HP had this brief email exchange with one of this blog's favorite writers, Bill Fleckenstein of Contrarian Chronicles over at MSN. I think Bill would agree with most HP'ers at this point - duck and cover.
Q: The National Association of Realtors, Fannie Mae, Ben Bernanke and other "experts" continue to say housing is coming in for an orderly "soft landing". What kind of landing do you think we're in for?
A: I think we will have a horrible recession.
Q: Bottom line - what or who were the top causes of the Great Housing Bubble?
A: An irresponsible fed and financial institutions that dropped lending standards to zero. Money essentially was free to all - whether they could ever hope to pay it back or not.
Q: You recently wrote that the "use-your-house-as-an-ATM-to-live-beyond-your-means stimulus is finished". If that is true, how bad do you think it will get for US retailers and US GDP?
A: See the first answer - the worst recession in at least 30 years.
Q: You were one of the first bubble-believers, mocked when home prices were skyrocketing. How do you feel now that it would appear you've been proven correct?
A: Sad - many people will be badly hurt.
Q: Quick - what are your 2007 predictions for US house prices, the dollar, the stock market and gold?
A: A lot lower for the first three, much higher for gold.
Q: With all that's going on in America today, what problem do you feel should be the most pressing for our leaders to address?
A: We need to get competitive, we need to eliminate waste, we need term limits, a flat tax and tort reform... and incentives to save.
Thank you Bill.
August 03, 2006
An HP Exclusive: A brief interview with Bill Fleckenstein of "Contrarian Chronicles", predicting "the worst recession in at least 30 years"
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49 comments:
too short! more!
Flat tax and tort reform! Ha, you liberal Dem idiots never are in favor of that. What a joke.
much props to you for getting the brief interview!
"We need to get competitive, we need to eliminate waste, we need term limits, a flat tax and tort reform... and incentives to save."
Bravo.
Run for office, and you have my vote.
Does that guy know what a raging racist you are? If he knew, I'm certain he would run away fast.
I agree on the tort reform, but on the incentives to save, I don't know how much more incentives we can have. The Roth IRA is a beautiful thing if you ask me, and yet we have a negative savings rate in this country. Trust me...if we have a horrible recession, that will be the best incentive to save, hands down.
The government and Fed are so inflationary, how would you go ask people to save? So that they could get robbed by hidden taxes?
We talk a lot about housing bubbles, however if fed keeps feeding the insatiable government and inflating in the name of saving economy, it may as well become a collapsing dollar rather than housing bubble. If we are really in the path to hyperinflation I think housing 'bubble' will do just fine.
Never, ever trust a man with a mullet.
Hard to take seriously a guy who has hair straight from the 70s. Seriously, he looks alot like this guy.
Keith, you scored points for Bill Gross. But lost 'em for the Hasselhoff lookalike.
In any case, a recession is a fall in GDP for 2 quarters or more. Six months where the economy catches it breath. It's a normal part of the business cycle. The guy makes it sound like the great depression.
damn old boy, you beat me by 4 minutes!
LMAO! The Hoff!! Good lord.
he's a contrarian. he has a contrarian haircut.
Bill has given the green light for other media people to say housing bubble has burst. . .
Just this afternoon, the Money Talk Radio show here in SD had a piece about falling housing prices, and the bubble - They just about quoted Keith and Bill directly - "real estate will always go up. . .internet stocks will always go up". . .commentator - "if you believe that, I have a bridge to sell you.". . .The MSM is really driving the bubble burst story now.
The yoy real median price of Insane Diego real estate turned negative in June, just as it did in the early summer of '90 before Gulf War I. LA, Orange County, Ventura, Santa Barbara, and Riverside/San Bernardino are following closely behind.
The bust is underway.
Upscale neighborhoods of Portland, OR have seen a 40-60% increase in listings over the 5-year average this spring-summer. National City estimates Portland as a whole to be overvalued by ~41% (risk of a 29-30% decline), but I (in real estate for 22 years) estimate the upscale areas to be overvalued by 60-70% (subject to possible 35-40% decline). Houses that were bought/sold for $400s-$500s in the early '00s are listed in the $900s to $1.3M today. Utterly ridiculous. Prices are at levels based on 1-yr. adj. rates of 3.5% and interest-only loans and no down present 2-3 yrs. ago.
Portland "flippers" and home-equity consumers, you're in deep weeds, folks. And this is before Intel announces the next round of mass firings. You'd better bail, and it had better be quick!
Saving is being punished. The 5% that an e-savings account pays becomes more like 3% after income tax. Inflation is higher then that. On the other hand dept is rewarded by the mortgage interest deduction. Plus with inflation, the dept is just melting away. No wonder we have a negative savings rate!
Contrarians are the only people who will put you on the path of a Bull Market when everyone still thinks the path best traveled and one most people are still on is now a Bear Market one that has alreay delivered its goods.
The markets are designed for most of the people to loose money so a few can win. It is set up that way.
Forget about his haircut, listen to what he says, look at what he does.
There is talk of deflation and inflation. Two camps. Think again. The future will bring a re-evaluation of things. There will be deflation in huge vehicles and over-sized houses, and inflation in small houses, rural lots and smaller vehicles. Over sized cities and towns will deflate. Close in farm land will inflate. People who know how to DO SOMETHING (Action) will go up in value. People who know how to DO NOTHING (limp wristed, lay-a-rounds who say they are thinkers) will lose value.
Read James Howard Kunstler. Get your head on straight. And have a few laughs. The 'Long Emergency' is his best.
Dude, that guy is, may I say it, MINT?
Kieth, thanks for the posting place, wanted to buy something when my landlord decided to sell our place, but thought things were way over priced here in DC- the wonders of the Internet eventually brought me to this wonderful place of like-minded "sick" souls. Finally, realizing that I am not alone in this world and the our numbers keep growing everyday- thanks being to Allah. So, being a COMPLETE novice tp teh investing thing (but learning a little but everyday), how do I actually take the plunge and make some $ off of this definite downturn; that is, who do I call, what do I say, and what do I buy- yeah, I know that you guys are into gold and shorting, but how do I actually do it? Funny thing is, I consider myself to be well educated (patent attorney), but know absolutely nothing about investing! Many thanks. Oh, and I was raised Catholic and the Allah thing was just for fun!
Vitoria above answered an earlier question about "what will happen to all those illegals"
Apparently they now have the time to post racist comments on housing bubble blogs, because it was these blogs of course that caused the crash and therefore the loss of their jobs in the underground economy ; )
Bank's profit hurt by 3 Dwek loans
Central Jersey sets money aside in case of default
Posted by the Asbury Park Press on 08/2/06
BY MICHAEL L. DIAMOND
BUSINESS WRITER
Central Jersey Bancorp's second-quarter earnings were hurt after it set aside thousands of dollars in the event three unsecured loans it made to Ocean Township real estate investor Solomon Dwek go into default, officials said Tuesday.
Dwek, a former director and major shareholder at the Long Branch-based bank, received three unsecured loans prior to 2005 for a total of $413,000, said James Vaccaro, president and chief executive officer. Although those loans are currently being repaid, the bank boosted its loan loss reserves by $103,000 in the second quarter as a precaution.
How unusual was it for Dwek to receive the unsecured loans?
Although most borrowers are asked to put up collateral when they borrow money, Vaccaro said it is not unusual for the bank to issue unsecured loans. Dwek's loans were approved based on his financial strength at the time rather than his ties to the bank, Vaccaro said.
"Those are always arms-length decisions," he said. "Every loan has to stand on its own based on the merits of underlying credit. There's no wavering on that policy."
Dwek, 33, has been charged with defrauding PNC Financial Services Inc. after he bounced a $25.2 million check on April 24. He wired most of the money to HSBC Group the next day, leaving PNC with a $21 million loss, according to PNC and the FBI.
Court hearings have shed light on Dwek's business dealings, which include loans from at least 19 banks. Banks, investors and contractors claim Dwek owes them $338.5 million.
Dwek's deals have recently shown up in banks' quarterly financial statements. PNC, for example, lowered its earnings by $9 million.
On Monday, Central Jersey reported its net income was $675,000, or 8 cents a share, for the quarter ended June 30, compared with net income of $610,000, or 7 cents a share, for the same quarter a year ago.
Despite the improved financial performance, Vaccaro said the bank's net income would have been $733,000, or about 9 cents a share, if it didn't set aside money in case Dwek's loans go into default.
"They're unsecured in nature, and because they are associated with the entire Dwek issue, we thought it was appropriate to take a 25 percent reserve," Vaccaro said.
One expert said the unsecured loans were curious, particularly since Dwek probably had assets that he could have used as collateral. If the loans were secured, the bank, in the event of a default, would be able to recoup at least part of its money by selling the collateral.
"For me, an unsecured loan is a rare animal, especially when you are a developer and you have all these properties you can secure it with," said Paul Nadler, a retired banking professor from Rutgers University.
Central Jersey Bancorp was formed in 2005 after Monmouth Community Bank and Allaire Community Bank merged. The bank has 14 branches in Monmouth and Ocean counties and $511 million in assets.
Dwek was on Monmouth Community Bank's board of directors for about three years before resigning in 2002 for reasons that are unclear.
But Dwek continued to have a major stake in the succeeding company. As of April, he owned nearly 780,000 shares of Central Jersey Bancorp's common stock, representing just under 10 percent of the company.
Dwek's holdings in Central Jersey and two other Shore banks have been significantly reduced. An ING Financial account with 564,000 shares of Central Jersey Bank, 115,780 shares of Rumson-Fair Haven Bank & Trust and 45,720 shares of Shore Community Bank stock was liquidated last week and sold to two institutional investors for $7 million.
more..
http://www.app.com/apps/pbcs.dll/arti
Starbucks execs are making excuses for flagging sales (some BS about frozen drinks slowing the pace of workers) as Americans stop buying $4 cups of coffee. Stores like Starbucks that sell non-essential goods are like the canary in the coal mine.
They are trying to tell us something about the state of this economy.
http://tinyurl.com/s8zov
Fleck has been calling for a big stock market decline for at least the last 3 years. I've been reading his column the entire time. He may 'finally' be right.
There will be a recession, but no worse than 2001, then another bubble will pop up and replace it.
I agree, that no one is taking the housing downturn serious enough as it just began to decline rather than level off this summer. It won't be to 2007 when the decline in Housing and business adjustments force a mild recession. But as long as the International system is running the same way, we will always advert a major recession.
"All this talk is meaningless. What matters is the individual play. What this man says makes sense, to ridicule him for his appearance because one has an opposing view is childlike."
I ridiculed his appearance and I agree with him. Plus, I'm not saying he's fat, or ugly, or has a big nose or a weak chin. I'm saying he has a mullet. That's something he could change if he wanted. A mullet. He's 45, it's 2006, and the man looks like he's about to start a fight at an ice hockey game.
maybe it's an old picture
bottom line - dude is right
interest rates - will the fed pause here or even start to lower knowing that housing and gdp is tanking, or will they keep raising knowing that inflation is raging?
It's the greed-soaked culture you people have been voting for for the last 30 years that took us here. The shallow, materialistic, nongenuine society the market culture of consumerism has created.
Look no further than the policies of the republican party for an explanation. Yet you continue to roll your eyes at liberals who warned you where we were headed.
I hope to be able to leave this cesspool of a culture and country if the shit hits the fan. It's gotten to the point that I don't even want to vacation in this shithole of capitalist excess- too depressing to witness.
Oh and tort reform will really solve our problems. Of course it won't do a thing about the fact that a business sues a business every 11 seconds in this country. No, it's the bad individuals filing suit against the benevolent corporations, right?
We already HAVE a flat tax if not a regressive one. Read this book http://www.perfectlylegalthebook.com/index.htm
if you want to know how the wealthy are screwiing you BLIND with the blessing of the republican party.
And someone please define what he means by "waste".
vitoria,
no one cares about your views on race... this is the real world.
Yeah ya ho.
"I know that you guys are into gold and shorting, but how do I actually do it? Funny thing is, I consider myself to be well educated (patent attorney), but know absolutely nothing about investing! "
I think that realizing that you are not a super smart investor is the first step. The market is very strange right now. Not reacting as most bears think it should. Be very careful and cautious right now. One more thing, the wall street institutions are all crooked. They will steal your money like it was free candy in the receptionist's bowl.
Regarding the "mullet", as a woman I find him incredibly sexy looking, to a large extent because his hairstyle. All the men I've found irresistibly attractive in the past have had longish hair - not *long long* hair, just enough length so you can *see* what it actually looks like. Something about a strand of hair curling behind an ear - damn! I wish more men had enough courage to forego the taunts of mainstream American culture and dare look sexy.
toll's up!!!!!!!!!!!!!
A drop in the housing prices in the Portland, OR/Vancouver, WA market would be a welcome. The Californicators and flippers have inflated home prices well beyond the average family income in this area. I don't care if it turns out to be brutal when the bubble finally bursts up here. A lot of people are still jumping into real estate to sell part or full time. We also have a lot of Russians that come to this area who supposedly are religious refugees and are suddenly living in nice big homes and driving nice cars. I wonder where that money comes from?
Interestingly enough, Nostradamus predicted that all hell would break loose in 2007-- of couse, that's only the case if his predictions were interpreted correctly AND Nostradamus was right.
With that said, what impressed me the most about Bill Fleckenstein was an accompanying link to a book entitled:
"The 2010 Meltdown: Solving the Impending Jobs Crisis"
The housing bubble is nothing compared to the "jobs crisis." That is, highly skilled workers (capitol) have enough money to retire whereas the unskilled ones don't.
So Bill Fleckenstein could be right here because if there is a crash, then perhaps even the "skilled workers" will be left with nothing, because of the crash, and have to work.
In my mind, the skilled have to work voluntarily or through economic coersion (a crash that changes their mind) because, otherwise, we won't have an economy.
I'm probably generalizing here but I see the Russians that have come here as they most dishonest, cunning shysters of their culture. As you can see by what they're doing to their own country, they have no ethics and absolutely no respect for fair play. Ruthless and corrupt.
They are no doubt a welcome addition to the republican party.
WOW!!!
You got to read Mish's last post.
"is housing bottoming out?"
http://globaleconomicanalysis.blogspot.com/
There once was a man with a mullet,
Who said we should keep our cash in a bucket,
No crash has happened, but still he’s been yapp’in
perhaps sooner or later it will happen.
http://globaleconomicanalysis
.blogspot.com/
Russia is just biding her time and waiting ......
If you see your opponent (USA) in a game of chess making grave errors, would you tell them ??
The Russian bear is slowly awakening from it's hibernation.....and it is hungry.
If you want a glimpse at the "future" just read (or re-read) George Orwell's novel 1984. The parallels with what I see happening today are truly eerie.
>>Regarding the "mullet", as a woman I find him incredibly sexy .
~
>>>>Here's another reason our economy is in trouble.
Huh??? Let me expand: Sexy, independent-minded, and highly intelligent - irresistible!
"I'm probably generalizing here but I see the Russians that have come here as they most dishonest, cunning shysters of their culture."
Yes, the ones who came here, during and before the cold war, were a lot different from the ones today. Those were the eastern European workhorses that made America great, starting from the late 1800s to the 1980s. Afterwards, the postGorby years, the shysters started coming and we have a whole different clubhouse today.
The Fed headed off the last recession after the dotcom debacle with low rates (low for too long as well) How they gonna sweep this one under the rug?
Like Grandma said, "sweep'n it under the rug doesn't make it go away come moving day"!
Leading indicators show economic decline whether housing tanks or not. Likewise housing is done for even if rates go down.
Safe assets may be BEGBX (5year international bonds AAA).Inflation is a lagging indicator,no one will be bidding prices up next year except maybe safe haven assets.
'THE THINKER' is so open minded his brains fell out!
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Hey, don't pick on Fleckenstein, i think he's cute! Larry
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