March 30, 2009 9:00 pm

Headlines, Thoughts and Updates - March 30, 2009

Here are a few headlines, but I had to cut it short this morning. Too much going on. Our client conference call starts at 8:50AM Eastern this morning. The global violence is growing. Prepare yourself for something we have only seen in movies and fiction.

Violence in Pakistan - Here is the third major act of violence in the past two weeks. Why don't we hear about these in the US papers. First, we saw the police headquarters in Islamabad bombed. Last week it was a mosque, leaving 70 dead. And today another 60 dead at the Police Academy. - Mike

60 feared dead as gunmen storm Pakistan police academy - Gunmen have stormed a Pakistan police academy, triggering an intense battle with security forces in which 60 people are feared dead and hundreds have been taken hostage, local news has reported. - http://www.telegraph.co.uk/news/worldnews/asia/pakistan/5075299/60-feared-dead-as-gunmen-storm-Pakistan-police-academy.html - U.K. Telegraph _______________________________________

GM and Chrysler Kaput – We have a zero bet on GM with PUTs, and it will pay off handsomely. They cannot survive, but unraveling this pile of elephant dung will result in elephant dung throughout the US and global economy. It will not be easy. And it will be a devastating blow to millions of pensioners, employees, suppliers and more. - Mike

GM and Chrysler denied extra funds - The Obama administration refused on Sunday night to give fresh bail-out money to General Motors and Chrysler, telling the carmakers to come up with new plans or risk insolvency. GM has received .4bn in government aid and had asked for an additional .6bn. Chrysler has received bn and had asked for another bn. But both companies failed to meet targets on cutting their debt and reducing the cost of benefits paid to workers. The crisis talks between the companies and the administration's auto task force cost the job of Rick Wagoner, chief executive of General Motors, who was asked to step down by the White House after 30 years with the carmaker. Officials said on Sunday night that Chrysler would be given 30 days and GM 60 days to reach agreement with debtholders and unions, with new tougher targets for cost cutting, or they would lose their last chance for a government bailout, almost certainly sending them into bankruptcy. - http://www.ft.com/cms/s/0/a2ede9ae-1cc1-11de-977c-00144feabdc0.html - Financial Times
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Merkel Gets It – Germany has long been a nation of savers, so now it is only logical that they speak up and tell it like it is. Only Merkel has the guts to tell the world . . . stop spending like there's no tomorrow . . . because if we continue on this path . . . there will be no tomorrow. - Mike

Merkel warns on further stimulus - Angela Merkel, the German chancellor, will warn leaders of the world's largest economies next week against pumping too much money into reviving global growth, saying that such action would create an unsustainable recovery. - http://www.ft.com/cms/s/0/eda17b82-1b09-11de-8aa3-0000779fd2ac.html - Financial Times
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Liars Can Figure but Figures Don't Lie – We've seen a lot of numbers over the past two weeks pointing to a recover in housing and all sorts of other areas of the economy. Next month we will probably see revisions. But even if the numbers stand, you can make them look like whatever you want if you selectively choose numbers to fit your message. For those hat believed mortgage defaults were slowing and that housing was recovering, here is a WSJ article that paints a different picture. Moreover, as we have discussed with clients, there are many elements behind the numbers you have seen over the last few weeks.

Mortgage Defaults, Delinquencies Rise Article - Defaults on home mortgages insured by the Federal Housing Administration in February increased from a year earlier. - http://online.wsj.com/article/SB123840821794969275.html#mod=testMod - The Wall Street Journal
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Stocks Fall Sharply in Asia and Europe - Stocks fell sharply in Europe and Asia on Monday, amid signs of chaos in the auto industry and fears that the Group of 20 meeting this week will fail to come up with a plan to revive global growth. In Washington, the White House pushed out the chairman of General Motors on Sunday and instructed Chrysler to form a partnership with the Italian automaker Fiat within 30 days as conditions for receiving another much-needed round of government aid. The moves came just hours after the board of the French automaker PSA Peugeot Citroën said it had fired its chief executive. "I'm not sure the worst is behind us," Valérie Cazaban, a fund manager at Stratège Finance in Paris, said. "We're waiting for the G-20 and we're not sure everyone is in agreement on what needs to be done." - http://www.nytimes.com/2009/03/31/business/31markets.html?_r=1&hp - The New York Times
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Officials Prod Banks To Restart Lending, But Who’ll Borrow? - The Treasury and the Federal Reserve are throwing trillions of dollars at financial firms to prod them to lend more. But even if those programs succeed, debt-strapped families probably won’t want - http://www.investors.com/editorial/IBDArticles.asp?artsec=5&issue=20090327 – Investors Business Daily
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Is Calpers Waking Up? – They've finally decided to ask for better terms from the hedge funds that have raped them. Better late than never? NOT. It is far too late for Calpers. They have no hope of ever catching up, unless they put it all on the roulette wheel in Vegas . . . and win. Unfortunately, no one is really talking about the fact that Calpers and many other pension funds have been raped to death. They are in a coma at this point, and they have no clue what is going on around them.

California Pension Seeks New Terms From Hedge Funds - The California Public Employees' Retirement System said the largest U.S. state public pension wants to renegotiate new terms from hedge funds. - http://www.bloomberg.com/apps/news?pid=20601087&sid=aR_cVQn81GTo – Bloomberg News______________________________________

Totally Clueless – Direcotr Heim below actually believes they can hold their heads above water. What do they do if the markets does not recover? In fact, what happens if the markets drop another 10-30%? KaBoom. One final note. Pension funds still have no clue about how little value is left in their real estate joint ventures. - Mike

Pension funds called next big crisis - Click photo to enlargeSteve Wilson color illustration of a hand placing an “IOU” into the pensions piggy bank. The national economic collapse is battering municipal and state pension plans, and that means taxpayers will likely dig deeper into their pockets to pay retirees. “It’s a ticking time bomb,” said Trumbull Finance Director Lynn Heim. “Unless the market takes off, we will just be holding our head above water." - http://www.connpost.com/ci_12019394 - Connecticut Post

March 30, 2009 9:00 pm

Flyer Accuracy

It's the unwritten rule that if a home is for sale, it's advertised with the use of flyers. And in a flyer, you'll see some of the basics: square footage, bedrooms, bathrooms, and price.

Sometimes you'll see other language such as "New Plumbing" or "All Appliances Stay." That's great if true, but the seller and buyer should each verify this.

The flyer says "All Appliances Stay," but all of them? Really? What if the listing agent made a mistake and the seller didn't catch it? The buyer can insure this buy specifying individual appliances in an offer. Without that, there's not a guarantee the new Energy Star washer and dryer set will remain within the home.

Recently, I helped some buyers find their first home. The flyer advertised "New Plumbing." But when a home inspection was conducted, it was revealed that the new plumbing was done by the homeowner himself and not permitted by the county. When everything was settled, the buyers bought the home but only after the seller paid a licensed plumber to re-work the entire system, permit and all. The buyers had great leverage because they had, in hand, the flyer stating new plumbing.

If you're a seller and you're advertising your home with flyers (99% of you), make sure the information is accurate. If you're a buyer and you like what the flyer says, make sure you protect yourself by specifically identifying what you want.

March 30, 2009 9:00 pm

More Pain, No Gain: S&P/Case-Shiller Preview for January 2009

As I had noted in a prior post, given their strong correlation, the home price indices provided daily by Radar Logic can be effectively used as a preview of the more popular monthly S&P/Case-Shiller home price indices.

The current Radar Logic data reported on residential real estate transactions (condos, multi and single family homes) that settled as late as January 26 appears to indicate that price declines are continuing in every market while accelerating notably in some.

Clearly, the impact of the recent stock market crash and ongoing economic crisis is bearing down on both consumer sentiment and, more fundamentally, credit availability resulting in a significant pullback in spending on homes and other costly purchases.

As the economic fallout continues, look for more markets to experience a reacceleration of price declines.

Phoenix, Miami, San Francisco, and Los Angeles are clearly continuing their historic price slide as the number of distressed sales climb and buyer sentiment relents under the weight of the recessionary conditions.

Boston, Denver and Chicago all appear to be following the typical seasonal pattern of increasing prices during the high transaction months of the spring and early summer and price declines during the fall and winter but it is important to note that prices are clearly trending and even, most notably for Boston, accelerating lower.

The Washington DC and New York regions are nearly perfect examples of markets that have broken down under the strain of the housing bust and wider economic turmoil showing consistent price declines throughout spring and summer months where normally strong seasonal sales patterns typically brings increasing prices.

March 30, 2009 9:00 pm

UPDATE: Lenny Kravitz

The other day Your Mama discussed the Miami Beach, FL house that rock star Lenny Kravitz recently foisted on to the market with an asking price of ,850,000 and ever since some of the children have been hissy fitting about wanting to see some photos of the interior.

Well children, pour yourself a tall gin and tonic and brace yourself puppies because here they are.

If anyone were to ask Your Mama, and of course no one did, this kind of corny nightclub day-core applied to a private residence is exactly why Mister Kravitz can’t get sell his penthouse apartment in New York City. A sensible person–that being one with eyeballs–would need to get up in here and gut the place because let’s be honest, how many people actually want a metal grill catwalk that lights up from underneath in their home? Or a red lacquered living room that looks like a damn strip club? Or, lawhd have mercy, a hallway lined with mirrors and white faux-fur? Pleeze.

Now children, leave Your Mama alone for a bit because after peeping at Mister Kravitz’s decorative disaster down in Miami Beach, we are in desperate need of a nerve pill and a recuperative nap.