Is President-Elect Obama's Treasury Nominee...

...in trouble?

This entry from the Big Picture blog suggests yes and further offers why that is a good thing:

That said, I think the decision to delay the Geithner hearing has given opponents a chance to educate members of Congress and defeat this ill-advised nomination. Indeed, based on conversations I have had with several members of the GOP leadership in the past 24-hours, it seems that members of Congress in both parties are starting to ask themselves what also they do not know about Tim Geithner. I believe that we can stop this nomination and give President Obama another chance to fill this key Cabinet post with a competent candidate.

Goodbye Circuit City...

...read the story here.

But a preview of things to come...

UPDATE: From the Circuit City website. It appears that upwards of 34,000 jobs will be lost as a result of this bankruptcy.

When Will House Prices Stabilize?

That's the big question for many people. After all, it is the falling "paper value" of homes that have instigated much of the "paper wealth" destruction in the last 24 months.

Well, to answer this question, I've been doing some research. Here's a good rough way to calculate a likely stabilization point for home values:

When the median home price of an area is roughly three times the median income level of that same area.

This would mean the following:

If metro area X had a median income of $50,000 (roughly what the Census Bureau calculated for the U.S. in 2007) then the median home price for the same metro area should be no more than $150,000.

Sounds good and all, right? Well, Houston, we actually might have a big problem.

Why, you ask?

Because in 2007, with the 50k median income, the median nationwide home price was over $200,000 (note: all of these stats vary depending on specific regions of the country and further vary for specific localities within those regions).

Meaning that, the median income/median home price calculation is out of whack (a term not found in Black's Law Dictionary but which is clearly understood by most Americans) by a factor of at least 1.

But, you say, home prices have fallen a great deal since 2007. True.

Yet so has income.

Ultimately, the key will be for home prices to fall at a faster rate than income in order to reach that 3x ratio.

Hopefully that will be a shorter rather than longer time frame. And, even more hopefully we will reach that equilibrium of sorts at a higher income figure than lower one.

If not, the stabilization point of home prices will be well past the point of major fiscal discomfort.

Housing Foreclosures Continue to Grow...

Here's an interesting article on the foreclosure problem from HousingWire.com:

Foreclosure activity surged 81 percent in 2008 compared to 2007, despite the undying efforts by lenders and lawmakers to ease the foreclosure fiasco, according to a report released Thursday by RealtyTrac.

The Foreclosure Market report showed a total of 3,157,806 foreclosure filings — including default notices, auction sale notices and bank repossessions — were reported on 2,3330,483 U.S. properties during the year. In more digestable terms, one in every 54 housing units received at least one foreclosure filing during the year. Wow.

"Wow" is right. We discussed this issue last fall in my Property I class and this 1 in 54 number is even worse than the worst case problem I discussed with my clients. Ouch.

The SmartCode Advanced...

...comes to Montgomery, Alabama.

On January 30-31, the City of Montgomery in conjunction with land planning firm PlaceMakers will present the first ever SmartCode Advanced.

This unique seminar will explore the SmartCode efforts in the River Region through work sessions, tours, and other small group settings.

Here's the agenda.

Bank Stocks Get Hit Hard...

CNBC is reporting that this is not a good start for bank stocks on this particular Thursday.

So, where's this pre-inauguration stock market bounce that had been predicted?

The Return of Rail?

This Washington Monthly article discusses why that's a very good and plausible idea:

For years, state transportation officials have watched I-81 get pounded to pieces by tractor trailers, which are responsible for almost all non-weather-related highway wear and tear. To make matters worse, traffic is projected to rise by 67 percent in just the next ten years.

The conventional response to this problem would be simply to build more lanes. That’s what highway departments do. But at a cost of $11 billion, or $32 million per mile, Virginia cannot afford to do that without installing tolls, which might have to be set as high as 17 cents per mile for automobiles. When Virginia’s Department of Transportation proposed doing this early last year, truckers and ordinary Virginians alike set off a firestorm of protest. At the same time, just making I-81 wider without adding tolls would make its truck traffic problems worse, as still more trucks diverted from I-95 and other routes.

Looking for a way out of this dilemma, Virginia transportation officials have settled on an innovative solution: use state money to get freight off the highway and onto rails. As it happens, running parallel to I-81 through the Shenandoah Valley and across the Piedmont are two mostly single-track rail lines belonging to the Norfolk Southern Railroad. Known as the Crescent Corridor, these lines have seen a resurgence of trains carrying containers, just like most of the trucks on I-81 do. The problem is that the track needs upgrading and there are various choke points, so the Norfolk Southern cannot run trains fast enough to be time competitive with most of the trucks hurtling down I-81. Even before the recent financial meltdown, the railroad couldn’t generate enough interest from Wall Street investors to improve the line.

Cool Thing To Do...

...while many of our readers are not from around the Montgomery River Region area, those that are might be interested in this cool upcoming event in Downtown Montgomery.

It's the ClefWorks concert and promises to be unlike anything you've seen before.

Very urban setting. Very interesting music.

Hope to see you there.

Remember That Place You Grew Up...

Here’s an article that I thought you might find interesting about Detroit. As I read it, I nodded the whole way through because it perfectly described the spirit of the place where I grew up.

2009 is Only Twelve Days Old...

...but we might have already found our leading candidate for "Most Ridiculous Idea for '09":

Instead of reducing taxes on interest payments, the Government could tax all bank deposits and other risk-free savings. This would create a negative risk-free interest rate, encouraging savers either to invest in property, shares and other productive assets - or simply to save less and consume more. In either case, the result would be more consumption and physical investment, less unemployment and faster recovery from the slump.

It is somewhat hard to fathom that this idea made its way into the printed world. Penalizing people for saving when it was excessive lending that created this huge problem in the first place?

This is akin to forcing the credit drunk to not just drink more liquor but, if they don't, then punishing them for even an iota of sobriety.

Strange. Bizarre. And an early candidate for this year's "Most Ridiculous"...

Stimulus Dollars for Demolishing Sprawl?

That's what the Calculated Risk blog is suggesting:

And since Obama asked for suggestions ... How about a demolition program?

First, if any state and local governments have old idle buildings waiting for future plans, why not demolish them today? This would provide jobs for local workers, and prepare the land for future development and remove an eyesore. The Federal Government could pay for this demolition.

While we don't support another large government "stimulus", if one must occur, this sounds like a very interesting idea.

The federal government can pay people to demolish the bad rather than build more of it. This has alot of potential.

"Monumental Stupidity"

That's what Mish Shedlock is calling Zakaria's ridiculous declaration related to governments and the markets in the latest Newsweek.

We tend to agree (and, might even have considered a stronger adjective to go with it).

Read Shedlock's post and Zakaria's article here.

More Calls for "Stimulating Sprawl"...

This time a quartet of large Democratic governors are leading the charge for $350 billion worth of federal fake money to build and repair roads and bridges: http://www.reuters.com/article/newsOne/idUSTRE5014F120090102

My response is simple: when are we going to get some freaking non-idiots to run our governments. The Republicans screwed it up in one direction and now the Democrats are aiming to do the same in the opposite direction.

Where are the people listening to the Mish Shedlock's and Karl Denninger's who have been consistently correct on economic issues. We seem predestined to either finance sprawl with fake money or fake credit. This is very troubling in a macro sense.

p.s. Caveat: I voted for neither major candidate. This is not intended as any type of partisan comment (other than noting that almost all the partisans seem to be losing their minds).

We interrupt this Holiday Posting Hiatus to bring you word that the federal government is now apparently bailing out GMAC which--if you can really believe the sheer audacity, stupidity and recklessness of this--will allow GMAC to lower its lending standards to provide auto loans to those just a smidge about subprime.

It's as if George Bush is attempting to morph into history's most inept president ever (and this coming from someone who, up until the last four months, remained positive about President Bush).

Folks, this is cause for great alarm. The federal government is now providing federal funds to re-enable private companies to engage in the same type of loan practices which caused this problem in the first place.

2008 is ending in the bleakest of ways. 2009 is beginning even worse.

UPDATE: More here from the Market Ticker blog on the monumental ridiculousness of this GMAC bailout. We predict that this might be the act that really gets some major attention in the New Year.

Daily Sprawl in 2009...

...as the year winds down, we'd like to thank all of our readers. The numbers keep growing and that's rewarding to know.

Daily Sprawl will head into 2009 with a somewhat more structured format. For starters, every day, we will post the one article that we think is the daily "must read" for those who follow sprawl and related topics.

Then, twice per week, we'll recommend green and natural products (that's been a big hit with our readers based on feedback).

Finally, we'll feature at least one sprawl related book or movie each week for your reading/viewing pleasure.

We hope that this format will touch the bases with all of our interested readers.

Thanks again for a great 2009...See you on January 2nd, 2009...Chad.

Hiding the Ball...

...the always interesting Financial Sense website has a good article discussing the current litigation between Bloomberg and the Fed related to the Fed's refusal to disclose certain financial information related to the bailouts.

What might the Fed be hiding behind Door #1?

We probably don't want to know because of the chaos that learning it might mean.

Toy Safety This Christmas Season...

The excellent Seventh Generation website has a great new article on tips for buying toys that are safe for our kids:

* First, avoid toys made in China, where lax regulations often mean that anything goes as far as toy safety is concerned. While not all toys from China are unsafe, the country's track record of producing hazardous goods demands a precautionary stance.
* Choose toys made in Western Europe, where countries have strong consumer protection policies. Toys made in America are a good second choice, but consumers should be cautious because lack of domestic regulation means certain hazards like phthalates (see below) may be present.
* Shop in small "boutique" toy stores and mail order catalogs. These merchants traditionally shy away from the mass-market offerings that are the most at-risk for problems and instead offer higher quality toys from more discerning manufacturers and imports from safer countries.
* Unless they're clearly labeled as "phthalate-free," avoid soft plastic toys, which often use these toxic chemicals to maintain pliability. Playthings that commonly contain phthalates include vinyl and other flexible plastic toys as well as polymer play clays. Toys made in Europe are generally safe as the E.U. has largely banned phthalates from children's products. New U.S. regulations will ban phthalates from toys starting in February 2009, but a recent regulatory ruling allows manufacturers to sell out their remaining stock of existing phthalate-contaminated items first.
* Watch out for lead, which in recent years has shown up in the paints and parts of all kinds of toys, including big name brands and vinyl items. Lead test kits are the only way to tell if lead is present in any toy you've bought. If it is, return that toy for a refund.

Grocery Store Contigency Plans

This article discusses how English grocers are game-planning for potential supply line problems. No doubt that U.S. stores are doing the same as the growing problems are apparently not bound by any border.

The Shallowness of Humans...

...can be especially disturbing in tough economic times like these:

"I try to have Alba come once a week," says Mrs. Sirof. She says she feels "horrible" about laying off Ms. Monterrosa. But there are some perks she isn't willing to give up. "Nothing deters me from my Botox treatments."

Read the entire WSJ article here.

Listen to these Experts...

...and you'll get a real sense of the potential problems and their scope.

Click here for the CNN article.

Well, Here's a Real Shocker...

...not really, but some are seeming to pitch it that way.

CNBC headline: "Many Borrowers Re-Default After Mortgage Is Modified"

The problem here is that many of the decision-makers continue to ignore the fact that the current crisis is one of excess credit rather than insufficient credit. That is to say, there is too much credit in the system when compared to the assets that back the credit and the ability to repay that credit.

Simply rejiggering these loans to make them somewhat less onerous doesn't address that underlying problem. At best, it delays it. To truly reach a solution, we have to understand the reality that many of these loans should not have been written in the first place.

Tweaking, er, I mean "modifying", them in increments will not ultimately stabilize them. Instead, they have to go away (aka default) in order to bring the amount of credit back into line with the assets backing it.

Until this is understood, the crisis will continue to linger on...

When the Dust Clears...

...expect to see the rating agencies, like Moody's, among those most profusely sued and investigated.

Why?

Well, as this NYT article points out, their lack of institutional integrity is startling.

The Domestic Automaker Bankruptcy...

...watch continues. This LA Times story explains what we've been reporting for awhile now: GM could go under soon with Chrysler close behind.

As someone who grew up in the Detroit area, I'm a nostalgic fan of the domestic auto industry. However, what reason have these companies given taxpayers to believe that these billions in bailout dollars is not simply a PAUSE button on the road toward a final crash?

Very little from everything that I've read. Stay tuned.

UPDATE: More insightful analysis from the Econobrowser blog on the domestic automakers ongoing death dance.

UPDATE #2: "Forgive me for not believing a damn thing Ford says." So says Mish Shedlock. Click here for his explanation of why.

I've been told in the past that one strong indicator of prolonged economic trouble is the number of utility shutoffs. The idea is that some of the last bills to go unpaid are the gas, water, and electricity ones.

If that's the case, then this WSJ article is very concerning.

The Market Ticker Blog...

...continues to speak the truth:

The bottom line is that there is no fix for this mess nor will the economy recover until and unless the bad debt is removed from the system.