Tuesday, December 29, 2009

Hardtimes Roundup

Worst Decade Ever for U.S. Jobs:

Empty Chinese Skyscrapers

Abandoned Detroit Skyscrapers

CNN Money:
Can farming save Detroit? -- Yes, a farm. A large-scale, for-profit agricultural enterprise, wholly contained within the city limits of Detroit...

This is possibly not as crazy as it sounds. Granted, the notion of devoting valuable city land to agriculture would be unfathomable in New York, London, or Tokyo. But Detroit is a special case...

The massive Renaissance Center office and retail complex, built in the 1970s, mostly served to suck tenants out of other downtown buildings. (Today 48 of those buildings stand empty.)...

Virginia Pilot:
FBI deluged by fraud cases from real estate bubble -- The criminal cases against Brian W. King and Ronnie E. Brodie are typical of what the FBI is seeing as a result of the rise and fall of the real estate market.

King, 42, of Virginia Beach, pleaded guilty this month to falsifying mortgage applications, obtaining more than $700,000 in loans he never should have qualified for by inflating his income.

Brodie, in an unrelated case, will be arraigned Wednesday on similar charges of lying on her mortgage papers. Like King, the 36-year-old from Virginia Beach is accused of inflating her income.

Cases such as King's and Brodie's have become commonplace in U.S. District Court in Norfolk, as the FBI and other federal agencies begin seeing the fruits of mortgage fraud investigations that started three years ago just as the real estate market began deteriorating...

James Howard Kunstler / CF Nation:
Forecast 2010 -- The Long Emergency is officially underway. Reality is telling us very clearly to prepare for a new way of life in the USA. We're in desperate need of decomplexifying, re-localizing, downscaling, and re-humanizing American life. It doesn't mean that we will be a lesser people or that we will not recognize our own culture. In some respects, I think it means we must return to some traditional American life-ways that we abandoned for the cheap oil life of convenience, comfort, obesity, and social atomization...

Kevin Depew / Minyanville:
Five Themes for 2009: The Final Reckoning --

Sunday, December 27, 2009

China Launches World's Fastest Train

China Daily:
'Fastest in the world' -- The Wuhan-Guangzhou high-speed railway, arguably the world's fastest train journey at a speed of 350 km/h (217 mph), started operation on Saturday...

China will build 42 high-speed passenger rail lines with a total length of 13,000 km in the next three years, covering more than 90 percent of the population.

By 2012, trips from Beijing to most provincial capitals would only take between one and eight hours, said Wang Yongping, the Railway Ministry spokesman.

High-speed rail services from Beijing to Hong Kong are expected to open in three years, cutting the journey from 23 hours to eight. The one-way trip from Shanghai to Hong Kong will be shortened to six hours from the current 18, he said.

High-speed trains not only shorten the distance between cities but also change the speed of China's economic growth, said Wang Xiaoguang, a professor with the Chinese Academy of Governance.

China, a vast country that is often worried about the wide income gap between its highly developed coastal areas and the lagging interior, is looking to the railways to help spread the wealth, he said...

A kid enjoys the ride on the new high-speed Wuhan-Guangzhou rial line on Saturday.

Wuhan–Guangzhou High-Speed Railway -- a 968-kilometre (601 mi) high-speed rail line, operated by China Railway High-speed (CRH), connecting Wuhan (Hubei) and Guangzhou (Guangdong), in the People's Republic of China. It is the world's fastest nuclear powered train service...

The first commercial trains left Wuhan and Guangzhou North at 9:00 am on December 26, 2009, and reached their destinations in three hours, compared with ten and a half hours for the previous service...

...during test runs, a train achieved a top speed of 394.2 kilometres per hour (244.9 mph)...

Saturday, December 19, 2009

Morgan Stanley's Financial Advice to Underwater US Homeowners: Consider Just Walking Away

It looks like many U.S. homeowners will follow the lead of Morgan Stanley and walk away from their mortgages (called a strategic default) if they are too far under water. Morgan Stanley will walk away from 5 San Francisco office buildings in bought for $6.5 billion in 2007. The properties may have lost half of their value. What's good for the bank is good for the borrower.

Morgan Stanley to Surrender 5 San Francisco Towers -- Morgan Stanley, the securities firm that spent more than $8 billion on commercial property in 2007, plans to relinquish five San Francisco office buildings to its lender two years after purchasing them from Blackstone Group LP near the top of the market.

The bank has been negotiating an “orderly transfer” of the towers since earlier this year, Alyson Barnes, a Morgan Stanley spokeswoman, said yesterday in a telephone interview. AREA Property Partners will take over the buildings, which have been held by the bank’s MSREF V fund. Barnes declined to say when the transfer will occur...

Zero Hedge:
Morgan Stanley Abandons 5 San Francisco Office Towers -- What do the five buildings below have in common:

One Post, 201 California St., Foundry Square I, 60 Spear St., 188 Embarcadero, commercial buildings in San Francisco that Morgan Stanley walked away from.If you answered these are the 5 San Francisco office towers which, top tick mogul Morgan Stanley bought at the very peak of the housing market from Blackstone, and just abandoned earlier today, you win 10 shares of Federal Reserve Capital LLC, (the 33 Liberty Strategic Onshore Value Loss Fund)...

Calculated Risk:
Does Morgan Stanley "Walking Away" from CRE Contribute to Strategic Defaults? -- ... Note that Morgan Stanley is current on the loan and is not in foreclosure. They are simply "walking away" because the buildings are worth less than the amount owed...

One of the greatest fears for lenders (and investors in mortgage backed securities) is that it will become socially acceptable for upside down middle class Americans to walk away from their homes.... I wonder if hearing about "rich" banks that are paying "large" bonuses walking away from commercial buildings also weakens the social pressure? ...

Huffington Post:
If Morgan Stanley Walks Away, Why Shouldn't You? Firm Walks Away From 5 Properties -- To the extent that Morgan Stanley is leading by example, the securities colossus is sending an unlikely message to underwater homeowners: Walk away...

The Big Picture:
Morgan Stanley’s Commercial Jingle Mail -- Good luck making moral arguments against homeowners doing just that in the future . . .

Seeking Alpha:
The Golden Rule of Defaults: Banks vs. Consumers -- Morgan Stanley is walking away from five office buildings it bought two years ago at the height of the market for $6.5 billion (that's "B"... not "M"), which have since lost as much as 50% in value. The reason, says a corporate spokeswoman, "This isn’t a default or foreclosure situation... we are going to give (the lender) the properties to get out of the loan obligation.” ...

The Agonist:
Morgan Stanley Defaults-- This is just a beautiful example of how the morality that applies to the corporate world is so different than the morality expected of you as a homeowner....
See data on strategic defaults -- homeowners who choose to default on their mortgage even though they could still afford to pay it.Wall Street Journal:
Debtor's Dilemma: Pay the Mortgage or Walk Away -- In Down Real-Estate Market, Homeowners Are Deciding to Abandon Their Loan Obligations Even if They Can Afford the Payments

Should I stay or should I go? That is the question more Americans are asking as the housing market continues to drag.

In good times, it would have been unthinkable to stop paying the mortgage. But for Derek Figg, a 30-year-old software engineer, it now seems like the best option.

Mr. Figg felt trapped in a home he bought two years ago in the Phoenix suburb of Tempe for $340,000. He still owes about $318,000 but figures the home's value has dropped to $230,000 or less...

Another risk for defaulters is that banks could sell the rights to pursue claims to collection agencies or other firms, which could then dun the borrowers for up to 20 years after a foreclosure. Such threats appear to deter some borrowers. A recent study from the Federal Reserve Bank of Richmond found that under-water borrowers were 20% more likely to default in a state where mortgage lenders can't pursue claims on other assets than in those where they can....

Friday, December 18, 2009

Tuesday, December 15, 2009

A Well Researched Housing Bubble

Kevin Depew / Minyanville:
Real Estate Bubble Explained in 30 Seconds -- Do we really need another explanation of the real estate bubble? You bet we do! Especially when the explanation comes to us from a 30-second circa 2005 national advertising spot...

Wednesday, December 9, 2009

U.S. Dollar is living in an Alternative Financial Reality

The greenback is a glorious old brand that's looking more and more like General Motors.The Coinage Act of 1792 affirmed the dollar as the U.S. currency unit and specified that each was to equal the value of the Spanish milled dollar and was to contain 371 4/16 grains of pure, or 416 grains of standard, silver. The problem today is that the greenback is a glorious old brand that's looking more and more like General Motors.

James Grant / Wall Street Journal:
Requiem for the Dollar -- Ben S. Bernanke doesn't know how lucky he is. Tongue-lashings from Bernie Sanders, the populist senator from Vermont, are one thing. The hangman's noose is another. Section 19 of this country's founding monetary legislation, the Coinage Act of 1792, prescribed the death penalty for any official who fraudulently debased the people's money. Was the massive printing of dollar bills to lift Wall Street (and the rest of us, too) off the rocks last year a kind of fraud? If the U.S. Senate so determines, it may send Mr. Bernanke back home to Princeton. But not even Ron Paul, the Texas Republican sponsor of a bill to subject the Fed to periodic congressional audits, is calling for the Federal Reserve chairman's head.

I wonder, though, just how far we have really come in the past 200-odd years. To give modernity its due, the dollar has cut a swath in the world. There's no greater success story in the long history of money than the common greenback. Of no intrinsic value, collateralized by nothing, it passes from hand to trusting hand the world over. More than half of the $923 billion's worth of currency in circulation is in the possession of foreigners...

The greenback is a glorious old brand that's looking more and more like General Motors...

There's one more thing: Return to the statute books Section 19 of the 1792 Coinage Act, but substitute life behind bars for the death penalty. It's the 21st century, you know.

22% Unemployment Reality

US Unemployment rate: 3 measuresThe SGS Alternate Unemployment Rate reflects current unemployment reporting methodology adjusted for SGS-estimated long-term discouraged workers, who were defined out of official existence in 1994. That estimate is added to the BLS estimate of U-6 unemployment, which includes short-term discouraged workers.
The Onion:
Labor Dept: Available Labor Rate Increases To 10.2% -- In what is being touted by the Labor Department as extremely positive news, the nation's available labor rate has reached double digits for the first time in 26 years, bringing the total number of potentially employable Americans to an impressive 15.7 million.

"This is such an exciting time to be an employer in America," said Labor Secretary Hilda Solis, adding that every single day 6,500 more citizens join America's growing possible workforce. "There's such a massive and diverse pool of job-ready Americans to choose from. And each month the number only gets higher." ...

Though Labor sources said the new figures were encouraging, officials were quick to point out that the exact number of those now possessing the capacity to be offered work someday is actually much higher.

"Our findings don't take into account all the men and women who are available for work but haven't applied for a job in the last month," Solis said. "That's another 2.4 million Americans out there who can proudly say they wake up every day, get their kids ready for school, and then sit in their living rooms praying for the phone to ring." ...

Tuesday, December 8, 2009

Food Stamps Feed 1 in 8 Americans

NY Times:
Food Stamp Use Soars, and Stigma Fades -- With food stamp use at record highs and climbing every month, a program once scorned as a failed welfare scheme now helps feed one in eight Americans and one in four children.

It has grown so rapidly in places so diverse that it is becoming nearly as ordinary as the groceries it buys. More than 36 million people use inconspicuous plastic cards for staples like milk, bread and cheese, swiping them at counters in blighted cities and in suburbs pocked with foreclosure signs.

Virtually all have incomes near or below the federal poverty line, but their eclectic ranks testify to the range of people struggling with basic needs. They include single mothers and married couples, the newly jobless and the chronically poor, longtime recipients of welfare checks and workers whose reduced hours or slender wages leave pantries bare...

Thursday, December 3, 2009

Goldmanites Infest Obama White House

Matt Taibbi's 'Obama's Big Sellout': How The White House Is Caving To Wall Street --
"[Bob] Rubin probably more than any other person was responsible for the financial crisis by deregulating the economy [while] in the White House. And he had a major role in helping destroy one of the world's biggest company in Citigroup. He has one of the worst tack records you can find, but he was basically the guy who was the architect of the entire Obama policy. Obama put him in charge of everything. "
Zero Hedge:
Matt Taibbi Exposes Obama's Wall Street's Inner Circle, Pays Particular Homage To Robert Rubin -- Matt Taibbi gives an in-depth presentation unmasking the Wall Street crony advisors that whisper in the President's ear daily, the political push-pull that ended up gifting Tim Geithner his current job, as well as an analysis of the brains behind it all- former Goldmanite, Robert Rubin...
On Bob Rubin's Watch:
Crooks And Liars:
Matt Taibbi: Obama's Big Sellout to Wall Street (MSNBC, Morning Meeting, with Dylan Ratigan video) -- Rolling Stone's Matt Taibbi and the Financial Times' Chrystia Freeland discuss Matt's recent article at Rolling Stone and the divide between the recoveries on Wall Street and Main Street. Their analysis about what's wrong with the economic team Obama has surrounded himself with is spot on and until he starts listening to some different voices on how to fix our economy, Matt Taibbi is correct, the cycles of bailouts are going to continue to repeat themselves.
Bethany McLean / Vanity Fair:
The Bank Job -- One of the biggest disconnects on Wall Street today is between the way Goldman Sachs sees itself (they’re the smartest) and the way everyone else sees Goldman (they’re the smartest, greediest, and most dangerous). Questioning C.E.O. Lloyd Blankfein, C.O.O. Gary Cohn, and C.F.O. David Viniar, among others, the author explores how their firm navigated the collapse of September 2008, why it has already set aside $16.7 billion for compensation this year, and which lines it’s accused of crossing...

Goldman Sachs C.E.O. Lloyd Blankfein and C.O.O. Gary Cohn, in the boardroom of Goldman’s headquarters, in New York City.

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