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The Rise and Fall of San Diego House Prices

On July 8, 2010, in Housing, Uncategorized, by Tim

Kelly Bennett of the Voice of San Diego files this report about the rise and fall of the San Diego property market – one of the first areas where prices surged almost ten years ago and one of the first to crash starting in 2005. Ahh… Memories…

At about the 1:30 mark, Rich Toscano of Piggington.com fame makes an appearance. Recall that Rich was one of the earliest housing bubble bloggers, starting out in late-2004 as I recall, just before yours truly. That price history of one San Diego house was quite illuminating as well – $246K in 1998, $495K in 2002, $830K in 2005, and $585K last year.

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A Tough Second Quarter for Hedge Funds

On July 8, 2010, in Commodities, Stocks, by Tim

Bloomberg has a lengthy report today on the performance of hedge funds during the second quarter, a stretch that included the months of May and June that were not kind to stocks.

Hedge-fund managers, Wall Street’s best compensated and supposedly smartest investors, are dazed and confused.

Reeling from the worst second-quarter performance in a decade, hedge funds have scaled back trading as they struggle to figure out where markets are headed amid sometimes vicious crosscurrents in stock, commodities and other markets, according to brokers and managers.
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Hedge-fund managers, who oversee $1.67 trillion in assets, are reluctant to put money to work as they are buffeted by a wide range of often conflicting political and economic forces, from fiscal policy in Europe and the U.S., to what regulations will be imposed on the financial-services and energy industries, to the growth prospects in China. In turn, smaller and fewer trades may make it harder for funds to rebound from losses incurred since May, when the industry suffered its worst decline in 18 months.
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Barton Biggs, whose purchase of stocks in March 2009 gave Traxis Partners LLC a 38 percent gain last year, said last week he sold about half his stock investments because of concern governments around the world are curtailing stimulus measures too soon.

“I’m not wildly bearish, but I don’t want to have a lot of risk at this point,” Biggs, who manages $1.4 billion, said in a telephone interview. “I’m not putting my money into anything. I’m raising cash.”

Borrowing is down and cash holdings are up, making you wonder about the industry’s future. After losing 19 percent in 2008 and gaining back 20 percent last year (for a net decline of three percent), hedge funds were down 1.2 percent during the first half.

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Confidence in Gold Bull Market Restored

On July 8, 2010, in Commodities, by Tim

This item at The Economist offers some encouraging words for precious metals investors, suggesting that now is the time to sell your gold baubles since the average 2010 price has come within 29 percent of the inflation-adjusted average price from 1980, offering up this long-term chart that says more about paper money than it does about the yellow metal.

Don’t try to probe too deeply the logic logic behind the advice “Perhaps now is the time to sell. After the January 1980 peak, the price fell by 55% over the following two years”. What’s important to understand here is that bashing gold after the recent correction is just more evidence that the long-term bull market still has a very long way to go.

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More on QE II (Quantitative Easing Part Two)

On July 8, 2010, in Economy, by Tim

In this report at the Washington Post, Neil Irwin lays out the three modest options currently being considered by the Federal Reserve to spur growth now that the U.S. economic recovery appears to be experiencing a modest setback and Congress seems unwilling to act.

One pro-growth strategy would be to strengthen language in Fed policy statements that the central bank’s interest rate target is likely to remain “exceptionally low” for an “extended period.” The policymakers could change that wording to effectively commit to keeping rates near zero for even longer than investors now expect, perhaps adding specifics about which economic conditions would lead them to raise rates. Such a move would be opposed by many members of the Fed policymaking committee who are wary of the “extended period” language, arguing that it limits their flexibility.

Another possibility would be to cut the interest rate paid to banks for extra money they keep on reserve at the Fed from 0.25 percent to zero. That would give banks slightly more incentive to lend money to customers rather than park it at the Fed, although it also could cause technical problems in the functioning of certain credit markets.

A third modest possibility would be to buy enough new mortgage securities to replace those on the Fed balance sheet that are paid off as people take advantage of low interest rates to refinance.

It doesn’t sound like much yet, but, it’s a big departure from the discussion earlier in the year when the big question was whether the “extended period” language was going to be removed from the policy statement in the upcoming Fed meeting or in the one after that, paving the way for short-term interest rate hikes three to six months later.

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“The Ketchup Packet Soup Train”

On July 8, 2010, in Economy, by Tim

The Daily Show’s Jon Stewart talks about the most recent report on the labor market, the effectiveness of the last stimulus program, and the extension of unemployment benefits, a program he refers to as something other than a “gravy train”.

Brace yourself for the Christina Romer Rolling Stone cover and a cameo by Nouriel Roubini.

Also on Comedy Central in recent days was another well-known economist, Nobel Laureate Paul Krugman, who appeared on The Colbert Report as detailed in this item at the Huffington Post. Once again you’ll hear how our problems are all about the lack of demand – as in the Great Depression, how we arrived at this point is largely immaterial and, to economists, the only way our problems can be solved is if we somehow boost demand.

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Thursday Morning Links

On July 8, 2010, in Uncategorized, by Tim

MUST READS
IMF lifts world growth forecast – Reuters
Risks to world recovery have ‘risen sharply’ – CNN/Money
Greece Pushes Through Pension Overhaul Despite Protests – NY Times
Wells Fargo to cut 3,800 jobs, shut subprime lending unit – MarketWatch
EMU break-up risks deflation shock that would dwarf Lehman collapse – Telegraph
U.S. Crash Looms Without Roadmap Directions – Baum, Bloomberg
Fannie Mae and Freddie Mac delist from NYSE – CNN/Money
Baltic freight index slides to 14-month low – Reuters
Barbie does economics – Behavioural Investing

MARKETS/INVESTING
Oil rises to near $75 on global stock rally – AP
Gold Fluctuates as Six-Week Low Spurs Demand – BusinessWeek
Don’t panic, the Baltic dry is a rubbish indicator! – FT AlphaVille
Bounce leaves bears, bulls battered but entrenched – MarketWatch
Doug Kass: Stocks Have Hit Bottom for the Year – FMMF
The Mystery of BIS Gold Swaps – HuffPost
Insane Bulls And Bears – Forbes

ECONOMY/WORLD/HOUSING/FED
Is deflation the problem that will throw us into a depression? – Fortune
HSBC: Milton Friedman got it wrong on profit being the only aim – Telegraph
Surprise surge in job growth in Australia – SMH
Europe names 91 banks taking part in stress tests – Reuters
IMF praises Asia’s efforts in heading off housing bubble – MarketWatch
Nevada Leads Country with 70% of Mortgages Underwater: LendingTree – Housing Wire
Home Values Decline in May; Get Ready for a Bumpy Summer – ZillowBlog
In case Geithner needs a refresher on capital gains and dividend tax rates… – LA Times
Fed’s Kocherlakota: Tax Financial Institutions Based on Risks They Create – WSJ
Federal Reserve weighs steps to offset slowdown in economic recovery – Washington Post

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