Free Republic

Jack Risko of Dinocrat.com charts oil and gas prices, showing a pattern that looks very much like a speculative bubble. Notice in particular the freefall of natural gas prices (the red line), suggesting that oil prices may fall even further. Jack speculates that one motive for the Soviet invasion of Georgia is to threaten the major pipeline supplying Europe, thereby helping to sustain oil prices. A major fall of oil prices to pre-run-up levels would severely cut the income of Russia, not mention the oil states of the Gulf and Hugo Chavez.

Bad news from the Baku-Tbilisi-Ceyhan pipeline - an installation that may not normally draw much of your attention, but which is a throbbing artery of global energy supply, carrying vital oil supplies from Central Asia towards a tanker terminal on the Turkish coast. On some remote, sun-baked plain of Anatolia, an explosion sparked a fire earlier this week, temporarily cutting the flow through the pipeline. But guess what? Here's the good news: the oil price did not zoom upwards in response, not a blip, barely a flicker. Actually the price of a barrel of crude has been falling: from a...

Everybody Gets a TrophyEconomic perils of the Nanny StateBY TONY ALLISONLet me take you to a magical land called NannyState, where once upon a time everyone was happy, inflation was low and real estate always went up. Or did. Times are a’ changing in NannyState and all is not well.   Everyone was elated in NannyState in 2002-2006, because real estate really went up. Way up. There was no need to sacrifice or save because you could buy a home with no money down. Everyone could enjoy the American Dream! In fact, banks offered a 125% loan so you could upgrade...

Pulte Homes applauds President Bush for signing into law today a comprehensive housing bill passed earlier by Congress. With record amounts of housing inventory and stagnant consumer demand continuing to drive down prices nationwide, Pulte Homes believes the $7,500 tax credit for first-time homebuyers included in the legislation can provide a much-needed shot in the arm to the housing industry. "We expect the $7,500 tax credit to get more first-time homebuyers off the sidelines and into a home," said Richard J. Dugas, Jr., president and CEO of Pulte Homes. "That, in turn, will free up home sellers who can then...

There's been a lot of discussion about how much the new housing bill passed by Congress will help individuals facing foreclosure. Some will be able to keep their homes, to be sure. But there's a different provision of the Housing and Economic Recovery Act that I want to focus on -- the much-trumpeted tax credit for first-time homebuyers. A tax credit is much more valuable than a deduction. A credit reduces dollar for dollar the amount of tax you owe. A deduction merely reduces the amount of your income that is taxable. Under the new law, certain homeowners will be...

The collapse of the housing bubble is likely to eliminate most, if not all, of the gains that families had made in accumulating wealth over the last two decades, according to a new study from the Center for Economic Policy & Research in Washington, DC. In the report, entitled The Impact of the Housing Crash on Family Wealth [pdf file], the authors project that the sharpest falloffs are projected to occur for the youngest families. If housing prices fall another 10%, as they seem likely to do, the study estimates that families will have a net worth anywhere from 56%...

BENTONVILLE, Ark. -- Dennis Pflueger and his wife won a rent-free year in a nice new house in an expensive subdivision not far from the headquarters of Wal-Mart Stores Inc. As part of the prize, they then have the option to buy the four-bedroom home for $452,000. Mr. Pflueger, a telephone-cable installer who describes himself as an "old redneck," is in the middle of his free year. But the Pfluegers are a bit lonely. Just one other family lives in any of the 28 new or unfinished houses on Foxboro Court. ...Since real-estate tanked, many new planned communities across the...

Highlights: 1. In time, history will provide a fulsome overview of the twin housing and debt crises, perhaps the most challenging debacle since the Great Depression. At this early stage, however, Westwood tallies a “top 10� list of underlying causes and considers what can be done to reverse the situation. 2. Ranging from an unprecedeted level of debt creation that fueled massive asset inflation, to insane lending practices and, ultimately, exploring the last 20 years of the American debt-culture, this report outlines just how the economy arrived at this juncture, and how our business and government leaders mistook debt-driven liquidity...

Housing Bubble Correction Update: Fasten your seat belts, here comes the jobs crash The housing market has fallen hard but it's not time to buy, no matter what you hear. Depending on where you live it's time to decide if you can afford not to sell before prices go lower, or grin and bear it. The choice depends on your likely future employment prospects and where you live. In our first major update in our series of housing bubble forecasts since 2006 that began with our August 2002 Yes, it's a housing bubble analysis, we delve into the next phase...

ALTHOUGH the price of oil continues to hit new records, it has in one respect been a quiet week on the oil markets. America’s lawmakers are celebrating Independence Day by taking a few days off. That has led to a brief interruption in the torrent of proposals aimed at curbing speculation. Ten different bills on the subject are in the works in Congress. Before the House of Representatives shut up shop, it approved one by a vote of 402-19. America’s politicians are not the only ones to have fingered speculators for the feverish rise in the price of oil and...

Home-price declines continued to get steeper in April, according to the S&P/Case-Shiller indexes and the Ofheo home price index, which showed at least three years of gains erased. Separately, consumer confidence dropped like a stone in June, and expectations hit an all-time low, according to the latest survey from the Conference Board. Home prices in 20 major U.S. cities have dropped a record 15.3% in the past year and are now back to where they were in 2004, according to the Case-Shiller home price index released Tuesday by Standard & Poor's. In a separate report, the Office of Federal Housing...

ACCORDING to Shell Oil president John Hofmeister, the “proper” range for oil should be somewhere between US$35 - US$90 a barrel. Based on that statement and assuming it’s more or less accurate, what do you think we should make of the current oil price of US$130 - US$140 per barrel? How much of the spectacular rise in oil is due to speculation? That is important to determine as excessive speculation could basically drive prices much higher than its real demand-supply equilibrium. Open interest in WTI oil futures has been growing exponentially at 18% per annum since 2001, thanks to the...

The Bubble How homeowners, speculators and Wall Street dealmakers rode a wave of easy money with crippling consequences. By Alec Klein and Zachary A. Goldfarb The Washington Post Sunday, June 15, 2008; A01 Part I · Boom The black-tie party at Washington's swank Mayflower Hotel seemed a fitting celebration of the biggest American housing boom since the 1950s: filet mignon and lobster, a champagne room and hundreds of mortgage brokers, real estate agents and their customers gyrating to a Latin band. On that winter night in 2005, the company hosting the gala honored itself with an ice sculpture of its...

Stacey Korn arrives just before 10 a.m. to unlock her shop on Northwest 23rd Avenue. She hoists orange molded plastic benches from the back and places them outside under the windows. Then she sets up her sidewalk sign: "Shop 'Hello' -- nifty gifts for the whole family," it says. "Patronizing us is like flirting with a wealthy widow. You can't overdo it." Korn needs her sense of humor now more than ever. As the economy slumps, sales at her Hello Portland store at 525 N.W. 23rd Ave. are half what they were soon after opening in late 2005. Her family...

....Speculative bubbles are fueled by the social contagion of boom thinking, encouraged by rising prices. Sooner or later, some factor boosts the transmission rate high enough above the removal rate for an optimistic view of the market to become widespread. Arguments that this boom is unlike past bubbles—I call them “new era” stories—become more prominent and seemingly credible. A survey that Karl Case and I conducted in 2005, for instance, found that on average, San Francisco home buyers expected housing prices to increase by 14 percent a year over the next 10 years. About a quarter of the respondents reported...

The dramatic surge in oil prices—including a $16-per-barrel jump in just two days last week—has left Washington regulators scrambling to exert new oversight on futures trading in oil and other commodities. The U.S. regulatory agency's abrupt shift toward more rigorous oversight in the past two weeks also represents a stark example of how the pinch from high gasoline prices has changed the political landscape and made energy traders prime suspects in congressional inquiries. As recently as May 20, the U.S. commodities regulator, the Commodity Futures Trading Commission (CFTC), insisted at a Senate hearing that speculation was not causing the...

NEW YORK (Fortune) -- High-flying tech stocks crashed. The roaring housing market crumbled. And oil, rest assured, will follow the same path down. Not everyone agrees. In an echo of our most recent market frenzies, some experts pronounce that the "world has changed," and that the demand spikes, supply disruptions, and government bungling we face now will saddle us with a future of $4, $5 or even $10 a gallon gasoline. But if you stick to basic economics, it's clear that the only question is when - not if - prices will succumb. The oil bulls are correct in their...

(NECN) - Maybe, just maybe, the oil speculators are cashing out. Oil prices fell sharply in New York on Tuesday, a fall sparked by declines in U.S. oil and gas consumption, and a rebound in the U.S. dollar. Light, sweet crude for July delivery fell $3.45 to settle at $124.31 a barrel on the New York Mercantile Exchange, and dropped below $124 in after-hours electronic trading. Oil prices have fallen by 8 percent from their peak of $135 per barrel on May 22. Gasoline prices at the pumps, which often lag behind oil prices, have shown no sign of letting...

I see nothing in the present situation that is either menacing or warrants pessimism. . . . I have every confidence that there will be a revival of activity in the spring and that during the coming year this country could make steady progress. --Andrew W. Mellon, U.S. Secretary of the Treasury, December 31, 1929 The bursting of every bubble is followed by statements suggesting that the worst is over and that the real economy will be unharmed. The weeks since mid-March have been such a period in the United States. The underlying problem--a bust in the residential real-estate market--has,...

U.S. home prices dropped at the sharpest rate in two decades during the first quarter, a closely watched index showed Tuesday, a somber indication that the housing slump continues to deepen. Standard & Poor's/Case-Shiller said its national home price index fell 14.1 percent in the first quarter compared with a year earlier, the lowest since its inception in 1988. The quarterly index covers all nine U.S. Census divisions. Prices nationwide are at levels not seen since the third quarter of 2004, according to Maureen Maitland, a S&P vice president. However, the index is still up 60 percent versus 2000. Two...

After being buffeted by the dot-com, housing and credit bubbles -- not to mention the Chinese stock-market bubble -- there is a readiness by people on Wall Street and elsewhere to ascribe the term "bubble" to all sorts of things. But when it comes to commodities like crude oil and corn, that may be off the mark. ...But figuring out whether a commodity exceeds its fundamental value is difficult: Because there is no income stream, there is no equivalent to the price-to-earnings ratios that people use to value stocks. Prices, to be sure, are soaring -- crude oil fetched $132.19...

...Many banks and investment firms have come out to defend the rise in oil prices, saying that it is based on fundamentals and that prices could rise much further. While they go on saying this and prices move upward, open interest in crude futures contracts has been moving steadily downward since a high of 1.58 million last July to 1.36 million now. What’s more, in the recent oil spike, open interest actually fell 8% in a week as oil moved up over 2.6%. Could this be a sign of a short squeeze, with small traders who had shorted oil closing...

With home values continuing to plummet across the country, it's become clear that the real estate meltdown is far from over. Values for single-family homes in 14 major U.S. cities posted double-digit declines from their respective peaks, according to the Standard & Poor's/Case-Shiller Home Price Indices, which tracks prices of single-family homes. On a national level, home values are down 12% since December 2006. And according to Beth Ann Bovino, a senior economist at Standard & Poor's, they could drop another 10% by the end of the year. "Things are accelerating downwards [and] in most cases the fall gets steeper...

The Village of Imagine has fallen victim to the local and nationwide housing slump. The project's developer is reconsidering plans to build the mixed-use complex of shops, restaurants and residential units across from the Orange County Convention Center. The project -- originally hailed as Orlando's version of the famed San Antonio River Walk -- is spearheaded by Intrawest Corp., a Canadian developer known mostly for its ski resorts. The planned village, across Universal Boulevard from the county's giant convention center, was to include more than 40 boutiques and restaurants along waterfront walkways. But all that has materialized is a 315-room...

The House passed two bills attempting to rehabilitate the housing and mortgage market this week. There doesn't seem to be any shortage of criticism and blame for the bad decisions, and rightly so. Lenders and banks do share much of the blame for the overheated market. Lending standards were relaxed, or even abandoned altogether, creating an exaggerated pool of homebuyers that led to ballooning home prices that many, especially real estate investors, expected to continue forever. Now that the bubble has burst, the losses are staggering. However, many in Washington fail to realize it was government intervention that brought on...

LONDON (Thomson Financial) - The International Energy (otcbb: IENI.OB - news - people ) Agency has slashed its 2008 oil product demand forecast again in its monthly report, this time by 390,000 barrels per day, and hinted at more cuts in the future. Oil product demand this year is now seen at 86.8 million barrels per day (bpd), against 87.2 million bpd forecast in last month's report, said the energy adviser to 27 oil consuming countries in its May monthly report. Slower growth in the United States and other industrialised nations will weaken demand, said the IEA. 'This report sees...

Mumbai: The oil boom is on its last leg and may last a few months before a clutch of new refineries start operations amid slackening economic growth across the world, consultancy firm and investment bank Lehman Brothers has predicted in a report. The report said supply is in fact outpacing demand growth even as inventories have been building up for quite some time now. This announcement must surely come as a huge relief for consumers reeling under high oil prices for some time now. Tellingly, this news comes only two days after Thomas Boone Pickens, an American billionaire who made...

I’ve long been a bear on oil and energy as an investment thesis — Simply put, the end product of all energy is totally commoditized and every player in the business is totally beholden to the vagaries of the market to set the price of that end product. Intel gets to choose how much to price their processors for. And they’ve kept gross margins far above 50, 60% regardless of the cycles playing out in the broader economy. I like to invest in businesses that have lots of defend-able proprietary technologies and/or strategies in their business model. Google’s another great...

Many investors have become contrarians and are now apparently experts in being able to spot bubbles. Hence, they all are fully aware that a bubble exists in agricultural commodities at this juncture. Really, you can listen to just about any financial source and hear some commentator warning about the epic bubble that is evident in agricultural commodity prices. However, some of these same folks were completely blindsided by the collapse of the tech bubble in 2000. And they also were shocked that real estate prices could ever decline in value. Of course, this new class of maverick investor is also...

Foreign banks flee Spanish property debt By Ambrose Evans-Pritchard in Madrid Last Updated: 1:06am BST 04/04/2008 International banks are scrambling to sell their holdings of Spanish mortgage debt at a steep discount, fearing that the country may be sliding into the worst economic downturn in its modern history. A blizzard of grim data has soured the mood, capped yesterday by a plunge in PMI purchasing managers' index to an all-time low of 40.9. Car sales fell 28pc in March, and even Madrid's legendary tapas bars seem to have lost their late-night sparkle. Read more by Ambrose Evans Pritchard The Spanish...

ALGIERS (Reuters) - Petroleum prices will range between $80 and $110 per barrel for the rest of 2008, OPEC President Chakib Khelil said on Saturday. Khelil, who is also Algerian energy and mines minister, told Algerian television OPEC was under "big pressures" from consuming nations who liked to portray the group as responsible for high oil prices, when in fact the market was responding to U.S. economic problems and the falling dollar. "Prices will continue to be high, and the prices for the rest of the year will be between $80 and $110," he said. ... He added Algeria's oil...

You didn’t have to be a rocket scientist in the 1990s to figure that speculative investment in dot-coms with no revenues would be disastrous. The same goes for lenders giving mortgages to borrowers with no job, no income and no assets. So after surviving the tech bubble and while trying to extricate the economy from the housing bubble, why are we bent on heading into the global warming bubble? So who in their right mind would push for this? I met many of them up-close-and-personal last week at a major Wall Street Journal conference at which I was an invited...

I heard it on TV so it must be true. All kidding aside, the last two days have been absolutely brutal for the commodities side of our portfolio and Wednesday, the energy stocks also got whacked. And I don’t know about you folks but I haven’t reached that zen, Buffett-like state where falling prices don’t faze me. They faze me. A lot. In my experience, the periods in which my self-doubts peak are honestly the times I should have been buying. Even in the short time since this website/blog has been up (since 01/2007), the market has already tested me...

In his recent letter to shareholders, Warren Buffett quoted a Silicon Valley bumper sticker: "Please God, just one more bubble.” Well, that driver got his wish, but the bubble is in commodities this time around — not tech. From wheat to gold to copper, commodity prices have exploded over the past five years. Many experts say a bust is imminent. "We’re seeing bubble-like trading activity from speculators that has sent markets to levels that basic fundamentals probably don’t justify in the near term,” Bill O’Neill, former director of commodity research for Merrill Lynch and now a partner at LOGIC Commodity...

The Short View: Chinese bubble By John Authers, Investment Editor Published: March 12 2008 17:47 | Last updated: March 12 2008 17:47 As the year turned, the world’s fears were invested in the US. All its hopes were turned to China. That has changed. Anxiety about China has suddenly spiked. This is partly because the bubble in its domestic equity market has burst. The Shanghai Composite is down 31.6 per cent from its October peak – more than the Nasdaq Composite had dropped at the same stage after the tech bubble burst. Hong Kong-quoted H-shares and New York-quoted ADRs are...

Defeats puncture the Obama bubble Story Highlights Hillary Clinton halts Barack Obama's run of 11 primaries and caucuses victories Obama still slightly ahead in delegates who will choose Democratic nominee Near-tie may last for weeks or even months of hard and nasty campaigning By CNN's Jonathan Mann (CNN) -- It was a bubble and it burst. The growing American infatuation with Barack Obama had to pop eventually and this week, the cult of personality finally got punctured. Obama's run for the presidency is hardly over, but it's a little deflated. For now, the fun is over and the fight is...

WASHINGTON (AP) -- Battling a dangerous wave of home foreclosures, Federal Reserve Chairman Ben Bernanke called Tuesday for additional relief and urged lenders to help distressed owners by lowering the amount of their loans. ADVERTISEMENT "This situation calls for a vigorous response," Bernanke said in a speech to a banking group meeting in Orlando, Fla. Even with some relief efforts under way by industry and government, foreclosures and late payments on home mortgages are likely to rise "for a while longer," Bernanke warned. Rising foreclosures threaten to worsen the problems in the housing market and for the national economy, which...

How a Bubble Stayed Under the Radar By ROBERT J. SHILLER ONE great puzzle about the recent housing bubble is why even most experts didn’t recognize the bubble as it was forming. Alan Greenspan, a very serious student of the markets, didn’t see it, and, moreover, he didn’t see the stock market bubble of the 1990s, either. In his 2007 autobiography, “The Age of Turbulence: Adventures in a New World,” he talks at some length about his suspicions in the 1990s that there was irrational exuberance in the stock market. But in the end, he says, he just couldn’t figure...

Britain can no longer depend on being cool By Wolfgang Münchau Published: February 24 2008 19:12 | Last updated: February 24 2008 19:12 Axel Leijonhufvud, the Swedish-born economist, once made an insightful observation about inflation targeting. It worked better in practice than it did in theory, he said. I feel the same about the UK economy. Given what we have long known – about the country’s relatively low productivity growth rate and the erosion of its scientific and engineering excellence – the British economy should clearly not have performed quite as well as it did for the past 15 years....

Japain Feb 21st 2008 From The Economist print edition The world's second-biggest economy is still in a funk—and politics is the problem THE ghost of Japan's “lost decade” haunts the United States. As the consequences of America's burst housing bubble are felt through financial markets, it has become popular to ask whether Japan's awful experience of boom-and-bust has lessons for other rich countries facing, at best, sharp slowdowns. Japan's property-and-stockmarket bubble burst in 1990, creating bad loans equivalent in the end to about one-fifth of GDP. The economy began growing properly again only 12 years later, and only in 2005...

It may be bursting. And Robert Samuelson rightly piles on: As a journalist, I harbor serious doubt about each of the most likely nominees. But with Sens. Hillary Clinton and John McCain, I feel that I'm dealing with known quantities. They've been in the public arena for years; their views, values and temperaments have received enormous scrutiny. By contrast, newcomer Obama is largely a stage presence defined mostly by his powerful rhetoric. The trouble, at least for me, is the huge and deceptive gap between his captivating oratory and his actual views. The subtext of Obama's campaign is that his...

Interested buyers looking for mortgages to buy units in Miami's Opera Tower, Everglades on the Bay or Four Ambassadors shouldn't bother approaching BankUnited. The Miami-based bank has included them on a list of 191 condo projects it won't write loans for. The Business Journal obtained a list of "non-permissible" projects used internally at BankUnited (NASDAQ: BKUNA) and updated as of Jan. 14. Most of the forbidden properties were in Miami and were added at the last update. It wasn't clear who at the bank wrote the list, but the author stated a reason for almost every project declared off-limits. Declining...

Florida Taking Its Toll (Brothers) On Daughter's Condo You just can’t make this stuff up. Apparently even a big builder’s daughter can’t seem to keep faith in the Florida housing market. According to an SEC filing, Wendy Topkis, daughter of Toll Brothers co-founder and Vice-Chairman Bruce Toll, is walking away from a Florida condo, just like everyone else. A Toll Bros. condo!! The Palm Beach Post says it best: Et Tu Wendy? According to the home builder’s proxy statement: Prior to fiscal 2007, the Company entered into an agreement of sale to build and sell a condominium to Wendy Topkis,...

The financial turmoil is like an elephant in a dark room By Martin WolfPublished: January 22 2008 20:02 | Last updated: January 22 2008 20:02 “I was gradually coming to believe that the US economy’s greatest strength was its resiliency – its ability to absorb disruptions and recover, often in ways and at a pace you’d never be able to predict, much less dictate.� Alan Greenspan, ‘The Age of Turbulence’. EDITOR’S CHOICE Economists’ forum - Nov-16 Every week, 50 of the world’s most influential economists discuss Martin Wolf’s articles on FT.com  We all hope that Mr Greenspan proves right...

CARLSBAD, Calif. -- Marty Ummel believes she paid too much for her house. So do millions of other people who bought at the peak of the housing boom. What makes Ummel different is that she is suing her agent, saying it was all his fault. Ummel claims that the agent hid the information that similar homes in the neighborhood were selling for less because he feared she would back out and he would lose his $30,000 commission. Real estate lawyers and brokers say the case, which goes to trial in North County Superior Court on Monday, is likely to be...

(snip) Too many people expected to get a bigger, better house without first earning more money. Many of the people who are struggling to make their house payments were duped. But it's also true that many of the borrowers who are in trouble knew they couldn't make the payments and were counting on rising home values to make up for any shortfalls. As I thought through my own experience, I realized how much of a role values played in my own real estate decisions. When I was a child, my mother moonlighted at department stores in December to earn extra...

Lennar Corp.'s November sale of 11,000 properties in eight states set a price that may mark the bottom for the U.S. housing market: 40 cents on the dollar. That's how much Morgan Stanley Real Estate paid for an 80 percent stake in the 32 communities, 60 percent less than the price at which the properties were valued just two months earlier. That's also what some investors say they would pay for distressed land, condominiums, homes and whole developments, whether it's now or later this year. "If you're an opportunistic buyer with enough cash and credit, it will be one of...

Neighbors discover squatters at vacant homes Poor market leaves many houses empty By JOHN G. EDWARDS REVIEW-JOURNAL A couple, who declined to be identified, with a girl in a highchair, move their belongings out of a house Thursday after being evicted for living in the home illegally. Photo by Jeremy Lyverse/Review-Journal On New Year's Eve, a middle-class neighborhood in southwest Las Vegas discovered new neighbors in foreclosed and formerly vacant homes. James Totland, a nearby resident, said the new residents appeared to be squatters. "It's insane," Totland said. "It's scary really." Real estate saleswoman JoAnn'E Verry and broker Scott Hurlburt...

Top economist says America could plunge into recession Suzy Jagger in New York Losses arising from America’s housing recession could triple over the next few years and they represent the greatest threat to growth in the United States, one of the world’s leading economists has told The Times. Robert Shiller, Professor of Economics at Yale University, predicted that there was a very real possibility that the US would be plunged into a Japan-style slump, with house prices declining for years. Professor Shiller, co-founder of the respected S&P Case/Shiller house-price index, said: “American real estate values have already lost around $1...

Officials Say They Are Falling Behind on Mortgage Fraud Cases JOHN LELAND The number of mortgage fraud cases has grown so fast that government agencies that investigate and prosecute them cannot keep up, lenders and law enforcement officials have said. Reports of suspected mortgage fraud have doubled since 2005 and increased eightfold since 2002. Banks filed 47,717 reports this year, up from 21,994 two years ago, according to statistics from the Federal Bureau of Investigation and the Financial Crimes Enforcement Network of the Treasury Department. In 2002, banks filed 5,623 reports. “I don’t think any law enforcement agency can keep...