Marin Real Estate Bubble

Moral Hazard's Time of Reckoning

2022-09-29T14:54:00.021-07:00

moral hazard

noun

~~The risk to an insurance company that the holder of a policy will destroy the insured property in order to collect the monetary reimbursement available under the policy.~~
The risk that an individual or organization will behave recklessly or immorally when protected from the consequences.
The prospect that a party insulated from risk may behave differently from the way it would behave if it were fully exposed to the risk.
(economics) the lack of any incentive to guard against a risk when you are protected against it

The Can Has Reached The End Of The Road

BY TYLER DURDEN

THURSDAY, SEP 29, 2022 - 01:20 PM

Markets are like children. They can only learn the most important lessons the hard way, by making mistakes and suffering the consequences.

One of my earliest memories is of a visit to a local park with my father and my sister. This park had a big fountain full of fish and my sister climbed up to get a closer look while my dad repeatedly warned her to be careful. She didn’t listen and fell in, so dad had to pull her out. The water was cold and she was shivering.

Years later, my father told us that he intentionally fought the urge to grab her before she fell, even though he was certain that she would. He wanted her to learn an important lesson about listening to her parents, and being careful around water. He even let her stay in the cold water a beat longer to make sure the lesson stuck.

I share this story as an allegory of the right way to manage an economy and a financial system. Good policymakers know that economic agents (of any age) are like children. If you prevent them from suffering the consequences of their own decisions — however painful those consequences might be — then they will never learn. Investors, bankers, and borrowers are always probing the boundaries of what they can get away with. Bail them out from stupid risk taking and they will get stupider.

We’ve all met kids who are never punished by their parents or allowed to fail. They grow up to be miserable adults, stumbling from one fiasco to another and eventually spiraling out of control. That’s the state of the global financial system today.

For decades, central bankers and other government officials have been bailing out market participants from the consequences of their own folly. The 1987 crash, Long Term Capital, the 2008 financial crisis, the European debt crisis, and countless other macroeconomic events that should have resulted in major players being punished for making bad decisions did not. Instead, rates were cut, money was printed, stimulus was introduced, and the kids who ignored the warnings of their parents were not allowed to fall. They were given stern warnings after the fact, but kids who didn’t get wet don’t listen.

All of this was done under the guise of protecting ordinary people. Let Wall Street fail, government officials told us, and Main Street would suffer. This was always a dubious claim, but some version of it was embraced by both sides of the political spctrum in almost every country, and the financial system grew ever more fragile.

Then came COVID, and any pretense of discipline went out the window. Bailing out bad actors was now a virtue, no matter how little they deserved it. So the Federal Reserve backstopped the junk bond market then gave a speech about protecting healthcare workers. The most egregious interventions were eventually wound down, but the precedence had been set: the closer the kids got to the edge, the more the government would try to save them. An importat opportunity for a market reset was lost, and the can was kicked further down the road.

All that stimulus — the size and variety of which was unprecedented in modern history — resulted in record inflation. Unlike the prior interventions, whose negative consequences were felt in more implicit ways such as economic inequality, the negative consequences of this affair are front page news. People hate inflation so governments have no choice but to respond, undoing decades of easy money and raising interest rates. Markets are not taking it well. Currencies are plunging, borrowing costs are soaring and the global economy is starting to teeter.

Policy makers are now stuck in a bind. Do nothing and inflation will rage, or do something and important markets may break. The proverbial can has reached the end of the road.

What happened in the UK this week — a collapsing bond market that forced the Bank of England to reverse itself — is only the beginning. You can’t abruptly cut off a kid you’ve been spoiling for years without causing a tantrum. That’s not how people work, and it’s certainly not how markets work. A global economy built on cheap money is about to be tested in unprecedented fashion.

How many public companies who loaded up on cheap debt to finance share buybacks will now have to reverse the process? How many governments who run major deficits will be able to tighten their belts as borrowing costs rise? How many centrist governments will survive simultaneously surging food, fuel and borrowing costs? How many real estate deals will remain viable when mortgage rates approach 8%? Which hedge fund is about to blow up?

Only time will tell, and you’ll have to protect yourself.

How?

As it turns out, there’s one financial system that has never had a bailout, market intervention or outside stimulus. You’ll know it from its extreme volatility, and the fact that its biggest players can and do fail. In this system, the depositors who trust bad banks lose their savings and the traders who used too much leverage lose everything.

The stewards of the old system love to criticize this one, in part because lots of people can and do get wet on a regular basis, some of them undeservedly so. But in a year when the old system keeps teetering on the edge, this one has already had its baptism by fire, making it antifragile and far more trustworthy.

Source: https://www.zerohedge.com/markets/can-has-reached-end-road

Why Greatly Reduced House Prices Would be a Good Thing

2017-02-11T12:14:00.003-08:00

I am both glad and angered to see this New York Times article. Glad because it says the same things we bubble bloggers said (and still do) for so long - we need to stop treating our primary residence like an investment; angry because only now is a big news outlet finally agreeing with us.

To reiterate what has already been said here and on many other housing blogs: some of the reasons why we should stop treating real estate like an investment and instead treat it like any other consumer good:

Rising house prices are undesirable for the same reasons that rising milk costs, gasoline costs, etc. are undesirable.
High housing costs and high rents make it very difficult for many Americans to move to where the jobs are.
Lower housing costs and rents would work their way through the general economy thereby lowering the cost of living for many Americans thereby making American workers more competitive with foreign workers.
High housing costs diminish economic growth.
High housing costs widen income inequality.
Housing is a basic need and should be a right in the same vein as health care.
Health benefits.
Environmental benefits.
An end to housing bubbles.
Etc...

Here's the full New York Times article:

Why Falling Home Prices Could Be a Good Thing

By CONOR DOUGHERTY

FEBRUARY 10, 2017

Suppose there were a way to pump up the economy, reduce inequality and put an end to destructive housing bubbles like the one that contributed to the Great Recession. The idea would be simple, but not easy, requiring a wholesale reframing of the United States economy and housing market.

The solution: Americans, together and all at once, would have to stop thinking about their homes as an investment.

The virtues of homeownership are so ingrained in the American psyche that we often forget that housing is also a source of economic stress. Rising milk prices are regarded as a household tragedy for some, and spiking gas prices stoke national outrage. But whenever home prices go up, it’s “a recovery,” even though that recovery also means millions of people can no longer afford to buy.

Homes are the largest asset for all but the richest households, but shelter is also a basic necessity, like food. We have a variety of state and federal programs devised to make housing cheaper and more accessible, and a maze of local land-use laws that make housing scarcer and more expensive by doing things like prohibiting in-law units, regulating how small lots can be, and capping the number of unrelated people who can live together.

Another big problem: High rent and home prices prevent Americans from moving to cities where jobs and wages are booming. That hampers economic growth, makes income inequality worse and keeps people from pursuing their dreams.

So instead of looking at homes as investments, what if we regarded them like a TV or a car or any other consumer good? People might expect home prices to go down instead of up. Homebuilders would probably spend more time talking about technology and design than financing options. Politicians might start talking about their plans to lower home prices further, as they often do with fuel prices.

In this thought experiment, housing prices would probably adjust. They would be somewhat cheaper in most places, where population is growing slowly. But they would be profoundly cheaper in places like super-expensive San Francisco.

That was the conclusion of a recent paper by the economists Ed Glaeser of Harvard and Joe Gyourko at the Wharton School of the University of Pennsylvania. The paper uses construction industry data to determine how much a house should cost to build if land-use regulation were drastically cut back. Since the cost of erecting a home varies little from state to state — land is the main variable in housing costs — their measure is the closest thing we have to a national home price.

According to them, a standard American home should cost around $200,000, a figure that includes the cost of construction, what land would cost in a lightly regulated market, and a modest profit for developers. In many places, that’s what the prices roughly are. But for a few metropolitan areas like San Francisco and Boston, homes are wildly overpriced, leading to distortions in the economy and labor market.

We would still see homes of different sizes and styles — condos in some places, single-family homes in others — depending on the market in each city. A New York home would be smaller than one in, say, Houston.

And prices would still vary from place to place, based on demand and geography. It’s easier to build in Phoenix (plenty of flat land), and harder in San Francisco (lots of hills and nearby water). But while building in the San Francisco metro area is more expensive than in other places, it’s not that expensive. By the paper’s calculations, a home in the San Francisco area should cost around $281,000.

The actual price for a standard home in the area is more like $800,000 (using 2013 data). The paper argues that most of that difference is caused by regulatory hurdles like design and environmental reviews that can add years to a project’s timeline and suppress the overall housing supply. The result is overpayment on a grand scale for the few homes that do get built.

People are sure to quibble with the economists’ calculations, but their general conclusion — that an abundance of new homes would result in lower prices — is not remotely controversial. Many studies, from the McKinsey Global Institute, California’s Legislative Analyst’s Office and others, have shown that California’s high home prices are largely a supply problem: The state doesn’t build enough homes.

There are counterexamples around the world. Tokyo has not had rapid home price appreciation because increases in demand are met with increases in new building.

So let’s carry on with this hypothetical. Say we opened the floodgate of development. What kind of effects could we expect? The economy would grow, and by a lot. According to a recent paper by the economists Chang-Tai Hsieh, from the University of Chicago’s Booth School of Business, and Enrico Moretti, from the University of California, Berkeley, local land-use regulations reduce the United States’ economic output by as much as $1.5 trillion a year, or about 10 percent lower than it could be.

That is a theoretical figure that includes easy-to-see things like increased sales of building materials and more jobs for construction workers. Most of the increase, however, would come from more abstract gains like increased wages for people who are willing to move from an economically distressed city to a faster-growing economy elsewhere, but are currently unable to because housing is too expensive.

Over time, the accelerated pace of building could lead to a long-run deflation in home values. But for the most part that would be limited to a few coastal cities. And while the older homeowners there would most likely be resentful of all the new apartments, condos and townhomes that caused their home equity to shrivel, younger people would have an easier time getting started.

Moreover, it’s likely that lower home prices would encourage workers to move farther and more often in search of job opportunities. The impact on mobility could be huge, as the $1.5 trillion figure shows.

There was a time, a few decades ago, when the cost of living did not vary all that much from city to city. Since then, as places like New York, San Francisco and Seattle have been hit with skyrocketing rents and home prices, the regional disparity in housing costs has altered how Americans of different incomes pursue opportunity.

Back when home prices were more even from place to place, people with different levels of education and income tended to flock to the same types of high-wage places, according to research by Daniel Shoag, a professor of public policy at Harvard, and Peter Ganong of the University of Chicago.

Today, people with less education tend to go where housing is cheap, like Las Vegas, while college-educated workers with skills that are in demand still go to places where wages are high, like the Bay Area.

That’s because lower-income people have little to gain by going to California’s coastal cities. Wages might be higher, but as the state’s poverty figures show, a better paycheck doesn’t help if it’s swallowed by rent. The loss of mobility makes income inequality worse, because lower-wage workers are effectively locked out of exactly those places where wages and the demand for workers are greatest.

Finally, if housing were plentiful and cheap, we would probably stop having big housing bubbles. One good way of describing a speculative bubble is a moment when society deludes itself into believing that something plentiful is scarce, or will soon be. In the mid-2000s, banks and homeowners came to believe that homes would be scarce in places like Las Vegas and Phoenix, even though there were enough materials, land and labor to keep building and building and building.

Housing is particularly prone to bubbles because, in contrast with other products, we seem to want it more when it is expensive and less when it is cheap. And no matter how many times we look out an airplane window to see vast acres of emptiness, we somehow still believe that land is a great investment because nobody is making more of it.

Homes would still hold a lot of value; they still might appreciate, if more slowly; and desirable neighborhoods would still seem relatively expensive. But there would probably be fewer manias in which people expect home prices to double in just a few years.

Just as we don’t expect to make a profit selling our cars, if we stopped thinking of our homes as big moneymakers, we would probably start focusing on building them faster and less expensively.

Jeff Wilson, a college professor turned entrepreneur who refers to himself as Professor Dumpster for the year he spent living in a metal trash container that he turned into a home, is trying to make this happen on a small scale. Mr. Wilson’s nascent company, Kasita, wants to produce a line of one-bedroom homes. They would be identical in size and bought for a single price, and could be placed on city lots that traditional developers are unlikely to be interested in.

Homes would be stacked together, creating de facto apartment buildings that could be built and unbuilt in a few weeks. Although that wouldn’t do much to help a family of four, it might take some pressure off the housing market by directing younger people to studios instead of having them pile in together, freeing up some three-bedroom apartments for families.

For now, Americans seem unlikely to embrace this vision on a large scale, and even if they did, it would take a long time to start seeing home prices drop or flatline. But mass-produced homes from the past — brick townhouses or bungalows that came from a Sears catalog — are now sought after, so this imaginary world needn’t be uglier, though it very well may be.

Also, even if homes were a lot cheaper, we would probably retain the societal benefits of homeownership: As Mr. Glaeser and Mr. Gyourko’s data shows, housing is already relatively affordable in the vast majority of American cities. So there is little reason to believe that people would desert overpriced neighborhoods if they suddenly became cheaper.

This does not mean that select places like New York’s West Village or San Francisco’s Mission District would suddenly be affordable — or that American cities would suddenly fill up with towering condominiums and blocks of identical rowhouses. Housing is a regional problem, spread across miles of cities and suburbs, so a lot of new development would probably occur in close-in suburbs where there is more land than people think.

Take Boston. The median Boston suburb has a minimum lot size of one acre, and many suburbs have minimum lot sizes of one home per two or four acres. That is a huge drag on the region’s overall housing supply, according to Mr. Glaeser.

Yes, adding more homes, even medium-density ones, would annoy people looking for less crowded quarters. But the nation as a whole would probably be better off, both in jobs and in financial security. The money not spent on housing could flow to other, possibly more productive, investments — like stocks in new companies or bonds for infrastructure projects.

Of course, our view of homeownership is so entrenched in our economy, our political system and our tax code that it would be impossible to change in a short time, and probably even in a long time. But there could be political and societal benefits. What if local decisions that today are dictated by fears of declining property values could instead be made with an eye toward what’s best for education or job growth?

The point of this thought experiment isn’t to embrace it full-on, but to open our eyes to the negatives of the national obsession of owning a home, expecting its value to rise, and using the levers of local government to keep neighborhoods as they are.

'Progressive' San Franciscans Strongly Support Immigration Rights (Just Not In Their Neighborhood)

2016-12-17T11:48:00.000-08:00

One of my gripes about Marin and much of the Bay Area is what shameless hypocrites we are. In Marin, being "progressive" is only skin deep: it's just about appearing progressive while quietly making sure its other communities that bear the brunt of the less desirable consequences of progressiveness.

I am glad others have noticed this too.

Full article:

'Progressive' San Franciscans Strongly Support Immigration Rights (Just Not In Their Neighborhood)

by Tyler Durden

"Not in my back yard..."

San Francisco is one of the most progressive cities in the nation, especially when it comes to national immigration, notes San Francisco Chronicle's Vincent Woo.

We believe so much in the natural right of people to join us here in America that we fought to keep our status as sanctuary city even in the face of being federally defunded for it. We pride ourselves on our rejection of plans to tighten immigration controls and deport undocumented immigrants.

Yet, Woo exclaims, take that same conversation to the local level and all bets are off.

City meetings have become heated, divisive and prone to rhetoric where we openly discuss exactly which kinds of people we want to keep out of our city.

This is an ethically incoherent position. If we in San Francisco so strongly believe that national immigration is a human right, then it seems strange to block migration into our own neighborhoods.

Consider the San Francisco Board of Supervisors’ decision to challenge the environmental review of a proposed housing project at 1515 Van Ness Ave. Despite the project’s plan to rent 25 percent of its units at a below-market rate, many members of the neighborhood preservation group, Calle 24, expressed anger that the project might bring tech workers into the Latino Cultural District.

Or that members of the Forest Hill homeowners association opposed a project that would build affordable housing for seniors and the formerly homeless on a site now occupied by a church. One of the grievances aired was that it might bring mentally unstable or drug-addicted people into the neighborhood.

Both of these groups are reacting to the threat of change. In both cases, residents took it as a given that they were within their rights to control who lived in their neighborhoods.

Conservatives see national immigration as a privilege to carefully dole out. Liberals see immigration as a human right that needs to be protected. San Francisco progressives view living in certain neighborhoods as a privilege to be earned, and see nothing wrong with preventing certain groups of people from moving in, a traditionally conservative view.

Tech workers have now become the most visible of those whom neighborhood groups seek to exclude. Tech workers have been been cast as shallow opportunists who indifferently displace existing residents. However, most tech workers who move here are simply migrants from less affluent parts of the country. They’re people from places like the Midwest who are just trying to find good jobs in one of the last functioning economic engines in the country. If we believe that San Francisco should be a shelter for people from less prosperous countries, why shouldn’t it also be a shelter for people from less prosperous parts of our own country?

Even more pointedly, more than a third of Silicon Valley tech workers are immigrants themselves. For many people in China, India and Eastern Europe, working in technology is one of the few ways out of their countries and into ours.

Neighborhood activists want to protect their vision of San Francisco, and that is absolutely a noble purpose. However, blocking future residents isn’t the way to go about it. How would you even do it?

The current approach of attempting to just halt construction hasn’t proven effective at preserving neighborhood aesthetics. To truly control who lived in a neighborhood, you’d have to create some official tribunal that would essentially have the ability to vet applicants by their demographics. This is would be very dangerous and likely illegal. It’s hardly a progressive idea to deliberately institutionalize exclusionary policy.

If we really believe that migration is a human right and not a privilege extended at the discretion of current residents, then we need to acknowledge that neighborhood meetings where people feel entitled to debate the virtues of future residents are antimigration by definition.

We need to acknowledge that making room for, say, an Indian tech worker on an H1-B visa who is trying to get a green card serves the very same ideological purpose as making room for an undocumented worker from Mexico.

Once again the progressive agenda can be translated as the elite establishment liberals exclaiming "do as I say, not as I do..it's the fair thing to do." [emphasis mine]

The Obama Administration Is Finally Targeting the NIMBY Nonsense That’s Made Cities Unaffordable

2016-09-28T11:30:00.003-07:00

Something we housing bubble bloggers pointed out time and time again, "back in the day":

"In a white paper released Monday, the Obama administration pins a whole bunch of America’s problems—including income inequality, plodding economic growth, gentrification, long commutes, the strained safety net, homelessness, and racial segregation—on the restrictive land-use policies of American cities, counties, and suburbs (and by extension, the NIMBYs who promote them)."

Full article:

The Obama Administration Is Finally Targeting the NIMBY Nonsense That’s Made Cities Unaffordable

By Henry Grabar

In a white paper released Monday, the Obama administration pins a whole bunch of America’s problems—including income inequality, plodding economic growth, gentrification, long commutes, the strained safety net, homelessness, and racial segregation—on the restrictive land-use policies of American cities, counties, and suburbs (and by extension, the NIMBYs who promote them).

It’s nothing you won’t already know if you’ve tried to buy a house or rent an apartment in a number of American cities lately (or if you read Slate!). The 23-page Housing Development Toolkit reiterates arguments that housing writers like Emily Badger and Matt Yglesias have been making for the past five years, as America’s housing problem morphed from foreclosures to sky-high rents and home prices.

Still, it’s nice to see it coming from the very top.

The problem is worst in certain high-cost, high-wage cities, but the White House isn’t intervening on their behalf. Instead, the report does a good job illustrating how what began with cranky homeowners in the San Fernando Valley, anti-gentrification activists on the Upper West Side, or at quality-of-life meetings in Palo Alto, California, and Winnetka, Illinois, has helped to reverse what for a 100 years was the defining feature of American life: economic mobility.

Between 1880 and 1980, poor people moved to rich places: Okies to California, southern blacks to Chicago and New York, rural whites to cities across the Midwest and later, the South. That happens less now than it used to, in part because the poor can’t afford to live near the rich. As a result, the rate of income convergence across states has declined over the past 30 years, after a century of gains spurred by economic mobility. The wonkiest argument in favor of housing-supply restrictions in high-wage cities like San Francisco might be Conor Sen’s belief that “job convergence between metros ‘spreads the wealth’ ”—that San Francisco’s loss is Phoenix’s gain, and that’s good for America.

Not really: Per capita income in Connecticut and Mississippi moved toward evening out between 1940 and 1980, and then stopped. That poor people stay in Mississippi or move there because they can’t afford the New York suburbs is not cause for either state to pat itself on the back.

For this we can blame both well-intentioned environmental protections and permitting processes, but also, in the White House’s words, “laws plainly designed to exclude multifamily or affordable housing.” There can be no ambiguity about the anti-rental housing sentiment in places like Boulder, Colorado, or Westchester County, New York: It is pure, territorial NIMBYism. The report reserves a special section for Los Angeles, which both has, by some measures, the highest rents in the country and is also home to a celebrity-funded anti-growth initiative masquerading as an environmental movement. (As the situation in the Bay Area demonstrates, restrictions on infill housing either force teachers to commute two hours to their jobs—inhumane and not environmentally friendly—or force police officers to live in trailers in city parking lots—hey, that’s one way to fulfill a residency requirement!)

"The growing severity of undersupplied housing markets,” the report concludes, "is jeopardizing housing affordability for working families, increasing income inequality by reducing less-skilled workers’ access to high-wage labor markets, and stifling GDP growth by driving labor migration away from the most productive regions.”

Like, 10 percent of GDP growth.

The administration has already used what power it has through the Department of Housing and Urban Development to try to desegregate the suburbs. So what’s in the Obama toolkit of policy prescriptions for local and state housing?

Establish as-of-right development (in other words, a project is a go once you’ve met the zoning requirements, and doesn’t need to go through other types of review). This was one of the goals of Jerry Brown’s now-dead affordable housing proposal for California.

Tax vacant land, or acquire it and put it into use, through land banking or otherwise.

Shorten permitting. San Diego’s “Expedite Program” allows affordable, in-fill, or sustainable projects to be reviewed in just five days. Austin’s S.M.A.R.T. Housing Program has helped speed the creation of 4,900 units of affordable housing since 2000.

End off-street parking requirements that subsidize driving and pass car costs onto renters and buyers, whether they like it or not.

Enact high-density and multifamily zoning; include bonuses for density; adopt inclusionary zoning.

Tax incentives and abatements for affordable or transit-oriented development.

The problem with this report, unfortunately, is that it does little to confront the large, diverse, and effective coalition that is arrayed against these changes: the wealthy suburbanites who don’t want rental housing in their neighborhoods; the urban white ethnics for whom more than half of household wealth sits in home values; the labor unions reluctant to support initiatives that lead to nonunion construction; the environmental groups and preservationist groups fearing a slippery-slope erosion of hard-fought gains; the Agenda 21–fearing conservatives; the municipal politicians who view extensive land-use reviews as an essential component of their power; the poor tenants who fear the catalytic, rent-spiking effect that new construction can sometimes produce at a local level and resent bearing the burdens of new development; the car-dependent commuters who feel that an on-street parking spot is a God-given right.

Will those people be convinced by suggestions for housing development emanating from the Oval Office? Somehow I doubt it.

Occupy Marin Anyone?

2011-10-26T22:45:00.001-07:00

Back in the early phases of this blog I speculated whether the inevitable collapse of the housing bubble would finally lead to much needed social unrest over the greed, corruption, crony capitalism, and deception (to name a few) that the housing bubble exposed and which continues today. So disgusted was I with Americans' complacency that I "ended" this blog with "Where Is the Outrage?". It's been nearly two years since that last post and it seems that finally, after numerous bailouts, an ongoing and much needed foreclosure "crisis", failed and misguided attempts to artifically inflate house prices, massive currency debasement, sovereign debt crises that span the world, numerous who-could-have-knowns?, etc., etc., etc. (too much time has passed to review all that has happened, I'm sorry) that it appears to finally have an answer (hopefully only an early answer): Occupy Wall Street.

What I don't get is "Occupy Oakland". Why Oakland? Wall Street I understand as it has been part of the problem. But Oakland? Really? Oakland has been a victim for crissakes. The protesters should be occupying the locales of "the 1%", not the locales of "the 99%". They should be in DC for certain but they aren't. And they should be in the leafy residential communities of the 1% such as, say, Marin, but not Oakland.

So I cordially invite all you protesters to come on over, en masse, smell the smug in our air and occupy Marin. We've tried so very, very hard over the years to discourage the "unclean" from visiting that it is long over due. So please, come on over and stir it up.

...Prudence, indeed, will dictate that Governments long established should not be changed for light and transient causes; and accordingly all experience hath shewn that mankind are more disposed to suffer, while evils are sufferable than to right themselves by abolishing the forms to which they are accustomed. But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security...

-- Adams, J., Adams, S., Bartlett, J., Braxton, C., Carroll, C., Chase, S., Clark, A., Clymer, G., Ellery, W., Floyd, W., Franklin, B., Gerry, E., Gwinnett, B., Hall, L., Hancock, J., Harrison, B., Hart, J., Hewes, J., Heyward, Jr., T., Hooper, W., Hopkins, S., Hopkinson, F., Huntington, S., Jefferson, T., Lee, F. L., Lee, R. H., Lewis, F., Livingston, P., Lynch, Jr., T., McKean, T., Middleton, A., Morris, L., Morris, R., Morton, J., Nelson, Jr., T., Paca, W., Paine, R., Penn, J., Read, G., Rodney, C., Ross, G., Rush, B., Rutledge, E., Sherman, R., Smith, J., Stockton, R., Stone, T., Taylor, G., Thornton, M., Walton, G., Whipple, W., Williams, W., Wilson, J., Witherspoon, J., Wolcott, O., Wythe, G. -- 1776

Where Is The Outrage?

2009-12-24T11:24:00.000-08:00

Take a look at this article:

Goldman Sachs creates CDOs (collateralized debt obligations), bundling bad debt with good (and linked to mortgage debt by credit-default swaps) during the most manic phase of the housing bubble.
Pension funds, insurance companies, and others bought them believing Goldman's hype that the housing market couldn't fail. Goldman didn't even let buyers short them.
All the while realtors, real estate agents, lenders, local papers where all fueling the buzz about how real estate can't fail, "buy now or be priced out forever".
Goldman Sachs then short their own CDOs well beyond what was justifiable for hedging risk.
The housing markets then predictably implode. Pension funds, insurance companies, mom and pop all bank huge losses.
Goldman Sachs pockets huge rewards.
You and I then bail out the losers.

"The simultaneous selling of securities to customers and shorting them because they believed they were going to default is the most cynical use of credit information that I have ever seen,” said Sylvain R. Raynes, an expert in structured finance at R & R Consulting in New York. “When you buy protection against an event that you have a hand in causing, you are buying fire insurance on someone else’s house and then committing arson.”

Or a school bus mechanic taking out life insurance on all the kids who ride that bus. Or your doctor taking out life insurance on you before doing your heart surgery. Or airline mechanics taking out insurance on the passengers. Or ferris wheel mechanics...

Where is the outrage?

Unemployment By County

2009-12-20T13:36:00.001-08:00

It's been quiet. Too quiet.

I found this somewhere, I can't remember where. It's an animated display of the growing unemployment rate by county. It comes from the U.S. Department of Labor (so you know the real unemployment rates are much higher than what's shown below). [The graphic to the left shows the final slide.]

Look at little 'ol Marin in the map. It almost seems to try and hold off the waves of unemployment crashing against its borders, but in the end it succumbs. It ends up in the 7.0 - 9.9% unemployment range along with Sonoma County and all the other "we're immune, we're special" places.

I wonder what it could mean?

Then there are the reports (like this one, for example) of how the pricing in"luxury" markets is now getting pummeled whereas the "plebeian" markets, after having been oppressed, are benefiting somewhat from desperate attempts to prop them up with bailout and stimulus money provided by you and me, Mr. and Mrs. Tax-payer (so you just go ahead, pat yourself on the back).

And then there is the Marin IJ (so it must be worse than reported) pointing out that while the cheaper areas in the Bay Area are rising a little in price thanks to the bailouts and stimuli, Marin prices are still going down, over -12%, and are likely to get a whole lot worse.

And oh my but how many formerly for-sale houses are now for-lease or for-rent, at least here in Mill Valley! I guess all the Marin "FBs" are asking potential buyers for a personal bail-out while they wait for a return to a "normal" housing bubble.

Dec. 24 Update: Oh, and I forgot to mention that this POS in Mill Valley, the one accross the screet from the 7-11, is back on the market. I guess the "let's rent it" thing didn't work out so well for them. 'Such a shame, really; who could have known?' Anyway, I first noticed this POS back in December of 2005. So this place has been trying to sell for over four years or more than 1460 days at more or less the same asking price. More on the history of the posting on this POS can be found here.

Have a merry Christmas Marin!

Don't Cry Little Debt Baby

2009-10-12T20:05:00.000-07:00

Oh how sweet. A little debt baby! And getting started so early too. You are going to grow up to be such a good consumer. Oh yes you are!

Welcome to the world your daddy helped to create, honey! How? Why my dear, with his eager participation of course. That and a bit of denial and a large helping of self-justification. You see, your daddy, like so many others, realized that saving was hard work. Too damn hard, in fact. And let's face it, it takes a lot of self-discipline, sacrifice, and a modicum of modesty to actually save for retirement (and your future) and oh but those granite counter tops are just so expensive! And then of course he fell for the lie (not just once, but twice) that the stock market and even our houses could do the saving for us. Your daddy thought it was a new paradigm, a brave new world, that "it was different this time" -- he thought he could spend all of his earnings on frivolous things like vacations to exotic climes, a new BMW every couple of years (for use when your daddy wasn't driving the obligatory Prius that advertises oh-so-well his "concern" for the Earth and how environmentally responsible he was), all those nights out eating the ever so trendy Asian Fusion food, etc. You know, stuff that white people like.

So your daddy, like so many other people his age, believed what he wanted to believe. He took on more and more debt, spent more and more of his "trapped" equity, and believed, because it felt so good to do so, that there would be no consequences of the adverse type because, after all, everyone was doing it. And how else could he "keep up with the Joneses"? And now that the world your daddy helped to create is crumbling, Congress and the Fed and all the other spineless men who have their thumbs so deep in the pie that it's coming out their ears have further impoverished this country in a vain attempt to artificially prop up house prices, bail out the failed financial institutions that, to a great extent, enabled this problem and basically to keep the financial orgy going just a little bit longer because your daddy will be damned if he has to actually save for what he wants, and wants now.

But guess what, sweetheart? You will still get an inheritance! That's right... an inheritance! It's just that it won't be the sort of inheritance you were counting on. And what is that wonderful inheritance? Why, what you and your generation and the generations to come will inherit is your daddy's generation's debt of course. You get to pay for their lifestyle!... a lifestyle they couldn't afford themselves. And it will only cost you your livelihood and standard of living. Sure, you might not ever be able to afford a house without first selling your children off for slavery. You might not be able to afford the luxury of getting sick. But be confident that it will all be for a good cause -- it was the debt they needed (really) and that they were entitled to. And have no fear because it's all part of your daddy's plan, it's all well thought out. Believe me. Because even though the plan was devised by the corrupt men on Wall Street and in Congress and in the investment banks and even by Mr. "Yes We Can" (and Mrs. Yes You Will) and sold to the dumbed down and overly medicated American public as "a good thing", it's still your daddy's plan because he helped let it happen. Your daddy didn't so much as lift a finger to oppose the bailing out of the people and institutions that created this mess, he didn't object to the propping up of artificially inflated property values, he looked the other way when the American people were bribed by its own government to buy new cars and new houses, and he was busy that day when our so-called "free" markets were so manipulated that even a banana republic dictator would be impressed. No, for people like your daddy, it's just not practical to tell the truth in times like these.

So try not to be too harsh on us. When you are old enough to fully understand, please don't pee on your daddy's grave no matter how much you might want to... Yes, your daddy saw this coming a long time ago, there were plenty of warning signs and plenty of nay-sayers shouting to be heard over the din of delirium, but he just chose to ignore them because he was having just too much of a good time at your expense. You don't know it yet, but you will learn soon enough that it is easy for people like your daddy to believe what they want to believe; it is easy for us to only pay attention to the things that support our preconceived notions and to believe the things we most want to be true. So we find it easy to believe that what we've done is the right thing to do and you will too. When things get tough for you, just remember we were entitled to what we wanted now, pop an Abilify or three, or whatever the drug du jour is when you are an adult, and you too will soon be a believer.

Same as it Ever Was Pt. II

2009-08-29T15:12:00.000-07:00

William Cohan over at The Atlantic (I am really starting to like that magazine) has a nice article, entitled "An Offer He Couldn't Refuse" (but the online version is entitled "The Final Days of Merrill Lynch"), describing the events leading up to and during the purchase of Merrill Lynch by Bank of America; a transaction which was, for all intents and purposes, forced upon BofA by the thuggery of Bernanke and Paulson and, by extension, the Fed and U. S. Government (and, by extension, the U.S. citizenry -- you and me). I won't excerpt out the juicy bits for you, but this quote is central to the real issues of the legality and Constitutionality of what Bernanke and Paulson did:

"...it also sounds an awful lot like what happens in a banana republic or in Putin's Russia, when the captains of industry did favors for the government in exchange for economic subsidies. How do you stop from going down the slippery slope and becoming like Putin's Russia?"

There is decent discussion about the vast amount of "moral hazard" wrought by Bernanke and Paulson (not just with regard to the Merrill deal, but also the GM bail out, TARP, etc.), the sanctity of contracts, and how the markets can function properly if the rules can change whenever the Fed or government decides to change them or if big risk-takers can bet on being bailed-out.

PS - The graphic in the online version of the article is just part of the full graphic in the print version. The full graphic is priceless as it shows Lewis being forced into eating from a bowl of bubbling, green, malignant, toxic sludge.

Same as it Ever Was

2009-08-21T08:44:00.000-07:00

One thing that has angered me so much about the housing bubble was how something as basic and necessary as a home was now treated like an investment and a cash machine. This change in attitude towards such a basic need was, of course, all just one small part of an unfortunate transition towards a society where jobs are transitory, where people likely face having more than one "career", lost pension plans, layoffs, outsourcing, bankrupt social security and Medicare, and all the rest. In response we became a nation of self-proclaimed investors and traders. We allowed ourselves to be convinced that 401Ks, IRAs, ROTHs, stocks, bonds, REITs, etc. and, oh of course, houses were viable proxies for retirement savings. There was (almost) no risk because we were so willing to believe what we wanted to believe: it was "different this time", it was a "new era", stock market valuations no longer mattered, debt no longer mattered, the development of "wealth creation technology", "almost all if not all of those gains are here to stay", "Fifteen percent is pretty much in the bag", "buy now or be priced out [of the housing market] forever", etc, etc, etc. And it had the added benefit (some might say delusion) that we could "live it up" and spend 100% of our earnings since our houses and Wall Street were saving for us.

I have absolutely no problem with people who choose to invest or trade. But I think there are some things that are just too important to people, our communities, and society to risk being treated as an investment (and therefore prone to becoming a bubble or speculative mania) and housing is definately one of them.

You see, the problem with investing is that sometimes you lose. ~~It has to be so; there are always two sides of a trade; someone wins and someone loses.~~ We seem to have forgotten that inconvenient fact or, rather, we no longer take personal responsibility for that fact -- we are entitled to a profit don'tchyaknow. We seem to have allowed ourselves to believe all the hype and garbage that bankers, realtors, Wall Streeters, Fedsters, and everyone else with a vested interest, would like us to believe... that we can all be winners if only we bring "a bucket of money and a box of stupid" to the bargaining table. And what's worse is that The System has become so dependent on debt and investment dollars, the transition from a nation that produces to one that consumes has been so complete, that losses can no longer be tolerated and certain businesses are believed to be "too big to fail". Hence, massive bailouts of the very people and institutions that got us in to the current economic mess and a recession that has been called the "worst since [the] Great Depression".

Which (finally) leads me to my point (if I even have one): you would think that now, finally, we would understand the folly of our ways and, you know, try and fix things at least as far as housing is concerned. But you would be wrong. You see, the debt-based consumption economy in combination with the "too big to fail"/bailout mentality means that reckless risk-taking is officially encouraged by even the highest echelon of government. We are content to just pretend that everything is now fixed, everything is ok, and while no one is looking, conduct business as usual but just disguise it a bit and pretend it is a fix because, after all, if it blows up we can just bailout the system with taxpayer dollars and burden future generations with more of our debt... they won't mind:

Much to their dismay, Americans learned last year that they “owned” Fannie Mae and Freddie Mac. Well, meet their cousin, Ginnie Mae or the Government National Mortgage Association, which will soon join them as a trillion-dollar packager of subprime mortgages. American taxpayers own Ginnie too...

Herein lies the problem. The FHA’s standard insurance program today is notoriously lax. It backs low downpayment loans, to buyers who often have below-average to poor credit ratings, and with almost no oversight to protect against fraud. Sound familiar? This is called subprime lending—the same financial roulette that busted Fannie, Freddie and large mortgage houses like Countrywide Financial...

On June 18, HUD’s Inspector General issued a scathing report on the FHA’s lax insurance practices... The FHA’s reserve fund was found to have fallen in half, to 3% from 6.4% in 2007—meaning it now has a 33 to 1 leverage ratio, which is into Bear Stearns territory. The IG says the FHA may need a “Congressional appropriation intervention to make up the shortfall.”

...at the FHA, the [mortgage] down payment requirement remains a mere 3.5%. Other policies—such as allowing the buyer to finance closing costs and use the homebuyer tax credit to cover costs—can drive the down payment to below 2%.

Then there is the booming refinancing program that Congress has approved to move into the FHA hundreds of thousands of borrowers who can’t pay their mortgage, including many with subprime and other exotic loans...This program is intended to reduce foreclosures, but someone has to pick up the multibillion-dollar cost of the 30% loan forgiveness. That will be taxpayers.

In some cases, these owners are so overdue in their payments, and housing prices have fallen so dramatically, that the borrowers have a negative 25% equity in the home and they are still eligible for an FHA refi.

A few weeks ago a House committee approved legislation to keep the FHA’s loan limit in high-income states like California at $729,750. We wonder how many first-time home buyers purchase a $725,000 home. The Members must have missed the IG’s warning that higher loan limits may mean “much greater losses by FHA” and will make fraudsters “much more attracted to the product.”

...Is anyone on Capitol Hill or the White House paying attention? Evidently not, because on both sides of Pennsylvania Avenue policy makers are busy giving the FHA even more business while easing its already loosy-goosy underwriting standards.

Source.

When does We the People get fed up? Or are we just a nation of hypocrites who will tolerate any wrong as long as we think we can profit by it?

Take a Look in the Mirror

2009-07-19T15:38:00.000-07:00

As I am just catching up on reading the news from the last few weeks (I was traveling abroad), I saw this quote over on the Ben Jones blog:

If society just followed the advice of its grandparents, there wouldn't be an ongoing crisis with foreclosures that helped trigger the nation’s economic woes, according to the author of a new book. Shari Olefson, a Tampa, Fla., attorney…says simply blaming Wall Street, government regulations or predatory lenders — all who share culpability — is just shifting responsibility away from those who bought the homes.

I don't know how many times I got creamed by readers when I expressed that very same opinion on this blog.

If you want to know who is most to blame for this housing (and the ensuing economic) mess, just look in the mirror. You know who you are. You ignored that little cautionary voice in the back of your head, didn't stop to think for yourself, you let your friends/relatives/neighbors do the thinking for you when you said to yourself "everyone else is doing it, so..." and agreed to pay that stupid/ridiculous price for your house. Blame the enablers all you want, but at the end of the day the final responsibility rests on the shoulders of those who decided to "pull the trigger".

Fiscal Crisis Brings Prop 13 Up For Discussion (Again)

2009-06-29T19:47:00.000-07:00

Well, this is certainly blogworthy and so I am forced to break this hiatus.

It seems that the fiscal crisis in California -- Californians' long overdue day of reckoning -- is fueling discussion regarding the viability of Proposition 13.

It's about time! But don't get too excited. Talk like this has happened before following other crises, but there was always some new boom just around the corner to derail any serious reconsideration of Prop 13; the last one being the .com bubble. I can only hope that there won't be another boom anytime soon to distract determined discussion of at least seriously modifying Prop 13. But it'll never happen, of course; Californians form opinion using their pocketbooks and not their brains.

The Quiet Coup

2009-04-22T22:14:00.000-07:00

Please check out this article in The Atlantic by a former chief economist at the IMF.

Fellow Americans, you have been duped long enough. Considering to whom the government is giving your hard-earned money, how do you feel about having just paid your taxes? When do you finally say "enough is enough"? When you no longer have anything left to lose? By then it will be too late.

Summary:

The crash has laid bare many unpleasant truths about the United States. One of the most alarming, says a former chief economist of the International Monetary Fund, is that the finance industry has effectively captured our government—a state of affairs that more typically describes emerging markets, and is at the center of many emerging-market crises. If the IMF’s staff could speak freely about the U.S., it would tell us what it tells all countries in this situation: recovery will fail unless we break the financial oligarchy that is blocking essential reform. And if we are to prevent a true depression, we’re running out of time.

Open Thread

2009-04-12T09:48:00.000-07:00

We desperately need a new thread. Discuss what you want.

South Park: How the Financial System Really Works

2009-03-27T13:49:00.000-07:00

Dollar Devalued Yet Again

2009-03-22T11:55:00.000-07:00

Check out this post. Here's a summary (emphasis mine):

On Wednesday, right around the time the US markets were winding down, the Dollar was deliberately devalued. Everyone in the world watched it happen, except for Americans, who were outraged or offended by some manufactured distraction, as usual. The Federal Open Market Committee {FOMC] published an historic press release. Here's an excerpt:

"Job losses, declining equity and housing wealth, and tight credit conditions have weighed on consumer sentiment and spending. Weaker sales prospects and difficulties in obtaining credit have led businesses to cut back on inventories and fixed investment. U.S. exports have slumped as a number of major trading partners have also fallen into recession...."

So what does that mean?...

It means the Federal Reserve is now printing its own money. It's a defacto devaluation of the U.S. Dollar, with a promise of more to come. The Federal Reserve is going to buy everything in America that's not nailed down, throwing another $1,150,000,000,000 lifeline at markets...

President Obama may have no other choice than to take this route as foreign investors grow wary about the capability of the USA to service its debts. We will see less participation in Treasury auctions, since sovereign wealth funds will likely decide that domestic investment is probably a better idea that depreciating Treasuries. For the time being gold investments will look like a safer place to hold wealth, along with oil, silver, and certain other commodities.

Maybe Ben Bernanke will be able to do what no central banker has ever done before: put in just the right amount of inflation... not too much, not too little.

[How successful will Bernanke be at 'quantitative easing'?] In the past, they tended to overdo it.

There are not many examples. France, England and America in the 18th century. Practically no examples we know of in the 19th century (they'd learned their lesson!). And in the 20th century - only marginal countries... or countries with nothing left to lose... engaged in 'quantitative easing.' Germany did it in the 1920s, because her war reparations burden was greater than she could sustain. Argentina did it in the 1980s, because it owed too much money to too many foreigners. And Zimbabwe did it in 2003-2009, for reasons of its own.

There are not many examples because the consequences of over-doing it are so horrible, central bankers have generally not done it at all. Quantitative easing was always a possibility... but it was always a last resort... like blowing up the powder and spiking the guns; it was something you did when you knew you'd lost the battle already.

While all this was happening, the American people were off gnashing their teeth over the relatively miniscule AIG bonuses. And then Obama went on Jay Leno, which had to be discussed, and then he spoke to Iran, which was a big deal. And then there's Limbaugh and Beck to bash. Plus, the Special Olympics. And so it went.

Want more? How about this post over at Seeking Alpha which probably should have been titled "The United States of America is Now a Banana Republic".

Anyway, I think it's pretty clear that the U.S. government doesn't need our money. I mean, if the Fed can manufacture money, any amount, at will, out of "thin air", whenever it feels like it, then the Federal government doesn't need nor deserve our hard-earned tax dollars. We might as well keep it for ourselves (to buy gold, as kindling for a fire, you know, for stuff of real value).

DataQuick, January, 2005 to Present

2009-02-20T13:02:00.001-08:00

(Click on picture for larger view)

As one commentor over at CalculatedRisk said, "it is nice to see marin get bitchslapped".

Source

Note: I forgot to mention that these data points are year-over-year percent (de)appreciation.

Update February 22, 2009: Due to the incredulity of one commentor regarding the previous chart, I made the following chart using the same DataQuick source:

(Click on picture for larger view)

For the Marin data series in the above chart, peak (June, 2007) to trough (January, 2009) is a -45.4% decline. For the Bay Area series, it's a -54.9% decline.

Foreclosure Is Part of the Solution, Not the Problem

2009-02-01T10:48:00.000-08:00

As the Obama Administration rushes to prove that it is just as clueless and fiscally irresponsible as the previous administration vis the "credit crisis", I found this Wall Street Journal article refreshing. Yes, foreclosure is a perfectly acceptable choice for people who find their precious house price is less than their mortgage -- that is precisely why the house is held as collateral. There is absolutely nothing wrong with "walking away", "jingle mail", or "mailing in the keys".

The cure for the current economic "illness" is not greater and greater amounts of what got the economy sick in the first place. It's not effectively 0% interest rates. It is not massively punishing savers. It's not more lax lending. It is not more artificial asset price inflation. It's not more housing tax incentives. It is not forcing tax payers to bail out failed businesses that deserve to be weeded out of the business "gene pool". It's not the Fed buying bad assets at ridiculously inflated prices or setting up bogus banks to hold the bad assets. And it most certainly is not preventing or delaying foreclosures.

How long will it be before the myopic, short-sighted, entrenched group-think in Washington is finally forced to admit or shamed into admitting this simple truth? How impoverished must our country become, how much crushing debt must we pile on to the younger generations before they understand this?

The cure for the current economic mess is what's been needed for the last decade or more: to allow the free-market to remove the excesses in the economy and to price assets based on what people earn for themselves. Foreclosure is the free-market in action doing exactly what it should be doing and what needs to be done.

Government and government-sponsored market interventions and manipulations are the exact opposite of what the markets need.

Preventing foreclosures has become a top priority of politicians, economists and regulators. In fact, allowing foreclosures to happen has merit as a free-market solution to the crisis.

If the intent is to help homeowners, then foreclosure is undoubtedly the best solution. Household balance sheets have been destroyed by taking on too much debt via the purchase of inflated assets. With so little savings, a household with negative equity almost implies negative net worth. Walking away from the mortgage immediately repairs the balance sheet.

Credit may be damaged, but homeowners can rebuild it. And by renting something they can afford, instead of the McMansion they cannot, homeowners are most likely to have some money left over each month that they can save toward a down payment on a house they can eventually afford.

If the intent is to help the credit markets, then foreclosure is undoubtedly the best solution. The securitization model has proven to be flawed...

...The intent of [loan] modification programs to date is to create a generation of mortgage slaves. Fortunately, mortgage slaves can free themselves via foreclosure, and the masses are choosing to do so.

Just In Case You Were Wondering

2009-01-09T10:42:00.001-08:00

I was out in west Marin the other day and drove past the boat-garage-pretending-to-be-a-desirable-Marin-abode. It's still for sale. I last blogged it in a post entitled Waiting for Mr. Market to Catch Up to Their Marin Wishing Prices. Apparently, the sellers are still waiting for a Mr. Right buyer to come along "with a bucket of money and a box of stupid".

I first blogged this POS back in November, 2005. So that makes its real DOM something in the neighborhood of 1130 days (give or take). They are currently asking the bubblicious, staggering price of $525K for this 1br, 1ba, 543 ft^2 boat garage (but to put things in to their proper context, $795K was the highest, delusional listing price I've seen for this POS). Three cheers for Marin seller obstinacy, wishful thinking, and denial!

Price Decline from Peak

2008-12-31T15:05:00.000-08:00

I found the following graphic over on Mish's blog. Please check it out for the whole story.

A -44.55% decline from the peak in single family residence prices in the San Francisco Bay area in just 18 months! Anathema!

November YOY Results for "Immune" Marin

2008-12-19T11:43:00.000-08:00

More year-over-year declines for Marin. Rather surprising considering we were supposed to have "dodged the subprime bullet". At least that's what the Marin IJ once quoted our esteemed local real estate industry as saying.

From the Marin IJ:

Another month of plummeting home sales in Marin included a price drop of nearly 30 percent from November 2007, as discounted foreclosure sales continued to drive the Bay Area market. The median price of a single-family home in Marin last month was $790,000, down from $975,000 last year, MDA DataQuick reported Thursday. In October, the median single-family home price in Marin was $850,000. Realtor Peter Harris in Novato said bank-owned properties and short sales have made up about 85 percent of his business over the past year. ‘Prices are half of what they were,’ Harris said. ‘Condos are selling in the low $100,000s. We haven’t seen this for a long time.’

From DataQuick:

By the way, the graphic for this post is from a May 16, 2007 IJ article. I saved it knowing this day would come.

This Thanksgiving I Give Thanks to All of You Who Made this All Possible

2008-11-28T15:59:00.000-08:00

This post over at the Mess That Greenspan Made blog is down right scary -- by some estimates the potential cost of the bailouts will reach $8.5 trillion. Can we survive that? No way that is going to get paid back. Or this at Calculated Risk showing that the current bear market is the worst ever (on a percentage basis).

It seems to me that the genesis of this "crisis" was in the 1980s, the rise of yuppiedom, and has gotten progressively worse by an ever growing populous that more and more chose to finance their lifestyle with debt vs. wealth earned until it reached the point where people willingly paid ludicrous prices for houses, a college education, etc. For kids who came of age during this 28-year span, living on debt has been the norm. I feel the most sorry for them, the unwinding will be the hardest on them as they don't know any better. But for the rest of us boomers who have witnessed, and in far too many cases gleefully participated in, the entire life-cycle of this debt-investment craze, I have little sympathy. Blame Wall St., bankers, financiers, etc. all you want but in the final analysis no one held a gun to your head, no one made you agree to pay a stupid price for your house.

Really, is cheaper housing such a bad thing? Maybe it is for you who listened to the self-interested persuasion of a realtor/agent, you who bought in to the ludicrous pricing and was hoping to retire on the sale of a house. But think past yourself (if you're able). Think about your kids and your grandkids. Do we really want a future where so few can afford something as simple and as basic as a house? Do we really want to live in a nation so impoverished by desperate attempts to prop up prices that we know in our heart of hearts are insane, even still? Besides, we have truly important things to worry about, like a world wracked by global warming, the solutions to which will require personal sacrifice on a scale we of the post-war generations can hardly imagine, and an ability to think beyond our own selfish wants and desires.

But at the very least let's not ever forget the people who got it right, early, when action could have made a difference:

I hope you all enjoyed your Thanksgiving.

It's Official

2008-11-20T18:55:00.000-08:00

I'm sure you all remember that classic April 10, 2007 Leslie Appleton-Young quote in the Marin IJ that went "When is the 30 percent decline in Marin County's [real estate] market going to happen? Not in my lifetime"? I promised you then in a post that I would be "keeping this link for future use so we can rub it in her face when the time comes". Well, that time has come:

Leslie Appleton-Young: Consider your face officially rubbed in it.

From DataQuick:

When will people finally stop giving credibility to realtors and RE agents (and all others paid to have a particular point of view) by asking for their opinion on real estate? When will the mainstream media stop quoting them?

Two Ways to Say the Same Thing

2008-11-08T17:14:00.000-08:00

Here are two ways of saying the same thing. The first in 2007 and the second in a letter written 1802.

“I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.”

Thomas Jefferson, Letter to the Secretary of the Treasury Albert Gallatin (1802), 3rd president of US (1743 - 1826)

The reason why we are in this mess is credit -- too much of it, too cheap. That's why housing, tuition, etc. went through the roof. Now our country is desperately dependent upon it and doing everything it can to prop up these phoney prices.

Withdrawal's a bitch, ain't it? Price things based on what people actually earn for themselves and it would all be reasonably affordable and "the economy" would still be humming along nicely. Stop meddling in the market Mr. and Mrs. Congressperson, Mr. Bernanke, Mr. Paulson. Let the free markets work; let them discover the correct prices of assets. Yes, it would be painful in the short term but we'd all be better off for it in the end.

As credit tightens and the credit pendulum swings the other way, those of you who bought with borrowed dollars thinking the sky's the limit and those of you who are planning to do so now had better watch out.

Canadian L33t

2008-10-28T22:21:00.000-07:00

I've tried very hard not to get political on this blog, but....

I think I found a program that should appeal to Bay Arean ego in the unlikely event that the republican candidate for the US presidency is elected: