Randy_H

The New MacroShares Housing Funds Revealed

Unless you plan on paying cash when you buy a home, then you *must* employ leverage in your hedge to match the leverage you would be using when buying with a mortgage. Even at 20% downpayment, you are employing tremendous leverage when financing a house.


On May 10 12:14 AM johngonole wrote:

> wrong and you lose big. I would prefer an instrument like this that
> is one to one without any leverage. That is if prices move up 1%

Housing Conversation Needs a Dose of Reality

"As William points out the gains were real as anyone who sold their house at the top is loving life right now. Why no one brings these winners up is a bit alarming and part of the one sided editorialism of the day."

I have been blogging about this for years now. And I am one who sold my home in 2005 after a decade of ridiculous gains (and one trade up).

Let me tell you why, exactly, I and those like me are loathe to talk too much about what "winners" we are: People don't like us.

I've been told that I'm the "other side of the coin" from flippers who exploited on the way up. I've heard from Obama's press secretary that people who are trying to profit off of the troubles in housing will not be rewarded. I've been called a "housing market short seller". I've been told that I also need to be taxed at 90% on any gains I made selling my house, since I didn't buy another one in a reasonable period of time.

The fact is, there is a large mass-feeling that people who bought homes all along, naive of the bubble, consciously or not, were the wholesome folks just doing the right thing -- living the American Dream(tm). Meanwhile, folks like me broke from the herd. While we ended up being right, we were wrong to go it alone. To try to pull a fast one. To bail out on everyone else. ...

You get the point. The main thing is that those feelings are real, and people are pissed. They are pissed at realtors(tm). They are pissed at mortgage brokers. They are pissed at bankers bankers. They are pissed at Congress. And, they are pissed at anyone who made money in the bubble, whether that be flippers or peak-sellers.

The Geithner Plan FAQ

Wow. This author has managed to make clueless Pollyanna prattle sound almost intelligent.

You know, it could be that these so-called "toxic assets" aren't undervalued, but really are worth squat, but that the world won't end because of that nonetheless.

You can always pick out a lame argument when it starts right off offering you a false-choice. Sorry Brad, it's not a simple binary either-or scenario. Were it that easy, we wouldn't be debating all this.

Truth and Consequences of the Fed Purchasing Treasuries

Or perhaps there is evidence of deflation. Simply correcting for distorting hedonics (those obviously of political convenience) reveals there is fairly deep deflation underway.

One thing is for sure. It's hard to know what's going on with all the BS coming out of every organ of government these days. That includes Ron Paul, the genius who'd eliminate the Fed entirely. Sure. That's akin to unilateral nuclear disarmament. I don't like the Fed anymore than nuclear weapons. But I recognize why we need to maintain both.

Cramer Grilled on Jon Stewart

Cramer's put more people into more bad trades than years worth of CNBC late night infomercials.

Stewart bitches about populism, then happily resorts to it when convenient. Santelli is just a Chicago trader who, unlike Cramer & Stewart, didn't carefully plan his entry into this fiasco as a well-designed publicity stunt. You could see it on his face whenever some inane ideologue like Kudlow interviewed him shortly after his rant.

The fact is, like it or not, Santelli was right. Stewart was right, but took the cheapest, easiest route by skewering Rick. And Cramer is a clown. As for Stewart's arguments about how anyone on CNBC is tarnished simply by being on the station: uh, John, you're on MTV. You know, like you're no Ken Ober. Sorry.

Has the U.S. Layoff Trend Turned?

Wrong. There is a much deeper round of layoffs currently in the late phases of execution planning. In just my consulting with large tech corps, every single one is going through ranking and planning for another 10% or more. This will be the second round for most of these guys. Third for one of them.

These aggregate charts and tables don't properly consider the hugely bimodal nature of the data. Layoffs have probably peaked in low-flexibility sections of the labor market, like unionized government and health workers. But make no mistake, among educated, higher end, knowledge, finance and high-end service workers the real pain is yet to come.

Europe's job losses will be delayed by 6 months or more, due to their labor law frictions. Again, among the guys I work with, they're still trying to work through cutting people they'd ranked out in late December. It can take a year to get rid of someone in Germany, for example.

The Rally, When It Comes, Will Be a Doozy

Wow. Apparently many of you all missed the fact that people are scared. 2-in-5 of them are statistically likely to lose their jobs or be forced to accept pay cuts over the next 2-3 years. Shame on them for saving cash in a zero-risk place. How's anyone going to make commissions on that?

Sometimes this board reads like a realtor forum: "it's always a good time to buy!"

BofA, Wells Fargo: No Equity After Accounting for Bad Loans

On Mar 05 12:33 PM Chris B wrote:

> But continuing the analogy, if the fire sale price that I could sell
> my house for in 1 day is $20k, but I could put it on the market and
> sell it within 6 mos for $150k, and perhaps 1 year for $180k, what's
> the house actually worth? To me, it's $150-180k, because I have
> no intention of giving it away at a fire sale.

What passes for financial "wisdom" these days is astounding.

a) If your house is "worth" anywhere near $150K, then it will surely sell for more than $20K in a reasonably short time.

b) For an illiquid asset, 1 day is not a reasonably short time. Houses cannot, as a general rule, be sold in 1 day due to transaction frictions. A reasonably short period for selling residential real estate is 30-45 days.

c) I'm happy that you have no intention of "giving away" your house. That's irrelevant to the market price except insofar as it shows sticky price phenomenon. The idea is that you may change your mind, or have your mind changed for you by circumstances. In that case, what is your house worth? The best laid plans don't always materialize regardless of your vigor in stating your case. If I'm loaning you money or otherwise capitalizing your sitting there in your home office typing Seeking Alpha advice, then I want to know what your home is really worth as dictated by the market, not by your wishes for the future.

Your comment adds further evidence to my thesis that there are very few honest, free market participants in our supposed free market capitalism. Rather, people only embrace the free market when they're winning, and suddenly want to resort to rule changes when they are losing. (And don't start with arguments about when the FAS rules changed on MtM; fair value accounting has been a known factor for a long time prior for other reasons.)

Dr. Doom Responds on Wells Fargo

Tom, there's a lucrative career waiting for you as a "licensed" real estate agent. Methinks you're much more suited for their world of blissfully ignorant optimism and mindlessly leveling attacks at any hint of unpleasant reality.

Good luck, and remember, 6% is in the bag.

The Three Riskiest Banks - American Banker

How about DB and their exposure all over eastern Europe? What do they stand to lose in Estonia alone?

End of the Recession in 2009?

>>Here are a couple of data points from my neck of the woods.

And here a couple from mine (SF Bay Area):

* Corporate outlooks are dismal. Most have "no bottom in sight".
* European revenues have fallen off the planet. For many tech companies, this is the largest portion of their recent revenue growth.
* More job cuts are coming. Companies that cut 10%-15% earlier are now preparing to cut another 10% or so before year's end.

Traffic still does suck, but congestion periods are becoming visibly shorter. In many areas jams are gone shortly after 6:00pm. By comparison, in 1999 jams in those areas stretched until 8:30-9:00pm, and in 2005 jams lasted until 7:30-8:00pm.

I won't even go into real estate. lol.

Inflation: Demand Destruction and Wealth Erosion Trump Money Growth

Exactly. Thank you. Many of us have been saying this for a while now. The hyperinflation goldbugs are only able to comprehend half of the equation, and are ignoring the gaping hole through which capital is draining.

The terrible irony of US monetary expansion is that it could well have an opposite-aggravating effect on US deflation. The more $ we print, the more we destabilize the global economy, the more demand there is for our dollars (experienced as a "treasury bubble").

I posit that the more money we print, the more we lose control over our monetary policy. This won't result in any kind of hyperinflation, but in deflation as the world pushes up our real-interest-rate despite our zero-rate policy. When people are elbowing each other out of the way to buy 30 year bonds at 3% and short bonds at a negative rate that tells you something: the real rates are much higher. The Fed can say "0%" all day long, but the world is saying they're worth much more all-things-considered.

Rick Santelli Speaks for the Silent Majority

>>But, it all boils down to this; if they sink, the suction will pull the rest of us down with them.

I keep hearing different forms of that argument. Prove it. Show me. Not in a narrative blah blah blah, but give me a thesis and some numbers. Many have gone to great lengths to outline models for recover here on SA and other blogs. But all I keep hearing is "we have to artificially prop up house prices or else we'll all die".

Prove it or, as it were, STFU.

Santelli's Rant: A Watershed Moment?

Rick should live in a car for a while? Isn't his background one of a scrappy Chicago kid growing up on the South Side (can't find a reference on that, but I read it somewhere a while back). Cramer on the other hand is just a trustafarian who lived in his car for a while because it made for a good opener to get him laid and land him payola.

The Great Inflation Moderation That Wasn't

>Railroads are not a "real" industry in your mind? Wow, dude,

I was surprised to learn that Telecom wasn't a real industry as well. Who woulda thunk it?

Actually, I think he left out rail and telecom because those weren't simple speculative bubbles -- they were complicated by massive government distortions in the form of how deregulation occurred. Both were previously regulated monopolies. Is it possible to deregulate and break up a gov't supported monopoly without a bubble occurring?