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Fair usury: PITI monthly payment over 30 years in which the borrower's payment is less than 38 percent of total debt. This is empowering, and what gave rise to the middle class in the 20th Century. You won't find an economist, conservative or otherwise, who sees this as a poor expense. You will likely pay four times the cost of purchase price of your house, but you are also buying one of the surest investments of all time: land.
Dangerous usury: PITI monthly payment over any amount of time in which the payment is greater than 38 percent of total debt, or payment does not pay off any amount of principle. Also, any loan that exceeds 40 years amortized.
Unethical usury: Payday loans, where APR exceeds 300 percent. This is simply preying on the poor, and exactly what I believe Thomas Jefferson was preaching against.
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MINNEAPOLIS (AP) — Best Buy (BBY), the nation's largest consumer electronics retailer, lowered its 2008 profit estimate on Tuesday, blaming a softening economy that's steering shoppers away from high-margin items such as flat-screen TVs.
The company also reported that first-quarter earnings fell 18%, partly because of its new lower-margin business in China. Shares slid $2.83, or 5.9%, to $45.18 Tuesday.
CEO Brad Anderson said weakness in the overall economy was a major factor, skewing sales away from high-margin, big-ticket products to items such as notebook computers and gaming hardware, which don't bring as much profit.
"I think the reason those categories were soft had to do with the macro economy," Anderson said. "Some of our consumers felt the squeeze on their discretionary income. We felt that pretty directly and pretty immediately."
He said he expected improvement in the economy — and Best Buy's profits — by the end of the calendar year, however. In particular, he said the company expects television sales to pick up in the fall. "It is very heavily driven by the football season," he said.
FIND MORE STORIES IN: CEO Brad Anderson
Despite the difficult quarter, Anderson said he was upbeat about the company's long-term prospects. "We're never satisfied with missing earnings. However, we know it does not reflect the core health of our business."
He said the company gained market share, posted strong international sales and outperformed other electronics retailers.
Still, the company cut its fiscal 2008 profit outlook to a range of $2.95 to $3.15 a share, down from its earlier projection of $3.10 to $3.25. It retained its annual revenue guidance of about $39 billion.
AP
Stocks Plummet on Surging Bond Yields
Wednesday June 20, 4:52 pm ET
By Madlen Read, AP Business Writer
Stocks Fall As Soaring Bond Yields Rekindle Interest Rate Fears
NEW YORK (AP) -- A surge in Treasury yields rattled Wall Street Wednesday, forcing stocks to give up early gains and drive down the Dow Jones industrial average more than 140 points.
The 10-year Treasury note's yield soared to 5.15 percent late Wednesday from 5.09 percent late Tuesday, reigniting worries among stock investors that high rates could thwart corporate deal-making and further injure the limping housing market.
The stock market started reacting violently to Treasury yields two weeks ago when the 10-year yield surged past 5 percent for the first time since last summer. Wall Street had traded more mildly in recent days as yields retreated from last week's peak of nearly 5.30 percent, but Wednesday's yield advance stoked fears that they could resume their climb.
"People are watching this 10-year, and it looks like it might want to go back to 5.25," said Todd Leone, managing director of equity trading at Cowen & Co. Until last week, the 10-year Treasury yield had not traded consistently above 5.25 percent since 2002.
Furthermore, Leone said, the private equity deal-making wave, which was a main driver for the market for several weeks, seems to have slowed down a bit compared to last month. "The guys are doing a little more homework, and there aren't as many companies to grab up."
What you have here is the other side to abundant credit, as the subprime thing went off it shook some kernals of perma faith in the fraud system buidling up and later you see China starting to stop monetizing our debt, stop holding dollars or at least more $ and then a few other countries unpegged the $ and so forth and finally what will happen is less people will show up to buy treasuries, as the demand for them falls the price goes down and the yield goes up and higher rates begett more pain which in turn puts the entire economy on the rack, and here's the really nasty rub, we've spent all our credit, no one wants to own more of our debt we've come to the end of the rainbow and they don't want anymore of what we're selling so we can't debt our way out, we can't really pay our way out and so we're stuck, enjoy.
__________________
At what point then is the approach of danger to be expected? I answer, if it ever reach us, it must spring up amongst us. It cannot come from abroad. If destruction be our lot, we must ourselves be its author and finisher. As a nation of freemen, we must live through all time, or die by suicide.
If you thought the end of the housing slump was in sight, think again: the worst is yet to come, say market experts.
It’s no longer borrowers with risky credit histories that are taking the punches. The jump in the 30-year fixed-rate mortgage by more than half a percentage point to 6.74 percent in the past five weeks — the biggest rate spike since 2004 — is even putting a crimp on borrowers with the best credit.
It’s estimated the higher rate adds $116 a month to the payment for a $300,000 loan and about $42,000 over the life of the mortgage.
What’s more, the national median home price is set for its first annual decline since the Great Depression, and the supply of unsold homes is at a record 4.2 million, according to the National Association of Realtors.
Add to that the data recently released by real estate data firm RealtyTrac that showed home foreclosures increased 90 percent during May compared to the same period a year ago; foreclosures were up 19 percent from April.
It’s a blood-bath, one West Coast-based real estate expert was quoted as having said.
We’re talking about a two- to three-year downturn that will take a whole host of characters with it, he continued, from job creation to consumer confidence. Eventually it will take the stock market and corporate profits.
In fact, that’s already becoming apparent. The National Association of Home Builders/Wells Fargo index released this week showed confidence among homebuilders dropped in June to its lowest since February 1991.
Moreover, the Commerce Department reported that housing starts declined in May for the first time in four months, and NAR predicted that new home sales will drop 33 percent from 2005’s high to the end of the year.
Not surprising, homebuilding stocks are down 20 percent so far this year after falling 20 percent in 2006.
Another market expert opined that the situation is not just a housing recession anymore, it looks more and more like an economic recession.
With lenders tightening their lending standards and higher fixed mortgage rates, some ARM borrowers who have seen their home’s value drop even as interest rates adjust higher, won’t be able to refinance into fixed-rate loans.
MoneyNews Senior Financial Editor David Frazier predicted that, "With the inventory of homes on the market still near historic highs (relative to recent sales of homes), and more than $1 trillion worth of adjustable-rate mortgages set to readjust this year, foreclosures will continue to rise."
Frazier added that, "The high inventories of homes available for sale suggest that homeowners trying to escape foreclosure will have difficulty selling their homes unless they significantly lower their asking price.
"In turn, those homeowners who choose to lower the asking price of their home could be faced with negative equity — the amount they receive from selling their home could be less than the amount of money they owe on their mortgage."
The housing sector will push the U.S. economy into recession unless the Federal Reserve cuts its benchmark rate at the first surge in unemployment, Mark Kiesel of Pacific Investment Management Co. (Pimco) was quoted as saying.
MoneyNews’ Frazier noted though, "As long as the employment situation remains strong, the number of foreclosures may soon stabilize."
However, he added, "If job creation slows (which will likely be the case in the event overall growth in the U.S. continues to weaken), we think the number of foreclosures will continue to rise and home sales could be in for a sharp decline. Given the significant disconnect between the supply of homes on the market and the declining demand for homes (due largely to rising mortgage rates), we think home prices will also continue to fall."
In fact, said Frazier, "any deterioration in employment and falling home prices would likely lead to a drastic slowdown in consumer spending, as the "wealth effect" deteriorates and homeowners stop using home equity loans to spend at the local mall."
Consumer spending comprises nearly three-quarters of the total output of goods and services in the U.S.
In addition to their primary mortgages, homeowners had more than $914 billion of debt in home equity loans in 2005, more than twice what they had in 2001. About a third of that money, extracted as home values surged 53 percent from 2000-2005, was used to buy cars and other consumer goods.
If the Federal Reserve lowers its overnight lending interest rate, opined one news source, that would cut the prime rate that moves in tandem with it and reduce the interest on many types of ARMs, including home equity mortgages.
Until recently, experts were certain the Fed would lower rates by the end of the year. But with the agency’s continued focus on inflation and hints of that beginning to show up in the economy, experts now are less certain rates will go down and are increasingly suspicious that the Fed will in fact raise rates.
"This year’s readjustment of ARMs will likely serve to exacerbate a slowdown in consumer spending," offered Frazier.
Meanwhile, he added, recent increases in traditional mortgage rates, combined with other factors, could lead to a further deterioration in the housing market and the U.S. economy.
You know it's bad when even the cheerleaders quit on the team....
You know it's bad when even the cheerleaders quit on the team....
I work in the industry, I could give you example after example, I do loans in several states, the worst is Colorado.
Today's example.
Lady makes 2300 a month gross and has 400 a month in Child Support, calls in off a mailing, very hesitant, been burned before after much soothing she coughs up her application.
Says her home is worth 175 appraised for that a year ago, has a 2/28 that just adjusted from 6.5 percent to 8.5%, credit has actually improved, now her scores are over 620 used to be a no brainer but wait, here's where the fun starts.
She owes 136,000 should be a cakewalk but no, house is avm'd at 140, appraiser thinks that's generous so I can tell her to cough up the check for 350 for a no way in heck appraisal or I could just be merciful and tell her now.
The rub here is that she's literally dying a horrible slow death now and it's her first adjustment, there's no way out for her, she thinks she has equity, she thinks everything will be all right and I haven't even gotten to properly detail the horror show she's in for.
Her arm can go as high as 12%, she'll be out before it hits 10 and there is literally nothing I can do, her payment now is 1346 and will climb and climb and climb.
Six months ago I could have done this without breaking a sweat, now FHA is useless her DTI is too high with other debts of 185 a month, so fannie would work but they're battening down the hatches and what would have gotten a prime approval even at 100% spits out a TD now, not maybe just move on.
Folks there are a TON of these, it isn't about just some stupid people, it's about the entire system getting caught with it's pants down and there is no comming back from that with a soft landing.
I had a call yesterday from a guy who makes 1200 a month on SSI his payment is 1350.... dear God.
__________________
At what point then is the approach of danger to be expected? I answer, if it ever reach us, it must spring up amongst us. It cannot come from abroad. If destruction be our lot, we must ourselves be its author and finisher. As a nation of freemen, we must live through all time, or die by suicide.
~Abraham Lincoln Lyceum Address
Last edited by conraddobler; June 20th, 2007 at 06:47 PM.
What's the news on these ARM bailouts that are starting to gain prevalence?
Good luck, there will be no such thing, there aint that much tea in China.
That would be the nuclear bomb that causes a depression, you have to let the market work this out, anything counter to that will just throw us into a horrible depression, the last depression was caused by trying to avoid the pain.
Japan hasn't seen real estate values rise in 15 years because they tried something like this with commercial real estate, that would be the worst thing possible.
__________________
At what point then is the approach of danger to be expected? I answer, if it ever reach us, it must spring up amongst us. It cannot come from abroad. If destruction be our lot, we must ourselves be its author and finisher. As a nation of freemen, we must live through all time, or die by suicide.
Hmmm. I thought I read an article that stated that BofA was doing ARM bailouts and that the gov't is considering doing it....
Complete and utter horsepoop.
Their idea of a bailout isn't for that lady I mentioned, there are still people with equity left and some decent credit, they'll "bail" those out and call themselves heros, but it's nothing more than a standard refi.
I am currently bailing out the same people, about 1 out of 4 of them to be exact.
__________________
At what point then is the approach of danger to be expected? I answer, if it ever reach us, it must spring up amongst us. It cannot come from abroad. If destruction be our lot, we must ourselves be its author and finisher. As a nation of freemen, we must live through all time, or die by suicide.
Actually, that's what I suspected it was. I figured it all boiled down to some kind of marketing scheme. So, if you have equity, good credit and can go full doc, we'll "bail you out" of your ARM. Gee, thanks!!! :roll:
Actually, that's what I suspected it was. I figured it all boiled down to some kind of marketing scheme. So, if you have equity, good credit and can go full doc, we'll "bail you out" of your ARM. Gee, thanks!!! :roll:
Oh they'll tweak it some to actually dip down the standards a bit and make it look good but if you said tomorrow, ok BOA thanks man, you da bomb, I expect the thing cleaned up in 12 months and for you to bail out every loan, heres the money at 0% all you got to do is take the default risk you'd hear crickets chirping back at you.
__________________
At what point then is the approach of danger to be expected? I answer, if it ever reach us, it must spring up amongst us. It cannot come from abroad. If destruction be our lot, we must ourselves be its author and finisher. As a nation of freemen, we must live through all time, or die by suicide.
Not to be callous, but all of us real estate agents are currently mining all of our REO acquaintances from the early 90s, because listing foreclosures is going to keep those of us who remain in business ... um, in business. I'm late to this game so I guess I can feel good about myself, but a lot of these agents that were selling homes for $350,000 18 mos. ago will soon be selling the house for the bank at 60 to 75 cents on the dollar, with the banks taking a bath in the process. Phoenix will recover, but if anyone remembers what the S&L fallout was like, I think we'll approach that kind of mess.
I feel most sincere regret for those who bought homes in south Queen Creek for good money, didn't think to check about infrastructure (like roads), and now can't unload their homes because they're already $30,000 upside down after 1 year. They're stuck with their 75 minute commutes to downtown at a time when we've never seen higher gas prices. That's financial hell. I almost bought down there a year ago. Phew!
Not to be callous, but all of us real estate agents are currently mining all of our REO acquaintances from the early 90s, because listing foreclosures is going to keep those of us who remain in business ... um, in business. I'm late to this game so I guess I can feel good about myself, but a lot of these agents that were selling homes for $350,000 18 mos. ago will soon be selling the house for the bank at 60 to 75 cents on the dollar, with the banks taking a bath in the process. Phoenix will recover, but if anyone remembers what the S&L fallout was like, I think we'll approach that kind of mess.
I feel most sincere regret for those who bought homes in south Queen Creek for good money, didn't think to check about infrastructure (like roads), and now can't unload their homes because they're already $30,000 upside down after 1 year. They're stuck with their 75 minute commutes to downtown at a time when we've never seen higher gas prices. That's financial hell. I almost bought down there a year ago. Phew!
I think it might be much worse than the S&L thing, much much worse.
The reason is that back then we had more manufacturing jobs, less debt, more consumer savings.
The thing you have to think about is that with these REO's comming on line, and higher bond yields comming due to no one wanting our debt the perfect storm is brewing.
That means if builders stopped building today, it might take 6 months to a year to clear out the pipes of homes.
Builders can't quit building they'll go out of business, once they do the job loss will start to really drag the economy and here's the rub, with our debt as it is the Fed can't lower bond rates, they can lower whatever short term rates they want but it won't lower our bond rates because that's based on the world market buying them.
This is a real pickle we're in here.
__________________
At what point then is the approach of danger to be expected? I answer, if it ever reach us, it must spring up amongst us. It cannot come from abroad. If destruction be our lot, we must ourselves be its author and finisher. As a nation of freemen, we must live through all time, or die by suicide.
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