April 2006


Mortgage Bankers Association reported today that the index of new applications dropped 7% from it's peak few weeks ago. So far the index is pretty high, but we are over the hill. In other news, housing starts slumped nearly 8 percent to an annual rate of 1.96 million in March from a revised 2.13 million pace in February.

I hope feds will hit the breaks sooner than later, as the slump in real-estate could lead us into full-blown depression. 

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According to various anecdotal evidences the housing bubble had already burst, but as long as we don't feel the consequences, we will not notice that. The common story is when a person purchased real estate to flip it for profit and now this property hangs for sale for several month, because it's not easy to admit the loss and sale it for what it is worth now. There are so-called "ghost cities", where nobody lives and everything is "for sale".

But I just received spam where someone offers me a mortgage for 1% payment and no credit check. I suppose we will see some real downward price movements as soon as those crazy offers fade off.

In the meantime look at this story – Boomers just don't have savings to retire. Nothing, except their real estate, which is still quite inflated. I suppose there is a significant number of people close to retirement age who did not borrow up to their eyeballs and still have good chunk of real estate, but not much of other savings. The only thing those people could do is to sell their home and move to the cheaper area. The home price difference could be over $100k, still quite miserable, which will allow them to retire. Thus, we can see some aging people to move all around the country away from expensive places. The immediate result is the reduction of population is places like L.A., San Diego, NYC, Chicago and guess what? – expect further real estate price deterioration in those areas.

My answer to this post, claiming that the latest Fitzgerald filing is invalidating the case against Bush, because uranium claim was not so important.

I'm sorry ma'm, but you have no clue. Nobody is suing anyone for leaking classified or rather quickly de-classified information. The event that triggered the investigation was the blew-up of the fake front company that was pretending to be an energy materials trader and operated on Pakistan and Iran black market, specifically focused on Iran nuclear efforts. The cover was blown up and the company ceased to exist.

The investigation was set to determine the source of the leak to cut hairy tails quickly. The Bush, Cheney and Co denial of involvement had suggested that there is a real problem with classified information. Someone somewhere just knows too much. That damages the whole net of operations, because you don't know what the other side knows anymore.

If the secret service knew from the day one that the source of the operation blew-up is just this stupid idiot Bush, they would cut the damage more efficiently than otherwise. But Bush went onto denial and misled them.

The crime is not the leak. Big deal, we know what kind of idiots are located in WH, so we can expect them to do stupid things. The crime is obstruction of investigation. This whole crowd: Bush, Cheney, Card, Rice, Hadley must be prosecuted for perjury and obstruction of justice, as soon as possible. Let them leak besides the bars.

Looks like the conservative press (I don't use consrvative as a swear term here, I love Bloomberg and use it for my investment choices) signals the shift somewhere in Republican secret rooms to cut the damage and get rid of Bush before elections. This piece at Bloomberg compares Bush with Nixon and Simpson:

It's all of a piece. Since Sept. 11, Bush has acted as if he can do anything he wants because we're at war. How extensive are his war powers and when do they end? When Osama's captured? When the Iraqi Army “stands up''? Before his term ends? He doesn't say.

And what are those powers? As the president interprets them, he can round up anyone, hold and torture them as enemy combatants without benefit of counsel or trial. He can fudge the number of troops and amount of money needed in Iraq.

He can wiretap anyone without a warrant, even though getting a warrant is swift, is nearly automatic, and can be sought retroactively.

Domestically, he also has a free hand. He can ignore settled scientific judgments (and disband his science board, as he did last week) and make his own intuitive judgments about global warming, stem-cell research and the success of abstinence versus vaccines in reducing sexually transmitted diseases. He can get rid of any government employee who tells Congress or the public the true cost of the prescription-drug bill or his tax cuts.

If there's justice in the world, the clip of Bush's promise to hold the leakers responsible will replace, or at least accompany, every replay of the tape of Bill Clinton's “I didn't have sexual relations with that woman'' whopper. Bush joins Richard Nixon and O.J. Simpson and all the other Hall of Fame hypocrites who made such a to-do over searching far and wide for the miscreants they saw in the mirror each morning.

I hink Bush is a toast. 

Libby disclosure left few words about how the Iraqi nuclear thread was unrolled:

Mr. Libby also inaccurately described the CIA report on Mr. Wilson's trip, saying the former ambassador reported information about an Iraqi delegation visiting Niger in 1999 that was "understood to be a reference to a desire to obtain uranium." In fact, Mr. Wilson said he was told that a Niger official was contacted at a meeting outside the country by a businessman who said an Iraqi economic delegation wanted to meet with him. The Niger official guessed the Iraqis might want to talk about uranium, since Iraq had purchased uranium from Niger in the mid-1980s. But when they met, no talk of uranium took place.

So some little-thinking Iraqis requested a meeting with a Niger official and did not disclose in advance that they are not going to speak about uranium. As a result, they got their country destroyed and 100,000 people killed. Ups, sorry about that folks :-). Next time just watch your mouth.

Scooter, I like you. I almost love you, but like you. Gosh, you are good. You make me wanna smile, you make me wanna sing. I owe you a hug!

What impresses me the most in capitalism is how the market regulates itself. It is like a Phoenix that resurrects from ashes – it's not just the market that heals disproportions, but disproportions themselves are so organic and logical that I'm tempted to call them "the beauty of disproportions".

The motto du jour is "cheap labor conservative". What I see is not the malice of a secret "skull and bone" group that plans to make U.S. labor much cheaper, but His Majesty The Market is making it cheaper and there is no way around. The world is getting more round and there is no other way to feed 7 billion of people but to have the economy to be more efficient.

The efficient economy leads to globalization and globalization means the constant quest for more efficient labor. The more complicated jobs are constantly moving to the areas where people are most productive and simple jobs are constantly passed to areas where the labor is cheaper. But that also evens the labor contracts around the globe. If once upon a time the Chinese worker was paid 1,000 times less than U.S. worker, one day he will earn only 10 times less, probably after American worker will become 10 times cheaper and Chinese worker will get 10 times more.

The latest developments in real estate market show me how the American worker will eventually earn much less than in the year 2000. The magic trick is very simple, it is called real estate bubble. Those of us who were not smart enough (i.e. they are candidates to became that "cheap labor") are in the debt up to the eyeballs. Up to now it was fueled by real estate bubble. Not anymore. This article is very well describing the scenario of long struggle against the declining market:

If history is any guide, however, home prices won't peak for a while, said Edward E. Leamer, director of the UCLA Anderson Forecast. When the end of the Cold War caused consolidation of the defense industry, the number of home sales in the Los Angeles area peaked in November 1988 — but home prices didn't top out for nearly 2 1/2 years. “Then the prices began this gradual, painful, slow deterioration'' of about 5 percent a year, Leamer said.

“It's really slow, not enough to drive you totally crazy,'' Leamer said. “It's a little bit of pain every year. If you try to sell, you can't find anybody to buy, and the price is eating into your equity little by little. That's the kind of adjustment we expect to see.''

The families protecting their homes from foreclosure will work hard, for any pay, without strikes and labor unions, without healthcare and retirements. Like Chinese do.

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