By The Tim on September 23, 2011
Here is your open thread for the weekend beginning Friday September 23rd, 2011. 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.
Fanne Mae Cited For Not Stopping Robo-Signing
The Federal Housing Finance Agency’s inspector general said in a report Friday that Fannie failed to establish an “acceptable and effective” way to monitor foreclosure proceedings between 2006 and early 2011. Government regulators then failed to ensure it was complying with demands that it clean up its programs.
In 2005, Fannie hired outside investigators to look into allegations about faulty foreclosure documents. A year later, Fannie received a report from the investigators that found law firms working for Fannie had filed false documents.
http://www.huffingtonpost.com/2011/09/23/fanne-mae-robo-signing_n_977471.html
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http://www.iwatchnews.org/2011/09/22/6687/countrywide-protected-fraudsters-silencing-whistleblowers-say-former-employees
By early 2008, she claims, she’d concluded that many in Countrywide’s chain of command were working to cover up massive fraud within the company — outing and then firing whistleblowers who tried to report forgery and other misconduct. People who spoke up, she says, were “taken out.”
By the fall of 2008, she was out of a job too. Countrywide’s new owner, Bank of America Corp., told her it was firing her for “unprofessional conduct.”
Foster began a three-year battle to clear her name and establish that she and other employees had been punished for doing the right thing. Last week, the U.S. Department of Labor ruled that Bank of America had illegally fired her as payback for exposing fraud and retaliation against whistleblowers. It ordered the bank to reinstate her and pay her some $930,000.
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I wonder where all the goldbugs are hiding like microsofties? Spot gold $1630. Down almost $300.00 an ounce in about two weeks. It appears gold has lost more in less than a month than real estate did in the past two years.
http://www.kitco.com/charts/livegoldw.html
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RE: Pegasus @ 3 –
look at silver!
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RE: Pegasus @ 1 – I’m sort of surprised by that out of Fannie. Banks are known to be cheap and going cheap has consequences. Also, Fannie is generally better than the banks are REOs. So to see that they’re just as bad at controlling their processors is a bit of a surprise.
Now if the same report came out about DeutscheBank I would say doing that report was a waste of money.
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By Kary L. Krismer @ 5:
Fannie basically knowingly condoned the illegal practices which fits in with their decades of bad business practices and accounting frauds. Remember it was only a few years ago that they got caught fabricating their own financial statements for exec bonuses. Of course no one went to jail…….
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By Lurker @ 4:
Poor man’s gold!
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in all fairness to the shiny stuff though, they are both still way up YOY.
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RE: Lurker @ 8 –
And neither has counter party risk if you go phyzz instead of paper.
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By Lurker @ 8:
Yup and to be fair they were pumping it when the price was over $1900. It’s also down for both physical gold and paper.
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http://www.zerohedge.com/news/case-closed-cme-hikes-gold-silver-copper-margins
Downward manipulation in the PM markets today, yet again.
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RE: Pegasus @ 6 – I should have clarified by focusing on the period after the government basically took them over.
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By No Name Guy @ 11:
But they raised em after the close. Increased volatility means increased margins…go figure. It’s how the firms protect themselves from getting wiped out by their customers who are leveraged to the hilt and can’t pay up if they get locked in for days leaving them with a big fat negative hole in their accounts. Why would you care..you are holding physical gold as you stated in post #9? As far as manipulation I didn’t hear you crying when they lowered margins did I?
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RE: Kary L. Krismer @ 12 – They have improved but they are still running a losing business plan which we are covering. The place is still a dumping ground for political paybacks and boyfriends.
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RE: Pegasus @ 13 –
If you’ve been paying attention to the PM markets, you’ll notice that there’s a drop each and every time in the day or two BEFORE they raise the margin requirement.
The CME folks are clearly leaking to their buddies to front run….nothing like a little crony action before they wipe the weak longs with a margin hike. Once is happenstance, twice is coincidence, more than that and a game is being played, to paraphrase a saying I saw.
Oh, and the justification “well with all that volatility, we have to raise margins” is croaking frog quiet on many other futures contracts that have greater volatility. Its practically only the PMs that get margin hikes……
The point being, that the CME isn’t being transparent and neutral on both hiking and lowering margin requirements. They’re putting a finger on the scale, so to speak, by making the margin moves to shake out those close to being stopped out to move the market one way or the other.
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By Lurker @ 4:
silver has been crushed…
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By No Name Guy @ 9:
and for that luxury it’s down 40%…
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RE: No Name Guy @ 15 – I have seen margin increases on just about every commodity over the years so your claim “Its practically only the PMs that get margin hikes” is bogus. You are just upset ’cause you are losing money on a great pump story that you are long. It hurts when you are long the one having the margin increases on. Deal with it. That said you are right about the CME. For years there have been many attempts to clean that game up but all have failed. They protect the bigger moneyed interests which you don’t belong to. It extends to all commodities like oil, sugar, etc. It isn’t just gold.
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I’m long muffin futures.
Government is paying $16 per.
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By Pegasus @ 3:
Yes, where are all the goofs who claim gold’s value doesn’t change, only the currency does? Never mind the fact that gold increased nearly 500%, while the dollar only went down about 25%. Now on the down side they’ll have to cry conspiracy to explain why their no fail investment just acted like every other bubble since tulip mania.
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RE: Voight-kampff @ 19 –
Excellent!
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WA state budget fun ahead- get your popcorn. I can hear the public service unions screaming from my house:
” This most recent news presents an even greater challenge than I initially thought. Nearly 64 percent of the General Fund budget is protected by federal and state law and other considerations. So with the remaining time in this biennium we have a baseline of $8.7 billion from which we must cut $2 billion.
In other words, we have to cut 23 percent.”
See the full letter here:
http://tickerforum.org/cgi-ticker/akcs-www?post=194721
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By Scotsman @ 22:
Get ready for all the accounting gimmicks, and the sin/candy/soda tax to make a big comeback tour.
I’ve got a suggestion. Let’s allow casino gambling and tobacco/liquor sales on school grounds. Look at how we have all that public property going to waste after about 3pm. That would raise a lot of revenue. After all, it’s for the children!
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By Pegasus @ 3:
Everybody’s hiding under the same rocks in this global downwind. US and European markets are down in parallel with gold.
Pegs, what is your opinion re gold?
I think is what it has mostly been: An everyman’s hedge. Volatile; usually up when the dollar and other markets are down. An object of speculative bubbles. A market you have to follow closely to trade. What’s new?
My point is that there are no current visible safe havens. At least from where I sit.
Best,
Rick
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By Macro Investor @ 20:
anyone who believes that gold’s value doesn’t change just paper money does is an idiot. they’d have to explain the 1980s and 1990s.
gold and silver are not currencies anymore. they are far too volatile. they are at best semi-currencies.
gold vix=40
euro vix=20
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By ricklind @ 24:
uh the dollar and US treasuries? I guess you’re not sitting on them?
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It is amusing to see so many after the fact geniuses describe the real value of gold. OK, Einsteins, where will gold be in 3 and 6 months from now?
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RE: Blurtman @ 27 – Its the greater fool theory at work. Now that some of the fools got burned can they find a new flock of fools in 3 and 6 months? Reminds me of the Beanie Baby craze…..probably the same people buying after the run up and yelling how great it would be.
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RE: Pegasus @ 28 – You seem to be arguing for “fundamental value.” Fuggedaboudit. It is all supply and demand, that’s about it. Same with stocks. Historical P/E’s are meaningful until they are not, no absolutes there, either.
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Yet another massive oversight of the Obama regime:
“And the cumulative results of this abuse of power are corrosive to society. Lawless example by a ruthless few brings out the worst in all the people, always. And that is a shame.
“Our government teaches the whole people by its example. If the government becomes the lawbreaker, it breeds contempt for law; it invites every man to become a law unto himself; it invites anarchy.”
Louis D. Brandeis”
http://jessescrossroadscafe.blogspot.com/2011/09/gold-daily-and-silver-weekly-charts_23.html
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RE: Blurtman @ 29 – There is no fundamental value for gold and silver, at least at these extended levels. Its is just speculators buying and hoping someone else pays a higher price. Nothing new or extraordinary about. The increasing noise the higher a commodity goes is part of the plan to suck in new fools. Look at all the hype on gold and silver this year. Where was all the noise when prices were a lot cheaper? Silence!
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RE: Blurtman @ 27 –
It makes no difference, gold is a long term hold, that’s it’s problem. It’s a lost opportunity cost. When you go to sell gold you automatically devalue it. People will only buy gold at a discount, in many cases an extreme discount.
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RE: Blurtman @ 30 – And here are Jesse’s comments a few days before that:
http://jessescrossroadscafe.blogspot.com/2011/09/closer-look-at-gold-continuation.html
His charts all went bust a few days later.
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RE: Pegasus @ 31 – And the fundamental value of a non-dividend paying stock is?
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RE: David Losh @ 32 -What you describe is similar to all unmanipulated, market traded assets. If more folks sell a stock than buy, it becomes devalued. A small quibble with your statement: If you sell gold into a buying wave, the price will continue to rise.
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By Blurtman @ 34:
Things like growth rates, cash flow, earnings, etc. can be used to define it.
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RE: Blurtman @ 35 –
I would quibble with that, but it makes no difference. I put a longer post about it at http://www.davidlosh.com
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RE: Pegasus @ 36 – Wrong. Supply and demand. You can use any story you want to stoke demand, just like gold.
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RE: Blurtman @ 38 – Wrong. You better look up fundamental value. Supply and demand defines short term prices not values. False demand like speculators and alternate realities create false prices. It always ends badly when true reality surfaces and the specs get burned. Better get yourself some Beanie Babies and tell us about fundamental values for those or did you already play that game years ago and now have a huge loss and a worthless collection of dolls? I remember idiots buying silver at $40 to $50 dollars an ounce in 1980 “because the price is going up”. They lost 90 percent of their investment within a few years. Think it is any different this time? You pumped gold and silver here before when silver was about $50 earlier this year. It promptly dropped 40 percent in value.
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RE: Pegasus @ 39 – Price is indisputably knowable. Value is theoretical and in the eye of the beholder. Presumably if enough buyers believe a stock is undervalued and buy it, the price will rise. No different than gold.
Any stock that does not issue dividends is a purely speculative investment, as you say, price being based upon the next greater fool paying more than you did. You can cite historical P/E’s, expected cash flow, etc., but that is all a story. Nothing absolute there. All relative. Even with rising earnings, if there are more sellers than buyers, price go down. Supply and demand in the present, certainly. But also in the future. Unless there is a dividend revenue stream or something similar, it is all story that touts use to pump or dump.
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RE: Blurtman @ 40 – You need to learn the definition of fundamental value. It is not market price. Your comments are trying to give a fundamental value to a rock while claiming all businesses that don’t pay dividends are speculative investments. Both are erroneous. You are now trying to twist your original argument that fundamental value is determined by supply and demand. Go read a book on investments. I am not saying market prices are not affected by supply and demand. They clearly are and sometimes fundamental value has little to do with it. I had merely pointed out that a lot of the demand was from ignorant speculators, bad theories, buying “because it is going up”, lemming fever, promoters, cornering markets and false information.
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RE: Pegasus @ 41 – Fundamental value is but one of many theories.
Many fundamental value analyses are based on guessing future revenue or future cash flow and coming up with a story about what a company is worth. But this is merely a model based upon guesses of the future and based upon the relativity of historical valuation.
This is not science and we are not dealing in absolutes. You can shout from a mountaintop all day long what the fundamental value of a company should be, and therfore what the price of the stock should be, but it is all supply and demand. If more people are selling than buying, that will determine the price of the stock, and the market’s perception of the value of the company. All else is theory.
And I have cracked a few books on fundamental analysis and found it to so much nonsense, like much of everything in the social sciences. Flimsy sociology masquerading as mathematics.
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By Blurtman @ 29:
what he said.
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RE: Pegasus @ 41 – FWIIW, I studied fundamental valuation at the same school that gave the world the disastrous porfolio insurance theory and the currently disastrous financial engineering securitization theory. Remember, when the scientific method came on the scene, the charlatans who theorized about vapors and humors fled to the social sciences where experimentation and predicivity were not a requirement. Bernokio is a fine example of this.
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RE: Blurtman @ 42 – Ah you are the one that tried to use fundamental values not me…only you were confused about what it means and said it was supply and demand which it is not. You were caught blowing smoke and now you are running in circles. I know supply and demand can effect market prices. I never said it did not. I also have said that lots of times the demand is created by things other than realty. If you come up with something meaningful I will respond but no longer to your twisting your mistakes and reality.
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regarding gold:
i can’t count the number of top callers that have been made fools of the last decade or so.
when the top callers disappear…. :-)
fb
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By Blurtman @ 34:
OK, I’ll play.
Traditionally, that would be “book value.”
Which would, again traditionally, have some relationship to the market value. Oh, and earnings.
In a dot com world it had no relationship whatsoever.
In this world I think it has to do with whether the company actually makes money, whether or not paying dividends. I think that companies that actually do stuff and make money and don’t cook the books will always have some fundamental value. I could be wrong, have been before.
Rick
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By Blurtman @ 44:
Ouch! School of hard knocks.
Were Byron Scholes and Bob Merton classmates at that school, by any chance?
That same whacked out “perfectly hedged” crap that brought down LTCM in 1998 was recycled into the mortgage mess, with the same results. What’s next? Oh, I think I know: perfectly hedged debt. Kick the can far enough and something magical happens before we see it again.
Problem is, Greece is melting as we speak. Tip of the iceberg.
Sorry, Just not feeling optimistic tonight.
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By pfft @ 26:
True, not sitting on them. I think it’s mostly relative. The dollar will fluctuate but mostly go up next 4-6 mos relative to other asset classes, but the “real” value, whatever that means, will go down as more and more of them are printed. I personally think much of the price support for dollars is based on being the best of a bad lot. Oil, gold, or better yet, water, are probably better long term benchmarks of value. Canada will be rich.
Also, FWIW, I agree with you on stimulus vs austerity, to a degree. If we don’t have stimulus now, then we contract with major damage. But, medium and long term, we still have to unwind debt and take the pain. The transition is a b*tch.
I am not an economist and do not pretend to be one. Just a normal state school guy living in this time and space.
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By fubarrio @ 46:
I have not seen anyone here call the top. I have merely pointed out that the higher it goes the more insanity ensues amongst the buyers and the more noise about how great it is to buy at an all times high because it must go higher or because it is going up. Greater fools. The real estate bubble worked the same way only slower. People all excited cause their home was going up in price and the nonsense reasons given to justify a higher price.
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RE: Pegasus @ 45 – Check your meds. You lose.
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RE: fubarrio @ 46 – RE: ricklind @ 48 – I’ve suggested that folks guess where gold will be in the future. How about – where will gold be at the end of calendar year 2011 and end of calendar year 2012?
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One writer’s opinion of gold’s performance during an economic/financial crisis:
“Really, the basic steps are straightforward:
Economic/financial crisis leads to asset liquidation and dollar shortage
Dollar shortage leads to dollar appreciation and gold depreciation (in dollar terms)
One form of asset liquidation – forced gold selling – leads to gold depreciation (in all currencies)
Eventual monetary response creates surplus of dollars
Surplus of dollars causes dollar depreciation and gold appreciation”
http://seekingalpha.com/article/295567-how-gold-performs-during-a-financial-crash
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RE: Blurtman @ 53 – RE: ricklind @ 49 –
We all know where gold will be. It rises with inflation. Right now it can go up to $2400 an ounce.
Gold fell into the trap of all financially engineered global trade. The days when you could buy gold at $100 an ounce in South America, and sell it, the same day, in the United States for $125 are over.
Let’s also say that stocks have also fallen into the same trap. With E-Trade you look at stats rather than the value of the company. I’ll even say it’s the same with Real Estate.
When you are talking about value you should be talking about viability. What global concerns are driving demand? What is the next problem to be solved?
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RE: Pegasus @ 50 –
true — the only thing i would add is that the ‘animal spirits’ phase (now or approaching) was expected and hoped for by the speculators that took a punt (long) back in 2002-2005 time frame.
without all the noise and excitement it is pretty hard to get 25-28% appreciation a year.
back in 2004 if you said, “3k usd gold is coming” people instantly wrote you off as a kook — ask me how i know :-)
now, it might still be a wildly optimistic prediction, but it’s within the realm of something most reasonable people would consider ‘possible’.
if your a spec, the volatility, and the transaction costs/speed make playing in paper gold, ‘great’…buying or selling is measured in fractions of a second…even buying/selling physical while cumbersome and slow is faster than buying or selling a house that typically takes a month or so to clear….so the comparisons to the RE run-up or loss over a given time frame is not really relevant (imo)….
ever try putting stop-loss on a house? (i guess that would be jingle mail :-) ).
also, for other poster, note that gold is NOT really tracking inflation the last few years. it is tracking sovereign debt default and currency risk, imo….in fact it’s often moving counter to events one would generally consider inflationary…presumably because those actions are making people believe that some of the sovereigns can inflate their way out of defaulting.
disclosure: no material position
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RE: fubarrio @ 55 –
Gold is a hedge against inflation. It’s a straight line of appreciation that is now global.
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RE: Pegasus @ 1 –
Foreign Lobbyists Run Fannie/Freddie Now, IMO
As they run our government. Do you think they want our tax dollars to stop subsidizing more and more overpopulation lower wages they have planned for America?
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