The Fed’s Beige Book is out

The Federal Reserve Board’s Beige Book report on the economy is out. Inquiring minds are searching for answers. Here is the Real Estate Summary section:

Real Estate and Construction

Residential real estate activity improved since the last report. Most Districts noted an increase in home sales and construction prior to the April 30th deadline for the homebuyer tax credit, with contacts in many of these Districts also indicating a corresponding slowing in activity in May. Tight credit, the elevated inventory of homes available for sale, and the “shadow inventory” of foreclosed properties on banks’ balance sheets held back residential development in the New York, Cleveland, Atlanta, and Chicago Districts. Commercial real estate activity generally remained weak. Office, industrial, and retail vacancy rates continued to drift upward in many Districts putting downward pressure on rents. However, lower rents were said to have led to an increase in leasing activity in New York, Philadelphia, Richmond, Kansas City, Dallas, and San Francisco. The elevated inventory of existing properties for sale or rent continued to weigh on new private nonresidential construction. However, stronger industrial demand was noted in several Districts. Public construction increased in Philadelphia, Cleveland, and Chicago, but slowed in Minneapolis.

The above mention of “shadow inventory” is the first seen in, at least, a very long time. The San Francisco real estate section said this:

Real Estate and Construction

Demand for housing in the District appeared to be little changed from the previous period, while demand for commercial real estate deteriorated a bit further. Home prices continued to edge up in some parts of the District, and although the pace of home sales remained mixed across areas, it appeared largely stable on net. However, contacts continued to note that the limited availability of nonconforming “jumbo” loans has restricted sales of higher-priced homes in some areas. Scattered reports pointed to some modest improvements in residential construction, most notably in the repair and remodel sector. Conditions worsened somewhat further in commercial real estate markets, with vacancy rates for office and industrial space edging up in many parts of the District. However, contacts reported continued improvements in leasing activity for some market segments of the District as tenants seek to secure favorable terms.

Investment Banker: “It’s Going to Get Nasty…” But just How Nasty?

Inquiring minds are meditating on what a top investment banker has warned about what is about to happen. He said that the economic fallout of the sovereign debt crisis could get so nasty over the next five years that people would be wise to abandon the markets and instead buy land, barbed wire and guns.

With gold smashing through its all time record high this morning on the back of fears over a double dip recession, analysts are turning increasingly bearish on the markets. Anthony Fry, senior managing director at Evercore Partners, told CNBC that the bond markets could turn nasty over the next few months and said that the current problems created by the European debt crisis could be with us for at least five years.

“Look at the current situation. You have Greece, now you have Hungary and huge issues surrounding Spain and Portugal,” he said, warning of a “nightmare scenario” of hyper-stagflation, where inflation rises dramatically but asset prices deflate.

“I don’t want to scare anyone but I am considering investing in barbed wire and guns, things are not looking good and rates are heading higher,” said Fry.

RBS Chief Strategist Bob Janjuah echoed Fry’s sentiments, predicting that governments would inject at least $15 trillion dollars more qualitative easing into the system and that investors should get into gold to offset the depreciating value of fiat currencies.

“Over the next 6 months we will see private sector deflation pushing 10-year yields down to 2 percent,” he said. “This will see the policymakers mistakenly attempt to kick-start the economy and market with a global quantitative easing program worth between $10 and $15 trillion dollars.”

Janjuah pointed out that, while gold has dramatically risen in value over the last ten years, the S&P 500 and the Dow Jones have both remained flat over the course of a decade.

Problems in European Union

Inquiring minds are looking at the news feeds coming out of Europe and watching a meltdown. So much for thinking it was just a few countries that could be fit into a cute acronym of PIIGS.

France is selling 1700 buildings to raise cash.

Italy: 2009 Awful Year for Real Estate Sales, 10% Decline.

5 years after Greenspan’s “Froth not Bubble” comment

No bubble here.

Remember when Mr. Alan Greenspan, the darling of the MSM and Chairman of the Federal Reserve said there was no real estate bubble? That it was just “froth”? Yeah, it actually happened 5 years ago. Can you believe it? The OCRegister had this to say:

Welcome to National Froth Day, an annual event at Lansner on Real Estate, where we honor our inability to see a brewing bubble.

It was this day, five years ago, where then-Fed boss Alan Greenspan — and then-reigning “Maestro” of the economy — went to Congress and said he saw “froth” in housing, but not a bubble.

” … there can be little doubt that exceptionally low interest rates on ten-year Treasury notes, and hence on home mortgages, have been a major factor in the recent surge of homebuilding and home turnover, and especially in the steep climb in home prices,” his prepared testimony went. “Although a ‘bubble’ in home prices for the nation as a whole does not appear likely, there do appear to be, at a minimum, signs of froth in some local markets where home prices seem to have risen to unsustainable levels.”

Well, home prices had been rising sharply. Measured by the national S&P/Case-Shiller index, home prices had just completed their 54th consecutive quarter of year-over-year gains at an eye-catching 15.68% rate as Greenspan testified that day. That gain proved to be the cycle’s pinnacle appreciation rate.

“… in recent years, the pace of turnover of existing homes has quickened,” Greenspan’s testimony reads. “It appears that a substantial part of the acceleration in turnover reflects the purchase of second homes–either for investment or vacation purposes. Transactions in second homes, of course, are not restrained by the same forces that restrict the purchases or sales of primary residences–an individual can sell without having to move. This suggests that speculative activity may have had a greater role in generating the recent price increases than it has customarily had in the past.

The apparent froth in housing markets may have spilled over into mortgage markets. The dramatic increase in the prevalence of interest-only loans, as well as the introduction of other relatively exotic forms of adjustable-rate mortgages, are developments of particular concern. To be sure, these financing vehicles have their appropriate uses. But to the extent that some households may be employing these instruments to purchase a home that would otherwise be unaffordable, their use is beginning to add to the pressures in the marketplace.

Nailed that one, right? After Katrina, the Gulf oil spill, and the Federal Reserve’s call of no real estate bubble, I don’t understand how anybody can think that the government is to be believed in. We need less government. It is that simple. Simple police powers. Fixing roads. The defense of this country. That’s all.

Another crime for this age:

Hemet is waking up today to the understanding of not defending the American way of life. The Hemet Police Dept came under rocket attack. Yes…you just read that right. In California, in America, we are now having our police departments coming under rocket attack.

Police said Tuesday that a “suspicious device” found on the roof of a business after a fire earlier this month was a rocket. Authorities are attempting to determine whether the case is connected to a series of attacks on the Hemet Gang Task Force.

The fire was reported June 3 at Los Altos Market in Hemet. Police said the nine-pound, inert training rocket malfunctioned and landed on the roof of the building, where firefighters found it after the blaze was extinguished.

Please go to

An explanation of the world's debt "issue"

In this video entitled, “Clarke and Dawes Ask the Million Dollar Question”. Quite frankly, it is hilarious. Mostly because it is ALL TRUE! Please do yourself a favor and watch. You will probably learn a few statistics along with the laughs.

Remember to Vote today

California, please do your American duty. And your duty to the Bear Republic.

Vote.

So many lost their lives to secure that right for you.

We have so many problems that need attention and you need to voice your opinions about those problems.

Bernanke doesn't expect U.S. double-dip recession

You're known by your friends, right?

The man who never saw the Housing Bubble says he doesn’t think we will have a double-dip recession. I am sure that alieves any stress you were feeling, right? In “Bernanke doesn’t expect U.S. double-dip:

Federal Reserve board chairman Ben Bernanke said Monday he didn’t think that the U.S. economy would slip back in to recession, saying that consumer spending and business investment seem strong enough to keep the economy growing, albeit at a relatively subdued rate.

“My best guess is we’ll have a continued recovery [but] it won’t feel terrific,” he said.

Fears of a double-dip recession have multiplied in recent weeks. The weak May employment report released Friday, which showed just 41,000 private-sector jobs were created last month, was only the latest signal that the U.S. economy may be softening again.

But the Fed Chairman did leave wiggle room:

Bernanke quickly noted that there were “caveats” to this forecast. Growth was still not fast enough to bring down the high unemployment rate.

In addition, the U.S. banking sector was “not completely healthy,” he said. Banks were still deleveraging and not making as many loans as “we’d like to see,” Bernanke said.

Bernanke is brilliant, is he? He says the banking sector is “not completely healthy”. Ya’ think? How do these people get jobs?

Remember when people said, "The rich always have money!"?

Do you remember those days? At the outset of the real estate crisis? During the Sub-prime foreclosure crisis, I heard it all the time. I tried to tell these folks that historically they don’t always have money. That “the rich” usually stay afloat the longest because they have the means to. Rich people have lines of credit and cash flow. But by the end, they fall the hardest because they fall last. In real estate, it is actually better to fail earlier rather than later. Diana Olick writes in a recent column on the wealthy and their home values:

It seems that while the middle and lower end of the market was seeing real price recovery this Spring, the high end, which was pretty flat all fall, started to really tank from March through May.

Not surprisingly, the inventory of high end homes surged in January, just before that price drop and is continuing to climb.

I suppose some sellers were feeling better about the economy and the market and thought this was the time to get back in.

Unfortunately they were sorely mistaken.

The percentage of sellers who dropped their asking price at least once over the past 90 day period went from 33 percent in mid February to 38 percent at the end of May.

I wonder how many of these home owners in New Jersey, and for that matter, throughout the country have been voting for big-spending liberal Democrats? I bet they thought that the spending party would never end, and if it did, wouldn’t affect them. Can you say “Teaparty Activist”!

Do you spell PIIGS with an 'H'?

How do you spell PIIGS? Apparently with an 'H'

So how did Hungary get into such trouble? Inquiring minds are looking at Eurogroup Head Juncker Confident Despite Hungary and Euro Dilemma and wondering just how far this crisis is going to go.

Isn’t it amazing how all these bureaucrats start off saying how they are confident nothing bad is going to happen:

The growing debt crisis now besetting Hungary has stirred continent-wide anxiety and raised fears about the financial weaknesses of other Eastern European nations getting exposed, especially after having seen the Euro plunging to its lowest figure against the dollar in four years on Friday. But Jean-Claude Juncker, chairman of the Eurogroup of euro zone finance ministers and Luxembourg Prime Minister, is not worried.

Juncker made it clear that he is not fretful about the rate at which the euro is now pegged, but admitted that he was dumbfounded by how fast the currency plunge took place. He took sides with a faction of European politicians who are pushing for Europe to have its proprietary ratings agency. They believe that the ill performance of the agencies currently handling ratings only contribute to the global credit crisis.

But then again, why should these well-heeled bureaucrats have to worry. They are the last ones to lose their paychecks. So, of course, they aren’t worried.