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Michael Gracie

Stuff you might have missed because I was a lazy piece of…for the last month

Technology

  • The Cloud Isn’t Safe?! (Or Did Black Hat Just Scare Us?) [ReadWriteWeb] – Me thinks it isn’t too safe now, but might get a whole lot safer here very soon.
  • FACEBOOK FIRED: 8% of US Companies Have Sacked Social Media Miscreants [Mashable] – Ok…I signed up for Facebook in early August, and everyone knows my favorite word is “miscreant.” Should I fire myself?
  • Small Biz So Far Not So Crazy About the Cloud [GigaOm] – What about big business? Oops…I forgot they ARE the cloud.

Finance

  • Why Default on U.S. Treasuries is Likely [Reason] – I’ve got this finance reference on the shelf that bases everything on the “risk free rate.” Should I throw it out now?
  • FDIC Running Out of Cash [The Big Picture] – My money is safely stuffed in the mattress, but what’s the point? The FDIC will just set up its own printing press.
  • U.S. Underwater Mortgages May Reach 30%, Zillow Says [Bloomberg] – This whole housing meme has become a tiresome one. If Zillow had said this three years ago I would have been impressed.

Fly Fishing

  • North America’s Top 10 Trout-Fishing Towns [Forbes] – They missed Hartsel, Colorado! We call the place Redneck Disneyland (c) my neighbor, and it’s certainly my #1.
  • A 23-inch rainbow trout is a lot like a beautiful woman. If I do everything absolutely right, then maybe. [Moldy Chum] – I do everything wrong with both, hence relying on pure luck.
  • Confessions of a Kiss and Tell Angler [Cutthroat Stalker] – First rule to remember…no means no! Second rule…never kiss and tell. You’ll get a lot less refusals.

Adieu.

A weeks worth of housing-related links

The first brush: Almost a Quarter of U.S. Homeowners Are Underwater – stats were taken from a report by Zillow.com.

Barry Ritholtz clears things up a bit – in reality, 33% of Homeowners w/Mortgages Are Underwater.

Meanwhile, the luxury market is beginning to suffer like subprime did two years ago.

But, UK homeowners are getting a free pass, and a free mortgage.

There is no zero-rate for US home buyers (0% is reserved for the banks), but rates are at all time lows. Is it a good time to buy, or is the market just in the second inning of a long-term demographic shift?

The United States Of Ponzi

Nouriel Roubini pulls no punches:

Americans lived in a “Made-off” and Ponzi bubble economy for a decade or even longer. Madoff is the mirror of the American economy and of its over-leveraged agents: a house of cards of leverage over leverage by households, financial firms and corporations that has now collapsed in a heap.

When you put zero down on your home, and you thus have no equity in your home, your leverage is literally infinite and you are playing a Ponzi game.

And the bank that lent you, with zero down, a NINJA (no income, no jobs and assets) liar loan that was interest-only for a while, with negative amortization and an initial teaser rate, was also playing a Ponzi game.

Yep – it’s all that evil Wall Street banker’s fault. You twits!

BTW: there’s more Ponzi here.

Dr. Nouriel Roubini, please take a bow

And then grab a stage break

Nobody can be right all the time, but Dr. Nouriel Roubini has come pretty darn close so far. That does not, however, preclude being correct into perpetuity.

Dr. Roubini has now grasped near constant media attention, and I believe the media’s insatiable desire for content to force down the world’s throats will eventually perpetuate the production of new material that may not fit Dr. Roubini penchant for diligence. In other words, the man is in demand, and I fear it will eventually lead to some slips (if it hasn’t already):

So what can the government do? The easy part is lowering interest rates and buying toxic assets. The hard part, he says, will be tackling housing. Roubini says that the housing market, like a company restructuring in bankruptcy, needs to have “face value reduction of the debt.” Rather than go through mortgages one by one, he says reduction has to be “across the board…break every mortgage contract.”

This proposal smells faintly like an attempt at populism – and it surely would be well received by the indebted, everywhere. However, I’m not sure if Dr. Roubini thinks that by simply restructuring every mortgage on the planet borrowers will take the lesson to heart – if he does I think he is suffering from a bit of media fatigue. I’m somewhat more convinced that such a debt reduction will eventually find its way back to the balance sheets of citizens, in the form of new digital televisions and other like-kind frivolities, the desire for in the grand scheme of keeping up with the Joneses which got us into such a nasty mess in the first place. Make no mistake about it – lowering interest rates, the first-round enabler of the Jones family’s now cracked granite countertops, will guarantee it.

On a separate note, the prognostication continues at RGE Central:

Earnings per share (EPS) of S&P 500 firms will be in the $ 50 to 60 range, but they could fall to $40. The price earnings (P/E) ratio may fall in the 10 to 12 range in a U-shaped recession. If earnings are closer to 50 or the P/E ratio falls to 10 then the S&P could fall to 600 (12 x 50 or 10 x 60) or even to 500 (10 x 50). Equivalently the Dow (DJIA) would be at least as low as 7000 and possibly as low as 6000 or 5000.

See anything you can use to leverage informed decision making? I didn’t think so. The rest of us are looking at the charts, and seeing a potential bottom on the S&P of around 450. Charts are pretty much bunk as well.

Conclusion

There are laws of diminishing returns with respect to all analysis. My suggestion is Dr. Roubini take a breather from his, before the attention firestorm results in paralysis.

Roubini, Shiller, Schiff and Ron Paul – they were all right!

Continuing the new found tradition of Hitler parodies…

3:37 – “I’ll just sell some of my Lehman and AIG stock”

Classic.

Short case for a soft landing

While everyone frets about the latest jobs report, maybe there is a silver lining in those clouds…

There is considerable softening in housing demand (as well as abundant inventory) in developed countries, meaning both shrinking need for raw materials there and some additional demand decline as a result of diminished perception of wealth.

Could the world deflate it’s way out of a financial crisis? Don’t know, but at the minimum I’m having a harder time seeing a case for the continued price spirals we’ve become accustomed to.

Downward Pressure on Rents

Doubling up, and freebies, in the rental market.

Makes sense – there’s an increasing supply of unsold homes being laid on top of traditional rentals – it is simple supply versus demand. This competition may exacerbate housing price declines too, in the course of determining true valuation with down and dirty mathematics.

Residential homes worth $1?

At least one was in Detroit:

One dollar can get you a large soda at McDonald’s, a used VHS movie at 7-Eleven or a house in Detroit. The fact that a home on the city’s east side was listed for $1 recently shows how depressed the real estate market has become in one of America’s poorest big cities. And it still took 19 days to find a buyer.

It was actually sold for negative $9,999, as the bank was force to pay closing costs and real estate sales commissions. The house was gutted by looters prior to the sale and completely non-functional – still back taxes were over $5,000 (and likely accruing).

Intrinsic (or purely sentimental) value aside, homes are an asset like anything else, and assets are widely priced at the present value of future cash flows. The lender may well have made the right decision here.

Rx for Economic Pain

Reason:

“There’s a great misunderstanding of what’s happened,” says economist Allan Meltzer. The main trouble, in his view, is not that Americans are suffering from weak or negative economic growth. It’s that they have suffered a loss of wealth, a very different ailment…

When the economy contracts, the government may use sound monetary and fiscal policy to help revive growth. But when wealth goes up in smoke, the government can’t necessarily bring it back. If it tries, the effect is likely to resemble what happens when you give a recovering alcoholic a drink: deceptively pleasant at first, but ultimately calamitous.

Institute the No-Loss Rule, retroactively, for housing.

Breath fresh air – miss good news

I was fishing Wednesday, and I had an all day meeting on Friday (which unfortunately was on a river, so I couldn’t use NewsGator Go! to stay abreast). Saturday I pulled another all-dayer – there was no business talk but there was plenty of discussion regarding “life aquatica” and how to fool them. Some folks might think I missed a lot:

Interestingly, Forbes threw in a note – people aren’t visiting national parks like they use to.

Maybe they’re too busy keeping up with the news.