I love all the carefully chosen words to describe what we're seeing. "Soft Landing" of course takes the cake.
"Substantial" is a nice word. Being an independent bubble blogger, I can call it what it really
is:
A devastating, horrific, historic, epic housing and debt bubble Ponzi scheme collapse
Supply your own adjectives here. Here's Ben:
Oct. 4 (Bloomberg) -- The U.S. housing market is in the midst of a ``substantial correction'' that will lop about a percentage point off economic growth in the second half and remain a drag on expansion next year, Federal Reserve Chairman Ben S. Bernanke said today.
The Fed chairman also said in response to questions after a speech in Washington that the central bank remains ``concerned about inflation'' because it remains above ``what we would consider price stability.''
Taken together, the remarks may reaffirm the view of some investors that the central bank will keep the benchmark lending rate unchanged at 5.25 percent for the remainder of the year.
``There is currently a substantial correction going on in the housing market,'' Bernanke said. The decline residential housing construction is one of the ``major drags that is causing the economy to slow.''
October 04, 2006
SubstantialHousingPanic Reports: US housing correction "substantial" according to Bernanke
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35 comments:
so much for a 'gradual cooling'
http://www.federalreserve.gov/boarddocs/hh/2006/july/testimony.htm
The economy has had a rough 2 months. Neither August and September featured much(if any growth) growth, and housing declines can't be blamed for all of it.
Though on the plus side, money is rotating wildly back into stocks now(given the recent bull). While weaker earnings and a small recession(which the economy looks to be about in, give it another 1-3 months) will dampen it, I would much rather have money in Stocks than Real Estate which I consider the worst form of investment.
How much did you lose shorting FORD?
PLEASE HELP ME KEEP UP
I can't keep up I can't keep up
WHEN WAS YOUR GOLD POSITION CLOSED?
do a search under gold on "this blog" - Only purchase recommendations
I buy things, I sell things, I make money
I bought a house, I sold a house, I made money.
Will I buy a house today? No. Will I buy a house five years from now? Probably
Did I make a boatload shorting GM from $30 to $20? You bet. Did I think GM was a good short once it halved? Nope.
Are homebuilders good shorts today? Nope. Were they a year ago when Toll was selling? Yup.
My recommendation today is crystal clear and easy even for realtors:
Cash.
Pot House Owners Are Also Co-workers
Written for the web by George Warren, Reporter
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George Warren's Report
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Although none of the property owners has been formally implicated in the organized crime ring involving 41 "pot houses," News10 has discovered some striking connections between some of them.
Largest Indoor Operation
Nine people have been indicted so far in what drug agents call one of the largest indoor marijuana-growing operations ever uncovered in the United States. None of the suspects, however, owns any of the property where the pot was growing.
Agents of the federal Drug Enforcement Administration and the IRS are trying to find a link between the more than two dozen individual property owners and an organized crime ring based in San Francisco's Chinatown.
But News10 has discovered a more-than-coincidental connection between some of the homeowners.
Tale of Two Pot Houses
On August 28, agents from the DEA raided a house at 9226 Bearint Way in Elk Grove. According to court documents, they seized growing equipment and two burlap bags full of marijuana.
The same day DEA agents raided a home at 8693 Nemea Way, about six miles from the Bearint Way house. As with the other 39 pot houses busted in Sacramento and San Joaquin counties in August and September, the two Elk Grove homes were vacant and had been converted to indoor growing operations using stolen electricity.
The only obvious similarities were that both had been purchased in 2005 for about a half million dollars each, and the owners indicated in financing documents they intended to rent them out.
Pot House Coworkers
But the two houses appear to be owned by coworkers at a car dealership in Redwood City.
Van Tieu, the general sales manager at Menlo Honda, owns the house on Bearint Way. The Nemea Way house is owned by Jason Tam, which is the name of the Internet sales manager at the same dealership.
Other Connections
Both Tieu and Tam bought their homes through the same real estate agent. Kevin Parker of Prudential California Realty in Antioch sold at least 20 of the 41 pot houses.
Both men got 100 percent financing from Metrocities Mortgage. Metrocities provided no-money-down financing in at least 10 of the pot house transactions analyzed by News10.
News10 has learned a loan officer from Metrocities named Carrie Yeung shares a house with Parker, the real estate agent. A receptionist at the Metrocities Mortgage office in Pleasanton said Yeung left the company several weeks ago. The corporate headquarters in Sherman Oaks would not elaborate, calling it a "personnel matter."
Both Yeung and Parker have refused to answer questions from News10.
No Comment
News10 found Van Tieu at his Elk Grove home taking inventory of the damage left behind by the pot-growing operation, and asked if he had any knowledge of what had been happening there.
"My attorney suggests that I do not say anything so I have no comment at this time," he said.
Complex Case
Meantime, the first four defendants indicted in connection with the pot houses were due in Sacramento federal court on Friday. But the hearing has been postponed for at least a month because of the complexity of the case.
"There's a substantial correction going on!"
This guy's a frick'n genius!
How did he come up with that all by himself?
Nothin' like bringing up the rear!
Kinda like Foley!
I think homebuilders are great shorts.
Dow is hitting all time highs and they are barely pulling back.
The only potential buyers are the institutions that already own them.
Let's see. KB Homes didn't announce earnings. Seem fishy.
Many builders will be reporting quarterly losses in January. Short away and come back in June.
I happen to know what KB Homes paid for some land here in Northern California. They are selling every home in one community at a loss.
Keith reccommends cash - LOL!
Nothing like holding an asset that loses 1% to 2% a month in value (well, maybe investment RE is worse). In a true financial crisis the liquididy and utility of "cash" holdings are questionable too.
Funny how MSM reported that Bernanke's comments mean that "fed will pause for the remainder of the year."
But he actually said inflation is still a concern.
Meanwhile, homebuilder stocks go up today, even as BB admits to the substantial correction.
We are truly living in a bizarro world!
Bernanke: Start Saving Now
For all the economic literature Fed Chairman Ben Bernanke has undoubtedly pored through over the years, none of it trumps the basic lesson he probably learned in childhood along with so many others--save for a rainy day.
That was the basic message from Bernanke, speaking to the Economic Club of Washington on Wednesday, as he addressed the issue of aging baby boomers and the likely impact of their retirement on future federal dollars.
"The coming demographic transition will have a tremendous effect on our budgets," Bernanke said, highlighting Medicare and Social Security as the obvious programs that figure to be squeezed.
Separately, Bernanke told the audience that he expects the current housing slowdown to shave a full point off the pace of gross domestic product growth during the second half of this year and possibly into 2007. Stock traders, interpreting that remark as a sign that the Fed is unlikely to resume interest rate increases past 5.25% anytime soon, bid shares higher. In late afternoon trading, the Dow Jones industrial average hit its second-straight record close, blowing past the 11,800 mark. The Nasdaq and Standard & Poor's 500 indexes were also higher.
my cash is making 5.05% at hsbc and 5.75% at e-loan
I don't know if is just me that fells like this but when Bernanke says he want to adjust social security and medicare, I feel like the _*$#!_ Fed man has his hand in my back pocket again even after they have already taken about a hundred thousand dollars from my S.S. retirement using there usual sneaky ways.
The Fed is talking tough on inflation but they are pumping money into the system like crazy. Mortgage rates are coming DOWN, banks and other lenders are begging people to borrow or refi. The world is awash with easy money. In short, there is not going to be any meltdown in housing or the economy.
Party like it's 1999!
LOL again! -- Keith tells us about those 5.75% CDs as if he's proud. Hey Keith, 5.75%-(5.75*.39)-12% = -8.5%, your return after taxes and inflation on those cash holdings. Keep up the good work.
LOL!
Agau,
Keith will have moved the CD money long before inflation is 8.5%.
As inflation goes up, so will the CD yields that are offered by he banks.
Since banks are in the business of making money, you are right in thinking the CD’s yield will fall behind the inflation rate. But it’s a small loss, while everything else is a big loss.
anon 11:20:41,
you don't have a clue and you are misinformed. the fed has got nothing to do with social security. it merely says that if we continue to dowhat we're doing now (i.e. low savings rate & excessive spending) it will put a strain to future entitlements.
Hate to tell you this buybonds, but price inflation is about 1% per month right now. We have inverted yields, and the bond market is hypnotized by the BoJ's antics.
Keith will pay a 2% penalty when he panics and withdraws from those CDs. Then his negative return will approach 10% APY -- LOL!
No surprise here, just the head jew coming out and telling half truths about something so evident that even the brain washed and brain dead lemmings are starting to take note of. And I'll call that what it really is..... jewspeak.
Agau,
Money domiciled in an HSBC UK Channel Islands account is not taxed.
As to the utility of holding cash: It depends on what you think is happening. 5.05% will seem a princely return if the RE & Equity markets deteriorate over the next 12 months. And holding cash will position you for some rather tasty deals if that holds true.
And the game is to beat the market. If you don't know that much, you're not really in the game.
errr it is taxed if you are a US resident- surely not evasion?
Keith,
Do you think that it is fishy that ever since the former Goldman Sachs CEO took over the reins as Treasury Sec. the market has gone straight up and to the right?
Could he be taking is market maker skills to the government.
Keith,
Can you post a story on this coincidence so it can get picked up by fool or another publication. This needs to hit the mainstram media.
Core inflation is still up, and accelerating.
People who think it is a foregone conclusion that the Fed will continue to hold rates or even drop them soon are ignoring overt statements from the Fed to the contrary, like this one:
http://www.autodogmatic.com/index.php/sst/2006/09/29/poole_favors_low_inflation_over_output
So, it isn't a done deal. The Fed knows inflation is still a risk--remember they look at core CPI, not CPI.
On the investment subject, anyone making less than 5.5% on cash is losing money in real terms. In fact you probably need closer to 7% to stay afloat. Don't fool yourself.
Keith: Your call to go to cash instead of commodities right now looks a lot like "selling low". Wouldn't a significant trading pullback suggest a good buy-in point?
Or do you really think recession will somehow negate real value on a global scale?
Look at the record of commodities during the Great Depression (and recessions in general). They are actually quite strong under these circumstances.
Also interestingly, M1 decreased significantly from 1995-1996, but inflation kept right on truckin'.
We ain't gonna have real deflation. Not only is it the Fed's top priority to prevent it, but I see no way to weasel out of all the things we're collectively on the hook for, which imply inevitable inflation.
You can have as much easy money and the economy STILL won't respond. Mortgage rates have not come down that much.
Matter of fact, the economy is already at the tip of recession.
This was all started by Sir Alan te "shister". Just read the following by Bill Fleckenstein who has been "right on".
"But if you can't see a problem, you can't try to head it off at the pass -- just as he was oblivious to the bad real-estate loans and junk-bond "investments" that helped precipitate the 1990-91 S&L collapse.
Ironically, in 1985, as a paid consultant to Charles Keating's Lincoln Savings & Loan, Greenspan proclaimed that its management was "seasoned and expert" -- with a "record of outstanding success in making sound and profitable direct investments." He later wrote a letter to Edwin Gray, then-chairman of the Federal Home Loan Bank Board, telling Gray to "stop worrying so much," and "that deregulation was working as planned." Greenspan noted 17 S&Ls that had just reported record profits. Within four years, 15 of those 17 institutions were out of business, costing the Federal Savings & Loan Insurance Corp. $3 billion.
"Just as the masthead of my daily column says "All roads lead to inflation," by my reckoning all financial problems lead back to Greenspan. I have not penned a Greenspan rant in some time. Given all the focus on his speech last week -- and the fact that he's getting ready to ride off into the sunset -- I will have a special follow-up column tomorrow to reprise his comments. Stay tuned.
Bill Fleckenstein is president of Fleckenstein Capital, which manages a hedge fund based in Seattle. He also writes a daily Market Rap column on his Fleckenstein Capital Web site. His investment positions can change at any time. Under no circumstances does the information in this column represent a recommendation to buy, sell or hold any security. The views and opinions expressed in Bill Fleckenstein's columns are his own and not necessarily those of CNBC or MSN Money.
Good job Bill!
fed, loans money as its busines, they lower savers rates of return when the economy does well and they lower savers rates when the economy does not do well, and as all retirees must sooner or later be savers for their subsistence, read the cards,the housing bubble was created on savers loans, who lost spending power on their money,while the home became tax favored
12% a year inflation, as loss of spending power, means the monies must be spent now asap, thus creating jobs, a country of tenements? without food self sufficency? ugly ugly!!!!!!
Everyone was so worried about Y2K in 2000. Well the housing bubble popping scares the B-Jesus out of me. This one can be biblical. And I'm sitting back drinking Pinot Noir, 2000 vintage, with my housing profit in 1 year C.D.'s earning 6%. I think I'll just sit by the t.v. with some popcorn and watch the side show. What me worry? Not on your life!
there is holy crap coming out of the Pope's nose
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