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Genesis Posts: 71403 Incept: 2007-06-26 
KD^2 
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http://market-ticker.org/archives/930-As....
---------- "The monetary base in ALL modern monetary systems is the sum of unencumbered assets against which one is both WILLING AND ABLE to borrow." - Me
2009-04-03 10:13:29
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Tesla Posts: 8174 Incept: 2008-04-03 
Delaware
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And people wonder why more regulation isn't effective...it's because  like these populate the regulatory agencies.No government is smarter than the average of its people; and most of the time it's a whole lot dumber. Think about that. ---------- "Neither the wisest Constitution nor the wisest laws will secure the liberty and happiness of a people whose manners are universally corrupt." Samuel Adams I'd rather die on my feet than live on my knees. - Emiliano Zapata
2009-04-03 10:26:28
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Themortgagedude Posts: 3930 Incept: 2007-12-17
saint louis
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There are some problems that you've oversimplified here - letting the banks eat the losses and auction off the properties will cause further deterioration of prices and probably an over correction. And this affects appraised values and future sales of homes. But what it comes down to is there are no easy answers and most likely its time to take a big ole spoonful of that nasty medicine. Thats why I'm one of them here that thinks maybe we're too near the waterfall's edge to be saved now. Maybe its time to start over. Either print or start over. Most likely print first and start over later.
---------- "These are interesting times. We don't trust the government, we don't trust the legal system, we don't trust the media, and we don't trust each other! We've undermined all authority, and with it, the basis for replacing it! It's like a six-year-old's dream come true!"
2009-04-03 10:49:53
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Genesis Posts: 71403 Incept: 2007-06-26
KD^2
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Quote:There are some problems that you've oversimplified here - letting the banks eat the losses and auction off the properties will cause further deterioration of prices and probably an over correction. And this affects appraised values and future sales of homes. Pendulums always swing too far in both directions. So? You can't avoid it. ---------- "The monetary base in ALL modern monetary systems is the sum of unencumbered assets against which one is both WILLING AND ABLE to borrow." - Me
2009-04-03 10:50:39
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Themortgagedude Posts: 3930 Incept: 2007-12-17
saint louis
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We won't disagree there. Thats kinda my point too. And sometimes the simplest solutions are the best.
---------- "These are interesting times. We don't trust the government, we don't trust the legal system, we don't trust the media, and we don't trust each other! We've undermined all authority, and with it, the basis for replacing it! It's like a six-year-old's dream come true!"
2009-04-03 10:55:39
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Morgan Posts: 99 Incept: 2008-02-29 
Wisconsin
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Will abolishing MTM give banks the greenlight to put their forclosure inventory on the market? If housing prices correct even more won't this put pressure on insurance companies to lower the price of homeowner's insurance? The FIRE economy is a really hot idea.
2009-04-03 10:57:32
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Kuhio Posts: 206 Incept: 2008-12-31
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As Bismark famously said, "Politics is the art of the possible." Of course, he wasn't speaking with regards to mathematical reality; rather, he was referencing an appeal to collective fantasy. I've said it before, and I'll say it again: these types of obfuscations and continued bailouts are NOT the result of Wall St capturing DC, but the other way around. Our central government is so absolutely dependent on the current FIRE economic model for survival (for both tax receipts and the ability to lend based on the resulting economic activity), that it will (and is) commit its entire future survivability on resuscitating a return to asset inflation, credit expansion and securitization. It will not stop until it an EXTERNAL reality forces it to stop. That reality is the market. If the private credit market and global economy is indeed larger than the Fed and collective central bankers + government Treasury's ability to manipulate & control, then it's only a matter of time before they too get a "default" notice. That's when the SHTF. Last modified:
2009-04-03 11:07:00 by kuhio
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Kuhio Posts: 206 Incept: 2008-12-31
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@Genesis Quote:Pendulums always swing too far in both directions. So? You can't avoid it. But that IS the entire point of regulation - to "save" capitalism from its excesses. Since the current regulatory environment (including establishing the Fed) has done nothing towards achieving that goal, but in actuality has perverted market indicators (eg risk assessment) and continued to block justice in order to serve its own ends (ie the preservation of the FIRE model), then perhaps we might consider, "When, in the course of human events ..." Last modified:
2009-04-03 11:04:47 by kuhio
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Tesla Posts: 8174 Incept: 2008-04-03
Delaware
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Kuhio - your post is why regulations are always a very bad idea. Regulations and their respective agencies give people a false confidence that they are "paying" someone else for due diligence that would be their own responsibility otherwise. So when regulations/regulators fail, it's always more carnage than if the regulations did not exist in the first place. Would Madoff have been as successful in his fraud if the SEC wasn't assuring investors that their regulations and investigations were keeping them safe ? Capitalism's excesses get muted by the consequences of failure. The lack of failure of the responsible agents in the current environment is exactly why the final failure will impact far more people than would otherwise be hurt. ---------- "Neither the wisest Constitution nor the wisest laws will secure the liberty and happiness of a people whose manners are universally corrupt." Samuel Adams I'd rather die on my feet than live on my knees. - Emiliano Zapata
2009-04-03 11:12:35
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Berkleyreindeer Posts: 560 Incept: 2008-07-22 Minneapolis , MN
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you forgot about the MASSIVE amount of 5/1 IO's. 5 yr fixed, interest only payment, then 25 years of ARM. Payment shock just like the neg am's simply because they could "afford" the 5 yr part and then were planning to refi. I'd have to assume these loans are almost as upside down as the neg am's now. a lot of the borrows thought they were soooooo smart taking 5 years instead of 3. morons. middle america (at least here in MN) loved those things. stretch for that 3 car garage (filled with crap) so the 2 cars can sit in the driveway. ---------- It'll get worse. Just wait. Last modified:
2009-04-03 11:19:09 by berkleyreindeer
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Tesla Posts: 8174 Incept: 2008-04-03
Delaware
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*laugh* A few years ago I had neighbors who stretched to afford that new 5000 sq ft house from their existing 2800 sq ft one because "they needed more room for their stuff".
---------- "Neither the wisest Constitution nor the wisest laws will secure the liberty and happiness of a people whose manners are universally corrupt." Samuel Adams I'd rather die on my feet than live on my knees. - Emiliano Zapata
2009-04-03 11:15:57
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Berkleyreindeer Posts: 560 Incept: 2008-07-22 Minneapolis , MN
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tesla: SIPC covers 500k. some investers with madoff lost 9 figures. they were flying naked. the fact most of wall street had him figured out but did nothing is damnable. goldman wouldn't even trade with his broker dealer. try telling me thay didn't know what was going on!!! ---------- It'll get worse. Just wait.
2009-04-03 11:18:01
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Timbo Posts: 1132 Incept: 2008-10-10
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Karey Wutkowski, Reuters wrote..The data showed that re-default rates were high and rising for loans modified in each of the first three quarters of 2008.Which of the following would make a good title for this story? A) Mortgage modification: Like trying to pull teeth with a badger B) Re-default data shows Obama housing plan potential C) Housing data still blows donkeys D) Zeppo the Clown's Beep-Beep Idiot Circus ---------- http://mises.org/story/770 http://www.theplacewithnoname.com/blogs/klessons/index.html If you don't fly the plane and find a place to land, then God will find a place to park you.
2009-04-03 11:31:59
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Margincalltime Posts: 830 Incept: 2008-04-01
NJ
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The solution is pretty simple, but noone wants to acknowledge it, they'd rather continue to perpetuate the myth and defy both gravity and mathematics. 1. No more bailouts of any kind, force repayment of existing bailouts within the next 60 days. 2. Use a fraction of the money that you would have used for bailouts and take a portion of that money which is returned to increase the social safety net temporarily as debts are disgorged/crammed down, etc. Maybe those FEMA "shelters" can be used for housing. You don't want angry people roaming the streets hungry. 3. Enforce all existing regulations, prosecute those responsible for fraud (AIG anyone?) 4. Follow the rest of KD's plan to limit leverage, etc. Prices will fall to more sustainable levels, maybe even "overcorrecting" providing those with cash on the sideline to be enticed to put it to work. It will also restart lending/borrowing as prices become more reasonable. The only credible borrowers are those with the cash and why would those credible borrowers borrow if prices remain too high? Why invest capital into an environment where the government is hell bent on propping up prices that at any moment may come crashing down given the unsustainability of the "propping up"? Banks aren't lending because the only ones that want to borrow are those that are overlevered already and are a poor credit risk. Benny's pumping of taxpayer capital into failed institutions is an exercise in futility. Oh, Benny/Geithner/Obama, you're afraid of letting banks fail and it taking the system down? Fine, you need to make sure you make it crystal clear to the American people what you are doing if you follow the above plan. 1. You let the citizens know they won't starve to death and will have shelter. Federal money will be used to guarantee it. 2. Banks will go under, LARGE banks, but your deposits will be safe. The assets of any large financial institution with insured deposits will be transferred to a healthier bank and your funds will be available. 3. All federal funding used to support basic necessities will be transparent, no gaming of the system. I'm sure I'm missing some things, but you get the overall idea. The obfuscation of the truth and shenanigans must end and that's the way to do it and restart the system in a healthy, sustainable fashion. Problem is there is no political will to do the right thing. I also think lobbying should be banned outright. Aren't our elected representatives supposed to work for us? Why are our interests being subverted by lobbyists for large donors? Doesn't that defeat the purpose of elective representation? Last modified:
2009-04-03 11:38:36 by margincalltime
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Baldy Posts: 6555 Incept: 2008-05-16
Pittsburgh
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Does anyone know if the gov collects info on the median income for a single person? No spouse, no kids etc? EDIT- Got it from WIki which is close enough
---------- FY2011 Budget - Hist'l Tables (PDF 2.0 MB) http://www.whitehouse.gov/omb/budget/fy2011/assets/hist.pdf 1996-2011 budgets: http://www.gpoaccess.gov/usbudget/browse.html Last modified:
2009-04-03 11:53:41 by baldy
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Need4mospd Posts: 12 Incept: 2009-02-04 Houston
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Am I the only one that thinks the asshat image looks like an upside down strawberry ice cream cone?
2009-04-03 11:51:09
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Tesla Posts: 8174 Incept: 2008-04-03
Delaware
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That would be a double scoop 
---------- "Neither the wisest Constitution nor the wisest laws will secure the liberty and happiness of a people whose manners are universally corrupt." Samuel Adams I'd rather die on my feet than live on my knees. - Emiliano Zapata
2009-04-03 12:03:05
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Oxfordrick Posts: 2685 Incept: 2007-07-09
san diego
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Why doesn't President Obama simply advise citizens who cannot afford their mortgage payments to walk away and rent somewhere they can afford? That's change I can believe in. But it seems as though he also wants to extract the maximum penalty from struggling homeowners to bail out bank bondholders.
2009-04-03 12:04:31
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Tesla Posts: 8174 Incept: 2008-04-03
Delaware
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Because it's now a "right" to own a house. The American Dream is not just a privilege anymore. And just you wait, we'll be extending that to the rest of the world just as soon as we issue a bit more money.
---------- "Neither the wisest Constitution nor the wisest laws will secure the liberty and happiness of a people whose manners are universally corrupt." Samuel Adams I'd rather die on my feet than live on my knees. - Emiliano Zapata Last modified:
2009-04-03 12:11:54 by tesla
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Kuhio Posts: 206 Incept: 2008-12-31
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@Tesla & Margincalltime - Two points: 1. Tesla - Systems that don't bend, break. That is, the effect of stored energy in a system unable to bend (ie dissipate energy) is much worse when a precipitating event occurs. Ergo, when a "regulated" system fails, the systemic effects are much, much worse than if individual components had failed in non-catastrophic fashion. We are in complete agreement regarding regulation. No one provides due diligence better than investors themselves or directly responsible agents. The concept of independent auditors who had their own capital at risk (via partnership arrangements such as Price Waterhouse) came about during the Victorian era. 2. Margincall - I don't know if you're old enough to remember the old Fram commercial, "You can pay me now, or you can pay me later." Your list of prescribed actions WILL occur - it's simply a matter of time. We can either perform them in a collective, orderly fashion, or we can wait until external factors, like the market, dictate terms. That's why, while I recognize KD for the genius that he is, he seems to have a blind spot for group psychology ie herding behavior. Calls to Congressional representatives, tea parties, et al are simply an utter waste of time. The system will not be reformed until it is FORCED to reform. That force is the market. KD is absolutely correct in this regard - he knows, we all know, that when the market calls, that's the end game. Last modified:
2009-04-03 13:41:06 by kuhio
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Jnojr Posts: 552 Incept: 2008-09-18
San Diego, CA.
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Quote:Everyone in government and banking has for the last two years and change tried to avoid the fundamental reality: house prices must reset to their economic value, which is relatively easy to define - it is represented as a house price of approximately three times median income. There are several areas (San Diego is the first, glaring example that comes to mind for me!  ) where that "rule" has never been the case, or hasn't in so long that "never" might as well be the case. This doesn't mean that housing has been fundamentally "unaffordable" for decades.Don't get me wrong, I'd love to see the median house price in San Diego drop to three times the median income. But if that happened, the next day every available house would be snapped up, and asking prices would quickly rocket skyward again. That "rule" of house prices tends to hold in icy, wind-swept places. It doesn't in places where people actually want to live.
2009-04-03 12:23:11
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Hihoherewego Posts: 595 Incept: 2009-02-25
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KD-- Somewhat related to topic. From Yve's ala Tyler Durden.... http://www.nakedcapitalism.com/2009/04/g....
2009-04-03 12:28:05
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Morgan Posts: 99 Incept: 2008-02-29
Wisconsin
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Kuhio,Quote:That's why, while I recognize KD for the genius that he is, he seems to have a blind spot for group psychology ie herding behavior. Calls to Congressional representatives, tea parties, et al are simply an utter waste of time. The system will not be reformed until it is FORCED to reform. That force is the market Respectfully disagree. Some people make things happen, some people watch things happen, and some people don't know anything has happened. Denninger definitely does not have the personality to fit the character of the latter two. This board is all about civil disobedience a la Thoreau. That is why I pointed out decreasing house prices make conditions ripe for negotiating lower homeowner's premiums (as I did last year). I also quit paying the premiums on our other insurance policies last year because it was obvious the insurance companies can not pay the claims anyway. Quote:Our houses are such unwieldy property that we are often imprisoned rather than housed in them. Last modified:
2009-04-03 12:34:19 by morgan
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Eaglewwit Posts: 1889 Incept: 2007-11-30 SoCal
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Jnojr, that may be true, but if you do some research you will probably find that it might be around 3.5 to 4.0 times median income. It is simply the location premium. However look at the bubble years where it reached 10 time income, reversion to the mean is gonna be a real bitch in Socal. In my opinion we are still a ways off in the coastal areas. The math always wins. Median incomes in Socal are a bit higher than the national, mainly due to over paid government employees, but socal cannot escape the math. Surf through zillow and look at what house were selling for in the 90's and even 2000, you will find some amazing stuff. Then think about how most incomes, aside from public employees, have barely risen and are now going down.
---------- "Not even I imagined we would see trillions of dollars being created and given to the culprits as a means of allegedly "saving" the system. This is not mere Keynesianism; it is Keynesianism on steroids and crystal meth."
2009-04-03 12:41:53
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Oxfordrick Posts: 2685 Incept: 2007-07-09
san diego
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Actually in San Diego we suffer from the real estate disease, which means buy the biggest house you can nearly afford and you'll do well. Kinda like buy and hold but with ninety something percent leverage. The last housing recession did not cure the disease, this time we might. House prices may not turn up until it is profitable (truly profitable) to buy a SFR and rent it out, realizing that rents are likely to fall. Rational homebuyers (we are not close to there yet) will demand a risk premium (ie house payments and expenses significantly less that rent) before they are willing to take on the speculative risks of homeownership. I'm a happy renter till then.
2009-04-03 13:31:40
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