R.I.P. Steve Jobs 1955-2011

A Sad Day For Apple

Thursday, October 6th, 2011 - By Steve Christ

 

I never met Steve Jobs. Even still, tonight's news makes me sad.

From the Apple website:

 

 

Steve Jobs

1955-2011

Apple has lost a visionary and creative genius, and the world has lost an amazing human being. Those of us who have been fortunate enough to know and work with Steve have lost dear friend and an inspiring mentor. Steve leaves behind a company that only he could have built, and his spirit will forever be the foundation of Apple.

 

 

By the way, this is still the best commencement speech I have ever heard.....

 

As Jobs once said:

 

• “Your time is limited, so don't waste it living someone else's life.”

• “Don't be trapped by dogma, which is living with the results of other people's thinking.”

• “Don't let the noise of others' opinions drown out your own inner voice, heart and intuition.”

• “Stay hungry, stay foolish”

 

Like the company he founded it is about, truth, simplicity, and the freedom to follow your own heart.  

 Rest in peace, Mr. Jobs.

 

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42% of Workers Living Paycheck to Paycheck

Nightmare on Main Street

Wednesday, October 5th, 2011 - By Steve Christ

 

 

 

According to a recent poll by CareerBuilder.com , 42% of workers report they always or usually live paycheck to paycheck just to make ends meet.

Here's one of the reasons why...

From Bloomberg by Sho Chandra and Steve Matthews entitled: Falling Wages Threatening U.S. as Consumers May Cut Spending

“Ninety-one percent of people in the U.S. labor force have a job. That may be the extent of the good news for these Americans, whose incomes tell a darker story. 

Take-home pay, adjusted for prices, fell 0.3 percent in August, the third decrease in five months, and personal income dropped for the first time in two years, the Commerce Department reported last week. The declines followed news from the Census Bureau that median household income in 2010 fell to $49,445, the lowest in more than a decade, and the poverty rate jumped to 15.1 percent, a 17-year high.

Salary and benefit growth “has been going nowhere,” said Mark Zandi, chief economist at Moody’s Analytics Inc. in West Chester, Pennsylvania. “One of the key reasons the recovery has stalled is that real incomes have fallen.”

Inflation-adjusted weekly earnings have fallen for six consecutive months, dropping 1.8 percent in August from a year earlier, a pace not seen since the 18-month economic slump ended in June 2009.

“Those who are employed are worried about their income and are seeing real purchasing power get squeezed, therefore they’re set to retrench a bit,” said Julia Coronado, chief economist for North America at BNP Paribas in New York, who has served on the Fed board’s forecasting team. “That’s the danger right now. It means the recovery remains very fragile.”

The worsening outlook for incomes will cause “continued pressure on home prices and on the stock market,” said Malcolm Polley, who oversees $1 billion as chief investment officer at Stewart Capital in Indiana, Pennsylvania. Corporate sales may be hurt as demand cools, and there may be more withdrawals from retirement plans and higher use of 401(k) loans, he said.”

 

As always, it's all about what is in the wallet at the end of the day...

 

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Shiller: "There has never been a bust of this proportion"

Housing Set For Bigger Declines

Thursday, June 9th, 2011 - By Steve Christ

Like an old FM radio station, the hits just keep coming and coming...

This one is an oldie but goodie. In fact, it is the gift that keeps on giving.

From Bloomberg by John Gittlesohn entitled: Home-Price Drop of 25% Wouldn't Shock Shiller

Robert Shiller, the economist who co- founded the S&P/Case-Shiller index of U.S. home prices, said a further decline in property values of 10 percent to 25 percent in the next five years “wouldn’t surprise me at all.”

“There’s no precedent for this statistically, so no way to predict,” Shiller said today at a conference hosted by Standard & Poor’s in New York.

U.S. home prices plunged 33 percent in 20 cities through March from their 2006 peak, reaching their lowest level since 2003, according to a Case-Shiller report on May 31. The decline signaled a “double dip” as the index fell below its previous post-housing-bubble low set in April 2009. Prices more than doubled from 2000 to July 2006.

A model for the U.S. may be Japan, where home prices fell for 15 years after that country’s real estate bubble burst in the early 1990s, Shiller said.

“They lost close to two-thirds of their value,” Shiller said. “Then they went up for one year in 2006 and then they started going down again.

Forecasting home prices is impossible because there’s no historical precedent for the real estate bubble of the 2000s and the subsequent price drop, Shiller said.

“In real terms, there has never been a bust of this proportion,” he said. “Even in the Great Depression, home prices fell nominally approximately almost as much as they did recently. But that was with all prices falling. So real estate prices didn’t go down hardly at all during the Depression.”

 

The fantasy recovery goes on…

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Consumers More Glum as Housing Double-Dips

Consumers More Glum as Housing Double-Dips

Tuesday, May 31st, 2011 - By Steve Christ

Here’s the latest word from Cheery-Ville, where it’s getting harder and harder to slap a happy face on the U.S. economy.

Heck, even the people are buying it anymore…if they ever really did.

According to The Conference Board this morning, the Consumer Confidence Index fell to 60.8 in the lowest reading of the last six months. That was well below expectations of a move in the opposite direction as the consensus among economist was for an increase to 67.

“Consumers are considerably more apprehensive about future business and labor market conditions as well as their income prospects,” said Lynn Franco, director of The Conference Board Consumer Research Center. She also said fears over inflation, which eased in April, picked up again in May.

That puts the bellwether index still far below a reading of 90 that indicates a healthy economy. In fact, it hasn’t even approached that level since the recession began in December 2007.

Meanwhile, the news in housing today only confirmed what we have known all along: The housing double-dip is well underway….

From Bloomberg by Bob Willis entitled: Home Prices is 20 U.S. cities Fall to 8-year Low

“Home prices in 20 U.S. cities dropped in March to the lowest level since 2003, showing housing remains mired in a slump almost two years into the economic recovery.

The S&P/Case-Shiller index of property values in 20 cities fell 3.6 percent from March 2010, the biggest year-over-year decline since November 2009, the group said today in New York. At 138.16, the gauge was the weakest since March 2003.

A backlog of foreclosures poised to reach the market means prices may stay depressed, dissuading builders from taking on new-home construction projects. Unemployment at 9 percent and stricter lending conditions are signs that any recovery in housing may take years.

“With the foreclosure pipeline still full to bursting, it’s hard to see this downward pressure on prices abating,” said Paul Dales, a senior U.S. economist at Capital Economics Ltd. in Toronto. “I wouldn’t be surprised to see prices continue to fall this year and maybe into next year.”

Nationally, home prices decreased 5.1 percent in the first quarter from the same time in 2010, and were down 4.2 percent from the previous three months, the biggest one-quarter decrease since the first three months of 2009. At 125.41, the index was the lowest since the second quarter of 2002.”

By the way, the one thing that is up is the participation rate in food stamp program. All told, 44.199 million people are now standing in the modern day equivalent of the soup line.

 That’s marks an all-time high.

 

The fantasy recovery goes on…

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A Keynes and Hayek Throw Down

The Battle Rages On

Thursday, May 5th, 2011 - By Steve Christ

This is one that has been floating around the internet for about a week now.

Like most sequels it’s not as good the original. But if you could use a quick primer in the magic act behind Keynesian economics this is an entertaining and informative place to start.

It’s entitled: Fight of the Century: Keynes vs Hayek Round Two.

And here is the original video that started it all…

Bottom-up or top down? The battle rages on.

Talk about an end to laissez-faire.

 

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The New Housing Paradigm

The Pendulum Swings Back

Tuesday, April 19th, 2011 - By Steve Christ

Sometimes people ask me why I left the big money of the mortgage business behind at its height.

And when they do, I always tell them the same thing: that the mortgage business left me long before I ever decided to leave it.

That's because being a "mortgage consultant" at the peak had very little to do with how I was taught the business to begin with. Instead, it turned into a game where the only thing that mattered was the size of your pipeline and how many people you squeezed each month.

How you slept at night was your own problem. And no amount of money in the world was enough for me to live like that.

So when it all came crashing down, all I could say was, “See I told you so.”

As a mortgage guy, all I can you is that was pretty easy prediction to make—even though nobody believed it at the time.

But when you crumple up and throw away 50 years of mortgage wisdom in the blink of an eye it shouldn't have surprised anyone that disaster would eventually ensue.

In the end, it was only just a matter of time....

The good news is that the mortgage pendulum is swinging back to where it all began.

In fact, according to a the proposal released by the Federal Reserve today, lenders would actually be required to make sure borrowers actually have the ability to repay their mortgages before making a loan to them. Go figure.

The rule, which is required by the Dodd-Frank financial reform law, is intended to tighten lending standards and combat home lending abuses that contributed to the 2007-2009 financial crisis.

The proposed rules for a “qualified residential mortgage” include:

• Minimum 20% down.

• Owner occupied only.

• Mortgage debt service to income no greater than 28%.

• No prior defaults, judgments or BKs

• Only straight 30-year mortgages No balloon payments, no interest only, no negative amortization.

The long story story short is that what was old is about to become new again. The problem is that is going to make purchasing a home as hard as it was before the train veered off the tracks.

That ultimately means fewer borrowers and even lower prices...

In the meantime, how people feel about housing as an investment continues to drop.

From Bloomberg by Kathleen M. Howley entitled: Americans Shun Cheapest Homes in 40 Years

 

“Victoria Pauli signed a one-year lease last week to stay in her rental home in Fair Oaks, California. She had considered buying in the area, where property prices have slumped 57 percent since a 2005 peak.

In the end, she decided it wasn’t worth it.

“I know people who have watched their home values get cut in half, and I know people who are losing their homes,” said Pauli, 31, who works as a property manager for a real estate company. “It’s part of the American dream to want to own your own home, and I used to feel that way, but now I tell myself: Be careful what you wish for.”

The most affordable real estate in a generation is failing to lure buyers as Americans like Pauli sour on the idea of home ownership. At the end of 2010, the fourth year of the housing collapse, the share of people who said a home was a safe investment dropped to 64 percent from 70 percent in the first quarter. The December figure was the lowest in a survey that goes back to 2003, when it was 83 percent.

“The magnitude of the housing crash caused permanent changes in the way some people view home ownership,” said Michael Lea, a finance professor at San Diego State University. “Even as the economy improves, there are some who will never buy a home because their confidence in real estate is gone.”

The median U.S. home price tumbled 32 percent from a 2006 peak to a nine-year low in February, data from the Realtors show. The retreat surpassed the 27 percent drop seen in the first five years of the Great Depression, according to Stan Humphries, chief economist of Zillow Inc., a Seattle-based real estate information company.

“If we’ve learned anything from this mess, it’s that housing is not a risk-free investment,” said Michelle Meyer, a senior economist at Bank of America Merrill Lynch Global Research in New York. “Everyone knows someone underwater in their mortgage or struggling to sell a home.”

About 11 million U.S. homes were worth less than their mortgages at the end of 2010, according to CoreLogic Inc., a Santa Ana, California-based real estate information company. An additional 2.4 million borrowers had less than five percent equity, meaning they’ll be underwater with even slight price declines, according to the March 8 report. The two categories add up to 28 percent of residences with mortgages.

Pauli, the California renter, said she has no such aspirations, at least for now. She pays $1,500 a month for her three-bedroom, single-family home with a two-car garage, granite kitchen countertops and stainless-steel appliances. Her neighbors who bought before the housing crash typically have mortgage payments of about $2,800 a month, Pauli said.

“I don’t see myself purchasing, even with all the great prices I see,” Pauli said. “Going to bed every night worrying about your home value doesn’t sound like a good time to me.”

This is one double dip that cannot be stopped.

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Bill Gross Goes Short the U.S.A.

The Bond King Wasn't Bluffing

Monday, April 11th, 2011 - By Steve Christ

Here's one that caught my eye last night...

Bill Gross has actually gone short on Uncle Sam---proving that his sudden lack of interest in government debt is no mere bluff.

For a guy known around the Street as the “Bond King” that would on par with Charlie Sheen suddenly deciding to give up hookers and blow

But as Gross points out, the current quantitative easing regime "is in fact inflationary, and, if truth be told, somewhat of a Ponzi scheme."

What's more, he rightfully claims: "It raises bond prices to create the illusion of high annual returns, but ultimately it reaches a dead end where those prices can no longer go up."

In fact according to Gross, “What I would point out is that Treasury yields are perhaps 150 basis points or 1½% too low when viewed on a historical context and when compared with expected nominal GDP growth of 5%.”

If Gross is correct, that would push yields on 10-year notes to 5%, ending the bond bull market and perhaps collapsing the bond bubble entirely.

In the meantime Gross maintains, “ we are out-Greeking the Greeks'...

From Reuters entitled: PIMCO now betting against U.S. government debt

“The world's largest bond fund began betting against U.S. government debt last month on the expectation that shaky finances will jolt interest rates higher.

PIMCO, through its outspoken co-chief investment officer, Bill Gross, has been raising alarms about a lack of buyers for Treasuries once the Federal Reserve ends its own bond purchase program, also known as QE2, in June.

In February Gross revealed his ultra-bearish view on the United States by dumping all of his fund's U.S. government-related debt holdings.

The portion of PIMCO's $236 billion Total Return Fund held in long-term U.S. government debt, including U.S. Treasuries, declined to "minus 3" percent in March from zero in February and 12 percent in January.

In a short position, an investor sells a borrowed security on a bet it can buy the bond back later at a lower price.

Cash equivalents, including Treasury bills and other debt with maturities of less than a year, rose to 31 percent of the fund's assets from 23 percent in February.

PIMCO's vote on the state of U.S. finances comes just as Washington narrowly averted a government shutdown on Saturday after Democrats and Republicans agreed on cutting $38 billion in spending for the fiscal year.

The 11th hour compromise probably had little impact on the investment strategies of Gross, who said in an April newsletter that the U.S. government was "out-Greeking the Greeks," a reference to the out-sized government debt in Greece that forced the country to ask for a bailout.

"We are smelling $1 trillion deficits as far as the nose can sniff," if the government fails to address the biggest entitlement programs: Medicare, Medicaid and Social Security, Gross said in his outlook.”

 

I'll say it again....the status quo cannot possibly be maintained.

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60 Minutes: The Next Housing Shock

Crooks, Liars, and Thieves

Monday, April 4th, 2011 - By Steve Christ

 

I have been over this ground before but sometimes it takes a 60 Minutes piece for some people to get it.

Without comment here's Scott Pelley on “The next housing shock”.

Crooks, liars and thieves.....

The only defense against them is the rule of law.

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