And Still I Persist

As I’ve mentioned earlier, I’ve had some persistent problems logging into WordPress (the blogging software used here) from any computer other than one of my desktop computers in my home office. Apparently, this is a well-known problem. I worked my way through a few of the suggestions on that page w/out much success, but then deleted all the files in wp-content/cache and uploaded a new copy of wp-login.php; I also cleared out all of my browser’s private data. That combination appeared to do the trick; for the first time in weeks, I can post to this blog from my laptop.  So postings should now be much more frequent.  ..bruce..

As Webster has mentioned, some time early in 2006 I started tracking several pieces of the financial sector using a new tool I invented that we named “Boomerang”. Suffice to say it was originally conceived as a tool for intelligence fusion for things like the war on terror. Unable to find a vehicle inside the DoD or the Intelligence Community, I took it to the commercial world, and we have been doing fun and lucrative things with it for our customers.

One trend became clear from the data - the US (and to some extent the world) is about to undergo a period of tremendous deflationary pressure. The economy for the last 12+ years has been operating on a series of asset bubbles, the most recent one being in housing. There are some wonderful write ups as to how this happened, but the roots of this came from the mass infusion of money into the credit markets. As a result over the last 5+ years, the prices of homes have gone crazy pretty much everywhere in the country, some places more than others. Prices were fueled by cheap credit, and the cost of homes continued to soar. A decade ago, funding mortgages were largely the realm of government sponsored enterprises like Fannie Mae. Since then, a huge and growing number of companies are into the “MBS” game. This has bypassed some of the controls that used to exist, and the era of cheap and easy money was born.

The net result is a huge amount of “Sub Prime” lending funded by strange sources such as pension plans and hedge funds. What does one of these “Sub Prime” loans look like? A great example would be this house in Carlsbad, CA. 4,180 sqft, 5 bed/4.5 bath in La Costa Oaks. This property is currently under foreclosure on its 100% financed ~$1 Million mortgage. (Hat tip to Bubble Markets Inventory Tracking). Yes, someone was dumb enough to take on almost $10K / Month in payments. This is not a one off event. It is being repeated thousands of times across the country.

Below is a graph of the estimated amount of Sub-Prime lending over the last few years. Imagine what it will mean to take a good percentage of this much money out the US economy. When I say “take it out” I mean gone, deflation, wealth removal (some would argue the wealth never existed).

Thanks to Calculated Risk, a great econ site, and where the original info for the graph was sourced.

…I’ve been having network problems downstairs (fixed now), and WordPress has some quirky bug that often prevents me from logging into the blog from my laptop (shortly put, it won’t let me get past the log-in screen when I try to do anything such as write a post, moderate comments, etc.). So, I’m back.  ..bruce..

Ran across The Comics Curmudgeon site thanks to a link from Memepool. Josh Fruhlinger, who runs the site, does out loud (well, on the web) what many of us have been doing subvocally for years: mocks the lame comics that persist on newspaper comics pages everywhere. He pays particular attention to Mary Worth, Judge Parker, Mark Trail, Rex Morgan, Dick Tracy, and Apartment 3-G.

He also links to, finds amazing and occasionally seems a bit worried by the host of other sites, products, songs, videos, and additional comics-related phenomena, not to mention the extensive reader comments to his postings.  ..bruce..

UPDATE (10/15/06): Henderson has posted some of his data and observations above.

“Evil” Bruce Henderson, my co-blogger, has developed a data mining tool that constantly surveys the web, building up data about housing prices and mortgages being issued. The results are troubling, to say the least; I’ll leave it to him to post the information should he choose to.

In the meantime, Robert Samuelson — one of my all-time favorite commentators, due to his intellectual honesty and general track record for being right on the money (so to speak) — now has the following to say:

We are at the endgame for housing. Until recently, our national motto has been “in real estate we trust.” Just last week, the Census Bureau reported that median home prices after inflation rose 32 percent from 2000 to 2005. In some places, the gains were huge: 127 percent in San Diego, 110 percent in Los Angeles and 79 percent in New York. But real estate — which has acted as a national piggy bank, with homeowners borrowing and spending against rising house prices — no longer looks so trustworthy. On this, more than falling oil prices or a record Dow, hangs the economy’s immediate fate….

Adjustable rate mortgages (ARMs) represent a quarter of the nearly $10 trillion in single-family mortgages, says economist Michael Fratantoni of the Mortgage Bankers Association. ARMs typically change rates annually and are 2 to 2.5 percentage points above, say, a one-year Treasury note. But “hybrid” ARMs made in 2003 and 2004 provided low fixed rates for three to five years; many of these rates are now rising. Consider a borrower with a 4 percent ARM of $200,000 lent in 2003. The monthly payment had been $955, says Fratantoni. Now, the ARM would reset at 7.5 percent; the payment increases to $1,362. Switch to a 30-year fixed-rate loan, and the rate would be 6.25 percent with a $1,164 monthly payment.

To service their loans, some consumers will curb their shopping. Susan Sterne of Economic Analysis Associates says that debt payments will absorb a record 15.6 percent of personal disposable income in 2007. Sterne expects growth in consumer spending and the overall economy to weaken, though she’s not predicting a recession. But some forecasters think one is possible.

Read the whole thing; hat tip to Real Clear Politics. ..bruce..