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."

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.