Monday, March 24, 2008

USA: The Worlds Deadbeats

Probably the best thing I saw all week on the Housing Bust was a CNBC interview by Jimmy Rogers, so here it is:




I love Rogers interview style; he's combative & pissed about anyone even suggesting that he's 1% wrong. So great.

But he's dead right. There has arisen this strange mindset that the business cycle can & should be abolished at all costs. And the primary cost is that the dollar has been let go. We're the New Mexico! The dollar will soon have the same dreadful stench of failure as the peso.

No country has ever printed it's way out of a crisis. In fact, almost all collapses into 3rd World Status have resulted from firing up the printing presses.

And amazingly, in response to what is almost certainly the greatest bubble ever created, our government has decided to throw More Money at the problem. What solves a crash brought on by excessive credit? MORE CREDIT!

How Do You Cure A Credit Bubble?

I'm a bit puzzled by some of the underlying thought processses behind those proponents of a massive government bailout of some sort of the US housing industry. On one hand, they seem, for the most part, to be agreeing with the premise that the state of the US balance sheet, whether our private (consumers) or our public (the government) is at minimum unsound and in the long term creates extreme risk. On the other hand, they seem to be saying that the only way out of our current difficulties is to continue to expand credit. Huh?

Via Financial Times (a fine paper in many respects, but can't say I agree with this particular opinion):

Moreover, the US has structural vulnerabilities that Japan did not have: low household savings, untested derivative markets, and a large current account deficit.

But there may be a conflict between the private interest of the banks and the public interest in continued credit expansion.

So, were financially unsound and its in the public interest to become more financially unsound? Continued credit expansion, the so called "hair of the dog" approach is really what we need? When does it reach the point where it's time to enter a good detox center (managed credit contraction) instead? So, levering the entire world's output and the entire worlds stock market capitalization at over 10x thru derivatives alone isn't enough (estimated size of derivatives market $516 trillion divided by $48 trillion world GDP or by $51 trillion world stock market capitalization)? Keep the frat party going as long as possible, keep misallocating far too many resources into financial engineering and real estate?

Then of course, there are those within the "We'll fix our balance sheet by borrowing and leveraging some more crowd" who want to "fix" our situation via some sort of upside down Nixonian price controls, i.e. price floors. So is the thought process something along the lines of "Just because temporary price controls were a disaster doesn't mean temporary price floors won't work out just wonderful"? This via the Senate banking committee chairman (Chris Dodd):

What we're trying to do here, in addition to providing assistance to the homeowner, is to create a floor...

So what is the right price to set it at, i.e. the floor? Is it better set by free markets or by government subsidies? Furthermore, what if Chris Dodd and the like were to actually to "succeed" in putting a floor on house prices (doubtful but lets just play "what if"). Is having housing prices artificially subsidized at levels far above long term trends actually in the long term best interest of our economy? Further, is it in the best interest of those looking to buy a house both now and in the future to not only have to pay some of their tax money subsidizing the cost of housing, but to overpay once more in buying an artificially overpriced house?

It seems to me that trying reflate the bubble in some way shape or form is about the worst thing we can do. The only viable long term solution is to attempt to deleverage / contract the credit cycle to a market driven level of balance, but given the magnitude of the rise, to do it in some sort of managed fashion. As to the particulars of how best to manage it? There are plenty of arguments to be made on each step of the way, sure to provide plenty of fodder for discussion. Some of my own thoughts are here, including perhaps the less conventional belief that it may be time to consider putting away the interest rate tool after this coming week.

Our Fed has already thrown BILLIONS at the problem, trading US treasuries for toxic crap mortgages. So have NO ILLUSIONS, we are BAILING OUT WALL STREET, shoving BILLIONS at Wall Streeters, and all this will be borne by US taxpayers. Add to all this a war that is sapping our finances for BILLIONS EVERY WEEK, and you can easily see that this crisis may be beyond our governments ability to handle:

Sub-prime collapse 'beyond the US Federal Reserve'
By David Uren
March 18, 2008 12:17am
  • US Federal Reserve 'lacking funds to help crisis'
  • Losses yet to come 'easily exceed remaining $400bn'
  • Not going to be able to deal with situation on own
FEARS are growing that the US Federal Reserve may soon find itself short of the funds needed to continue propping up the nation's financial system. The central bank yesterday used its financial muscle to back the bail-out of the stricken Wall Street investment banking giant Bear Stearns, which will be taken over by rival JPMorgan Chase at a fraction of its worth last week.

But analysts believe the threat to the financial system, which continues to flow from the collapse of the sub-prime mortage market last year, is getting too big for the Federal Reserve.


"This is now beyond the Fed," ANZ international economist Amy Auster said.
"It is not going to be able to deal with this situation on its own." Cash reserves drying up She said the US central bank had already extended support of about $US400 billion ($426 billion) to the US financial system, compared with its assets of $US800 billion. She said financial system losses yet to be reported could easily exceed another $US400 billion. "What is missing at the moment is the US Treasury," she said.

But Treasury Secretary Hank Paulson has already declared his hostility to federal measures to help the sinking financial sector.
"Let me be clear: I oppose any bail-out," he said in a speech 10 days ago. "Most of the proposals I've seen would do more harm than good - bailing out investors, lenders or speculators who, instead of getting a free pass, should be accountable for the risks they took," he said. " I believe our efforts are best focused on helping homeowners who want to stay in their homes."

More could follow Bear Stearns


There remains a vast quantity of financial assets of doubtful value that will expose banks and other financial institutions to the kind of panic that brought investment bank Bear Stearns to the brink of disaster on the weekend.
"When the fifth-largest investment bank is in trouble, you have to become concerned about the solvency of the system and the banks in the system," Ms Auster said.

In 2006 alone, there were $US550 billion of "collateralised debt obligations" issued, she said.
These are the bundles of mortgages and other securities that have been at the heart of the sub-prime crisis. Ms Auster said the market for these securities depended upon the ratings agencies, bond insurance and collateral. "

All three elements of this infrastructure - the three bands of the bridge have collapsed," she said.
When the Federal Reserve announced its extraordinary Sunday afternoon bail-out of Bear Stearns, it also extended a lifeline to all the other major investment banks, offering them access to emergency funding for the first time since the 1930s.

As in Australia, the central bank is assumed to be the lender of last resort for the commercial banks, which take deposits from the public, but not for investment banks and stockbroking firms.
But the tangled web of counter-party arrangements that has developed between financial institutions over the past decade means that allowing Bear Stearns to go broke would have jeopardised major banks.

"If Bear Stearns defaulted on their paper, it would pull at least another bank down," senior economist with finance broker ICAP, Matthew Johnson, said.


Drop in the ocean


Mr Johnson said he estimated the Federal Reserve was halfway through the ammunition it had to deal with the crisis.
"The $US450 billion remaining is a drop in the ocean compared to the asset classes in trouble," he said, noting that in addition to mortgage-related debt, some of the big private equity deals were beginning to unravel.

The biggest risk to the real economy is that credit dries up, as bankers become scared to lend.
Morgan Stanley chief economist Gerard Minack said while the Federal Reserve was cutting interest rates, its efforts were being neutralised by the banks.

"Nobody is enjoying easier financial conditions," he said.
Mr Minack said there were no grounds for equating the coming recession in the US to the Great Depression, but it could still be as nasty as the downturn in 1974.

Ms Auster said Australia would not escape the effect of the recession, with its share market having already fallen further than US markets.


So the writing is on the wall: If you wonder which way we were going to swing on letting this thing unwind, it is now clear:

STAGFLATION

There is no Economic Force On Earth that could stop a multi-trillion dollar evaporation in homeowner wealth from SOMEHOW affecting our economy. NOTHING. Throw money at it, bail out Wall Streeters, give every American $600 each, do whatever you want, the shit is GOING to hit the fan... HARD.

We could have taken our lumps, let bad securitized mortgages take down the idiots that owned them, let foreclosures just happen, and let the natural cleansing process work itself out.

But no. Not only are US taxpayers bailing out those responsible, we are starting up the cycle again. Gee, I wonder what happens this time?


Remember the post about this country actually becoming economically dependent on bubbles? Look at this chart & you can see that is ALL WE KNOW HOW TO DO. In stifling the rampant inflationary byproduct of a stock bubble, we have created an even more monstrous, dangerous and completely uncontrollable housing bubble, and our response?

"Those Who Forget History Are Doomed to Repeat It"

Except this time, gentle reader, there will NOT be another bubble as the result of trying to avert the bursting of the last one. Nope. It'll be straight up stagflation.

But I guess in some respects that IS a bubble. A hyper-inflation in the price of everything.

And curiously, Fed cuts have not EVER been a panacea:

Deep Fed cuts no help for home prices

March 18th, 2008

posted by Jon Lansner/O.C. Register columnist

When the Fed cuts hard, watch out! LA/OC home prices haven’t fared well in the past two decades after the nation’s central bank throws serious stimulus into the economy. Same can be said for big cities in one nationwide index. That’s what my ol’ pal, Professor History, found looking back over 20 years of Fed and price history. History’s trusty spreadsheet has data going back to 1988 showing the “effictive Fed funds rate” and the S&P Case-Schiller home-price index for the region, plus a 10-city index. Then we pondered what home prices in the year that followed any one-year change in the Fed funds rate. We choose to study this relationship, with a built-in delay, because Fed actions — either tightening money or making it cheaper — takes significant time to work through the economic system. Here’s what was found (Or just look at chart above. Click on it to see larger version!) …

• Periods of steep Fed cuts, which we are clearly in, produced on average the lowest home-price gains locally. Nationally, they were below average. Why? The Fed is only this generous, rate-wise, when the overall economy is hurting. And housing, at its core, reacts to the broad economy, not rates.
• Another weak period for housing is when the Fed hits the economy brakes with rising rates. In fact, that’s the worst time for national pricing, based in this 10-city index. Again, the resulting slower economy isn’t peachy for local housing.
• Thus, the best time for housing are those eras when the Fed isn’t much in the news and is either doing nothing or simply polishing its interest-rate policy with minor moves.

The influential Fed funds rate is the overnight rate banks charge each other and is a market for many short-term yields. The Fed clearly does not control longer-term rates, such as those that help set many fixed-rate mortgage deals. Still, the Fed’s actions appears to offer good hints at the economy’s future — and seem to show what’s next for real estate.

Here’s how Professor History’s math sliced the past 20 years into five periods, from the ones with the steepest one-year Fed funds cuts to the ones with the harshest increases — and those in between vs. annualized home-price changes for LA/OC and a 10-city U.S. index one year later …

And I just watched Meet the Press with nitwit Maria Bartiromo commenting on how the Fed cuts, and fiscal stimulus will end these bad times.

How ludicrous.

This woman is predicating the idea that we are in some sort of marginal slowdown; a normal cyclical slowdown of a few percent in GDP that actually can be mitigated by Fed action. A slowdown of a few percent usually can be altered by some Fed Marketing; Some sort of borrowing stimulus that brings a lot of projects to a positive NPV by lowering interest rates.

Lowering Interest Rates Is The Root Cause Of The Current Problem!

Bartiromo & MANY, MANY others are assuming that this slowdown is like all past slowdowns. It is NOT. It is unprecedented in history, except for possibly The Great Depression. The worst post-War slowdown was the 1970's -- wait for it -- STAGFLATION crisis, which if you recall, had to be solved with 20% interest rates that literally BROKE towns like Bend for a good 10-15 years afterwards.

But I actually think we might have a short respite from calamity, about 6-9 months. Why?
ARM resets lessening over the next 6-9 months, before a spike higher

ARM resets are actually going to lessen dramatically over the next few months, before exploding again.

Be careful.

MANY will call this The Bottom. ALL CLEAR.

Not so. This will simply draw in new buyers who are decimated in the next wave of resets & the subsequent foreclosures. DOn't even think about buying until The Rest Of The US hits bottom, probably in 2010 or 2011... and of course there will be Bend, lagging 2-3 years behind and at 5X the losses. The decimation here will be simply incredible.

What was The Death Knell, the WORST story of the week for us locally?

Wells Fargo gives Deschutes housing market soft ranking

Bank may require bigger down payments

By Andrew Moore / The Bulletin

Published: March 19. 2008 4:00AM PST

Deschutes County home buyers seeking a mortgage from Wells Fargo & Co. might have to come up with a bigger down payment because of new rankings Wells Fargo has given Deschutes and other counties across the nation.

The San Francisco-based financial services firm, the nation’s second-largest mortgage lender, recently gave counties one of four rankings: normal, soft, distressed and severely distressed, according to a Feb. 25 document sent to its wholesale mortgage lending customers.

Deschutes County is one of four West Coast counties with a soft housing market, according to the document. The rankings are based on declining property values, an oversupply of homes and a greater than six-month average to sell a listed home.

The soft ranking means potential borrowers might have to put more money down to secure a home loan, said Doug Houser, the bank’s Central Oregon home mortgage branch manager. In normal markets, the bank can lend money to borrowers with as little as 5 percent down for a conforming loan. Now, because of the soft-market ranking, some borrowers may have to put at least 10 percent down, said Houser.

However, Wells Fargo continues to offer other loans that do not require any money down, he added.

Conforming loans are those below $417,000 for single-family homes, the maximum amount Fannie Mae and Freddie Mac can buy from banks and mortgage lenders. Fannie Mae and Freddie Mac are government-chartered private corporations that purchase home loans from banks and mortgage lenders.

Wells Fargo does not sell its loans to Fannie Mae or Freddie Mac, said Houser.

The recently signed federal stimulus package temporarily ups the conforming loan limit in Deschutes County for a single home to $447,500.

The down payment requirements for nonconforming loans, also called jumbo loans, also went up, from at least 10 percent down to 15 percent down, according to the Wells Fargo document. A nonconforming loan is any loan greater than $417,000 for a single-family residence.

Houser said the Wells Fargo housing market rankings are based on home values.

“It isn’t news to anybody that sales prices of homes in Central Oregon aren’t what they were, so if you have sales prices that are less than or are declining, it’s a soft market,” said Houser.

Deschutes County home prices depreciated an average of 2.84 percent in 2007, according to a recent report from the Office of Federal Housing Enterprise Oversight.

Houser said that not all housing in Bend is in decline, saying that some “micro-neighborhoods” are increasing in value or remaining static. In short, from a customer’s point of view, Houser said being in a buyer’s market is good news.

“Basically, the opportunity is ripe,” said Houser. “For a borrower, it’s just a great time. Values are great and interest rates have remained low, which usually don’t happen at the same time.”

The other West Coast markets labeled as soft are Jackson County, where Medford and Ashland are located; Washington’s Pierce County, which is home to Tacoma; and San Luis Obispo County in Central California.

There were no distressed or severely distressed markets listed in Oregon and Washington. All other counties in the two Northwest states were ranked as normal markets.

Worse off are markets ranked as distressed and severely distressed in California and Nevada. Los Angeles, Orange, Riverside and San Diego counties were ranked severely distressed, along with Nevada’s Clark County, where Las Vegas is located, meaning home buyers seeking a nonconforming loan will have to put down at least 25 percent of the home value’s for a down payment. Similar restrictions apply for conforming loans in distressed and severely distressed markets.

This is what is just IRONICALLY HILARIOUS about attempts to prop up this market. PRIVATE FOR-PROFIT BANKS are doing all in their power to mitigate losses due to BAD IDEAS initiated during the bubble. Their natural inclination is to STOP LOSING MONEY by throttling back their bubble practices. Our governments inclination is to do the exact opposite. This should tell you what is going to happen to our government & BY EXTENSION, us over the next few years. Our government is bankrupting us so that FOR PROFIT institutions will be bailed out.

And of course, I can't let a post get by without putting Renaissance on the front page (as I recall, didn't some local blogger actually predict this last OCTOBER?):

Bend subdivision faces foreclosure
Renaissance Ridge owner says he plans to refinance with local lender

By Andrew Moore / The Bulletin

Published: March 20. 2008 4:00AM PST

Renaissance Ridge, a partially-developed, 210-lot subdivision in southwest Bend might be headed for foreclosure, according to documents filed with the Deschutes County Clerk’s office, but developer Randy Sebastian said he’s working hard to prevent it.

The number of homes going into foreclosure continues to rise in Deschutes County, and Renaissance Ridge would be among the largest casualties to date of the local real estate downturn.

The default notices filed March 7 against Aspen Landing, LLC, a holding company for the subdivision’s developer, Renaissance Homes, say Cleveland-based KeyBank is owed approximately $13.1 million plus interest by Aspen Landing. The Renaissance Ridge subdivision property owned by Aspen Landing is to be put up for auction July 25 in lieu of payment.

Sebastian, the owner of Renaissance Homes, said he is committed to the development located off of Brookswood Boulevard and plans to refinance it with a local lender within 60 days. The Portland resident, who was in Bend on Wednesday for the opening of his company’s design center at 55 N.W. Wall St., said he is not walking way from the development; rather, KeyBank is getting out of the housing market.

“It’s not a Bend issue, not a Renaissance Homes issue; it’s a lender that wants out of the builder/developer market, and they don’t want to extend their loans,” said Sebastian. “I’ve got my life savings out there.”

In a statement sent to The Bulletin by KeyBank and attributed to Roberta Fuhr, a senior vice president and manager of the Homebuilder Group, the bank confirmed it has initiated foreclosure proceedings on Renaissance Ridge in accordance with Oregon law, adding: “This is an unfortunate situation for all involved. It is never a lender’s preference to foreclose in order to enforce its creditor rights.”

The statement also said that although KeyBank has discontinued lending to builders outside of the 13 states in which it has branches, it will continue to originate loans for home builders in Oregon and other states within its branch banking market.

Sixty-four homes in the subdivision have been built or are under construction. Deschutes County land records — in which the subdivision is legally recorded as Aspen Rim — show that 36 homes have been purchased.

Homes in the development currently range from $369,000 to $590,000. The rest of the development has been subdivided, paved with streets and strung with utilities, but the individual lots are unimproved.

The development has dangled some incentives for prospective home buyers in recent months, including offers to buy down interest rates on home buyers’ loans for up to $14,000, and in February 2007, offering a free Mercedes Smart Car.

It also shaved prices on its homes in February by 11 percent to 20 percent, according to The Bulletin’s archives.

Renaissance Ridge homeowner Bill Ormsby, a Southern California retiree who has lived in the development for a year, said he has wondered about the profusion of empty lots in the development but said he feels confident he and his wife won’t be leaving.

“We’re gonna stay put,” said Ormsby. “It shouldn’t affect us too much.”

Renaissance Homes is also developing a 60-home subdivision near Shevlin Park and a 30-unit townhome development in Bend’s NorthWest Crossing. Sebastian said he has sold units in each of his three Bend developments within the past week and that activity is “still strong.”

“There are some positive things happening,” Sebastian said. “We’re not leaving Bend.”

Not the first

Renaissance Ridge is not the first subdivision in Bend to receive a notice of default, a legal device used to notify potential creditors that an entity is behind in the payment of a loan.

In May 2007, Umpqua Bank filed a notice of default on a 38-acre plot of land approved for 265 homes in northeast Bend then owned by Proterra Development Ventures, according to The Bulletin’s archives. The bank sold the land in October 2007 for $10 million to the Edge Development Group, which is in the process of developing a subdivision on the property — titled Mirada — with homes ranging from $189,900 to $249,000.

A notice of default is not a guarantee of foreclosure, said Tom Greene, the president of the Central Oregon Association of Realtors. Greene said the vast majority of defaults are remedied before foreclosure proceedings — usually held six months after a notice of default — ever begin.

“Under Oregon law, the occupant of a home has up until five days before (a property) goes to court to make a deal with the bank, to sell to someone else or buy it (outright),” Greene said.

Greene added that should Renaissance Ridge go to foreclosure, homeowners in the subdivision would be legally unaffected.

Softening market

Home sales in the region slowed down during the past couple months, compared with last year.

Combined single-family home sales in Bend, Redmond and Sisters dropped from 470 in the first two months of 2007 to 263 in the first two months of 2008, according to data provided by the Central Oregon Association of Realtors, and housing supplies in those three cities remain at 11, 12 and seven months, respectively, according to the association.

In addition, through March 17, Deschutes County has recorded 265 notices of default, according to county records, which is an increase from the 75 notices recorded in the same period last year. For all of 2007, the county recorded 591 properties that had entered the earliest stages of foreclosure.

Market fears

Elsewhere in Bend, Buena Vista Custom Homes has rented 18 of the 29 homes in its Forum Meadows development near St. Charles Bend since efforts to sell the homes in mid-December at auction failed to produce a single sale, said Mike Higgins, a spokesman for the Lake Oswego-based builder.

“It was done in a loss position, but it was better than the alternative,” Higgins said. “If we can’t sell them, we’ve got to do something. We looked to auction the homes, but it didn’t work. Builders right now are just trying to make the mess go away.”

Homebuyers and builders have moved from overconfidence to fear of a sluggish market that won’t recover, said Peter Storton, the owner and broker of RE/MAX Town & Country Realty in Sisters.

“The next 12 to 18 months will be a reverse of what we have seen,” Storton said. “We have to hang on to the customers that we have and convince people that it’s a good time to buy.”

Greene wondered if all the recent housing turmoil is ultimately a good thing for homebuyers. He said he hates to see people get into financial trouble, but “land prices in Deschutes County got so high, and this is one of those steps in this correction,” said Greene. “It’s like the stock market; that’s basically what’s happening here.”

What is HILARIOUS is that Sebastian, Storton, and every other Central Oregon RE wanker greases up their MAN-TWAT for the RE-fuckfest every time they even see a reporter.

And of course, hardly a mention that Foreclosures are UP 253% Year Over Year In Deschutes County. Nope, We Are Bend. We Are Different, We Are Special. Sheesh.

And someone wanted me to post a Sweet-Ass piece of Marketing Goodness about the Plaza:

Anonymous mailer regarding fantastic Plaza condos

(S)he said they received this postcard anonymously, not a customer or friend of Breeze & Co. THAT is pretty damned desperate.

And I'll say again that Breeze is merely 49% responsible for this abomination. Her LENDER is 51%, and that is the party that is going DOWN. And in fact has already gone down. The proliferation of this midset will spawn what is probably the most profound shift in thinking with respect to Middle American finances EVER. From an anonymous comment:

Anonymous said...

Today there is no incentive re-pay your debts. Worse case scenario is you won't be able to obtain more credit.
>>

I have a sister near LA, who has been declaring bankruptcy every 7, for the past 40 years, and shes still living the life.

She gets a new house every few years, contract purchase never pays a single payment, or down, gets a new car every year, drives off the lot with nothing down, always stated-income, her husband is a contractor,

About every 3 years they evict her, and about every other year they repo the new car, and she applys for credit cards everywhere she goes, I once ran her SSN for her back when it was legal, and she came back with a dozen aliases,

She has been doing this for 30+ years, ...

Her children, her husband, they do it to. One time I asked her about it, and she said "For what I paid in taxes, they owe me", I thought that funny as she never had a job in her life.

Most of her friends live this way, why should she work, car dealers want to move cars, nobody loses on a repo, nobody loses on a non-paid card, nobody loses on a home repo,

They never even look, most people are just too happy to sell the house, or get the car off the lot.

My sister learned when she was young, that she could enjoy the best things in life for free, without working, and the best part is she's now in her 50's and going strong, even with the new bankruptcy law, shes' still driving new cars, got fuel in the tank, and lives in a new house.

Oh, and she even collects welfare, food stamps, medical-aid for the whole family, her husband works under the table his whole life, there's never been taxes filed, they don't make money, ...

Most of her friends do the same,

Here's the point, and it may not be now, but my guess is more than 10% of Americans live this way in cali, and they're now in Bend, living this way, something has to give,

I have long predicted a return of debtors prison, and some states have done it, but we all pay, and easy-money credit, while it keeps our way-of-life running, simply can't keep running this way, eventually the party will end.

March 21, 2008 4:09 PM

THIS will become the economic status of MILLIONS of Americans. And if our government remains true to form, there wll be yet another overhaul of the Bankruptcy System in this country.

It will be reduced to Bad Check status.

Is it bad? Well, it's more of a blemish on your record than a permanent black mark. They will start expunging bankruptcies & other financial black marks from peoples credit records en masse. They will have to. FICO scores will be rejiggered. Equifax, Experian, and TransUnion will, at GOVERNMENT MANDATE, start to "lose" negative financial events on our credit records.

GUARANTEED.

The only consequences for default now are irritating phone calls:

Duncan McGeary said...

I had a bit of a epiphany when I was behind on my credit card debts. Years ago....

If I didn't answer the phone, and let it go to the answering machine, there wasn't a whole more they could do to you....

(Addendum... as Dunc states in the comments, HE DID PAY OFF THESE CARDS!)

And to date, this harassment has been manageable. Not since the Great Depression will so many people be in dire financial STRAITS (yeah, I said "straits"!). They will have to go beyond this to somehow avert the fact that vast swaths of the consuming US public will be UNABLE to make large-scale, credit based purchases (ie HOMES, CARS, APPLIANCES) until our credit system is almost totally abolished.

That means all FICO ills forgiven, credit reporting companies MUST starting expunging black marks SOONER that 10 years.

The responsible will be PUNISHED, the irresponsible will be REWARDED.
Bubble Behavior Rewarded Yet Again.


We are going down the roads the Japs did for the past near 20 years,Prop Up The System At All Costs. What happened to them?

I say again, that Rent & Invest The Diff is the Best Idea EVER, especially in Bend:


Ratio of OFHEO house price index to personal consumption expenditures on rent

What was probably the Most Important Story of the week, at least according to our fearless leaders was this:

High Desert population: Coming or going?

Moving cos. see more departures than arrivals this year

By Deanne Goodman, KTVZ.COM

Census numbers from July 2007, released Thursday, estimate Deschutes County's population at just over 154,000, having grown by almost 34 percent since 2000.

But these days, moving companies are seeing more people leave the area than come.

"We did probably about 12 moves out last month, going to different states and maybe saw five or six come in at the most," said Jason Taroli, a sales manager at Prestige Storage and Moving.

U-Haul also reports more trucks leaving than coming into the area. In 2007, they helped 4.1 percent more families move to Bend than leave. But since January of this year, U-Haul has helped 19.8 percent more families move out of Bend.

Employees at Prestige Moving and Storage blame the cooling real estate market and economy.

"Even last summer was not as busy as we were used to being," Taroli said. "We were still fairly busy but compared to past summers, when we were crazy busy, last summer we were comfortable busy."

But one company says it stays busy whether people move into the area or leave.

"It's expensive to move, and a lot of time people have it in their mind, they'll store their stuff until they can come back and get it. Either way, it works out for us," said Robert Hurzeler, a manager at Secure Storage.

Hurzeler says regardless of the economy, his units stay 100 percent full. Thursday morning, two became vacant and then he got a call a family in Arizona. They reserved the two units for their move to Deschutes County.

"This is a beautiful place, and I think it's going to continue to grow because a lot of people want to live here," Hurzeler added.

If the population keeps growing at the rate it has the past seven years, Deschutes County will pass the 200,000 mark in 2013.


This is The End. We have THOUSANDS of spec homes & empty lots already available. This doesn't even come close to counting the onslaught of foreclosure-bound properties which will be setting the New Low Comps around here. It's going to be a nightmare.

And maybe not surprisingly, almost everyone is relying on the old It's Beautiful In Central Oregon So People Will Forever Want To Move Here.

This reminds me of when I went to The Bahamas many years ago. I went out in "the countryside" of this paradise, only to find hundreds of overgrown concrete foundations that had been poured. They were everywhere. Paradise. But also Desolate Poverty. Bend 2012.

Finally, there is the Cruel, Cruel Irony of Tuscany Buttplugs. This was posted over on BendBB yesterday:

Posted: Sat Mar 22, 2008 3:23 pm Post subject:
Paul-doh! wrote:
EVIL, WHINY Paul-doh!
If she goes forward, she WILL be a builder. ONCE. Tuscany Idiots will be her first, last, and only HURRAH. She should SAVE HER MONEY, and be a librarian.


Interesting that she just put her personal residence on the MLS:
http://tinyurl.com/32lft9

She's trying to raise $1.8MM in Tuscany Pines Venture Capital by selling the old McMansion. As I said... she will be a builder... ONCE.

And such is the destiny of So Many around here. They will lose everything, home, business, cars, boats, everything. All for want of a bubble fortune.

And speaking of bubbles, there's been a bit of a bubble in the comments section, last weeks count going over 600. Is it due to my brilliant writing? Ummm, almost certainly not. Personally I think there are 4 reasons for the apparent popularity of this blog:

First & foremost, it should speak to some in our local media that people around here are tired of bullshit. They want the straight dope on what the fuck is going on. Our current media sellouts are still butt-fucking their buddies in the RE industry, and when a reporter even THINKS about not towing the line, they are BLOWN OUT THE HATCH. People are sick of this.

Spurting love juice a'comes Mike Hollern
Spreading STD's and a'caller'n
On Costa, cuz he's a'swaller'n
Bulletin standards, they are a'faller'n

Second, the housing bust is not just a national story, it's coming into the Cent OR area FINALLY, after our requisite 18-24 month lag time. We are just starting to see the deleterious effects of this thing. And in a place that has triple to quadruple the exposure to housing, it is virtually impossible to ignore, and pretty naturally people thirst for whatever straight shooting, unvarnished news they can get on the subject.

Third, as an illustration, my wife's initial reaction to blogging, sight unseen, was "that's just a bunch of biased, personal ranters with their own agenda, just like The Bulletin!". Then she began to read the comments on this blog. And read. And read. And read. And her initial comment was, "Wow, there people are posting TONS of hard facts, that are NOT BEING REPORTED ANYWHERE." Contrary to popular delusion, and my own initial preconceptions, bloggers are starting to post headlines before the mass media. I actually look to local Bend blogs now, before the online mass media bullshit of the Bulletin or KTVZ, for "real news".

Look at Fishers Dismissal from The Bulletin; I'm not sure if he actually called OPB, but the only other conceivable source for this story was either this blog or BendBB. There is of course chaff with the wheat, but the amount & quality of the wheat is pretty fucking amazing. Especially since no one here is in it for the money.

Finally, this blogging stuff is pretty fun! I mean where else can you post your own take on things, whether on target (or topic) or not, and KNOW it's going to be aired? Everywhere else, including the blogs of mass media around here, as well as RE blogs that shall remain nameless, have some sort of moderation, and that means DISCRIMINATION no matter how you slice it. And it almost always ends up egregiously in error.

Many moons ago "Becky Breeze" posted to a local board, "her" comment was removed as a fake (which is why I can provide no link to it), but then was reinstated once sufficient verification procedures were satisfied by the moderator.

I mean, sorry, but that's just stupid. Neither before nor after was "her" identification EVER proven.

Give people an open, brawling, dog-eat-dog forum without oversight or moderation... and good things will come. Well, at least that's my opinion.

I'll end with this piece on The Great Deleveraging, something that will be the defining trend of Our Time:

The Great Unwind has begun, Citigroup warns
Avoid leveraged companies, countries and consumers, bank's strategists say
By Alistair Barr, MarketWatch
Last update: 9:51 p.m. EDT March 19, 2008
SAN FRANCISCO (MarketWatch) -- The Great Unwind has begun, Citigroup Inc. strategists warned on Wednesday.

As markets and economies de-leverage across the globe, investors should avoid companies and countries that have grown to rely too much on borrowed money, they said.

That means favoring public-equity markets over hedge funds, private-equity and real estate, while leaning toward emerging market countries and away from developed nations like the U.S., the bank's global equity strategy team advised.

Within equity markets, the financial-services should be avoided because it's still over-leveraged, while other companies have stronger balance sheets, the strategists said.

"Steady growth, low inflation and rock-bottom interest rates encouraged economic and financial participants across the world economy to gear up over the past few years," Robert Buckland and his colleagues on Citi's global strategy team wrote in a note to clients. "Easy money encouraged many to buy a bigger house, a bigger car or a bigger speculative position."

"But now, any behavior that relied upon continued access to easy money is being dramatically reassessed," they added. "Leveraged banks must lend less, leveraged consumers must consume less, leveraged companies must acquire or invest less, and leveraged speculators must speculate less."

Financial-services companies are the most vulnerable to this reduction of borrowed money across the globe, they said.

During the last credit crisis in 1998, European banks were leveraged 26 to 1. In the early part of this decade, leverage grew to 32 to 1. Now the sector is geared 40 to 1 on average, according to Citi's European bank research team.

"The banks have a long way to go," the strategists said. "We would continue to avoid the sector while they are de-leveraging."

Other companies are in much better shape, having rebuilt cash from strong earnings since 2003. Emerging market companies have developed particularly strong balance sheets, having learnt hard lessons from the Asian financial crisis a decade ago.

However, even though some companies may not have much debt themselves, they may be exposed to over-leveraged customers or highly leveraged investors, Citigroup warned.

Automakers, home builders and electronics retailers benefited as customers borrowed money cheaply in recent years to buy cars, houses and flat-screen TVs. That attractive financing is now being withdrawn.

"There will be plenty of companies that have strong balance sheets, so may not be most immediately vulnerable to the credit crunch," Citi said. "But they may find that their leveraged customers are vulnerable."

The difference, or spread, between interest rates on investment-grade corporate bonds and Treasury bonds has jumped in recent months, even though most companies aren't very leveraged.

This widening may be caused by leveraged investors such as hedge funds having to sell good quality assets to meet margin calls, or requests for more cash or collateral.

"It is the leverage of the investors who hold these bonds that is now being brutally exposed," Matt King, a Citigroup credit strategist, said.

"We are now confronted by a broad bloodbath in the credit markets," Citigroup said. " The most leveraged paper is falling in value because it is leveraged, and now the least leveraged paper is also falling in value because it is owned by leveraged investors."

Investors should also avoid hedge funds themselves, along with private equity, Citi added. Both types of investment rely at least partly on borrowed money to generate returns.

"Private equity returns have been especially strong. Without leverage it will be much harder to meet excessive investor expectations [most surveys suggest 20% annual returns are expected from the asset class]," Citi warned. "Similarly, many hedge funds have generated healthy uncorrelated returns by adopting cautious underlying strategies, but applying significant leverage. Again, that looks unsustainable in the current environment."

Leveraged economies, like the U.S., should also be avoided, in favor of emerging market countries, which have reduced borrowing, the bank advised.

With less capital sloshing around the world, and the dollar falling, the U.S. may have to compete more to finance its deficits.

"The U.S. shows up as the world's greatest consumer of external capital," Citi noted. So it "has the most to lose as this capital becomes less freely available."End of Story
Alistair Barr is a reporter for MarketWatch in San Francisco.

Wanna know where the Next Big Thing is? It's here, managing The Big Unwind, the greatest De-Leveraging of all time. Some will make BILLIONS in "managing" this debacle for the victims. Or should I say "victims".

The unfortunate ultimate result is that the US will become The Worlds Deadbeats.

250 comments:

«Oldest   ‹Older   201 – 250 of 250   Newer›   Newest»
Bewert said...

Bingo!

Anonymous said...

Did anyone here by any commodity's per Mr. Rogers, in that insipid TV cut&paste here that HOMER posted?

Mr. Rogers says to BUY commoditys.

Did anyone here do so?

Anonymous said...

I read todays Oregonian, and theres a story about the Simmons kid who was found not-guilty by the grand-jury, but the DA went ahead and made him plea-bargain to a guilty, now he's suing Deschutes County for $3.5M.

Sounds like a Kuratek. The UofO law school folks say it is a clear case of double-jeopardy.

I think we should just reserve 1/2 our tax collection effort for paying off bullshit.

Bruce should be happy, not only did the kid get laid ( 17 on 14, later 18 on 15 ), but he'll get paid to boot!

PopGoesBend said...

Adkisson said housing inventory in Bend is now at 11 months. [ ?? ] Less than six months is a seller’s market, six to 10 months is a stable market and anything more than that is a buyer’s market, explained Adkisson.

Even the king of throwing bullshit Lawrence Yun says that a stable market is 6 months.

He said two days ago "The lower price reflects continuing buyer's market conditions with a clear oversupply at 9.6 months supply of inventory" Source

So 10 months inventory in Bend is stable, but nationwide 9.6 months is a clear oversupply and a buyer's market.

Wow. Bend really is special.

Anonymous said...

If you look at the Deschutes County DIAL Page- property ownership information- you will see the bulletin was given the land for their new building, from brooks resource, for free. The estimated value was $2,000,000- I think that may explain a thing or two

If you look at the Deschutes County DIAL Page- property ownership information- you will see the bend weekly was given the land for their new building, from brooks resource, for free. The estimated value was $1,000,000- I think that may explain a thing or two

If you look at Brucey you'll see that he indirectly works for Hollern.

tim said...

Did anyone buy commodities?

Thanks to my reading of Jim Rogers' Hot Commodities, I bought a broad-based commodity ETF (ticker symbol DBC) about six months ago.

tim said...

Yes, six months has always been what's called "normal" by Realtors (although I have seen reference to 4 months and even lower as "normal").

10 months is 67% more than six months.

These people will change any definition at any time. Lying, apparently, is the easiest thing in the world for these people.

Anonymous said...

I bought some DBA about the time, that was why I was asking. It seems that about the time HOMER published this insipid FUCKING stupid video on a text site, that it was time to sell. Do you think they have a hope? The de-inflation has got to start soon. Yes, six months ago was a good time to buy a lot of stuff.

I just wonder why Rogers is doing the cramer now, e.g. shouting about buying commodity's, ... FOOD.

Anonymous said...

TALEB fucking kicks GREENSPAN's ass. TALEB says that BEND-OREGON is the ultimate 'black-swan'

***

Taleb Outsells Greenspan as Black Swan Gives Worst Turbulence

By Stephanie Baker-Said
Enlarge Image/Details

March 27 (Bloomberg) -- On a freezing day in March 2007, Nassim Taleb walked into a conference room at Morgan Stanley's Manhattan offices on 47th Street and Broadway to address a group of the firm's risk managers. His message: Your models don't work.

Using a whiteboard to scribble out his calculations, Taleb, now 48, began one of his rants, this time against stress tests -- Wall Street lingo for examining how a market rout will play out. Stress tests are inherently risky because they ignore rare but potentially devastating events, Taleb said.

``Past shortfall doesn't predict future shortfall,'' the options trader turned best-selling author recalls telling the assembled group of about 40. The risk managers, part of a tribe of mathematical model makers known in the finance world as quants, stared back at him blankly, and a debate ensued, according to people who were there.

Only six months later, Morgan Stanley experienced its own rout. The world's second-biggest mergers adviser announced in December that it had written down its subprime-related holdings by $9.4 billion after the firm's traders misjudged how fast and far prices of the debt would fall. Their risk management had failed.

The Lebanese-born Taleb, a balding man who labels himself a philosopher of randomness, has an eerie knack for timing things right. His most recent book, ``The Black Swan: The Impact of the Highly Improbable'' (Random House), came out in May 2007, just months before the subprime fiasco rocked global markets and led banks to announce at least $208 billion worth of writedowns. The book's message offered something of a preview of the crisis: that we're all blind to rare events and routinely fool ourselves into believing we can predict risks and rewards.

Crisis, Crash, Collapse

Taleb argues that history is littered with high-impact rare events, known in quantspeak as ``fat tails,'' for their shape when plotted on a bell curve. He cites the Latin American debt crisis of 1982, the collapse of hedge fund firm Long-Term Capital Management LP in 1998 and the crash of the U.S. stock market in October 1987, to name a few.

As the founder and manager of New York-based Empirica LLC, a hedge fund firm he ran for six years until he closed it in 2004, Taleb built an investment strategy based on options trading. It was designed to bulletproof investors against blowups while profiting from rare events. His 20-year trading career has been marked by jackpots (like when he lucked out in trading options during the stock market crash of 1987) followed by long dry spells.

``If you lose money on a steady basis and then make money in a lumpy way, people think you're crazy,'' he says.

Hedge Fund Advising

While Taleb has stepped back from everyday trading, he remains an adviser to Santa Monica, California-based hedge fund firm Universa Investments LP. It opened its doors last year under the direction of Mark Spitznagel, 36, Taleb's former trading partner at Empirica.

Universa has a so-called Black Swan Protection Protocol managed by Pallop Angsupun, a former Taleb student who's hedging roughly $1 billion of client investments against certain events that can cause market declines. The firm has another $300 million pot betting on large positive jumps in individual stocks and is readying a similar, third fund several times that size, a person familiar with the funds says.

``Nassim and I share this genetic flaw,'' says Spitznagel, a one-time Chicago pit trader who was a student of Taleb's at New York University. ``We're not interested in the small frequent payouts. We want the infrequent huge payouts.''

Multimillion-Dollar Advance

Taleb has gone from being a leading Wall Street heretic -- he rails against economists and quantitative model makers -- to a mini institution whose appeal reaches well beyond the realm of finance. More than 370,000 copies of ``The Black Swan'' are in print in the U.S. and the U.K. It spent 17 weeks on the New York Times best-seller list and is being translated into 27 languages. It even outranks Alan Greenspan's memoirs, ``The Age of Turbulence: Adventures in a New World'' (Penguin, 2007), among 2007 best-sellers on Amazon.com.

The success of ``The Black Swan'' has led to a $4 million advance for the English-language rights to a follow-up book, according to a person familiar with the deal. It's tentatively titled ``Tinkering'' and will examine how to live in a world we don't understand.

Taleb now charges more than $60,000 for some of his lectures, according to the London Speaker Bureau, a firm that places business, political and motivational speakers. He warns audiences against believing worst-case scenarios and making so- called naked, or unhedged, bets on the future that could lead to disastrous losses.

Australia Discovery

The message of ``The Black Swan'' -- whose title describes a bird once thought not to exist, until it was found in Australia in the 17th century -- has penetrated Wall Street trading rooms, says Aaron Brown, a risk manager at Greenwich, Connecticut-based AQR Capital Management LLC, which manages about $8.6 billion in hedge fund assets.

``You can't say you haven't read it or you read it but you're not going to do anything in response in a trading or risk management role,'' says Brown, a former Morgan Stanley risk manager who calls Taleb a friend while disagreeing with him that banks' risk models are useless.

Now, everybody wants to talk about ``black swans,'' those highly improbable events that can cause havoc. The National Aeronautics and Space Administration's Langley Research Center in Hampton, Virginia, has invited Taleb to talk about how to identify technology black swans as it prepares to send humans back to the moon and beyond.

Societe Generale

The U.S. Fire Administration, part of the Department of Homeland Security, wants him to address 200 executive fire officers to talk about the probability distribution of forest fires. He's given talks about risk models for the U.S. Department of Defense, where he's a member of the Highlands Forum, a Pentagon-sponsored study group on risk.

Taleb is no security expert nor does he claim any special knowledge of space technology. Instead, these groups want to hear him talk about how to apply his ideas on chance and decision making to their specific fields.

One day last December, Taleb stood before 30 top executives from Societe Generale SA, France's second-biggest bank. The executives, including Chairman Daniel Bouton, had gathered at Prague's five-star Hotel Aria, where each room is dedicated to a famous musician, for a conference organized by Paris-based business school ESCP-EAP.

The proliferation of bank mergers has resulted in fewer banks and a greater concentration of risks, Taleb warned, according to a person who attended. The probability of a devastating banking loss has increased rather than decreased, he said. The response was muted, and attendees walked out with copies of ``The Black Swan,'' the person said.

Marking a Shipwreck

About six weeks later, SocGen revealed the biggest trading loss in banking history, announcing that it had lost 4.9 billion euros ($7.2 billion) and blaming 31-year-old trader Jerome Kerviel.

Taleb's fan club has grown far beyond the investment and research communities. When Tampa, Florida-based Odyssey Marine Exploration Inc. discovered a colonial-era shipwreck in the Atlantic Ocean last May with 17 tons of gold and silver coins valued at some $500 million, Greg Stemm, the company's co- founder, happened to be reading Taleb's book.

Stemm decided to name the site ``The Black Swan.'' Soon after, the two met for champagne in Los Angeles and bonded over the role of randomness in life.

Irked Statisticians

Taleb has made enemies, too. In August, The American Statistician, the quarterly journal of the American Statistical Association, came out with a special Black Swan issue that published a series of critical reviews alongside an article by Taleb.

``He characterizes statisticians as people who blindly assume things, and nothing could be further from the truth,'' says Peter Westfall, the journal's editor and a professor of information systems and quantitative sciences at Texas Tech University in Lubbock.

Even his one-time colleagues disagree with him. Robert Engle, a Nobel laureate in economics who teaches at New York University's Stern School of Business in Manhattan, says Taleb's book ignores a mass of literature on rare events called extreme value theory, which is often used to assess risks in insurance as well as finance.

``He's reflecting an opinion that financial markets are sort of out of control,'' Engle says. ``I think a lot of mistakes are made, but I don't think he helps us understand the mistakes.''

Jet Versus BMW

Taleb's book blends highbrow philosophical musings with quasi-self-help advice that appeals to our fascination with success and chance occurrences. While Stephen Covey's ``The 7 Habits of Highly Effective People'' (Simon & Schuster, 1990) purports to give everyone a road map on how to become the next Bill Gates, Taleb reminds us that skills and hard work aren't always enough.

``Hard work plus luck is what gets you a jet instead of just a BMW,'' he says over duck at a dim sum restaurant in London, where he's conducting research with a colleague.

It's much the same message he delivers in more formal settings. One day last June, Taleb gets up in front of about 40 people at Miller's Academy, a West London lecture society, to talk about black swans. Surrounded by antiques and a fish tank stuffed with dead owls, he begins his trademark attack on Gaussian statistics, named after 19th-century German mathematician Carl Friedrich Gauss, who charted probabilities on a bell-shaped curve.

Skeptical Economist

In a bell curve, high-frequency events are represented at the top, or middle, and infrequent episodes are charted on the edge, or tail, of the curve. The tail is usually thin, reflecting rare, low-impact events. Gaussian statistics might work in casinos, but it can't accurately help calculate stock market valuations, Taleb argues.

``With stocks, we don't know if we're overpaying,'' he tells the audience.

``No self-respecting statistician in finance is using Gaussian statistics,'' interjects Lord John Eatwell, an economist and president of Queens' College at Cambridge University, who's sitting in the back. ``All models are Bayesian,'' he says, referring to the theory derived from 18th- century British mathematician Thomas Bayes that allows for data to be constantly added to calculate probabilities.

Taleb shoots back: ``Bayesian is necessary but not sufficient.''

Taleb, who sports a salt-and-pepper goatee and mustache and a 60-euro black Swatch watch, is often quick to take offense. At a conference in Italy, a group of students told him he looked like Umberto Eco, the somewhat paunchy Italian philosopher and author of the novel ``The Name of the Rose.'' Taleb says he promptly went on a diet.

Trader to Philosopher

For more than a decade, Taleb has been trying to transform himself from trader to philosopher.

``By the age of 30, I was emotionally outside the world of finance,'' he says.

Surrounded by a collection of ancient sculpted Roman heads, Orthodox Christian icons and thousands of volumes spread throughout his suburban home north of Manhattan, Taleb has churned out a series of technical papers and books. His first mainstream book, ``Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets'' (W.W. Norton, 2001), which has 160,000 paperbacks in print in the U.S., was translated into 20 languages and turned him into a guru in some finance circles.

Taleb has learned about uncertainty firsthand. Born into a prominent Greek Orthodox Christian family, he says he witnessed Lebanon's transformation from heaven to hell when civil war erupted in 1975. At the time, he was a 15-year-old student at Beirut's Grand Lycee Franco-Libanais, an elite French-speaking school that was damaged during the war.

Wharton MBA

He listened to adults tell him that the conflict would soon end, only to watch it drag on for almost 17 years. His family's home in Amioun, in northern Lebanon, was destroyed in 1982, when his grandfather, former Deputy Prime Minister Fouad Ghosn, was a member of parliament.

Taleb left Lebanon to attend the University of Paris and then got his Master of Business Administration in 1983 from the Wharton School at the University of Pennsylvania, where he says he fell in love with options. An options contract allows but doesn't oblige an investor to buy or sell a security or index at an agreed price at some future date.

Two years later, he got his first lesson in financial uncertainty. After a brief stint as a trainee at Bankers Trust Corp., Taleb joined French bank Indosuez, now part of Credit Agricole SA, as a currency options trader.

Plaza Accord

On Sept. 22, 1985, France, Germany, Japan, the U.K. and the U.S. signed the Plaza Accord, an agreement to push down the value of the dollar to shore up the U.S. current account deficit. Taleb was sitting on currency options -- which give investors the right to buy or sell a currency at a specified exchange rate -- that had cost him pennies. The options exploded in value that day.

``I had no clue what had happened to me,'' he recalls. ``We were lucky. We made a lot of money but by accident.''

A French colleague, Jean-Manuel Rozan, later wrote about the episode in a memoir disguised as a novel called ``Le Fric,'' or ``Cash'' (Michel Lafon, 1999), in which he named Taleb and called him the Bobby Fischer of options, referring to the legendary chess player.

After this fluke, Taleb says he became obsessed with buying out-of-the-money options -- puts and calls whose strike price is either lower or higher than the market price of the underlying security. An agreement to sell is a put option; an agreement to buy is a call option.

`Nassim the Dream'

A typical trade might work like this: Microsoft Corp. is trading at $35. Taleb would buy a put option, agreeing to sell another investor the stock at a strike price of, say, $25 in the next three months. He's betting the stock will fall much more than it has done historically, making the option cheap to buy. If the stock fell further, to $20, he would exercise the option and force the investor to buy at $25, pocketing the difference. If the stock doesn't fall, the option expires and Taleb has lost only the pennies he paid for it.

In 1986, Taleb moved to First Boston Inc. (now part of Credit Suisse Group), where fellow traders called him ``Nassim the Dream,'' recalls Demetrios Diakolios, a former colleague. At First Boston, Taleb, then 28, built what he terms a ``massive'' position in out-of-the-money calls on Eurodollar futures.

`He Cleaned Up'

On Oct. 19, 1987, he was sitting at a row of desks on First Boston's trading floor at Park Avenue Plaza in Manhattan when his dream came true. The Dow Jones Industrial Average plummeted 22.6 percent in the biggest one-day drop in U.S. stock market history. The crash caused Eurodollar futures to surge after the U.S. Federal Reserve pumped liquidity into the banking system, lowering interbank borrowing rates. Taleb's positions exploded once again.

``We all knew that he did well, that he cleaned up on that and made $35 million to $40 million,'' Diakolios says of the sum the bank made on Taleb's positions. ``The equities guys below us thought, 'Why did some guy upstairs make all this money on a day when everybody got killed?'''

The payday for Taleb was big. Without divulging the amount, he says 97 percent of the money he's ever made was on Black Monday in 1987.

``There are concentrated pockets of luck,'' he says.

After a few months of volatile trading, the market calmed down, and Taleb grew bored. In 1991, he moved to Union Bank of Switzerland, now UBS AG, as chief options trader. He lasted less than a year; he says endless meetings annoyed him.

Chicago Pit Trader

In 1992, Taleb turned his back on Wall Street. He moved to Chicago to become a pit trader and market maker at the Chicago Mercantile Exchange. In the pit, he saw how options are priced in real markets rather than from mathematical models. At the time, he was working on his Ph.D. in option pricing at the University of Paris Dauphine (which he completed in 1998) and writing his first book, ``Dynamic Hedging: Managing Vanilla and Exotic Options'' (Wiley, 1997).

After two years, Taleb moved back to New York, where he worked at CIBC-Wood Gundy, a unit of Toronto-based Canadian Imperial Bank of Commerce, as global head of financial option arbitrage and then at Paris-based BNP Paribas SA, France's biggest bank, as an options trader.

Teaching at NYU

In the mid-1990s, when he was still in his 30s, Taleb found out that the scratchy voice he'd attributed to too much shouting in the pit had a more ominous cause. He had throat cancer. The disease tends to strike smokers over 50. Taleb wasn't a smoker except for the odd Friday when he would light up a pipe after a good trading week. After two years of radiation treatment, the cancer disappeared. Yet the effects linger, and Taleb says he remains paranoid that this particular black swan will resurface.

Taleb's following grew in 1999 when he began teaching an evening graduate course at New York University. His class on model failure in quantitative finance attracted like-minded students, including Spitznagel.

After the course wrapped up in the evening, Taleb would go to the Odeon cafe in Manhattan's TriBeCa neighborhood for drinks with students and Wall Street quants to talk about everything from pricing options to the failures of value-at-risk models, which banks use daily to decide how much to wager in the markets.

``It became an unofficial meeting place for people interested in quantitative finance and trading,'' recalls AQR's Brown, author of ``The Poker Face of Wall Street'' (Wiley, 2006).

Options in Bulk

Taleb quit BNP Paribas in 1999 and set up Empirica in Greenwich, Connecticut, bringing Spitznagel with him. Empirica wasn't like most hedge funds. The Russian financial crisis and the collapse of Long-Term Capital Management after $4 billion in losses had spooked many investors. Taleb began offering hedge fund clients protection against a blowup like LTCM by offsetting some of their trades with options.

Empirica ended up acting like a superbroker or clearinghouse for buying out-of-the-money options. After spending millions on computer systems and giving their software programs code names like Igor, Taleb and Spitznagel would download 600,000 option prices every night and produce bids on 30-40 big blocks, getting them cheap by buying in bulk, Taleb says.

Guarantee to Investors

The goal was to protect investors against market crashes. Knowing how much they would pay for options, the two guaranteed investors they wouldn't lose more than 13 percent a year.

``Our aim was not to make money,'' Taleb says. ``I make no claims of being able to beat markets.''

Empirica did outperform the market. In 2000, its returns rose by about 60 percent on the back of high volatility and the bursting of the dot-com bubble, Taleb says. The next year, after the Sept. 11 terrorist attacks, nervous investors came flocking. Then volatility dropped as the stock market slowly drifted down, removing the opportunities to profit from wide market swings.

In 2002, Empirica posted its worst year as returns fell about 12 percent, Taleb says, while the Dow Jones Industrial Average dropped 17 percent.

``I knew he was likely to lose money most of the time because it was kind of an insurance,'' says Jean Karoubi, an Empirica investor and chief executive officer of LongChamp Group Inc., the New York-based hedge fund unit of Silvercrest Asset Management Group LLC, which manages about $10 billion.

Fearing New Cancer

Taleb and Spitznagel moved Empirica to midtown Manhattan in 2003 and changed tack for some clients. To profit from low volatility, they began selling at-the-money options -- those close to the market price of the underlying security. In 2003 and 2004, Empirica posted small positive returns, Taleb says. Eager to focus on writing ``The Black Swan'' and still afraid, he says, that his cancer might return, Taleb shuttered Empirica in 2004 and returned about $380 million to investors.

``I was fed up,'' he says. ``I just wanted to write, and I had writer's block.''

``The Black Swan'' was itself a black swan -- an unexpected hit. The book swings from advice on how to distinguish between positive and negative black swans in everyday life to ruminations on Taleb's hero, Karl Popper, the Austrian-born 20th-century philosopher who argued that scientific theories should be tested not through attempts to verify them but through efforts to prove them false.

`Go to Parties!'

``If you are in banking and lending, surprise outcomes are likely to be negative for you,'' Taleb writes. ``Put yourself in situations where favorable consequences are much larger than unfavorable ones.''

He adds little tips such as: ``Go to parties! If you're a scientist, you will chance upon a remark that might spark new research.''

Taleb has a foot in academia. He's now a visiting professor at the London Business School, where he's conducting experiments with Dan Goldstein, an assistant professor of marketing, on the psychology of risk and decision making. Taleb wants hard proof that people misjudge risks.

In one pilot experiment, they posed the following question to participants: ``You're on vacation in a foreign country and are considering flying the national airline to see a special island you have always wondered about. Safety statistics in this country show that if you flew this airline once a year, there would be one crash every 1,000 years on average. If you don't take the trip, it is extremely unlikely you'll revisit this part of the world again. Would you take the flight?''

Everyone answered yes, assuming that one crash every 1,000 years was a minimal risk.

Finding the Extremes

Another group was given the same problem except they were told that an average of 1 in 1,000 flights on this airline crashes. Although it's the same risk mathematically, 30 percent refused to fly when presented with this wording.

``This one-in-every-X-years framing is something you hear concerning market crashes in financial reports on TV,'' says Goldstein, 38, who holds a Ph.D. in psychology.

Extremes are more likely in finance than in the real world, Taleb says. At a conference for risk managers in London last June, he used the following illustration: ``Say I sample from the world population and find two people cumulatively 14 feet tall. What's the most likely allocation for Gaussian? One and 13? No, it's seven and seven.''

In wealth, it's the opposite. ``If we sample from the world population and get two people whose net worth totals 14 million pounds, what's the most likely combination?'' he asked. ``Seven and seven? No, it's 5,000 pounds and 14 million pounds minus 5,000 pounds.''

`We Need Chutzpah'

He gives these two domains different names. The first he calls Mediocristan, where, if you have a large sample, the average of an independent, identical, random set of variables will converge in the middle. In Taleb's other domain, Extremistan, average outcomes have little meaning. If financial markets are governed by extreme movements and unexpected events, we shouldn't be fooled into believing worst-case scenarios, he says.

``We need more chutzpah,'' he says. ``If someone tried to do stress testing before the stock market crash in '87, they would not have tested for 20 percent down.''

Taleb likens modern-day financial markets to medicine in the 1800s, when going to a hospital in London or Paris multiplied your risk of death by four times, he says. Similarly, quants increase risk by deploying flawed financial tools designed to reduce it, he argues.

For Taleb, the ills besetting financial markets are a vindication of his ideas. Like medicine, though, he isn't offering easy cures.

LavaBear said...

I bought DBA (mixed agriculture fund) and DBO (earl) back in Oct. I scaled back on both earlier this month. (too bubblie) I don't think I did it because of Mr. Rogers' but I do think he's a damn good interview.

tim said...

I don't know why people love "The Black Swan" so much. I still think his "Fooled by Randomness' is a much better book.

In The Black Swan he prattles on in a much too "I love myself" way, similar to reading Mandelbrot or Wolfram.

Anonymous said...

ya, ya, ya ok interview, but I still hate fucking TV, and HOMER must live in front of the fucking TV.

Why in the hell did ROGER do the CRAMER on commodity's. ON another note did any of you see the full page add last week in the WSJ that FOX took out "Don't take your money out of BEAR STearns, it will always be around- CRAMER, 3/12/2008 "FAMOUS LAST WORDS"

FOX says, Want news? Then don't watch msnbc.

I don't watch tv, but did did tickle me to see cramer get shit rubbed in his nose, and he did appear to be a bruce-pussy in protecting BS.

Anonymous said...

Yes, Wolfram makes me puke with his 'new kind of science', and then trys to make it appear in popular press that he invented physics, and computational computing.

Taleb is right though, its all about DUMB FUCKING luck, like my CPA says, its all about being at the right time, at the right place.

"Shit Happens",

End of Story.

Bend, "Here back in Bend" Ace Reporter, ... "We're in a World of Shit here in Bend".

Anonymous said...

Mr. Rogers says "Put all your money into commodity's" Mar 20, 2008.

April 1, 2008, Commodity's collapse and never return.

Was Rogers trying to create his own exit market?

tim said...

Rogers has been consistent on his commodities call. He's not the problem, the media is.

CNBC wants to talk about stocks. If your gig isn't stocks, they only talk to you when everyone else is hot and bothered.

LavaBear said...

>>CNBC wants to talk about stocks.

I thought CNBC was about hot chicks talking about stuff? I turn it on to see what Margaret Brennan is wearing then when I hear that they are talking I hit mute.

Bewert said...

Via KTVZ:

Former President Bill Clinton will campaign for his wife, Hillary, in Bend on Monday, campaign officials said Friday.

Clinton will attend a "Solutions for America" event at Bend High School, at a time not yet announced, campaign officials said. All events are free and open to the public.

It's one of two stops in Oregon for the former president, who has been busy stumping across the country for his wife's presidential bid. He first will attend a similar event at a middle school in Medford Sunday evening. Other stops and details have yet to be announced.

Medford also was one of the stops during last week's Western Oregon visit by Democratic presidential candidate Barack Obama, with whom Hillary Clinton is locked in a tight battle for the party's nomination.

...

We've become important ;)

Personally, I want to ask exactly how the math works out for Hillary actually winning the nomination.

And that's my last national comment for the day.

tim said...

>>Margaret Brennan

She is a hottie. If I could get her to bring me beer, she'd be perfect.

Anonymous said...

Former President Bill Clinton will campaign for his wife, Hillary, in Bend

We've become important ;)
***

Nothing new -- Robert Kennedy was at the Bend High School stumping back in late 60's. I lived down the street. As Buster says, "Know your Bend history." (I can't believe I'm actually quoting Buster.)

Bewert said...

Re: Nothing new -- Robert Kennedy was at the Bend High School stumping back in late 60's.

So this is the first presidential candidate or spouse visit since '67?

Anonymous said...

Buster might also want to point out that Hillary ( cheney-in-drag ) is only coming to Right-Wing places, like Medford & Bend, and avoiding all liberal Oregon.

A thinking person might argue, is hillary running against obama or for cheney??

Hillary is a Right Wing Bitch, ClitorisB her hubby, is-was the best republican, the repub's ever had.

tim said...

>>Hillary is a Right Wing Bitch, ClitorisB her hubby, is-was the best republican, the repub's ever had.

He was whatever he had to be for it to be all about him. No more, no less.

tim said...

http://tinyurl.com/3yknc4

Oh look. The magical growing gov't is growing again.

IHateToBurstYourBubble said...

I can't believe I'm actually quoting Buster.

It's like losing your virginity... hurts like hell the first time.

Then it becomes surprisingly easy.

Anonymous said...

Serious question for lava, tim, and the 'foz'.

What online brokers do you use?

What are the pluses minuses?? This question is only being asked cuz us old people need to learn from the young-un's.

BEM & Homer are free to respond, but I assume you got all your money in BEND-RE futures. Locked solid.

IHateToBurstYourBubble said...

Timmy,

They're looking for you over on BendBB...

Anonymous said...

I'm fond of E*Trade, and I would give you my login & password, but I can't remember it right now.

Perhaps homer will let you try his account, he frequently lets bendbb take a spin on his account.

IHateToBurstYourBubble said...

When hot property cools off
By David Fisher / The Bulletin
Published: December 28. 2007 4:00AM PST


Bend started the year with more than 1,100 unsold homes on the market, according to MLS data reported by Bratton Appraisal Group’s Mike Caba. That number quickly soared to more than 1,600 by June as speculators and other homeowners tried to sell at the same time.

The number of listings gradually shrank to around 1,300 by early this month, as some homes sold and some would-be sellers opted to pull their homes off the market to wait for another season.

Still, at the year’s average monthly sales rate, it would take more than a year to sell off even that reduced year-end inventory level — more than the six months of inventory that most industry observers say is the hallmark of a well-balanced market.


As recently as the end of last year, SIX MONTHS WAS NORMAL. But, Costa went in search of NEW ESTIMATES when the market really hit the shits in Q1.

He found Adkisson... and blew out Fisher for good measure. How dare he say 6 months is NORMAL!

IHateToBurstYourBubble said...

Well, let's see the sort of pieces the Bulletin was printing 6-9 months ago about where RE was going...

If history proves a guide, housing slump won’t last
By David Fisher / The Bulletin
Published: August 05. 2007 4:00AM PST

[There's a picture with this caption]
Work continues on a house in the new Renaissance Ridge development in Bend. Though the number of unsold homes in the city has hit a record this year, analysts expect the slump to be a short-term problem only.

A few years ago, Krishan Tinney was stuck in traffic — again — on her grinding commute from Los Angeles to Ventura County. So she called a friend in Bend to kill some time.

“What are you doing?” Tinney asked.

“Oh, I just got off work,” her friend said. “Thought I’d walk down to the river and float for a while.”

It was 4 o’clock on a Thursday afternoon.

A few months later, Tinney and her husband, an engineer, ditched Southern California, moved to Bend and bought a house — something that was way beyond their means in SoCal’s heady housing market. Since then, he has recruited friends to join him at Columbia Aircraft Manufacturing Corp. Her parents have moved here, too.

The Tinneys sold their first house a few months ago and moved into a bigger, brand-new one in south Bend’s Renaissance Ridge subdivision.

“We could never have done this in Ventura County,” Tinney said, plucking a few weeds from her tiny new lawn last week as she got ready to take her young daughter swimming. “We feel very fortunate. We love it here.”

Drawn by the lure of relatively affordable housing through the years, the low-key, small-city atmosphere and the stunning natural beauty of Central Ore­gon, Tinney and thousands of newcomers like her have rained a remarkable streak of good fortune on Bend’s housing market.

Since 1988 — the year the city pulled out of its last major real estate slump — the average price of a Bend home has shot up an average of 11.3 percent per year, according to Central Oregon Multiple Listing Service numbers, dwarfing the 4.8 percent average annual gain in the nation’s average home price during that period and rivaling the

12 percent average annual return of the S&P 500 stock index.

Even ignoring the unsustainable growth rates of the boom years of 2004-06, the city’s real estate gains have been impressive.

The average price of Bend houses gained an average of

10 percent per year from 1988 to 2003, according MLS numbers, while prices nationally climbed only about 4.2 percent per year.

Of course, the numbers are rough. Some of Bend’s average price gains have come more from increases in the construction of super-expensive homes than from the price appreciation of individual houses. Still, it’s clear that the local housing economy hasn’t experienced anything like a drawdown in nearly a generation.

Until, possibly, this year.

The inventory of unsold homes in the Bend market has swelled to record numbers this year, while sales levels for the first six month of the year have fallen back to levels not seen since 2003.

The traditional underlying drivers of the local housing market are likely still there, University of Oregon economist Tim Duy said Thursday. Newcomers are still attracted to Central Oregon’s natural beauty and, even at today’s prices, average housing prices here remain lower than they are in neighboring California and in other high-priced regions along the nation’s gold coasts.

But working off all of those unsold houses might bring some pain, Duy said. The only question is how much and for how long.

“I’ve got to think that the world is not falling apart here,” Duy said. “But prices are going to have to come down to get rid of whatever excess inventory has built up.”

Rough past

Bend’s prices have appreciated so much during the past 20 years, Duy noted, partly because they started so low.

The real estate economy here was in rough shape as the 1970s faded into the ’80s, Brooks Resources Corp. CEO Mike Hollern recalled recently.

A housing boom in the late 1970s attracted a stream of new contractors to town and filled neighborhoods with new housing, Hollern said, but the optimism didn’t last long. Interest rates spiked in the early 1980s as the Federal Reserve Board launched an aggressive battle against inflation, sending average mortgage rates soaring from the 9.25 percent average of 1978 to a peak of nearly 15 percent in 1982.

That, combined with an employment crunch in the wood products industry, hit Bend’s economy hard, Hollern said. Downtown shops closed and boarded their windows. Contractors pulled up stakes and left town.

Don Kelleher, now a longtime real estate agent, was in a retail business at the time, trying to make ends meet while paying 19 percent interest on inventory loans. His wife, a real estate agent at the time, closed deals that required the sellers to bring money to the table because the sales prices of their homes could no longer pay off their mortgages.

From the exuberance of the 1970s, confidence plunged to an all-time low.

“There was a time when we would hear about a housing start — just one house, not a subdivision — and everybody would drive by to see who the hell was building a house,” Hollern said. “Whoever it is must be crazy.”

It took the local housing market years to recover.

From 1983 — the earliest year for which the Central Oregon Multiple Listing Service has reliable numbers — through 1985, the average price of a Bend home fell more than 8 percent, from $54,521 to $50,144. Prices staged a brief rally in 1986 as mortgage interest rates dropped back below the 10 percent mark again. But 1987 brought another 2.8 percent slide, and the average price of a Bend house — which amounted to only about $54,000 that year — was less than half the national average.

Weakness in the housing market was mirrored by sluggishness in other market sectors, Hollern said.

Brooks Resources — formed in 1968 as the real estate arm of the old Brooks-Scanlon lumber company — started Shevlin Center, which today is a thriving hub of office buildings and industrial plants on the west side of the Deschutes River along Colorado Avenue, in the early 1980s. But nothing happened for years, even though Brooks and the city poured thousands of dollars into the Colorado Avenue bridge and other improvements.

Awbrey Butte also stood virtually empty through the first half of the ’80s, Hollern said, even though Brooks bought it in 1970 and master planned it a few years later.

Still, the city was beginning to sprout some of the seeds of its future growth. Developments like the High Desert Museum, along with a trickle of new concert series, new restaurants and new shops increased the city’s attractiveness while the Sunriver Resort, founded by investor John Gray in the mid-1960s, and Black Butte Ranch, founded by Brooks Resources in 1970, exposed the area to a steady stream of tourists from the cities of California and the Pacific Northwest.

Developments like the new St. Charles Medical Center, meanwhile, increased the city’s service level and formed the nexus for a growing employment base, Hollern noted. But the key to the city’s growth through the 1990s and beyond proved to be its attractiveness to retirees and young, skilled urban workers who brought pre-existing wealth or, in some cases, their own jobs with them when they moved to the High Desert.

“We have become,” Hollern said, “a poster child for the non-placebound economy.”

From close to the bottom of Oregon’s 36 counties in terms of household income in the early years of the 1990s, Deschutes County has climbed to among the highest in the state, Hollern noted. Still, storm clouds have gathered again around its housing market.

Speculative bubble

From 2004 through 2006, the smooth, upward-trending curve that maps Bend’s historical housing prices takes a sudden jump upward.

Fueled by cheap mortgage rates and intense investor interest, the average price of Bend’s housing shot up 24 percent per year in that span, giving the city a prominent spot on national rankings of overpriced housing markets.

Whether that’s fair or not is debatable. Most relative price rankings — including a quarterly report generated by Global Insight and National City Mortgage that pegged Bend at or near the top of its list for more than a year — attempt to measure the degree of an area’s “overpriced” condition by comparing home prices to prevailing local wages, leaving investment income, self-employed income and other common sources of Bend household wealth out of the equation.

Still, there’s no doubt that home prices have broken beyond the city’s established trend line, said Duy, who tracks a collection of local economic data to produce a quarterly Central Oregon economic index for The Bulletin. The question now is, where does it go from here?

Some factors, like the city’s continuing attractiveness to wealthy newcomers, are likely to continue to drive growth for years to come, Duy said. But other shorter-term factors, like the oversupply of houses for sale, a growing credit crunch in the mortgage lending industry and the deflation of investor interest in the housing market here and nationwide, all foreshadow some tough months, or years, to come for local residential real estate.

Sellers in any real estate market are psychologically resistant to lowering home prices, Duy said, but the market’s current angst could work itself out through one of a couple of scenarios: prices could come down, which could drain the area’s excess inventory quickly if they come down far enough, or prices will remain stuck somewhere around their current levels or even rise while the region relies on population growth to work off the excess — a process that could take much longer.

Bend money manager Bill Valentine, who warned his radio talk show listeners about inflation in the local housing market as early as 2005, likened the choice to the difference between ripping a Band-Aid off quickly to take the pain all at once, or peeling it off hair by painful hair.

“It has to return to the trend line, and it’s going to happen in one of two ways: fast and ugly or slow and painful,” Valentine said Thursday. “We are gonna end up in the same place, regardless, with a healthy real estate market. We’re probably gonna end up with a thinned-out real estate force, but we still have a great place to live, and people will still be able to make a decent living building houses here and selling real estate.”

A couple of wildcards — recession or rapidly rising interest rates — could make recovery longer and tougher, Valentine said, although an out-and-out recession seems unlikely at this point, and 10-year Treasury bond rates, which tend to foreshadow mortgage rates, have actually dipped in recent weeks.

Hollern, who has led Brooks Resources, the region’s largest development company, since its founding, said he also sees a bright future for real estate here over the next 20 years, although he also sees pain coming in the short term.

“We are overbuilt at the moment,” Hollern said. “But as long as our growth rate — in terms of real people, real jobs and real kids — continues, we’ll work through this in a couple of years and things will pick up again.”

That couple of years, though, could feel like a long stretch for some.

Justin Peterson, a 30-year-old Bend mortgage broker, grew up in Redmond. Up until this year, he hadn’t experienced a local real estate downturn in his lifetime. Now, he’s living through one.

Peterson and his wife bought three investment houses during the boom years of 2005 and 2006. He’s trying to sell one now to generate cash, so far without much luck. Two are rented.

The experience so far hasn’t soured him on real estate investing, Peterson said, but lessons have been learned. Going forward, he said he’ll be more conservative, maybe buying a property every few years rather than buying them in a lump, reducing the chances of buying at the peak of a cycle. He’ll stay more liquid, too — cash is king in a downturn, and it can take a lot of cash to hang onto houses to wait one out.

But for now, like a lot of other recent investors, he’s a seller.

“We definitely haven’t lost faith in real estate, for sure,” Peterson said Thursday. “We’ll just get past this correction and make our adjustments and move on.”


Wow. Now that's impressive.

0% accuracy for the 24th month in a row. Did Costa used to be an economist at NAR? Because The Bulletin has an uncanny knack to get it WRONG on their rosy RE predictions EVERY SINGLE TIME.

Yet they keep going back to the pig trough... I mean, the RE experts like Adkisson & Pam "It can only go up cuz it can't go down" Lester, Norma DuBois, and Sandy Garner...

When a species gets it wrong so often, it usually goes EXTINCT. Oh right... newspapers ARE going extinct. Thank The Lord, NOTHING would be better than the pathetic excuse for a bought-and-paid-for-whore newspaper that we have.

IHateToBurstYourBubble said...

Tell me that reading the first few paragraphs doesn't tell you volumes about the lying ass whores who run this towns pathetic newspaper! It's so ridiculous, it's actually comical.

Some fake-ass story about some fake-tittied Cali-bangers giving each other a finger banging on the Deschutes. What a load of shit.

But other shorter-term factors, like the oversupply of houses for sale, a growing credit crunch in the mortgage lending industry and the deflation of investor interest...

Yeah... that CREDIT CRUNCH was reeeeal short-term. I haven't heard shit about that motherfucker since last August when they printed this piece. You're a regular Svengali. Are you taking taking money to manage given your prescient predictions on RE & the economy? Cuz you should. Just tell some chimp what you think is a great fuckin' idea, and have the fuckin' chimp do the EXACT OPPOSITE.

Costa, you are pathetic piece of shit. Are you French? Cuz you fuckin sell out at the drop of a hat, you moldy cum-sponge motherfucker.

Anonymous said...

Hollern, who has led Brooks Resources, the region’s largest development company, since its founding, said he also sees a bright future for real estate here over the next 20 years, although he also sees pain coming in the short term.

“We are overbuilt at the moment,” Hollern said. “But as long as our growth rate — in terms of real people, real jobs and real kids — continues, we’ll work through this in a couple of years and things will pick up again.

If you look at the Deschutes County DIAL Page- property ownership information- you will see the bulletin was given the land for their new building, from brooks resource, for free. The estimated value was $2,000,000- I think that may explain a thing or two

Anonymous said...

... bulletin was given the land for their new building, from brooks resource, for free.
***

Now there's some good-ass detective work. Case closed - Bull bought and paid for. (Is D Foster anonymously leaking some news?)

Anonymous said...

DIAL 1777 Chandler, and 'note' the big sales price of zero-dollars. Note that 1998 was when the entire HOLLERN smart-growth program began. Is there a relationship between the BULL&HOLLERN to cozy to be true? Why was Bruce-Pussy the first to deny? Have you all noticed since BP showed up, he has NEVER once offended the master?

-------------------------------------------------------------------------------

Vol Page 1999-50482 Sales Date 10/18/99 Adjusted Sales Price $0

Sales Code 09 TRADE OR EXCHANGE OF PROPERTIES

Grantor: Grantee:

BROOKS RESOURCES CORP WESTERN COMMUNICATIONS INC
296 SW COLUMBIA STE A 1526 NW HILL ST
BEND OR 97702 BEND OR 97701

***

Anonymous said...

SALES: --- 1 ---
Date 10-18-99
Sale $ 0
Cndtn 09
Class 999
Inst # 1999-50482

CENTURY WASHINGTON CENTER PHASE I II III & IV Lot: 1

RC992270 12/03/99 |
| Posted on 12/03/99 by GREGBA
|
| Source: CENTURY WASHINGTON CENTER PHASE I,
| II, III, IV; JV8905-08907

1999-50482 10/18/99 | Deed
| Posted on 01/11/00 by EILEENW
|
| Clerk Recording Grantor:
| BROOKS RESOURCES CORPORATION
|
| Clerk Recording Grantee:
| WESTERN COMMUNICATIONS INC

RC20021083 06/21/02 |
| Posted on 06/21/02 by PATF
|
| ** Text:
| Code Change From 1107 To 1001
|
| Source: JV 12427 & JV 12641

Anonymous said...

Where is CACB going? Here is where?

Todays WSJ talks about a bank called 'Fremont' in cali.

Note this bank's stock has plummeted just like CACB, and that bank-regulators are coming down hard now on all small regional banks. The problem? The BANKS are refusing correct the new values of RE on their books, thus the regulators are demanding the banks shore up cash, and there is NO cash, thus in this case the bank will be seized.

Bank runs galore, and watch CACB like a hawk, because it makes CACB look conservative.

It's going to get REAL FUCKING ugly around here in the next few months.

Anonymous said...

An organized Fraud Bend, Oregon. Circa 1998 to 2008.

(1) PR & Marketing Crap-Shacks & condos at public expense.

(2) Easy-Money.

(3) Subsidized SDC's

The BULL & SORE were cheer leaders since the fraud began in 1998. Now ten years later the fraud collapses and those of us still in Bend, get to watch the implosion.

Anonymous said...

CACB sister bank 'fremont' getting a cali enema.

Fremont General given 60 days to raise capital or sell bank

By E. Scott Reckard, Los Angeles Times Staff Writer
March 29, 2008
Regulators who forced Fremont General Corp. out of the sub-prime lending business last year have given the financial company until May 26 to find a buyer for its bank, Fremont Investment & Loan, or raise more capital, Fremont said Friday.

Seeking to preserve the bank's dwindling capital, the Federal Deposit Insurance Corp. barred Fremont Investment from increasing compensation for officers and directors. The FDIC's order, dated Wednesday, prevents the bank from transferring funds to the holding company or affiliates.

Fremont also was ordered to cut its interest rates on deposits to levels typical of California banks and thrifts.

One of the 10 largest lenders to high-risk borrowers during the housing boom earlier this decade, Fremont sold a troubled commercial lending unit last year and shut down its sub-prime mortgage business.

It has been looking for an investor to help revive it as a more conventional lender. Gerald J. Ford, a billionaire bank turnaround specialist, agreed in May to invest $80 million and run the company, but backed away in November.

Fremont said Feb. 28 that it had hired investment banks Credit Suisse Securities and Sandler O'Neill & Partners to raise capital or find a buyer. It's uncertain whether such efforts will yield a solution that satisfies the regulators, Fremont said Friday. Its shares fell 9 cents to 52 cents on the day.

Last week, Fremont said it agreed to sell the rights to service $1.9 billion in mortgages to a subsidiary of Carrington Capital Management for an undisclosed sum.

The FDIC notified Fremont Investment & Loan in May that it was undercapitalized. The bank submitted a capital restoration plan in August, but the FDIC deemed it insufficient. The bank submitted a revised plan in November but this month said that plan was obsolete, the FDIC said in its order this week.

The FDIC provides insurance up to $100,000 per depositor plus $250,000 per retirement account. The agency's toll-free information line is (877) ASK-FDIC.

Anonymous said...

Who OWNS Bend? Hollern

Who OWNS the BULL? Hollern

Who OWNS city-hall? Hollern

Who is the biggest employers? Hollern

Who is everyone afraid to mention? Hollern

Bruce-Pussy is a Gimp, but whose Gime is he?? Hollern's.


Who is the MOST powerful MORMON in Bend?? Hollern

Anonymous said...

The FDIC provides insurance up to $100,000 per depositor plus $250,000 per retirement account. The agency's toll-free information line is (877) ASK-FDIC.

*

You'll hear a lot about this, but let me tell you, a friend just got back 10% of of his money from the Benjamin Franklin ( a bank that no longer exists here ) collapse in Oregon 20 years ago. He got the money last week. The Small print in the FDIC says they have 99 years to return your money.

Anonymous said...

BEM frequently says "We're redundant", the below was cut&pasted from BENDBB, note that is is written by an LA-REALTOR, I know our MARGE talks this way, but I can see soon, our realtors in Bend talking this way. Soon we'll be just like everyone else talking obvious fucking sheeeet. I still say, and BEM did it last week, we have to focus on FIXING BEND, but we already know most of you ain't staying, so fucking leave. Homer say's "drop the price", I say "Stay and fight, or fucking leave".

****
"Over the past several months, tens of thousands of people in the mortgage, title and escrow industries have lost their jobs.

Homes have lost value so fast that the companies and organizations that track home values have never witnessed anything like it.

Last week, a major investment bank failed. And the bank's failure was mildly papered over by rescue efforts on behalf of the Fed which required the Fed to use powers it hadn't exercised since 1933.

And we haven't even touched upon foreclosures that are uprooting thousands of families while pressuring housing prices down even further.

These are the facts, folks. What we're seeing is NOT business as usual. It is the largest financial hiccup in modern history.

And our industry's response? The NAR's "now is a great time to buy" campaign, which just comes off as totally ridiculous to anyone who can think.

How should the media be covering this horrible convergence of events? Are we, as a group, so ethically blind that we would want the media to soften their coverage out of respect for our advertising dollars? That's not the way it works.

I can't believe that at this stage of the game it needs to be said, but the faster our industry acknowledges the pain people are going through, the faster we will have taken the very first step toward earning some credibility. The truth is, that it's pefectly understandable to find buyers on the fence. It's perfectly logical to find people who want to wait until the smoke clears. Why fight the reality of the market? And why attack the news media for reporting it? As realtors, it makes us look as small-minded and self-interested as many people already think we are."

LavaBear said...

>>What online brokers do you use?

I use Schwab for work 401k crap. Personally I've started using a Wells Fargo Trade account because they offer 100 free trades a year if it's tied you your savings/checking accounts. Their research and usability pretty much sucks but free is the right price for me.

I find myself using finance.google.com more and finance.yahoo.com less and less. Not sure why...just is.

Anonymous said...

I'm not impressed with this, as I want to do pure CHINESE YUAN ( having lived there ), this outfit does have a nice selection of offshore choices.

*

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Anonymous said...

This an excellent overview of where we are today.

*

DAS PHONY KAPITAL
by Bill Bonner

A good flim flam needs a good mountebank and a good mark. Two weeks ago, we pointed out that Wall Street was full of bright cads and dull sharks. Then, last week, we showed that conceited humbuggers run the central banks. Today, it is the politicians we come, not to bury, but to praise. They did their work well; they set up the marks.

The two great political figures of the last thirty years were Mrs. Thatcher and Mr. Reagan. These titans from the two sides of the Atlantic led the way to a new idea of how the world should work. Thenceforth, capitalism was king. But it was a new kind of capitalism they had crowned, one with a strange, unnatural face. It was not the old free enterprise, king of the jungle, red in tooth and claw. This new capitalism was more like the owner of a pet shop, where all the animals were cute and cuddly – and didn’t eat the customers.

Mrs. Thatcher and Mr. Reagan and their followers had seen how centrally planned economies worked; the Chinese and Russians showed what happened when bureaucrats ran an economy. The free market seemed like the best alternative. But the trouble was, these new ‘conservatives’ had no real respect for it. Instead of quaking before it in genuine fear and awe, like Moses before the burning bush, they began to believe that they could be its master. Then, they developed a whole host of fantasies about what this tamed beast could do for them.

Not only could the free market solve the problem of poverty, it could solve almost every other problem too. It was a social panacea. Just look at the wealthy countries, they said. Switzerland is clean and prosperous. By contrast, communist China is a dump. People are healthier and happier in capitalist countries, where they have better automobiles and lower birthrates. Science, supported by the free market, would find cures to diseases too...and even help people live longer. The logic was simple enough: free enterprise made people rich. And with their money, they could do wonders – cleaning up the factories, building hospitals and clinics, organizing public day care and Pilates classes...even getting rid of smoking!

Nothing was too absurd or contradictory for the True Believers. Gradually, they began to confuse the fruit with the tree...and then mistake the tree for a lamppost. Financial incentives were thought to be the key to everything. If an executive failed to maximize shareholder value, it was because his bonus was not large enough. If students showed poor test results, it was because teachers were paid by the job, not by the outcome. And if terrorists attacked a building in New York, it was because they lacked financial opportunities in Cairo. (Later, people were dumbfounded when doctors who had worked for the National Health Service tried to blow up cars in Glasgow and London.)

The ideas were slippery but they greased the skids. Soon, the marks were ready to go along with anything. Shareholders consented to hundreds of millions in bonuses and stock options for key executives. Investors signed up for hedge funds, willingly giving managers “2% and 20%” for putting quarters in the slot machine for them. Taxpayers allowed huge tax cuts – widely believed to be aiding the wealthy – because they looked forward to the day when they would be wealthy too. And almost everyone, everywhere eagerly went on a spending spree, in the belief that this new, kindler, gentler capitalism would add wealth faster than they could get rid of it. And if they overspent, hyper-capitalism would soon catch up.

In public finance, this delusion led to Dick Cheney’s famous quip: “Deficits don’t matter.” This, in turn, led to the greatest explosion of government red ink the planet had ever seen. During the first seven years of the George W. Bush administration, about $20 trillion was added to the U.S. ‘financing gap’ – more than under all America’s other presidents put together.

What was good for the top was good for the bottom. Private households, too, ran deficits of their own. Savings rates fell close to zero while U.S. household debt rose from less than $2 trillion in the first year of the Reagan administration to nearly $13 trillion in the 6th year of the present administration.

In Britain the story is about the same. Before the Thatcher revolution, household debt was about 65% of household income. By 1988, it had reached 100%. And by 2007, it was more than 150%.

When a consumer spends a dollar he earned, it is taken in as income to the businesses that receive it. But it offset by a cost too – a wage expense. But if the consumer spends a borrowed dollar, it comes to business like manna from heaven, with no balancing wage cost. Higher profits, greater leverage, more debt – it was all catnip to Wall Street. Financial assets were only 4.5 times GDP in 1980. Now they are 10 times as large. But that is nothing compared to the sugary confections of the credit industry. Credit default swaps, alone, are said to be worth $45 trillion.

The earnings of the financial sector equaled only 10% of total corporate earnings in 1980. By 2007, they made up 40% of the total, even though they still only employed 5% of the workforce.

But, “that game is now up,” says the Economist . The “new” capitalism was a fraud. It didn’t make people rich. It only allowed them to get rich – or poor – depending on what they did with it. Americans used their economic freedom to ruin themselves. But that’s just the way capitalism really works. You don’t get what you expect...or what you want; you get what you deserve.

Anonymous said...

Thanks lava, just curious what the other do,

I use ameritrade for online, don't really trust etrade, just play around. I have an account with WAMU like you mentioned from wells-fargo, which I might start using more.

I just dabble in ETF's most short financial, and long ag commodity, so I did agree with Mr. Rogers, having read his books, I just didn't like Homer putting TV on the the blog, but I guess given that Homer is god, ... Like Timmy says soon we'll be getting HDTV from homer. I think I have upgraded 90% of my domiciles to cable-internet, so I guess I'm ready.

Most of my cash is in long-term offshore, I have always in my gut felt that the USA was running the dollar into the toilet since the 1970's. Too much real estate, but I own real estate all over the western US, and its all paid for.

I got burnt by brokers back in the 60's, so I have never really 'played' the stock market. I'm not exposed enough to wall-street to really know if its still a rigged/fucked racket. Like the WSJ said friday, the past TEN YEARS nobody made money going long on the S&P 500. I think thats whats good about 'das kapital cronyism' wall-street keeps the myth that the stock-market only goes up, just like REAL-ESTATE, trouble is stock's have been net-zero for ten years, and real-estate is going to be a net-zero wash in five years.

All I can really say is some future time I'll be sitting in a bar, and some young kid will say. "what was it like when you could buy 1,000 acres on the coast for $100/acre, on contract for $100 down?" Like most things the days are over, even in the 1950's Oregon was back-water, by the 1980's 'they' had arrived, now its all going to be foregone conclusion, that you don't 'make' money on RE or S&P.

Anonymous said...

Blogger bruce said...

Re: If you look at the Deschutes County DIAL Page- property ownership information- you will see the bulletin was given the land for their new building, from brooks resource, for free.


Tell me how to find that. - bruce


***

Now this is what its all about right here, our Bruce-Pussy, Mr. Write Exec-Session complaint, Mr Fucking expert on city-hall, Mr. fucking cut&paste of daily-kos until you vomit. You know he don't read his shit, you know he never comments from the heart.

"TELL ME HOW TO FIND IT", Isn't OUR PUSSY the one dumping on US, everyday NOD's, Liens, ... Hell Bruce-Pussy wrote the DIAL server, and invented the internet, Al Gore was ramming his corn-hole, before Al saw his first computer.

"Tell me how do find it",

Let's see the code words here 'DIAL', and BULL, you google BULL's address, and pop that into DIAL, now the hard part, Bruce-Pussy is a fucking MORON, so he don't know how to read the fucking county records.

Why bother with this shit?? Because bruce-pussy as always here was doing his typical indirect denial to cover HOLLERN ass. Rather than questioning validity of assertion, he suggests that if he couldn't find the data it didn't exist, ergo the assertion is a fraud.

Why bother with dropping a sledge-hammer on Bruce-Pussy every time he does what he does??

If the "ENEMY", is going to put someone in OUR playground for PAY, just like the Al-Queda or anyone else we're going to torture their mother-fucker. In the IRA when you catch a snitch on the enemy payroll you knee-cap them, we'll here you just drop the literary hammer. It's about as violent as we can get. :)

foz said...

***Serious question for lava, tim, and the 'foz'.

For personal stuff I use Charles Schwab. I used to work for them so was forced to use them but now I use them because they are pretty good and the commission schedule for active traders is pretty good. I'm paying 6.95 per trade (plus SEC fee) on unlimited share size. When I did work for them one of my projects was to try out every broker out there (for active traders). Interactive Brokers was the only one that came close.

Bewert said...

No, I didn't say I couldn't find it, I said show us it, since you said you had it. Or show us where to find it. You were the one hollering about it, just like you are always fucking yelling about Kuratek getting paid off last October. Prove shit. Otherwise shut the fuck up.

I don't use DIAL much, and I have absolutely fucking nothing to do with Hollern. I would know him if he was standing right next to me.

I've wonder for a long time how the hell a little paper like the BULL can afford such a big fancy building. Even during the boom of RE advertising. This explains a lot. Talk about a conflict of interest.

Bewert said...

Yeah, I'm fucking sending ethics complaints in with my own fucking name and signature bitching about our fucking HOLLERN-bought and paid for City Council, as you would say, and you think I fucking work for him.

You are fucking delusional. Have a few more beers. It's early.

St Paddy said...

I just noticed a builder in Redmond via Portland deeded ten homes back to Washington Federal Bank on tues in lieu of foreclosure. I didn't open every one but from the ones I did open it looks like it was only to the tune of a couple million or so and half. But it is "the best time to do something in twenty years"

Anonymous said...

I'm fucking sending ethics complaints in with my own fucking name and signature bitching about our fucking HOLLERN-bought and paid for City Council, as you would say, and you think I fucking work for him.

*

Everyone on this blog knows, that we'll all be long dead by the time you send that 'executive session' complaint to the governors office. Given that why do you keep bringing it up, as if it were going to happen anytime soon?

Until you fucking send the complaint to the governor shut the fuck up, we're tired of hearing you tell us what your going to do. Be a man and do something, and then if you wish take credit. Where in the FUCK did you learn this technique of promising shit, and never delivering? Its like a fucking kinder-garten class around here. Everyone knows why your 'bruce-pussy' cuz you a man-twat with a childs mind.

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