Another Fun Day in the Mkt... - Page 5

Thunder22 · #1 03-02-2009, 03:19 PM

Quote:

Originally Posted by LeMansX5

Getting very tired of looking at this chart.

Be thankful that there's a chart to look at. The way things are going... well, I don't even want to think about it.

X5rolls · #2 03-02-2009, 03:21 PM

I fear that business will have nothing to look forward to short, mid, long term till we change from a democratic led congress.

LeMansX5 · #3 03-02-2009, 04:17 PM

Quote:

Originally Posted by gresch

Be thankful that there's a chart to look at. The way things are going... well, I don't even want to think about it.

So true....

youry · #4 03-02-2009, 03:35 PM

The only problem is that I don't see the catalyst to move the market up. Earnings are a joke. The gov and the fed are bailing banks every day. Hopefully the market turns at one point thought I doubt we'll see any sustained rally.
if you trade stocks look into Oct SKF under $100 puts. Time decay will kill that etf. Now it trades around 195

X5rolls · #5 03-02-2009, 03:52 PM

I am beginning to like the idea Robert Samuelson is promoting to get housing purchases going again. Personally, I don't think the market is going to go anywhere until there is a floor established either by buyouts or backing out of positions (don't want to go there here) or getting people off the sidelines to purchase homes again. Rates are good and values are way down.. good time to buy in a normal economy.

Thoughts?

washingtonpost.com

Wrong Turn on Housing

By Robert J. Samuelson
Monday, March 2, 2009;
Washington Post A17

How to rescue housing? The Obama administration doesn't have a plan -- or, more accurately, it has only half a plan. It presupposes that preventing or minimizing home foreclosures is a formula for revival. It isn't.

Almost everyone agrees that a housing recovery is essential for a broader economic upswing, in part because housing's collapse brought on the recession. Mortgage delinquencies triggered the financial crisis. Tumbling home prices (down 26 percent from their peak) ravaged consumer confidence, borrowing and spending. Since late 2007, housing-related jobs -- carpenters, real estate agents, appraisers -- have dropped by 1 million, a quarter of all lost jobs.

Housing's distress is too much supply chasing too little demand. Huge inventories of unsold homes have depressed prices and construction. Given that prices rose too high in the "bubble" -- homes were affordable only because credit was dispensed so recklessly -- much of this painful adjustment was unavoidable. But that process should be mostly complete.

Here's a little-known fact: Housing may be more affordable now than at any recent time, thanks to lower prices and falling mortgage rates (now about 5 percent). The National Association of Realtors has an "affordability index" that estimates the family income needed to buy a median-price house, assuming a 20 percent down payment and monthly mortgage payments equal to 25 percent of income. Affordability is now the highest since the index's start in 1970.

Unfortunately, demand hasn't followed affordability. In January, sales of new and existing homes continued prolonged declines, dropping 10.2 percent and 5.3 percent, respectively, from December. There's a buyers' strike. Why? Shouldn't lower prices spur demand?

Well, yes. There are many theories as to why they haven't. Perhaps prospective buyers can't get loans. Or people are so gloomy that they're afraid to buy. But the most important explanation is probably deflationary psychology. If yesterday's $250,000 house is now $200,000, it may be $175,000 by June. Waiting is better.

Unless such deflationary psychology is broken, it becomes self-fulfilling. The more buyers wait, the more prices fall; and the more prices fall, the more buyers wait. The Obama administration essentially ignores this problem, though it can be addressed.

The simplest way is to bribe prospective buyers not to wait. For example: Give them a 10 percent tax credit, up to $15,000, on the purchase of a new home. Anyone who bought a $150,000 home would get a $15,000 tax break. The credit would expire in a year. Waiting would be costly. Buyers would delay only if they thought home prices would drop as much or more.

Precisely this proposal comes from the National Association of Home Builders. Normally, it would be an atrocious idea, because it would reward people who would buy anyway and would be skewed toward wealthier buyers. But now it's worth trying.

Somehow, we need to cut bloated inventories (13 months of supply for unsold new homes), curb falling prices and stimulate new construction. The hope is that once buying improves, it would feed on itself. People would join from the sidelines. The NAHB says its plan would create 250,000 jobs and cost $40 billion -- big money, but tiny compared with the hundreds of billions lavished on recovery programs. The Senate included the plan in its stimulus, but it was later dropped.

It wasn't an Obama priority. Some administration proposals, focused on foreclosures, are desirable. It's sensible to allow Fannie Mae and Freddie Mac to refinance older mortgages, at lower interest rates, even if homeowners' equity has dropped below today's requirement of 20 percent.

This would reduce defaults and increase borrowers' spending power.
Other ideas seem more dubious. For $75 billion, another proposal would subsidize homeowners so their monthly mortgage payments dropped to 31 percent of their income. Because that's still high, many of these homeowners would probably default anyway. Even worse is the "cramdown" proposal, backed by the administration. This would allow bankruptcy judges to cut mortgage payments. If passed, this would probably raise future mortgage costs because lenders would have less access to collateral.

In any case, minimizing foreclosures alone won't revive housing. If the recession and unemployment worsen, foreclosures will increase, because people without jobs and income can't make their monthly payments.

The best way to limit foreclosures is to promote an economic recovery by stimulating home buying. It's true that the recent "stimulus" plan included a tax credit of up to $8,000, but that was restricted to first-time buyers and made "refundable," meaning people could receive the money even if they didn't owe taxes. These are younger and poorer buyers -- the weak credit risks of today's crisis. They won't rescue housing.

All this is telling. The administration and Congress, though pledging to restore economic growth, care more about protecting foreclosure victims and promoting homeownership among the young and poor. Politics trumps economics.

Wagner · #6 03-03-2009, 08:03 AM

Quote:

Originally Posted by X5rolls

I am beginning to like the idea Robert Samuelson is promoting to get housing purchases going again. Personally, I don't think the market is going to go anywhere until there is a floor established either by buyouts or backing out of positions (don't want to go there here) or getting people off the sidelines to purchase homes again. Rates are good and values are way down.. good time to buy in a normal economy.

Thoughts?

washingtonpost.com

Wrong Turn on Housing

By Robert J. Samuelson
Monday, March 2, 2009;
Washington Post A17

How to rescue housing? The Obama administration doesn't have a plan -- or, more accurately, it has only half a plan. It presupposes that preventing or minimizing home foreclosures is a formula for revival. It isn't.

Almost everyone agrees that a housing recovery is essential for a broader economic upswing, in part because housing's collapse brought on the recession. Mortgage delinquencies triggered the financial crisis. Tumbling home prices (down 26 percent from their peak) ravaged consumer confidence, borrowing and spending. Since late 2007, housing-related jobs -- carpenters, real estate agents, appraisers -- have dropped by 1 million, a quarter of all lost jobs.

Housing's distress is too much supply chasing too little demand. Huge inventories of unsold homes have depressed prices and construction. Given that prices rose too high in the "bubble" -- homes were affordable only because credit was dispensed so recklessly -- much of this painful adjustment was unavoidable. But that process should be mostly complete.

Here's a little-known fact: Housing may be more affordable now than at any recent time, thanks to lower prices and falling mortgage rates (now about 5 percent). The National Association of Realtors has an "affordability index" that estimates the family income needed to buy a median-price house, assuming a 20 percent down payment and monthly mortgage payments equal to 25 percent of income. Affordability is now the highest since the index's start in 1970.

Unfortunately, demand hasn't followed affordability. In January, sales of new and existing homes continued prolonged declines, dropping 10.2 percent and 5.3 percent, respectively, from December. There's a buyers' strike. Why? Shouldn't lower prices spur demand?

Well, yes. There are many theories as to why they haven't. Perhaps prospective buyers can't get loans. Or people are so gloomy that they're afraid to buy. But the most important explanation is probably deflationary psychology. If yesterday's $250,000 house is now $200,000, it may be $175,000 by June. Waiting is better.

Unless such deflationary psychology is broken, it becomes self-fulfilling. The more buyers wait, the more prices fall; and the more prices fall, the more buyers wait. The Obama administration essentially ignores this problem, though it can be addressed.

The simplest way is to bribe prospective buyers not to wait. For example: Give them a 10 percent tax credit, up to $15,000, on the purchase of a new home. Anyone who bought a $150,000 home would get a $15,000 tax break. The credit would expire in a year. Waiting would be costly. Buyers would delay only if they thought home prices would drop as much or more.

Precisely this proposal comes from the National Association of Home Builders. Normally, it would be an atrocious idea, because it would reward people who would buy anyway and would be skewed toward wealthier buyers. But now it's worth trying.

Somehow, we need to cut bloated inventories (13 months of supply for unsold new homes), curb falling prices and stimulate new construction. The hope is that once buying improves, it would feed on itself. People would join from the sidelines. The NAHB says its plan would create 250,000 jobs and cost $40 billion -- big money, but tiny compared with the hundreds of billions lavished on recovery programs. The Senate included the plan in its stimulus, but it was later dropped.

It wasn't an Obama priority. Some administration proposals, focused on foreclosures, are desirable. It's sensible to allow Fannie Mae and Freddie Mac to refinance older mortgages, at lower interest rates, even if homeowners' equity has dropped below today's requirement of 20 percent.

This would reduce defaults and increase borrowers' spending power.
Other ideas seem more dubious. For $75 billion, another proposal would subsidize homeowners so their monthly mortgage payments dropped to 31 percent of their income. Because that's still high, many of these homeowners would probably default anyway. Even worse is the "cramdown" proposal, backed by the administration. This would allow bankruptcy judges to cut mortgage payments. If passed, this would probably raise future mortgage costs because lenders would have less access to collateral.

In any case, minimizing foreclosures alone won't revive housing. If the recession and unemployment worsen, foreclosures will increase, because people without jobs and income can't make their monthly payments.

The best way to limit foreclosures is to promote an economic recovery by stimulating home buying. It's true that the recent "stimulus" plan included a tax credit of up to $8,000, but that was restricted to first-time buyers and made "refundable," meaning people could receive the money even if they didn't owe taxes. These are younger and poorer buyers -- the weak credit risks of today's crisis. They won't rescue housing.

All this is telling. The administration and Congress, though pledging to restore economic growth, care more about protecting foreclosure victims and promoting homeownership among the young and poor. Politics trumps economics.

Remember, only 4.5% of mortgages in the USA are more than 60 days behind...that means more than 95% are paid on time.

X5rolls · #7 03-03-2009, 10:20 AM

95% on time is a good metric to keep in mind

. I keep coming back to the thought that we can possibly help put the bottom in place by rewarding consumers to start spending again.

Housing sales are a huge lever and there are apparently a fair number (not sure what it is) of people (first time homebuyers included) that are on the sidelines ready to go but want to wait for the market bottom.

Creating this expanded tax credit for new house purchases and possibly existing home sales is a good idea - I especially like making the credit expire at the end of 09 - it creates incentives to purchase and a sense of urgency to get going. From an economics perspective, this seems to be a way to generate demand.

motordavid · #8 03-03-2009, 10:56 AM

Interesting article but it avoids talking about the 200 pound rabid rat in the room, imo:
-Some/more than some, consumers treated the artificial and unsustainable housing "appreciation"
as a personal piggy bank they could "borrow" against Not sure, even in these lean calamitous times
that many have learned their lesson.

-If V&I were still working, but like many employed today, were nervous over our short term future employment situ,
all the inducements proposed would have little effect on our running out to buy a new house, different house.

-The deadbeats are indeed a small % compared to those paying their morts; however, the "value" of everyone's home
is substantially less than "it was" or, what someone might have paid for it in the past 5 years.

-A huge portion of all mortgages, of all design and terms, were run through the investment bank securitization process, spread
thinly like manure on a million sandwiches and, resold in various forms; thus, the toxic lunch pail that many banks and other
financial companies possess abd hold on their books.

-Add in CDSs, CDOs, run the blender again and that, simplistically, is a major part of the reason(s) the econ is where it is, imo.
AIG didn't lose $62 Billion last qtr because the real insurance biz was off that much; it is the continual unwinding of CDSs, et al,
that is in a major effect, eating up these companies.

The continual laundry list of "fixes" that roll out of the politicians' lobbyist driven staff offices, seldom address those issues above, imo.

X5rolls · #9 03-03-2009, 12:32 PM

I don't disagree with your points. However, the need to get to the bottom of the market is paramount in my opinion. Getting there through intervention is an option on the housing market is all I'm saying.

It won't turn all the ships around but it might turn one ship in the right direction. No doubt there are people sitting on the sideline not purchasing houses that might if there was more incentives - once the buying starts it just changes the supply and demand economics. That is pretty basic. Will it work? I don't see the harm in putting these tax breaks in place.

Quote:

Originally Posted by motordavid

Interesting article but it avoids talking about the 200 pound rabid rat in the room, imo:
-Some/more than some, consumers treated the artificial and unsustainable housing "appreciation"
as a personal piggy bank they could "borrow" against Not sure, even in these lean calamitous times
that many have learned their lesson.

-If V&I were still working, but like many employed today, were nervous over our short term future employment situ,
all the inducements proposed would have little effect on our running out to buy a new house, different house.

-The deadbeats are indeed a small % compared to those paying their morts; however, the "value" of everyone's home
is substantially less than "it was" or, what someone might have paid for it in the past 5 years.

-A huge portion of all mortgages, of all design and terms, were run through the investment bank securitization process, spread
thinly like manure on a million sandwiches and, resold in various forms; thus, the toxic lunch pail that many banks and other
financial companies possess abd hold on their books.

-Add in CDSs, CDOs, run the blender again and that, simplistically, is a major part of the reason(s) the econ is where it is, imo.
AIG didn't lose $62 Billion last qtr because the real insurance biz was off that much; it is the continual unwinding of CDSs, et al,
that is in a major effect, eating up these companies.

The continual laundry list of "fixes" that roll out of the politicians' lobbyist driven staff offices, seldom address those issues above, imo.

Eric5273 · #10 03-03-2009, 12:56 PM

I think that very few of the economists are pointing to the real problem here which is a declining middle class. Wages have consistantly dropped compared to cost of living over the past 30 years. The way most middle class families have sustained a "middle class" lifestyle is to run up their debt. It is easy to say "live within your means", but that would mean an end to the middle class, as the majority of Americans would fall below what we consider "middle class" today.

All the other problems such as the housing crisis, banking crisis, credit crisis, etc....they are all a result of this issue. And thus, anything short of addressing this issue will be a temporary bandaid on the real problem.

People all scream about "income redistrubution" -- and that is why the politicians are affraid to really take on this issue. But you won't have any income to redistrubute if this problem is not addressed. We'll see what you think when the DOW is at 4000, or maybe 2000. Don't worry...it is coming...that much is for sure.

They should forget about raising the income tax rate, or other trivial stuff like that. They should eliminate all income and sales taxes, and impose a flat wealth tax -- everyone pays the same rate. Something similar to how you pay property tax on your home. Next, they should impose a 30 hour work week on all business, except those with fewer than 25 employees. A few changes like that will go a long way towards fixing the problems. Not this idiotic spending bill, that while helpful, will not fix any problems long term.