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Traffic Volume Continues to Decrease in October
You have to go back six years to Oct 2002 to see a lower VMT figure than 10/08. That's a big change and only partially recession-related - - the first break in the upward trend occurred about the time oil started its upward price trend and the initial jobless phase of the recovery ended in mid-2003, after the 2001 recession.
Just a Recession, Like All the Previous Ones
However, as you went beyond Norris' snapshot analysis, consider that the truth could be both the business cycle and "our era" as the analysis is expanded from one generation to two - -
If the post-1987 data shows a cyclical pattern trending towards less employment of young adults (somewhat contributed to by the older boomers in their peak earnings years being able to shelter their post-teen children into their late 20s), how does this compare to "our parents era" when young boomers married younger, formed households sooner, and fully participated in the labor market (esp. thru the two major post-WWII recessions and serial energy crises)?
If this recession hangs on into 2010 or later with a jobless recovery, we could see far more competition for jobs across the age range. It may be understating it to say that there may be substantial social and political consequences.
Natural Gas Transportation Is a Win-Win Technology
mcauleysworld.wordpres.../
"Pickens’ Natural-Gas Nonsense"
Friday, September 12, 2008
By Steven Milloy
Mortgage Modifications Don't Necessarily Offer Relief
Servicers make more money on dragging things out and going to foreclosure that they do on loan mods. Their "prosperity" business model doesn't contemplate default rates that do real harm to investers. Their call center fire-walls block meaningful discussions with loss-mitigation staff, etc.
I was 3 payments late on my 7%ARM (sched. to reset in a yr. at 10%), due to a local housing depression that almost destroyed my business, when my uncle proposed a loan mod to the servicer - -
- - With his 805 FICO, he would co-sign
- - Change to fixed 15-yr 6.5% to accelerate principal reduction
- - Principal bal. lowered to 87% of current bal.
- - $10,000 cash bal.-reduction payment to deal with cash-flow issues and fact that the proposed lowered principal bal. was still $10k under water
In my ignorance at the time, I didn't realize how inflexible the servicer's arrangement with the investors apparently was. We offered to replace a subprime mtge with a prime one in a market where house prices were dropping $10,000 a month, a deal clearly in the interest of the investors.
14 mos. after refusing our offer (w/o even a counter), they now have accepted a deed-in-lieu w/ full debt forgiveness, and investors will lose multiples of the discount we were proposing, well over $100k after selling expenses.
A servicer-lender system that worked in prosperous times has failed. The structural barriers to meeting the common interests of borrowers and lenders/investors will require legislation, including allowing bankruptcy judges to modify loans on principal residences, as a counter-weight to the barriers.
The Pickens Plan Changes Its Strategy
Not good enough.
We need to save energy in a hurry due to general oil depletion issues and for national security. The single largest energy efficiency / conservation option (with the possible exception of improving the energy efficiency of buildings) is to expand and electrify the freight railroads. (Passenger can follow, but freight now is critical.)
Diesel-electric rail transport is 10X more efficient that big rigs, not counting the savings on road maintenance and public safety from getting the big rigs off the road - - and electrified rail is double that. Rail saves so much energy that using coal-fired electricity to run trains reduces CO2 emissions compared to NG-powered trucks (gasoline and diesel are not even in the running).
Between the Civil War and 1905, America expanded the rail network from about 30,000 miles to 240,000 miles. The current network is a little over half that, due the the transition to trucking that came when we switched from a coal to an oil economy, and the largest use of rail is transport of bulk commodities (e.g., coal mine to power plant).
An added effort should be made to expand water transport of goods, incl. river/canal/coastal traffic and more shipping of Asian goods to Gulf and E. Coast ports via Panama Canal vs. Trucking from W. Coast Ports.
The diesel saved can go in part to ensuring that shortages of home heating fuel do not occur during the transition of building heating to geothermal heat pumps and other non-oil heating sources.
The International Energy Agency is finally coming around to the reality that an energy crunch is upon us with the end of cheap oil. (Even now, oil is not cheap @ 4X its 1998 low and 3X its 2002 low.)
This July The Oil Drum, theoildrum.com, published a detailed proposal by Alan Drake, a proponent of expanded and electrified rail, which can be found at www.theoildrum.com/nod.... Mr. Drake's dedication to the national interest come thru in every word.
The expanded rail network in the 19th century converted the US into a truly national ecomony by the end of the century. The relative impact of that effort was greater than the construction of the interstate highway system. (An anecdote tells the tale: the 1906 SF earthquake was about as devistating as Hurricane Katrina was on NOLA, but a much smaller country was able to provide what some have commented was more effective and timely relief from all over the country via rail.)
A government effort to support and guide the reconstruction of our freight rail system is needed now.
The Deflation Debate: Why This Time Is Different
What happens when the Treasury (soon) goes into the bond market in a big way, if there are shortage of buyers?
If rates on long issues then rise substantially to attract the extra cash needed? If the dollar then drops fast and oil and other commodities rise fast... just after OPEC has (on or before their Dec meeting) cut quotas again, triggering an unintended second oil price spike?
Negative Sentiment on Crude Oil Overdone - First Energy Analyst
KSA seems to have figured out prior to the election it wasn't gonna happen, and started their cut-backs some time ago (not that the price crash didn't have something to do with it).
This latest production burst is like past times when they produced way over quota coincidentally during politically interesting periods, like Spring-Fall '04 to give Bush a boost, with the difference that, now, they probably want to cut back for geological reasons like letting over-worked fields rest.
The fear here is that all the OPEC producers will cut back too much and create another price cycle, but at a minimum, oil could "pop back up to $80 to $90" by the end of the year.
Purchase Applications Support Housing Sector’s Weakness
Home builders might get together and propose a massive effort to make existing buildings more energy efficient. Nega-watts are better than coal-fired power plants.
Same for the commercial construction industry.
The Day After: Is the Honeymoon Already Over?
Obama has said he would make energy his top priority. Pickens isn't finished talking, either. Given the liquidity trap possibilities and the credit crunch, he and his advisers may rightly conclude that direct investments in energy, infrastructure, and mil and non-mil goods are needed.
One suggestion is to identify and down-size aging fed, state and local govt cars and trucks. Buy American, possibly as part of a larger program to keep GM-Ford-Chrys. in the game. Park the old ones and parcel them into the auction markets over a couple of years...
Best hopes for optimal bipartisan actions to address the crises now and after 1/20.
Why TARP Has Failed
Take out the trash.
An intermediary needs to be introduced and rules imposed to get a much quicker MBSs valuations than "months or longer" and to do loan mods on targeted mortgages of primary residences in reliance on results. If this involves legislation or regulation to modify MBS contracts, so be it. (Though, based purely on financial considerations, selected non-primary residential mortages might be included if a security holder notice-and-approval mechanism could be efficiently implemented.)
The goal is to get marketable valuations quickly and re-liquidify the MBS market.
Sheila Bair's current "class action" loan-mod exercise re IndyMac is being rendered ineffective because only mortgages not bundled into MBSs are included and her model is unable to drill down to outcome comparisons based on probable losses arising from foreclosure (thus no meaningful compromise of principal as a part of work-outs and too high an income threshold for participation).
If a minimum baseline, separate from any given delinquent or at-risk mortgage, can be set, then the Bair approach can be expanded and made more efficient.
The $700B bailout bill was originally advertised as being mainly for buying MBSs to improve bank liquidity, help homebuyers, and establish a real-value bottom to house prices (rather than an "undershoot" based on excess foreclosures and real, measureable harm to neighborhoods).
But Bait and Switch happened. If nothing meaningful happens on relief for homebuyers/house prices, the Hill will move on bankruptcy reform. I think bankruptcy reform is needed anyway, but it will surely occur if there is no alternative option out there.
Housing Affordability Close to 4-Year High in September
In the short run, thru next spring, mortgage interest rates are likely to rise with rising 10-yr treasuries. In addition we are seeing record suspensions in 401k contributions (even as consumption drops) which will result in increased income taxes, draining further from disposable income.
The Home Ownership Bubble
Homebuyer - - some debt
Renter - - under water
15 More Thoughts on the Current Crisis
"[T]he only way to cure it is through expedited bankruptcy procedures."
Why not the same for homeowners? Justifiable loan mods in both the interests of lenders/investors and homeowners are being frustrated by the structural barriers of the current system, including lender-servicer arrangements skewed in favor of servicers that promote foreclosures over meaningful work-outs that let folks stay in their homes.
Hottest Potato in Washington: The Homeowner Bailout Plan
Balance the interests of these workers (and of their employers in an efficient labor market) with those of the lenders and security holders by amending the bankruptcy code to allow insolvent people living in their homes to get loan mods in bankruptcy. This will help all homeowners by getting to the housing price bottom quicker (more folks stay in their homes and fewer REOs compete with regular existing home sales).
Lenders are not the only members of the business class.
Case-by-case adjudication and settlements from the bottom up would ripple thru the system and help correct the current structural barriers that are hindering loan mods in tens (hundreds?) of thousands of cases where - - but for the financial interests servicers and their law firms have in properties going to foreclosure vs. work-outs - - mods are in the financial interests of the lenders.
Not to mention how destructive to communities are the walk-aways, short-sales, deeds-in-lieu, foreclosures, cash-for-keys, and evictions...
There is no one silver bullet. A diversity of top-down and bottom-up solutions are needed.
Bailout, Schmailout
Balance the interests of these workers (and of their employers in an efficient labor market) with those of the lenders and security holders by amending the bankruptcy code to allow insolvent people living in their homes to get loan mods in bankruptcy.
Lenders are not the only members of the business class.
Case-by-case adjudication and settlements from the bottom up would ripple thru the system and help correct the current structural barriers that are hindering loan mods in tens of thousands of cases where - - but for the financial interests servicers and their law firms have in properties going to foreclosure vs. work-outs - - mods are in the financial interests of the lenders.
Not to mention how destructive to communities are the walk-aways, short-sales, deeds-in-lieu, foreclosures, cash-for-keys, and evictions...