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)

Tuesday January 27 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Wall Street crisis snares Main St. schools: Five Wisconsin school districts claim they were misled by advisers and could lose most of $200M investment - (www.cnn.com) To the advisor’s credit, he did say up-front that for the deal to go bad, you would need a depression, which is what I believe we are moving towards. Let’s face it Wisconsin, you were gambling with money you did not have in order to make up a deficit in your retirement/pension/health care funds. Lehman Brothers. Washington Mutual. And now ... Whitefish Bay Schools? The global financial crisis that claimed some of the world's biggest banks now has this suburban Milwaukee school district and four others on the brink of losing a hefty $200 million investment. Two years ago board members from the districts signed off on an investment to fund their teachers' retirement and health care benefits. Shawn Yde, business director for the Whitefish Bay School District, says he and his board members were told they were making a conservative investment in "AA" and "AAA"-rated bonds. Mark Hujik, from the Kenosha school board, says he and other board members were told they were investing in highly rated, and relatively safe, corporate bonds. But instead of buying corporate bonds, the school districts actually purchased one of Wall Street's most complex financial instruments: synthetic collateralized debt obligations (CDOs). Through the CDOs the schools were insuring the debt of more than a hundred companies, including 3M (MMM, Fortune 500), General Electric (GE, Fortune 500) and Exxon Mobil (XOM, Fortune 500). But they were also insuring debt from Lehman Brothers, Washington Mutual, Fannie Mae and Freddie Mac. With the downfall of Lehman, the failure of Washington Mutual and the government takeover of Fannie and Freddie, the debt defaults came rolling in, and the value of the schools' investment fell 95%. The districts are now suing their investment advisor, Stifel Nicolaus, and the Royal Bank of Canada - which created the investment product - calling it fraudulent and alleging they were misled from the beginning. 'You would need 15 Enrons': The school boards' complaint says the nature and risks of the investments were intentionally or negligently misrepresented, or omitted by the RBC and Stifel Nicolaus. RBC and Stifel Nicolaus denied any wrongdoing and claim the risk was clearly outlined. And it was - on paper. Board members from all five districts - West Allis, Kimberly, Waukesha, Whitefish Bay and Kenosha - signed closing documents that outlined investment risks. But according to Whitefish Bay's Yde, "the risk that was verbally provided to us is not the risks that we have in this transaction." The school districts cite multiple meetings they had with David Noack, their then-financial adviser from Stifel Nicolaus. According to an audio tape of a 2006 Whitefish Bay School Board meeting, Noack told board members, "It takes 15 defaults for us to start losing money and we have someone watching over every company every day for seven years. If it looks like it's going that way, they get out of it ...You would need 15 Enrons. You would need something to happen overnight." A videotape of another local school board meeting in May 2007 shows Noack saying, "If we stick to all investment-grade companies, you've still gotta have 10% go under, and I would assume - I'm not an economist, but that's a depression."

Circuit City collapse could hit real estate investors - (www.reuters.com) The collapse of electronics retailer Circuit City (CCTYQ.PK) could drive down shopping and strip mall rents, and deal another blow to commercial mortgage-backed securities' (CMBS) investors who have already seen their bond prices slide. After a dismal holiday shopping season and several failed attempts to sell itself, Circuit City -- having filed for Chapter 11 bankruptcy protection in November -- last week said it would close all its 567 U.S. stores and liquidate its assets. The move left 30,000 employees of the Woodland Hills, California-based company without work, and creditors -- including landlords -- lining up to get whatever they can after the company sells its inventory. "Now those landlords are in line like the rest of their creditors -- and probably in the back of the line to get paid," said Suzanne Mulvee, Property & Portfolio Research real estate strategist.

Williams-Sonoma Will Cut 1,400 Jobs After Sales Slump - (www.bloomberg.com) Williams-Sonoma Inc., the U.S. gourmet-cookware retailer, will cut 18 percent of its full-time workforce after holiday sales slumped and said its fourth-quarter profit would fall to the low range of its forecast. The San Francisco-based company said in a statement that it will eliminate 1,400 jobs by the end of the month as part of a plan to trim pretax costs by $75 million in 2009. Chief Executive Officer Howard Lester told employees of the cuts earlier today in an e-mail. Williams-Sonoma joins other retailers, including Saks Inc. and Macy’s Inc., in announcing firings or store closings in recent weeks as they reel from the worst holiday season in almost four decades. Home-furnishings retailers have been hit especially hard because of the U.S. housing slump. “To bring our infrastructure in line with today’s level of business, we have made the difficult and painful decision to further reduce our workforce across all areas of our company,” Lester, 73, said in the e-mail. “It is our sincere hope and expectation that no further major reductions will be required.”

Life Insurers Seek Lower Cash Cushions - (www.washingtonpost.com) Battered by the financial crisis, life insurers are urging regulators to let them operate with thinner financial cushions -- the capital they must hold to absorb financial shocks and cover their obligations to policyholders. The American Council of Life Insurers, an industry group, has been pleading with regulators to adopt a variety of changes in capital and reserve requirements before companies must file their annual reports for 2008. The ACLI fears that the reports could otherwise spook policyholders into dropping coverage and liquidating policies -- steps that an ACLI official said would be unwarranted and contrary to consumers' interests. The changes the industry group seeks would make companies appear healthier.

Jim Rogers: ‘UK has nothing to sell’ - (www.ft.com) The pound is a currency with no underpinning and should fall against the dollar and the euro, says Jim Rogers, chairman of Rogers Holdings and co-founder of the Quantum Fund with George Soros. He says his view reflects the UK’s dire economic situation: “It’s simple, the UK has nothing to sell.” The pound is set to fall much further according to Jim Rogers, chairman of Rogers Holdings. Is he right? Mr Rogers says the two main pillars of support for sterling have been North Sea oil and the strength of the UK financial services sector, in particular, the City of London’s role. But Mr Rogers says just as North Sea oil is running out, so London’s standing as a major financial centre is set to suffer. “I don’t think there is a sound UK bank now, at least, if there is one I don’t know about it,” he says. “The City of London is finished, the financial centre of the world is moving east. All the money is in Asia. Why would it go back to the west? You don’t need London,” says Mr Rogers. Mr Rogers thinks the pound is more vulnerable than the dollar or the euro. He says the UK housing market is arguably in a worse state than that of the US, given pockets of strength in the US and prices that are sliding across the board in the UK.

Barclays Falls Seventh Day on Nationalization Concern - (www.bloomberg.com) Barclays Plc, the U.K. bank that turned down government funding last year, declined for a seventh straight day in London trading on speculation that it may be forced to take more writedowns and be nationalized. Barclays, which dropped as much 35 percent earlier in the day, recovered to close down 9.3 percent at 66.1 pence. The shares have lost 57 percent this month, valuing the company at 5.5 billion pounds ($7.5 billion). “There is genuine fear from shareholders, who see a real risk of nationalization,” said Simon Maughan, an analyst at MF Global Securities Ltd. who has a “sell” rating on Barclays. “The whole rest of the world, operating in the same business as Barclays, has seen significant losses. There is talk that Barclays will bring its results forward to prove its case. Bring it on.”

College costs also a bubble, far beyond real value - (www.lawschool.com) As steadily as ivy creeps up the walls of its well-groomed campuses, the education industrial complex has cultivated the image of college as a sure-fire path to a life of social and economic privilege. Joel Kellum says he's living proof that the claim is a lie. A 40-year-old Los Angeles resident, Kellum did everything he was supposed to do to get ahead in life. He worked hard as a high schooler, got into the University of Virginia and graduated with a bachelor's degree in history. Accepted into the California Western School of Law, a private San Diego institution, Kellum couldn't swing the $36,000 in annual tuition with financial aid and part-time work. So he did what friends and professors said was the smart move and took out $60,000 in student loans. Kellum's law school sweetheart, Jennifer Coultas, did much the same. By the time they graduated in 1995, the couple was $194,000 in debt. They eventually married and each landed a six-figure job. Yet even with Kellum moonlighting, they had to scrounge to come up with $145,000 in loan payments. With interest accruing at up to 12% a year, that whittled away only $21,000 in principal. Their remaining bill: $173,000 and counting. Kellum and Coultas divorced last year. Each cites their struggle with law school debt as a major source of stress on their marriage. "Two people with this much debt just shouldn't be together," Kellum says. The two disillusioned attorneys were victims of an unfolding education hoax on the middle class that's just as insidious, and nearly as sweeping, as the housing debacle. The ingredients are strikingly similar, too: Misguided easy-money policies that are encouraging the masses to go into debt; a self-serving establishment trading in half-truths that exaggerate the value of its product; plus a Wall Street money machine dabbling in outright fraud as it foists unaffordable debt on the most vulnerable marks.

No-Rental Rules Hinder Recovery - (www.smartmoney.com) In growing numbers of American towns and subdivisions, that question has become anything but academic, as homeowners associations abruptly ban rentals. Blame it on the huge slump in the housing market. For owners who have to move or who own houses as investment properties, short-term rentals can bring in some cash and keep them from having to sell at a big loss. But instead of greeting renters with hosannas, many towns and subdivisions are barring their doors, arguing that tenants usher in neglect, misbehavior and even violent crime. Almost 60 million Americans live in developments governed by homeowners associations, and by some estimates as many as 40 percent of those communities enforce restrictions that keep owners from becoming landlords. Indeed, many associations are enacting even tighter anti-renter rules — even in the parts of the country hit hardest by falling prices. Often the backlash comes after the rowdy-tenant threat becomes a reality. In Sacramento an active-adult community recently erupted into a geriatric war zone over rental rules after tenants got blamed for diapers in the pool and other transgressions. The city of North Las Vegas had so much trouble with crime and vandalism, much of it attributed to renters, that it forbade new home buyers from leasing out their homes within two years of purchase.

OTHER STORIES:

Pimco Quits GM Bondholder Group After Reneging on GMAC Deal - (www.bloomberg.com)
Federal House Loan Banks may have to borrow from U.S. - (www.latimes.com)
Roubini Predicts U.S. Losses May Reach $3.6 Trillion - (bloomberg.com)
Why this contagion will be with us for years to come - (business.theglobeandmail.com)
The Rise of the Insane State - (www.geocities.com)
Months of Supply Metric is Utter Nonsense - (www.miamicondoforum.com)
SoCal home price drops nearly 35 percent - (www.signonsandiego.com)

Dollar Falls to Lowest Versus Yen Since 1995 as Options Expire - (www.bloomberg.com)
Investors Dump Shares As Banking Fears Mount - (www.washingtonpost.com)
Hedge funds’ $400bn withdrawals hit - (www.ft.com)
Saudi billionaire Alwaleed rejigs investments-report - (www.reuters.com)
Japan Exports Plummet Record 35%, Signaling Job Cuts - (www.bloomberg.com)
January house sales plunge 50% in Toronto - (www.yourhome.ca)
Dutch house sellers reduce prices as buyers stay away - (www.nrc.nl)
The Future of Housing: Think Small - (biz.yahoo.com)

Trichet ready to supervise banks - (www.ft.com)
New House Prices vs. Median Income - (www.seekingalpha.com)
Lost Decade -- Per Capita Net Worth and Living Standards - (www.chartingtheeconomy.com)
Grim 2009 Forecast for Housebuilders - (www.nuwireinvestor.com)
Banks Foreclose on Builders With Perfect Records - (www.nytimes.com)

Canada Cuts Rate to Record 1%, Signals More Easing - (www.bloomberg.com)
Emerging Markets Face $180 Billion Investment Decline - (www.bloomberg.com)
King Says BOE Asset Buying May Start Soon Amid Slump - (www.bloomberg.com)
UK jobless rate at 6.1 pct, highest in 10 years - (finance.yahoo.com)
A Boom in Office Towers in Calgary - (www.nytimes.com)
Geithner Says Obama Economic Plan Will Come in Weeks - (www.bloomberg.com)
Obama Team Pushes to Complete Rescue as Stocks Plunge - (www.bloomberg.com)
California's median home price falls 38 percent - (finance.yahoo.com)
Hearing Over, Geithner’s Confirmation Is Expected - (www.nytimes.com)
Economists predict economic gloom for next four years - (www.chicagotribune.com)
Stimulus Projects May Be Slow, CBO Says - (www.washingtonpost.com)
Intel to Shutter Five Older Plants by End of 2009 - (www.bloomberg.com)
Toyota moves into first place - (www.ft.com)
What Obama Left Out of the Economic Recovery Plan - (informationclearinghouse.info)
Obama Stimulus: An $825 Billion First Step - (gothamgazette.com)
U.S. stimulus not enough, TARP bailout misused: Soros - (www.reuters.com)

Retailers cut inventory to address shift in consumer spending - (www.latimes.com)
Chrysler-Fiat alliance offers advantages for both firms - (www.latimes.com)
Intel slashes some processor prices by nearly 50% - (www.chicagotribune.com)
In 2009, Layoffs Is the Business to Be In - (www.nytimes.com)

Monday January 26 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

L.A. area home prices close out 2008 down 35% - (www.latimes.com) Southern California home prices continued their decline at the end of 2008, closing the year at 2003 price levels, a real estate research firm reported today. The December median sales price for all Southern California homes fell to $278,000, a 35% drop from the same month a year prior, according to San Diego-based MDA DataQuick. The falling prices were again driven by sales of foreclosed properties, which comprised 56% of all homes sold in the region. Consequently, the lowest median sales prices were reported in San Bernardino County ($180,000) and Riverside County ($209,000), where foreclosures have been rampant. Los Angeles County's median sales price of $320,000 was down 32% from December 2007, while Orange County's median price fell 30% to $397,000. San Diego's median price dropped 30% from December 2007, to $300,000. Ventura County's $338,000 median December sales price was down 36% from the prior year. Low prices drove the number of Southern California homes sold in December up by 51% over the previous year. "It does look like the spigot is being opened a little bit, at least for low-cost home purchases," said John Walsh, MDA DataQuick president.

Latest Bank Bailouts Aren't Likely to Help: Dr. Doom - (www.cnbc.com) The financial media is minimizing Faber’s importance by calling him Dr. Doom repeatedly. People really ought to pay attention to what he is saying. The new bank bailouts are not likely to work because they are run by the same people who prolonged the economic agony by throwing money at weak companies rather than allowing them to fail and encouraging the strong ones, Marc Faber, the publisher of the Gloom, Doom and Boom Report, told CNBC Monday. Britain threw its troubled banks another multi-billion pound lifeline Monday by allowing them to insure against steep losses and guaranteeing their debt, while an adviser for U.S. President Elect Barack Obama said the rest of the TART money will be used to clean out bad assets from the financial system. "The financial crisis has occurred because of government interventions," Faber told "Squawk Box Europe." "Specifically central banks, or specifically the US Fed, by keeping interest rates artificially low for too long, they created a huge leverage in the system. So the people who created the problem now are in charge to bail out the system and that's why I am very skeptical that it would work," he added. The governments' efforts to pour money into certain businesses to keep them afloat while letting others fail were arbitrary and increased volatility, he said. "I think it was good that Lehman went bankrupt but I can't see any reason why AIG has been supported. Either you bail out everybody or nobody," said Faber.

Fund to repay investors in securities not cash – (www.ft.com) Hedge fund GoldenTree Asset Management is offering securities to investors who want to withdraw cash, The Financial Times reported... In a letter to investors last month, GoldenTree said: 'Withdrawing partners that do not elect to revoke their withdrawal request will receive their proceeds primarily in kind. It is unlikely that any cash will be distributed.' This has triggered protests from investors, many of whom would have problems disposing of the securities as GoldenTree specializes in investing in complex, often illiquid, debt instruments.

Should Uncle Sam pay for financial advisors for everyone? - (www.latimes.com) I guess this story could be classified as ridiculous financial media story of the week. Unfortunately, this one is coming from a very smart guy. The problem is these stories are coming out almost daily. Add one more federal bailout program to the list: subsidized financial advice... Add one more federal bailout program to the list: subsidized financial advice for the masses. That's the proposal of Yale University economics professor Robert Shiller, perhaps better known for his research chronicling the housing market’s collapse. Writing in the New York Times over the weekend, Shiller asserted that the mortgage mess might not have mushroomed to its current proportions if millions of Americans had had the help of an objective third-party counselor on financial issues. "Many errors in personal finance can be prevented," Shiller wrote. "But first, people need to understand what they ought to do. The government’s various bailout plans need to take this into account -- by starting a major program to subsidize personal financial advice for everyone. "Giving the general public access to trained advisors would be a boon for the nation in this time of doubt and distrust," he wrote. Shiller cited recent research showing how abysmally low many Americans score on financial literacy tests: A paper by Kris Gerardi of the Federal Reserve Bank of Atlanta, Lorenz Goette of the University of Geneva and Stephan Meier of Columbia University asked a battery of simple financial literacy questions of recent homebuyers. Many of the respondents could not correctly answer even simple questions, like this one: What will a $300 item cost after it goes on a "50 percent off" sale? (The answer is $150.)

Federal Home Loan Bank of Seattle Suspends Dividend, Likely Short of Capital on Mortgage Debt - (www.bloomberg.com) The Federal Home Loan Bank of Seattle said it will suspend dividends and “excess” stock repurchases, becoming the second of the government-chartered lending cooperatives to say its capital may be running low. The likely capital shortfall as of Dec. 31 was caused by “unrealized market value losses” on residential mortgage bonds without government backing, the bank said in a U.S. Securities and Exchange Commission filing today. Washington Mutual Inc. and Merrill Lynch & Co. had been the biggest stakeholders and borrowers in the Seattle Federal Home Loan Bank, or FHLB. Seattle joins the San Francisco FHLB in taking steps to guard its reserves after the U.S. housing market collapse sent mortgage-backed bonds tumbling. The declines may leave as many as eight of the 12 FHLBs below capital requirements, Moody’s Investors Service has said, eroding a below-market rate source of about $1 trillion in financing for Citigroup Inc., JPMorgan Chase & Co. and other companies that participate in the cooperatives. “Systemic weakness in the FHLBs, which may require federal action, could have a number of implications for U.S. banks and thrifts, including: higher costs of FHLB borrowings, reduced value of FHLB stock, and increased demand for alternative sources of liquidity,” Frederick Cannon, an analyst at Keefe, Bruyette & Woods in San Francisco, wrote in the report to clients yesterday. The San Francisco FHLB reported Jan. 8 that it was suspending dividends and repurchases of shares in excess of what is required for members’ current loans because of losses on so- called private-label, or non-agency, mortgage bonds. It didn’t say whether it expects to still be above capital requirements.

Federal Mortgage Banks Already Burning Taxpayer Money Rapidly - (www.washingtonpost.com) The mortgage crisis is seeping into one of the last dry corners of the mortgage business, the regional network of Federal Home Loan Banks, which provide U.S. banks with hundreds of billions of dollars in low-cost funding to support lending to home buyers. The little-known network has grown in importance as banks lose access to other sources of funding because of the credit crunch. The volume of outstanding loans provided by the home-loan banks has increased by 58 percent since the beginning of 2007, to more than $1 trillion at the end of September. But several of these banks hold mortgage-related investments that have plummeted in value. The losses are draining the capital foundations of the home-loan banks, forcing them either to reduce their lending -- making mortgages more expensive and harder to get -- or to raise additional capital. The money could come from taxpayers. The Treasury Department created a program in September that for the first time allows the home-loan banks to borrow directly from the federal government. That hasn't happened yet, but some financial experts said it's looking increasingly likely. A report from Moody's Investors Service this week, citing "the demonstrated importance of the [home-loan banks] to the banking system through the credit crisis," concluded that the government was likely to provide the necessary support to keep loans flowing.

State Pensions’ $865 Billion Loss Affects New Workers – (www.bloomberg.com) State governments from Rhode Island to California have run up estimated pension-fund losses of $865.1 billion, forcing some to cut benefits for new hires. Assets for 109 state funds declined 37 percent to $1.46 trillion over the 14 months ended Dec. 16, according to the Center for Retirement Research at Boston College. The Standard & Poor’s 500 Index of stocks fell 41 percent in the period. “Not a whole lot of people get too excited about pension funds,” Philadelphia Mayor Michael Nutter said in an interview. “But if you have to pay those costs, they do grab your attention.” After Philadelphia’s fund lost $650 million in the first nine months of last year, Nutter joined the mayors of Atlanta and Phoenix in writing a letter to Treasury Secretary Henry Paulson seeking financial help for U.S. cities. Their November letter cited investment deficits and rising pension costs. The $865 billion in losses, which exceed the $700 billion Troubled Asset Relief Program that Congress approved in October, comes as states face budget deficits totaling $42 billion.

Fairfield Greenwich Shutting Down - (clusterstock.alleyinsider.com) We're told by a reliable source that the Fairfield Greenwich Group is finally shutting down. The fund of funds hedge fund made and lost its reputation and fortune by putting investor money into the hands of the world's greatest swindler, Bernie Madoff.


OTHER STORIES:

Soros Says Stimulus Not Enough; TARP Misused - (www.cnbc.com)
Russia Will Join OPEC Soon, Boone Pickens Predicts - (www.cnbc.com)

Obama Bringing "Strong Message" to Ailing Banks - (www.cnbc.com)
Chasing Bonds Rally Is 'Terrible Mistake': Jim Rogers - (www.cnbc.com)
Hunt for Missing Manager Leads to Louisiana: Report - (www.cnbc.com)
Busch: Don't Take the Lead from the UK Again.... - (www.cnbc.com)
Fiat Poised to Take Over Stake in Chrysler: Reports - (www.cnbc.com)
Clock Is Ticking for GM, Chrysler - (www.cnbc.com)
Slideshow: Barack-Tails: Drinks of The Inauguration - (www.cnbc.com)
Buffett: Don't Expect Short-Term Miracles from Obama - (www.cnbc.com)
RBS Posts the Largest Loss in UK History - (www.cnbc.com)
Carlos Slim May Be Buying Big Stake in NY Times - (www.cnbc.com)

Cost of Borrowing Zooms Up for Corporations - (www.nytimes.com)
Jim Rogers Says Worried About Dollar, Favors China - (www.bloomberg.com)
‘Time to Sell’ Treasuries, Biggest Korean Fund Says - (www.bloomberg.com)
No sign of Florida financier or his clients' millions - (www.usatoday.com)
UK unveils second bank rescue - (www.ft.com)
Britain Announces New Bank Bailout - (www.nytimes.com)
British Banks, After Bailout, in Line for More - (www.nytimes.com)

Obama Advisers Say They Will Aim TARP Funds at Widening Credit - (www.bloomberg.com)
Report: New York to lead US cities in job losses - (finance.yahoo.com)
California Finds Public-Works Spending No Unemployment Cure-All - (www.bloomberg.com)
RBS expects full-year loss up to 28 billion pounds - (finance.yahoo.com)
Prepare to bury the fatally wounded big banks - (www.ft.com)
Book says inflation rates of 1970s could return - (www.usatoday.com)
A weak housing market is good for me - (property.timesonline.co.uk)
California's budget crisis may delay tax refunds - (www.marketwatch.com)
High-income Debtors Being Foreclosed On In California - (www.washingtonpost.com)
Obama team weighs government bank to push bad debts onto taxpayers - (finance.yahoo.com)
Federal Mortgage Banks Already Burning Taxpayer Money Rapidly - (www.washingtonpost.com)
Lessons from when the bubble burst in Japan - (search.japantimes.co.jp)
Maybe the bond market is right - (www.seekingalpha.com)
Interest Rate Drop Has Dire Results for Legal Aid - (www.nytimes.com)

Rents falling nationally - (www.marketwatch.com)
Loan Fraud Seen on the Rise - (www.nytimes.com)
Yet another hedge fund manager missing - (www.bloomberg.com)
Hedge-Fund Managers Bullish on MREs, Guns, Inflatable Lifeboats - (www.boingboing.net)
Foreclosure aid likely to help 4 foolish states, hurt everyone else - (www.businessweek.com)
Foreclosure Heat Map - (www.ritholtz.com)
Bailout Is a Windfall to Banks, Not Borrowers - (www.nytimes.com)
Bankers First - (www.portfolio.com)