Housing Doom

Napoleon was not French.  Stalin was not Russian.  Hitler was not German.  Churchill was not English.

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Underwater? About to lose your house to foreclosure? See how with a second job and a 50 year mortgage- you too can stay chained to a mortgage for life:

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"Ara Hovnanian, CEO of K. Hovnanian Homes, suggested to Bloomberg TV that interest rates should be temporarily slashed to three percent on 30-year fixed-rate mortgages in 2009. The rate would then rise to four percent in 2010, though it’s unclear what would happen after that."

Surely not on new mortgages?! Please click on below to see the "hole" post at TheTruthAboutMortgage blog.

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"The false economy brought on by government-induced inflation and nearly unlimited credit seemed as if it would go on forever… but forever is a long, long time."

(mistake in earlier version of the title — hate it when that happens )

Doom friend Mike has collected a Murderer’s Row from the malls.  This does not look good.

UPDATE:

"We have all agreed that our gifts to each other this year will be to take $200 and pay that towards our credit card balances." - great idea from Doomer AZSALUKI (see comment #4 below)

What, Me Worry? “They” will come to the Rescue

by Mike Folkerth

Truer words were never spoken than those of the Swiss psychiatrist Carl Jung who pronounced that, “People can’t stand too much reality.” As we watch the false economy of the U.S. meltdown, “reality” is not a word that is spoken on the main stream news or by our political wizards.

But then, if we don’t face reality head on, it will run over us from behind. Understanding what is really happening gives one the knowledge to step out of the path of the bus.

George Bush, underscoring how dire the economic crisis has become, told world leaders, “I agreed to a $700 billion rescue plan for financial institutions only after I had learned the U.S. was at risk of sinking into a “depression greater than the Great Depression.”

Too bad Mr. Bush and congress didn’t divulge this information to the American people before he shared it with the world. In the U.S., there has yet to be an official declaration that we are in a recession!

Following is a large dose of the reality that we need to ingest daily in order to plan properly. For those who say, “It’s always like this in an election year,” I think you should have your medicine checked and get a prescription for the non-delusional stuff.

STORE CLOSINGS AND LAYOFFS

Ann Taylor is closing 117 stores nationwide, Eddie Bauer has already closed 27 shops in the first quarter and plans to close up to two more outlet stores by the end of the year. Women’s retailer, Cache, announced that it is closing 20 to 23 stores this year.

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"Roubini, Schiller [sic], Schiff and Ron Paul - they were all right!" No doubt this is funnier if you don’t understand German.

Don’t worry, we’re nowhere near this point. Neither does Germany represent America’s role in the drama. 1945 was actually the climax of the long process that ended England’s hegenomy.

I heard part of Margaret Atwood’s lecture series on debt last week on CBC.  At one point she explained the meaning of "the mills of the gods grind slow, but they grind exceeding small." According to our program, subprime is merely the mid-life crisis for Pax Americana, and shouldn’t last more than about 5 years.  If you were watching this space last week, you’ll remember that what we’re facing is merely a replay of Grant’s second term (except this time we’re looking at it from the point of view of 1873 Vienna).  The Empire will run for another three decades, and then we’ll enjoy three decades of real instability before the Chinese Century inevitably starts around 2075.

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Here is Housing Doom’s third installment of our unauthorized annotated transcript of the American Enterprise Institute’s September 30, 2008 seminar "The Deflating Mortgage and Housing Bubble, Part IV: Where Is the Bottom?" [1] This is the presentation by Nouriel Roubini.

Highlights

• "… there’s a growing recognition that this was not just a subprime mortgage problem …"
• "… this is other huge time bomb of the CDS market where about $55 trillion of nominal protection has been sold against an outstanding stock of only $6 trillion of corporate bonds. "
• "… the $1 trillion number at this point is not the ceiling, it’s just barely a floor …"
• "… currently financial markets are dysfunctional. Fundamentals don’t matter, valuations don’t matter, it’s just flow."
• "… And even a small tiny island like Iceland can have systemic effects on asset prices, let alone if you have a blowup of Hungary, or Argentina, or Korea, or other economies."

Nouriel Roubini: [23:34] Well, Desmond called it very well, I think many aspects of why things are getting worse rather than better in the housing market, and I share his outlook and pessimism. I would like to elaborate on the broader picture about what’s happening in the economy and the financial markets.

I’ve been saying for a while this will be the worst financial crisis the US has experienced since the Great Depression and it looks like the worst one. I mean I don’t think there’s anything that’s happened since the Great Depression looks so severe. Of course the real economic consequences in terms of output contraction are not going to be as bad as the Great Depression because there is a massive amount of policy action, but in terms of financial shock, I mean what does happen in the last few months is really quite unbelievable, every other week another major financial institution going belly up.

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Like the U.S., China’s housing market is also deteriorating as their economy cools.  Sales in Beijing are down 70% year-over-year:

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Las Vegas residents know the spin- the pundits have said for years that all the folks moving to Las Vegas will have the housing market recovering quickly.  The problem is, now people are moving out.  [Hat tip to JW!]

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Here is Housing Doom’s second installment of our unauthorized annotated transcript of the American Enterprise Institute’s September 30, 2008 seminar "The Deflating Mortgage and Housing Bubble, Part IV: Where Is the Bottom?" [1] This is the presentation by AEI Fellow Desmond Lachman. He made use of a slide deck [2] and about three weeks after the event added newspaper articles to the site that he had written on the subjects of the future of banking regulation [3] and prospects for world-wide deflation.[4] The event site has both a video and an audio recording of the seminar.  No official transcript yet exists, but AEI has recently added a summary.[5]

Highlights

• "This is almost a once in a hundred year kind of event that is very likely to crush growth."
• "It looks to me as if it’s baked in the cake that you’re going to be getting the recession, rising unemployment, and that’s not too good for house markets. "
• "… the fact that the Fed is reducing interest rates to 1 percent in my view is neither here nor there."
• "… So you get somewhat in a vicious cycle, and that’s the reason why I think that you’ve got to get some sort of intervention to stop it."
• "What we’re going to need is we’re going to need stabilizing of the housing market through unorthodox means, coupled with a massive fiscal stimulus package, coupled with monetary policy accomodation, and then we might have a chance …"

Desmond Lachman: [12:38] Thank you very much Alex, and thanks once again for arranging this, and I really have to give you credit again, you and Chris, for having foreseen this as long ago as March of 2007. [slide 1 -- refer [2] below] You saw this coming in a big way and I recall at that time Ben Bernanke was just beginning to figure out that there might be a minor problem with subprime mortgages.

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To which Rep. Dennis Kucinich (D., Ohio) replied,[1]

"That statement that you just made you will hear about for the rest of your career."

Yep, that sounds about right.  In the interests of their physical safety, Doomers are strongly encouraged not to read the rest of the WSJ article.  I just about fell off my chair when I read this bit.

U.S. lawmakers kept up the criticism of the Treasury Department’s management of the $700 billion financial rescue plan on Friday, accusing officials of being disingenuous in the way they sold the program to Congress.

UPDATE: Check out "Bailout Anger Boiling: ‘Is Kashkari A Chump?’ ", by Diana Olick (posted about the same time as this)

… and by the way, thanks go to the Implode-O-Gang for their hilarious satire movie poster — Doom originally borrowed it here.

MORE:

Big hat tip to StockMarket-Implode for posting this embed.

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