tag:blogger.com,1999:blog-5806884.post6343576057878567996..comments2023-10-31T03:18:26.963-07:00Comments on Great Guys Weblog: Great Recession (1): Crisis overview & bad loansBrethttp://www.blogger.com/profile/15063508651955739056noreply@blogger.comBlogger21125tag:blogger.com,1999:blog-5806884.post-82036291615776287122010-04-16T14:11:39.416-07:002010-04-16T14:11:39.416-07:00Harry wrote: "It did fill up, but only becaus...Harry wrote: "<i>It did fill up, but only because...</i>"<br /><br />You have a very simplistic view of the world if you think that many millions of square feet became occupied for one and only one reason. That explains why you think government solutions are so likely to succeed: there's only one reason for any event occurring so of course government can foresee that and formulate a sane policy to optimize the situation.Brethttps://www.blogger.com/profile/15063508651955739056noreply@blogger.comtag:blogger.com,1999:blog-5806884.post-4092932434853549742010-04-16T09:26:32.456-07:002010-04-16T09:26:32.456-07:00Harry,
a. the creeping socialism of rent control...Harry, <br /><br />a. the creeping socialism of rent control had a lot to do with abandoned neighborhoods. Pesky, unreasonable landlords didn’t want to maintain their property when they couldn’t get rents to cover their costs and make a nice profit for their trouble so they walked away from their property. Unspeakable slums flourished under the control of drug lords and other criminals.<br /><br />b. no union, including municipal ones, would hire blacks or Puerto Ricans* > they couldn't get jobs > went on welfare > families broken up > crime increased > more creeping socialism > criminals were coddled instead of incarcerated > neighborhoods were razed > enormous anti-human housing projects were built > crime went up > criminals were rehabilitated instead of jailed > people locked themselves in their homes > more socialism > schools became armed camps > Giuliani got elected > a lot of bad guys went to jail > things got a lot better > enter Bloomberg > high crime rates are back…<br /><br />*the first Hispanics on the scene.erphttps://www.blogger.com/profile/09826044412670324694noreply@blogger.comtag:blogger.com,1999:blog-5806884.post-2448886955368885722010-04-16T08:07:37.723-07:002010-04-16T08:07:37.723-07:00erp, it wasn't municipal unions that cleaned o...erp, it wasn't municipal unions that cleaned out NYC.<br /><br />Chanos has been whipping China for weeks now. Classic bear propaganda.<br /><br />He might be right. But he's sure interested in pricking the bubble.<br /><br />If the US double dips its way into a real recession (despite howls from some quarters, something -- probably stimulus spending -- buoyed US consumption of most things at levels only one-twentieth below boom levels), then China will feel our pain.<br /><br />I can recall, during the S&L crash, that Houston had 39million square feet of unoccupied commercial space. It did fill up, but only because oil rose for reasons unrelated to banking in Texas.<br /><br />The idea that Chinese overbuilding will be absorbed requires a belief in some outside source of revenue generation that is not so evident to me.<br /><br />(USAA appears to have equity of around 5% of assets. If this is real equity, then it is an order of magnitude better than money center banks. <br /><br />(But USAA is also only one-fifteenth the size of a money-center Bad Boy.)Harry Eagarhttps://www.blogger.com/profile/04196202758858876402noreply@blogger.comtag:blogger.com,1999:blog-5806884.post-49685084214169242372010-04-15T18:03:22.228-07:002010-04-15T18:03:22.228-07:00"Note that I commented on Miami, so you'r..."<i>Note that I commented on Miami, so you're basically changing the subject.</i>"<br /><br />Sorry, I thought that you were commenting on malinvestment in infrastructure, and its potential effects.<br /><br /><a href="http://www.businessinsider.com/chinese-stimulus-spending-constructed-an-empty-city-in-the-middle-of-nowhere-2009-11#ixzz0lDiDDrRL" rel="nofollow">Chinese Stimulus Spending Constructed An Empty City In The Middle Of Nowhere</a> <br /><br />The China bears tell us that stimulus spending there is largely being wasted. This report from Al Jazeera offers startlingly strong support for that proposition:<br /><br />[...] Al Jazeera’s Melissa Chan reports from Inner Mongolia, where a whole town built with government money is standing empty.<br /><br />Shockingly, centrally planned government spending may not really be such a good idea.<br /><br />[video clip]AVeryRoughRoadAheadnoreply@blogger.comtag:blogger.com,1999:blog-5806884.post-37854217834183680302010-04-15T11:49:50.551-07:002010-04-15T11:49:50.551-07:00Miami was saved from Detroit's and the other m...Miami was saved from Detroit's and the other major cities' fate of creeping socialism and municipal union control by the influx of conservative Cubans.erphttps://www.blogger.com/profile/09826044412670324694noreply@blogger.comtag:blogger.com,1999:blog-5806884.post-40289944509821391082010-04-15T11:06:27.508-07:002010-04-15T11:06:27.508-07:00By the way, which ghost metropolis is that?By the way, which ghost metropolis is that?Brethttps://www.blogger.com/profile/15063508651955739056noreply@blogger.comtag:blogger.com,1999:blog-5806884.post-86416989416190826442010-04-15T10:38:10.459-07:002010-04-15T10:38:10.459-07:00Rough asks: "What's your prognosis for De...Rough asks: "<i>What's your prognosis for Detroit in the "mid to long run?"</i>"<br /><br />Note that I commented on Miami, so you're basically changing the subject. The situation in Detroit is very different than the situation in Miami which is very different than the situation in Dubai which is very different than the situation in China.<br /><br />Detroit is a mess for a number of reasons. One important reason is that it is pretty business unfriendly so the businesses left, then the people left, and left behind empty buildings. This is pretty much the opposite of Miami where the builders got ahead of demand, lost a bundle, took some banks and other investors with them, but people continued to move there, business continued to expand, and eventually most buildings have or will have reasonable occupancy rates.<br /><br />China isn't like Miami or Detroit. China has huge problems which could easily lead to disaster, the building bubble might well be a factor, but it's insignificant relative to their other problems.Brethttps://www.blogger.com/profile/15063508651955739056noreply@blogger.comtag:blogger.com,1999:blog-5806884.post-38136966417057178982010-04-15T09:55:01.214-07:002010-04-15T09:55:01.214-07:00Detroit has so much "additional infrastructur...Detroit has so much "additional infrastructure" that they can't <i>give</i> it away.<br /><br />What's your prognosis for Detroit in the "mid to long run?"<br /><br />How about the ghost Metropolis that China's built? Nobody lives there, so there aren't any jobs to be had...<br /><br />I guess that eventually you could get some squatters that subsistence farm in the vacant apartments and industrial parks...<br /><br />In any case, if it's true that construction accounts for over 50% of China's GDP, then when their RE bubble bursts the "some people that do quite poorly" will outnumber then entire population of No. America.<br /><br />But hey, nothing wrong with looking for the silver lining - unless you can't perceive the cloud surrounding it...AVeryRoughRoadAheadnoreply@blogger.comtag:blogger.com,1999:blog-5806884.post-66306049783800682972010-04-15T08:06:25.377-07:002010-04-15T08:06:25.377-07:00Rough quoted: "We've seen similar bubbles...Rough quoted: "<i>We've seen similar bubbles in Dubai, Miami - scores of other entities have gone through this and it never ends well.</i>"<br /><br />Oh? How did it end in Miami?<br /><br />Yes, some people did quite poorly, but last I looked Miami was still doing okay.<br /><br />In China, some people will do quite poorly, but they'll still have a lot of additional infrastructure that I doubt will go to waste in the mid to long run.Brethttps://www.blogger.com/profile/15063508651955739056noreply@blogger.comtag:blogger.com,1999:blog-5806884.post-51667906824823287272010-04-15T05:17:33.432-07:002010-04-15T05:17:33.432-07:00Sweet!!!:
"Last week I, Vince Veneziani, had...Sweet!!!:<br /><br />"<i>Last week I, Vince Veneziani, had the opportunity to visit Kynikos Associates in Manhattan and speak with its President, famed short-seller James S. Chanos.</i><br /><br />"<i>The billionaire hedge funder is the stuff of legend. He made a killing shorting companies like Tyco, Worldcom, and of course, Enron. Chanos spoke with us at length on everything from how he discovered Enron's problems to the issues at hand with Greece to the ongoing problems in China.</i><br /><br /><a href="http://www.businessinsider.com/qa-with-jim-chanos-part-ii-china-is-a-property-bubble-2010-4" rel="nofollow">"<i>We'll be running several posts on our Q&A sessions with Chanos throughout the week... Chanos part 2: China's High-Rise Property House Of Cards</i>"</a><br /><br /><b>Jim Chanos:</b> What we're simply saying is you are seeing an epic building boom in China and more interestingly, an epic high-rise building boom in China.<br /><br />It's not just high speed rail and airports and new roads. That's only a very small part of their infrastructure spending. This is primarily a story about people putting up high rise office buildings and condos in the big cities. That's what it is. [...] <br /><br />We've seen similar bubbles in Dubai, Miami - scores of other entities have gone through this and it never ends well. [...]<br /><br />The other interesting thing about the boom here is that it is completely high end. When people talk to me about China's "migration of people" into the cities and the population and blah blah blah, and the growth of the economy, I said "That's all and good but they're putting up the equivalent of New York City highrises at almost New York City prices for a populous that is 1/10th of that per-capita income." So this building boom is aimed at: A) the corporate market, corporate highrises and office buildings or B) very high end of the residential market. It's not the masses - it's for people speculating.<br /><br /><b>Business Insider:</b> I've heard that a lot of families in China are maxing out as much as they can in terms of credit and borrowing in order to get into this.<br /><br /><b>JC:</b> They have to! Keep in mind that the average median income in China, and it's only slightly higher in the cities, is something like $3500 per person. Typical second-tier city real-estate prices have now gone above $100 a square foot. So a typical 100 square meter condo is probably going to cost you after all your expenses (if you build it out to live) $120,000 to $140,000 US. Well say you're a dual income couple and you make $7000 to $10,000 a year total. OK? Even if you put down the 20% down that everyone's pointing to, that's 20% on your purchase price. <b>You're still paying mortgage interest of probably ... 60 to 100% of your income, pretax.</b><br /><br /><b>BI:</b> Pretax?<br /><br /><b>JC:</b> <i>Pretax.</i> And that's not super high end - that's an urban couple, dual-wage earners in a second-tier city. <b>So it's already getting to the absurd in terms of prices relative to incomes. And the problem is construction is 50-60% of China's GDP. And of that, the vast majority is this type of construction.</b> There's going to be a real brick wall here being hit at 200 MPH - it's just a matter of when.<br /><br /><b>AVRRA:</b> <i>Getcha popcorn here, peanuts - hot peanuts, hot dogs... </i>AVeryRoughRoadAheadnoreply@blogger.comtag:blogger.com,1999:blog-5806884.post-69450626845140005912010-04-14T23:06:17.033-07:002010-04-14T23:06:17.033-07:00"My bank (USAA), has had a continuous net-wor..."<i>My bank (USAA), has had a continuous net-worth rate of growth since its inception...</i>"<br /><br />I make no claim, assertion or implication directly regarding USAA, <i><b>but,</b></i> a continuous growth of net worth isn't a definitive indication of lack of stupidity anymore, because the banking and insurance regulators have relaxed the rules to allow bad loans and investments to be carried as "money-good".<br /><br />So until such time as all of the bad loans and investments have finally been flushed from the system, which will be many years from now, and USAA continues to stand tall, <i><b>then</b></i> it can be said without question that they're non-stupid. Maybe they're just good with accounting tricks, like Bank of America or Wells Fargo, to name only two transgressors.<br /><br />Based on their stock prices, those companies seem to also have been judged as non-stupid, and yet they're the walking dead, technically insolvent and within a few years, practically as well.<br /><br />Wells in particular has been very, very, <i>very</i>, <i><b>very,</b></i> <b>VERY </b>stupid. Their homegrown Cali HELOCs alone might be enough to sink the company; add in the Golden West Financial/World Savings Bank trash that they became responsible for after purchasing the shady & slipshod Wachovia, and they have zero chance of surviving as an independent organization - unless Cali property values increase by 70% within the next two years...<br /><br />*ahem*<br /><br />Point being, balance sheets are now untrustworthy, and USAA's become far less select about their clientele in a bid for growth. <br /><br />Essentially, anyone who's ever served in the U.S. armed forces, any branch, any time, active, Reserve or Guard, officer or enlisted, is now eligible. That's in many ways an above-average group, but hardly "elite".<br /><br />And danger abounds whenever any person or organization decides to seek growth by lowering their standards. Today's USAA isn't your father's USAA.AVeryRoughRoadAheadnoreply@blogger.comtag:blogger.com,1999:blog-5806884.post-59663775645023113852010-04-14T17:31:26.941-07:002010-04-14T17:31:26.941-07:00A very small bank with a select clientele.
Perha...A very small bank with a select clientele.<br /><br />Perhaps the fact that your deposits are not insured has something to do with its conservative approach.Harry Eagarhttps://www.blogger.com/profile/04196202758858876402noreply@blogger.comtag:blogger.com,1999:blog-5806884.post-23852117504954572612010-04-14T14:03:26.348-07:002010-04-14T14:03:26.348-07:00Skipper, I think it has something to do with the q...Skipper, I think it has something to do with the quality of their clientele.erphttps://www.blogger.com/profile/09826044412670324694noreply@blogger.comtag:blogger.com,1999:blog-5806884.post-48525792101269853922010-04-14T11:57:50.440-07:002010-04-14T11:57:50.440-07:00Bankers are really really stupid, as they keep dem...<i>Bankers are really really stupid, as they keep demonstrating.</i><br /><br />Not all bankers.<br /><br />My bank (USAA), has had a continuous net-worth rate of growth since its inception, including through the latest financial schlamozzle.<br /><br />So, either they are not stupid, or something about their business prevented stupidity's exercise.Hey Skipperhttps://www.blogger.com/profile/10798930502187234974noreply@blogger.comtag:blogger.com,1999:blog-5806884.post-24882082049060061392010-04-12T18:13:47.905-07:002010-04-12T18:13:47.905-07:00Obviously, G-S was a dead letter by the '90s,...Obviously, G-S was a dead letter by the '90s, since most banklike functions had escaped from the regulated banks.<br /><br />It didn't help that even the regulated banks weren't being regulated seriously, since the people in charge did not believe in regulation.<br /><br />Bankers are really really stupid, as they keep demonstrating. <br /><br />It's a question now, with borders down and entities well hidden in the Cayman Islands and elsewhere, whether a 21st c. G-S is even possible.<br /><br />We now have enough experience with unsupervised financial markets to understand that these ramifying idiocies will recur and some indication that the recovery time between deflationary incidents is collapsing.<br /><br />I used to say they came every 5 years. It's about half that now, I think.Harry Eagarhttps://www.blogger.com/profile/04196202758858876402noreply@blogger.comtag:blogger.com,1999:blog-5806884.post-89874521282854507082010-04-12T12:50:38.179-07:002010-04-12T12:50:38.179-07:00Harry,
I have a reasonable knowledge of Glass-Ste...Harry,<br /><br />I have a reasonable knowledge of Glass-Steagall and some modifications all the way through to Graham-Leach-Bliley but have been unable to figure out how these changes caused or allowed for the mess. Nor has anyone yet provided a cogent explanation. Assertions and hand-waving don't count. If you can provide a detailed explanation, I'd love to learn.Howardhttps://www.blogger.com/profile/14980738175201874292noreply@blogger.comtag:blogger.com,1999:blog-5806884.post-76660926231039386352010-04-12T06:53:57.559-07:002010-04-12T06:53:57.559-07:00I have no expectations that the financial 'ref...I have no expectations that the financial 'reforms' will be any less of an unworkable mess than health 'reforms,' although it is easy to see what ought to be done.<br /><br />Glass-Steagall worked very well. Bring that back.Harry Eagarhttps://www.blogger.com/profile/04196202758858876402noreply@blogger.comtag:blogger.com,1999:blog-5806884.post-23645064854142842022010-04-12T06:29:38.955-07:002010-04-12T06:29:38.955-07:00Rough,
Yes, such a disconnect between incomes and...Rough,<br /><br />Yes, such a disconnect between incomes and property prices can't last indefinitely. However, with Ponzi home finance (ala Minsky) in the U.S. the ride is wilder and financial turbulence is more likely to (did) translate into significant real economic shock.Howardhttps://www.blogger.com/profile/14980738175201874292noreply@blogger.comtag:blogger.com,1999:blog-5806884.post-822181999925262042010-04-12T03:06:50.300-07:002010-04-12T03:06:50.300-07:00The Teranet Index will soon be following Case-Shil...The Teranet Index will soon be following Case-Shiller down into the abyss, down payments or not...<br /><br /><a href="http://www.cbc.ca/money/story/2010/04/08/real-estate-royal-lepage.html#ixzz0ksXru8An" rel="nofollow">"The [Royal LePage Real Estate Services] survey found the average price of detached bungalows in Toronto climbed to $459,107 in the first quarter, up 13.3 per cent from a year ago. Standard two-storey homes in Toronto were up 13.2 per cent, rising to $562,150 while condo prices rose a more moderate 10 per cent to $317,579. In the Vancouver area, detached bungalows climbed an eye-popping 21.8 per cent to <b>$906,045</b> while two-storey homes were up 19.2 per cent to <b>$987,500</b> and standard condos were up 15.7 per cent from early 2009, rising to $470,000."</a><br /><br />Incomes aren't rising to support such prices...AVeryRoughRoadAheadnoreply@blogger.comtag:blogger.com,1999:blog-5806884.post-41226235073645783342010-04-11T20:28:46.923-07:002010-04-11T20:28:46.923-07:00He got $100 million from Citi to be on their board...<i>He got $100 million from Citi to be on their board, and chaired the executive committee...</i><br /><br />I've been waiting for institutional investors with the knowledge and resources to push back against this kind of behavior from members of corporate boards, nothing yet.<br /><br /><i>...it confirms my view that American business leaders are, on balance, no more competent than a random collection of winos hanging out around the Salvation Army.</i><br /><br />Perhaps a slight overstatement, but I know what you mean. I see most of the political class that way.<br /><br /><i>The bankers (and banklike managers) begged not to be overseen. They got their way. The markets failed.</i><br /><br />We'll see if you're willing to stand by this statement after the post on rules and regulations in this series.Howardhttps://www.blogger.com/profile/14980738175201874292noreply@blogger.comtag:blogger.com,1999:blog-5806884.post-44900542292948110602010-04-11T06:38:46.137-07:002010-04-11T06:38:46.137-07:00Did you see Rubin's testimony to the recession...Did you see Rubin's testimony to the recession inquiry?<br /><br />He got $100 million from Citi to be on their board, and chaired the executive committee, but he had no operational tasks, the committee met infrequently and did not take important decisions and he did not give advice.<br /><br />I am conflicted in how I feel about this.<br /><br />On one hand, it confirms my view that American business leaders are, on balance, no more competent than a random collection of winos hanging out around the Salvation Army.<br /><br />On the other, I guess Citi shareholders should be glad he wasn't doing anything.<br /><br />On the third hand, hard to blame that on Washington.<br /><br />The bankers (and banklike managers) begged not to be overseen. They got their way. The markets failed. QEDHarry Eagarhttps://www.blogger.com/profile/04196202758858876402noreply@blogger.com