Realtors Crying Because The New Rules Are 'too tough'

Looks like the National Association of Realtors® (NAR) is really getting squeezed. Two stories out in the last week demonstrate that they pine for the old days where they could take their 5% of ridiculously inflated prices and live like kings. Take for example:

• Realtors are upset about new rules requiring that appraisals be done without any pressure from mortgage originators. They call them 'faulty' because the old way, letting appraisers value a house at whatever it was listed for, worked out so well (for them).
• They're also upset that those big old mean banks are refusing to eat millions of dollars in short sale losses. They think the banks are being too harsh on the poor home owner who wants to bail on their mortgage and leave the bank to absorb $10,000 - $100,000 + worth of bad debt. The NAR of course, is upset because they're not getting their 5% on the short sale. They say that only by reducing housing inventory will the market get healthy again. I note that they are not willing to split the loss with the bank to help 'reduce the inventory'.

I'm sure the NAR is probably getting lots of sad calls from their membership indicating the trouble they are having paying their Lexus/Mercedes lease payments with the market being what it is. But the idea that the NAR is even slightly concerned about the economy at large is laughable. Banks cannot afford to lose all this money any more than the NAR can and the faulty appraisals were a primary facilitator of what got us into this mess in the first place!

Remember That You Read It

5/27/2009

"WASHINGTON (AP) — More than 90 percent of economists predict the recession will end this year, although the recovery is likely to be bumpy.

That assessment came from leading forecasters in a survey by the National Association for Business Economics released Wednesday. It is generally in line with the outlook from Federal Reserve Chairman Ben Bernanke and his colleagues."

"More than 90 %" Eh? Too bad they didn't list names. I don't know anything about NABE, but I suspect they're about as good as the National Association of Realtors at predicting the economy.

Congress Balks At Massive Corporate Welfare

Wall Street will be sure to punish them shortly with a horrendous roller coaster ride for their reluctance. Then they will then quickly relent (probably before the week is out) and give their 'approval' for something that is already completely outside their control. Clearly the Fed is running the show here, with the ability to buy up massive corporations and chain US taxpayers to the debt. As Ron Paul said, Congress should just go home since they've abandoned their duty to the populace.

In the end, it won't matter. This bail out plan wont' fix whats wrong with the world's economy. What's wrong is that there are too many houses that were priced in a fantasy world, over leveraged by their current owners and now out of reach of most buyers. Add to that new due diligence on behalf of lenders, and you've got yourself a pyramid scheme that's reached its apex. The fed thinks if they can just get new suckers to buy into the fantasy pricing everything will be 'ok'. It won't.

The only way to fix this is to lower housing prices by either devaluing the dollar or letting the housing market crash because what supported it previously was fraud, plain and simple. Devaluation has it's own problems, as we've seen with the oil markets. Not to mention inflation will cause mortgage rates to rise, so in the end, it will be self defeating.

The only thing Paulson's plan will do is give some on Wall Street a chance to take back their gambling bets. To be sure, it will only hurt you and me. But as Paulson sees it, that's going to happen anyway, so he might as well try to help his buddies.

Bankrate Says: If the Ship Is Sinking, Rent More Deck Chairs

Tonight on the local news I saw a BankRate authored piece about how you shouldn't panic in the face of the current market 'volatility' and that you should instead use this time as a way to "dollar cost average". This has been the standard response to jittery investors: If the price is dropping and the stock is fundamentally sound, it's a great time to buy more!

But the devil is in the details. Nothing in this current market is fundamentally sound. They even trotted out the old "If you'd invested all your money in 1950, even with all the ups and downs you would have made this huge sum of money!" They of course, never mention what would have happened if you'd invested all your money on Monday October 28, 1929.

And sadly, that is the type of unusual event we're looking at. It's not as if there's been some huge price shock to our economy. The 70's oil embargo explained the economic downturn then. What explains this one? Alan Greenspan's "JUST GIVE IT AWAY!!!" monetary policy clearly shares a large part of the blame. He kept interest rates so low for so long it was inevitable there would be a bubble of some sort (in this case, a real estate bubble). I have to chuckle every time I see him on TV saying that this is a once in a lifetime event while making it appear he had nothing to do with it.

The fundamental problem that is haunting our economy (and by extension, the world's economy) is that the US is broke. It's hard to imagine, but we're borrowing money left and right from other countries like China. All the wars, all the bailouts mean that the taxpayer, the engine of the economy, is being saddled with more and more debt when they can't pay back what they already owe. China and Arab nations, now flush with dollars which are loosing value every day, are looking to purchase more and more of the US's remaining assets. Although, for the life of me I can't understand why anyone would buy a failing, poisoned bank and not, say, a milk production company or perhaps some of our coal mines/natural gas fields.

Peter Schiff, who has consistently been correct in his predictions of the US economy (despite being called a "prophet of doom" and just an overall 'buzzkill') thinks that foreign stocks priced in foreign currencies (he recommends Asian securities...no surprise) are a good place to stick your money. Maybe. But if banks fail because their borrowers don't pay back, our lenders (China principally) are going to be in trouble too.

In short, there's nothing normal about the current economic climate. And in spite of all the bad news, the market was actually up today. Why? Because the government has floated the idea that it will create an 'entity' that will take their bad loans off of their hands. How incredibly ridiculous is that??? So the government takes on bad debt. Then what? They will be paying the banks dollars in exchange, which will then spread the illness further to our already declining currency. The ridiculousness of these ideas should be enough to demonstrate just how desperate the situation has become.

And in the tradition of the Grand Master, I predict the next big shoe to drop will be the sudden confessions of multiple companies and government agencies that their retirement/pension plans are catastrophically underfunded. And the 401(k) lawsuits are just starting too. Fun.

Can It Get Worse? Yes!

The FDIC is now going bankrupt. And we haven't even started to see major banks fail yet.

Everyone! Make An Orderly Line At The Trough!!

Uncle Sam is giving away cash! Actually, he's giving away your cash. CNN is reporting that AIG is the latest recipient of a government gift. A mere $85 billion "loan" (apparently that's what you call it when you give it to a compulsive gambler who's luck has temporarily gone bad). In return the government gets an 80% stake in the company. There's something strangely ironic about an insurance company that made money hand over fist for assuming risks then -when things go bad- they pop their golden government parachute. Kind of like discovering that Mili Vanili didn't really record that album you bought (....you know it's true).

And this brings up an interesting question. Why are we still angry at Fidel Castro? We're nationalizing the private sector faster than he ever dreamed of. In 1997 dollars, he only nationalized $6 billion in US assets in 1960. We're way beyond $6 Billion just this week. So much for the free market, eh? Maybe the US should get into the automotive, airline and home construction businesses too.

These giveaways currently add up to a total of $900 Billion in giveaways in less than a year. And man, Paulson's just getting started! It's interesting to note that Paulson has close, personal ties with China. Maybe he's the economic Manchurian Candidate?

But to be fair, it was our friends and neighbors (and perhaps "us"?) who got us into this mess. The True Believers who thought the housing market could only go up. and up and up. So why not take out that 3rd home equity loan and take a 6 month tour of Africa? We can't lose!

So, in the next few weeks, I'm sure the sound will get louder and louder....The Giant Sucking Sound of the American Dream being foreclosed upon and the collapse of America's free market facade.

The $600 billion Housing Fraud

Today an analyst, Geraud Charpin, who is the head of European credit strategy at UBS in London, predicted the losses from the sub prime mortgage collapse will reach at least $600 billion. This, after AIG, the world's largest insurer announced they lost $5.3 billion in the last quarter, in no small part due to the $11 billion in write downs they took last year on mortgage backed (read:sub-prime) assets they held.

And the write-downs are just starting, as more and more companies come out of the closet and fess up to owning sub-prime junk. $600 billion....just vanished somewhere in the market. How will the world's economy cope with this one?

I fear that somewhere out there, right now, a major retirement fund manager is wringing his hands wondering when would be the 'right' time to announce the huge write down. The DJIA lost 315 points today. Soon that will seem minor.

The real estate market is bad...but that's the good news!

Gotta love Realtors. A month ago they were predicting that we had already found the "bottom" of the real estate market. Now they're telling us, that *right now* is the bottom. This new reassessment is due to the fact that in December 2006, the market for existing housing fell by 8.4%, the biggest decline since in 17 years (or as some of the stories claim, "since 1982" [eh..one of those is wrong I guess].

Note the textbook use of "weasel words" in the following examples:

But economists said they believe the low point for housing has been reached and they are forecasting a slow rebound in 2007.

Just who are these "economists"? Surely not all economists are saying this. In fact, the article cites *just one* economist (David Lereah), who conveniently works for The National Association of Realtors.

And this one:

Because of that optimism, analysts don't believe the slump in housing will drag the overall economy into a recession.

Who are these "analysts"? No mention is made. But apparently they caution us from reading too much into the bad news (the 80% higher than predicted jump in jobless claims), and yet because of the optimism of unknown economists, they don't think we're headed for a recession ("Because of that optimism, analysts don't believe the slump in housing will drag the overall economy into a recession").

Ah..now that's reassuring. Let's all go out and buy a half million dollar closet condo.