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September 12, 2008

Housing Crisis Will End on June 30, 2009

rollercoaster-0908.jpg
So says James Cramer in New York magazine this week. Prepare to break out your wallets on that date, because housing prices, he says, will bottom and it will be "the best opportunity to buy since the 1989–1991 real-estate crash." He gives 10 reasons why, including the eventually evening out of supply and demand; the $300 billion mortgage relief legislation, turning high-interest mortgages into more modest, 30-year versions; prices lowering so much in some areas that buyers won't be able to resist; and the slow bottoming out of New York City. Immigration and population growth will play a part too, he says, and it looks to him like we hit bottom this summer and are starting on the slow road to recovery. Well, not that slow, apparently. Who out there agrees?
End of the Housing Market Free Fall [NY Magazine]
Photo by jkeys.




Posted by lisa at 9:27 AM | Comments (70)
Categories: Market

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Comments

Hey What...give us 10 reasons why this isn't going to happen. Come on, lets have a serious debate here!

Posted by: daveinbedstuy at September 12, 2008 9:30 AM

I think this has some legs. Also NYC is the 22 most expensive place to live in the World.

Posted by: sebb at September 12, 2008 9:32 AM

June 30th, 2009?

C'mon!

ANYBODY who knows ANYTHING about real estate knows it will happen on July 1st, 2009.

Oh, by the way, the world will end on December 21st, 2012.

Posted by: Prodigal_Son at September 12, 2008 9:36 AM

I predict over 100 posts on this story today.

Posted by: 11233 at September 12, 2008 9:36 AM

Correct me if I'm wrong but DOWhat has the world ending October 16, 2008.

Posted by: daveinbedstuy at September 12, 2008 9:38 AM

1. Fannie Mae
2. Freddie Mac
3. Bear Sterns
4. Lehman Brothers
5. Merrill Lynch
6. OPEC
7. WAMU
8. Countrywide
9. Bank Of America
10. Brownstoner

The What

Someday this war is gonna end...

BTW This blog disgusts me. Nothing on 911, What a joke....

Posted by: what at September 12, 2008 9:41 AM

Interesting that he thinks the whole drag on the market from Wall Street will be played out by then. Are most of the firings done already?

Posted by: This Aint No Disco at September 12, 2008 9:43 AM

The What-

This blog disgusts you yet you post here at least 40-50 times a day. Says more about you than Brownstoner.

Think about tit...

Posted by: Prodigal_Son at September 12, 2008 9:54 AM

"Nothing on 911, What a joke...."

Yeah, and no oversized American flag flying all over the site. And perhaps a few pictures of our dear leader, Rudolph William Louis "Rudy" Giuliani. You know, the guy who's all of a sudden all about the rural family values, while condemning the smarty-pants big city folk and their cross-dressing, divorcing and re-marrying, gay-tollerating ways. This is downright unpatriotical. In fact, I want to see everyone flying the flag or go to jail, your choice.

Posted by: heck_of_a_job_brownie at September 12, 2008 9:55 AM

"I think this has some legs."

I think you have some crack.

Posted by: DOW8000SP800 at September 12, 2008 9:55 AM

What...5 of those items are now behind us...Bear Stearns, Fannie Mae, Freddie Mac, Bank of America (dividend intact with a 7.90% yield) and Countrywide (bought by B of A)... and the sixth, lehman will likely be sorted out today or Monday.

Brownstoner is a different story and will likely be the keystone to a global property implosion.

Posted by: daveinbedstuy at September 12, 2008 9:56 AM

11. FDIC

Posted by: DOW8000SP800 at September 12, 2008 9:56 AM

http://stats.bls.gov/news.release/ppi.nr0.htm

Crude goods declined 11.9% in August!

This may very well be a deflationary scenario.

Posted by: Polemicist at September 12, 2008 9:58 AM

and Producer Prices fell 0.9%, more than forecast.

The next Fed move will be a rate cut.

Posted by: daveinbedstuy at September 12, 2008 10:03 AM

What,

I work near ground zero and could hear the bagpipes from my office yesterday. I noticed and appreciated your 9-11 post. I gave it a moment of silence but didn't see the need to add anything.

I remembered not only those that fell, and those they left behind, but the way the City pulled together in the aftermath. The communal spirit was tremendous. Unfortunately, since I had Brownstoner open, your post also caused me to realize how far removed from that spirit some of the debate on this site can be. I thought better of saying anything about that yesterday out of respect for the day.

Posted by: slopefarm at September 12, 2008 10:03 AM


There ought to be some classic "What" lines coming out of this post. Do your thing, man!

Posted by: East New York at September 12, 2008 10:03 AM

Hey Dave,
How's life? Well you know I must disagree with your economic assessment. “and the sixth, lehman will likely be sorted out today or Monday.”
Selling of a bank does not make it sorted out. The Macs are not out of the woods yet, in fact we’ll see more movement in the next few months. WAMU will probably be under by the end of the year. There are very few banks in this country that are on solid footing.
But I wish that was the least of our problems. It doesn’t really matter what the interest are if there are not enough banks with money to lend. I think most people are still bullish on buying a house at a lower price but they can’t if they don’t have a job or a bank to lend them money.

Posted by: 7andfive at September 12, 2008 10:08 AM

7andfive....the issue on buying a home and getting a mortgage has simply reverted from one of too much liquidity and lax standards to one of much more logically tighter standards. Should mortgages ever have been given to people who can't put at least 20% down? I don't know but that's the issue now. There is plenty of money out there as long as you are a qualified buyer. Whether that means 10%, 15% or 20% down (plus of course an acceptable credit score) is open for debate.

When the Fed lowers rates it'll open up the mortgage floodgates again. Banks won't be able to resist the lowered borrowing costs and the higher mortgage rates!

Posted by: daveinbedstuy at September 12, 2008 10:15 AM

If B of A buys Lehman, not only will the equity be worthless but they won't pay the bondholders just like they did with Countrywide.

There will be inside deals to retain employees, many of the best are already jumping ship.

Posted by: daveinbedstuy at September 12, 2008 10:18 AM

The national market will rebound. NYC will not.

And no, all of the issues with those financial institutions are very much not behind us. Expect very significant layoffs over the next year as these institutions try to figure out how to become profitable again in the new financial world. Expect many laid off bankers and lawyers to sell their homes. Expect few buyers to be waiting to pick up their homes for anything close to top-of-the-bubble prices.

Also expect a significant drop-off in foreign buyers, which have been a big driver in NYC real estate (unlike the rest of the country, which, as I pointed out, will rebound while NYC founders).

And the surveys that show NYC as a not-particularly-expensive city as compared to other financial centers are misleading. Consider what counts as "New York City" in that survey and what counts as "London" or "Paris" or "Tokyo." New York housing, at least where anyone who actually works in the global financial engine wants to live, is amazingly expensive.

Posted by: lechacal at September 12, 2008 10:21 AM

Dave....of course we are in this mess because of lax standards. And we will get out of this mess by banks requiring the 10-20% down, as you mentioned.

But here is the problem; most Americans are so in debt there is no way they will have 10-20% for a downpayment. At least not for at least another 5 years or 10 years at current prices. Lower rates are not going to help when people do not have job security or a large cash reserve. Banks (the few left) can resist the lowering borrowing costs because there will no longer be a market to resell those loans.

Posted by: 7andfive at September 12, 2008 10:22 AM

lechacal, even trophy Manhattan townhouses are cheap compared to London, Tokyo, Paris and Hong Kong

Posted by: daveinbedstuy at September 12, 2008 10:24 AM

Oh wait, I almost forgot: In the middle of all of this, expect a big dump of new condo inventory into the NYC market. Let's see how condo prices hold up when a few thousand (at least) new units get dumped on the market while it sinks in that this will be an unhappy Christmas for Wall Street.

Sorry guys, this is just reality. The rest of the country has been going through a very healthy correction and is therefore ready for a rebound. NYC real estate is still bloated and simply will not rebound before it has a correction.

Posted by: lechacal at September 12, 2008 10:27 AM

Dave, you know I'm always happy to give DOWhat's prediction of the world ending on October 16. We have 34 days left (why did DOWhat stop his countdown? No probs - I've got his back)

"I say in about 90 days all hell is going to break lose. The crash will be very very bad. Then you will here from me in a big way. When I post something like this: I love the smell... There will be no refuting any of my arguments!

The What (Tick.. Tick.. Tick..)

Someday this war is gonna end...

Posted by: what at July 18, 2008 2:52 PM"

Posted by: Biff Champion at September 12, 2008 10:27 AM

dave, I disagree with your comparison of trophy homes in the major cities. Perhaps there is a price differential, but by no means is it significant enough to hold out as justification for some kind of rebound in the NYC market. I really am surprised at how willing people are to believe the statistics thrown out by these surveys without going behind the numbers to understand them (particularly when they seem so obviously wrong to someone who moves around a lot).

Posted by: lechacal at September 12, 2008 10:31 AM

lechacal...i wasn't taking a position on how far down Manhattan properties would decline. Just stating that they were not expensive compared to the others.

Manhattan properties may be "so obviously wrong to someone who moves around a lot" within the US but not on a global scale. You don't want to know what rents are for a decent flat in Hong Kong!!!!

Posted by: daveinbedstuy at September 12, 2008 10:35 AM

Lechacal, must argue you with you. New York real estate is not expensive compared to Tokyo, London and even Sydney (where I spend a good bit of time). Everybody I know in London and Sydney are struggling to find places to live that they can afford and that meet their standard of living (ie how they themselves grew up). And they are moving to parts of London and Sydney that would be the equivalent say of Bushwick (closer to city but more rundown) or Sheepshead Bay (farther from city but more suburban) to find housing. Clearly NYC real estate is overvalued when compared to most places but compared to a few of the cities we have been discussing, NYC is not nearly as bad.

I also welcome a serious discussion on this topic though. I think if Dave, Biff, Lechacal, Dow, What and any one else with a perspective to add would just talk about this stuff without devolving into personal crap, it could be really fascinating.

Posted by: wasder at September 12, 2008 10:36 AM

Daveinbedstuy you are 100% correct . Rents and prices in NYC are very cheap and this market has been second behind LA or San Fran for a long time in being the most expensive in the Unites States. There is no Justification for that.

Posted by: sebb at September 12, 2008 10:38 AM

What, I must say I was bummed out by your 9/11 stuff yesterday. First harshing on Brownstoner for not splashing it on the front page and then calling everyone out for not responding to your Forum post. I know I did my own thing in re remembrance yesterday and I don't think anybody needs to be guilted by you about how we remembered that day that changed everybody a little. This is a real estate blog not a geo-political one, though you seem to forget this often.

Posted by: wasder at September 12, 2008 10:39 AM

I should probably get back to work rather than spending time mustering data to back myself up. I guess part of it depends on whether you measure absolute prices or affordability. I actually recently spent a couple of years down under and am pretty familiar with Sydney, and I'm not sure I agree that Sydney is less affordable than NYC. But that's just personal anecdote and nothing that would stand up in court.

Posted by: lechacal at September 12, 2008 10:40 AM

lechacal....nothing ever posted here would stand up in court, LOL, unless of course you mean the court of public opinion or the court of brownstoner posting!!!

Posted by: daveinbedstuy at September 12, 2008 10:44 AM

Lechacal: My info is also anecdotal as well (especially with Sydney) and I don't mean to be pig-headed about this. I would just say that for the neighborhoods that I would consider most being like Brownstone Brooklyn demographically/economically (Easter Suburbs of Sydney--Bondi, Tamarama, Clovelly, Bronte etc) people making equivalent to what my wife and I make are having a really hard time buying anything they like and are starting to venture to areas once considered unthinkable (Redfern, Western suburbs etc). And somebody who recently came to visit me from London, heard about the house I was buying and spat up with envy at the "steal" I was getting on the house we are buying. IT just feels like those cities cause folks to spend a considerably higher proportion of their income on housing. But again, this is only a sideline issue to what we are talking about and I don't want to sound like a blowhard.

Posted by: wasder at September 12, 2008 10:46 AM

I really don't think NYC real estate will bottom before 2010.

I think it goes like this:

Wall Street lays off a bunch of people in 2007/2008.
Wall Street hires fewer people in 2008/2009.
Wall Street bonuses at the end of 2009 suck.

Some people sell property because they got laid off or their bonuses suck.
Other people don't buy property because they got laid off or their bonuses suck.
Some people look to rent a cheaper place when their lease is up because they got laid off or their bonuses suck.
Other people leave the city because they got laid off and cannot find another job.

Prices generally stagnate or drift downward for a few years (beg. in 2007).

The investment banks that are going belly up finally do so in first half of 2009.

Bottom hits sometime in late 2009/2010. Economy stabilizes (may not be great, but will be stable). Wall Street can start hiring again. Neighborhoods with good quality of life (pleasant housing, nice stores/restaurants, low levels of random street crime) see more and more buyers showing up.

Posted by: northsloperenter at September 12, 2008 10:47 AM

The What: "...911, What a joke...."

Indeed. They be laughin' at ya while you're crawlin on your knees.

Posted by: deadnancy at September 12, 2008 10:47 AM

wasder....I'm jump into this debate. I lived in Europe for a number of years (Amsterdam). Properties are more expensive in Europe. But buying on the open market in cheaper than renting (which is not the case in the US) - thanks to some very generous tax credits. I got almost $300 monthly from the government on my 1000euro mortgage.

But here is the thing. Those European markets are starting to soften. London is being helped by rich Russians. Russia doesn't have a second city and since everyone can't live in Moscow many go to London. But they can't hold the market up forever. And do you really think a rich Russian is going to consider New York over price? So really this price issue is mute because for those in the market a couple thousand more per month does not matter.

Posted by: 7andfive at September 12, 2008 10:47 AM

and then brownstone prices go through the roof again nothsloperenter because, as we all know, brownstones are the most desireable places in the world to live!!!!

Q.E.D.

Posted by: daveinbedstuy at September 12, 2008 10:49 AM

Owning in both London and NY I would say London property is more expensive.
NY has more millionaires than any other city in the world. (Wall Street Journal last Saturday).
I don't think bankers and lawyers will be selling their homes even if they do lose their jobs. They have cash reserves. What you will see (in a climate of job losses) are less lawyers and bankers moving from their rentals to buy. Will this have an effect? ...it depends on the other elements of the demand side and supply side.

Posted by: Aussie at September 12, 2008 10:51 AM

Not that I want to aid What in his listing of doom but AIG now looks like it might go under as well!!!

Posted by: daveinbedstuy at September 12, 2008 11:01 AM

Aussie, I know a great many bankers and am a lawyer myself. I can tell you that a lot of people who make well into the 7 figures (and beyond) live with shockingly thin reserves. The instinct to spend at or above one's means affects the rich maybe even more than the merely middle class.

There are of course many exceptions to this (myself included, being a cheap, cheap Yankee).

You don't know who is swimming naked until the tide goes out (Warren Buffet). There are a lot of people in very expensive NYC homes who will be forced to sell in the next couple of years.

Posted by: lechacal at September 12, 2008 11:16 AM

Aussie,

Florida appears to have even more millionaires than NY
http://blogs.wsj.com/wealth/2008/08/18/florida-beats-new-york-for-millionaires/

How's their real estate market doing?

Posted by: the chicken at September 12, 2008 11:17 AM

Hey Chicken: Congratulations on your two short positions. They appear to be paying off handsomely. Don't close them out yet!

Posted by: lechacal at September 12, 2008 11:21 AM

The problem with Florida is that its just one big high-rise condo market. There are no brownstones which, as we all know, always hold their value!!!

Posted by: daveinbedstuy at September 12, 2008 11:21 AM

dave -- it wouldn't surprise me at all if brownstone prices start going up again 2010, especially as today's "new" construction will probably be looking a lot less trendy and shiny then while brownstones will still have their solid charm.

The uglier and shoddier stuff built from 2003-2009 will probably stay cheap.

Posted by: northsloperenter at September 12, 2008 11:24 AM

Thanks Lechacal - if only it was my own money...

Posted by: the chicken at September 12, 2008 11:25 AM

you a stock broker or investment advisor the chicken????

Posted by: daveinbedstuy at September 12, 2008 11:27 AM

Lechacel is correct. In places like Port St. Lucie, FL, and Stockton, CA, the banks are unloading foreclosures at 50% of their 2005 peak prices. Probably by late 2009, all the foreclosures will be off the books, and a new cycle will being.

NYC values are barely off their ridiculously high peak. The waves of layoffs in the financial industry are just starting. Values have no place to go but down. Fortunately, it will not be like the coop-glutted early 1990's because there have been almost no coop conversions in the last 15 years.

Posted by: Suburbandude at September 12, 2008 11:33 AM

used to be a sell-side analyst Dave, now on the buyside (uses my powers for the forces of good....)

Posted by: the chicken at September 12, 2008 11:45 AM

"Indeed. They be laughin' at ya while you're crawlin on your knees."

Thinking you are first when you really are TENTH?!!?!

Posted by: East New York at September 12, 2008 11:50 AM

what industry do you cover?? i did a brief stint as a sell side asian equity salesman (the dark side) years ago but otherwise always been on the buy sidde

Posted by: daveinbedstuy at September 12, 2008 11:51 AM

I agree with Cramer's prediction. In fact, let's all agree! If everyone agrees the housing crisis will end, then it will end! After all, mass psychology is at least half of what drives market forces. Let's all root for some irrational exuberance!

Posted by: Park Sloper at September 12, 2008 11:53 AM

But chicken, what about your 2% and 20%? That money becomes your money...that's the magic of hedge funds (and why I won't invest in them).

Posted by: lechacal at September 12, 2008 12:00 PM

Oh please, Lechecal and others, if you don't live here where are you going to go?? In the USA anyway. The only place I'd live other than NYC is London, Dublin or Paris. But we can't afford it. Way too expensive compared to NYC.

How about you, Lechecal, are you going to the South or the Midwest where they think Sarah Palin is a genius?

The cultural divide is wide and getting wider and the big cities on the coasts are the ONLY places to be. A factor that will always hold up this real estate market. Smart, cultured, progressive people want to be in NYC, always have and always will.

Posted by: traditionalmod at September 12, 2008 12:04 PM

Park Sloper - I agree that psycology place a huge part in all this BUT - the thing that I can't figure out is - where will future mortgages come from to support the housing market:

The current plan (universally accepted apparently) is to shrink Fannie and Freddie - well since they provide the vast vast majority of conventional loans, who is going to take their place - clearly investment banks arent going to be jumping into this market for a long long time - nor can they compete with the cost of borrowing that even a smaller Fannie and Freddie will be able to offer.

The Government now controls the housing market 100% - either they open the spigots and re-inflate everything (at the expense of the treasury) or we are in for a long long long period of falling and stagnate home prices.(and do not ignore the demographic reality of an aging population - which will further put pressure on housing prices)

Posted by: fsrg at September 12, 2008 12:05 PM

I don't think the housing crisis will end for a while. NYC has been fortunate due to foreign buyers (like London, which my friends call it 'Moscow-on-Thames'). And the i-bankers are still in trouble. We will just have to 'bear' with this for a while.

Posted by: gwbrubaker at September 12, 2008 12:21 PM

traditionalmod: Real estate prices are driven by change. You have pointed out a static truth that has not changed. Thus it will not change the markets. Other factors are changing around this static truth, and the market will move accordingly.

Posted by: lechacal at September 12, 2008 12:26 PM

I really respect what this guy has to say as well....also not terrible news...

http://www.urbandigs.com/2008/09/manhattan_real_estate_the_sky.html

Posted by: 11217 at September 12, 2008 12:31 PM

Do you also really respect what this guy has to say?

http://www.amazon.com/gp/reader/0385514352/ref=sib_dp_pt#reader-link

He was the chief economist for the National Association of Realtors when he penned this gem in 2005.

Ahh yes, it sounds like 1988 all over again.

Posted by: lechacal at September 12, 2008 12:37 PM

If one believes that history repeats itself and this cycle is not unique, then historically real estate corrections are most accute in the first two years of a drop (i.e. 1989-1991) and then level off. As such, it would be logical that the end of 2008 represents a full two year down turn with bottom in 2009.

http://mysite.verizon.net/vodkajim/housingbubble/new_york.html

Posted by: Handle at September 12, 2008 12:41 PM

jim cramer, the emeril lagase of stocks. only if joe shmo could buy a house just like joe shmo buys a stock when jim says to. talking head.

Posted by: BrooklynLove at September 12, 2008 12:58 PM

Chicken,

NYC has the most millionares of any city, not in USA, but in the world. That is just a fact, but if you think millionares didn't save Florida so they are irrelevant to NYC that is OK with me.

Bit strange to compare NYC to Florida though, so far as what has happened with property.

Posted by: Aussie at September 12, 2008 1:01 PM

Aussie: Again, focus on change, not static truth. NYC has the most millionaires in the world. Fine. But that is not new information. Prices are where they are (very high) party as a result of that. So pointing it out is just like various other static facts that don't actually change the direction of NYC real estate, like limited space, or desirability of living in The City. In a sense they impart inertia on prices to the extent they don't change, but focusing on them at all is kind of missing the point. On the whole, the forces that act upon NYC real estate are changing substantially for the negative.

Compare this to Fort McMurray in Canada. You could point out that it is a frozen wasteland in the middle of absolutely nowhere hidden up in some remote corner of our socialist neighbor to the North. And you would be right. But if you pointed out these static truths as evidence for an argument that prices there should be low, you would be wrong. It turns out Fort McMurray sits near vast reserves of oil that just became economically feasible to extract, and now has some of the highest real estate prices in all of Canada. Again, focus on the change.

And in NYC, nothing is changing for the positive. Except maybe interest rates, but the effect of lower rates will be overwhelmed by things like tighter credit, lower employment, less foreign buying, a surge in new condos on the market, etc.

Posted by: lechacal at September 12, 2008 1:18 PM

Cramer has the right date, wrong year. 2010 will be the turnaround. NYC will not lag.

Posted by: FatLenny at September 12, 2008 1:30 PM

I understand you point Lechacal but the many factors that increase the appeal of NYC (the "existing information" as you call it) act as a constant force that sets the long term trend for this town as up. The current problems will slow and partially disrupt the trend but as they abate the trend will resume. That could happen more quickly than you think. Something very big will be needed to disrupt the trend substantially. I personally think we are too close to that "something very big" than should ever be possible, but if it happens I'll have more to worry about than property.

Posted by: Aussie at September 12, 2008 2:07 PM

being a millionaire ain't what it used to be. I doubt if a millionaire could afford the typical HOTD.

Posted by: denton at September 12, 2008 2:15 PM

Agreed Denton. But if NYC has the most people with money, it should mean we can comfortably compare our NYC Real Estate prices to other major cities. NYC while expensive is not as expensive as other major cities. Don't know why some don't like me making the comparison.

Posted by: Aussie at September 12, 2008 2:38 PM

Cramer is smart about the economy, but he's no expert on NYC real estate. NYC lags the rest of the economy by about two years. We may bottom around next summer, but that doesn't mean you should buy then. I predict that when prices here do bottom out (probably 10-20% off peak levels, vs. 25-50% down across the rest of the country), they will stay down ("plateau," if you will - but that really means something that goes up and the flat, whereas this will go down and then flat... more like a cnayon, or a cliff).

It'll be 2011 to 2013 before prices begin moving back up and threaten to move above last year's peak.

Of course, that's not so far off, so there's nothing particularly wrong with buying next summer, as long as you're not a flipper (i.e. not insane). So Cramer's advice is not terrible... it just won't look like a valley in the way Cramer expects it to.

Posted by: sdrubbins at September 12, 2008 2:59 PM

Here's why the current financial markets are just a circus. Who do you think is feeding this informations to Cramer on Citicorp....

Cramer says...

"Memo to Citigroup (C) : You are next. It doesn't matter that you have a huge asset base and the terrific worldwide deposit business. You are just too vulnerable. These things are sequential. After the hedge funds are finished with Lehman (LEH) and AIG (AIG) and Washington Mutual (WM) , they are going to go after you, Citigroup. This moment is an obvious one. Pandit's done nothing. He can't defend himself. The financials are totally opaque. Unless it is having a great quarter that we don't know about and can announce that it has sold its last three or four acquisitions (even at fire sale prices) or it has an investor in the wings we don't know about, operating on Citigroup is just too easy a way to make a hedge fund's quarter. Because there is no SEC protection from short-selling without upticks, and since you don't need to borrow the shares beforehand, I can't think of a reason the hedge funds don't do their bear-raid thing on Citi. It has nothing but horrid mortgage exposure, and it is without a doubt, like AIG, too difficult to understand. This one's a tough one. Everyone who has bought on the big broker and bank financings is down now that Merrill (MER) has broken the print price of $22. The inevitability of this is so extraordinary that we have to believe it isn't next. Who would give them money unless they raised money themselves? So, here we go. I would buy position limit September 17.50 puts and position limit September 15 puts. Why not the September 20 puts? Because there is always a chance that the Federal Reserve reads this article and says, "We'd better cut rates big, because Citigroup is too big to rescue." There was a time that I wouldn't write an article like this. Citigroup? No matter what they did, they would be fine. But in 1990 I heard people say Citigroup would be fine. They said it all the way to $5 when Prince Al-Waleed bought his big stake. I think they will be saying it again next week, but I am too old and too knowledgeable about what happened in 1990 to risk not telling you to buy those puts for protection after the hedge funds eliminate the hope for AIG, WaMu and Lehman. Oh, one more thought: What the heck is this stock doing as high as $18? Makes no sense"

Posted by: daveinbedstuy at September 12, 2008 3:01 PM

@Dave, I used to do telecoms on the sellside but generalist on the buyside.

@Aussie, I only raised the Florida article because you cited the NY millionaires but I don't think the levels in either case are enough to distort the market significantly (Monaco springs to mind as an example of this). If you read the article in the link, it actually incorporates home equity in the calc so it's even more spurious.

@Lechacal, don't be pissed off at the fees - you either choose to pay them or you don't - and there's a lot of overhead associated with running a proper fund. You should be pissed off at those hedge funds that don't do what they say on the tin, those that run with excessive leverage and huge directional bets. We're up double-digits year to date with an average gross book of 120% - I think I've earned my money ;)

Posted by: the chicken at September 12, 2008 4:50 PM

I change my vote to 2011. Beware of Alt-A my friends. From Bloomberg:

http://tinyurl.com/4aevmg


Posted by: FatLenny at September 12, 2008 5:00 PM

Hats off to TheWhat for warning us about the upcoming financial and housing crisis a year ago. Looks like this weekend is going to be a Bear Stearns redux, where we are all going to be sitting around our computer on sunday night to find out who the buyer of lehman is going to be. This time is going to be a lot uglier, for the shareholders, bondholders and employees of lehman because of the unwillingness of the fed and treasury dept to backstop any deal. Leh's stock price is down 95% from the feb 2007 and their employees have lost more than $10 bill collectively. The wealth destruction we have witnessed is just horrific. We are not going to see the end to this crisis until two to three other financial institutions/investment banks/commercial banks follow suit. The run up in NYC real estate prices in the past 10 years has largely been due to the paper wealth created by investment banks and the economic stimulation that trickled down to other industries (legal, accounting, corporate events, etc) The reversal is starting with the destruction of all these institutions.
The short term implications of a possible lehman bankruptcy filing (some said it will get "taken care off" on here? yeah right, by who?) and its 24,000 employees (mostly in NY) is unimaginably horrible. The long term trend is NY is ceding its status as the financial center of the world to cities like London and Singapore.

Posted by: dandel at September 14, 2008 4:26 PM

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