the visible hand

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Archive for March, 2008

Diesel: The truck stops here

Posted by ecoshift on March 27, 2008

Diesel prices weigh on truckers, loggers, landscapers – Mar. 27, 2008
Diesel: The truck stops here
From haulers to loggers to landscapers, soaring fuel costs hit the bottom line but cutthroat competition keep price hikes at bay.
By Steve Hargreaves, CNNMoney.com staff writer
Last Updated: March 27, 2008: 9:50 AM EDT

NEW YORK (CNNMoney.com) — The kid who delivers your pizza may be charging you an extra buck for gas, but for the guy that trucked the tomatoes, hauled the dough or milked the cows, passing along the fuel increase isn’t as easy as pie.

From truckers and farmers to loggers, construction workers and fishermen, skyrocketing diesel prices are pushing what many consider the backbone of the American economy right up to the breaking point.

“I’m in debt,” says Jim Gossett, an owner/operator truck driver with a wife and daughter in Chapel Hill, N.C. “Do I turn in all my equipment, potentially lose my home?”

For the last nine years Gossett has driven a truck. For the last few he’s been running a specialized carrier, delivering boats to marinas and dealers across the country.

He says his profit margin used to be around 25%. But with the near-tripling of diesel prices over the last few years, he now says that has been cut to 5%.

He says cutthroat competition in the industry means he’s unable to pass along the increased cost.

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OECD lowers US growth outlook

Posted by ecoshift on March 20, 2008

FT.com / World – OECD lowers US growth outlook
by Delphine Strauss
Published: March 20 2008 10:31 | Last updated: March 20 2008 15:10

Advanced economies are “not sheltered from financial turmoil” and economic prospects have deteriorated faster than was expected as recently as December, the Organisation for Economic Cooperation and Development said on Thursday.

The Paris-based international organisation for advanced economies said the effects of financial turmoil, the turning of the global housing cycle and squeezed incomes from “soaring” energy and food prices were “unlikely to fade soon”.

It cut its forecast for US growth in the first quarter of 2008 to a mere 0.1 per cent and predicted growth would grind to a halt in the following three months, saying recent data suggested “that the US economy is now essentially moving sideways, if not contracting outright”.

Jørgen Elmeskov, OECD acting chief economist, told a press conference that if investment in US residential property continued to slide at its current rate, by the start of next year “housing construction would be in the deepest slump since our records began” in 1960.

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Taking the long view…

Posted by ecoshift on March 16, 2008

Tonight Asian markets are dropping, the dollar continues it’s downward spiral and Dow futures indicate a panicky open tomorrow despite three separate (not to say desperate) moves by the fed earlier today to increase confidence and liquidity in the markets.

At times like this — when it is so easy to get caught up the details and passion of the moment — it is important to step back, take in the long view, and reflect on just how much has been accomplished since the turn of the millennium. Click the link for prescient forecast of all that would be accomplished.
(hat tip to commenter DrChaos over on the Calculated Risk blog)


Bush: ‘Our Long National Nightmare Of Peace And Prosperity Is Finally Over‘ | The Onion
January 17, 2001 | Issue 37•01

WASHINGTON, DC–Mere days from assuming the presidency and closing the door on eight years of Bill Clinton, president-elect George W. Bush assured the nation in a televised address Tuesday that “our long national nightmare of peace and prosperity is finally over.”

“My fellow Americans,” Bush said, “at long last, we have reached the end of the dark period in American history that will come to be known as the Clinton Era, eight long years characterized by unprecedented economic expansion, a sharp decrease in crime, and sustained peace overseas. The time has come to put all of that behind us.”

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Northern California’s Housing Market Remains Frozen

Posted by ecoshift on March 15, 2008

Northern California’s Housing Market Remains Frozen : Housing Wire
By Paul Jackson  •   March 14, 2008  •   Comments

The waiting game between northern California’s Bay Area buyers, sellers and lending institutions continued last month as sales dipped below 4,000 for the second month in a row, a real estate information service reported Thursday.

A total of 3,989 new and resale houses and condos sold in the nine-county Bay Area in February. That was up 11.2 percent from 3,586 in January, and down 36.7 percent from 6,305 for February 2007, DataQuick Information Systems said.

January and February are the two slowest months in DataQuick’s statistics, which go back to 1988. They are the only months with sales below 4,000.

“The lending system has been in lockdown mode the last half year, especially when it comes to so-called jumbo mortgages which have traditionally been the majority of Bay Area loans,” said Marshall Prentice, president at DataQuick.

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Dollar plunges to record low

Posted by ecoshift on March 13, 2008

FT.com  – Dollar plunges to record low
By Krishna Guha in Washington
Published: March 13 2008 20:19 | Last updated: March 14 2008 00:45

The dollar plummeted to record lows and the price of gold touched $1,000 on Thursday as retail sales figures confirmed that the US is in recession and concern intensified about spreading distress in the hedge fund sector.

In a turbulent day of trading, the US dollar tumbled against the yen, breaking through Y100 to the dollar for the first time since 1995, before recovering to Y100.79. The euro moved to record highs above $1.56 – at which point Goldman Sachs estimated that the eurozone had overtaken the US as the world’s biggest economy measured by market exchange rates – before easing slightly.

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Souring Home-Equity Loans

Posted by ecoshift on March 12, 2008

Latest Trouble Spot for Banks: Souring Home-Equity Loans – WSJ.com
“Losses May Hit Lenders That Skirted Subprime; Surprise Delinquents”
By ROBIN SIDEL
March 12, 2008; Page C1

Here comes another headache for banks suffering from the mortgage downturn: Losses on home-equity loans are soaring, even at some lenders that avoided big blunders on subprime loans.

When times were good, banks raked in billions of dollars in profit from home-equity loans, which allow borrowers to tap the accumulated value in their property with either a loan for a specific amount or a line of credit. As long as home prices were rising, lenders had little to worry about.

But falling home values are leaving banks with little or nothing to collect on many home-equity loans in case of default. Some stretched borrowers are keeping up with their mortgage and credit cards — but not their home-equity loan.

The problems are already causing trouble for J.P. Morgan Chase & Co. and Wells Fargo & Co., and are expected to hit other large banks when first-quarter earnings results are released next month. The pain is likely to deepen through the rest of 2008, sapping capital levels and resulting in tighter lending standards as banks try to reduce their risk.

“These losses are well beyond what we would have modeled…and continue to get worse,” said Charles Scharf, head of J.P. Morgan’s retail business.

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Douglas County, Oregon: Lumber mills curtailed due to housing slump

Posted by ecoshift on March 10, 2008

No mention of onerous regulations here…


KDRV 12 –
Hundreds lose mill jobs
BY RON BROWN
February 29, 2008

GLENDALE, Ore. — The slump in the housing market is starting to hurt to families in southern Douglas County. Swanson Group has closed its mills in several Oregon communities for the next couple weeks.

The Swanson Group Sawmill at Glendale was quiet Friday. It’ll be that way for at least the next couple weeks. The company says it’s being squeezed between high log prices, low demand for lumber, a shortage of rail cars to ship products, and competition from Canadian suppliers.

“Ya know, prices today are at levels that they’re lower than the levels that I saw when I joined this company in 1977. We haven’t seen ‘em this low frankly since the early 80’s and that’s unadjusted for inflation. So, it’s horrible economic conditions,” said CEO Steve Swanson.

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codes, damned codes

Posted by ecoshift on March 10, 2008

After reading The Journal’s recent cover story “Codes, Damned Codes” on the county’s heavy handed code enforcement activities in McKinleyville I wondered if there could possibly be a more confrontational way to go about “protecting” renters and future home owners from sub standard building and land use practices. I imagined that some would view the effort as protecting property values for the neighborhood and therefore at least somewhat justified. And of course more than a few people will feel that, jeez, look at all the damn hassles they had to go through to be in compliance with county regs, why should Joe Blow get pass on all the mind numbing paperwork, expensive and arcane compliance requirements and wallet busting fees?

Then I read the piece posted below from the Washington Post where code enforcement actions had an unexpected outcome in Virginia. Now I’m wondering: How many family incomes does it take to buy property these days? And, with real estate prices dropping precipitously only a couple of counties away, what is keeping Humboldt real estate prices from following suit? And, finally are there alternatives to punitive culture based code enforcement practices? Perhaps we should review our options before we have our own unanticipated outcomes. Any property rights advocates out there?


Some Once-Crowded Homes Now Stand Vacant – washingtonpost.com
In Springfield and Herndon, Crackdown on Multiple Occupancies Collides With a Less-Forgiving Economy
By Bill Turque
Washington Post Staff Writer
Sunday, March 9, 2008; Page C05

The four-bedroom, 1950s rambler on Hanover Avenue in Springfield was an illegal boardinghouse, neighbors complained in February 2007. Some called it the “Hanover Hotel,” a home with too many people, too much noise and a lot of cars.

County inspectors, under pressure from residents and elected officials to deal with a growing number of cases of residential overcrowding, found that the basement had been improperly divided into four rooms and that the house was set up for as many as 15 occupants.

They cited the owner, Elsa DeLeon, for a series of code violations and ordered her to bring the property into compliance. DeLeon, a Honduran immigrant, told The Washington Post at the time that only eight people lived there, all family members who were needed to help make the mortgage on the house she bought for $550,000 in 2006.

By May, it was in foreclosure, sold to Deutsche Bank National Trust of Kansas City for $120,600, according to county records. The house has been vacant for months; DeLeon could not be located to comment. It will go up for auction today, along with hundreds of other foreclosed properties areawide, at the Washington Convention Center. The starting price is $169,000 — less than half the value of surrounding homes.

This situation is not what Fairfax County officials had in mind when they started cracking down on overcrowding. The goal was to restore stability in older neighborhoods where homes had been rented to immigrant laborers or purchased by extended immigrant families that pooled their resources in a region of premium housing prices.

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TIPS’ Yields Show Fed Has Lost Control of Inflation

Posted by ecoshift on March 10, 2008

Bloomberg.com: Worldwide
TIPS’ Yields Show Fed Has Lost Control of Inflation (Update1)
By Sandra Hernandez and Deborah Finestone

March 10 (Bloomberg) — Bond investors have never been so sure that the Federal Reserve will lose control of inflation. They’re so convinced that they’re giving up yields just to buy debt securities that protect against rising consumer prices.

The yield on the five-year Treasury Inflation-Protected Security due in 2012 has been negative since Feb. 29, ending last week at minus 0.16 percent. The notes, which were first sold in 1997, have never before traded below zero. Even so, firms from Deutsche Asset Management to Vanguard Group Inc., the second-biggest U.S. mutual fund company, say TIPS are a bargain.

For the first time in a generation, money managers must come to grips with a central bank that’s more intent on spurring the economy than restraining price increases. With oil above $100 a barrel, gold approaching $1,000 an ounce and the dollar at a record low against the euro, TIPS show investors aren’t convinced Fed Chairman Ben S. Bernanke will be able to tame inflation once policy makers stop cutting interest rates.

“The way TIPS are trading now, investors believe headline inflation will stay lofty and are willing to give up the real yield for that,” said Brian Brennan, a money manager who helps oversee $11 billion in fixed-income assets at T. Rowe Price Group Inc. based in Baltimore. Prices for the securities indicate “a real concern of a recession and high headline inflation,” he said.

Because TIPS pay a principal amount that rises in tandem with the consumer price index, buyers accept lower yields in a bet the inflation adjustment will make up the difference.

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Wall St executives on defensive over pay

Posted by ecoshift on March 8, 2008

FT.com / Companies / US & Canada – Wall St executives on defensive over pay
By James Politi in Washington
Published: March 7 2008 20:25 |

Three top Wall Street figures at the centre of the US mortgage crisis on Friday faced a barrage of criticism from Democratic lawmakers, who accused them of raking in excessive pay packages while their companies suffered billions of dollars of losses.

Appearing before the House oversight and government reform committee, Angelo Mozilo, chief executive of Countrywide, the largest US mortgage lender, Stan O’Neal, former chief executive of Merrill Lynch, and Chuck Prince, the former chief executive of Citigroup, were forced to defend their compensation as fair and in line with investors’ interests.

“The reality is that I received no severance package. I received no bonus for 2007, no severance pay, no golden parachute,” Mr O’Neal said. “The amount discussed in the press [$161m] consisted mainly of deferred compensation, stock and options that I earned during the years prior to 2007,” he added.

Henry Waxman, the Democratic chairman of the committee, opened the hearing with a statement that included the question: “When companies fail to perform, should they give millions of dollars to their senior executives?” Later, he added: “You’re in the middle of an enormous debacle. It seems like everyone is hurting except for you.”

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