Property Grunt

Monday, January 28, 2008

A lot this going around.


I have no idea where to begin because it all has been so overwhelming.

In a nutshell the Fed is attempting to head of a recession with a combo one two punch of lower interest rates and stimulus package which includes tax rebates.

A lot of people are unhappy with Bernanke’s approach.

One day after the Fed slashed its benchmark interest rate to head off a possible recession, a small minority of economists warned on Wednesday that the central bank was in danger of invoking the same remedies that it did after the bubble in dot-com stocks burst seven years ago.

Though most experts agree that the economy is on the brink of a recession, and some even contend the recession has already begun, critics say the Fed’s attempted rescue looks uncomfortably similar to the aggressive rate reductions that aggravated the speculative bubble in housing.

“We’ve literally forgotten that this is the very policy environment that led to the housing and mortgage problems in the first place,” said Michael T. Darda, an economist at MKM Partners, an investment firm in Greenwich, Conn. “We’re not going to see another housing bubble, but we could see more inflation.”
Beyond the danger of higher inflation, some analysts warn that the Federal Reserve and its chairman, Ben S. Bernanke, could also lose credibility by appearing to act in knee-jerk response to plunging stock prices.

“They risk being seen as bailing out equity investors,” wrote Adam S. Posen, deputy director of the Peterson Institute for International Economics in Washington. “It makes it look as though stock market fears are driving the Fed to action.”

As for the stimulus package, the objective is to obviously get is all to buy s**t.

The obvious risk is that once people get their hands on the cash, they will apply those funds to their living costs which include home costs and credit cards. But here is where it gets funkier. Let’s say some people were smart enough to exercise fiscal responsibility and managed to get a stranglehold on their spending. Do you think they are going to blow their wad on a flat screen or an SUV? Hells no! They are going to shove all that in the bank somewhere safe. And how do banks make money? They lend it out this money. And here we go again.

However, I am not sure it will ever get that far since banks have tightened up their lending standards and I think everyone will have burned through their rebates to pay off their outstanding bills.

This article in the NYT shows how failure is rewarded in Wall Street.

UNDER the stewardship of Dow Kim and Thomas G. Maheras, Merrill Lynch and Citigroup built positions in subprime-related securities that led to $34 billion in write-downs last year. The debacle cost chief executives their jobs and brought two of the world’s premier financial institutions to their knees.

In any other industry, Mr. Kim and Mr. Maheras would be pariahs. But in the looking-glass world of Wall Street, they — and others like them — are hot properties. The two executives are well on their way to reviving their careers, even as global markets shudder at the prospect that Merrill and Citigroup may report further subprime losses in the coming months.

Mr. Maheras, who left his job as co-president of Citigroup’s investment bank this fall after being demoted, has had serious discussions with several investment banks, including Bear Stearns, about taking on a top management position, people who have been briefed on the situation said. And he has also been approached by investment firms willing to back him to the tune of $1 billion or more if he decides to start his own hedge fund, these people said

I am not really surprised about this. History is littered with infamous figures from Mike Milken to Mel Gibson who have been bad boys and have made the comeback.

What I do know is this that there is a ton of chaos on the horizon which makes this a day trader’s paradise.

And yes. I did catch tonight’s 60 minutes on the subprime mortgage mess and I plan on doing an entry on it tomorrow.

I would also like to do a shout out to Fly Rig. This is a site which is planning on becoming the alternative to Craigslist.

In Flyrig’s words it has broker reviews, searchable local interest information (such as restaurants, stores, and schools), and public transportation information combined together in a Google maps mashup. Users can also rate brokers and comment on their listings, pointing out discrepancies between the description and actual unit, or providing additional information on local interest points.

This is will be a huge help for people looking rentals. In my experience I have shown clients the same apartments they have seen with other agents and of course who gets blamed for that? This site will allow clients to keep track of apartments they have seen.