San Diego Housing Bubble News and Analysis

One of the groups seriously impacted by the great recession is the "pre retirement" generation - currently the "Baby Boomers" - the workers between the ages of 45 and 64.

Click on graph for larger image in new window.

This graph shows the unemployment rates for two groups: 45 to 54 (seasonally adjusted), and 55 to 64 (only NSA data is available).

The unemployment rate for these age groups hit an all time high during the great recession (highest since WWII).

Michael Winerip at the NY Times has a story about the plight of several "Boomers" who he has tracked for the last year: Time, It Turns Out, Isn’t on Their Side (ht Ann) A YEAR ago, I wrote about a job fair at the Sheraton in Midtown Manhattan, where over 5,000 mainly white collar, middle-aged jobless men and women waited in the cold for more than two hours, hoping to find work. ...

For that column, I interviewed two dozen boomers. Given recent reports from the federal government and Manpower, the employment agency, that the hiring outlook is beginning to improve, I thought it would be worthwhile to go back to those highly motivated people. ...

The short answer is, of the 16 I interviewed again, 9 describe themselves as still struggling. Eight continue to be unemployed or are working part-time jobs that pay near minimum wage. Several were so concerned about bias, they did not want to give their ages. ...

Of the 16, only one, Mr. Kramer, who was unemployed eight months before being hired in July as a closing manager at a Best Yet supermarket, has found a job that pays more than his old position. More typical of the seven who’ve found full-time work is Ben Brief, 60, a printing supervisor, who’d been jobless two months when I interviewed him on Sixth Avenue in the 20-degree weather. Mr. Brief was out of work nine more months, before finding a printing job that paid 20 percent less than his previous position. “I’m glad to be working, but people know they can pay you a lot less in this economy,” he said.Kind of hard to sing "Yeah, time time time is on my side ..." when you are 60 and unemployed or underemployed.

As noted on numerous occasions, public union greed and arrogance has no bounds.

Worse yet, today we have yet another major example that shows many elected politicians still have zero political willpower to do anything serious about it. In Montgomery, Maryland, the politicians are even willing to cook the books for the benefit of unions.

Please consider Montgomery, Md., pension deal eases sacrifice for unions.
The politics of shrinking government spending can lead to tortured math and bureaucratic back flips. In one of the Washington area's wealthiest counties, recession has prompted a bout of creative bookkeeping and something called the "Phantom COLA."

As state and local officials from California to Miami have sought to cut payroll costs, officials in Montgomery County last year pressed government employees to forgo part of their negotiated pay raises. They did. But some of the county's powerful public employee unions also benefited from an unusual deal.

Employee pensions -- already a major cost -- will be calculated as if employees had received their full raises.

To manage that financial sleight of hand, county computer programmers must essentially set up two sets of books, one with employees' real salaries and another that includes what government documents refer to as the "phantom" cost-of-living adjustments.

"It makes no sense to base a pension on a salary that wasn't paid," said Montgomery County Council member Phil Andrews (D-Gaithersburg-Rockville), who cast the sole vote against the arrangement. "It's indefensible policy . . . and we can't afford it."

But the politics are not that simple in Montgomery, or elsewhere, as recession-squeezed budgets are forcing uncomfortable interactions between some Democrats and the party's allies in the labor movement, a significant electoral force. Rory Reid, son of Senate Majority Leader Harry M. Reid (D-Nevada) and a candidate for governor in Nevada, has questioned the sustainability of public-employee pay.

In a recent newspaper column, Willie Brown, the former speaker of the California State Assembly and former San Francisco mayor, took on the state's "out of control civil service." "We politicians, pushed by our friends in labor, gradually expanded pay and benefits" and layered on "incredibly generous retirement packages," he wrote. "At some point, someone is going to have to get honest." Time To Get Honest Is Always

The time to get honest is always. The time to show leadership and face reality is now. A few politicians are facing reality.

Facing Reality

• March 12, 2010 Kansas City School Superintendent John Covington: Kansas City School District Faces Bankruptcy, Closes 29 of 61 schools; Every Child Left Behind For Decades


• March 11, 2010 Governor Christie, Las Vegas Mayor Oscar Goodman: Hardball In New Jersey, No Balls In Virginia; Brass Balls In Las Vegas


• March 2, 2010 New Jersey Governor Chris Christie: Governor Christie: "Time to Hold Hands and Jump Off the Cliff" - Chris Christie For President?


• January 25, 2010 Numerous Small Cities: Growing Movement To Disband Police Departments

Facing reality at long last and taking a leadership role are two different things.

The one person clearly taking an actual leadership role is New Jersey Governor Chris Christie. The governor continues to impress.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post ListMike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

The Nashua Telegraph reports on New Hampshire. “In terms of home foreclosures, Scrooge took a holiday in December, but in January, he came back strong. The state saw 352 foreclosure deeds in January, a record for that month and the second most ever, just seven behind the 359 of last October, according to statistics compiled by the New Hampshire Housing Finance Authority. ‘This level of foreclosure activity may reflect the possible deferral by lenders of foreclosure proceedings during the holiday period, and it certainly offers evidence of the continued economic distress of many New Hampshire home owners,’ according to the authority’s report.”

“Banks will hold off on foreclosing in December for two reasons: They’re hesitant to foreclose during the holidays, and December can be a tough month for scheduling, said Jane Law, director of communications for the New Hampshire Housing Finance Authority. ‘That has happened in the past, particularly by some of the larger lenders,’ Law said.”

“Nashua Realtor Paul LaFlamme said he handled two foreclosures in January, which he called a ‘heavy’ number for one month. And there might be more coming, said LaFlamme, whose business includes short sales. Some banks have approached LaFlamme to get his opinion on the market value of properties, an indication that the lenders might be preparing to take ownership of the properties, he said.”

The Union Leader in New Hampshire. “There were 505 bankruptcy filings in February, a historic high for that month in New Hampshire. It’s the highest number since the bankruptcy laws were changed in 2005, and comes after a record January, when 381 bankruptcies were filed here. Sandra Kuhn, vice president of FamilyLegal law firm in Concord, isn’t surprised that bankruptcy filings are at an all-time high. These days, many of her clients are unemployed and unable to find work. ‘They’re living paycheck to paycheck, and when they don’t have that paycheck, they’re spiraling out of control,’ she said.”

“Meanwhile, new mortgage data indicate the problem still may be getting worse. The latest National Delinquency Survey by the Mortgage Bankers Association found that delinquencies continue to rise in New Hampshire, with 9 percent of all home loans past due in the fourth quarter of 2009. (Rates were not seasonally adjusted.) In sheer numbers, 10,674 prime loans and 5,446 subprime loans in New Hampshire were delinquent at the end of last year, according to the MBA.”

“The psychological aspects of foreclosure and bankruptcy can seem even more difficult for many these days, according to Kuhn. While some national experts say the economy is improving, folks who are still unemployed or losing their homes aren’t seeing any improvement. Kuhn would like to see a moratorium on mortgage payments — a kind of ‘breathing room’ — for those who are jobless.”

“‘It’s really, really hard if you’re unemployed, to be able sometimes to pay your mortgage,’ she said. ‘The thing is, nobody’s getting jobs.’”

The Times Argus in Vermont. “The recession continues to make its presence felt in Vermont as the number of homeowners facing foreclosure jumped 17 percent last year. There were 1,928 foreclosures filed in the state in 2009 compared to 1,639 the prior year, according to the Department of Banking, Insurance, Securities and Health Care Administration. With the exception of Rutland County, foreclosures increased in all 14 counties in the state last year.”

“The number of calls to the Mortgage Assistance Program hotline would indicate that more foreclosures are likely, at least in the near term, said Thomas Candon, deputy commissioner of the Department of Banking, Insurance, Securities and Health Care Administration. Some distressed homeowners are working with lenders to modify the terms of their mortgage using a voluntary loan modification program. But Candon said a successful outcome for many homeowners is questionable.”

“‘We’ve had people actually calls us, get into a loan modification, come out of it, go back into another one,’ said Candon, in pointing out the difficulty.”

The Warwick Beacon in Rhode Island. “Following the lead of its neighbors, Warwick gave first passage to an ordinance that city council members hope will work to stem foreclosures in the city at Monday evening’s meeting. ‘When I checked the number of foreclosures I was simply shocked and I said to myself ‘something needs to be done about this,’ said Helen Taylor (Ward-3). ‘This forces the banks and the lenders to sit down with the homeowners to negotiate with them to refinance or lower the price of the monthly payments that they’re required to pay.’”

“The process does allow for foreclosures to take place, but only after a good faith effort at resolution has occurred. Bill White, president of Coastway Community Bank, says that’s already happening. He observed it is not in the bank’s interest to foreclose, as the bank ends up selling the property at less than what it is worth. ‘When talking about some of the larger out of state banks maybe they aren’t going through the process, but we bend over backward. Where people have had extenuating circumstances we modify payments. It’s our best bet to get paid,’ he said.”

“‘I don’t see it as a productive step,’ he added. White said legislators are ‘making judgment we haven’t done that (attempted to keep people in their homes) and we have. I’m sure it is well intentioned but speaking for Coastway it misses the mark.’”

“Despite voting for the ordinance, councilman Ray Gallucci (Ward-8), said he believes it will be difficult to enforce. ‘I think it’s a good piece of legislation, but if we can’t enforce it, what good will it really do. I’m hearing Providence is having some trouble enforcing it,’ said Gallucci.”

The Boston Globe in Massachusetts. “Massachusetts could face a second wave of foreclosures as tens of thousands of distressed and bank-owned properties hit the market, slowing the state’s nascent housing recovery, officials from the Massachusetts Housing Partnership said. Clark Ziegler, executive director of the state’s quasi-public, affordable housing agency, said there are about 64,000 distressed properties in so-called shadow inventory poised to go on the market because they have delinquent mortgages, are in foreclosure, or already are owned by a lender.”

“‘The report is not warning of the ‘next big crisis,’ Ziegler said, but is a reminder that the housing market still a long way from recovery. ‘The reality is that there are more [foreclosed properties] to come, and it will stretch out how long it takes the recovery to play out,’ Ziegler said. ‘It is a cautionary tale.’”

“Alan Clayton-Matthews, a professor of public policy at Northeastern University, doesn’t believe shadow inventory will have a big impact locally. He said shadow inventory has been an issue for a while. ‘If this were a problem, it would derail the recovery in housing. We would have seen its effects by now,’ Clayton-Matthews said.”

“But Barry Bluestone, dean of the School of Public Policy and Urban Affairs at Northeastern University, said he was alarmed to see a recent surge in auctions of foreclosed homes, which can bring down prices especially in hard-hit towns. The number of published auction announcements tracked by Warren Group jumped in January by 81.5 percent to 2,385 compared with 1,314 in the same month in 2009. ‘The number of auctions is off the chart,’ Bluestone said. ‘It can have the effect of continuing to depress prices just as they are continuing to come back.’”

The Asbury Park Press in New Jersey. “The total value of properties in the township has decreased by about 7.5 percent, from $6.16 billion to about $5.7 billion, following the township-wide reassessment completed in December. The reassessment was intended to bring valuations in the township closer to market-rate figures, after Manalapan lost nearly $300,000 in legal fees and judgments in 360 lost tax challenges last year.”

“The average township home is now assessed at about $376,900, a 12 percent decrease from last year’s figure, $428,480. But the new valuation won’t be used on local and county tax bills until after 2010 municipal, school, fire and other budgets are adopted, township Chief Financial Officer Patricia Addario said. ‘(The reassessment) is not necessarily good news, because the value is irrelevant until you determine what the rate is,’ said Alan Ginsberg, an accountant who saw the assessment on his single-family Wildflower Court Colonial dip by about 13 percent.”

“Gov. Chris Christie’s looming budget cuts will put the brakes on an already slow economy, but the short-term pain will make New Jersey more competitive, Joel Naroff, an economist, said Thursday. ‘The issue was not the pain, but how to spread the pain,’ Naroff said. ‘We now have a governor who intends to inflict a major amount of pain across the state. And I congratulate him for that.’”

“Short of the creation of a bubble that rivaled the technology bubble of the 1990s and the housing bubble of the 2000s, consumers will remain stingy and the economy will grow only modestly, Naroff said. ‘I call it a change in strategy from shop ’til you drop to shop ’til you’re tired,’ Naroff said.”

“It means the state can’t count on a very big increase in tax revenue, leaving the state government faced with slashing expenses — a move that won’t be confined to the public sector, he said. ‘Everybody has to pay a steep price in the short-term,’ Naroff said after his speech, ’so that in the long-term we can have an economically competitive state.’”

Crain’s New York Business. “Real estate developer Shaya Boymelgreen’s Web site proclaims his finance business is ‘built on a solid foundation.’ He might wish to revisit that statement after federal regulators seized LibertyPointe Bank, an institution that he helped start and served as chairman. LibertyPointe late Thursday became the first New York City bank to fail in 11 years. For Mr. Boymelgreen, it was just the latest turn of the screw.”

“In January, he was evicted from his corporate headquarters in Brooklyn after the landlord said Mr. Boymelgreen stopped paying rent. Several of his real estate projects are stalled, and he faces a flood of lawsuits alleging everything from failure to repay loans to fraud and negligence, as well as breach of contract related to the construction and sale of two condominium projects.”

“Mr. Boymelgreen branched into banking in 2005, starting LibertyPointe with a partner named Meyer Eichler, the founder a Coney Island Avenue bookstore that bills itself as the world’s largest Judaica store. The idea was the bank would serve Brooklyn’s Orthodox Jewish population. ‘Money is begging us to come out,’ Mr. Eichler told The Brooklyn Paper at the time.”

The Real Deal on New York. “State Attorney General Andrew Cuomo’s office, which regulates the sale of condominiums in New York, has told the developers of the financially-troubled One Madison Park condominium to offer refunds to any buyers that have not closed on their apartments, The Real Deal has learned.”

“Cuomo’s office forced the rescission offers after senior lender Istar Financial filed last month to foreclose on developers Ira Shapiro and Marc Jacobs for allegedly defaulting on five months of interest payments, pledging apartments without the bank’s permission and allowing the building loan to fall out of balance by $63.6 million, according to court documents and legal sources.”

“Such a move would require the developers to refund deposits on more than 40 percent of the 69-unit tower at 23 East 22nd Street, as half of the units are under contract and a dozen of those contracts have closed, according to Department of Finance records.”

The New York Times. “Senate Banking Committee members from both parties said on Wednesday that they had agreed to include in their regulatory overhaul bill a new Office of Research and Analysis that would provide early warnings of possible systemic collapses, Edward Wyatt and Sewell Chan report in The New York Times. By standardizing financial instruments and reporting mechanisms, the agency would give regulators a broader view of the health of participants in the financial markets and the potential for problems to spread. The idea’s supporters say that kind of information was lacking in recent years as the housing bubble burst and troubles spread from firm to firm.”

“‘One of the problems we observed in the recent crisis is that nobody knew who had what,’ said Senator Jack Reed, a Rhode Island Democrat who last month introduced a stand-alone bill to establish a National Institute of Finance. ‘The result was a cascading effect of uncertainty and doubt.’”

From CNN Money. “In the U.S. Senate, the progressives are restless. A handful of them are making it known that Democratic leaders shouldn’t take their votes for granted when it comes to Wall Street reform. ‘I won’t vote for a bill if the banks have control of it,’ said Sen. Sherrod Brown, D-Ohio.”

“Brown sits on the Banking, Housing and Urban Affairs Committee and is among a group worried that Democrats have given away too much to woo Republican support for the bill. ‘Republicans are doing the bidding of their benefactors, the banks,’ he said.”

“The warnings come as committee Chairman Chris Dodd announced that negotiations with Republicans are taking too long and that he will unveil his own Wall Street reform bill Monday. Though Dodd’s proposal has no Republican support, the Connecticut Democrat said he will incorporate many Republican ideas in the hopes he will win bipartisan support.”

“Two other senators who have expressed deep reservations: Bernie Sanders, I-Vermont, and Ted Kaufman, D-Delaware. In remarks on the Senate floor, Kaufman warned that he won’t get behind ‘compromise measures that give only the illusion of change and a false sense of accomplishment.’”

“Sanders said he would vote against a Wall Street reform bill unless it includes an independent consumer regulator and tough new restrictions on banks. ‘The American people are disgusted with the behavior of Wall Street, and they don’t want us to go back to a time when Wall Street had no accountability and no regulation,’ Sanders said.”

“Still another Democratic senator, who asked not to be named, said the influence of banks isn’t limited to senators in just one party. ‘These banking institutions are so powerful, they’re all afraid of taking them on,’ the senator said.”

The Hartford Courant in Connecticut. “Unemployment in Connecticut ticked up slightly to 9 percent in January, the highest in this recession, according to a new report released by the state Department of Labor. The January rate, up from 8.8 percent in December, is the highest number for Connecticut since 1976, but it still is lower than the national rate of 9.7 percent.”

“In a sign of recovery, employers in Connecticut added 2,300 jobs in January — the first time since October that the net job figure increased and only the second time since March 2008. ‘Don’t break open the champagne, but you can open a bottle of beer over that one,’ said economist Nick Perna, a Yale lecturer and economic adviser to Webster Bank.”

“Over the past 12 months, construction had the biggest loss by percentage — 12 percent fewer jobs — and professional and business services lost the most positions, 18,600 over the year. Overall, the state’s economy reached 1,610,400 jobs in January, down by 52,500 from January 2009. The decline since the employment peak in March 2008 was 101,100, or nearly 6 percent of all jobs. ‘There’s a long way to go to regain the jobs that have been lost, Perna said. ‘All the TARP and all the other stuff from out there just kept the bottom from falling out,’ he said.”

“Perna is one of a stable of economists who make forecasts for the Wall Street Journal. That newspaper asked him which of five things was the greatest threat to the economy: scarcity of credit to small and medium-size businesses, losses in commercial real estate, another decline in the housing market, the U.S. deficit and less spending from consumers.”

“His answer: ‘None of the above. The U.S. Congress. And I mean that.’ Perna said the Senate has gone beyond gridlock to ‘armed conflict.’ ‘These people have gotten ideologically constipated,’ he said. “I think we’re now incapable of making reasonable economic policy in Washington.’”

The Norwich Bulletin in Connecticut. “Eastern Connecticut home foreclosures rose last month, with Windham County registering the highest percentage of the state’s eight counties. Windham County foreclosures rose 41 percent to 106 from 75 in January, according to RealtyTra. Windham’s February rate was 32.5 percent higher than the 80 foreclosures in the same month in 2009.”

“New London County foreclosures rose 11 percent to 174 in February from 157 in January. New London’s number was up 39 percent from the 125 in February 2009, RealtyTrac statistics show. The figures made New London the No. 5 county in the foreclosure rate rankings. The head officer of the region’s real estate sellers association wasn’t alarmed by the numbers. ‘Connecticut is in much better shape than the rest of the country,” said John Bolduc, CEO of the Norwich-based Eastern Connecticut Association of Realtors.”

“Connecticut had less of a housing boom than states such as Arizona, California and Florida, meaning the foreclosure problem is not as intense. Bolduc said he expects foreclosures to remain a problem for another year or two. ‘It’ll hang around, but things should get better,’ he said.”

The Wethersfield Post in Connecticut. “With jobs disappearing, unemployment growing and Connecticut facing an ongoing budget nightmare - in an election year - the Spring 2010 issue of ‘The Connecticut Economy: A University of Connecticut Quarterly Review,’ analyzes the state’s grim budget prospects.”

“The Quarterly Review also examines the economic consequences of local policy decisions including zoning controls, taxes, spending and regional cooperation that affect property values and the mix of residential housing. The editors note that Connecticut is an old state and growing older; the 39.4 median age of the state’s population ranks Connecticut as the seventh oldest state in the nation.
So, if Connecticut hopes to replace its aging, retirement-bound baby boomers with a cadre of younger workers, it needs to import them with a mix of challenging jobs, good pay and affordable housing, writes Quarterly Executive Editor Steven Lanza.”

“However, like most towns in other states, Connecticut communities have long used zoning controls to regulate the pace, mix and location of development. Lanza examines whether zoning works at cross purposes with broader public policy objectives, such as attracting young professionals to a rapidly graying state.”

“To shed light on how local policies affect real property values, co-editor Dennis Heffley and UConn economics Ph.D. graduate student Ekaterina Gnedenko apply a novel ‘open city’ model to examine policies including municipal taxes, spending, zoning and regional cooperation that maximize local property values.”

‘They note that ‘if property values reflect not just a town’s site and socioeconomic conditions, but also ‘how the town is run,’ then public officials who seek to enhance property values may be serving the interests of their constituents well.’”

From Tom Abate at the San Francisco Chronicle: Financial leaders dissect meltdown "What is quite shocking," [John Lipsky, a senior official of the International Monetary Fund] said, is how inadequate the world's regulatory supervisors were in curbing the lax lending standards at the heart of the housing and credit bubbles. Shocked? Hmmm ...

• Estimated 15% of Seattle mortgage holders underwater: http://is.gd/9YpKo #
• Seattle is #1 again! (for the biggest rental price drops) http://is.gd/9Ytun [spotted by reader 'see it clearly'] #
• RT @calculatedrisk: Shiller: Homeownership and American Culture http://bit.ly/9guSou #
• 2005: Weyerhaeuser buys Federal Way building for $21 million. 2010: They sell it for $8.2 million. http://is.gd/9ZZaW #
• Ray Pepper succeeds in getting some attention on the local news for his politically-charged ad: http://is.gd/a0H12 #
• Some squatters in Puyallup clearly don't understand how adverse possession works. http://is.gd/a0Hgx WA a.p. law:http://is.gd/a0Hyd #
• via @SeattleTimes – Posh Four Seasons project in downtown Seattle faces liens, lawsuits http://is.gd/a0MHY #
• KING5 crowing about "AMAZING GAINS" in King County home sales. http://is.gd/a40vF #
• KOMO's take on the Puyallup squatter story says the home was on the market as a short sale. http://is.gd/a4aAq #
• Zillow and Redfin get nods from the Wall Street Journal for their iPhone apps: http://is.gd/a5slX #
• RT @KirstenGrind: Another Washington bank gets a #NASDAQ warning: http://bit.ly/dw7S8H #
• Good article spotted by a reader: The myth of mortgage interest deduction http://is.gd/a9llP #
• Random: real estate agents make top 5 lists of would-be adulterers. http://is.gd/a9C3o #
• More big price cuts at Seattle-area condos:35% off Hjarta and Florera http://is.gd/ae9uF #
• Snohomish County paying two developers $1.7 million in botched handling of land-use issues. http://is.gd/ae9Wd #
• Looks like Seattle's got our very own version of Madoff… http://is.gd/aecd3 http://is.gd/aechI #
• $6 billion to WaMu holding company in settlement w/ FDIC & JPMorgan Chase http://is.gd/aoDNr http://is.gd/aoDQN #

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Note: this data is not seasonally adjusted. There is a very distinct seasonal pattern for imports, but not for exports. LA area ports handle about 40% of the nation's container port traffic.

Sometimes port traffic gives us an early hint of changes in the trade deficit. The following graph shows the loaded inbound and outbound traffic at the ports of Los Angeles and Long Beach in TEUs (TEUs: 20-foot equivalent units or 20-foot-long cargo container). Although containers tell us nothing about value, container traffic does give us an idea of the volume of goods being exported and imported.

Click on graph for larger image in new window.

Loaded inbound traffic was up 33.8% compared to February 2009. (up 9.5% compared to last year using three month average).

Of course trade collapsed in February 2009, so this is a very easy comparison. Inbound traffic was still down 18.3% vs. two years ago (Feb 2008).

Loaded outbound traffic was up 32.7% from February 2009. (+33.5% using three months average) This was also an easy YoY comparison for exports, because U.S. exports fell off a cliff in near the end of 2008.

Just as with imports, exports are still off from 2 years ago (off 10.0%).

And more from Ronald White at the LA Times: Trade numbers climb sharply at Southland ports Trade numbers at the ports of Los Angeles and Long Beach, the nation's busiest seaport complex, rose sharply in February compared with the same month last year, lending strength to the arguments of some experts who believe that a stronger-than-anticipated recovery may be underway.
...
"Our feeling is that consumers are coming back. They are spending a bit more of their money. They are less concerned about losing their jobs than they have been in the last three months," said Ben Hackett, founder of Hackett Associates, which tracks international trade at the nation's busiest seaports for the National Retail Federation.

Hackett said his firm had scaled back its expectations for trade growth in 2010, "but we think we'll be seeing a relatively strong year at a 10% to 14% increase. We should see steady improvement, minus the usual seasonal adjustments." The LA Times article is using the YoY numbers. However looking at the graph (red line), exports recovered in the first half of 2009, but export traffic has been mostly flat since last summer. The YoY increase for March will be much less than for February!

It is harder to tell about imports (blue line) because of the large seasonal swings.

Post off-topic ideas, links and Craigslist finds here. Please visit the HBB Forum.

 Is the number 8 so lucky that you would overpay just to spend $888,888?

 

Irvine Home Address ... 1 RAMADA Irvine, CA 92620
Resale Home Price ...... $888,888

GA_googleFillSlot("InPostAd");

Hold me, love me, hold me, love me.
I ain't got nothin' but love babe,
Eight days a week,
Eight days a week,
Eight days a week.

The Beatles -- Eight Days a Week

IHB News

Shevy's brother, Shayden Akason, and Shayden's team from the Oak Grove Lutheran School is playing for the North Dakota Class B State High School Basketball Championship this week. Their team is 23-0 and favored to win the championship. I want to wish them continued success as reward for their hard work and dedication. Some white men can jump.

Housing Bubble News from Patrick.net  Origin of Housing Bubble: The "National Homeownership Strategy" (theaffordablemortgagedepression.com)
Selling mansion? Expect to wait 3 years! (lansner.freedomblogging.com)
Defaulted loans may haunt seniors (finance.yahoo.com)
Unemployment rate hits record high in Southern California (pe.com)
Credit Card Excess Contracting for First Time in 40 Years (mybudget360.com)
Politics, shaky economy create no rush to restructure Fannie and Freddie (washingtonpost.com)
Europe bars Wall Street banks from government bond sales (guardian.co.uk)
Goldman Sucks (youtube.com)
Buying A House (youtube.com)
Grayson introduces pay-as-you-go public option act (grayson.house.gov) FHA, Fannie, Freddie, etc, all make housing LESS affordable (gregfielding.housingstorm.com)
Why California Is Doomed (Charles Hugh Smith)
Fed sees 'little change' in West's housing (lansner.freedomblogging.com)
Are we facing a second house price crash? (money.uk.msn.com)
Most Americans still unprepared for retirement (money.cnn.com)
Public Pensions Are Adding Risk to Raise Returns (nytimes.com)
The Magic Disappearing Act of American Jobs (theatlantic.com)
Developers New Scam: transfer tax paid to developers, forever (housingwatch.com)
San Diego real estate has a California problem (signonsandiego.com)
Do-it-yourselfers can shell out for a real estate 'bargain' (washingtonpost.com)
Strategic defaults on houses on the rise (sfgate.com)
Short-Sale Program Will Pay "Owners" to Sell at a Loss (savers and taxpayers lose) (nytimes.com)
Freddie Mac Will Buy Out 120-Day Delinquent Mortgages (savers and taxpayers lose) (housingwire.com)
Using the American Middle Class as a Credit Card for Wall Street Excess (mybudget360.com)
Billionaire: America's housing crisis getting more severe (bubblemeter.blogspot.com)
States Payrolls Lag as U.S. Austerity Sets In (bloomberg.com)
Underwater borrowers: To walk away or not when you owe more than house is worth (sun-sentinel.com)
Moreno Valley is prime example of housing boon and a bust (pe.com)
'Shadow inventory' may prolong housing slump (pressdemocrat.com)
The high cost of quake insurance in CA will rock your bank account (articles.latimes.com)
Condo towers sell for two-thirds off original value (lansner.freedomblogging.com)
Jobs: Short-term hope, long-term despair (money.cnn.com)
Rethinking the Government's Role in Housing Finance (nytimes.com)
Rep. Barney Frank warns of Fannie, Freddie risks (washingtonpost.com)
Fannie, Freddie Ask Banks to Eat Soured Mortgages (bloomberg.com)
Money and Politics: Are they somehow connected? (theonion.com)

 

Irvine Home Address ... 1 RAMADA Irvine, CA 92620

Resale Home Price ... $888,888

Home Purchase Price … $258,000
Home Purchase Date .... 7/12/1995

Net Gain (Loss) .......... $577,555
Percent Change .......... 244.5%
Annual Appreciation … 8.6%

Cost of Ownership
-------------------------------------------------
$888,888 .......... Asking Price
$177,778 .......... 20% Down Conventional
5.01% ............... Mortgage Interest Rate
$711,110 .......... 30-Year Mortgage
$184,263 .......... Income Requirement

$3,822 .......... Monthly Mortgage Payment

$770 .......... Property Tax
$0 .......... Special Taxes and Levies (Mello Roos)
$74 .......... Homeowners Insurance
$147 .......... Homeowners Association Fees
============================================
$4,813 .......... Monthly Cash Outlays

-$935 .......... Tax Savings (% of Interest and Property Tax)
-$853 .......... Equity Hidden in Payment
$347 .......... Lost Income to Down Payment (net of taxes)
$111 .......... Maintenance and Replacement Reserves
============================================
$3,483 .......... Monthly Cost of Ownership

Cash Acquisition Demands
------------------------------------------------------------------------------
$8,889 .......... Furnishing and Move In @1%
$8,889 .......... Closing Costs @1%
$7,111 ............ Interest Points @1% of Loan
$177,778 .......... Down Payment
============================================
$202,666 .......... Total Cash Costs
$53,300 ............ Emergency Cash Reserves
============================================
$255,966 .......... Total Savings Needed

Property Details for 1 RAMADA Irvine, CA 92620
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4 Beds
3 baths Baths
2,852 sq ft Home size
($312 / sq ft)
7,020 sq ft Lot Size
Year Built 1979
5 Days on Market
MLS Number S607557
Single Family, Residential Property Type
Northwood Community
Tract Cc
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Beautifully remodeled & expanded luxury home in gated community priced to sell now*Regular sale-not short sale*Entertainer's backyard w/pool, spa w/flagstone hardscape & waterfall*Expanded & totally remodeled kitchen (maple cabinets, granite countertops, tumbed marble backsplash, center island, corner lazy Susan, breakfast bar, Subzero refrigerator w/maple door fronts, stainless steel appliances including Viking 6 burner stove)is open to breakfast room & family room w/fireplace*Travertine floor downstairs, reshaped curving staircase, two-tone paint, plantation shutters, crown molding, newer double paned widnows, concrete tile roof, & the list goes on*Luxurious master suite w/retreat has fireplace, 3 closets, bath w/double sinks, separate tub & shower*One bedroom downstairs has remodeled bath w/shower w/tumbled marble surround, frameless door, newer vanity with maple cabinet*Walk to award-winning schools including Northwood High*No Mello-Roos*Great association w/pool,spa, tennis, gates*

The writer seems to have mistaken an asterisk for a period.

 

My taste is as bad as the owners; I like that carpet under the table and the decor in the bedroom.  

 

 

 

 

 

 

On March 12 the Guardian reported Greece debt: EU agrees bailout deal
Exclusive: Germany plays pivotal role in potential eurozone rescue package for Greek debts

The eurozone has agreed a multibillion-euro bailout for Greece as part of a package to shore up the single currency after weeks of crisis, the Guardian has learnt.

Senior sources in Brussels said that Berlin had bowed to the bailout agreement despite huge resistance in Germany and that the finance ministers of the "eurozone" – the 16 member states including Greece who use the euro – are to finalise the rescue package on Monday. The single currency's rulebook will also be rewritten to enforce greater fiscal discipline among members.

The member states have agreed on "co-ordinated bilateral contributions" in the form of loans or loan guarantees to Greece if Athens finds itself unable to refinance its soaring debt and requests help from the EU, a senior European commission official said.

Other sources said the aid could rise to €25bn (£22.6bn), although it is estimated in European capitals that Greece could need up to €55bn by the end of the year.EU Bonds For Greece Rescue

Also on March 12 Bloomberg reported EU Said to Discuss EU Bonds to Fund Any Greek Rescue.
European Union finance ministers will discuss next week whether any Greek bailout should be funded by EU bonds guaranteed by euro region governments, said three people briefed on preparations for March 15-16 meetings.

Another option would be for governments in the 16-nation euro region to give Greece loans to help the country finance its budget deficit, said the people, who spoke on condition of anonymity because the talks are private. Any EU bond sale would have to be agreed upon by all 27 EU nations, they said. Ministers from countries using the euro meet in Brussels on March 15 and will be joined by the rest of the EU the next day.

EU leaders have signaled they may offer Greece financial assistance if necessary, though German Chancellor Angela Merkel has so far refused to publicly give the green light for any such aid.

The German government has dropped its opposition to a bailout, paving the way for the EU to approve the plan to aid Greece at the Brussels meeting on March 15, the Guardian newspaper in London reported. Aid to Greece through the loans could reach 25 billion euros ($35 billion), the newspaper said.

Elmar Brok, a member of Merkel’s Christian Democrats in the European Parliament, said there is “unity in the euro group on finalizing a package that can be used to help Greece.” German Finance Ministry Unaware of Greek Bailout Deal

The Guardian may have an exclusive story, but is it correct? On March 13 ABC News is reporting German Finance Ministry Unaware of Greek Bailout Deal.The German Finance Ministry said on Saturday it was not aware of any agreement by euro zone members to provide a multi-billion euro bailout package for heavily indebted Greece.

"We are not aware that this is being planned," a ministry spokesman said, adding that Greece had not requested any aid.

"Greece is implementing its (savings) program and we expect that it will manage it alone," he said.Bailout No Longer Needed?

The Wall Street Journal is reporting No Need for Greek Bailout Now, France's Lagarde Says
Credible efforts by Greece's government to clean up its finances have so far negated the need for any bailout from the European Union, French Finance Minister Christine Lagarde said Friday.

In offering a strong vote of confidence in the new Greek government, Ms. Lagarde said in a Wall Street Journal interview that Greece had "for once, over-delivered from what was expected" in terms of legislation intended to cut spending.

Whereas she had expected cuts worth 1.5% of gross domestic product, the government had come up with 2%, she said.

Nonetheless, Ms. Lagarde said that "technical experts" at the EU have been working on a contingency plan, so that if the need arose, "all we would have to do is press the button."

Ms. Lagarde gave only guarded support for the creation of a European Monetary Fund, a new project currently under debate within the European Commission. "The European Monetary Fund is one of many options that we should explore [and] examine to see whether there is virtue and value in having it," she said. "I am not sure it is the ultimate answer to the issues we are dealing with at the moment."

Asked why the E.U. is so opposed to having the IMF simply fill such a role now and come to the aid of one of the euro zone's members, Ms. Lagarde said it is complicated by the presence of a monetary union. Whereas the E.U. worked with the IMF to provide support to Hungary and Latvia, both members of the broader European Union but not part of the euro zone, having the IMF involved in the euro zone "is a bit different."

"It is as if California were in terrible shape and you were to call the IMF to rescue California. That's a bit odd within the same monetary zone," she said.

In reference to the euro's slide against the dollar since the Greek crisis erupted, Ms. Lagarde said she was "kind of pleased that it has come down a bit" because it means that French exporters are "not knocking on my door" and pressuring her to do something about the high exchange rate.Patchwork Pension Plan Adds to Greek Debt Woes

While pondering the Greek bailout ping-pong match now currently set to no after being set to yes just a day earlier, please consider Patchwork Pension Plan Adds to Greek Debt Woes
Vasia Veremi may be only 28, but as a hairdresser in Athens, she is keenly aware that, under a current law that treats her job as hazardous to her health, she has the right to retire with a full pension at age 50.

“I use a hundred different chemicals every day — dyes, ammonia, you name it,” she said. “You think there’s no risk in that?”

“People should be able to retire at a decent age,” Ms. Veremi added. “We are not made to live 150 years.”

Perhaps not, but it is still difficult to explain to outsiders why the Greek government has identified at least 580 job categories deemed to be hazardous enough to merit retiring early — at age 50 for women and 55 for men.

As a consequence of decades of bargains struck between strong unions and weak governments, Greece has promised early retirement to about 700,000 employees, or 14 percent of its work force, giving it an average retirement age of 61, one of the lowest in Europe.

The law includes dangerous jobs like coal mining and bomb disposal. But it also covers radio and television presenters, who are thought to be at risk from the bacteria on their microphones, and musicians playing wind instruments, who must contend with gastric reflux as they puff and blow.

The situation in the United States is different but also painful. The government will face its own fiscal reckoning, analysts say, as 78 million baby boomers begin drawing on Social Security and Medicare programs to support them in retirement. Without some combination of higher taxes, benefit reductions or an increase in the retirement age, both programs will run short of money to make their promised payments within the next few decades. And many American states are woefully behind on funding their pension obligations for public employees.

In Europe, the conflict has already erupted on the streets, with workers demanding that generous retirement policies be kept while governments press to pare pensions and raise retirement ages because taxpayers cannot bear any additional weight and creditors will no longer finance excessive borrowing.

According to research by Jagadeesh Gokhale, an economist at the Cato Institute in Washington, bringing Greece’s pension obligations onto its balance sheet would show that the government’s debt is in reality equal to 875 percent of its gross domestic product, which is the broadest measure of a nation’s economic output. That would be the highest debt level among the 16 nations that use the euro, and far above Greece’s official debt level of 113 percent.

Other countries have obscured their total obligations as well. In France, where the official debt level is 76 percent of economic output, total debt rises to 549 percent once all of its current pension promises are taken into account. And in Germany, the current debt level of 69 percent would soar to 418 percent. There is much more in the article including a nice country by country table of current debt obligations and unfunded liabilities. Here is a partial list.

Greece...... 116% 875%
France...... 76% 549%
Germany... 72% 418%
UK............ 63% 442%
Poland...... 50% 1550%
US............. 84% 500%

For all the talk about how the US will implode because of Social Security and Medicare, it appears much of the Western world is in the same boat. This is certainly not a pretty picture.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post ListMike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

A Game of Tag Breaks Out Between London’s Graffiti Elite Wall Street Journal (hat tip reader Lance)

Climate linked to smaller birds BBC

The Dollar, the Deficit, and Accounting Identities Dean Baker

Fragile riches Rolfe Winkler

CSI Lehman-Barclays: Who Really Killed the September 2008 Deal? WSJ Deal Journal. Note the examiner’s report suggests that the FSA did not kill the Lehman deal; rather it set criteria as early as Sept. 10 and was never presented with a deal.

U.S., Europe at odds over global financial reform Washington Post. Pure Treasury PR.

Are Shipping Numbers Masking A Stealth Commodities Selloff? Clusterstock

Robert Reich: The Sham Recovery Huffington Post

The German Finance Minister Needs To Confront Investment Banks Simon Johnson

China May Face ‘Massive’ Bank Bailouts After Stimulus Program Bloomberg

Centrally Planned Suburbia Matt Yglesias

‘Apartheid’ call system filters out poor Barclays clients Daily Mail (hat tip reader Steve L)

Mortgage lending falls as buyers leave market Times Online

Not Durable? Michael Panzner

Antidote du jour:

From the December 2009 issue of The Baffler (no online version of this article available). For those not familiar with The Baffler, this is the revival of a magazine of business and culture edited by Thomas Frank that had previously been published from 1988 to 2007. This issue was called “Margin Call” and included articles by Matt Taibbi, Naomi Klein, Michael Lind. I believe readers will find this piece to be relevant. Enjoy!

Since inequalities of privilege are greater than could possibly be defended rationally, the intelligence of privileged groups is usually applied to the task of inventing specious proofs for the theory that universal values spring from, and that general interests are served by, the special privileges which they hold.

Reinhold Niebuhr, Moral Man and Immoral Society

A year on from its brush with Armageddon, the financial services industry has resumed its reckless, self-serving ways It isn’t hard to see why this has aroused simmering rage in normally complacent, pro-capitalist Main Street America. The budget commitments to salvaging the financial sector come to nearly $3 trillion, equivalent to more than $20,000 per federal income tax payer. To add insult to injury, the miscreants have also availed themselves of more welfare programs in the form of lending facilities and guarantees, totaling nearly $12 trillion, not all of which will prove to be money well spent.

Wall Street just looted the public on a massive scale. Having found this to be a wondrously lucrative exercise, it looks set to do it all over again.

These people above all were supposed to understand money, the value of it, the risks attendant with it. The industry broadly defined, even including once lowly commercial bank employees, profited handsomely as the debt bubble grew. Compensation per worker in the early 1980s was similar to that of all non-government employees. It started accelerating in 1983, and hit 181 percent of the level of private sector pay by 2007. The rewards at the top were rich indeed. The average employee at Goldman Sachs made $630,000 in 2007. That includes everyone, the receptionists, the guys in the mail room, the back office staff. Eight-figure bonuses for big producers became standard in the last cycle. And if the fourth quarter of 2009 proves as lucrative as the first three, Goldman’s bonuses for the year will exceed bubble-peak levels.

The rationale for the eye-popping rewards was simple. We lived in a Brave New World of finance, where the ability to slice, dice, repackage and sell risk led to better outcomes for all, via cheaper credit and better diversification. We have since learned that this flattering picture was a convenient cover for massive risk-taking and fraud. The industry regularly bundled complicated exposures into products and dumped them onto investors who didn’t understand them. Indeed, it has since become evident that the industry itself didn’t understand them. The supposedly sophisticated risk management techniques didn’t work so well for even the advanced practitioners, as both top investment banks and quant hedge funds hemorrhaged losses. And outside the finance arena, the wreckage is obvious: housing market plunges in the U.S., UK, Ireland, Spain, the Baltics and Australia; a steep decline in trade; a global recession with unemployment in the U.S. and elsewhere hitting highs not seen in more than 25 years, with the most accurate forecasters of the calamity intoning that the downturn will be protracted and the recovery anemic.

With economic casualties all about, thanks to baleful financial “innovations” and reckless trading bets, the tone-deafness of the former Masters of the Universe is striking. Their firms would have been reduced to sheer rubble were it not for the munificence of the taxpayer—or perhaps, more accurately, the haplessness of the official rescuers, who threw money at these players directly and indirectly, through a myriad a programs plus the brute force measure of super low interest rates, with perilous few strings attached.

Yet what is remarkable is that the widespread denunciations of excessive banking industry pay are met with incredulity and outright hostility. It’s one thing to be angry over a reversal in fortune; it’s one of the five stages of grief. But the petulance, the narcissism, the lack of any sense of proportion reveals a deep-seated pathology at work.

Exhibit A is the resignation letter of one Jake DeSantis, an executive vice president in AIG’s Financial Products unit, tendered in March 2009 as outcry over bonuses paid to executives of his firm reached a fever pitch. The New York Times ran it as an op-ed. “I am proud of everything I have done,” DeSantis wrote.

I was in no way involved in—or responsible for—the credit default swap transactions that have hamstrung A.I.G. Nor were more than a handful of the 400 current employees of A.I.G.-F.P. Most of those responsible have left the company and have conspicuously escaped the public outrage….

[W]e in the financial products unit have been betrayed by A.I.G. and are being unfairly persecuted by elected officials.…

I take this action after 11 years of dedicated, honorable service to A.I.G. … The profitability of the businesses with which I was associated clearly supported my compensation. I never received any pay resulting from the credit default swaps that are now losing so much money. I did, however, like many others here, lose a significant portion of my life savings in the form of deferred compensation invested in the capital of A.I.G.-F.P. because of those losses.

Anyone with an operating brain cell could shred the logic on display here. AIG had imploded, but unlike a normal failed business, it left a Chernobyl-scale steaming hulk that needed to be hermetically sealed at considerable cost to taxpayers. Employees of bankrupt enterprises seldom go about chest-beating that they did a good job, it was the guys down the hall who screwed up, so they therefore still deserve a fat bonus check. That line of reasoning is delusional, yet DeSantis had no perspective on it. And there is the self-righteous “honorable service,” which casts a well-paid job in the same terms as doing a tour of duty in the armed forces, and the hyperventilating: “proud,” “betrayed,” “unfairly persecuted,” “clearly supported.”

And to confirm the yawning perception gap, the letter was uniformly vilified in the Times’ comment section, but DeSantis’s colleagues gave him a standing ovation when he came to the office.

The New York press has served as an occasional outlet for this type of self-righteous venting. Some sightings from New York Magazine:

[I]f someone went to Columbia or Wharton, [even if] their company is a fumbling, mismanaged bank, why should they all of a sudden be paid the same as the guy down the block who delivers restaurant supplies for Sysco…?

I’m attached to my BlackBerry. … I get calls at two in the morning. … That costs money. If they keep compensation capped, I don’t know how the deals get done.

It never seems to occur to them, as Clemenceau once said, that the graveyards are full of indispensable men. So if the cohort with glittering resumes no longer deems the pay on offer sufficiently motivating for them to get out of bed, guess what? People with less illustrious pedigrees will gladly take their places.

And the New York Times has itemized how the math of a successful banker lifestyle (kids in private school, Upper East Side co-op, summer house in Hamptons) simply doesn’t work on $500,000 a year. Of course, it omitted to point out that outsized securities industry pay was precisely what escalated the costs of what was once a mere upper-middle-class New York City lifestyle to a level most people would deem stratospheric.

Although the word “entitlement” fits, it’s been used so frequently as to have become inadequate to capture the preening self-regard, the obliviousness to the damage that high-flying finance has inflicted on the real economy, the learned blindness to vital considerations in the pay equation. Getting an education, or even hard work, does not guarantee outcomes. One of the basic precepts of finance is that of a risk-return tradeoff: high potential payoff investments come with greater downside.

But how did that evolve into the current belief system among the incumbents, that Wall Street was a sure ride, a guaranteed “heads I win, tails you lose” bet? The industry has seen substantial setbacks—the end of fixed commissions in 1975, which led to business failures and industry consolidation, followed by years of stagflation, punitive to financial assets and securities industry earnings; the aftermath of savings and loan crisis, which saw employment in mergers and acquisitions contract by 75 percent; the dot-com bust, which saw headhunters inundated with resumes of former high fliers. Those who still had jobs were grateful be employed, even if simultaneously unhappy find themselves diligently tilling soil in a drought year, certain to reap a meager harvest.

But you never heard any caviling about how awful it was to have gone, say, from making $2 or $3 million to a mere $400,000 (notice how much lower the prevailing peak numbers were in recent cycles). And if you were having trouble paying your expenses, that was clearly bad planning. Everyone knew the business was volatile. Indeed, the skimpy salaries once served as a reminder that nothing was guaranteed.

So why the unseemly whining? It’s a symptom of longstanding pathologies in the industry that were once narrowly useful but which have gotten wildly out of hand.

It wasn’t always that way. I worked for a few years in the early 1980s in investment banking at Goldman Sachs, and later in the decade starting up the M&A business for a Japanese bank, then the second largest in the world, in that brief window when the island nation seemed to be buying up America. I have continued to consult to the industry.

Unfortunately, it isn’t hard to see how those on the investment banking meal ticket come to have an unduly high opinion of their worth.

Wall Street jobs have long been the prime objective at the top of the MBA food chain, and that has always been a function of the money. Aside from looking for people who are well groomed, articulate and reasonably numerate (image is important, given the fees charged to corporate clients), firms screen job candidates for money orientation and what is politely called drive. At Goldman, the word “aggressive” was used frequently a term of approbation.

But the firms are white-collar sweatshops with glamorous trappings. You do not know how hard you can work, short of slavery, unless you have been an investment banking analyst or associate. It is not merely the hours, but the extreme and unrelenting time pressure. Priorities are revised every day, numerous times during the day, as markets move. You have many bosses, each with independent demands and deadlines, and none cares what the others want done when. You are not allowed to say no to unreasonable demands. The sense of urgency is so great that waiting for an elevator is typically agonizing. If you manage to get your bills paid and your laundry done, you are managing your personal life well. Exhaustion is normal. On a quick run home en route to the airport after an all-nighter, a co-worker tried to shower fully clothed.

A setting that would seem to reward, nay require, cutting corners has another striking feature: intolerance for error. A computation mistake or a typo in a client document is a career-limiting event. Minor miscues undercut the notion that your firm can execute the more complex and risky elements correctly

And the dynamic doesn’t change much over the course of one’s career. The drill of being a medical resident (or pre-Iraq, a tour of duty) has a known endpoint. But investment bankers have signed a Faustian contract: You have no right to personal boundaries. The business says how high to jump, and you are expected to deliver. Yes, more senior people have more dignity, but the idea that your needs are second to those of the business never changes.

In my day, it wasn’t uncommon for the firm to ask associates to reschedule weddings if they conflicted with a deal. It wasn’t that firms were opposed to marriage; indeed, the partners knew a young man was theirs once he procured a wife and, better yet, kids. He was tied hopelessly into a personal overhead structure that would keep him in the business.

Not that there was any real risk that someone would leave voluntarily. Exhaustion and loss of personal boundaries are an ideal setting for brainwashing, which is why people who have spent much of their career in finance have such difficulty understanding why their firm and their worldview might not be the center of the universe, why they might not be deserving of their outsized pay.

The finance community has other elements in common with cults. One is the implicit and explicit reinforcement of bankers’ “specialness,” their elite status. In how many lines of work do you get to meet with CEOs at a tender age, much less work on matters where hundreds of millions, often billion, are routine? Senior people in the investment banks are political fundraising heavyweights and sit on high-prestige nonprofit boards. Anyone of a Calvinist persuasion would be impressed.

Another parallel to cult indoctrination is that the demands of the job remove new hires from established friends and family and plunge them into a new environment. Most people who come to Wall Street are not New York natives, and the extreme and erratic hours make it difficult to maintain old ties. Season tickets are likely to be given away. Vacations (save for the week before Labor Day and the Christmas-New Year’s period) are frequently rescheduled.

Class consciousness is felt nowhere more keenly than in the world of high finance. Wall Street denizens earn more money than most people—that’s the point, after all. And that means they become accustomed to the perks, such as eating at restaurants that might strain the budget of those less well situated. And, frankly, with their lives revolving around finance and business, other interests wither. In most cases, it’s more fun for them to talk shop than to relate to people outside their cloistered world. The incestuousness often extends to one’s personal life. When I was at Goldman, the only married women professionals who were not married to men at Goldman had come to the firm hitched.

These values become deeply internalized. One buddy, a vice president in hard-charging, testosterone-filled M&A, spent the better part of a weekend lying on her side on the floor of her office, reading deal documents. She kept reassuring concerned colleagues that she was fine, until the pain got so bad that she relented and called her boyfriend. He came and took her straight to the hospital. The doctors operated immediately, assuming she had appendicitis. They found instead diverticulitis, which usually afflicts the elderly, and she was so close to a colon rupture that they had to remove half of it.

The partners at her firm instructed her to not to return until she had recovered fully. But this was September. Bonuses were paid at year end, and as she read the unwritten code, and knew that staying away too long would be seen as a sign of weakness. She was back at the office three weeks later, looking wan.

She later became the first woman investment banking partner at her prestigious firm. Her instincts served her well. Or maybe not. She later lost 90 percent of the vision in one eye to glaucoma, an easily treated disease, because her overloaded schedule made eye exams seem like a luxury.

Trading, the other side of the business, is stereotyped as the antipode of investment banking, with the market makers and the dealmakers viewing each other in disdain. While there are other subcultures within large firms, the bankers and the traders are the alphas and set the tone.

In the old days, traders were almost without exception order flow traders who served the socially useful function of making markets in instruments that weren’t listed on exchanges. It’s an adrenaline-filled game, with quick highs and gut-wrenching lows. Unlike bankers, who can never truly take personal credit for the profits on a deal (even if they brought it in, the firm’s franchise usually played a role), traders see their P&L as their own output, even though they use the firm’s infrastructure, research and capital.

Historically, traders often came from modest backgrounds Indeed, some scrappy firms such as the former bond market king Salomon Brothers didn’t care if traders had two heads as long as they produced.

But as Wall Street became a bigger and more profitable, in part by eating commercial banks’ lunch, trading-related jobs became more sought after. Even Tom Wolfe took note in his 1987 novel Bonfire of the Vanities, portraying Sherman McCoy as inordinately proud of the Ivy Leaguers reporting to him.

As markets became more liquid, and more complex instruments were created, firms began creating specialist trading groups to make bets with house funds. Unlike the traditional market makers, they did not deal with customer orders but were strictly out to make money into more money. The pattern for the so-called proprietary traders was set nearly 20 years ago. Securities industry denizens were taken aback to learn that Larry Hilibrand, a member of Salomon Brothers’ bond arbitrage group, made $23 million in 1990, then an unseemly sum. But even that wasn’t enough for Hilibrand; he and his colleagues decamped to form the now infamous Long Term Capital Management, which did spectacularly well before nearly bringing down the entire financial system in 1998.

Trading is an autistic activity. Markets are impersonal. And despite the shows of bravura, there’s an ever-present undercurrent of terror. Even if things look to be working out well, they could turn swiftly into monstrous losses. And again, as LTCM illustrated, it’s all too easy for successful traders to lose that sense of fear, to start believing in their own genius and take risk recklessly.

The picture of traders, both in the media and too often in their own eyes, reveals more than a bit of a John Galt fantasy, casting them as brilliant, productive people, with others piggybacking on their earnings. That’s hogwash. Traders conveniently forget that they have managed to get themselves in a hugely advantageous position: They get a slice of their profits if they win, but don’t disgorge them when they screw up. The worst that happens is they lose their job. And a remarkable number fail upwards, or at least sideways. Witness how John Meriwether, is now raising his third fund after heading two firms (LTCM and JWM Partners) that failed.

Moreover, traders benefit from massive subsidies, such as artificially low interest rates (not just now, but certainly since 2001 and, some argue, even earlier), plus industry-serving policies that produced a highly concentrated structure, with a small number of firms sitting at the nexus of massive capital and information flows. The big Wall Street firm trader’s claim that he is an independent operator fully deserving his earnings is a wonderful bit of mythology. It’s like claiming prowess in hunting based on the results achieved at a well-stocked game reserve, with some of the prey drugged to boot.

Many psychological disorders are otherwise healthy tendencies carried too far, unchecked by other personal attributes. Single-mindedness, drive to succeed, aggressiveness and lack of remorse are useful traits in business, but when do they tip into the psychopathic? In the case of Wall Street, the collective psyche has suffered as important checks on ego and behavior have eroded.

One no longer operative constraint is the partnership form of ownership. In the days when partnerships prevailed, senior management had good reason to keep pay demands in line. The partners had most of their wealth tied up in the business; they lived poor and died rich. If the firm suffered a loss, the consequences were disruptive to catastrophic. You couldn’t replenish capital easily; mortgaging the house will only go so far. And the partners were personally liable. They were on the hook for any shortfall. Many once famous Wall Street names lost their independence due to weak performance or losses: Kuhn Loeb, First Boston (over a series of years), Bache & Company, A.G. Becker, Lehman Brothers Kuhn Loeb (in 1984), Drexel Burnham Lambert.

But despite the peril it posed to the owners, the partnership form had some compelling advantages: Compensation levels were confidential, so as not to annoy less well remunerated clients, and the firms were not exposed to double taxation. And the partnerships had a cachet that the public firms, mainly retail brokers, sorely lacked.

That mode of operation in turn produced a great deal of vigilance, at least in the firms that proved to be survivors. The management committees needed to set pay levels so that the business was also retaining sufficient capital to remain competitive. These owners also had narrow spans of control, acting as players in as well as managers of businesses they had grown up in. In the market-making businesses, they were usually the senior traders on the desks and knew the foibles of their subordinates.

And so performance-inducing levels of compensation and the long-term health of the business were held in balance. Moreover, the leadership had reason to rein in big egos, since they could feel emboldened to take risks that would jeopardize the firms.

In the early 1990s, Sallie Krawchek, then an equity analyst covering publicly owned investment banks for Sanford Bernstein, remarked, “It’s better to be an employee of a Wall Street firm than a shareholder.” Being public changed all the incentives. Management had less reason to be cautious. Indeed, that also showed up in her analysis. The most profitable business was fixed income, meaning the debt-trading business, and even then the firms were on a trajectory of taking on more risk.

And more risk changes the meaning of trader profits. The private partnerships had managed against the fact that the non-partner market-makers didn’t share in the downside, and a key device was making sure that joining the partnership was the richest reward. That alone encouraged underlings to be more judicious.

To illustrate how much values have shifted in a money-minded business, John Whitehead, the former co-chairman of Goldman who presided through 1984, blasted the current CEO Lloyd Blankfein over the “shocking” pay levels. “They’re the leaders in this outrageous increase,’’ Whitehead remarked in 2007. He urged the firm to be “courageous” enough to lower bonuses and re-instill a sense of propriety.

But Whitehead, like most seasoned hands trying to persuade younger generations of the error of their ways, was ignored.

In the “other people’s money” world, there was less reason for restraint. Indeed, an expression has become common that would have been unthinkable in the 1980s: “IBG, YBG”— “I’ll be gone, you’ll be gone.” In other words, long-term consequences (likely damage) don’t matter; all that counts is this year’s kill. And if it’s big enough, you will never need to work again.

This attitude is predatory. And it has become widespread. A former Deutsche Bank employee, Deepak Moorjani, wrote:

When speaking about the banking sector, many people mention a “subprime crisis” or a “financial crisis” as if recent write-downs and losses are caused by external events. Where some see coincidence, I see consequence. At Deutsche Bank, I consider our poor results to be a “management debacle,” a natural outcome of unfettered risk-taking, poor incentive structures and the lack of a system of checks and balances.

In my opinion, we took too much risk, failed to manage this risk and broke too many laws and regulations. … [T]he system of incentives encourages people to take risks. I have seen honest, high-integrity people lose themselves in this cowboy culture, because more risk-taking generally means better pay. Bizarrely, this risk comes with virtually no liability, and this system of O.P.M. (Other People’s Money) insures that the firm absorbs any losses from bad trades.

And remember, in the Brave New World of OPM, management has every reason to be in on the game. Their bonuses are a function of the profitability of the businesses that report to them. And now that the consequences are evident, it is easy to rationalize the behavior: Everyone else was operating the same way, there was money to be made, you were just providing what the “market” wanted.

A second change has been in how members of the industry see themselves. Most I ran across were proud to be members of respected firms (the reaction when offering your card was quick confirmation), but no one labored under the delusion that finance was an elevated calling. It was a necessary function, the plumbing of a capitalist economy. If there was anything to congratulate yourself for, it was having discovered and gotten into a field that offered outsized rewards, thanks to regulatory and scale-based barriers to entry. The same M&A banker who jeopardized her health in her successful pursuit of partnership once commented dismissively, “It’s indoor work.” A successful institutional salesman said he had never run into more mediocre overpaid people than on Wall Street.

Thirty years of conservative extolling of the virtues of “free markets” seems to have contributed to the banking sector’s inflated ego. Even though the securities markets are far from “free” (they are regulated to varying degrees), the mythology has taken hold that players in finance allocate capital to its best uses—a role of vital importance to society—and therefore deserve to be more richly compensated than everyone else. Such rationales became necessary as growth in capital markets pay greatly outstripped that of other forms of indoor work.

But this flattering self-image is inaccurate. It’s the end investors that are making the capital allocation decisions; the brokers and bankers are facilitators and an information hub. And, unfortunately, as we’ve seen with auction rate securities and dodgy collateralized debt obligations sold to hapless investors as far away as Norway and Australia, the sellers were sometimes less than forthcoming about the quality of the wares they were peddling.

Nevertheless, one sees bankers and brokers, who concede that much of the anger directed at fancy finance is “very well deserved” nevertheless take DeSantis-like exception to their specialty being spattered in the mud-slinging. From the blogger Epicurean DealMaker:

And, in twenty years of offering M&A and financial advice to corporate clients, I have yet to meet someone who has intentionally pushed a “bad” M&A idea to a client, either. Sure, I’ve been in pitches where a banker has proposed silly, ill-thought-out, or downright stupid M&A ideas to a client, but those instances are either unintentional—in which case the client throws the banker out of his office and said banker usually gets fired in the next round of layoffs—or intentionally designed to provoke a deeper and more productive dialogue with the client.

One wonders, has the Epicure ever actually worked on the sell side? There, the banker’s role is to elicit the best possible price. And, trust me, plenty of crappy businesses get peddled. That’s precisely when a broker adds most value, in monetizing a garbage barge, and I saw tons of them when representing one of the preferred dumping grounds, the hapless Japanese. Ah, but of course! They aren’t your client; it’s perfectly OK if the guy on the other side of the table is a stuffee.

Yet to prove his point that the critics have gone overboard, the Epicure wraps himself and his colleagues in a mantle of “we’re good guys in our sector.” What is troubling is that his black-and-white portrait doesn’t appear to be a rhetorical device; he seems to believe it.

Later he writes:

Would the esteemed economist from the New York Times care to explain to me exactly how the finance industry was able to unilaterally increase demand for its services while drastically expanding its operating margins? Maybe I don’t remember my entry-level Economics so good, but that strikes me as a somewhat dubious proposition. And yet, that is exactly the conclusion an inattentive or ill-informed reader would draw from Mr. Krugman’s tendentious screed: regulate those nasty bankers, before they force our country to lever up and make them filthy rich again!

The anger is as telling as the logic, or lack thereof. The Epicure never addresses the inconvenient truth that lay at the heart of all those arguments for stricter regulation: that the rising asset values that fueled the securities industry boom in turn were the result of ever-increasing borrowings. Private sector debt to GDP rose gradually in the 1980s, more steeply in the 1990s, and went near hyperbolic from 1999 onward.

In modern economies, we don’t let banking systems that lend money on a reckless scale go bust, as much as that would be a useful cautionary practice. We socialize the losses. Those who weren’t perps fail to acknowledge that they benefited from the wanton risk-taking nevertheless. In the case of the Epicurean Dealmaker, how can he not recognize that transaction prices were pushed up enormously by the easy access to cheap deal funding? And that his fees, set as a percentage of the deal price, were higher as a result? Many of the cheap loans that funded transactions and pushed M&A prices into the stratosphere were in collateralized loan obligations. The big lenders and investment banks hadn’t unloaded them when the crisis hit, so they are part of the losses that taxpayers are now eating.

That’s why the great unwashed public is furious. They may lack the sophistication to grasp the arcana of the financial crisis, but they sense that the explanations for the costs they are bearing are insufficient; they see that a lot more people were feeding at the trough, directly or indirectly, than the poster children served up for public ridicule. And they’re right.

So the whining, the petulance, the defensiveness, the distorted reasoning, signifies something much deeper and more troubling.

Finance has lost sight of its role.

Banking and capital markets have become important to advanced economies, but also they represent a charge on the productive economy, just like lawyers and national defense. Ironically, the Japanese understood this well, and were still unable to prevent a turbo charged borrowing binge that left their economy a mess. They recognized that letting banks be very profitable comes at the expense of industry. And indeed, until the global financial crisis, while Japan’s domestic economy remained mired in deflation, its export sector was still robust. When our crisis broke out, Japanese policy makers were uncharacteristically blunt and warned the US that the mistake they had made was not cleaning up their banking sector quickly. We are repeating their error for the very same reason: financial firms have great political clout.

Or, as John Maynard Keynes put it, “When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill done.”

Yet the people at the heart of this system, even with the wreckage they created all around them, still fail to acknowledge that the rich pay of recent years was the product of a debt binge. It wasn’t just the makers of the pernicious securities who benefited; all boats in the finance industry rose with the surge of borrowing. Trying to defend the status quo ante shows a willful, self-serving blindness to the proper place of financial markets in a healthy economy.

Worse, it bespeaks a dangerous, destructive ideology that has somehow managed to live on, zombie-like, through the crisis. The idea that the needs of the financial sector trump those of the productive sector isn’t just specious; as the crisis so vividly demonstrated, it’s outright dangerous. But its strange persistence as an article of faith among our leadership class, both in government and the media, has yielded inertia and fecklessness where there should be energy and resolve. It seems that before we can confront the challenge of mending our broken financial system, a battle of ideology must be waged and won. And the hour is getting late.

Longtime homebuilding executive William H. McFarland has taken the reins as CEO of FNE Holdings LLC, the parent company of Irvine-based Fieldstone Homes. The 29-year-old Fieldstone has built nearly 26,000 homes in Southern California, Utah and Texas.

In the past, McFarland served in various executive positions at the Irvine Co., overseeing homebuilding and apartments. He was last in the news as one of four members of the William Lyon Homes board who resigned in a public spat with the company’s co-founder and namesake over his efforts to take that firm private. McFarland declined to answer any questions about Lyon Homes, preferring to speak instead about future prospects for Fieldstone.

Us: It’s been brutal for homebuilders these past few years. What’s the outlook looking forward?

Bill: We all know the market overall has not been great, but it’s coming back. At same time, there have been and are markets that did not experience a downturn, including the San Antonio market where Fieldstone has operated since 2003. Recently, Fieldstone increased its market share in San Antonio, and it is seen as the real value builder in that market. This is because we appeal strongly to first-time and first move-up buyers—the buying segment best situated to benefit from current market conditions.

Us: The Irvine Co. has had some initial success with its opening at Woodbury, and Lennar is venturing back into the market, resuming sales at its Central Park West. Do you sense that the market is picking up?

Bill: In Southern California, we see pockets of strength and good indications that some areas are improving. Houses are selling. The key right now and for the foreseeable future is to provide good value to the buyer. This is Fieldstone’s strong suit. The company is recognized as a very efficient value builder that produces great product at a lower cost than most builders. We’re in the “sweet spot” of the market. This is because Fieldstone does not have carry-over land inventory to work through. We’re proceeding with new projects both on a fee-builder basis and with new acquisitions located in areas specifically chosen because they are showing strength.

Us: Are you concerned that sales will slacken after tax credits expire and after the Fed ends its program of buying mortgages?

Bill: There will probably be at least some temporary decline in sales as a result of the tax credit expiration. It’ll have some impact. However, who knows?  The government may offer another extension of the buyer’s credit and/or continue to buy mortgages if the market is not improving. Job growth is the driver for housing demand, and until job growth turns positive, there will likely be government homebuyer support efforts of some kind. These programs are helpful for homebuyers in obtaining mortgage loans to buy houses.

The challenge for private homebuilders is obtaining new construction loans and equity capital to build new homes. We can say that this is a great time for the non-traditional lender to be in the financial stream providing financing of all types to homebuilders at a low-risk, high-return value. In fact, investors don’t have many other alternatives to give them good value.

Today, with selected markets improving, investors can make sound investments in real estate development, provided they are careful in choosing with whom they invest and where. It is a good time to participate in residential homebuilding to add a higher yielding asset class in their investment portfolios.

Us: When the new home market returns to normal, will it be just like before, or have things changed for good?

Bill: No one can answer the question of the future except to say it is unlikely that we will see another housing bubble anytime soon, if ever. Our objective is to take advantage of Fieldstone’s strengths as the efficient, lower-cost provider of great brand-name product in the housing marketplace and to be selective in new projects going forward. We will respond to the market that evolves and rebuild the company’s volume in that way.

Us: You’ve been moving around a bit of late. How did you end up at Fieldstone?

Bill: I have been an investor in Fieldstone for six years and had been on the Board of Directors for most of 2009.

Us: What are your plans and goals for Fieldstone?

Bill: This is a great time for first-time and first move-up buyers to be in the market if they can get financing. This is the niche Fieldstone serves, so we will focus on our strengths to provide our great brand-name product in the housing marketplace and to be selective in new projects going forward on both a fee-builder basis and with new acquisitions located in areas specifically chosen because they are showing strength.

Our challenge is in finding construction financing, but this is a great time for the non-traditional lender to be in the financial stream providing financing of all types to homebuilders at a low-risk for high-return value.

Us: How long to plan to be at the helm of FNE Holdings/Fieldstone?

Bill: I plan to remain at Fieldstone for many years to come.

Insider Q&As:

Builder sees ‘pockets of strength’ in SoCal is a post from: Lansner on Real Estate

It's said you have to kiss a lot of frogs to find your handsome prince. Researching on the web is the same. You have to read a lot of drivel to learn anything of worth.

Because I do wade through so much drivel in the course of a day, something has to be pretty awful for me to take note of it.  This "exceptional" piece however, caught my eye. I challenge anyone to figure out the thesis of Tiger Woods Practices in Isleworth FL, Nation's 2nd Worst Housing Market:

The recently scandalous Tiger Woods has finally picked his golf clubs back up. The golfer returned to the playing fields in Florida, in a neighborhood called Isleworth, a luxury golf community outside of his Orlando home. Not a coincidence, the golf course is headed by golf legend Arnold Palmer, who is also hosting Woods' first possible return championship, the Arnold Palmer Invitational.

Tiger took a break from the golf world after his personal life became top news last November. Golfing took a hit because Woods always drew in high revenue and attention, but his absence allowed other golfers to get a taste of victory.

"At this point, we still don't know," stated Scott Wellington to the associated press. "He has until next Friday to commit. But it was a busy day, for sure. We had a lot of calls, a lot of interest and we sold some tickets. It was interesting."

Florida was hit almost as hard as California when the housing market crashed. As of February, Florida had the second highest foreclosure rate in the nation with 54,032 houses under foreclosure. The 2009 fourth quarter negative equity estimates ranged around 47.8 percent of all present mortgages.

Isleworth, is in Orange County, which has faired better than others in Florida, but Orange County is still in sixth place in the state for highest foreclosure numbers. Isleworth represents true Floridian luxury. Membership of the country club is by invitation only. Looks like they haven't rescinded Woods' membership like some of his advertisers have.

My theory is that the original article was only supposed to be about Woods possible return to golf, but some editor said the article wasn't long enough.  The reporter was told to add two more paragraphs. With no more information on Woods available, she wrote about the location- and its foreclosure rate. The information lengthened the article, but left her with no discernible thesis.

It does give one pause though. Traditionally when a location is talked about, you expect a discussion of things like climate, economy, schools, etc. Are we starting to hit the point that when we discuss a locale we discuss the foreclosure rate- even in an article about golf? In the future can we expect the following types of comments?

• So Sally moved to Colorado. What's the foreclosure rate there these days?
• How can you consider vacationing in Las Vegas? What about all those foreclosures?
• Smith is an amazing quarterback, especially considering the foreclosure rate of his hometown.
• Pleasanton is a lovely town with tidy homes, well manicured lawns and hardly any foreclosures.

Maybe it's not quite that bad yet. Maybe this is just an example of truly terrible writing. Then again, maybe it's a sign of things to come.

Feel like spending around $1.3 million or so?

Here’s what it’ll get you in the Convenant of Rancho Santa Fe:

Enjoy!

View the segment here.

Springtime's great in MB. Watch for a warming trend later this week, like things weren't hot enough already in the local RE market.

Once again, we love the flood of new options for open-house gawking, shopping, or what have you.

Ah, and one of our old friends is back, and we've got a price now – see below.

Click here for the complete list of opens published in the Beach Reporter, or at any time use the link from the "Property Search Tools" pull-down menu in the top navigation bar.

As always, click any highlighted property address for more pics & details via Redfin.

Please report back here at MBC on any open houses you visit – what you like, what you don't like, etcetera.


Hill Section

We last saw 910 2nd on the market in Fall 2008. Back then, the home began at $2.895m and had a more or less immediate deal, but that fell through. (See "Down Hill.") It lingered for a while thereafter but eventually quit.

The home itself (5br/4ba, 3400 sq. ft.) is a familiar design to those who know the architect, but it's no less interesting for that. No square lines here – bright, rounded rooms dominate. There are flashes of elegance.

You get some ocean peeks (views?), afforded by the location up along the hill, but busy 2nd St. is a liability.

The chances of this one reaching its goal price in 2008 may have been irretrievably damaged when next-door neighbor 918 2nd sold for $2.920m in Sept. 2008. That home was very similar in design, slightly newer and bigger (2000 build, 4br/4ba, 4300 sq. ft.), set on a lot nearly twice the size. So how could you get 2.9 for a home that's 20% smaller on half the land?

That was a tough question then, so the sellers quit. This year, they're starting at $2.599m, down almost $300k from their last list price, but is that adjustment enough?

910 2nd is open Sun. 1-4pm.

805 Duncan Place (5br/3ba, 4100 sq. ft.) offers plenty of house with a substantial location issue. How do you feel about living at the corner of an alley and a busy street (Ardmore in this case)?

The late-80s build has been freshened up inside with a modern kitchen and some inspired Craftsman style. Nice touches give it a warm, natural feel, and – how often do you get this: Fruit trees!?

As we often say, price can solve problems like location challenges. Point of reference: 808 Duncan Place (5br/5ba, 3525 sq. ft.), a newer and elegant home with some views, right across the alley, just sold for $2.088m in December.

805 Duncan starts at $1.995m. It's open Sat. & Sun. 1-4pm.


Sand Section

4419 Highland Ave. (4br/3ba, 1975 sq. ft.) is back, and we now have the first word of the new price: $1.189m.

As we noted in "'Gateway' Returning?" last week, this profoundly challenged home began new in June 2007 at $1.695m and slid, over about 16 months, to $1.265m before renting out in Fall 2008.

The current listing is pretty reserved, leading with the notion that $1.2m qualifies as "affordable" beach living. So the new writeup made us pine for the classic original listing description:
First thing that will win you over is the high ceilings, second, large open living room with stylish fireplace exquisite ocean and Malibu mountain views! Three levels of bliss!Three levels of bliss, indeed. Now, there is a little gem in the new writeup: "effortless access to all local services." You know the location. You know the history. We'll let you consider the implications of that.

4419 Highland is open Sun. 2-4pm. Catch it on your way into, or out of, town.

456 27th (3br/3ba, 2625 sq. ft.) is one of 3 "Old World" style listings referenced here at MBC the other day (see "Kickin' It Old World").

Though the build is late-70s officially, the home's been updated in important ways, building on the original style. The kitchen is very inspired, modern, European.

It's not the free-flowing layout you'll find in newer construction, but it's great to have a distinctive home when there's so much that's cliché amid the bulk of other offerings.

Locationwise, as plateau streets go, 27th is one of the quietest. The home offers a bonus roof deck as well.

456 27th starts at $1.690m; open Sat. & Sun. 1-4pm.


Tree Section

2701 Maple is another inspired, old-style home featured in "Kickin' It Old World" here recently.

The listing says the home "won an architectural award when built" (in 1983). That makes sense: the style is a standout in the neighborhood.

Inside, Maple's bigger (4br/4ba, 4000 sq. ft.) than most Tree Section homes, with an yard that's typical for the area – a nice little patch of grass.

The home's been updated nicely, so don't worry too much about the mid-80s vintage or the even older styling. Starts at $1.825m.


2701 Maple is open Sun. 2-4pm.

592 31st (5br/5ba, 3750 sq. ft.) is near a block that always gets a shout-out here at MBC as one of the best in the Tree Section. Though it's west of Blanche – that dream block's cutoff – these downhill streets near Sand Dune Park are pretty sweet, too.

(Did we mention The Dune? Don't worry about The Dune.)

The house is an exquisite, newer (2006) custom build that drips comfort and home.

The street-to-alleystreet lot puts the garage out back, a great asset in an area where, too often, the garage factors into the façade.

At nearly $750/PSF, the sellers are seeking an ultra-premium price.

A couple of nearby homes of comparable size have closed near the mid-$500s in PPSF: 562 33rd (5br/4ba, 3550 sq. ft., 2003 Cape Cod, $2.0m) and 566 31st (5br/5ba, 3350 sq. ft., late-90s Spanish, $1.795m).  Sure, this one's got lots of extra, but how much?

592 31st starts at $2.799m. Open Sun. 2-4pm.

1408 Poinsettia (4br/3ba, 3100 sq. ft.) feels like more than the sum of its parts. On the surface it's a fairly typical, late-90s Mediterranean speckie. But with upgrades to the kitchen and living areas, plus a smashing sense of décor by the current owners, you may agree it's something special.

Purchased for $1.749m in Dec. 2007 – it sold quickly back then – 1408 Poinsettia is offered now for $1.699m, not much of a step down given all that's come to pass since then. Open Sat. & Sun. 2-4pm.

A couple excerpts from American Banker: Regulatory Actions Hit a Record Level in '09

"Bank regulators issued 1,143 formal enforcement actions against banks and their holding companies last year, a new record and more than double the 2008 tally."

"Informal actions by the agencies, which are not made public and often go untracked, also doubled during that time, reaching 1,099 last year, according to data provided to American Banker."

According to the FDIC quarterly banking profile, there were 8,012 insured banks at the end of 2009. Some of these actions are double counts since regulators might issue an informal action and then a formal action against the same bank (or multiple formal actions), so we can't say the percentage of banks operating under enforcement actions (either formal or informal), but it could be in the 20% to 25% range.

A couple of quotes from the article: "For the bank failures that have occurred so far, every one of the large loss reports the inspector general has done or any GAO investigation has concluded the reason the bank has failed is the regulator did not take early enough action or severe enough action." said [Bob Clarke, a senior partner at Bracewell & Giuliani LLP and former comptroller of the currency] said. I've posted a few of the inspector general reports, and it appears the field examiners identified the problems early - but then insufficient actions was taken. And to put it more bluntly: "The regulators were asleep for 10 years during the boom and there's now this remarkable turf war under way with regulatory reform," said Chris Low, chief economist for First Horizon National Corp.'s FTN Financial.

Jed Graham writing for Investor's Business Daily says something I have been saying for several months: Extra Stimulus Aid Fuels Sales, But Fiscal Flood Cresting Early
In gauging the economic recovery's trajectory, you shouldn't forget that this is not a normal tax season.

People who don't pay income tax are getting an extra $30 billion in refundable tax credits thanks to the Recovery Act, the Joint Committee on Taxation has estimated. Based on the timing of tax refunds in past years, well over half of that has likely been paid out already.

Mark Zandi, chief economist at Moody's Economy.com, said the extra serving of tax-season cash to modest-income families "helps explain the somewhat surprising strength in retail" in February.

Excluding AMT relief, Zandi figures peak stimulus hits this month or next.

Just how big of a boost will this extra cash provide? If the economic impact came in a single quarter, CBO's analysis implies that it would hike GDP by 0.6-1.5 percentage points. In all likelihood, the effects will be over a longer period.Retail Sales Mirage

"I think we are seeing the effects (of Recovery Act tax refunds) on retail sales and spending," said Allen Sinai, president of Decision Economics.

Same-store sales at major retailers rose 4.1% in February, the best year-over-year gain in over two years, Retail Metrics said March 4.

January 2010 sales were nothing to brag about and February 2010 same store sales will not be either.

February 2009 sales were horrible so year over year comparisons will be extremely easy. Moreover, the whole same store sales methodology is flawed to begin with on account of closed stores, and even closed chains like Circuit City. For details, please see Retail Sales Rise: Where? Let's Take a Look; Expect Nothing Less Than Panic

Finally, one has to take into consideration favorable income tax returns.

In spite of that, tax collections are down although many states have raised sales taxes. That's what really matters.

Moreover tax credits for houses have run out of stimulus effect as has cash-for-clunkers.

Expect actual tax collections (reported later) will likely fall short regardless of what the report says.

I am on the road now. The above was written ahead of Friday's advance sales report.

Addendum:
A quick post before I hit the road returning home.

Bloomberg reports U.S. Stocks Advance as Retail Sales Bolster Economic Optimism
U.S. stocks rose, keeping the Standard & Poor’s 500 Index at a 17-month high as an unexpected increase in retail sales added to evidence the economic recovery is strengthening.

Google Inc. and Target Corp. climbed more than 0.4 percent after the Commerce Department said purchases at U.S. retailers increased 0.3 percent last month, compared with a 0.2 percent drop forecast in a Bloomberg survey of economists. National Semiconductor Corp. rose 1.3 percent after the chipmaker forecast better-than-estimated revenue.

“People are looking to buy stocks,” said Mark Bronzo, a money manager in Irvington, New York, at Security Global Investors, which oversees $21 billion. “Risk appetite seems to be growing as people become more comfortable with the sustainability of the economic recovery. Today’s retail sales numbers and the better outlooks from retailers confirm that.” Please consider the Department of Commerce Advance Monthly Sales For Retail and Food Services for February 2010.
The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for February, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $355.5 billion, an increase of 0.3 percent (±0.5%)* from the previous month and 3.9 percent (±0.5%) above February 2009. Total sales for the December 2009 through February 2010 period were up 4.5 percent (±0.3%) from the same period a year ago. The December 2009 to January 2010 percent change was revised from +0.5 percent (±0.5%)* to +0.1 percent (±0.3%)*.Note the big downward revision in January. So now February is artificially elevated sequentially.

Also note that economists were surprised by the strength of February sales (that really were not very good in the first place for multiple reasons) even though Retail Metrics said on March 4 that "Same-store sales at major retailers rose 4.1% in February"

You can't make this stuff up. No one would believe it.

Let's see how the market closes. A gap and crap on silly misplaced optimism as well as silly reporting from those who do not understand retail sales would fit the bill. But hey, who knows.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post ListMike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Real estate news and views from around the globe that make you go, “Really?”

• OVERVALUED: Estimates of home values from Zillow.com may be no more accurate than homeowners’ estimates of value, according to a new study in The Appraisal Journal. (HousingWire) MORE HERE!
• U.K.’S PRICIEST: London’s Chester Square tops U.K. priciest list again. (Bloomberg) MORE HERE!
• HELMSLEY HOTEL: The estate of real-estate baroness Leona Helmsley has signed a deal to sell one of its prime Manhattan hotels for about $170 million. (WSJ) MORE HERE!
• SAVE THE SIGN: SkyTag says it would pay to preserve the land around the Hollywood sign — if it’s allowed to keep about 20 giant signs up throughout the city. (L.A. Times) MORE HERE!
• HANDS OFF FHA: The National Association of Realtors opposes hiking minimum downpayments. (Inman News) MORE HERE!

Really? Flaws seen in Zillow ‘Zestimates’ is a post from: Lansner on Real Estate

A funny look at Ginnie Mae's online tool for making that important rent versus buy decision, recently spotted over at Patrick.net.



The numbers are pretty funny too - $750 to rent and a purchase price of $950,000??