before their marriage crumbled has taken a plunge of $1,755,000. The 2-story house had a price tag of $6,750,000 when it went up for sale in April. Now it’s listed at $4,995,000. That’s a real speedy drop, but as I reported earlier today, James, who owns the 3,626-square foot house, is trying to leave Orange County and the L.A. area quickly, heading for Austin, Texas, where Bullock already lives. Their divorce in the wake of his cheating scandal has been finalized, but it’s also been widely reported that he wants his children to be able to continue their relationships with Bullock. A condo James owns near the Sunset Beach house is also on the market and the price on that was lowered to $1,195,000 from $1,290,000. James bought the house in 2003 for $3.5 million.

Highlights:

· The house, on a 40-foot by 90-foot corner lot, was remodeled from the ground up in 2002.

· The home has 4 bedrooms with in-suite baths plus a powder room and a large media room.

· There’s a glass-enclosed swimming pool with ambient mood lighting.

· The master bath shower has glass walls, for ocean views.

· A 3-car garage has a built-in tool crib and space for an extra car or workshop.

· No surprises here – the home has a “state of the art surveillance system with multiple security cameras, professional quality video and audio systems throughout.”

FHFA Proposes Rule Clarifying Fannie Mae, Freddie Mac Conservatorships - (www.housingwire.com) The Federal Housing Finance Agency (FHFA) sent a proposed rule to the Federal Register to clarify the terms of conservatorship and receivership. The rule would apply to operations at Fannie Mae, Freddie Mac and the Federal Home Loan Banks (FHLBs) under the Housing and Economic Recovery Act of 2008 (HERA). It aims to bring conservatorship and receivership operations into greater transparency and models many provisions in the Federal Deposit Insurance Corp.(FDIC) rules for conservatorships and receiverships, according to an FHFA statement. It comes at a time when the future of the government-sponsored enterprises (GSEs) is in question, with some calling for their eventual wind-downs. As HousingWire explores in the July magazine issue, a bill submitted in the House of Representatives details the timeline to take the GSEs out of conservatorship and eventually completely remove the government's guarantee of Fannie and Freddie.

OTHER STORIES:

Millions in UK to see private sector pensions reduced - (www.telegraph.co.uk)

Volcker Pushes for Reform, Regretting Past Silence - (www.nytimes.com)

The economy as confidence game - (www.washingtonpost.com)

Why you're not making more money than a decade ago - (www.marketwatch.com)

Is Now a Good Time to Buy a House? - (Charles Hugh Smith at www.oftwominds.com)

The Crisis & the Euro - (www.nybooks.com)

Housing Double Dip Appears To Be Underway - (www.forbes.com)

San Diego Explained: The Housing Bubble - (www.voiceofsandiego.org)

Microsoft, Fujitsu near deal: report - (www.cnbc.com)

J&J sued over children's drug recall: report - (www.cnbc.com)
French group may invest in Cameroon smelter - (www.cnbc.com)

GM drops plan for in-house financier - (www.cnbc.com)
Obama promises more aid for combat vets - (www.cnbc.com)

Illinois Stops Paying Bills, but Can't Stop Digging Hole - (www.nytimes.com)

Office Vacancy Rate in U.S. Climbs to 17-Year High as Jobs Recovery Slows - (www.bloomberg.com)

$3.5T in commercial real estate debt and $10.3T in residential real estate debt - (www.doctorhousingbubble.com)

V-shaped recovery, where art thou? - (www.csmonitor.com)

Housing Market Weighs on the Struggling Economy - (www.pbs.org)