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>>POT calls losing ground +10.29%, ...slipping
>>POT $110 Calls +25%, $1.73
Can it hold?
http://i50.tinypic.com/igkppv.png
>>AGU $65 Calls +75%, running:
http://i45.tinypic.com/jhpyrt.png
>>FERTILIZER runners : AGU +1.93%, CAGC +1.75%, POT +1.08%, MOS +1.15%, CF +0.98%, IPI +0.51%, TNH +0.54%, MON +0.49%, CMP +0.41%, TRA +0.61%
>>VIX 26.52....a little bit of fear there on the vix
>>ICE +1.90% ($97.50) gap at the open, CME +1.28% $279.59
Y'know, if you take out the "P" that ticker is OMG...fitting, really
I was up until midnight checking the news and asian markets..looked as if nothing good was going to happen to help Greece...from all I could gather, they really are in a tight spot, with few options...and Germany having a very hard time selling Greek bailout to their population
BEAR ETFS up PM: QID +0.38%, SDS +0.77%, SKF +0.15%, FAZ +0.14%,
>>OIL: $74.42%, USD: 80.350, EURO: 1.365, FAZ +0.24%, GOLD $1,076%
I'm listening right now..EURO under 1.37, and futures are flat
Good Morning!
>>US foreclosures drop in Jan but more loom-RealtyTrac
NEW YORK, Feb 11 (Reuters) - U.S. mortgage foreclosure filings dropped in January but the decline may prove only temporary as housing-rescue efforts fall short of addressing current drivers, a report released on Thursday showed.
Foreclosures are by far one of the biggest threats to the U.S. housing market, which remains highly vulnerable to setbacks and heavily reliant on government intervention. If foreclosures continue dropping it would be one of the strongest signals yet the market is on the path to recovery.
Foreclosure filings -- including mortgage default notices, house auctions and home repossessions by banks -- were reported on 315,716 properties in January, a decrease of nearly 10 percent from December, but up 15 percent from the year-earlier month, real estate data firm RealtyTrac said.
One in every 409 U.S. housing units received a foreclosure filing in January, Irvine, California-based RealtyTrac said in its January 2010 U.S. Foreclosure Market Report.
Furthermore, more than 300,000 properties received foreclosure filings for an 11th straight month, Irvine, California-based RealtyTrac said.
While January's decrease may indicate foreclosure prevention efforts are gaining traction, the data has been volatile in recent months and foreclosures appear poised to rise again.
"January foreclosure numbers are exhibiting a pattern very similar to a year ago: a double-digit percentage jump in December foreclosure activity followed by a 10 percent drop in January," James J. Saccacio, chief executive officer of RealtyTrac, said in a statement.
"If history repeats itself we will see a surge in the numbers over the next few months as lenders foreclose on delinquent loans where neither the existing loan modification programs or the new short sale and deed-in-lieu of foreclosure alternatives works," he said.
REOs, or real estate-owned properties, activity nationwide was down 5 percent from the previous month but still up 31 percent from January 2009; default notices were down 12 percent from the previous month but up 4 percent from January 2009; and scheduled foreclosure auctions were down 11 percent from the previous month and up 15 percent from January 2009, RealtyTrac said.
High unemployment and wage cuts have hurt the ability of many home owners to pay monthly mortgage payments. Unemployment was 9.7 percent in January, according to the Labor Department.
Many lawmakers, advocacy groups and housing experts say the government's Home Affordable Modification Program, or HAMP, has fallen short because of its failure to adequately address negative equity, or "underwater" mortgages.
Negative equity has been one of the biggest banes of many homeowners, making many unqualified for home loan refinancing and preventing some from selling their homes. Borrowers in negative equity are more prone to defaults and foreclosures.
SUN BELT STILL HURTING
Despite a year-over-year fall in foreclosure activity of nearly 18 percent, the foreclosure rate in Nevada, once one of the hottest U.S. real estate markets, remained highest among U.S. states for the 37th straight month.
One in every 95 Nevada housing units received a foreclosure filing during the month -- more than four times the national average.
A 4 percent month-over-month increase in foreclosure activity boosted Arizona's foreclosure rate to second highest among the states in January. One in every 129 Arizona housing units received a foreclosure filing during the month.
Foreclosure activity decreased by double-digit percentages from the previous month in both California and Florida, and the two states registered nearly identical foreclosure rates -- one in every 187 housing units receiving a foreclosure filing.
California, the most populous U.S. state, had a foreclosure rate statistically higher by a slim margin and ranked third highest among the states, while Florida's foreclosure rate ranked fourth highest.
Other states with foreclosure rates among the nation's top 10 were Utah, Idaho, Michigan, Illinois, Oregon and Georgia, the report showed.
(Editing by Andrew Hay)
http://www.reuters.com/article/idUSN1016412620100211
USAT: Smaller banks at risk if commercial real estate falters
Updated 19m ago |
By Paul Wiseman, USA TODAY
A blizzard of commercial real estate defaults could bury hundreds of community banks, a congressional watchdog reports Thursday.
The Congressional Oversight Panel, created to oversee the government's bailout fund, is warning that losses on commercial real estate loans could reach $300 billion, potentially wiping out "hundreds more community and midsize banks" and drying up the credit needed to restore the economy to health.
Over the next three years, a commercial real estate collapse "could overwhelm an already-weakened financial system," panel Chair Elizabeth Warren says in an interview. "The commercial real estate problems would be tough to absorb in any economic environment. But they come at a time when the economy is fragile and the banking system is even more fragile."
Bank failures numbered 140 last year and 16 so far in 2010. Now, commercial real estate is absorbing a one-two punch:
•A weak economy has pushed vacancy rates higher and rents lower, forcing developers to default on loans. Standard & Poor's says the situation looks like the early '90s commercial real estate meltdown that killed hundreds of banks. Citing figures from the real estate firm CB Richard Ellis, S&P says office vacancy rates reached 17.3% in the third quarter of 2009 and are likely headed higher, vs. a peak of 18.9% in 1991. Retail vacancies are already at 12.3%, vs. 11.3% in '91. S&P says most banks it rates can survive if losses spread over a few years.
•About $1.4 trillion in commercial real estate loans will mature between now and 2014, which in many cases means developers will need to refinance or make balloon payments that exceed the value of the underlying properties. Deutsche Bank estimates that more than 65% of commercial real estate loans might not qualify for refinancing because banks have tightened underwriting standards and property values have collapsed.
Smaller banks will bear the brunt of commercial real estate losses: "Over the last decade, the Wall Street banks sucked up all the credit card and home mortgage lending that used to be the bread and butter of these community banks," Warren says. So they turned to commercial real estate.
A robust economic recovery "would be the best elixir," says real estate analyst Jonathan Miller. "Our forecast suggests that probably will not happen."
Will the government rescue little banks the way it rescued big ones? Says Warren, "Who will bear the losses? Some will be borne by investors, some will be borne by community banks and some may be borne by taxpayers. ... We're going to have to make some tough choices."
http://www.usatoday.com/money/industries/banking/2010-02-11-banks11_ST_N.htm
WT: Israel's Netanyahu keeping mum about Obama's virtual arms embargo
Wednesday, February 10, 2010
WASHINGTON — Israel's government has kept its silence during a year-long ban on weaopns sales imposed by the United States at the same time the administration has approved $10 billion in weapons sales to Arab states, a report said.
The Jewish Institute for National Security Affairs reported that the government of Prime Minister Benjamin Netanyahu has sought to conceal a virtual arms embargo by the administration of President Barack Obama. The institute said the Israeli government was also refusing to protest massive U.S. weapons projects for Arab rivals in the Middle East, which has eroded Israel's military superiority over its neighbors.
"Israel, in very important ways, isn't protesting where it might," JINSA said.
Over the last year, the United States refused to approve any major Israeli weapons requests. Government sources asserted that the refusal represented a White House policy to link most arms sales to Israel to progress in the U.S. plan to establish a Palestinian state in the West Bank.
At the same time, Obama has approved more than $10 billion worth of arms sales to Arab League states, including Egypt, Kuwait, Jordan, Morocco, Saudi Arabia and the United Arab Emirates. JINSA said Israel, which receives more than $2.4 billion in annual American military aid, refrained from objecting to U.S. plans to sell F-16s, Harpoon Block 2 anti-ship missiles, Hellfire air-to-ground missiles, fast attack craft and helicopters to Egypt.
In a Jan. 27 report, the institute, regarded as close to the Defense Department and U.S. military, said the White House has blocked key weapons projects and upgrades for Israel. JINSA said Obama rejected Israel's request for AH-64D Apache Longbow helicopters while approving advanced F-16 multi-role fighters for Egypt.
"Indeed, Israel's request for six AH-64D Apache Longbow attack helicopters was blocked by the Obama Administration in June — the same time the Egyptian sale was approved," the report said.
The administration's policy, the report said, has violated a pledge given more than 40 years ago to maintain Israel's military superiority over its Arab neighbors. JINSA said the erosion of Israel's qualitative edge began under the previous administration of President George Bush.
"How does Israel compete when the Obama administration announces 24 more F-16s for Egypt and 24 additional F-16s for Morocco," the report said. "The concept of the Qualitative Military Edge failed to keep up with the changes in U.S. arms sales and training policy over the decades."
JINSA dismissed Israeli government claims that the White House was ready to address the erosion of Israel's military superiority. The institute said the January 2010 visit by U.S. National Security Advisor James Jones did not concern Israel's qualitative military edge.
"Actually, it was to push Israel into more pointless talks with Palestinians, who declined to cooperate," the institute said.
The U.S. aid to Arab states, the report said, has hampered Israeli military cooperation with Washington. More than 20 years ago, the Israel Air Force stopped participating in U.S.-sponsored regional exercises to prevent the leakage of combat tactics.
"It's one thing for our lover to take pictures in the bedroom," the report quoted an Israeli combat pilot as saying. "It is another for them to sell the pictures on the street."
JINSA said Israel has lost its advantage over the Arabs regarding the quantity and quality of weapons. The institute said the Arabs also appear to have caught up to Israel in the area of tactics and training. The sole advantage was said to concern the quality of Israeli soldiers and officers.
"Changing Israel's local security paradigm at the same time as increased sales to the neighbors -- and no new sales to Israel — means the balance is pushed further out of whack," the report said.
http://www.worldtribune.com/worldtribune/WTARC/2010/me_israel0104_02_10.asp
Shakespeare: "The first thing we do, let's kill all the lawyers". - (Henry VI, Act IV, Scene II).
I agree 100%, which is why I proposed that we should elect our presidents from a random lottery of taxpaying citizens with no criminal record, lol
One day you go to your mailbox, and there's the notice informing you to give notice at your job, because you're expected at 1600 Pennsylvania Ave in 1 month...
I figure we couldn't do worse, and we might do better. Unfortunately anyone who wants the job probably has already owes too many special interests and has some ulterior motive, while the smart ones, like Colin Powell, don't even consider the position because of the BS, as you said.
This is certainly creating uneeded waves. If the republicans hope to run a campaign for president, they need a candidate capable of winning over independents...
...speaking as an independent, I must say, this is not the one. I wouldn't care much what the rest of the world thinks of our president, as long as he/she is doing the best job for us, defending our interests. However, I truly hope we don't elect another president who makes me cringe when I've travelling overseas. I don't care if our president scares them, lol, just please not another incompetant fool...is that asking too much?
In a nation of 350,000,000 people, isn't it possible to find better candidates? Good grief
BT: Sarah Palin's 'hillbilly' palm prompts draw howls of ridicule
Wednesday, 10 February 2010
belfasttelegraph.co.uk
US Republican superstar Sarah Palin has become the subject of widespread scorn in the US after being seen referring to notes scribbled on her hand during a major speech.
Video footage showed Mrs Palin — who frequently criticises President Obama’s use of the teleprompter — glancing down at the palm of her left hand on which the words “energy”, “budget cuts”, “tax” and “lift American spirits” had been written in ink .
The former governor of Alaska was pictured during a Q & A session at the grassroots Tea Party. Mrs Palin was ex-Republican vice-presidential candidate in 2008 and has maintained a high profile ever since.
Mrs Palin's detractors have ridiculed the crib notes -- already being called the "Hillbilly Palm Pilot" -- noting that basic conservative principles are something she should surely know like the back of her hand.
Minutes before she used the notes she had castigated President Obama in a prepared speech as a "charismatic guy with a teleprompter". As John McCain's running-mate in 2008, Mrs Palin struggled in interviews when asked about current events and world affairs -- a lack of knowledge that hurt the Republican ticket.
comments:
Mocking Palin was such a sad and childish thing to do. This administration needs to GROW UP.
As for the media , it too needs to GROW UP. There are more important stories to report on. Very sad.
Posted by Sherry | 10.02.10, 14:22 GMT
I am an American and this woman is an idiot! The day she becomes President I will be arriving on your shores.
Posted by francie | 10.02.10, 12:57 GMT
Over on Reddit it seems the Dems are hoping she wins the GOP ticket. Electioral victory on a plate.
This would signal the completion of the hard right take over of the Republican party rendering it unelectable.
Floating independents will flock to the Dems.
Love it.
Can you imagine the TV debates?
hahahaha
Posted by MS | 10.02.10, 12:42 GMT
Re Roy Rodgers referring to Palin as a 'redneck'. Are you planning to refer to Obama as a 'nigger'? These are both racially insulting terms and if one is not acceptable, neither is the other. Its called symmetrical legislation. I'm writing as a 'redneck', ie white rural and working class, but I dont hold with suburban neo intellectual pc warriors using it as a term of abuse.
Posted by Sartorius | 10.02.10, 12:31 GMT
Having 4 words written on her and doesn't make her a stupid hillbilly. She has to know about these topics in order to talk about them intelligently.
Oh dear I just can't believe that Ms Palin stooped to doing anything so absolutely terrible. Shocking! Just imagine how unhygenic and childish. I simply cannot entertain such behaviour. Writing on the back of your hand -horrible!
All part of the politically motivated press-led Sarah Palin ridicule and smear campaign.
Posted by T J McClean | 10.02.10, 10:23 GMT
Read more: http://www.belfasttelegraph.co.uk/news/world-news/sarah-palins-hillbilly--palm-prompts-draw-howls-of-ridicule-14674947.html#ixzz0fCWIMomx
DJ: Asian Shares Higher; China CPI Provides Some Relief
FEBRUARY 10, 2010, 11:17 P.M. ET
By Colin Ng and Kirsty Green
Of DOW JONES NEWSWIRES
SINGAPORE (Dow Jones)--Asian shares were higher Thursday, with China's more benign than feared inflation data lifting the Shanghai and Hong Kong markets while Australia received a boost from a solid jobs report.
Still, a cautious mood prevailed as investors watched developments in fiscally strapped Greece.
Australia's S&P/ASX 200 was up 0.9%, Hong Kong's Hang Seng was 1.4% higher and China's Shanghai Composite was 0.2% higher. South Korea's Kospi Composite advanced 1.4%. Dow Jones Industrial Average futures were 42 points higher in screen trade. Markets in Japan and Taiwan were shut for a public holiday.
Trading activity was thin as a holiday mood set in ahead of the Lunar New Year and many investors were closely watching for signs the European Union would move to address Greek debt troubles.
"There is an enormous amount of anticipation of an announcement on Greece tonight and there is some concern that we might actually drift off on an announcement, but if we do see a pop in the euro, it could really boost this equity market," said RBS head of Sydney sales trading Justin Gallagher. "The market will need to see definitive action from the EU."
The Chinese consumer price index data provided some cheer as the January CPI came below market expectations, slowing to a 1.5% rise from December's 1.9% increase. The inflation reading was helping to ease investors' concerns over further monetary tightening policies from Beijing. "This is good news for the market; the inflation being slightly lower means less possibility for tightening measures in the near-term," said Qian Qimin from Shenyin Wanguo Securities.
In Hong Kong, China plays were leading gains as investors reacted to the better than expected China inflation data. Cosco Pacific rose 3.4%, Tencent was up 3.3% and Bank of Communications tacked on 3.1%.
The Australian market received a boost from a very strong jobs report with BHP Billiton up 1.4%, Commonwealth Bank of Australia up 1.9% and Woodside Petroleum up 3.6%. The economy added 52,700 jobs in January, beating expectations for an increase of 15,000 jobs and the unemployment rate came in at 5.3% compared with the 5.6% rate expected.
Telstra, however, was bucking the market after the country's biggest phone company by subscribers reported lower-than-expected first half net profit of A$1.85 billion and cut its revenue guidance for the fiscal year.
"As expected by the market, this result highlights the slowing top-line momentum at Telstra, but the rate of decline is worse than expected," said Macquarie Equities.
In South Korea, financial stocks, steelmakers and shipbuilders were driving strong gains in that market.
Earlier Thursday, as widely expected, the Bank of Korea kept its benchmark interest rate unchanged at an all-time low of 2.00% for a 12th consecutive month.
BOK Governor Lee Seongtae said the central bank will "cautiously" maintain its easy monetary policy stance, but added that it continues to see the need to "normalize" its policy rate.
Banks were higher, tracking their American peers with KB Financial up 3.4% and Woori Finance adding 1.9% despite poor fourth-quarter results. Posco rose 2.4% and Hyundai Steel advanced 1.7%, and among shipbuilders, Hyundaii Heavy Industries advanced 6.3%.
Among other regional markets, Singapore's Straits Times Index was 0.6% higher, Malaysia's main index was up 0.1% and Indonesian shares were up 0.1%. Philippine shares were 1.6% higher, but New Zealand's NZX-50 was bucking trend, shedding 0.6% as losses in the property sector weighed.
In foreign exchange markets, the euro was pushing higher as players awaited European developments. Tim Condon, foreign exchange strategist with ING, said that the euro could rebound further if a bailout for Greece is confirmed, possibly back to mid-January levels of around $1.45. .
The euro was at $1.3781 from $1.3734 in late New York trade Wednesday, and at Y123.88 from Y123.56. The U.S. dollar was at Y89.90 from Y89.96. Trade was thin with the Tokyo market on holiday.
The U.S. dollar was likely to fall against the yen unless a plan for handling Greek problems emerged soon, said BNP Paribas Foreign Exchange Analyst Rob Ryan. "At least for today and possible the rest of the week, it all depends on what comes out of the European meeting. Without a concrete plan, it's bad for euro, it's bad for risk, and dollar/yen gets crushed," said Ryan.
The Australian dollar surged one U.S. cent to US$0.8870 as the better-than-expected jobs data raised expectations for a rate hike from the Reserve Bank of Australia in March. The market was now pricing in a 50% chance of a March hike, from 25% before the data.
"The strength of this employment growth just shows this economy has a ton of momentum behind it," said ANZ Strategist Tony Morriss. Australian bonds were also hit by the report with the three-year futures contract down 14 ticks at 95.06
Spot gold was at $1,073.55 per troy ounce, up $2.85 from the New York close. Nymex March crude oil futures were up 28 cents at $74.80 per barrel.
-Colin Ng, Dow Jones Newswires; +65-6415-4140; colin.ng@dowjones.com
TALK BACK: We invite readers to send us comments on this or other financial news topics. Please email us at TalkbackAsia@dowjones.com. Readers should include their full names, work or home addresses and telephone numbers for verification purposes. We reserve the right to edit and publish your comments along with your name; we reserve the right not to publish reader comments.
http://online.wsj.com/article/BT-CO-20100210-722655.html?mod=rss_Global_Stocks
Ritholz: Insolvent European vs American States
By Barry Ritholtz - February 10th, 2010, 9:33AM
While all the investing world seems to be utterly fixated on the outcome of Greece’s solvency woes, perhaps we need to step back and put this into perspective.
Portugal, Ireland, Italy Greece and Spain are in varied degrees of difficulty; but how significant are the PIIGS’ debts to the world’s economy? (If they require a workout, perhaps they can what we do. Give them lower rates and an extended term and/or a cramdown to their lenders).
In contrast, consider the distressed United States: How do our own economic “pigs” measure up? In terms of economic importance relative to the world, aren’t the bigger US States that are in deep distress more important (GDP sizewise)?
Consider the size of the budget issues and debt load in dollar and percentage terms for just these six states relative to their European cousins:
You Can’t Put Lipstick on These PIGS:
California
Budget gap (as a % of the total budget): 22%
Gap: $22.2 billion
New York
Budget gap (as a % of the total budget): 9.8%
Gap: $5.5 billion
Florida
Budget gap (as a % of the total budget): 19.9%
Gap: $5.1 billion
New Jersey
Budget gap (as a % of the total budget): 7.7%
Gap: $2.5 billion
Arizona
Budget gap (as a % of the total budget): 19.9%
Gap: $2 billion
Nevada
Budget gap (as a % of the total budget): 16%
Gap: $1.2 billion
All data for fiscal year 2008
Source Businessweek
All by itself, the insolvent nation-state of California is the 8th largest economy in the world. Its the size of France. According to the CIA Factbook, Greece is number 34. That is a lot of hyperventilating about a relatively small impact to global GDP. Italy is 11, Spain is 13, Portugal is 50, and Ireland is 56.
Additionally, in the US, we have 43 of the 50 states in some form of financial distress.
Perhaps the solution to California’s woes is for Arnold (who is from Austria) to have California join the EU. Then, they might qualify for a bailout from Germany . . .
>
courtesy of the WSJ
http://www.ritholtz.com/blog/
http://online.wsj.com/public/resources/documents/info-enlargePic07.html?project=imageShell07&bigImage=wsj_EUSummitSub100209.gif&h=376&w=990&title=WSJ.COM&thePubDate=20080826
CHS: Why We Keep Getting Poorer: High-Cost Housing
(February 4, 2010)
CHARLES HUGH SMITH
The reason why we're poorer: more of our income goes to housing than it did 35 years ago.
Simply put: housing costs have far outpaced household incomes over the past 35 years, making the high cost of housing the primary driver of declining discretionary income: what's left after paying taxes and housing.
You might want to refill your coffee or tea cup because we have to slog through some potentially confusing numbers to root out the truth.
There is information in the difference between median income and mean/average income.
Median is the number at the 50% line, e.g. first half of households earning less than the median household income and the other half earning more. ( wikipedia on median/mean)
Mean income (average) is the amount obtained by dividing the total aggregate income of U.S. households by the number of households.
Consider that the median income of U.S. households in 2008 was $50,303 while the average income was $68,424. (Source: U.S. Census Bureau Table H-6. You have to download the h06AR Excel file to obtain 2008 data.)
Why the big difference? The higher income households earn a much greater income that the lower 4/5 of households. That preponderance of income in the top 5% and top 20% causes the average income to be much higher than the median.
We need to ask not just much more do higher-income households earn that middle-income households, but how much has each group's income risen in the past 35 years? In other words: has income risen equally across all incomes, or has it risen more in one group or another?
The Census Bureau divides the households into quintiles--20% each, with a special category for the top 5%. (income by quintile.)
The numbers are remarkable. I am not making a judgment here, i.e. that incomes "should be" different from these facts; we all know wages for low-skill jobs have stagnated while high-pay, low-skill factory positions have declined due to global wage arbitrage and broad post-industrial trends.
Nonetheless, it is clear that the vast majority of income increases have accrued to the top 20% and top 5%. Here are the numbers, adjusted into 2001 dollars (data ends at 2001):
Bottom 20%
1975: $12,664
2001: $14,021
increase: $1,357
percentage increase from 1975: 10.7%
Middle 20% a.k.a. "the middle class"
1975: $39,807
2001: $51,538
increase: $11,731
percentage increase from 1975: 29.4%
Top 20%
1975: $91,848
2001: $159,644
increase: $67,796
percentage increase from 1975: 73.8%
Top 5% a.k.a. "the wealthy"
1975: $134,735
2001: $280,312
increase: $145,577
percentage increase from 1975: 108%
Now let's move on to look at housing. Our statistics are once again drawn directly from U.S. Census Bureau data: median house prices 1975-2009.
The average house price in 1975 was $39,500. Using the Bureau of Labor Statistics inflation calculator, we find that comes to $158,000 in 2008 dollars.
The average (mean) house price in December 2008 was $301,200--almost twice the 1975 cost. To be exact, 90.7% higher.
Thus we can see that only the top 5% of households actually gained enough income to match the rise in housing costs. Even the "upper middle class" in the top 20% of households only gained 74%, substantially less than the 90% rise in housing.
The lower 3/5 of the households were completely blown out of the water by housing's 90% rise; obviously, their ability to afford a house was essentially destroyed by this asymmetric rise in the cost of housing.
I want to note that all these numbers are adjusted for inflation; they are all "apples to apples."
Now let's consider a popular metric of housing affordability: gross income to the cost of a house. According to mybudget360.com, the home price/income in 1950 was 2.21 and 2.11 in 1960. In other words, a house cost 2.1 years of income in 1960.
Here is my analysis of the Census data median house prices 1975-2009.
1975: median income $42,936, median house price $148,800
Home price/income ratio: 3.46
1975: average income $50,137, average house price $158,000
Home price/income ratio: 3.15
Clearly, housing affordability had already dropped substantially from 1960 to 1975.
2008: median income $50,303, median house price $245,300
Home price/income ratio: 4.87
2008: average income $68,424, average house price $301,200
Home price/income ratio: 4.4
However you want to slice it, housing costs substantially more in terms of income than it did 35 years ago.
While the final Census Bureau numbers are not yet available, private data suggests median income dropped in 2009 as the recession took hold, returning household incomes to 1997 levels. (Source: davemanuel.com)
Meanwhile, according to Census data, the average house price in December 2009 was $290,000--a mere 3.7% decline from the 2008 price of $301,200.
As income drops and Federal tax credits and Federal Reserve support of the mortgage markets continue propping up historically asymmetric housing prices, affordability will continue to decline.
If average house prices were to return to the 1975 ratio of approximately 3 times average household income, than would require the average price to drop from $290,000 to around $195,000. (Assuming real average household income has declined to around $65,000, a number which may well be optimistic.)
To all those who believe demand for housing will soon exceed supply, recall that the Census Bureau counts almost 19 million empty dwellings in the U.S. even as foreclosures are slated to reach 4 million in 2010.
A decline to the 3-to-1 ratio of income to price fits in with my projection for housing bubble symmetry:
Here is a pie chart of wealth distribution/ownership:
If you haven't visited the forum, here's a place to start. Click on the link below and then select "new posts." You'll get to see what other oftwominds.com readers and contributors are discussing/sharing.
DailyJava.net is now open for aggregating our collective intelligence.
http://www.oftwominds.com/blogfeb10/high-cost-housing02-10.html?source=patrick.net
BL: U.S. Losing AAA Is Way to Rein in Pelosi, Reid: David Reilly
Commentary by David Reilly
Feb. 9 (Bloomberg) -- When it comes to America’s AAA debt rating, we have to ask whether we would be better off without it.
That notion is pure heresy, and Treasury Secretary Timothy Geithner was quick this weekend to try and dispel any thought that the U.S. would ever be in for a downgrade.
“That will never happen to this country,” Geithner said during an interview with ABC News. The remark came after Moody’s Investors Service last week said the pristine U.S. rating will come under pressure unless something is done about mounting deficits.
Geithner shouldn’t have fought Moody’s report. He should have embraced it. What better way to impress upon Congress that the U.S. is very much in crisis and needs to face up to its problems.
That reality has yet to set in on Capitol Hill. Two weeks ago, for example, the Senate shot down a proposal to create a deficit-reduction commission. The measure failed because the Left worries such a committee will cut spending, while the Right is afraid it will call for tax hikes.
So no spending cuts or tax hikes, which is what we need -- just deficits as far as the eye can see. Let’s break out the fiddles already and watch Rome burn.
This is why concerns over the so-called PIGS -- Portugal, Ireland, Greece and Spain -- or those on the geographic and economic periphery of the European Union are really a sideshow. The real danger to markets lies with the DOLTS, or Dangerously Over-Leveraged Triple-A Superpowers.
That club currently consists of the U.S.
Let’s Pretend
So far, membership has allowed the U.S. and its elected representatives to pretend urgent action isn’t needed. After all, DOLTS have the world’s reserve currency and nukes.
This supposedly means we can spend our way out of debt because creditors like China will forever lend us money. Failing that, we can just print more dollars.
Yet even these benefits can’t change the fact that the U.S. is on an unsustainable course with deficits rising, the national debt soaring, and Social Security and Medicare preparing to go bust. At 10 percent of gross domestic product, the $1.6 trillion budget deficit for 2010 forecast by the Obama administration ranks as the highest such ratio since World War II.
The administration predicts that this ratio will fall to about 4 percent by 2015. For that to happen, though, the economic recovery mustn’t sputter.
U.S. Weakening
Debt, meanwhile, is set to climb to 77 percent of gross domestic product by 2019, according to Moody’s, while “debt affordability would be weakened by higher interest costs in the next several years.” That compares with government expectations at the end of 2008 of a future debt-to-GDP ratio of about 40 percent by the end of this decade.
No wonder investors like Marc Faber, who publishes the Gloom, Boom and Doom report, say the U.S. would carry a below- investment grade, or junk, rating if the country were a company.
And starting in 2020, things will get even worse. “It is worth noting that after 2019 is when the most serious pressures resulting from Social Security, Medicare, and Medicaid will develop, so that failure to rein in the deficits would make it even more difficult to deal with such pressures,” Moody’s said in a credit opinion last week.
State and local governments are also in crisis, and, like their federal counterparts, are unwilling to face the harsh reality confronting them.
California Dwarfs Greece
The mire facing California, for example, makes Greece’s woes look somewhat manageable. California, staring at a $20 billion budget gap over the next 17 months, accounts for about 13 percent of the U.S. economy. Greece accounts for just 3 percent of the economy of countries that use the euro.
Things are so bad in Nevada, meanwhile, that the state could lay off every worker paid from its general fund and it would still be $300 million in the red, according to state Assembly Speaker Barbara Buckley.
Given all this, Geithner should be using Moody’s AAA talk as a cudgel to beat some reality into congressional heads. So far, though, President Barack Obama has preferred to kowtow to House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid, rather than lead them.
From the earliest days of his administration, Obama has tried to appease both, or stood by as they hijacked and then wrecked his initiatives. This started with Obama’s acquiescence to a pork-laden stimulus bill and continued as the president gave Congress control over initiatives like the health-care overhaul and financial reform.
Getting Worse
The result is that the government has accomplished little in the face of the greatest financial crisis since the Great Depression. And things may easily get worse.
An emboldened and divided Congress, meanwhile, shows no sense of recognizing the true extent of the meltdown. Unless there is a sense of immediate danger, there’s little chance it will do anything differently.
So while the threat of a downgrade might be unsettling, allowing the country to continue along its present course is far worse.
(David Reilly is a Bloomberg News columnist. The opinions expressed are his own.)
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To contact the writer of this column: David Reilly at dreilly14@bloomberg.net
Last Updated: February 8, 2010 21:00 EST