joi, 25 august 2011

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis

Schwab Sues Bank of America, Citigroup for Manipulating LIBOR Rates; IMF Notes that LIBOR Underpins $400 Trillion in Financial Derivatives

Posted: 25 Aug 2011 06:55 PM PDT

Investment News reports Schwab sues banks for manipulating Libor rates.
Charles Schwab Corp., the largest independent brokerage by client assets, sued Bank of America Corp., Citigroup Inc. and other banks claiming they manipulated the London interbank offered rate, or Libor, starting in 2007 in violation of U.S. antitrust law.

The banks conspired to depress Libor rates by understating their borrowing costs, thereby lowering their interest expenses on products tied to the rates, according to the lawsuit filed Aug. 23 in federal court in San Francisco, where Schwab is based.

The banks "reaped hundreds of millions, if not billions, of dollars in ill-gotten gains," Schwab wrote.

In separate suits in April, three European asset-management firms and the Carpenters Pension Fund of West Virginia sued the banks claiming they manipulated Libor. U.S. and U.K. officials are cooperating in a probe of possible Libor manipulation, a person close to the investigation said in March.

The Schwab suit seeks unspecified damages, which may be tripled under antitrust law. It also includes claims for racketeering and securities fraud.
Did the banks manipulate LIBOR? Of course they did. Proving it may be difficult.

LIBOR stands for London Interbank Offered Rate. It is the rate at which banks would lend top each other.

LIBOR is a rate at which banks say they would lend. However, it can easily be manipulated because it does not represent real transactions.

Previous LIBOR Manipulation Charges

Wikipedia describes previous LIBOR Allegations nicely.
On Thursday, 29 May 2008 the Wall Street Journal (WSJ) released a controversial study suggesting that banks may have understated borrowing costs they reported for LIBOR during the 2008 credit crunch. Such underreporting could have created an impression that banks could borrow from other banks more cheaply than they could in reality. It could also have made the banking system or specific contributing bank appear healthier than it was during the 2008 credit crunch.

For example, the study found that rates at which one major bank "said it could borrow dollars for three months were about 0.87 percentage point lower than the rate calculated using default-insurance data."

To further bring this case to light, the Wall Street Journal released another article dealing with this matter titled "U.S. Probe Presents Dilemma over Libor" on Friday, March 18 2011. The article stated that regulators are focusing on Bank of America Corp., Citi-group Inc. and UBS AG. Making a case would be very difficult because determining the LIBOR rate does not occur on an open exchange. According to people familiar with the situation, subpoenas have been issued to the three banks.

In October 2008 the International Monetary Fund published its regular Global Financial Stability Review which also found that "Although the integrity of the U.S. dollar LIBOR-fixing process has been questioned by some market participants and the financial press, it appears that U.S. dollar LIBOR remains an accurate measure of a typical creditworthy bank's marginal cost of unsecured U.S. dollar term funding."
LIBOR Underpins $400 Trillion in Financial Derivatives

The IMF Global Financial Stability Review states "LIBOR rates are estimated to underpin some $400 trillion of financial derivatives contracts".

That is a direct quote on PDF page 16 if the IMF review. It clearly shows why banks have a huge incentive to lie.

Am I the only one who thinks $400 trillion tied to a made up number is insane? Hells bells, $400 Trillion riding on LIBOR would be insane even if the number was real. Heck, $400 Billion would still be insane.

Here is an interesting snip from PDF page 93 (report page 74) "given the huge outstanding amounts of derivative contracts and other financial instruments linked to term LIBOR and Euribor, these benchmark rates need to be maintained. Although the survey methodologies have been effective at eliminating most biases at the individual contribution level, proposals by the British Bankers' Association (BBA) to increase the number of sampled banks and introduce more aggressive scrutiny of individual bank contributions are welcome."

It is staggering that there can be $400 trillion in derivatives based on LIBOR but there you have it. The number sounds impossible but the Bank of International Settlements shows there were $601 trillion in derivatives as of December 2010.

Of that number $465 trillion was interest rate contracts. For comparison purposes, a mere $65 billion is bet on gold.

Total Over-the-Counter Derivatives



click on table for sharper image

Bear in mind that $465 trillion on interest rate contracts is a "notional" amount. The actual market value of interest rate bets is a mere $14 trillion, and total derivatives a mere $21 trillion.

What a relief!

From the IMF Report ....
Box 2.2. Is the LIBOR Fix Broken?

Market observers have been expressing concerns that some LIBOR contributors submit rates that are too low, particularly when they are facing liquidity constraints (Mollenkamp and Whitehouse, 2008). This is said to be driven by the requirement of the British Bankers' Association (BBA) that all rate submissions be published, and by the fact that banks facing liquidity strains may not want to reveal the higher market rates they are actually being offered.



Box 2.3. The Federal Reserve's Term Auction Facility

In December 2007, the Federal Reserve announced a temporary Term Auction Facility (TAF) that enabled U.S. banks to borrow for four weeks against the wider range of collateral permissible at the discount window.

Conclusions

Short-term funding markets in mature economies have been under stress for an extended period despite extraordinary policy interventions by central banks to widen the availability of secured liquidity. Although interbank lending is no longer the principal source of bank term funding, wide spreads are not simply arising from the method for calculating interbank rates and are principally driven by concerns about banks being in significant distress, with U.S. dollar liquidity strains also representing a significant factor in the euro money market.

Further, evidence of disruptions to bank and near-bank financing markets indicates that the transmission of policy interest rate changes are less certain and reliable. Policy interventions to further broaden access to emergency liquidity may continue to contain systemic risks but are unlikely to resolve the crisis until broader policy measures are implemented.
The paragraphs I highlighted do not exactly match the one sentence Wikipedia found buried in the middle of the report: "It appears that U.S. dollar LIBOR remains an accurate measure of a typical creditworthy bank's marginal cost of unsecured U.S. dollar term funding".

Second Lawsuit in Six Weeks

This is the second LIBOR Lawsuit in the last six weeks. Last month Eldorado Trading Group LLC filed a lawsuit accusing a group of banks of conspiracy. See Trading Firm Accuses Bank of America, JPMorgan, UBS, and Citigroup of Conspiracy to Manipulate LIBOR

I do not think there is collusion here, rather they all lied because it was in their best interest to lie. Did they lie? Of course. Good luck proving it.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List
Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Fed’s Hoenig Says "Fed Can't Do It All, No Reason for Operation Twist to Work", Focus Should Shift to Fixing U.S. Fiscal Woes

Posted: 25 Aug 2011 01:05 PM PDT

Fed Chairman Ben Bernanke ought to listen to common sense from Kansas City President Thomas Hoenig who says Focus Should Shift to Fixing U.S. Fiscal Woes
Federal Reserve Bank of Kansas City President Thomas Hoenig said there's a limit to how much more the central bank can help the U.S. economy and that the focus should now be on solving the country's fiscal problems.

"We can't do it all," Hoenig, the central bank's longest- serving policy maker, said in an interview with Bloomberg Television that airs today. "We have a problem in this country with debt" and "if we don't turn to the long run, we will be dealing with overnight crises for as far as the eye can see."

"Monetary policy is an important tool, it is a valuable tool, but it is not an exclusive tool," Hoenig said in the interview from Jackson Hole, Wyoming, where the Kansas City Fed is hosting the central bank's annual symposium. Yet "it does not solve all problems."

Hoenig, who has led the Kansas City Fed since 1991, said he would probably oppose the idea of the Fed taking further action to stimulate the economy. He said he still continues to support the central bank's dual mandate for achieving price stability and full employment.

The Fed can use monetary policy to "perhaps nudge the economy in the short run," he said. Yet "whether it has a long-term beneficial effect is of greater debate, something that would have to be debated. I'm not sure more short-run fixes are necessarily good for the economy."

'Operation Twist'

When asked whether he would support action like that of "Operation Twist," the 1961 initiative by the central bank and President John F. Kennedy's administration to spur growth by lowering long-term rates and keeping short-term ones unchanged, Hoenig told Bloomberg Television, "I don't see any reason" why it would work.

"What's the fundamental problem?" Hoenig said. "Is the fundamental problem a yield curve issue? Or is the fundamental problem that the United States and world have too much debt?"

"Would Operation Twist help solve the problem?" he said. "If the answer is yes, go for it. If the answer is no, let's not."
Hoenig Interview

Inquiring minds may wish to play the Bloomberg Interview With Hoenig

The opening part of this interview is a bit of cheerleading for the Fed, not started by Hoenig, but by Bloomberg's Michael McKee.

  • Crises vs Problems: "Crises are dealt with in the moment, problems are dealt with in the long run. We have a problem. It's time to look to the long run."
  • Overnight Crises Far as the Eye Can See: "If we do not turn to the long run we will be dealing with overnight crises as far as the eye can see. "
  • On Monetary Policy: "We need to provide an environment where people can make decisions, where price signals mean something. We can't do it all. Monetary policy is a tool that can't solve every problem in America or the globe today. The Sooner we turn our attention to to the long-term the more adequate will be the solution."
  • On Stable Prices: "There is nothing inconsistent with stable prices and full employment. Stable prices is a necessary condition for that [full employment] and when you get away from that you introduce instability into the market."
  • On Full Employment: "Full employment follows a stable monetary policy and a stable fiscal policy. That's an outcome, not an input". Michael McKee "Can you target unemployment with monetary policy?" Hoenig "No, I don't think you can and I don't think you should."
  • On Savings Rate: "One of the things in this country we have don't for two decades now, we've consistently consumed more than we produced. That is not sustainable. We had a savings rate that was allowed to go to zero, that is not sustainable."
  • On Policy Choices: "So what are the policy choices going to be to over time allow our economy to become rebalanced, to produce more, to better balance ourselves with the rest of the world?"

This was a stunning interview, far better than anyone might have ever hoped for from a Fed Governor. Bernanke should listen, but he won't. Congress should hear, but they won't. Obama should listen but he won't either.

I would like to hear some political candidates speaking in these exact terms. Sadly other than Ron Paul, most are clueless.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List
Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

France, Spain, Italy Extend Bans on Short-Selling; Wasn't this Supposed to be Good News?

Posted: 25 Aug 2011 11:02 AM PDT

As rumored earlier today France, Spain, Italy Extend Bans on Short-Selling
French, Italian and Spanish stock- market regulators extended temporary bans on short selling introduced this month in a bid to stem market volatility.

Spain and Italy extended their bans through Sept. 30, regulators in both countries said in a statement. France's Autorite des Marches Financiers said its ban could last as long as Nov. 11. The "objective" is to lift the temporary ban on short-selling of financial stocks "as soon as market conditions allow," Spain's CNMV market regulator said.

The three countries, along with Belgium, imposed bans on short-selling of some financial stocks from Aug. 12 in an effort to stabilize markets after European banks including Societe Generale (GLE) SA hit their lowest levels since the credit crisis of 2008. The restrictions cover short selling of shares and equity derivatives in some financial firms.
Wasn't this Supposed to be Good News?

Why yes it was. So was the initial short-selling ban. Was it? Of course not.

Artificially driving out shorts creates air pockets of no support because it does not apply to market makers.

DAX 5 Minute Chart



click on chart for sharper image

I show a 4.8% plunge in about 45 minutes. I can also come up with 3.9% in 20 minutes.

The total top-to-bottom swing was 5.6% after a ridiculous gap up, probably coinciding with "good news" from Buffett. See Bank of America Surges on Fluff Buffett Deal; German DAX Market Plunges 4% in 15 Minutes; What's Buffett Doing? Bear Market Rallies End on Good News for details.

This kind of consistent, heightened intraday volatility is not healthy to say the least. It is a bear market sign, and given that bank stocks are the biggest part of the volatility, it is also a sign of huge bank stress.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List
Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Bank of America Surges on Fluff Buffett Deal; German DAX Market Plunges 4% in 15 Minutes; What's Buffett Doing? Bear Market Rallies End on Good News

Posted: 25 Aug 2011 09:56 AM PDT

Deal Book says "Buffett to the Rescue Again". Mish says "Hardly".

Everyone is excited Buffet is investing $5 billion in Bank of America. I suggest it may be a ploy.

It's difficult to know if Buffett really likes Bank of America or not. Perhaps he merely believes BAC can honor its dividend commitments. Perhaps Buffett is attempting to stabilize the markets.

Here are questions, the answers to which show Buffett may have other angles than simply believing in Bank of America.

  1. How much Wells Fargo does Buffett hold?
  2. Might not he attempt to change psychology in the banking sector given he is stuffed to the gills with bank stocks?
  3. Remember S&P PUTs Buffett Sold?

Please consider Buffett Invests $5 Billion in Bank of America
Warren E. Buffett comes to the rescue, again.

On Thursday, Berkshire Hathaway, run by Mr. Buffett, announced plans to invest $5 billion in Bank of America, a vote of confidence for the beleaguered financial firm.

The conglomerate has agreed to buy 50,000 preferred shares that will pay a 6 percent annual dividend. Bank of America has the option to buy back the shares at any time for a 5 percent premium.

"I remain confident that we have the capital and liquidity we need to run our business," Bank of America chief executive Brian Moynihan said in a statement. "At the same time, I also recognize that a large investment by Warren Buffett is a strong endorsement in our vision and our strategy."
Buffett did not buy common shares he bought preferred shares. And here are the "temporary results"

JPMorgan rose 4 percent. Citigroup rose 7 percent and Bank of America jumped a whopping 17 percent to a high of $8.80. Many Bank of America shorts were blown out today. An air pocket sits below.

That 17% pop did not last long. Share prices are sinking fast.

Bank of America 60 Minute Chart



DAX Drops 4% in 15 Minutes

Bloomberg reports European Stocks Slide as DAX Drops 4 Percent in 15 Minutes; RWE, EON Sink
European stocks declined, snapping three days of gains, as Germany's DAX Index tumbled 4 percent in 15 minutes amid speculation that regulators planned to impose further restrictions on equity markets.

Futures on the DAX plunged as much as 4.1 percent as a cascade of trades pushed the volume in the contracts to a quarter of the daily average between 3:45 p.m. and 4:15 p.m. in Frankfurt.

"It looks like someone fears the update today from French and Spanish regulators will extend the short-selling ban," said Michael Scholz, executive director for client solutions and derivatives at WestLB AG in Dusseldorf. "It was a strange move selling the DAX futures in 30 minutes. Someone may be preparing their portfolio for tomorrow."

A total of 50,000 contracts exchanged hands in the 30- minute period, according to Bloomberg data. The average volume in the past 30 days was 207,000, Bloomberg data show.
Short-Selling Restrictions

Authorities in France, Spain and Italy all had to decide whether to extend short-selling bans that would have expired over the next 48 hours.

Bear Market Rallies End on Good News Not Bad

Once Again, it's difficult to know precisely what the stock market is reacting to. It may or may not have anything to do with short-selling restrictions.

What I do know is that bear market rallies typically end on good news, not bad news. This fluff maneuver by Buffett, whatever his reasons, is just the kind of seemingly good news that gets sold.

Bank of America is now up 6.44% and sinking fast. It is just this kind of fluff good news that ends bear market rallies.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List
Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Reader Seeks Help/Advice on US Housing/Economy; How Far to THE Bottom?

Posted: 24 Aug 2011 11:22 PM PDT

Reader "Chris" is seeking advice on the state of the economy and the US housing market. Chris asks.
Hello Mish,

I have been reading your blog for a number of months now and I really appreciate your insights on the global economy. I have a more specific question for you in regards to housing.

We are recently married, 25 years old. My wife and I both have fairly solid jobs and we have a small amount of student loan debt. We currently rent a small apartment and have slowly started looking at housing in the Saint Louis area. While we both would like to upgrade our current housing situation, I get very gun-shy about jumping into such a large purchase, especially with the teetering of the economy. Saint Louis didn't have the large run up in home prices like the coasts have, but there was still a mini-bubble throughout the area.

My concerns are when I read these doomsday scenarios where housing prices collapse and food shortages occur. While I don't think this is the scenario that plays out, it's enough to get me thinking about an event like this and I get extremely cautious.

What I'm trying to ask is for your advice/prediction on where the US is headed where housing is headed and what your vision is as the new normal for housing and living standards.

Thanks for your time, and I really enjoy the blog.

Chris
Has Housing bottomed? If not, when will it?

Barry Ritholtz at the Big Picture Blog chimed in on the housing bottom question back in April, and in response to Barry's post, Calculated Risk chimed in. I will chime in after taking a look at what Barry and Calculated Risk have to say.

Barry posted his projection in Case Shiller 100 Year Chart



click on chart for sharper image

Based on the Upward Slope of Real House Prices Calculated Risk does not think home prices will fall as Barry suggests.
I've argued that "In many areas - if the population is increasing - house prices increase slightly faster than inflation over time, so there is an upward slope for real prices."



Sure - house prices could overshoot to the downside. But the projection on the first graph of close to 25% in further real price declines is probably excessive. Right now the real CoreLogic HPI is less than 5% above the trend line (it could overshoot), and the Case-Shiller national index will probably decline sharply in Q1 too and not be far above the trend line.
Japan Nationwide Land Prices

Here is a recap of how I have called things.

Flashback March 26, 2005: It's a Totally New Paradigm



Here are some excerpts from that post.
  • Ron Shuffield, president of Esslinger-Wooten-Maxwell Realtors says that "South Florida is working off of a totally new economic model than any of us have ever experienced in the past." He predicts that a limited supply of land coupled with demand from baby boomers and foreigners will prolong the boom indefinitely.

  • "I just don't think we have what it takes to prick the bubble," said Diane C. Swonk, chief economist at Mesirow Financial in Chicago, who was an optimist during the 90's. "I don't think prices are going to fall, and I don't think they're even going to be flat."

  • Gregory J. Heym, the chief economist at Brown Harris Stevens, is not sold on the inevitability of a downturn. He bases his confidence in the market on things like continuing low mortgage rates, high Wall Street bonuses and the tax benefits of home ownership. "It is a new paradigm" he said.
I called the top of the housing bubble in summer of 2005 based on the Time Magazine Cover "Why We're Going Gaga Over Real Estate" and have been updating the chart ever since, in real time.

When was the US Housing Peak?

Case-Shiller has the peak in summer of 2006. I have it in summer of 2005.

Summer of 2005 is correct. Case-Shiller is a lagging indicator. It shows prices on a delayed basis a quarter old. More importantly, Case-Shiller does not look at condos or new home sales.

In summer of 2005 the condo market bit the dust in many places. Also home builders started discounting heavily. Those discounts did not show up in prices for six months or longer. Instead, we saw incentives such as "free" three-car garages, free granite counter-tops, free cars, etc.

In addition, there were massive fraudulent cash back schemes starting in 2005 that overstated home prices. Thus, contract prices did not reflect real costs to buyers for numerous reasons. Real costs were much lower because of incentives and discounts.

Case-Shiller only looks at resales, and those resales did not catch the action in condos, in cash back schemes, in huge incentives, and fraud.

Where Are We Now?



I think housing in some areas is very close to a bottom. Others areas have more to drop.

No Need for Buyers to Rush In

Even if housing is at the bottom, based on inventory, shadow inventory, and boomer demographics, home prices are not going up significantly for a long time yet, perhaps a decade.

There is certainly no reason for buyers to rush. Moreover, anyone with any uncertainties regarding their employment has no business even thinking about buying now.

The global economy, including the US is headed for recession.

Flashback October 27, 2007: When Will Housing Bottom?
The following charts are from a friend who goes by the name "BC".



click on chart for a much sharper image

Housing Starts 1959 - Present



click on chart for a much sharper image

Those looking for a housing bottom anytime soon are likely to be disappointed.

Note that the current boom has lasted well over twice as long as any other. If the bust lasts twice as long as any other, 2012 just might be a rather optimist target for a bottom.
Please compare the above projections with recent charts by Calculated Risk.

New Home Sales



Housing Starts



Humorous Look at 2008 Bottom Calls

While searching for my housing bottom link from 2007, I stumbled across Rebuttal To SmartMoney Housing Bottom Call from May 2008.
Donald Luskin at SmartMoney is making a case that Housing Prices Near or at Bottom
Today home prices have fallen so much, mortgage rates are so low, and personal income is so high — that homes are more affordable today than at any other time, ever — with mortgage payments on the average home eating up about 40% of income.

With houses more affordable than ever before, why should we expect prices to fall much further from here?

Let's put it in concrete terms — jobs. Since the housing market started coming apart two years ago, jobs in the housing sector — broadly construed, to include everything from bricklayers to mortgage brokers — have already declined by over 1.5 million. That's about 1% of the whole national labor force, and it takes housing employment back to where it was in 2000 before the so-called "housing bubble" even got started. Which begs the question: How many more jobs are there to lose in this sector?
When I proposed 2012 as a possible bottom way back in 2007, many people thought the idea was absurd. Certainly Luskin must have thought so.

Well, here we are, less than six months away, prices still falling, and the economy likely headed for another recession.

2012 may still be an optimistic target for a bottom but we are certainly closer to the bottom now than we were than we were in 2007 or 2008.

Rentership Society

Reader Michael writes ...
Hi Mish

Thought you might be interested in this:

I had a neighbor over for dinner a few days ago. He's a solid homeowner, probably with reasonably high equity. Eventually the conversation turns to business health and the economy, housing, etc. His completely un-solicited comment was, "It's better to rent." I think my jaw hit the floor.
Signs Signs Everywhere a Sign

That is a sign we are far closer to the bottom than the top (look at my chart closely). Indeed some areas likely have bottomed.

Now let's return to reader "Chris".

I have no idea whether St. Louis is one of the areas that has bottomed or not. I can say we are back in conditions where it makes sense to assume in some locations there are reasonable values, perhaps even good values.

However, I repeat my caution: In general, housing prices will not go much of anywhere for a decade even though local conditions can vary widely. There is no need to rush to buy, even if the bottom is in.

My general advise stated last year still applies.

  • If you want a house and can afford a house
  • If you are fully prepared for the loss of a job
  • If you have six months (preferably a year) cash cushion of living expenses sitting in the bank
  • If you are prepared for reasonable losses (say 15-20% or so) .....

Then buy a house.

I am simply attempting to be realistic. I expect little to no "real" appreciation for a decade in most locations. Yet, residential real estate in good neighborhoods with good schools can easily outperform many other assets, especially the overvalued stock market.

As for food shortages and other hyperinflationist claptrap reader Chris asked about, I suggest people stop reading sites spewing such nonsense.

The irony is that if hyperinflationists are right, hard assets and housing should do splendidly.

Addendum:

Here are some common-sense thoughts from reader "Fedwatcher"
House prices will continue to decline in many high price areas. Some areas have already hit bottom. How do you tell? Well the fundamental value metrics are the cost to rent the house and the cost to build the house. Or rental equivalent and price per square foot. A two by four is a two by four and that cost will rise slowly. Rent is LOCAL and depends on employment. Then there is transaction cost - figure 10% to move from A to B.

Thus, if your attachments to the community are strong and you can see yourself in that house 10 years out, buy. If only 5 years out rent. In all cases you must factor in a long period of unemployment by one of the two incomes. Factor in 1 year at a minimum, that is take the bigger of the two salaries and assume it goes away for a full year. Finally since if you have to sell, it takes time and costs at least 6% to exit, can you afford that hit? You must assume that in today's market that price appreciation is negative in real terms. In some areas it is positive in nominal terms.

Owning has many "hidden costs" such as a new furnace or a new air conditioner or a new water heater or having your place put in a flood zone requiring you to buy flood insurance. Loans have covenants requiring that you have various forms of hazard insurance. If you do not buy it, your lender will and tack it onto the bill.

Realtors only show you an optimistic version of the costs. Realtors also show you houses that you qualify for, but not necessarily houses you can really afford.

An investment in a PC and learning how to use Excel is step number 1. You need to run the numbers.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List
Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
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Damn Cool Pics

Damn Cool Pics

The Best Wedding Photos Ever

Posted: 24 Aug 2011 08:02 PM PDT

Julian Sunmi Park and Benjamin Jinsuk Lee got married and opted to take some of the coolest, dorkiest wedding photos possible. I like this because it's a fun way to assert your nerdiness at your wedding without dressing up like a Klingon. It's a perfect compromise!

The album, shot by Amanda Rynda, shows the couple having a simple picnic that goes terribly wrong. The idea came when Ben said he wanted a more masculine take on the wedding photo.





































20 Prettiest Princesses in the World

Posted: 24 Aug 2011 02:38 PM PDT

These are some of the loveliest princesses from all over the world. There is no one winner in this bunch, they are all royally beautiful.

Kate Middleton

When lovely Kate Middleton weds Prince William on April 29, she likely will become England's newest princess, according to reports. But she won't be the world's only pretty princess. Whether they hold any actual power or not, attractive real-life princesses can be found all over the globe, giving 4-year-old girls everywhere hope that they, too, could one day wear a crown.

Princess Letizia

Future Queen of Spain, the wife of the heir apparent to the Spanish throne is a former TV anchor.

Charlene Wittstock

Future Princess of Monaco, The South African Olympic swimmer married Albert II, Prince of Monaco, the ruler of the tiny principality, in 2011. She is now Her Serene Highness, the Princess of Monaco, just like Albert's mother, Grace Kelly.

Charlene Wittstock and Albert II








Beatrice Borromeo

Future Princess of Monaco. The Italian model (and daughter of a count), Borromeo is generally acknowledged as the girlfriend of Pierre Casiraghi, the nephew of Prince Albert II, and third in line to the throne of Monaco. If she were to marry Pierre and he ascended the throne, she'd be the new princess of Monaco. Of course, that's a big if.


As a model, Borromeo leads a pretty charmed life anyway.

Charlotte Casiraghi

Potential Princess of Monaco. Charlotte Casiraghi, Pierre's sister and daughter of Princess Caroline, is fourth in the line to the throne of Monaco, but she's not technically a princess right now.


Though she's a private citizen, Casiraghi is honorary head of Monaco's horse-jumping organization, so she's got that going for her.

Princess Martha Louise Of Norway

Princess Martha Louisa of Norway signs her book Discover Your Guardian Angel at a book signing.

Princess Clotilde Courau

French actress Clotilde Courau, wife of Italian Prince of Venice and Piedmont Emmanuel Philiberto de Savoie, was an acclaimed actress before she wed the prince in 2003.

Princess Máxima

Future Queen of the Netherlands. Princess Maxima is married to Crown Prince Willem-Alexander, heir apparent to the Dutch throne.

Princess Haya Bint Al Hussein

The daughter of Jordan's king, here watching the races at Ascot, England, is also the wife of Sheikh Mohammed bin Rashid Al Maktoum, the ruler of the emirate of Dubai.

Princess Mathilde

Belgium's Future Queen. Princess Mathilde of Belgium, wife of Prince Philippe, the heir apparent to the Belgian throne, is also a descendant of Polish nobility.

Princess Tamara Czartoryski-Borbon

The daughter of Prince Adam Czartoryski Borbón and cousin to King Juan Carlos I of Spain, Czartoryski-Borbon is an athlete and model, and once hosted a Thai kickboxing show.

Princess Sirivannavari Nariratana

The only daughter of Thailand's Crown Prince Maha Vajralongkorn is a competitive badminton player and has started her own fashion line.

Crown Princess Victoria

Future Queen of Sweden. Princess Victoria is the heiress apparent to the Swedish throne. In August 2011, the palace confirmed that she was expecting her first child -- the future king or queen of Sweden.

Princess Madeleine of Sweden

The second daughter of King Carl XVI Gustaf and Queen Silvia of Sweden, Princess Madeline is renowned for her love of horseriding.



Princess Tunku Myra Madihah

Royal Daughter of Malaysia.

Princess Mary of Denmark

The Australian-born wife of Frederik, Crown Prince of Denmark, Princess Mary (here with daughter Princess Isabella) met her husband, the Danish heir apparent, in a pub during the 2000 Sydney Olympics.

Princess Beatrice of York

Princess Beatrice also happens to be fifth in line to the throne.

Princess Eugenie

Eugenie is sixth in line to the British throne.

Manohara Odelia Pinot

An American-Indonesian model, Manohara Odelia Pinot is in the process of divorcing her husband, Prince Tengku Muhammad Fakhry, whom she accuses of abusing her. The prince won a defamation suit against his estranged wife (whom he married when she was 16), but the controversy continues.

Source: life
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