According to the Japanese Ministry of Finance, Japan's total exports fell 45.7% in January, to the lowest level in 10 years. Japan is in a particularly precarious position given it's reliance on consumer discretionary exports such as electronics and automobiles to the West. Exports of Japanese cars fell by 69% in January.
The Government stated last week that Japan is in it's worst economic crisis since World War II (does anyone remember the early 90's?). On December 29, 1989, the Nikkei index closed at an all time high of 38,915.87. On February 29, 2009, it closed at 7461.22. A loss of roughly 81% over 20 years.
Japan is the second largest economy after the United States.
Wednesday, February 25, 2009
Tuesday, February 24, 2009
SF Chronicle to Be Shut Down or Sold Within Weeks
Today Hearst publishing announced that it may sell, or completely close the San Francisco Chronicle, which has been losing money since 2001. The Chronicle has lost $50 million in 2008, and if the paper can not pare costs within weeks via job-cuts and other methods, Heart officials said they would have no choice but to seek a buyer, and if a buyer could not be found, they would shut the newspaper down.
Is there any appetite for a company that lost $50 million last year in a dying industry in a rapidly deteriorating economy? Where are all the LBO funds?
[SF Chronicle][Hearst][San Francisco][Economy]
Is there any appetite for a company that lost $50 million last year in a dying industry in a rapidly deteriorating economy? Where are all the LBO funds?
[SF Chronicle][Hearst][San Francisco][Economy]
Nationally, Home Prices Slide to Q3 2003 Levels
As reported today in the
December 2008 S&P/Case-Shiller Home Price Index (pdf) , national home prices are now back to the levels of late 2003, having fallen 26.7% from their peak in Q2 of 2006. The 10-City Composite dropped 19.2% from a year ago, the largest decline since the inception of the index 21 years ago.
December 2008 S&P/Case-Shiller Home Price Index (pdf) , national home prices are now back to the levels of late 2003, having fallen 26.7% from their peak in Q2 of 2006. The 10-City Composite dropped 19.2% from a year ago, the largest decline since the inception of the index 21 years ago.
The seven worst performing cities in terms of year-over-year declines continue to be from the Sunbelt, reporting negative returns in excess of 20%. Phoenix was down 34.0%, Las Vegas reported -33.0% and San Francisco fell 31.2%. Denver, Dallas, Cleveland and Boston faired the best in terms of annual declines down 4.0%, 4.3%, 6.1% and 7.0%, respectively.
Eighteen of the 20 metro areas are in double digit declines from their peaks, with half of the MSA’s posting declines of greater than 20% and four of those (Las Vegas, Miami, Phoenix and San Francisco) in excess of 40%.
This is particularly troubling given that under the current plan, those who owe more than 105% of current value on their mortgage do not qualify to receive modification assistance. The government seems to want to help refinance people that don't really need it. The hammer on housing prices has come down and it's simply a matter of how long people can continue making payments while facing a stiff economic headwind and a historically high level of personal debt.
Monday, February 23, 2009
Gift Tax Holiday Could Release up to $500 Billion Directly into US economy
The current economic crisis is based on the enormous mortgage credit bubble and the eventual crash which tightly squeezed overleveraged consumers as well as institutions. Yet there has been very little done to directly stem the hastening downward spiral of home prices and consumer spending. Liquidity at the consumer level and the resulting confidence to get back into the housing market is key to the fundamental stability of our economy right now.
There is a vast amount of capital which can easily be released to provide hundreds of billions of dollars directly to consumers almost overnight, and at no current cost to taxpayers. The IRS estimated in 2004 that there were 2.7 million US adults who had gross assets of greater than $1.5 million. In total, these top wealth holders owned nearly $11.1 trillion in assets. After accounting for debts and mortgages of $850.1 billion, these individuals had a combined net worth of over $10.2 trillion. In Cash and Money Market type accounts alone this group had roughly $1 Trillion. Granted these numbers have been severely diminished by the recent correction but the fact remains that there are large stockpiles of untapped capital.
By simply allowing a temporary (say one month) gift tax exemption to a blood relative with a cap of $500,000 per gift and a maximum of 5 family members receiving the gift for a total gift exemption of up to $2,500,000, (per giftor) desperately needed capital would be released into the economy. This is less than the current amount which would be exempt from estate taxes if passed in 2009. This is money that has already been earned and taxed, and due to the restrictive estate tax structure sits dormant in hopes of more advantageous future tax treatment. If only 100,000 persons transferred $1,000,000, this would be a total of $100 Billion (the number could easily be multiple times this) injected directly into the economy and into the hands of consumers who could immediately take advantage of severely depressed real estate prices by purchasing a home or stimulate the economy through consumer spending.
Zillow estimates that only 8.6% of the homes in the San Francisco Bay Area will qualify for the current mortgage modification program while nationwide the number approaches only 25%. The restrictions that the loan to be modified not be “Jumbo” or more than 5% “underwater” means that the hardest hit areas (where many houses are 50% “underwater”) are not being assisted. Implementing this temporary tax treatment for gifts could easily release between 100 and 500 billion directly to consumers at a time when our economy is in dire need of consumer liquidity. No delays or government administration is necessary. There is very little downside, and everybody benefits when housing prices stabilize, foreclosures slow, and consumer spending is stimulated. Retail Wins, Automakers win, Housing market wins. Financial institution's balance sheets win. Liquidity, by the people, for the people. No printing press required.
There is a vast amount of capital which can easily be released to provide hundreds of billions of dollars directly to consumers almost overnight, and at no current cost to taxpayers. The IRS estimated in 2004 that there were 2.7 million US adults who had gross assets of greater than $1.5 million. In total, these top wealth holders owned nearly $11.1 trillion in assets. After accounting for debts and mortgages of $850.1 billion, these individuals had a combined net worth of over $10.2 trillion. In Cash and Money Market type accounts alone this group had roughly $1 Trillion. Granted these numbers have been severely diminished by the recent correction but the fact remains that there are large stockpiles of untapped capital.
By simply allowing a temporary (say one month) gift tax exemption to a blood relative with a cap of $500,000 per gift and a maximum of 5 family members receiving the gift for a total gift exemption of up to $2,500,000, (per giftor) desperately needed capital would be released into the economy. This is less than the current amount which would be exempt from estate taxes if passed in 2009. This is money that has already been earned and taxed, and due to the restrictive estate tax structure sits dormant in hopes of more advantageous future tax treatment. If only 100,000 persons transferred $1,000,000, this would be a total of $100 Billion (the number could easily be multiple times this) injected directly into the economy and into the hands of consumers who could immediately take advantage of severely depressed real estate prices by purchasing a home or stimulate the economy through consumer spending.
Zillow estimates that only 8.6% of the homes in the San Francisco Bay Area will qualify for the current mortgage modification program while nationwide the number approaches only 25%. The restrictions that the loan to be modified not be “Jumbo” or more than 5% “underwater” means that the hardest hit areas (where many houses are 50% “underwater”) are not being assisted. Implementing this temporary tax treatment for gifts could easily release between 100 and 500 billion directly to consumers at a time when our economy is in dire need of consumer liquidity. No delays or government administration is necessary. There is very little downside, and everybody benefits when housing prices stabilize, foreclosures slow, and consumer spending is stimulated. Retail Wins, Automakers win, Housing market wins. Financial institution's balance sheets win. Liquidity, by the people, for the people. No printing press required.
Anecdotal Evidence on Why the Banking System is Functionally Insolvent
Let's just take a gander at this little jewel located in a suburb approximately 25 miles outside of San Francisco (Not even one of the hardest hit areas in the US). Current asking price is $129,500. I would like to direct you to the Sales History about half way down the page.
http://www.zillow.com/homedetails/charts/18340627_zpid/
Sale History
11/18/2008: $147,153
03/04/2005: $437,000
07/07/1999: $112,000
So, in 1999, somebody cashed in their stock options (I'm told that in 1999, most Concord residents WERE getting equity participation packages) and bought this beauty. He sells less than 6 years later with an increase in equity (assuming 20% down) strictly from price increase (not mortage payments) of a respectable 1451.9% ( $22,400 to $322,600). Maybe he bought an Escalade. Maybe he bought 10 more houses and a steak dinner at Outback WITH the extra 1/2 pound of crab legs. (see: Consumer Discretionary Overcapacity) But I digress.
The real problem begins when buyer 2 comes into the picture. Most likely a 3 year fixed, zero down 30 year ARM which would mean that foreclosure sale occurred about 8 months after payment adjustment. Granted the loss of a home is a terrible occurrence, but there is also a lender of some sort who not considering other costs lost almost $300,000 (and 65%) in the course of 3 years on ONE HOUSE 25 miles from San Francisco. According to the Census Bureau, there are 69 million single family detached homes in the US (as of 2000).
It's easy to see how quickly losses could stack up with "assets" like this loan on the balance sheet of a leveraged institution.
[Housing Crisis][Foreclosure][Economy][Bailout]
http://www.zillow.com/homedetails/charts/18340627_zpid/
Sale History
11/18/2008: $147,153
03/04/2005: $437,000
07/07/1999: $112,000
So, in 1999, somebody cashed in their stock options (I'm told that in 1999, most Concord residents WERE getting equity participation packages) and bought this beauty. He sells less than 6 years later with an increase in equity (assuming 20% down) strictly from price increase (not mortage payments) of a respectable 1451.9% ( $22,400 to $322,600). Maybe he bought an Escalade. Maybe he bought 10 more houses and a steak dinner at Outback WITH the extra 1/2 pound of crab legs. (see: Consumer Discretionary Overcapacity) But I digress.
The real problem begins when buyer 2 comes into the picture. Most likely a 3 year fixed, zero down 30 year ARM which would mean that foreclosure sale occurred about 8 months after payment adjustment. Granted the loss of a home is a terrible occurrence, but there is also a lender of some sort who not considering other costs lost almost $300,000 (and 65%) in the course of 3 years on ONE HOUSE 25 miles from San Francisco. According to the Census Bureau, there are 69 million single family detached homes in the US (as of 2000).
It's easy to see how quickly losses could stack up with "assets" like this loan on the balance sheet of a leveraged institution.
[Housing Crisis][Foreclosure][Economy][Bailout]
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