Spitting Image - Madness sing Our House spoof :-)

thanks to mooseta

the drops will be greater than 50 grand this time....

der wertverfall wird die besungenen 50 tausend locker überschreiten......

CHINA AND ITS REGION / economist

thats just in.... gerade reingekommen

Commerce Dept. sanctions China over subsidy dispute
The U.S. Commerce Department announced sanctions against China on Friday in connection with a dispute over paper subsidies. Secretary Carlos Gutierrez said the U.S. has the right to apply countervailing duties to Chinese paper imports, which he said threaten U.S. products

more from bloomberg http://tinyurl.com/yo957m

The U.S. Commerce Department decided today to begin to levy new duties on imports from China to compensate for Chinese subsidies to exporters, reversing more than two decades of its practices

The immediate case concerns a complaint by NewPage Corp. that low-cost imports of subsidized glossy paper from China, South Korea and Indonesia are undercutting its profitability. China's exports of coated paper were set to almost triple in 2006 to $263 million from their level in 2004, according to U.S. government data.

this from the nyt http://tinyurl.com/2dtg44

At present, imports account for only 5 percent of the domestic market, but American manufacturers fear that imports are underpricing what they can produce and could wipe out the industry in a matter of years.

But trade and industry officials say future actions based on the department’s new policy could lead to duties on imports of Chinese steel, plastics, machinery, textiles and many other products sold in the United States, if as expected those industries seek relief and the department finds that they are harmed by illegal subsidies.

About NewPage Corporation
NewPage Corporation, headquartered in Dayton, Ohio, is a leading U.S. producer of coated papers in North America. With 4,300 employees, the company operates four integrated pulp and paper manufacturing mills located in Escanaba, Michigan; Luke, Maryland; Rumford, Maine; and Wickliffe, Kentucky. These mills have a combined annual capacity of approximately 2.2 million tons of coated paper

>i´m not sure if this is the right approach ...? ( to put it mildely) some might have forgotten that they need china to fund their deficit........

will be interesting to see what happens when the election is getting closer....last time one topic was the outsourcing to india........

>kann mir nicht vorstellen das dies der richtige ansatz ist...? (gelinde gesagt) evtl. haben einige vergessen das china dringend benötigt wird um das defizit zu finanzieren.......

wird spannend sein wenn die us wahlen nächer kommen...beim letzten mal war das outsourcing nach indien das große thema.......

>lets hope that things calm down and don´t escalate. if not....the cartoon could be outdated.. then the imports and the oil will get more expansive..........

>bleibt zu hoffen das sich die dinge beruhigen und nicht eskalieren. dann könnte der folgende cartoon überholt sein. dann wird für für die usa wohl öl und die importe teurer.......

>but i´m pretty confident that hank paulson is busy....... if this lead to free trade this is one of the rare times i would appreciate it.....

>ich tippe mal das hank paulson bereits am wirbeln ist...........wenn das zu einem freieren handel führt wäre eine der seltenen einflußnahmen die ich befürworten würde......

rodger rafter has some good points at "the market traders board" (especially the looming treasury auction on monday........... :-) http://tinyurl.com/2979sd

now to the original story:

So far the world has come to China, but now a rising China is beginning to reach out to the world, starting with Asia

...China's economic rise is certainly impressive. The economy's growth—an average of 10% a year since 1990—is not really more remarkable than the earlier rise of other Asian economies, led by Japan, but there is a difference: the huge size of China's population, at 1.3 billion. In 2005 China overtook Japan in the volume of trade it conducts. Depending on how you measure size and guess at future growth rates, it may overtake both Germany and Japan within 15 years to become the world's second-biggest economy. Measured at purchasing-power parity, China's share of the world economy is already much closer to the rich countries' (see chart 1). But bear in mind that the average Chinese income remains low. If China is on its way to becoming a superpower, it will be the world's poorest one yet.

Opinion polls suggest that the vast majority of Chinese see their rise as nothing that should trouble others. For many of them it merely marks a return to historical norms. Angus Maddison, an economic historian at the University of Groningen, has estimated that between 1600 and the early 19th century China accounted for between a quarter and a third of global output (see chart 2). At that time China's agriculture was more advanced than the West's, its cities bigger and more literate and its ruling classes more meritocratic. The country had also proved itself capable of long-distance exploration by sea. Another historian, Niall Ferguson, reckons that what went so spectacularly wrong for China then is more remarkable and worthy of investigation than why things should now be going right.

But what is the nature of China's rising economic power now? There is room for misperceptions. Policymakers in Washington, DC, are alarmed by China's export strength and its ballooning trade surplus. China is lambasted for having mercantilist policies that artificially boost exports, depress the Chinese currency, restrict imports and widen America's trade and current-account deficits.


In several respects that view is wrong. With a trade-to-GDP ratio of around 70% and a sea of foreign investment, China is one of the world's most open economies. Much of the growth in America's bilateral deficit with China reflects a shift in low-cost manufacturing from other parts of Asia to the Chinese mainland. Certainly China's currency is undervalued, having followed the dollar down since 2002. But that is reinforcing inflationary pressures, particularly in wages, so China's advantage as always the lowest-cost producer can no longer be taken for granted.

America's emphasis on exports misses the point about China's economic power. That power comes not so much from being a seller of things but increasingly from being a buyer, an investor and a provider of aid, in Asia and beyond. One Chinese diplomat puts it thus: “Imports: that's real diplomacy, because it means you're attractive to others. It means other countries need you, not that you need them.” This subtle understanding sets China in stark contrast to how Japan viewed the world during its post-war rise.

With this new kind of power, the economic and geopolitical sides are ever more intertwined. China's presence as a commercial force is rapidly being felt around the world, through its growing investments overseas and through an apparently insatiable hunger for resources to fuel the industrial revolution at home. The shock troops of this force are there to see in China's main airports: planeloads of oil-drillers, pipe-layers and construction workers, in company overalls and hard hats, off to work on oil rigs or build ports, highways or railways in South-East Asia, Africa, Latin America or the Middle East. Chinese workers are also moving into other countries in less formal ways. In the northern birch forests of Mongolia, unofficial groups of them are cutting down trees for chopsticks. In poor northern Laos, thousands of Chinese labourers have come across from neighbouring Yunnan to grow corn and sugarcane for export back to China; traditional slash-and-burn agriculture is giving way to polytunnels and large-scale market gardening.

This is not the first time that mainland Chinese have fanned out to work the world's natural riches. In the 19th century hundreds of thousands of coolies—indentured workers lured by Chinese and Western recruiters using a greater or lesser degree of deception—toiled in some of the world's worst hellholes: the guano deposits of Peru, the canebrakes of Cuba or the gold mines of South Africa. Now the Chinese are back in some of the same parts of the world. The difference this time is that Chinese capital, usually state-owned, stands behind them.

Trying to charm
One of the advantages of state-led development is that China can entice countries with packages of corporate investment, cheap loans and other aid goodies. This way China has rapidly acquired interests and influence across swathes of South-East Asia, Africa and Central Asia. China's outward foreign direct investment more than quintupled in the first half of the decade, to $11.3 billion in 2005, and will have risen sharply since. Once a big aid recipient, China hosted a summit of 48 African leaders in Beijing last November, promising $5.5 billion in aid for Africa. According to a recent report by the Institute for Public Policy Research in London, China has become Africa's third-biggest trading partner after America and France.

China is also increasingly investing in the rich world. To some Americans, in particular, this is distasteful. In 2005, citing national-security concerns, Congress succeeded in thwarting the $19 billion bid by China National Offshore Oil Corporation (CNOOC) for Unocal, an American oil major with reserves in Asia. Competing resource companies from the West often claim that Chinese companies outbid them in third markets, using cheap, state-subsidised funds. Yet in growing numbers of countries, rich and poor, the Chinese presence is welcomed for bringing jobs, cash and infrastructure.

read also "china is shifting $ reserves to equities" http://tinyurl.com/3x6q7e

Australia has received more Chinese investment than most Western countries, much of it in mining. It is criticised in America and Europe for cosying up to a dictatorship. “We're also strong on the human-rights front,” an Australian diplomat says in defence. “But there's stuff to be done in the meantime.” When a senior Canadian official is asked what conclusions Chinese resource companies should draw from CNOOC's experience, he replies instantly: “Come to Canada.”
China's rise is a global phenomenon, but the rest of this special report will concentrate on its relations with Asia. After all, the region is on its doorstep. “If we can't get respect in Asia,” says a Chinese policymaker, “we can't get on in the world. If we can't have a peaceful and prosperous backyard, then there can't be any rise of China.”

In vying for influence in Asia, China has many competitors. They include India, rising in its idiosyncratic way; Japan, seeking a more robust foreign policy in the face of China's rise; Russia, a resource giant, even if a diplomatic minnow in Asia; the ten countries that make up the Association of South-East Asian Nations (ASEAN); and—still the top dog even if distracted in the Middle East—America. here more on the strong ASEAN position http://tinyurl.com/2dpy6l

It is in Asia that America risks falling prey to a final misperception. As Mr Lampton points out, just as Americans overstate China's export prowess as a source of economic power, so they underestimate China's intellectual, cultural and diplomatic influence. If policymakers view China's power “in substantially coercive terms when it is actually growing most rapidly in the economic and intellectual domains,” he writes, “they will be playing the wrong game, on the wrong field, with the wrong team.”

number of the day.../ subprime in 45% of structured finance cdo´s

looks like the "crash test dummies" are close to a comeback...

denke das die "crash test dummies" bald ein comeback feiern werden

or the parody from weird al yankovic

About 45 percent of the $179 billion of structured finance collateralized debt obligations sold last year had subprime mortgage bonds in their collateral pools and could face ``severe rating cuts,'' according to Moody's Investors Service. The securities may become the ``worst-performing in recent history,'' Standard & Poor's said earlier this week.

CDOs May Face `Severe' Ratings Cuts on Subprime, Moody's Says http://tinyurl.com/2rgmej
Subprime Mortgage Bonds From 2006 May Be Worst Ever http://tinyurl.com/32bkww

Investing in distress - The vultures take wing / economist

this could be indeed be one of the major markets in the next years to come........

das könnte in der tat einer der vielversprechenste märkte die nächste jahre über werden.....

Banks and hedge funds get ready to capitalise on corporate misery

SOME of them look back fondly on the bursting of the dotcom bubble; others feel nostalgic about the 1990s recession. Distressed-debt traders, who buy bonds no one else will touch, and turnaround specialists, who pull companies back from the brink, operate in a topsy-turvy world, where bad times are good and corporate wreckage yields rich rewards.

The pickings have been slimmer for vultures over the past three years, however. Corporate profits have proved annoyingly robust and plentiful credit has made refinancing sickeningly easy (see article).

Except for the odd scrap of rotting meat (mainly among car-parts makers and airlines) they have had little to sink their talons into. This has led to “category creep”.

Traditional distress funds have drifted reluctantly into risky, but still solvent, junk bonds and high-yield loans to keep business ticking along. Now thanks to the subprime-mortgage woes, hopes are rising that trouble is finally on its way, bringing with it outsized returns for those who trade in corporate casualties

Investment banks, readying themselves for the expected downturn, have been strengthening their distressed-securities groups. Goldman Sachs is on the lookout for subprime bargains and recently lured a lieutenant of Carl Icahn, an ageing raider, to its “special situations” group. The investment bank, wary of the “vulture” tag, says it merely wants to ensure it can make money at every stage of the business cycle. Barclays has poached an entire team from Oaktree Capital Management, which manages distressed-securities funds. Oaktree itself is raising a new $3 billion fund.

>and with implosions like back in the dot.com era........

>und mit implosionen wie zu besten dot.com zeiten......

Behind this cyclical burst of activity is a deeper trend. Distress, once the preserve of specialists, is now attracting the mainstream. Edward Altman, a finance professor, counts 170 institutions that invest primarily in distress, more than ever before, with an estimated $300 billion at their disposal .....

Vultures hope that feast will follow the recent famine. They believe the very lack of distress lately will mean the carrion is more plentiful when times eventually change. More junk bonds are being issued than ever before, more risky loans are being offered. And remarkably, this lending free-for-all continues despite a sharp drop in credit ratings, says Martin Fridson, editor of the indispensable Distressed Debt Investor. No one seems bothered that 17% of senior, unsecured junk-bond issues are on the lowest possible rung, compared with 2% in 1990.

Mr Altman, who has spent many years tracking financial junk, says he has never seen anything like today's market. His diagnosis: “almost insane”. The “glut” will surely end dramatically, he says. Mr Fridson reckons a recession could cause defaults to jump to unprecedented levels.

That is when vultures come into their own. When sentiment turns after a long bull run, the market usually overreacts. It loses all sense of distinction between basket cases and risky but viable firms. The distress can also trigger forced sales of potentially valuable assets. Those gutsy enough to swoop can enjoy rich pickings. For example, buyers of some troubled American power companies have seen triple-digit gains as shares have recovered, boosted by mergers. Some investors in struggling cable firms have also done superbly—though others, who bought well before prices hit bottom, have lost money.

New, and sometimes nasty
The next wave of distress will be unlike the last in two respects. First, commercial banks no longer dominate the process. According to Standard & Poor's, a rating agency, non-banks such as hedge funds now make roughly half of all high-yielding leveraged loans and hold the lion's share of the secondary market.

Indeed for many distressed borrowers, hedge funds have become the last, best hope of salvation. Accredited, a troubled subprime lender, was recently propped up by a $200m loan from San Francisco-based Farallon after banks withdrew support. The hedge fund charged a credit-card-like rate of interest. It also secured the right for ten years to buy over 3m Accredited shares for $10 each, a deal that will bring it huge returns if the lender pulls through. This is a variation on the “loan-to-own” strategy now popular among hedge funds: credit is extended in the hope that it can be converted to equity when the company fails to recover, allowing the lender-turned-owner to restructure the firm thoroughly.


>sounds like farallon are smart guys..... or are they are just doubling down? :-)

> hört sich so an als wenn farallon extrem clever ist...oder schmeissen sie schlechtem geld gutes hinterher..... :-)

Farallon has an interest in keeping LEND afloat. They bought 1,975,000 shares during Q4 of 2006, most of that was probably above $30 as they hit 1,579,349 shares (a 6.3% stake) on November 2nd.

thanks to rodger rafter http://tinyurl.com/yvmeww

Though hedge funds offer quicker, more creative solutions than banks did in the past, their tactics can upset other creditors. They have also ruffled the feathers of the private-equity firms that sponsor leveraged takeovers. Fearful that activist funds will make trouble in a downturn, the buy-out shops have started asking their banks to insert legal clauses that prevent their debt from being sold into such hands.

The second change is likely to cause conflict too. Borrowers' capital structures—the various layers of debt and equity, each with different rights in the event of default—are now more complex. It is less clear than it was who is entitled to what.

That is largely thanks to the explosion of “second-lien” lending. These loans are secured against a company's assets, but with fewer rights than more senior loans. Trouble is, these rights are not always clear. Second-lien lenders, who provided 75% more money in 2006 than the year before, have begun to exploit this fuzziness to challenge those above them in the pecking order.


“We could see some almighty bust-ups when the market turns and everyone's less understanding,” says Mo Meghji, who runs a restructuring boutique......

Which leaves just one question: what might trigger the next crunch? Nobody knows, but Mr Arbess suggests it may arrive disguised as good news. The turning point of the last cycle, he believes, was the merger of AOL and Time Warner. That deal exposed the kind of faulty logic that allows a money-losing internet firm to get the better of a profitable media giant. So don't hope for a $100 billion leveraged buy-out—unless you're a vulture

builders on the block / uk

quite a different pictute than in the us. bigger market share, better stock performance etc.but things can change quickly... i think we will see soemthing similar in the us after the dust has settled (in a decade or so.......)

ein etwas anderes bild als in den usa. größere marktanteile, bessere aktienentwicklung etc. aber wie wir aus den usa wissen können sich diese dinge schnell ändern....denke das wir in den usa nachdem die scherben zusammengefegt worden sind ähnliche größenordnungen sehen werden.



IN BRITAIN'S overheated property market, the only things hotter than the prices of the houses for sale are the firms that build them. On March 26th Taylor Woodrow and George Wimpey agreed upon a £5 billion ($9.8 billion) merger to create the country's largest housebuilder.

The financial logic of the deal seems hard to fault. Last year the two firms built about 22,000 homes in Britain, a tenth of all completions. Together they will be able to trim costs by more than £70m a year and they will be in a stronger position in America, where they have operations in Florida, California, Arizona and Texas

this is from bloomberg http://tinyurl.com/3e2935

....a slumping U.S. property market, which accounts for about one-third of their sales

>wow. look at the performance compared to toll brothers (us builder)

>obwohl ein drittel aus den usa kommt kein vergleich zu einem us builder wie toll

The merger may be the biggest of its kind but it is not the first, as a wave of consolidation sweeps through the industry. Of the country's ten biggest builders in 2002, only six remain. The rest have been taken over by the three largest firms. Four years ago the top three firms controlled about 20% of the market; now they have around 30%.

>here is some us data:

The U.S. home-building industry still includes some 80,000 companies, most of them tiny local outfits, but it is changing dramatically. Five years ago, the top 10 home builders controlled only about 10% of the U.S. market. Now their share is about 25%, and the big builders predict it will top 50% within a decade

The upheaval is transforming an industry that Kate Barker, a member of the Bank of England's monetary-policy committee, heavily criticised in 2004. Ms Barker was investigating why the supply of new houses had responded so sluggishly to the house-price boom, with completions actually falling to a low of about 175,000 in 2001, although they have since staged a recovery (see chart). One reason she highlighted was a fragmented and inefficient industry, whose firms competed not for customers by offering better homes or building them more cheaply but for that scarce British commodity, land with permission to develop. Local firms dominated their regions because they often stood a better chance of gaming the planning system than their national rivals. Quality often suffered because demand was so great that builders could sell all but the shoddiest of homes.

this comes from ireland. could also be made from a frustrated uk citizen.....

größer/ bigger http://tinyurl.com/3ch7ys
thanks to "open window" http://tinyurl.com/yvw8fd

Two things have since changed. First, publicly quoted builders now look vulnerable to takeovers from rivals or private-equity firms because rising house prices have pushed up the value of their land faster than their share prices. This is partly because they value land on their books at its historic purchase price, rather than its current price. So it has often been cheaper to get land by pouncing on a rival than by buying it on the open market, says Kate Moy, an analyst at Teather & Greenwood, a stockbroker.

The second change is that Britain may soon weaken longstanding rules that have preserved “green belts” around towns and cities. Another report by the energetic Ms Barker, released in December, argued that farms and parks will have to be concreted over to provide living space for an extra 209,000 new households each year over the next two decades. One consequence is that firms may soon be able to buy land in suburb-sized chunks.


The potential change has sparked a flurry of interest in land adjoining towns and cities that may be reclassified. That seems to be shifting the balance of power from local builders to large firms with enough capital to buy rights to huge tracts of land. A sign of the shift, says Peter Damesick, head of research at CB Richard Ellis, is that even institutional investors with little previous experience are now getting into the game of speculating on town-edge land.

With interest in land running high the merger between George Wimpey and Taylor Woodrow is unlikely to be the last, if indeed it proceeds. Other builders and private-equity firms are running their slide-rules over the two companies, whose shares have gained on optimism that a counterbid may emerge. And several smaller housebuilders are also expected to fall to bids soon. Given the industry's generally shoddy customer service, few of them will be missed.

disclosure: short a basket of us homebuilder

Kass: Harley Hogs Feed at the Subprime Trough

kass makes a very good point and this is just one more example how widespread the addiction of debt is especially in the us. anybody (including bernanke....) who thinks that the housing subprime mess is an isolated event that won´t infect other sectors will be in for a nasty surprise.


kass trifft es mal wider auf den punkt. harley ist nur einbeispiel von vielen das zeigt wie weit speziell das us wirtschhftswesen mit der versorgung von immer mehr krediten verwoben ist. jeder (schließe da bernanke mit ein) der meint das die subprimeprobleme im immobiliensektor isoliert bleiben wird wohl noch ne weniger schöne überraschung erleben.

Judging by the commentary and the virtual invulnerability of worldwide equity prices, most see only a speed bump in the recent subprime scare. There is still a general belief on the part of the investment community that the mess is a containable fluke.

thanks to http://www.coxandforkum.com/

I have stressed the likelihood of a subprime contagion. After all, subprime is subprime and credit is correlated. Lower-quality, more-levered lending (with less collateral) is not confined to consumer loans, credit cards, homes, recreational vehicles and autos -- as investors might soon find out.

Even motorcycle (loans) are hitting potholes!

Indeed, it appears growing credit losses and delinquencies are beginning to render Harley-Davidson's motorcycle loans, well, increasingly like hogs.

Thirty-day delinquencies (and loss trends) in Harley-Davidson's receivables book offer a clear picture that credit-quality issues are broadening as HOG's receivables experience has begun to trace a pattern of deterioration that we first began to see in subprime mortgage loans during the first half of 2006

Harley-Davidson's 30-Day Delinquencies
4Q2006	5.18%
3Q2006	4.46%
2Q2006	3.61%
1Q2006	3.69%
4Q2005	4.83%
3Q2005	4.07%
2Q2005	3.66%
1Q2005	3.60%

As I have mentioned previously, Harley's finance subsidiary (HDFS) funded almost half of Harley-Davidson's motorcycle loans. Like subprime mortgage loans, HDFS' hog loans are pooled and securitized to institutional buyers. Unfortunately -- in credit trends and terms -- HDFS is also beginning to look more and more like New Century ......

In 2006-07, 28% of HDFS loans in its securitized pools had FICO scores below 650, which is considered subprime, which is very close to the 21% subprime market share of total mortgage loans made the previous year.

During the company's investor day on Feb. 28, Harley acknowledged that several of the securitization pools had breached their credit-quality metrics -- like subprime, the most recent pools' credit losses and delinquencies are rising faster than expected and more rapidly than earlier pools.

This is beginning to force Harley-Davidson to fund additional cushion reserves in the triggered securitization pools, much in the same way subprime mortgage originators have had to buy back bad loans. This takes a hefty bite out of HDFS' profitability by reducing its net interest margin.

Should the recent trend of rising credit losses and delinquencies in Harley-Davidson's loan-receivable book and in the securitization pools of their financial subsidiary (HDFS) continue, tighter lending practices likely will be instituted, and institutional buyers will be less receptive to buying HDFS' securitized pools. This could serve to reduce Harley-Davidson's sales growth and profitability.

> surprisingly harley has almost performed as bad as countrywide.....

> es ist wirklich erstaunlich das das harley fast so schlecht wie countrywider (der größte us hypothekenfinanzierer abschneidet )

Sound familiar?
It is beginning to look like the motorcycle lending markets are no longer "born to be wild." And, not surprisingly, I am still short Harley-Davidson.

More importantly, the fungus of subprime is beginning to spread into asset classes other than housing and mortgages. Don't believe for a moment that Harley-Davidson's dealers or the parent company were any less reluctant than the mortgage brokers to serve up loans for their product.

And last time I looked, a motorcycle is a discretionary item that is far less secure and stable than a home.

disclosure: short cfc and since visiting the "harley days" in hamburg a big harley fan

ken rosen / housing - first inning in pricing slump

click on the headline to watch the video.

klickt bitte auf die überschrift um das video zu starten


thanks to luvs_footie

Grim Reality / PIMCO

bill gross is right that the credit tightening will lead to real trouble for the us.

i´m not so sure about the other conclusion he is drawing (only 20%?). it´s also unusual that he uses the shiller and nar data and in the official pimco housing outlook they use the ofheo data http://tinyurl.com/29n2gg

bill gross beschreibt genau richtig das die eingentliche probleme die verknappung von krediten ist.

was die weiteren schlüsse und berechnungen (20%?)sind die er zieht bin ich mir da nicht ganz sicher. zudem ist es ungewöhnlich das er die shiller und nar daten benutzt während pimco im offiziellen housing outlook auf die ofheo daten zurückgreift http://tinyurl.com/29n2gg

Life, it seems, has become one giant reality show – or is it vice versa? Which is truth and which is the illusion or have both simply morphed into a uni-consciousness that feeds off information from different computers – one the living kind with two arms and two legs, the other more stationary with a plasma and keyboard. My Apple screensaver for instance features a stunning series of pictures of our galaxy and beyond, from detailed midnight close-ups of the moon’s craters to spinning supernovas of unimaginable beauty. While everyone “knows” that those objects are really “out there,” it’s possible to admit that they’re also in “there.” ......” It’s only my past experience that commonsensically points to the “out there” as real and the “in there” as an illustration. If I’d been raised and confined in a room with nothing but a computer, the tilt of perception would most likely be in the other direction. .......

Such complexity is also evident in the financing of the U.S. housing market. Long ago and far away there used to be an old “20% down” reality that morphed somehow into a subprime/Alt A cyberspace free-for-all (literally “free for all”).

thanks to http://www.glasbergen.com/

Talk about a second life! U.S. homeownership has expanded from 65% to 69% of households since the turn of the century, in part because it became so easy, and so cheap to finance a home. No avatars in that bunch – they were living, breathing U.S. citizens who yes, might knowingly or unknowingly have taken advantage of “low doc” or “no doc” applications, who might have taken out a “liar loan” in the face of “full disclosure” documentation required of their mortgage lenders, or who simply might just have jumped on board the 1% Fed Funds financing train of 2003. No matter. They bought a house, began living the American dream by making money with someone else’s money, and expected to live happily ever after.

Well, not so fast, at least for some of them, it seems. Home prices, as measured by the National Association of Realtors, have gone down by 2% nationally over the past 15 months and there’s fear in the air that it could get worse. It most assuredly will.

The problem with housing, however, is not the frequently heralded increase in subprime delinquencies or defaults. Of course write-offs, CDO price drops, and even corporate bankruptcies of subprime originators and servicers will not help an already faltering U.S. economy. But foreclosure losses as a percentage of existing loans will be small and the majority of homeowners have substantial amounts of equity in their homes. Because this is the reality of our U.S. housing market, analysts and pundits now claim we’re out of the woods: the subprime crisis is or has been isolated and identified for what it is – a small part of the U.S. economy.

It will not be loan losses that threaten future economic growth, however, but the tightening of credit conditions that are in part a result of those losses. To a certain extent this reluctance to extend credit is a typical response to end-of-cycle exuberance run amok. And if one had to measure this cycle’s exuberance on a scale of 1-10, double-digits would be the overwhelming vote. Anyone could get a loan because shabby credits were ultimately being camouflaged within CDOs that in turn were being sold to unsophisticated foreign lenders in need of yield as opposed to ¼% bank deposits (read Japan/Yen carry trade). But there is something else in play now that resembles in part the Carter Administration’s Depository Institutions and Monetary Control Act of 1980. Lender fears of potential new regulations can do nothing but begin to restrict additional lending at the margin, as will headlines heralding alleged predatory lending practices in recent years. After doubling over 18 months between 2005 and the first half of 2006, non-traditional loan growth has recently turned negative, and lenders’ attitudes are turning decidedly conservative as shown in Chart 1.
Bulls and bears argue over websites as to the percentage of all lending that subprime and alternative mortgage loans provide but while important, the argument obscures the critical conclusion that tighter lending standards and increased regulation will change the housing outlook for some years to come. As past marginal buyers are forced to sell their home to prevent foreclosures, so too will future marginal buyers be restricted from buying them. No one really knows the amount that homes must fall in order to balance supply and demand nor the time it will take to do so, but if one had to hazard a conclusion, it would have to be based in substantial part on affordability statistics that in turn depend on financing yields and home price levels in a series of different scenarios as outlined in Chart 2. The chart shows the amount that home prices or mortgage rates (or a combination of the two) need to decline in order to revert back to affordability levels in 2003, a year which might have been the last to be described as a “normal” year for home price appreciation.

>look at the shiller chart and decide if 2003 was a normal year....and what with the years prior to that?

>guckt euch den chart an und sagt mir ob 2003 ein normales jahr war. und vor allem was mit den jahren vorher passiert ist. Since then, 10+ annual gains have been the rule whereas average historical estimates provided by Robert Shiller may have suggested something on the order of 4-5%.


größer/bigger http://tinyurl.com/2d2zxy

By that measure alone, homes are likely 15-20% overvalued (3 years x 5%+ annual overpricing). Chart 2, in addition suggests much the same thing. If mortgage rates don’t come down, home prices need to decline by 20% in order to reach prior affordability levels. If rates do come down, home prices will drop less. größer/bigger http://tinyurl.com/2yq7t3

>to me it looks like he has left out the years prior to 2003. i wanted to add that lots of cities have gone almost parabolic. so even when the 20% for the nationswide level is true very important areas will get hammered. more shiller charts for other big cities via paper money http://tinyurl.com/2ygvb7

>für mich sieht es so aus als wenn er die jahre vor 2003 ausblendet. zudem möchste ich ergänzen das etliche große und wichtige stäfdte/regionen fast parabolisch gen norden geschossen sind so das selbst wenn die 20% auf landesebene korrekt sind diese regionen deutlich crashpotential haben. um mehr regionen im einzelnen zu sehen bitte auf den link von paper money klicken http://tinyurl.com/2ygvb7

>here are the future contracts thanks to macroblog! http://tinyurl.com/247fqe .

looks like the pace is accelerating......

>hier sind die futures / dank an marcoblog! http://tinyurl.com/247fqe

sieht so aus als wenn sich das templo der abwärtsbewegung beschleunigt......

größer/bigger http://tinyurl.com/2fbqfv

Chart 2, while somewhat subjective and time dependent, introduces the critical connection between home prices and interest rates. PIMCO cares about housing and its fortunes, but primarily because of its influence on yields. And while the Fed may be willing to allow U.S. homeowners to suffer a little pain as indeed they have in recent quarters, a double-digit decline would risk consequences that few central banks would be willing to underwrite.


>too bad they have taken the risk of inflating this bubble year after year ......

>zu dumm nur das die fed das risiko der blasenbildung nur zu gerne in kauf genommen hat ....

So a forecast of home prices almost implicitly carries with it a forecast for interest rates. To prevent a double-digit decline in prices, PIMCO’s statistical chart suggests that mortgage rates must decline a minimum of 60 basis points and the sooner the better. The longer yields stay at current levels, the more downward pricing pressure will build as foreclosures/desperate sellers dominate price trends as opposed to prospective buyers. While the Fed, as pointed out in last month’s Investment Outlook must be cognizant of an array of asset prices in addition to housing, homes are the key to future equitization trends, and fundamental therefore to the outlook for consumption.

You may want to take this looming grim reality with a grain of salt or suggest as old worlders do that it’s not real at all if it can’t be touched or if it doesn’t touch you. Not so. Don’t take my word for it though. Investigate the Fed’s own study, written in September of 2005 (Monetary Policy and House Prices: A Cross-Country Study) covering housing cycles in aggregate and individually for 18 countries over the past 35 years. This study’s important conclusion for PIMCO and our clients is that if home prices in the U.S. have peaked, and are expected to stay below that peak on a real price basis for the next three years, then the Fed will cut rates and cut them significantly over the next few years in order to revigorate an anemic U.S. economy. Strong global growth (not part of this study’s assumptions) may temper historical parallels and provide a higher floor than would otherwise be the case.

Nonetheless, prices for houses that I can see and touch every day outside my office are morphing with bond yields inside my computer screen to produce a reality show that speaks to an ongoing bond bull market of still undefined proportions.

>for a foreign investor with currency risk there will be probably no bull market in us bonds....

>für einen ausländischen investor dürfte selbst ein starker bondmarkt dank des $ wahrscheinlich zu wenig jubelstürmen führen

BNN - MUST SEE TV! / paper money

paper money hits is once again ! make sure you click on the headline

to see desperate spin attempts from guests like Michonski, CEO of Coldwell Banker and some shocked "former" bulls like David Seiders, Chief Economist of the National Association

a must see!


großes kompliment mal wieder an paper money! unbedingt auf die überschrift klicken

um verzeifelte spin versuche und geschockte ehemalige housing bulls zu sehen.

extrem sehenswert!

bear threat / colbert

click on the headline to start the video and see what colbert has to say....

klickt bitte auf die überschrift um das video zu starten und "knut" und colbert zu sehen


this bear "knut" was the major headline all over germany in the past week. every newspaper, every tv station has run stories in heavy rotation. unbelievable..... but cute!

euch brauche ich ja nicht zu erklären wer knut ist....



i highly recommend the following clip " seniors"!

zudem kann ich jedem noch den nächsten clip " senioren" empfehlen!

BOJ Is Watching Land Prices for Excess, Fukui Says

i haver never understand the japanese sense of humor.......

der japanische humor wird mir wohl immer ein geheimnis bleiben ......

i stay with homer..... / da bleibe ich doch lieber bei homer....

March 27 (Bloomberg) -- Bank of Japan Governor Toshihiko Fukui said he's closely monitoring land prices after a report showed real estate in some parts of Tokyo surged as much as 46 percent last year.

``We aren't yet in a situation in which land-price gains warrant concern of excessiveness, but we'd like to keep a close watch on them,'' Fukui said in parliament today. ``Rising land prices won't automatically prompt a rate increase.''

Concern that borrowing costs at 0.5 percent will fuel land- price gains could prompt the Bank of Japan to raise interest rates in the first half of this year. The central bank wants to avoid a repeat of an asset-price bubble, the collapse of which in the early 1990s led to more than a decade of stagnation in the world's second-largest economy.

``Land prices are rising, and that's spreading to other big cities'' .... ``This may increase chances of a rate increase before the July upper house election.''

Commercial land prices in Japan's three biggest cities rose 8.9 percent in 2006, the government said on March 22, as investors were lured by large-scale developments including Mitsui Fudosan Co.'s Tokyo Midtown project, which opens this week.

``We've got a clear impression that the recovery of land prices is becoming evident mainly in large cities,'' Fukui said, adding that gains in Tokyo, Osaka and Nagoya were ``prominent.''

Omotesando Hills
Commercial land in and around the three cities rose for a second straight year, after gaining 1 percent in 2005, the government said last week. Residential land prices increased for the first time in 16 years, up 2.8 percent.

The steepest gains were recorded in areas near Omotesando Hills, a retail and residential development in central Tokyo that opened on Feb. 11 last year. Commercial and residential land prices both rose as much as 46 percent near the project.

Japan's two largest developers will open developments in central Tokyo in coming weeks. Mitsui Fudosan's Tokyo Midtown project includes the city's tallest building. Mitsubishi Estate Co. is scheduled to open a new 42-story skyscraper in front of Tokyo Station in April.

``The recovery in land prices generally reflects the improving outlook for the economy and higher expectations for profits that can be made by utilizing land,'' Fukui said.

Land prices nationwide rose for the first time in 16 years in 2006 as gains in Tokyo, Osaka and Nagoya compensated for drops elsewhere in the country, last week's report showed. Japan's commercial and residential land values are still half the levels reached in 1988.

Some Areas `Overheating'
Finance Minister Koji Omi said last week that the gains don't signal another bubble is emerging. Economic and Fiscal Policy Minister Hiroko Ota said some areas are ``overheating'' and the government will ``watch developments closely.''

more on japan from tim http://tinyurl.com/29rcnr

ATA Truck Tonnage Index Rose 1.6% mom, down 1,7% yoy

at least some (relativeley) good news.

immerhin einige (relativ) gute nachrichten.


The American Trucking Associations’ advanced seasonally adjusted For-Hire Truck Tonnage Index increased 1.6 percent in February after falling a revised 3.1 percent in January.

On a seasonally adjusted basis, the tonnage index improved to 113.3 (2000 = 100) in February from 111.5 the previous month. The index decreased 1.7 percent compared with a year earlier, marking the eighth consecutive year-over-year decline. The not seasonally adjusted index fell 6.8 percent from January to 101.2.

ATA Chief Economist Bob Costello said February’s tonnage increase came as a surprise given other economic trends during the month and considering the rough winter weather. He attributed some of the index’s strength, however, to easy comparisons with January because the first month of the year was particularly weak.



“The latest increase from January, as well as the relatively small decrease from a year earlier, while welcomed, is probably not the norm, at least in the short-run,” said Costello. “Freight levels remain challenging, despite some anecdotal reports of better volumes in late March. At this time, however, it is difficult to ascertain whether those reports are due to seasonal blips or an underlying trend. We continue to look to the second half of 2007 for better tonnage volumes. But we shouldn’t expect a robust rebound in freight during 2007.”

Trucking serves as a barometer of the U.S. economy because it represents nearly 70 percent of tonnage carried by all modes of domestic freight transportation, including manufactured and retail goods.

Trucks hauled 10.7 billion tons of freight in 2005. Motor carriers collected $623 billion, or 84.3 percent of total revenue earned by all transport modes.

more on this topic from russ winter http://tinyurl.com/yqdz73