Detroit

To what banana-republic levels will real wages still have to sink?

Corporations are not people...

The economic superstar, with unemployment at a 20-year low and exports at an all-time high, produces 34% of the Eurozone’s GDP—and it smacked into a wall.

• Italy Is Biggest Risk to Euro, Says Fitch (WSJ)
• Greek Bailout in Peril (WSJ)
• Swiss Currency Test Looms for SNB’s Jordan in Race to Replace Hildebrand (Bloomberg)
• Daley to Depart as Obama Shifts Strategy From Compromise to Confrontation (Bloomberg)
• BOE Stimulus Expansion May Not Be Enough to Revive U.K. Recovery, BCC Says (Bloomberg)
• Geithner in China to Discuss Yuan, Iran (Bloomberg)
• China Won’t See Hard Landing in 2012, Former PBOC Adviser Yu Yongding Says (Bloomberg)
• Measures to boost China financial markets (China Daily)
• Obama Panel to Watch Beijing (WSJ)

All you need to know.

All you need to know.

When one hears of foreclosed real estate or its sibbling REO (real estate owned) aka repossessed property, typically visions of dilapidated shacks in Detroit, Las Vegas, or the Inland Empire come to mind. And with the average foreclosed home selling at $182,489 according to RealtyTrac, this is understandable. However, such a vision would be wildly incorrect when talking about the property located at 188 Minna St., in San Francisco, which just happens to be America's most expensive bank-owned home. As MSNBC reports, the property in question is quite unlike any other REO out there: because "there's the waterfall in the foyer. And the 2,500-square-foot master bedroom with a hallway just for closets. And the 22-foot glass walls that look out on San Francisco's Arts District." And while we don't know who the original owner is who happens to have walked away on this mortgage, we know which bank got stuck with it. Who else, but Bank of America. Luckily for the bank which recently tested a 4 handle stock price, this property won't be stuck on its books generating zero cash. "According to San Francisco real estate blog SocketSite.com, lender Bank of America, which picked up the deed to the 20,000-square-foot penthouse in lieu of foreclosure back in July, just sold the condo. Listed at $35 million, 188 Minna St. was purchased for an eye-popping $28 million, making it the most expensive residential sale in the city's history." To be sure, whoever bought the REO from BAC likely got a good deal on it: "the bank's asking price is half of what the original owner, developer Victor MacFarlane, was seeking for the unit back in 2008, although he did slash the price to $49 million the following year." Which also means that Bank of America was likely largely was underwater on the "half off" sale, which also means a huge writedown on the paper value of the apartment. And one wonders why Bank of America trades at fractions of its book value.

The Economic Collapse Blog does a terrific job of periodically putting together a compilation of the scariest data points about the US economy. Today is one such day, and the list of 50 economic numbers presented is indeed, as the author puts it, "almost too crazy to believe"... Almost. As noted: "At this time of the year, a lot of families get together, and in most homes the conversation usually gets around to politics at some point.  Hopefully many of you will use the list below as a tool to help you share the reality of the U.S. economic crisis with your family and friends.  If we all work together, hopefully we can get millions of people to wake up and realize that "business as usual" will result in a national economic apocalypse." Or, far more likely, 99% of the population can continue watching Dancing with the Stars, as what little wealth remains is terminally transferred to those who are paying attention right below everyone's eyes.

• Germany insists on new treaty for Europe (FT)
• Banks Prep for Life After Euro (WSJ)
• Bank Values in Europe Fail to Lure Buyers (Bloomberg)
• Banks' Ratings Reliance Nears End (WSJ)
• BOE’s King Waits to See Europe Crisis Response (Bloomberg)
• Accelerating U.S. Economy Eases Pressure for Further Fed Asset Purchases (Bloomberg)
• Government acts on payday loan worries (FT)
• Hong Kong May Loosen Property Curbs: Tsang (Bloomberg)

While the general media may be ignoring the latest peculiar twist on the "Occupy" theme, or in this case the "occupyourhomes.org", Bank of America is taking it quote seriously. As a reminder, "Tuesday, December 6th is the National Day of Action to stop and reverse foreclosures. The Occupy Homes movement is holding actions around the country in support of homeowners and people fighting to have a home. Find an event near you and join in our day of action tomorrow!. There are actions happening in over 20 cities nationwide. Events are taking place in Brooklyn, Buffalo and Rochester New York; Los Angeles, Oakland, San Francisco, San Diego, San Jose, Petaluma, Sacramento, Paradise and Contra Costa California; Lake Worth, Florida; Atlanta, Fayetteville, and DeKalb Georgia; Chicago, Illinois; Bloomington, Indiana; Minneapolis, Minnesota; Cleveland, Ohio; Denver, Colorado; Detroit and Southgate Michigan; St. Louis, Missouri; Portland, Oregon; and Seattle, Washington." And if you have not heard about today's protest on the conventional media that is understandable: as BAC says internally, this event "could impact our industry." Here are the specific warnings to BAC "field services" agents: i) Your safety is our primary concern, so do not engage with the protesters; ii) While in neighborhoods, please take notice of vacant BAC Field Services managed homes and ensure they are secured; iii) Remind all parties of the bank’s media policy and report any media incidents. Aside from the superficial implications, what is more important is that the big banks are showing precisely what the weakest links in the system are, and what makes them the most nervous: it is not protesters living in tents in a major metropolitan city: it is protesters disrupting the lifeblood of the broken banking system - the home selling/repossession pathway. Expect many more such protests now that Bank of America has tipped its hand.

A few weeks ago, SocGen's Dylan Grice released a piece which quickly became a scathing focal point in the inflation-deflation debate, in that he speculated that it was not the Weimar-unleashed hyperinflation (which incidentally is the primary reason why most Germany now dread what the outcome of a profligate ECB would look like) that led to the surge of the Nazi party, but in fact the opposite: the stinginess of German monetary authorities in the 1930s that further exacerbated the situation and helped unleash the Hitler juggernaut. Many promptly took sides in the argument, the bulk of which were shocked that Grice - traditionally a defender of prudent monetary and fiscal policy, would go so far as suggest that it is the ECB's duty to print or else it may justify another "Hitler"-type advent. Well it seems there was more than meets the eye, and in a follow up piece the strategist says: "The purpose of the historical analysis, therefore, was not to reach conclusions about how adherence to hard money principles will linearly lead to resurgent fascism, or war on a par with that seen in the 1930s. Neither was it in any way a defence of Keynesian fiscal activism. It was to illustrate that adherence to even the best principles must come at a price, making a judgment on whether or not that price is prohibitive or not is unavoidable, and today Germany and the ECB have to make that judgment." And his conclusion: "From the beginning of this crisis I've believed the only way politicians will get ahead of it is to bring in the ECB. Since I believe politicians do want to get ahead of it, I expect the ECB to print, and print copiously. I've repeatedly emphasized that printing will solve nothing, beyond buying market confidence for a while... All ECB printing will do is buy the politicians time and space to reset government and private sector balance sheets, to reform how their economies function and be honest with their own citizens. Whether they use that time or not is a separate question (frankly, I'm not hopeful)." But instead of us putting words in Grice's mouth, here is the explanation straight from the horse's mouth. Incidentally we agree 100% with Grice on the issue that eventual printing is inevitable. Which for the TLDR crowd means the entire Grice missive can be summarized as follows: 'buy gold.'

The Great Recession bites yet another New Normal in America.

Not like it matters considering it is pretty much November, but back in August, the Case Shiller index once again missed expectations. The overall index declined 3.8% compared to an expectation of 3.5%, but more importantly, to all those calling for a bottom to housing, we draw your attention to the Composite Top 20 Seasonally Adjusted index, which declined for a 4th consecutive month, in August dropping to 140.56, a decline of -0.05%, following a revised drop of -0.15% in July. No good news were to be found in the prepared remarks either: "The 10- and 20-City Composites posted annual returns of -3.5% and -3.8% versus August 2010, respectively. At -8.5%, Minneapolis posted the lowest year-over-year return, but has improved in each of the last three months. Detroit and Washington DC were the only two cities to post positive annual returns of +2.7% and +0.3% respectively." Here is the bottom line: the seasonally adjusted data has posted 4 consecutive declines; and 14 out of 15 consecutive drops. The Top 20 SA index is now at 140.56, the second lowest in years, and better only than the 140.39 in March 2011. In other news - there is no housing bottom.

Well, a few potential "red flags" are posted below....

Some observations from the front lines and supply trains in the developing saga of society vs itself