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We seem to have moved from Public Debt defaults (the point begun by Ben)
to mortgage defaults. But then again, they certainly do have a
certain degree of linkage/relationship so perhaps we have not strayed
far.
Time will tell.
Boater805
At 10:19 AM 8/3/2008, you wrote:
Again, Ben must have been
referring to the 21% one payment delinquency rate. That would be
about correct if the ?official? delinquency rate (30 day past due) is
4%.
Sales tax is certainly a key. But all revenues are important to any
state. Function and revenue are not segregated. In most
states property tax is the domain of local governments so the state is
not directly affected by property tax problems. However, as
municipalities suffer, so does the host state. You reflect on
Arnie?s pulling the salary trigger as a good thing. Others take it
as a sign that there are problems. There are. Nationwide
state revenues down 5%. Like I said, I haven?t any other
insight into California?s problems or lack of problems.
About defaults around the corner, I can?t disagree with you more.
They?re on us and its only just begun. 4000 S&Ls became
250 S&Ls in about 6 years in the ?80s. The ?80s were child?s
play compared to what we will see. The largest bank in
the US would already have been under had it not been for middle eastern
money (Citi). The final waves of adjustable resets are only now
hitting us. And the foreclosures? After a default it can take
two years to get a mortgagee out of a house so it can be auctioned.
The result of defaults will trickle in until they become a torrent in the
next couple years. Property values will decline to at least the
2001 values and with typical reversion to mean they should dip below
those levels. In Japan real property lost more than 60% of its
1980s value by the end of the ?90s. Can happen.
Back in the day, I used to tell boards of problem S&Ls and banks with
whom I was associated that foreclosures and repos were like an
annuity. Run a 4% delinquency (more than 30 days) in first
mortgages this month and you?re looking at a longer term loss of about
double that in foreclosures. In consumer loans (auto and mobile
home) run 8% delinquency and you?ll lose about 16 out of every 100 loans
to repo. The gift of bad credit keeps on giving.
The funniest thing (or not so funny) about bad credit decisions is the
inability of management to understand the meaning of down payment.
Management and boards THINK that because a person has ?good credit? any
resultant loan will be a ?good loan? regardless of downpayment.
Absolutely wrong in two respects. First, a person without a
downpayment hasn?t anything tangible to lose by allowing
foreclosure/repo. Mid western repo rates in Texas for the largest
mobile home company in nation in the ?80s was MORE THAN 50% of their loan
portfolio. When their equity went sour, those cowboys saddled up
their horses and galloped away from those homes. Second and far
more important, every extra dollar received in downpayment is one LESS
dollar lost if and when foreclosure/repo occurs. Gosh, what an
epiphany. And yet, I?ve seen this cycle 3 times in my
lifetime. Slow motion train wreck. This time, however, the
lack of inter institution liquidity occasioned by the derivative web and
inter institution dependence will accelerate things as Bear Sterns can
attest.
JMHO
From: realtraders@xxxxxxxxxxxxxxx
[
mailto:realtraders@xxxxxxxxxxxxxxx] On Behalf Of
hostmaster
Sent: Sunday, August 03, 2008 12:28 PM
To: realtraders@xxxxxxxxxxxxxxx
Subject: RE: [RT] Re: [TimeandCycles] The Great Bear has just
begun
Thanks for the referral to that article. It in fact makes exactly my
points.
1. Sales tax is the key element to State funding revenues, not property
tax.
2. The current deficits are projected to grow and the economy to mirror
the dot.com busts which hit Calif extremely hard. California also
survived those without any defaults. The fact the govenor is
pulling the salary trigger only helps manage the deficit, not make it
worse than prior ones.
Again, as in my prior post, I do agree that California is in for hard
times. My disagreement is with Ben's "facts" and his
belief defaults are coming around the corner.
Boater805
At 05:16 AM 8/3/2008, you wrote:
- Hard to support the proposition that ?Yes Chicken Little, Revenues
are up, Home prices are still above where they were 4 years ago. ?
when the Gov is cutting salary. And 11 months of housing
inventory. Sure housing prices are above where they were 4 years
ago. But they aren?t selling. You might read the attached
article on CA.
-
-
http://abcnews.go.com/Business/story?id=5473725&page=1
-
- And 4% delinquency. When a bank has a 30 day 4% delinquency
rate (actually the mortgagee is 2 months behind) in first mortgage loans,
the ultimate foreclosure rate in the portfolio will be DOUBLE (closer to
triple) that amount and that bank will be put on the Fed Reserve and
FDIC?s watch list. It?s as predictable as the sun coming up in the
morning. Two payments past due means, more often than not, the
house is a) vacant or b) the mortgagee is consulting with a bankruptcy
attorney. About Ben?s 21% foreclosure rate. I?d expect he?s
referring to the one payment delinquency rate. If the ?official?
delinquency rate is 4% then the one payment delinquency rate is closer to
21% than 10%.
-
- And finally, property, sales, personal and corporate taxes generally
aren?t fund or function specific, even in CA. That property taxes
fund schools, hospitals, etc is meaningless?.it?s all one pot of money
(very little specific use restrictions that can?t be avoided with the aid
of a crafty states attorney general) and if there isn?t enough, specific
functions don?t get ratcheted down in an orderly fashion. They just
run out of money.
-
- I?d say CA bonds, should any muni?s fail, would be first on my
list. Otherwise, I don?t have an opinion on CA finance (psst Orange
County).
-
- Hey, I really enjoy seeing the liberal west coast infection going
east. Having lived in Raleigh as dozens of CA corporate campuses
relocated in the ultra conservative state of NC in the 80s, I watched
that conservative state descend into much the same checkmate
situation. Governor Easley invoked an emergency fiscal declaration
in 2003 in which the state CONFISCATED from local governments 100% of the
otherwise shared sales tax (NC formerly got 2 out of 6.5% and the
counties got 4.5%). He was forced to do this to pay for his multi
billion dollar pre K (?save the children?) program he campaigned on AND
continued use of the state helicopter to fly him to his beach house on
the coast twice weekly. Ain?t socialism wonderful.
-
- From: realtraders@xxxxxxxxxxxxxxx
[
mailto:realtraders@xxxxxxxxxxxxxxx] On Behalf Of hostmaster
- Sent: Sunday, August 03, 2008 1:27 AM
- To: realtraders@xxxxxxxxxxxxxxx
- Subject: Re: [RT] Re: [TimeandCycles] The Great Bear has just
begun
-
- Really now Ben, I hope the technical trading analysis you post is
more accurate and better researched then this nonsense you are tossing
about regarding the State of California's liquidity. Its really sad
to see such plain wrong info being bantered about and even when called on
it instead of research and information the fall back is wild
guessing.
- 1. California property tax revenues primarily fund county and city
programs .. largest going to schools, county hospital system, jail system
and local law enforcement along with misc other. Most Statewide
programs and State employees are funded by sales tax and fees.
- 2. The # of mortgages in california that are more than 30 days behind
in payments is 4%. Not the 21% you seem to have made up out of thin
air (just what source do you claim to cite for that anyway?). That 4% is
about 4 times "normal" but even that is more than the number in
actual foreclosure.
- 3. Even property tax issues are somewhat abated since California
under propostion 13 has been unable to raise property taxes except upon
sale to new owners for decades. In fact, property tax revenues to
the state of california have continued to INCREASE right up thru last
week (and still continue to do so since foreclosures get re-assessed also
with the bank being the new owner and its still a move up in valuation
for any property that has not turned in the past 4 years or more on
average). Yes Chicken Little, Revenues are up, Home prices are
still above where they were 4 years ago. Payroll is way way down
due to the cuts via layoffs and minimum wage conversion.
- The bottom line, if anyone is planning going short on Calif State
Bonds due to the current mortgage issues and economic outlook you will
get severly burned. Have at it.
- For the rest of you who are more rooted to reality, remember that
prejudice is a great time saver as Ben has now illustrated. It allows one
to form an opinion without taking the time to gather the facts. It
is not a good investment tool however.
- Boater805
- At 06:28 PM 8/2/2008, you wrote:
- with 21% of homes in foreclousure in state of
california
- and banks like countrywide who do not hold escrow
for local tax
- how would state get revenues to pay their
employees?
- Ben
- ----- Original Message -----
- From: hostmaster
- To:
realtraders@xxxxxxxxxxxxxxx
- Sent: Saturday, August 02, 2008 7:54 PM
- Subject: Re: [RT] Re: [TimeandCycles] The Great Bear has just
begun
- I wish we could credit it to the govenor but it is the operation of
law. Our govenator continues to be a disappointment.
- As to Ben's forecast of possible public debt default, the State
Controller says that is not going to happen if a budget is passed in the
next several months. Large as the State of California debt service is,
the payroll load is far far far larger and those savings insure adequate
liquidity to continue making debt payments.
- Boater8095
- At 02:12 PM 8/2/2008, you wrote:
- I take it as good news that California is showing a little fiscal
responsibility and tring to cut expenses as they face lower tax
revenues. Had they done nothing and begun to face defaults then
*that* would be *bad* news indeed.
-
- Bob
-
- On 8/2/08, Ben
<profitok@xxxxxxxxxxxxx
> wrote:
- everything is REALLY bad
- all employees of california state recieved a letter telling them not
to come to work monday
- and, if they do
- they only get min wage!!!
- mkt should come hard down with this news
- ----- Original Message -----
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