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<a href="http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a8mdg7z0u7Dw">U.S. Housing Slump Has ?Just Begun,? Says Forecaster Talbott </a>



<em>Feb. 5 (Bloomberg) -- Let?s say you own a $1 million home in Santa Barbara, California.



The house seemed like a steal when you bought it with that adjustable-rate mortgage in 2005. You still love the white beaches and those yachts bobbing up and down in the harbor.



Then you awaken early one morning, troubled that your monthly payments will soon double. You go out to pick up your newspaper and see for-sale signs on five houses on the street. One identical to yours just sold for $500,000.



Are you going to pay the bank $1 million plus interest for your place? John R. Talbott, a former investment banker for Goldman Sachs, poses that hypothetical question in his latest book of financial prophesy, ?Contagion.?



His answer: ?I don?t think so,? he says. ?If I?m right, then this housing decline has only just begun.?



Talbott is an oracle with a track record: His previous books predicted the collapse of both the housing bubble and the tech-stock binge before it. A friend who runs a New York steak house introduces him as Johnny Nostradamus, he says.



What sets him apart from other doomsayers is his relentless emphasis on simple arithmetic. He walks you through the numbers to show how U.S. house prices got so out of kilter with wages, rental prices and replacement values -- the cost of buying a property and building a home. (?Homes in California by 2006 were selling at three to five times what it would cost to build a similar home from scratch,? he writes.)



Five More Years



Talbott?s latest predictions are sobering. The U.S. is only halfway through the total potential decline in housing prices, he says. Home values will continue to deteriorate for four to five years, he forecasts. Adjustable-rate mortgages issued in 2004 and 2005, for example, are only now resetting for the first time, he notes.



Bankers may ?try to blame the crisis on poor Americans with bad credit histories, but that is not the real cause of the housing crisis,? he says. ?The greatest home-price appreciations and the homes most subject to price readjustment are in America?s wealthiest cities and its glitziest neighborhoods.?



At the end of 2008, a record 19 million U.S. homes stood empty and homeownership sank to an eight-year low as banks seized homes faster than they could sell them, the U.S. Census Bureau said this week. Almost one in six owners with mortgages owed more than their homes were worth, Zillow.com said the same day.



By the time the crash ends, Talbott predicts, homeowners will have lost as much as $10 trillion, with investors and banks worldwide losing almost $2 trillion. And just as the U.S. starts getting over a prolonged recession, the first big wave of baby boomers will retire, depriving the economy of their productivity (and high consumption), he says.



Back to 1997



So how far will the price of your home on the range fall? Citing historical data and trends, Talbott concludes that real prices should return to their average 1997 levels, adjusted for inflation. Why 1997? A 120-year historical graph shows that real home prices in the U.S. stayed relatively flat for 100 years, then began rising in 1981 and surged from 1997 to 2006.



A return to 1997 prices ?would get us out of the heady, crazy days from 1997 to 2006 in which banks were lending large amounts of money under poor supervision and aggressive terms.?



How did we get into this mess? Talbott blames everyone from average Americans who caught ?the greed bug? to hedge funds and credit-default swaps. The single biggest error, he says, was for U.S. citizens to allow their national politicians to take large campaign contributions from big business and Wall Street -- a theme Kevin Phillips developed in ?Bad Money.?



?No Accident?



?This crisis was no accident,? he says. It began, in Talbot?s view, because the U.S. government was ?co-opted? into deregulating the financial industry. Politicians were ?paid to deregulate industry,? taking billions of dollars each year in campaign contributions.



His investment advice for this prolonged recession: Hang on to cash and invest in gold or Treasury Inflation-Protected Securities, or TIPS. If he had to invest in stocks, he would put his money in China.



Living in smaller houses with their savings gutted, U.S. baby boomers will face yet another big challenge, Talbott says:



?The toughest job to get in the future will be the elderly person greeting you as you enter the local Wal-Mart.?

<a href="http://www.amazon.com/Contagion-Financial-Epidemic-Sweeping-Economy/dp/0470442212/">?Contagion: The Financial Epidemic That Is Sweeping the Global Economy . . . and How to Protect Yourself From It?</a> is from Wiley (256 pages, $24.95, 15.99 pounds, 19.20 euros). </em>
 
[quote author="awgee" date=1234395470]McCulley, (PIMCO), says Geithner did a great job.



<a href="http://www.cnbc.com/id/29137779">McCulley</a></blockquote>
Of course, it's the treasury department and the FED who keep feeding PIMCO more and more business so biting the hand that feeds you wouldn't be a good idea.
 
[quote author="Daedalus" date=1234413816]I had tons of respect for the PIMCO guys before all this crap. They've lost a lot of it in the past year or so.</blockquote>


me too. all of the jawboning they've done to save their bacon on the FNM/FRE bonds looks slimy to me.
 
Tear apart Pimco Total Return Fund and you will see that Gross has a 50% short position. It goes a long way to explaining his year to date numbers.Me think he talk with forked tongue.
 
Check out this *itch and moan and complain site. Blame everyone else but yourself.



<a href="http://fightingforourhomes.com/">fighting for our homes</a>
 
Haven't we heard this lie before?



BofA CFO: Bank is financially strong

Bank of America CFO Price says company is financially strong despite industrywide concerns

Ieva M. Augstums, AP Business Writer

Friday February 13, 2009, 12:08 pm EST

Yahoo! Buzz Print Related:Bank of America Corporation

CHARLOTTE, North Carolina (AP) -- Bank of America Corp. Chief Financial Officer Joe Price assured employees Friday the company has enough cash to finance operations for more than two years.



Related Quotes

Symbol Price Change

BAC 5.67 -0.20





{"s" : "bac","k" : "c10,l10,p20,t10","o" : "","j" : ""} "Market turmoil has created lingering industrywide concerns that magnify the importance of maintaining an extra level of capital to support business activities," Price said in a question and answer dialogue posted on the company's internal Web site.



He added, "We currently have enough cash on hand to fund our parent company operations for more than two years without having to issue additional debt during that time."



Price went on to say Bank of America believes it has the best deposit franchise in the world, which is a "very cost-effective funding source," and that the company's liquidity "continues to be strong despite the difficult market environment."



The comments came as Bank of America shares fell 25 cents, or 4.3 percent, to $5.62 in midday trading Friday. Its shares traded at a 25-year low -- or $3.77 -- last week.



"The stock price is a daily indicator of current market sentiment and should not be confused with the capital or liquidity that we use to fund our operations, make loans or otherwise invest in revenue-generating activity," Price said in the posting.



Bank of America serves more than half of all U.S. households and millions of businesses.



The company's Tier-1 ratio -- the measure commonly used to rate a bank's strength -- was 9.15 percent at Dec. 31, well in excess of what regulators regard as well-capitalized.



But broad concerns remain regarding the health of the nation's banks, as the U.S. banking system faces the worst financial crisis since the Great Depression.



In the wake of Lehman Brothers' collapse last fall, many financial institutions had adequate capital but, because it was tied up in assets that could not be sold quickly, they lacked the liquidity to withstand market and credit turmoil.



This week, Treasury Secretary Timothy Geithner said the government will boost lending, determine which banks should get extra funding, and remove toxic assets from banks' books -- but he provided few details about how the plans would work.



Bank of America has already received $45 billion in government aid, including a $20 billion injection last month to help it absorb losses from its Merrill Lynch & Co. acquisition.



Over the past couple of weeks, Bank of America Chief Executive Ken Lewis has reiterated the strength of his company, saying that Bank of America would not need additional federal funding and he hopes the bank can pay back the $45 billion within three years.



Showing further support, Lewis spent almost a million dollars last week buying shares of his struggling bank.
 
Housing rescue plans fail for the most part (big surprise). The only way to make these loan modifications to work is to cut into the loan balance.



http://www.bloomberg.com/apps/news?pid=20601213&sid=aIex9YRATOo8&refer=home
 
<a href="http://news.yahoo.com/s/ap/20090304/ap_on_bi_ge/obama_housing">Making Home Affordable</a>



"Mortgages for single-family properties that are worth more than $729,750 are excluded."
 
Every now and then I try to explain that the Federal Reserve is accountable to no one or no agency. People tell me that can not be, and they never seem to able to tell me who the Fed is accountable to. Sometimes people are correct when they say the Fed "reports" to Congress. Here is an excerpt of the Fed "reporting" to Congress:









<em>??My question to you is, will you tell the American people to whom you lent $2.2 trillion of their dollars?? Sanders asked, referring to the size of the Fed?s balance sheet.



?the central bank chairman replied, ?No,?



Bernanke said the Fed?s lending programs were not gifts or subsidies but rather over-collateralized loans.



?We have never lost a penny doing it,? he said?</em>





U.S. Senator Bernie Sanders (I ? VT) and Fed Chairman Ben Bernanke

Reuters, March 3, 2009







Now, do you really think you live in a democracy? Forget the democratic republic. At this point, I would be happy with a mob rule democracy.
 
Now this is encouraging. Bay Area home price dropping to 1999 levels.



http://www.bloomberg.com/apps/news?pid=20601213&sid=alP0is59EVdo&refer=home



Where is Boston2theBay? I want to hear again how all those exclusive Bay Area high-end jobs are going to prevent house prices from dropping, unlike that backwater known as Orange County.
 
I'm sure he would say just the same thing as Irvinites do, it is the low end (south/east), not the 'prime' part of the bay (west/sf/marin).



But it will hit the medium and high end there, just as it will here, once those optionARMS start to reset in mass.
 
Attractive women are turning to dancing and adult films to pay the bills...



http://biz.yahoo.com/ap/090322/economy_adult_entertainment.html?sec=topStories&pos=3&asset=TBD&ccode=TBD



I personally know two female friends who live in Vegas that have resorted to dancing to make their money (one worked in banking and the other one was an architect).
 
IMO, this is the story of the day. I am not hearing much in the MSM.





<a href="http://www.bloomberg.com/apps/news?pid=20601087&sid=aiS1BUOMzWdw&refer=home">New reserve currency</a>
 
[quote author="awgee" date=1237944236]IMO, this is the story of the day. I am not hearing much in the MSM.





<a href="http://www.bloomberg.com/apps/news?pid=20601087&sid=aiS1BUOMzWdw&refer=home">New reserve currency</a></blockquote>


That could be good for gold's price!



I'm scared of the outcome of April 2...things could change from that point forward.
 
IMO, this is a must read. It takes 50% of what I have been ranting about for the last year and coherently consolidates it into one article.





<a href="http://www.rollingstone.com/politics/story/26793903/the_big_takeover/">The Big Takeover</a>
 
O.C. prognosticator defaults on rental house

<A href="http://lansner.freedomblogging.com/2009/03/25/oc-prognosticator-defaults-on-rental-house/17639/#more-17639">http://lansner.freedomblogging.com/2009/03/25/oc-prognosticator-defaults-on-rental-house/17639/#more-17639</A>
 
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