TexasBill

Foreign Investors: Listen to Putin's Renault Threat

Guess I don't understand what the big deal is. If Russia has to put more capital into the business, why shouldn't Renault have to if they want to maintain their 25% equity stake?

This is a pretty common feature of many partnership agreements. To wit: if a capital call should be required, one has the right to maintain one's ownership % by ponying up one's proportional share of the funds needed; if one refuses, one suffers dilution to the extent that whoever puts up the needed funds gains equity.

If Renault decides not to pony up, why should Renault expect to be able to maintain its 25% equity stake when someone else puts up the needed funds? To put it another way: what would be the incentive for another entity to put up any funds if no equity is available to them for doing so?

Weekly Sector Performance Since the March Lows

Interesting chart and way to look at sector performance. Thanks.

As a comparison, it would be useful to look at a similar chart showing the 6 months leading up to the March lows. I apologize if you already posted this and I missed it; if so, I would appreciate a link showing me where I can find it.

Asian Growth Can't Keep Reflation Trade Going

IGV.

Thanks for presenting this data and providing a story line that seems logical to me.

Based on the fundamentals, I've always felt that the markets were getting too far ahead of "the recovery" and your article seems to support this thought.

I also think that inflation will rear its ugly head again "someday" - but that isn't going to happen any time soon . I look forward to reading more of your interesting articles in the future!

There's No Lying in Government Statistics: The Labor Market Is Still Down

Mr. Frankel,

Your article got me thinking :

1. You said that "The fraction of the (civilian non-institutional) population with jobs peaked at the end of the Clinton Administration, exceeding 64% in January 2001. It has now declined below 55%. 55%/64% = 86%. Does this not mean that the employment rate has actually declined by 14% since Clinton's time?

2. You also said that: "The workweek reached a historically short level in June: 33.0 hours." Please help me here. If a "normal" workweek is 40 hours, doesn't a 33 hour workweek indicate that the total hours worked has fallen 17.75%? Why isn't this considered the unemployment/underempl... figure?

3. (I know I said two, but ....) Why do these two stats not relate more closely to the actual unemployment numbers put out by the BLS?

Thanks for the thought provoking article.

Financial Blog Watch: Don't Believe Everything You Read

Fascinating article. I follow Tyler, among others, with the goal of trying to figure out why things happen in the markets the way they do.

I seek divergent views because for every buyer there is a seller. They both see the same set of data yet they both think they are doing the right thing at that time. I think it's useful to understand both sides of a trade because I believe that in many cases the "truth" lies somewhere in the middle.

Therefore, I appreciate the opportunity to read Kid's critique of Tyler's post (and the cogent discussion of arb strategies and their risks). And I applaud the fact that Kid was able to disagree with Tyler's post without malice. It sure would be nice to see more of this kind of rational discussion at Seeking Alpha.

On 'Rock Bottom' Housing Prices

Reducing interest rates only puts off the problem. When rates go back to "normal" - market rates w/o any gov't interventions - future buyers will have to pay higher interest rates which means they can't pay as much for the house if their monthly payment remains similar to yours; i.e., house values will have to go down when interest rates go up.

If we are going to lance the boil, let's do it now and get it over with.

On May 13 09:40 PM Blackeyebart wrote:
>
> The only way to stop the slide in house prices is to reduce the need/incentive to sell. Lowering interest rates does that.
>

How Long Will the Good Times Last?

ChrisB etal,

You are dreaming if you think this is a one way elevator to the roof. Right now the Fed is forcing all the savers in the country to subsidize housing by imposing lower interest rates. What do you think will happen when the Fed starts to allow interest rates to go back to "normal" (or inflation kicks in and stomps on the interest rate accelerator)? Hint: look at what happened the last time the Fed started raising rates after holding them down after 9/11. Future home buyers won't be able to pay you as much for your house as they can now because the interest portion of their payment will be much higher.

With all of the incentives to purchase and all of the refinancings to take advantage of the lower rates going on currently, the Fed is setting a trap (IMO); if interest rates go up, as I expect they will, don't be surprised when people can't sell their house for what they paid or refinanced it for today.

How Do You Recapitalize $1.8 Trillion in Bank Loan Losses?

JoeTrader,

Cons: Where are the 2 million homeowners/renters going to come from? There's going to be a huge sucking sound of tenants leaving their existing homes/apts to take advantage of your gov't deal.

What are you going to do about the financial damage that your plan transfers to the landlords that own the homes these people are living in now? Seems to me that you are just hiding the pea under a different shell.

Roubini Was Right

What's with all this piling on crap? "Let He Who Is Without Sin Cast The First Stone".

I regularly monitor Felix's articles, along with others. Whille I don't always agree with him, I always appreciate his willingness to share his thoughts. FYI, I got completely out of the market last Nov, partly as a result of the insights I obtained reading Felix's blog.

Housing Prices: Bottom or Temporary Bear Break?

BTW, if the teaser rate ARM game is no longer an option, the implication is that the above referenced home buyer can only afford to pay for a home that allows them to have a 220k fixed rate loan at 6% for the 1,319 a month they can afford to pay. This means, on average, that housing prices will have to fall 38% +/- from the peak. Worse if you factor in that now they have to have a down payment while before they could get 100% financing.

Housing Prices: Bottom or Temporary Bear Break?

It's not that complicated to understand what happened. As ReEconomist said: "People were buying (monthly) payments not price."

Prices dramatically increased starting in 2001 because the Fed opened the floodgates; by reducing short term interest rates and actually encouraging folks to shift to ARMs instead of fixed rate loans, it made it possible for someone to pay much more for a home for the same monthly payment they would pay for a fixed price loan.

ARMs had "teaser" rates of 1-2%. At 6% for a fixed rate 30 year mortgage on a 220k loan your monthly payment was 1,319.00; it did not take a genius to figure out that with a 2% ARM, assuming amortization over the same 30 years, you could buy a 356k home for the same monthly payment. People rode this horse as long as they could sell their appreciated home or refinance into another ARM before their loan reset.

This strategy is no longer viable; but while it was, it enabled a lot of people to grab the brass ring.

Real Estate Bubble Is Only in 4 States: CA, FL, NV, AZ

This article's data is very selective. Case/Shiller tracks housing prices in 20 large cities located throughout the US. Each and every city is down y/y. Don't kid yourselves, this is a national problem, albeit with some areas feeling more pain than others.

How Dumb Does the NAR Think Homebuyers Are?

The Fed has been holding short term interest rates down (by pumping billions into the banking system, thus causing inflation to increase).

The market knows that the Fed can't keep the rates down indefinitely and are anticipating that, eventually, rates will have to go back up to counter inflationary expectations.

Foreclosure Stimulus to Boost Tech's Four Horsemen

It seems to me that the article is only looking at this only from the point of view of the homeowner, not the net effect on the economy. Yes, if the defaulting homeowner decides to stop making any payments on the mortgage he/she may use those funds on other things. However, the lender/investor is losing the use of that monthly payment. Therefore, doesn't the lender's/investor's loss balance out the defaulting homeowner's "gain" so that the net effect on the economy is zero?

Saving the Economy with IRA Funds

I agree with John's comments. It's a lot harder to come up with something new of your own than to take pot shots at something someone else comes up with. Furthermore, putting down new ideas discourages others from suggesting their new ideas. The benefit of brainstorming is that there usually is a nugget of gold somewhere in most ideas; but, many times, you have to combine that nugget with someone else's to get to a workable solution. If you discourage new ideas you miss out on the bonanza. Keep your mind open, choose the suggestions you like but try not to put down the originator of the ideas you don't agree with because, in the long run, you may end up shooting yourself in the foot.

Regarding Stan's suggestion, the objective of most people is to pay off the debt on their home, hopefully, by the time they retire. Why does it not make sense to use one's IRA to do this since its aim is also to provide for one's retirement?

From the point of view of retirement cash flow, does not reducing one's outlay for mortgage payments (by eliminating debt) have the same effect as increasing one's income by purchasing investments? I don't understand why it is OK to do one but not the other.

Personally, I would like the flexibility to be able to use any of my financial assets to pay off any of my financial liabilities. In this particular situation, I'd prefer to be able to use my IRA's assets to pay off my mortgage directly rather than substituting it for another debt instrument owned/serviced by someone else; I don't know why I would want to or need to bring in a financial intermediary to accomplish this.

In any case, I appreciate Stan giving me the opportunity to think about his suggestion.