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  • Crux of the crunch

    Crux of the crunch

    Over the years, during the tech stock bubble and housing bubble, the mainstream media (aka MSM) took a lot of heat from iTulip and many other alternative finance and economics web sites for poor coverage of the economy and finance. The MSM are accused of bias in favor of the financial services and real estate industries. The MSM missed the opportunity in the 2003 to 2006 period to warn borrowers to not take out risky loans and to batten down the hatches, decreasing debt and increasing savings, in preparation for a post housing bubble recession visible from over a year away and now in progress. MSM reporters and editors appear to be under pressure from publishers to cover these stories in a manner that maximizes reader complacency. One is left wondering if this result is intentional.

    The truth is more complicated. The MSM are about reporting news as it happens and are in competition with each other to cover what is going on now not what might go on in the future. There is no particular context other than perhaps and ideological or other filter of news interpretation. This is what makes iTulip different. Whereas the MSM is stuck in a 19th century model of covering events as they occur, iTulip can cover events in the context of its framework: Risk Pollution, Ka-Poom Theory, the Frankenstein Economy, and so on. Where the MSM reports seemingly random events, iTulip can use events both to determine patterns of development and change and also to feed back into our understanding of how the economy and financial system works. iTulip is always building on the past and evolving whereas the institutions of the MSM are static structures. This puts an inherent limitation on what the MSM can do.

    We operate on the principle that most reporters indeed want to help their readers and want to cover what is really going on but don't always have access to sources who can help them understand often complex issues. So our approach is to do our best to help them. One way is to provide iTulipers as sources with expertise in finance and economics. The New York Times story from the cover of today's business section is a perfect example. It is written by an iTulip reader and has not one or two but three iTulip members as sources.

    We are honored to have so many qualified experts among our members who are also generous with their time to advance the level of quality reporting in the MSM.
    The Affluent, Too, Couldn’t Resist Adjustable Rates (free registration required)
    March 20, 2008 (Jane Birnbaum - New York Times)
    Today’s ARMs were “designed to fail, so you have to refinance,” Ms. Wachter said. “It shouldn’t be surprising that values go up and down in this kind of situation. And when you most need to refinance you can’t — the crux of the crunch.”
    They took out adjustable-rate mortgages at the peak of the housing bubble to buy homes they would otherwise not be able to afford. Or they refinanced existing mortgages to take cash out. And now, two or three years later, the day of reckoning is here.

    These are not lower- and middle-income borrowers, but more affluent consumers with annual incomes of $100,000 or more who are increasingly being ensnared in the home mortgage crisis.

    People in all income categories “are facing the shock of new payments that can be twice as much as previous ones,” said Susan M. Wachter, professor of business and a real estate specialist at the Wharton School of the University of Pennsylvania.

    Nor will falling interest rates help most of these homeowners, as their low initial payments skyrocket and the worth of their homes erodes, said Allen Fishbein, director of housing and credit policy at the Consumer Federation of America.
    more... (free registration required)
    Last edited by FRED; 03-20-08, 01:14 PM.
    Ed.

  • #2
    Re: Crux of the crunch

    The MSM also has a built in bias as real estate ads constitute one of their last bastions of income. Every newspaper in the US contains staff terrified of losing their jobs as the industry contracts. I've been told by reporters here in South Florida that they couldn't get a piece negative on home ownership under any circumstances printed.

    Follow the money.
    "The test of our progress is not whether we add more to the abundance of those who have much it is whether we provide enough for those who have little." - Franklin D. Roosevelt

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    • #3
      Re: Crux of the crunch

      I had a chance to meet up with an old friend last night who works at a large newspaper and she mentioned that Real Estate advertising is getting absolutely pummeled right now.

      I had the misfortune of working in Financial and Real Estate Advertising for the same paper during the early 1990s, during the S&L crisis. It's not very much fun to see all your biggest clients go out of business or consolidate.

      Having said... there is a pretty sincere effort to keep the editorial and business sides of the paper separate, and I don't see any effort to downplay the problem here in DC.

      And more generally I don't think the lag is related to advertising revenue. I think it's got more to do with reporters covering only the stories in front of them, and not being able to differentiate the crackpots from the prescient with regards to future forecasts. Better just to repeat what your reliable, mainstream sources tell you (no one ever got fired for buying IBM, and no one ever got canned for reporting what the NAR told them).

      [ETA: Ha! I didn't notice my new iTulip title until after this post. Happy to live up to the billing.]

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      • #4
        Re: Crux of the crunch

        Originally posted by Jeff View Post
        The MSM also has a built in bias as real estate ads constitute one of their last bastions of income. Every newspaper in the US contains staff terrified of losing their jobs as the industry contracts. I've been told by reporters here in South Florida that they couldn't get a piece negative on home ownership under any circumstances printed.

        Follow the money.
        A reporter in Bend, OR apparently was recently fired for complaining that the negative aspects of his articles about local real estate were being edited out.

        The sunshine statements by a local appraiser are hilarious.

        source

        The Bend blogosphere is abuzz with the story of a Bulletin reporter who lost his job after complaining the paper was sugar-coating its coverage of the local real estate market.

        According to an e-mail that the reporter, David Fisher, sent to Bulletin Human Resources Director Sharlene Crabtree and that has been circulating among the paper’s staff, a story he wrote about the Bend Chamber of Commerce’s annual real estate forecast breakfast on Feb. 25 was edited to take out comments skeptical of an imminent turnaround in the floundering real estate market.

        Bend appraiser Dana Bratton told the cheering throng at the Riverhouse Convention Center that the Bend market would start pulling out of the doldrums on April 25.

        You’ve got 60 days to make that great buy, and then they’re onto us, and Bend is going to lead the nation out of this housing recession we’re in,” Fisher’s story quoted Bratton as saying.

        Fisher’s original story also included quotes from developer Mike Hollern and others questioning that scenario. But according to Fisher’s e-mail, Business Editor John Stearns edited his copy “in such a way as to remove any facts or opinions that tended to disagree with [Bratton’s] rosy predictions.”
        More from the delusional appraiser dude, via RealtyTimes. He actually reports all these negative numbers, and then suggests a fantastic recovery is imminent.

        Bratton, the president of Bratton Appraisal Group, Bend's largest appraisal company, is an annual fixture in the chambers late-February forecast event. This year, he appeared in the midst of what fellow speaker, Craig Ortega, Columbia River Bank president, called a "challenging" market

        Bratton's numbers, drawn mostly from the Central Oregon Multiple Listing Service, illustrated the steepness of the decline.

        Home sales in Bend dropped from their peak of 290 in September to 78 last December, Bratton said. Building permits slid from 220 in March 2005 to 25 in December 2007.

        As the market chilled, houses languished on the market and listing prices slid. Bratton likened it to "the Biggest Looser", the popular reality -TV show about obese people losing weight.

        In Redmond, he noted, the asking price on an house in Redmond's Obsidian Estates slid 37 percent since early 2007, from $134,900 to $84,900, and in Bend a home price on Gorge View Drive slid 49.83 percent from $1.495 million to $750,000,he said.

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        • #5
          Re: Crux of the crunch

          Originally posted by zoog View Post
          A reporter in Bend, OR apparently was recently fired for complaining that the negative aspects of his articles about local real estate were being edited out.

          The sunshine statements by a local appraiser are hilarious.

          More from the delusional appraiser dude, via RealtyTimes. He actually reports all these negative numbers, and then suggests a fantastic recovery is imminent.
          "...In Redmond, he noted, the asking price on an house in Redmond's Obsidian Estates slid 37 percent since early 2007, from $134,900 to $84,900..."

          $84,900 for a home in Oregon :cool:

          Too bad you can't pump your own gas... :rolleyes:

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          • #6
            Re: Crux of the crunch

            Originally posted by GRG55 View Post
            $84,900 for a home in Oregon :cool:

            Too bad you can't pump your own gas... :rolleyes:
            Seems like a good deal... if there were any jobs in Redmond, OR. The 3+ hour Redmond-Portland commute (each way) would be pretty expensive though. My rough calculation: 150mi / 25mpg = 6gal x $3.50/gal = $21 x 2trips/day x 5days/week x 52weeks/year = $10,920. You'd be wishing you could create your own gas, much less pump it.

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            • #7
              Re: Crux of the crunch

              Originally posted by zoog View Post
              Seems like a good deal... if there were any jobs in Redmond, OR. The 3+ hour Redmond-Portland commute (each way) would be pretty expensive though. My rough calculation: 150mi / 25mpg = 6gal x $3.50/gal = $21 x 2trips/day x 5days/week x 52weeks/year = $10,920. You'd be wishing you could create your own gas, much less pump it.
              I thought that Redmond/Bend was more or less a retirement haven, on the "dry" side of the Cascades? I had some dealings with the St. Charles Medical Centre in Bend some years back and spent a few days there, but circumstances didn't permit a lot of tourism at the time.

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              • #8
                Re: Crux of the crunch

                Originally posted by GRG55 View Post
                I thought that Redmond/Bend was more or less a retirement haven, on the "dry" side of the Cascades? I had some dealings with the St. Charles Medical Centre in Bend some years back and spent a few days there, but circumstances didn't permit a lot of tourism at the time.
                Aye, that it is, and outdoor recreation mecca. I wasn't seriously suggesting anyone would commute to Portland to work from there. Lots of retired Californians cashed out of their shacks and bought McMansions in Bend, or at least vacation homes. Population in 2000 was about 50,000, now nearly 80,000. The seasonal population must be even higher.

                Timber industry has been the main source of income historically, now it is tourism, with healthcare coming in second (taking care of aging retirees?). And of course construction and real estate, which is taking a nosedive. Doubt most of those other jobs pay very well either.

                Places like this have been and will be hit very hard by the housing bust.

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                • #9
                  Re: Crux of the crunch

                  Originally posted by zoog
                  You'd be wishing you could create your own gas, much less pump it.
                  I usually create my own gas by visiting Taco Bell... ;)

                  Comment


                  • #10
                    Re: Crux of the crunch

                    Jeff,
                    Bet you are right. As included below (re. 'capitalism'), real inflation-corrected asset market price histories are kept well-out-of-sight, because they show bubbles very well. I have reckoned for some time that this is decisive testimony to, in our nation, the brainwashability of the people when the news media are well-bought.

                    Two big points of mispractice of capitalism ("... asking for instability.").
                    ... addressing capitalism ‘theoretically’, so here’s my bit of thinking.
                    (1) Large scale irrationality of market pricing

                    STOCKS, see first 2 paragraphs of “The public be suckered” at:
                    http://durangotelegraph.com/telegrap...24/soapbox.htm
                    HOMES, see first and last charts here:
                    http://homepage.mac.com/ttsmyf/RD_RJShomes_PSav.html

                    is very dysfunctional.
                    (2) Substantially ‘hiding’ the foregoing histories from the people is dysfunctional/indefensible/asking for instability.

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