By The Tim on March 18, 2009
Here is your open thread for the mid-week on March 18th, 2009. You may post random links and off-topic discussions here. Also, if you have an idea or a topic you’d like to see covered in an article, please make it known.
Be sure to also check out the forums, and get your word in the user-driven discussions there!
Posted in Open Thread | Tagged open_thread
Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market.
From KIRO 7 news: Washington Unemployment Rate Jumps to 8.4%
http://www.kirotv.com/news/18950272/detail.html
From Q13 news
http://www.q13fox.com/pages/news_story_landing_page/?Unemployment-Rate-Highest-In-Two-Decades=1&blockID=242039&feedID=144#comment_name242039
Of note is this quote:
“Professional and business services took the brunt of the hit, losing 13,400 jobs.”
I wonder how this will affect the housing market especially the condo market in Seattle. I don’t know how broadly they define professional and business services, but it sounds like well paid jobs. The type of people that can afford half-million dollar condos.
I especially like Larson’s quote on the Q13 website. People without jobs will be buying houses apparently.
Yesterday a contractor, good contractor, high end, reputable, was telling me he hadn’t worked in a year. I’ve also said in comments that my little contracting business has no jobs up on my board for this year and we did very few last year. There are people who I refer work to who are just doing odd jobs to stay afloat.
In another exchange I was wondering how many jobs the construction industry has lost these past two years. The contractors are one thing but there are architects, accountants, lawyers, software programs, and management positions that are lost along with it.
Could construction actually drive the economy? Or has construction driven the economy these past few years?
We talk about consumer spending, but is that related to washers, dryers, curtains, and bedding? Is consumer spending really the stuff from Macy’s or is it home improvement, pictures, furniture, and carpets?
Then now that we are so over built in this country in terms of housing units where will the next job source come from?
Looks like the economy is taking off even as unemployment grows. Bernake is jumpy that the recession is ending in couple of months. The Fed and Treasury increased money supply like crazy! The Dow is sizzling. Housing starts are going up. So when are the prices going to go up in the US?
There’s a story out today (in the Times?) about how there isn’t enough financing available for the deliveries of Boeing and Airbus jets. Obama really needs to do something about the credit markets. I’m fairly sure that’s driving a ton of the unemployment.
If Obama really wanted to help the credit markets he could start by nominating people to the dozen and a half top level positions that remain unstaffed at the treasury department.
Maybe he can make a few calls while flying out to California for his appearance on the Leno show. Priorities.
Bernanke, Citi, et al’s recent statements about an economic turnaround and return to profitability starting NOW remind me of nothing so much as the town leaders midway through the movie Jaws, parading through the streets with their mid-sized shark and gleefully encouraging everyone to go swimming again.
Oh, my bad! President Obama is too busy working out his NCAA picks:
http://sports.espn.go.com/broadband/video/video?id=3992869
O One
B Big
A Ass
M Mistake
A America
I’ve been willing to give Obama a chance, but I’m rapidly losing patience. The time he and the Treasury Secretary have spent on the issue of AIG bonuses, for example, is absurd. I don’t care if all $200 million is going to the guy that caused AIG to make the transactions that brought the company down. It’s insignificant compared to the damage it’s causing to support for future bailouts (both voters and private investors/firms). Spending so much attention on that makes me wonder what they’re trying to divert attention from.
RE: David Losh @ 2 – Architects’ billings, what you might call the beginning of the pipeline in the construction economy remain very low. January was an all time low with some improvement in February. Here’s a quote from an article on Market Watch:
There are many, many unemployed architects out there with a basic freeze on hiring. I do not see any improvement in the near future. Perhaps fed-bucks will get some sectors moving of which I have very little clear sense. Even healthcare projects which have a reputation for weathering recessions well, are not plentiful in that they typically rely on bonds for funding. And that market is dysfunctional at this point. International work (i.e. China) has also essentially dried up. Yes, there are projects moving forward, but very few.
RE: Kary L. Krismer @ 8 –
I don’t know that it’s a matter of diverting attention away from anything, but skillful politicians like to rally people behind things, however insignificant….It’s hard to rally people behind raising taxes while cutting services, so contractually agreed upon bonuses are a great target.
How much money is being spent on earmarks which benefit almost nobody? There’s not a lot of screeching about that. But these AIG bonuses, which are certainly distasteful?
Perhaps the bonuses are distasteful, but does Obama really want to rally public support against future bailouts? Does he really want to discourage companies from working with the government, such as the proposed private/public partnerships to buy troubled assets? It’s nuts. The Republicans perhaps do want to stop such things, so I could see them making this a big issue. But the administration? Why? Seemingly it’s the worst strategic decision since Cramer decided to take on Jon Stewart.
While Congress and the administration worry about $200M in bonuses:
http://seattletimes.nwsource.com/html/boeingaerospace/2008877997_istat18.html
I think there is a genuine groundswell of populist anger building up regarding all the bail-outs, and economic troubles in general. The politicians are simply trying to direct that anger into some areas that are easier to deal with. Far better for people to be angry about Wall Street bonuses than to question the bail-outs themselves, or the government efforts to prop-up the economy.
I am quite certain that the new administration would LOVE not to have to talk about AIG bonuses, but they are very aware that anger over all the stuff going on is frothing over, and are treading very lightly. This is a large part of why they are also so reluctant to give details about their bail-out plans, and articulate precisely how money is being spent. The potential political backlash when the public truly understands what is going on is huge.
Jon Stewart on Monday referred to that groundswell and said what we needed was an entity to wear a big “Kick Me” sign–a reference to AIG.
I saw this on CL today It’s what a trillion dollars looks like.
Government speak, a billion here a billion there PRETTY SOON you start talking about real money.
http://www.pagetutor.com/trillion/index.html
What a farce. The whole AIG fuss is a distraction. What about those Fannie/Freddie bonuses?
http://finance.yahoo.com/news/Fannie-plans-bonuses-of-up-to-apf-14679491.html
What about the “bonuses” Obama and Chris Dodd got in the form of contributions from AIG as the two largest recipients of AIG campaign contributions? We’re living “1984″ as the world gets turned upside down. Too bad the P.I. isn’t here to do some investigative reporting…
With regards to construction, has the cost of materials to build a home gone down since the onset of the credit crunch and the home building slowdown? In what part of building a home can one find value – the lot, a builder’s estimate, subs, materials, permits?
I am always considering building a home instead of purchasing from the inventory as I don’t see any significant decline in my area of interest (a hedge of sorts). Another factor is simply, I don’t like what I see: contractor houses with cavernous square footage and the ubiquitous, but elegant, 2 car garage.
RE: bob @ 17 – Sale prices are not necessarily dependent on costs, but of the items you mention I think it’s the land that’s gone down.
Very interesting read on when Congress and the Administration knew about the AIG bonuses:
http://www.msnbc.msn.com/id/29754670/
what is really interesting to me is that this morning Senator Dodd was getting thrown under the bus for this. I guess the truth came out (see link) and now those articles I had been reading are suddenly no longer viewable. ha!
http://firedoglake.com/2009/03/17/treasury-attempts-to-blame-dodd-for-aig-bonuses/
Ok, now the govt is buying 10 year treasuries and a bunch of home loans.
30 year rates could go to 4-4.5%. What’s everyone’s opinion of the impact to our local housing market.
I know we’re screwed eventually because of hyperinflation, but how about the next 6-9 months?
If an AIG exec gave back their bonus, wouldn’t they still be taxed on it? They had a legal right to receive it. I don’t know why paying it back would change that. I don’t see that there would be a deduction.
RE: Lurker @ 20 –
Yeah, what about this story? He might as well have said, “yes, that is my hand in the cookie jar.”
http://news.yahoo.com/s/politico/20090318/pl_politico/30833
Hey, AIG got the best government they could buy. Dodd simply did what his keepers wanted.
Is this Bush’s fault?
I love the way people always act surprised when they hear that a politician greased somebody’s skids for the campaign donation quid pro quo.
Two words for what this country needs: term limits.
Is this Bush’s fault?
Yes. He ran the henhouse for eight years, installed a new IKEA-sized loading dock, and issued invitations to the foxes to back their semi trailers right up to facilitate easy access.
Angie,
What was Senor Clinton’s role?
Thanks for clearing that up, Angie.
You do know that congress has been controlled by the democrats for a couple of years now, and that Chris Dodd, Democrat, is in charge of the finance committee and the largest recipient of campaign contributions from AIG, the firm at the center of this controversy? And by the way, Obama received the second largest AIG contribution.
You also know that Barney Frank, Democrat, was in charge of Fannie/Freddie (banking committee), and was sleeping with one of the controllers at Fannie, who lived with him? These same guys are in line for bonuses in excess of $500K, and are at the heart of the mortgage mess and bubbled home prices.
I’m so glad that now with Bush gone, Dodd and Frank will be there to watch out for our interests and clean this mess up.
http://hotair.com/archives/2009/03/18/dodd-you-know-now-i-remember-adding-that-bonus-language/
RE: Scotsman @ 28 – Bush signed off on it in September correct. Or was Obama already in charge? Eight weeks certainly does not make a presidency. That said, Dodd seems to be in trouble. Our government is as corrupt as they come, both sides.
Re: Mikal @ 29
http://www.youtube.com/watch?v=lSYgdpYS-qI&eurl=http%3A%2F%2Fwww.redstate.com%2F&feature=player_embedded
Interesting… it appears that the republicans tried to introduce a bill to recoup the bonuses, but it was voted down. Why are they trying to protect AIG and why was there no support by the President, who professes that he is outraged?
The hate-on for Dodd is fabricated right wing bull, Scotsman.
Some friendly advice: your arguments would be much more compelling if you could manage to get your facts straight.
Angie, Angie, Angie- your link was yesterday’s news. Today, even CNN has it that not only did Dodd put the clause in, but he lied about not doing so- yesterday. Gotta keep up with these quickly evolving democratic talking points, err, lies.. Try reading this link again, and note the date:
http://hotair.com/archives/2009/03/18/dodd-you-know-now-i-remember-adding-that-bonus-language/
RE: Scotsman @ 32 – MISSION ACCOMPLISHED.
See Scotsman – The Fed came up with more money. it is buying US Treasuries. I know you will say this is technically not printing money but it kind of is. And look at this – Wall Street is heading higher.
Also at some point I think if you print enough money – you simply will get inflation that the Fed really wants.
RE: bob @ 17 – Let’s not forget the kitchen stadium with fabulous views into the designated TV room. And the gas fireplace that projects out of the corner of the room. Welcome home.
Wow. And look at what the Fed is doing. The mortgage rates are going lower even more.
So at what point does it make sense to jump in? It is clear that the ramblings that Fed cannot do anything etc. were all wrong.
Also will there be a run on the dollar? It will be cool stuff going on.
http://surkanstance.blogspot.com/2009/03/bottom-feeders-beware.html
The Fed and Treasury can do whatever it pleases. There was a whole discussion how the Fed and US govt do not print money but their actions really amount to increasing supply of money like crazy and this is kind of the same as printing money.
The supply of money went down because banks do not issue credit and velocity went down as well. The Fed controls the money supply equation and can flood the market with $$ as much as it wishes. And it is clearly flooding the market like crazy.
It also controls interest rates. If it lowers enough – then it will be simply profitable for you to buy.
The question that I would like to get answered on Seattle Bubble is this:
1) Given the prices that exist in the Puget Sound region – what interest rates for mortgages would make affordibility of housing close to historical norms?
2) To what extent would the Fed need to flood the market with $$ to basically replace all the money lost as a result of no lending by banks and credit collapse?
3) When will inflation start and when could hyperinflation start?
If we can answer #1 and #2 we can actually start making sense and try calling the bottom (or a local bottom). Saying that the Fed cannot do a thing is useless. I remember when I was almost getting flamed here if I even suggested that the Fed will print money. Well technically they don’t but it amounts to the same thing.
If hyperinflation starts – THEN all people who take on debt will benefit a LOT! Because their loans will become less and less valuable.
I think this is sthg that Tim should start a discussion about.
Just some raw data that you can apply your own meaning to. The following Bank Tracker site gives troubled asset information on US banks.
http://banktracker.investigativereportingworkshop.org/banks/
I was originally looking at Viking Bank that started in Ballard and then wanted to see how the Seattle area in general was doing. Here are the top 6 capitalized banks headquarted in Seattle. I know BoA, Wells, etc. do more biz here, but I’m thinking these local banks only do biz here and so might give a clearer picture about local financial health. They’re listed in order of size:
HomeStreet: 2007 troubled asset ratio: 12.78% — 2008 troubled asset ratio: 36.5%
Washington First Int’l: 2007 troubled asset ratio: 9.84% — 2008 troubled asset ratio: 56.7%
Washington Federal S+L: 2007 troubled asset ratio: 3.88% — 2008 troubled asset ratio: 23.1%
Seattle Bank: 2007 troubled asset ratio: n/a — 2008 troubled asset ratio: 108.8%
Viking: 2007 troubled asset ratio: 8.23% — 2008 troubled asset ratio: 59.1%
Evergreen: 2007 troubled asset ratio: 1.98% — 2008 troubled asset ratio: 41.6%
The national average for 2007 was 5.0% and 2008 was 9.9%. The definition of ‘troubled asset ratio’ as directly from the site:
RE: Robert @ 39 –
Robert –
The fed does not control interest rates. They are going to find that out very soon. You cannot simultaneously have low interest rates and inflation. No one will loan money out that they thing is going to be eaten up by inflation
If you look at markets that have experienced high inflation (Argentina, Eastern bloc) you will find lending typically shuts down altogether.
RE: DaveyDave @ 40 – So that’s a ratio of how much of their existing reserves is actually used up, judged by delinquencies? That’s how you get a percentage over 100%?
If that’s right, a company could look better on that stat simply by increasing its reserves.
RE: Kary L. Krismer @ 42 – Kary, if you’re refering to Seattle Bank, where are they going to get the capital to increase reserves? Their profit last year was -$19 million…
Unless they’re running up against a ratio the FDIC watches, they wouldn’t need capital to increase the reserves.
I guess my point though is I’d like to know what percentage of their loans are in trouble too.
What would you people think of a Constitutional Amendment that would restrict members of Congress to people with PhD degrees in Economics, Business, LLM’s in Tax, etc.?
I’m thinking we need to do something to raise the quality of those holding office. Clearly voting them out isn’t a workable solution.
RE: Kary L. Krismer @ 44 – You’re right, I was assuming they were redlining with their FDIC capital ratio requirements… Not necessarily true, but probable. Without knowing the Tier 1 and 2 levels, it’s tough to say. Are you looking for more information other than the percentage of >90 days and non-accruing over the total loan amount? I’m not sure what you mean by the percentage of loans that are in trouble outside of what’s presented on the site.
Okay, I see that information is there. I should have gone back and looked at the site. I was just struck by the definition and didn’t go back and look at the site again before commenting.
With leadership like this, how can our government fail?
http://www.youtube.com/watch?v=8N2uQ7Fg_Uk