Is Mass Fireclosure In Bend's Future? Hey, I'm just arson a question...

I guess I should start out with less than obvious money-grab, that we all pretty much knew would happen, from Cessna:

In Kansas, Cessna got quick action from government

By Peter Sachs / The Bulletin

Published: April 12. 2008 4:00AM PST

Two weeks ago, aircraft maker Cessna told the state of Kansas that it needed at least $25 million on top of local incentives if it was going to build a factory for its new long-range business jet.

Four days later, the Kansas Legislature passed a package worth up to $33 million, and Cessna agreed to build the factory in Wichita.

The multimillion-dollar aircraft company that recently landed here when it bought Columbia Aircraft Manufacturing isn’t afraid to ask governments for loans or tax breaks when it expands.

But other than saying it wants a tower at the Bend airport by the end of 2009, Cessna has made no requests of Central Oregon governments.

Bend city officials say by all indications, the company is in Bend to stay.

“As far as we know they are investing in Bend; they are investing in that plant; they are hiring workers; they are training workers,” said John Russell, the city’s economic development director.

But the city and the county have few economic incentives to offer if Cessna were to come asking in the future.

“I can’t speak for the board on that issue,” County Administrator Dave Kanner said. “I’m hard-pressed to think of a source of money that we could tap into for that purpose.”

Doug Oliver, a Cessna spokesman, reiterated the company’s commitment to Bend last week, but otherwise declined to comment on the company’s plans. Several other Cessna officials did not return calls seeking comment.

Mark Withrow, the new manager of Cessna’s Bend facilities, told the Bend City Council earlier this month that his company has huge expansion plans, but he wouldn’t go into specifics beyond saying he intends to add 100 more jobs to the plant, which currently has 430 employees.

Withrow acknowledged to the City Council that Cessna needs to bring down the cost of the Cessna 400 and increase its production numbers to make it more competitive.

“Our goal in Bend is much bigger than where we’re at in Bend,” he told the council.

Taking flight in Kansas

Cessna’s roots in Wichita, Kan., date to the company’s formation in 1927. About 8,000 of its 9,500 employees are there, according to the company’s Web site.

The company is Wichita’s largest employer and coupled with several other aviation companies, a key part of the state economy, said Kim Young, a project manager at the Greater Wichita Economic Development Coalition.

The city, county and state provide a number of incentives for Cessna and other companies. For example, businesses at Wichita’s airport don’t ever have to pay property taxes on their land or buildings, Young said.

Businesses can get income tax credits for each new job they add and certain businesses can write off up to 10 percent of the cost of equipment they buy.

The city and county also set aside money from their general funds that they can give to companies as forgivable loans. For example, if companies meet targets for new jobs, then they don’t have to repay the loans, Young said. And the state provides money to help train new employees in a range of industries.

“We’re constantly looking at how we can sharpen the tools in our toolbox,” Young said.

Incentives like those can add up to millions of dollars in savings for companies to build and expand in Kansas, Young said.

“Those are just some competitive advantages we have for business, and we certainly make up for it in other areas” like job creation, Young said.

Cessna’s ability to get the state Legislature to bend over backward so quickly earlier this month was “unheard of” and “unprecedented,” Young said.

“That’s exactly the type of thing that we wanted to do,” Young said. “We have to move at the speed of business, which is very fast.”

If not for the Legislature’s action, she said, there was a risk that Cessna would build the plant for the Citation Columbus jet in another state. The plant will bring more than 1,000 new jobs to Wichita.

Central Oregon incentives

Roger Lee, the executive director of Economic Development for Central Oregon, acknowledged that the region has a long way to go if it wants to compare to Kansas’ incentives.

“When we first met with Cessna they made very clear what was available to them in Wichita and other parts of Kansas,” Lee said.

Since Bend Airport is in Deschutes County, the city can’t provide many incentives beyond lower lease rates on land. And the county hasn’t shown much interest in creating aggressive economic incentives, Lee said.

“From our perspective, in many cases the city and the county have not been significant players as far as offering incentive packages ~ for this industry or any other industry for that matter,” he said.

The state currently provides some tax breaks for new businesses, but nothing that compares to Kansas, Lee said.

A special enterprise zone the city and county applied for at the start of the month could provide property tax breaks for businesses at the airport and in La Pine if the state approves it. That would mean businesses wouldn’t have to pay property taxes on new buildings in those areas for five years, Lee said.

The city’s special projects manager, Ron Garzini, said it’s not just about having financial incentives for companies.

“It’s not just a financial issue,” he said. “It’s also, if you’re willing to stretch a bit to show a commitment to them, that means you’re going to stay with them for a long time.”

And ultimately it’s those small steps at building relationships between business and government that matter, Young said.

“Not everybody can right away put dollars on the table,” she said. “But if you’re talking about it and working together, I think you’re certainly moving in the right direction.”

Peter Sachs can be reached at 617-7837 or psachs@bendbulletin.com.

Bye bye, Cessna. First HoltzTek, now this.

Lemme say this with some pretty high certainty: Cessna will be leaving the area within 1 year. That's what this article is; an ultimatum.

The thing you should ask about ALMOST ANY STORY in the Bulletin, is WHY is it there at all, WHO would benefit, and what the hell do they want.

This story came straight from Cessna corporate, and their wants are simple: They want to be subsidized in large monetary terms, or they're leaving Central Oregon & they're taking their jobs with them. Look at the tone of the piece: Strong-arming local governments for millions is Standard Operating Procedure for this company. This article is tenderizing us for the inevitable. It's coming, and unless we acquiesce, they will leave.

I would put to you that they knew this on Day 1. I think they know that any rational government in the circumstances our current local government is in, will be unable to pay this blackmail. Heads or tails, Cessna wins & Bend loses.

Pretty standard shakedown. The question is: Will we shoot our wad on them, or Juniper Ridge... or something else? No matter, whatever it is, the tentacles reaching out for the slim pickins' remaining in this one-horse shithole assure our almost certain destruction.

If we payoff Cessna, we go bust & lose JR. If we don't we lose the jobs, we build some half-assed "facade" out at JR, we go bust & JR ends up a decent wad of blown up lava rock.

Of course, we barely have enough to pay for staying afloat, not withstanding all these bullshit dreams, like JR. This Cessna money-grab is just the vultures starting to pick the Bend carcass to pieces. And sure as shit stinks, our City Council will almost certainly cave to ridiculous demands.

Cessna, a Word Of Advice: Pull a midnight holdup, just like Les Schwab. Roll into a City Council meeting and announce a 1 hour deadline on a series of ludicrous demands, and simply threaten to leave town otherwise. You'll get it. But hurry; pretty soon the pickin's will be to thin, and you won't get squat.

An interesting short, little piece on Marketwatch about The Great Unleveraging:

REAL ESTATE

No-down-payment mortgages gone for good?

Most mortgage insurance companies won't cover 100% loans anymore

By Amy Hoak, MarketWatch

Last update: 7:31 p.m. EDT April 10, 2008

CHICAGO (MarketWatch) -- No-down-payment mortgages have been scarce lately. But in the past several weeks they've become virtually non-existent. And it doesn't appear they will return any time soon.

While Fannie Mae and Freddie Mac still have products that allow borrowers to finance 100% of their home purchase (albeit at a higher cost), recently the major private mortgage insurance companies have backed off from insuring these loans, said Bruce Brown, a certified mortgage planning specialist with First Security Mortgage Co., in Kansas City, Mo.

Mortgage Guaranty Insurance Corp., for example, changed its guidelines last week to exclude coverage of 100% mortgages. At a minimum, borrowers need a 3% down payment and a credit score of at least 680 to be eligible for coverage. In selected markets where home prices are declining, a 5% down payment is the minimum required.

Genworth Financial is another mortgage insurance firm that recently stopped covering 100% loans. In some cases, it's willing to cover loans with 3% down payments; in all markets it will cover a loan that involves putting 5% down, said Mark Goldhaber, senior vice president of industry affairs for Genworth Financial.

Lenders generally require private mortgage insurance for loans that cover more than 80% of the purchase price.

"It's obvious why they're making these changes," Brown said of the insurance companies. "They have to eliminate the losses they're taking." Mortgage insurance companies have been hit hard by the increasing number of defaults and foreclosures, he pointed out.

At MGIC, the changes to underwriting of low loan-to-value loans -- as well as increases to the pricing on some products -- were made due to the recent performance of loans with those characteristics, said Michael Zimmerman, senior vice president of investor relations. But the changes, he said, also reflect a return to more historically normal underwriting standards.

"The more equity that a borrower has -- or, if you will, skin in the game -- in any investment, the more likely they are to have a higher degree of responsibility toward it," he said.

Goldhaber said that those in the mortgage industry also have a responsibility to put homeowners into the proper mortgage product. These days, it's irresponsible to give people a loan for 100%, he added.

"In soft markets like we have today, with declining home-price appreciation, to put someone in a zero down is really inappropriate," he said. "It's the kind of product choice that gets consumers in trouble."

Many people have been finding themselves upside down on their mortgages when the price of the home drops and they end up owing more than the home is worth.

"Putting a person in a zero-down mortgage means in many cases they will lose value on home before they even have the curtains hung," Goldhaber said.

Other ways to 100%

That said, while the conventional no-down-payment products may have disappeared, there are still ways to buy a home without a down payment, said A.W. Pickel, CEO of LeaderOne Financial in Overland Park, Kan., and former president of the National Association of Mortgage Brokers.

"You have to broaden your definition of no-down payment," he said, adding that loan options are available, if not in the form they were in before.

A gift from a family member or a community grant can take the place of a down payment, for example, he said. And down-payment assistance programs are available to help those seeking loans backed by the Federal Housing Administration, he added.

They're not offered now, but shared-appreciation programs might also be available, where investors share in the appreciation of a home in exchange for assistance at the purchase, Pickel said. He expects companies to get more creative and come up with other solutions too.

"You will see more unique products coming out," he said, as companies search for ways to help down-payment challenged buyers get into a new home.

But as of now, there are fewer options than there were before for would-be buyers who don't have ample cash reserves. And Brown sees that as an overreaction.

He believes consumers should have the option of financing their entire purchase -- even if it comes with extra fees or higher rates. Someone who doesn't have a lot of cash, but is a good credit risk, for example, should have that option, he said.

"In a lot of ways, we're creating an environment for investors," he said, as the number of renters is sure to grow. "Think of how many people would be in the market over the next several years if they could be in a house for no money down. Those people have no option but to remain renters."

A possible return?

In fact, the existence of no- and low-down-payment loans were one of the biggest reasons the homeownership rate rose during the housing boom, said Bob Walters, chief economist of Quicken Loans. Some sought these loans even if they could put money down, Pickel said.

"Everyone bought into the idea that if you can borrow money, it's better than using your own," Pickel said. "I don't think that's completely gone," he said, but added that now people have woken up to a sobering reality that home prices don't always go up and that putting money down might be in their best interest as a homeowner.

No one knows if, when and how these no-down payment loans will return en masse. But many people in the industry think they'll be gone for a good while.

"I don't want to say never, but my gut tells me it will be a long time before we see mortgage insurers pop back into the 100% market," Brown said.

If they do return, borrowers will likely need spectacular credit and the local housing market they're buying in will probably need to be a "prime market," that is, they'd need to have a small percentage of second homes and investor homes, said Anthony B. Sanders, professor of finance and real estate at Arizona State University's W. P. Carey School of Business.

"Markets such as Phoenix, Las Vegas and San Diego have higher percentage of second home/investor loans and viewed as being 'speculative' markets subject to dramatic downturns," he said in an email interview. Lenders still may be hesitant to make no-down-payment loans even after housing prices hit bottom, he said.

"But bear in mind that credit events in the mortgage market move in cycles and we swear to never repeat the same mistakes ... until we collectively forget about the last cycle," he added.

This is why recurring Bubbles usually have a total minimum half-life of around 30 years: People burned in the last one, usually will not jump into a similar one for their adult lifetime.

Note the mention of Genworth Financial, the product of the monster spinoff from GE in 2004. And although they ceased to own any Genworth shares in March 2006, and hence should have minimal financial exposure directly from this unit, GE nonetheless took a severe beating in the market after announcing a surprise drop in earnings that shocked Wall St.

Economic aftershocks threaten recent optimism

GE's warning pokes hole in recent sentiment that credit crunch has passed

By Laura Mandaro, MarketWatch

Last update: 6:13 p.m. EDT April 11, 2008

SAN FRANCISCO (MarketWatch) -- Wall Street, recently basking in optimism that the credit crisis may have turned a corner, got rained on Friday after a surprise drop in earnings from bellwether General Electric Co. renewed fears of persistent economic aftershocks.

General Electric, whose activities reach a broad spectrum of business and consumer activity from TV shows and commercial loans to industrial turbines, said that profit fell 6%. It placed a big part of the blame on the near-collapse of investment bank Bear Stearns Cos.

The profit disappointment came as a shock to many analysts and strategists who had been expecting that diversified, international companies as well as the broader U.S. economy were somewhat buffered from the big loan write-downs and trading losses that have rocked brokerages and banks this year. U.S. stock markets sold off sharply, cutting into gains made since mid-March.

"Apparently the suggestion earlier this week that the stock market has turned a corner has proven to be premature," Sherry Cooper, global economic strategist for BMO Financial Group, wrote in a note Friday.

The rebound had been fueled by renewed sentiment on Wall Street that the worst of the credit crisis -- including the threat of spiraling financial bankruptcies -- was past. The Federal Reserve's intervention with Bear Stearns contributed to that improved outlook. Plus, financial institutions in the thick of the credit crunch have been forecasting an end, or at least quantifying the magnitude, of the financial losses clogging up credit markets.

For the broader economy, several private-sector economists are looking for a second-half rebound, a view in line with that of Federal Reserve Chairman Ben Bernanke. "A lot of people are taking the Fed action with Bear Stearns as an inflection point that, with financial problems, we're getting our hands around those. That could be true," said Joseph Quinlan, chief market strategist at Bank of America.

Reflecting some of this good cheer, U.S. stocks had bounced off the mid-March lows set about the time the Fed and J.P. Morgan Chase & Co.

JPMorgan Chase & Co engineered an unprecedented bail-out of Bear Stearns. Stocks in financial companies, which have played a lead role in the credit crisis, have gained 13% including Friday's sell-off. The beaten-down U.S. dollar, for its part, has stabilized against some of its rivals, though it continues to notch new lows against the euro.

But a new worry has gained ground. Even as credit markets loosen up, the aftereffects of wide spreads and tight lending standards -- the hallmarks of a credit crunch -- could further punish an already floundering U.S. economy.

"The fear now in the markets is that we won't only have recession, but we'll have deep and prolonged recession. ... It's the knock-on effect of the credit squeeze," Quinlan added.

General Electric, the largest U.S. corporate borrower, showed that convulsions in the financial world can derail even the most diversified of firms. The conglomerate said that "extraordinary disruption in the capital markets in March" hurt its financial division's ability to sell assets and caused it to take higher losses on the current market value of its assets.

End in sight?

Finance ministers and central bankers from nearly 200 countries will weigh in with their own takes on the length and severity of the global financial system's recent troubles, and the related setback to the world economy, when they meet for the G7 meetings in Washington, D.C. this weekend.

Plenty on Wall Street, though, say further financial stresses like could surprise markets, sending stocks reeling as they did Friday and credit spreads further apart.

"People underestimate the impact troubles in financial markets have on other sorts of companies," said Steven Bleiberg, chief investment officer for Legg Mason's global asset-allocation division, which manages $6 billion. "We still have to deal with all the negative fallout from the collapse of the real-estate bubble."

Renewed optimism about the state of the financial system had been helping the market move higher, according to Bleiberg. But buying stocks based on an expected end to the credit crisis may be little more than wishful thinking. "There's more bad debt probably lying in wait. To say we're almost done is premature," he said.

Nonetheless, the optimists have a growing pool of forecasts and statements to draw on.

Goldman Sachs Group Chief Executive Lloyd Blankfein on Thursday became the latest investment banker to report a glimpse of light at the end of the tunnel, telling shareholders he felt like the financial system was closer to an end to the credit crisis than the beginning, according to media reports.

Morgan Stanley chief John Mack puts the U.S. economy in at least the ninth inning of the subprime crisis, and at least halfway through problems from commercial mortgages, reports say.

Recent outlooks on the broader economy also are projecting relief. Economists at Lehman Brothers, UBS and Nomura Securities all see a rebound in the second half of this year after a mild recession, or a least a contraction, in the first. Bernanke and some other Fed policy-makers are predicting a recovery in the second half, helped by the roughly $110 billion in tax rebates that the U.S. government will send households starting in May.

"We expect economic activity to strengthen in the second half of the year," Bernanke told lawmakers last week.

Meanwhile, estimates for the size of the pain facing the financial system have been trickling out of brokerage houses and research groups. Global financial institutions already have written off nearly $300 billion in bad loans and investments; they could have as much as $900 billion more to go.

The International Monetary Fund projected earlier this week that the potential losses from the credit crunch could top $945 billion globally over the next two years. Analysts at Goldman, which lost $1 billion in mortgage and securities investments in its fiscal first quarter, put the size of total credit losses at $1.2 trillion.

At the other end of the spectrum, on Friday Credit Suisse put a $650 billion price tag on credit-related losses from the U.S. banking crisis. Lehman predicts that the global write-downs could reach $400 billion by the end of 2008.

Putting a cap on the credit problems, even if it's a high one, has helped boost morale among investors. They spent the second half of last year trading without having much sense of the eventual size or severity a wave of subprime-mortgage defaults would have on the overall financial system.

"It's a critical piece of info for investors to chew on," according to Bank of America's Quinlan.
"Whenever you can quantify the problem, it helps the investors evaluate the risk still in the market."

The S&P 500 Index has risen along with the improved sentiment, though it took a hard fall Friday on the GE news. The benchmark index is up 6% from its 52-week low reached March 17, one day after J.P. Morgan said it would buy Bear Stearns with as much as $30 billion in financing from the Fed. In a first, the central bank also opened its discount lending to securities dealers.

These moves appeared to assure investors that the Fed wouldn't let big Wall Street dealers go bust. They "put a floor beneath financials," Quinlan said.

Earnings signposts, economic worries

The next slew of indicators will come from the biggest banks and brokerages, which are expected to do a spring housecleaning of their questionable credits when they report first-quarter earnings.

Merrill Lynch & Co., Citigroup Inc. and several regional banks report earnings next week. It's likely to be bloody.

Analysts have slashed earnings forecasts in the expectation that financial institutions will wipe off as much bad loans and trades as they can. UBS AG already have announced a combined $23 billion in write-offs.

An end to that housecleaning is key to turning the credit cycle around. But one problem is that credit is still inaccessible for some, particularly in the mortgage market, and much more expensive for businesses there than it was a year ago. Those higher costs have lingered despite the 3 percentage-point drop in the Federal Reserve's federal funds rate since September.

Rates on Baa corporate bonds, or bonds backed by riskier but still investment-grade credit ratings, have risen to 6.87% from 6.47% a year ago. Their spread to 10-year Treasury notes has widened by 1.6 percentage points.

The costs banks charge one another also have jumped. While mortgage rates for traditional, 30-year fixed rate loans have fallen, the gap between those rates and 10-year Treasurys has expanded.

Even though we have had some good news, "you will have to see the end of write-downs before the fixed-income and interbank-lending markets return to normal," said Michael Moran, chief economist for Daiwa Securities.

Before that happens, consumers and businesses will continue to find it tough to borrow, making it harder for home sales and prices to reverse and exacerbating an overall slump in the economy.

"The consumer is stretched," said Russ Koesterich, head of investment strategy at Barclays Global Investors. "The U.S. consumer will need a long period to repair his balance sheet. It's unrealistic to expect a very quick, robust economic recovery."

Laura Mandaro is a reporter for MarketWatch in San Francisco.

This GE hit is essentially an admission that absolutely NO PART of this WORLD is exempt from the crushing credit collapse.

I had actually just looked at GE in stunned amazement for many months defy any sort of acknowledgment in the stock price that it was being adversely affected. I was just amazed, because GE is an economic behemoth, and they are in everything.

The Fall of GE is essentially a parallel to The Fall of The Have's: It's like the heretofore unaffected Westsider super rich are actually starting to take it on the chin. No one is exempt from this thing. And unlike all the prognosticators who simply cannot believe their eyes, this will be WORSE than anyone thought possible. This AIN'T the ninth inning of ANYTHING.

And I'm sort of surprised that no one posted the full article du jour. I know, I know. The prospect of warm weather kept me from the bloggage as well. Slow week. Here it is:

Double -digit price drops for Redmond, Bend homes
Sunriver, Crook County prices rise
by Jeff McDonald / the Bulletin

Median home sales prices in the first three months of 2008 fell almost 12 percent in Bend and 14 percent in Redmond from the first quarter of 2007, according to a report Wednesday from the Central Oregon Association of Realtors.

Bend’s median sales price — the price at which half the homes sold for more and half for less — for single-family homes on less than an acre was $306,500 in the quarter. Redmond’s median was $220,000.

Elsewhere in the region, home prices dropped 15.5 percent in Sisters, 27.5 percent in La Pine and 9.1 percent in Jefferson County, but prices rose 16.5 percent in Sunriver and 8.1 percent in Crook County, the report said.

The number of homes sold in Bend in the quarter dropped 44 percent, to 222 units, and 30.3 percent in Redmond, to 92 homes, according to the Realtors association’s report of data provided by the Central Oregon Multiple Listing Service.

Local real estate officials weren’t surprised by the declines in sales and prices, citing more stringent lending requirements, a lack of buying urgency due to excessive inventory, and concerns about the national economy.

“That’s the market,” said Tom Greene, president of the Realtors association. “Sellers aren’t going to get what they got in 2006.”

Greene expects prices to stabilize during spring and summer but said the market could weaken further in fall and winter.

At the end of March, Bend and Redmond had 12 and 13 months’ worth of homes on the market, respectively, Greene said. That means it would take about a year or more for those homes to sell at the current rate of sales.

The average days a house sat on the market before being sold in the first quarter was 185 in Bend, up 6.3 percent, and 179 in Redmond, up 20.1 percent. La Pine had the highest average days on market, at 288.

The national economy, which two authorities — former Federal Reserve Chairman Alan Greenspan and former Treasury Secretary Lawrence Summers — said this week was in a recession, could pull the local housing market down further later this year, Greene said.

“We’re coming to the realization that the recession is one of the reasons we’re down,” Greene said. “There is some optimism — at least through summer — but it’s not going to be gangbusters.”

The year-over-year declines seen in Wednesday’s report aren’t surprising because the first quarter of 2007 was the strongest quarter last year, said Rockland Dunn, a broker for Summit Mortgage Corp. in Bend. The market started declining last June, Dunn said.

Several issues, including buyers taking their time to purchase and a perceived lack of financing, are keeping the market soft, he said.

The tightening credit markets and difficulty that some prospective buyers have in securing a loan have made it more difficult to close sales this year, said David Block, an appraiser for Bend-based Cornerstone Appraisal Group.

“Lending practices have changed dramatically,” Block said. “People can’t get out of their properties because values have dropped and they can’t get a loan.”

The region’s two highest-priced markets — Sunriver and Sisters — both maintained year-over-year gains in median sales prices, according to the MLS data.

Sunriver’s price gain was based on 11 sales, however, a 65 percent drop from the same period in 2007.

“January and February were not good for anybody out here,” said Mike Riley, general manager and principle broker for Coldwell Banker First Resort Realty in Sunriver. “But for March and April — so far, we’re up (number of sales) compared to the first two months.”

Heavy snowfall this winter contributed to the sales drop — so did people’s reluctance to drop their asking prices, Riley said.

“Sunriver is a second-home market — it isn’t affected in the same way,” Riley said. “A lot of owners haven’t budged in their prices or panicked.”

Jeff McDonald can be reached at 383-0323 or at jmcdonald@bendbulletin.com.

Funny. This is it. This is The Public Admission That Bend Is NOT Different, that the wave of destruction sweeping this country CAN happen here, that we are not the slightest bit exempt, and in fact are suffering through a price drop that is more severe than just about anywhere.

But it really wasn't a reason to stand up & cheer, or other such nonsense. I mean, if there is some sort of validation for this blogs existence, this would be it. Sure, we've had announcements of a severe slowdown is sales, but no really precipitous price drop.

And I guess it should be reiterated that there are some strange inconsistencies: A computation of months-inventory that looks 20-25% low, statements that Sisters is down & up, and the inane statement that March & April sales are up & "looking good!". Your standard retard could have "predicted" the same. It's like every Realtor in town has "discovered" this UNEXPECTED UPTURN in sales in the Spring. If you are a Realtor & are reading this, this is EXACTLY WHY you people are losing massive credibility.

This is it. It's started. The actual dropping of prices, and in a large amount, too. By my guess a 15% evaporation of home values wiped about $4 billion dollars out of the local RE housing equity stock. That ignores the inevitable hit that commercial is taking, and the monster hit on the Extreme Speculative red-headed stepchild: raw land.

But it passed with merely a whimper. And so it will go on.

We'll start to see the real slimey underbelly of just what this thing means soon: Property crimes, Bachelor scaling way back or closing, homelessness, mass vacancies downtown, Arson Fireclosures, and it goes on. It's really nothing to celebrate.

And the real horror is when it starts taking down regular people who participated to no extent. The de-leveraging is already hitting Main St. Even our favorite Mayor-To-Be, Dunc!

Had my Countrywide Home Equity Loan suspended yesterday. Now this shouldn't have bothered me -- I had no intention of doing anything but paying it off. Still, it was nice to know it was there.

Called them, and they said they were doing it to 'everyone' and that the terms could be 'reviewed.'

Asked the girl on the phone. "If someone who has made double payments on their initial loan for 21 months, and double interest payments on our HELOC, isn't worthy of credit, who is?"

This is just a chunk, and you should really read the whole thing. This thing will leave no one untouched. From GE clear down to Duncan, and you & me. I am as "delta neutral" on this thing as a person can be: I rent, cars are paid, I make ALL purchases in cash, my job is pretty removed from housing & credit problems. But I'm sure that I will at some point be adversely affected by this thing. If it's even from lessened quality of life by living here, that just makes me want to move on.

And as proof that you can learn things from the strangest quarters, I actually had a look at a book recommended by Tim a week or 2 ago, Fooled By Randomness. It's a fairly interesting look at randomness & it's effects on daily life, it's focus being largely on financial markets.

I use the term "strangest quarters" not to deride our brilliant Timmy, but the fact that I was reading a book about randomness, made me think about what a "long strange trip it's been" to the actual reading of the tome.

I was thinking about why I am married to my wife, and my conclusion is that it was a far from deterministic endeavor. It actually involved the strange intertwining of losing someone in my family, losing a job, the confusion of someone involved about these 2 events, their subsequent attempts to get me another job out of sympathy, and my subsequent meeting of my bride to be at this new job.

Such million-to-one happenstance is a common thread in the vast majority of my life. I am writing this blog SOLELY because I saw a short piece on the housing bubble many moons ago on KTVZ, I searched out & found BEM's original blog, I began commenting furiously, and started this blog because of the perceived vacuum of the closing of BEM's kick assery. This sum bitch has taken up a lot of my life. And I had no real Grand Plan for EVER doing anything like this. Almost pure chance.

Anyway, it made me distill my 2 fundamental investment thesii (Timmy?): If there does exist any sort of non-random, exploitable investment situation, to me it is these:

1) The stock market is NOT a pure random walk, there is an UPWARD bias. Otherwise we would be just as likely be where we are as we would stand to be at DJIA 30, at the depths of the Depression.

2) The prediction of the ascent of Bubbles is NOT a formula for making money. But the inevitable bursting of one comes as close to an investment sure thing as such things exist.

Now, I KNOW FULL WELL, that both of these statements violate some long-standing financial dogma: my "idea" of a random walk is that an "upward inexorable long-term bias" means that it's not TOTALLY random. And that even defining a "Bubble" is an exercise fraught with peril.

But there are some "rules of thumb" that seem to exist that allow one, on exceedingly rare occasions, to extract long term excess financial returns, by vaguely being aware of these 2 thesii, and they are really mirror images of each other:

1) Following extraordinarily negative volatile events in World Markets, (OK, I said WORLD MARKETS), you should accumulate stocks. This means once per decade type stuff... max.

2) Following"Bubbles" of extraordinarily large scale & magnitude, you can count on prognositcators to call for The End early & often. They will be wrong, and wiped from memory. The unraveling will be long, painful, self-reinforcing, and durable.

I am even more sure about Bubbles bursting than just about anything. Why? Remember the discussion about how almost any Bubble, left to expand without bounds, would soon consume all Earthly resources? And let to grow beyond that for just a few years would necessitate the creation of a solid gold sphere several times larger than the Earth to continue transacting. I'm not not sure of much, but I'm pretty sure that won't happen. Bubbles bursting are an investment sure thing. They will happen.

Notice that Buffett, whether wrong or right, rarely sells. He seems to follow some sort of philosophy based on Rule 1. He just buys when he believes a companies stock is well below some sort of "norm" valuation, and once he owns, he basically forgets about selling. I believe he bought US Air, watched it go higher, subsequently crater to single digits, publicly state he doubted things would get better, and the stock subsequently skyrocketed... and he sold.

He seems to realize that extraordinary volatility & randomness are inherent in owning stocks. He seems to abolish the "trading" mentality from Day 1. And he seems to make money in a way that seems a bit non-random to me. This is something at odds with this book which states flat out that there had to be a "Buffett" somewhere.

It should be noted that Buffett is a fairly extraordinary investor, but by purchasing via insurance entities, he employs huge amounts of leverage. His Super-cat lines WILL suffer a huge loss at some point, possibly after he dies, but he has piled up enough cash reserves, that he can currently swing bets in the billions without a problem.

The "Best Way" to capitalize on thesis 1 is to: 1) Wait for an exceedingly rare event of large negative magnitude. 2) Buy in wanton excess, and 3) Do not sell. Certainly do not be panicked out.

We are in the throes of thesis #2. I, and many on this blog, and the Original BEM foresaw that the bust would come. And if you recall, there were a non-stop litany of "experts" who said that it might come to others, but it sure as hell would not come to Bend. They were wrong.

And to me, it was no real guess that they would be wrong. If I had the slightest doubt, I would not have ever started this blog. Remember: I did NOT go along with CACB Shorters idea about shorting that stock, because I saw all sorts of peril & uncertainty in that particular bet. My margin of safety is quite thick. I did NOT fully understand their situation, and given a similar choice today, I would again decline.

And the nature of this thing gives people precious little way to capitalize. You can't "short" a house, Case-Schiller indices's notwithstanding. All I can do is wait for a bottom.

So capitalizing on thesis 2 is a bit harder, it is 1) Wait for the INEVITABLE bust of the Bubble 2) Do NOT buy when pundits tell you It's Over 3) Only buy when you are literally being PAID to enter a transaction, practically.

Problem there is these things go farther, harder, and longer than anyone dreams possible. And LONG after the rest of the country begins the slow agonizing process of recovery, we will still be mired in a financial quagmire. Bend, believe me, is going broke. It will be DECADES before this place recovers.

You can either leave or wait. And if you choose to wait, you should have 10 years of BURNABLE cash in the bank. But rest assured that at Rock Bottom, way out past 2015, there will be some spectacular bargains of a lifetime around here. Dunc bought Pegasus for $10K(?), only $5K down. It now provides a fairly comfortable living. THAT is a hell of an investment. Took 27 years, and gallons of sweat equity.. but still, not bad. That there is LONG WAVE, buy at the bottom thinking.

Author Nassim Taleb would have you think similarly that there had to be a "Duncan" who capitalized at the bottom, lo those many years ago. And he "may" be right. But if you are aware of such bargains and believe that economic depressions are not permanent, they just feel that way, that you can buy post-Bust at prices that may never be seen again in your lifetime. But today, is not that day.

Remember: Life Is Funny. It is 90% luck, and 90% certainty. If someone told me 3 weeks ago that it'd snow almost every day this past week, and it'd be 80 & sunny by the weekend, well... let's say I'd have bet against it.

Bottom line: This is NOT the ninth inning, it's the second for Bend.. maybe the 4th for the rest of the U.S. We are going below $200K medians. This town WILL go broke. Cessna IS LEAVING. This is going to hurt like hell. This is all pre-ordained, at least it is to the extent that anything in life can be.

Realize you are living in a fairly extraordinary set of circumstances, in a extraordinary place. The type & severity of financial Armageddon that will happen here, won't happen to 99.95% of the U.S. population in your lifetime. But I am equally sure that it will happen again... someday. Probably long after I and my kids are dead.

But at the end, ROCK BOTTOM, you might have the chance to get an asset, investment home(s) or business, that pays for an acceptable lifestyle for a pittance. THAT is what you should stay attuned to, that is what you should look for. But we are nowhere even remotely close to that today, nor will we be for years. Look for owner financing, look for people who will GIVE you money to get themselves out. Because that is all they will care about at Rock Bottom.