Bankrupting the Common People

Cold from China to Florida Pushing Up Energy Prices

January 5, 2010

Bloomberg - Cold weather from China across Europe and reaching to the U.S. is disrupting travel and pushing up energy prices.

Crude oil traded near a 14-month high in New York, and spot electricity prices in Europe rose. In China, heavy snows and the lowest temperatures in 50 years hampered delivery of coal. The Florida citrus crop could be hurt by freezing later this week; Manchester airport in England closed due to heavy snow.

Crude oil for February delivery advanced as much as 0.6 percent to $81.99 in New York while natural gas for delivery today in the U.K. rose to $7.42 per million British thermal units.

The eastern half of the U.S. is facing its coldest winter since 1982, Accuweather said on its Web site. Arctic air from Canada is spreading south. By Jan. 9, New York and Boston may have lows of minus 10 degrees Celsius (14 Fahrenheit).

In citrus-growing areas of Florida and Texas, the lows hovered just above freezing last night, sparing the crops any damage, Accuweather said. Freezing temperatures may hit the area starting Jan. 8.

The Climate Prediction Center of the National Weather Service forecast below-normal temperatures from Texas to Maine through Jan. 17. The Northeast consumes about four-fifths of heating oil in the U.S.

Corn Under Snow

About 500 million bushels of corn are stuck under snow in North Dakota and South Dakota, Minnesota, Nebraska and Wisconsin, according to Martell Crop Projections.

Beijing temperatures are forecast to drop as low as minus 16 degrees Celsius tonight, according to the China Meteorological Administration. Northern China may have 50-year record-low temperatures, China Central Television reported.

Schools in the Chinese capital were shut after it was hit by the heaviest daily snowfall since 1951 on Jan. 3, the official Xinhua News Agency reported. Premier Wen Jiabao called on local authorities to ensure food supplies, farm production and transportation safety, Xinhua reported.

Snowfalls have hampered carriage of coal to power plants in the eastern province of Shandong, reducing inventories of the fuel in the region to 2.7 million metric tons, enough for fewer than nine days of consumption, the Dazhong Daily newspaper reported today. That’s below the recommended minimum of 15 days, it said.

Beijing Capital International Airport opened its three runways after more than 500 flights were canceled yesterday because of snow, CCTV reported.

Germany, France

Temperatures will not rise above minus 6 Celsius in Hamburg in northern Germany tomorrow, Uwe Kirsche, the spokesman for Germany’s national weather service, said by phone. The cold weather is expected to continue for two weeks, he said.

Temperatures in central and northern France are likely to remain below freezing until early next week, Meteo France said. Freezing temperatures are expected in central and northern Italy by the weekend, it said.

Power for delivery on Jan. 7 in Germany, Europe’s biggest market, is trading at 48.25 euros ($69.60) a megawatt hour, 12 percent higher than for tomorrow, as demand is set to rise.

Consumption in France, the second-biggest market, is expected to peak on Jan. 7 at 92,000 megawatts as temperatures may dip as low as 6.5 degrees Celsius below average that day, according to national grid operator RTE. That’s 400 megawatts shy of the consumption record set on Jan. 7 last year. Germany doesn’t publish a national demand forecast.

In western France, where temperatures are expected to be about minus 6 Celsius today, RTE asked households to limit consumption to prevent disruptions.

Frozen Britain May Run Short of Gas

The freezing weather has raised fears that Britain could run short of gas after the National Grid issued only its second warning ever over surging consumption.

January 4, 2010

Telegraph - Demand for gas — the fuel used to heat about two thirds of Britain's homes — has risen to about 30 per cent above seasonal norms with Britain in the grip of one of its coldest winters for 100 years.

While it is unlikely that households will find their supplies restricted, a shortage could lead to higher bills.

The National Grid, responsible for meeting the country's energy requirements, issued a gas balancing alert on Monday to give warning that any further falls in supply could force big users like power plants to cut their consumption.

Extra gas supplies were rushed out to the liquefied natural gas importation terminal in Kent through pipelines in Belgium and Norway following the alert.

The National Grid said the risk of shortages had been temporarily averted by the influx. "Supplies of gas to the UK have increased following the issuing of a gas balancing alert today," a spokesman said.

Unusually cold weather is set to continue over the next two weeks, and the National Grid has not ruled out sending out further supply warnings.

In the event of a serious shortage, big industrial consumers are expected to bear the brunt of gas consumption cuts to shield residential users who rely on the fuel to keep warm.

2009 Bankruptcies Total $1.4 Million, Up 32 Percent

January 4, 2010

Associated Press - U.S. consumers and businesses are filing for bankruptcy at a pace that made 2009 the seventh-worst year on record, with more than 1.4 million petitions submitted, an Associated Press tally showed Monday.

The AP gathered data from the nation's 90 bankruptcy districts and found 1.43 million filings, an increase of 32 percent from 2008. There were 116,000 recorded bankruptcies in December, up 22 percent from the same month a year before.

While experts believe some of the increase is due to a natural recovery as consumers and attorneys become accustomed to a recent overhaul of bankruptcy laws, the numbers indicate clear correlations to recession-weary regions. Arizona saw the fastest increase, a jump of 77 percent from the year before, followed by Wyoming (60 percent), Nevada (59 percent) and California (58 percent).

Emile Harmon, who owns a law firm in Tempe, Ariz., said the firm has doubled its staff to handle the surge in bankruptcy filings. The lawyers have been steadily shifting away from their other areas of business, civil lawsuits and divorce cases.

"Bankruptcy is kind of swallowing the whole practice." Harmon said. "There's little time to do other stuff."

There's also no sign that things are slowing down. Harmon said bankruptcies have been coming in waves, first with those 18 months ago who had adjustable-rate mortages, then with those who lost their jobs due to the housing downturn. Now he's finding wealthy individuals and business owners who have finally succumbed to lower incomes and shrinking home values.

"A lot of the people we see were in a really good financial position two years ago," Harmon said. "People really look at you and say, 'I can't believe I'm here'"...

While every state saw a rise in bankruptcies, Alaska (up 12 percent), Nebraska (12 percent) and North Dakota (14 percent) performed best.

Foreclosures Crimp Home Value Estimates, Sabotage Sales

January 3, 2010

AP - It wasn't the first time that Katherine Scheri ruined a real estate agent's day with a low property appraisal.

Scheri, a real estate appraiser, had sized up a three-bedroom, two-bath house in Santa Ana, Calif., for $30,000 less than what the buyers offered to pay. A typical deal-killer for a seller.

The agent urged the lender to force Scheri to consider several other properties that could back up the original $310,000 sale price. Then he tried good old-fashioned guilt, telling Scheri her appraisal was going to ruin the buyers' shot at the American Dream.

"That's what he laid on me," Scheri recalled. "And I said, 'Don't you care they could be potentially spending $30,000 too much for a house?"

Across the country, agents and homebuilders are complaining too many appraisals are coming in low, scuttling deals.

The National Association of Realtors says nearly one in four of its members has reported clients losing a sale due to botched appraisals. The National Association of Home Builders, meanwhile, said low appraisals were sinking a quarter of all new home sales and argues it's not fair to compare distressed properties to brand-new homes.

And that gets to the heart of the problem.

Roughly 40 percent of all home sales this year were foreclosures or short sales, meaning the property sold for less than the mortgage. In some markets, like Las Vegas and Phoenix, they've hit more than 50 percent.

Appraisers determine the value of a property by looking at recent sales of comparable homes. They take an apples-to-apples approach, excluding or making adjustments for certain features, such as a swimming pool or finished basement. And generally, a foreclosure isn't used as a comparison for a standard sale.

But in some areas, appraisers like Scheri contend they are only sizing up homes according to the reality of the market, though they concede its becoming increasingly harder pinpoint what a home is worth.

Home prices in many large metro areas, including Los Angeles and San Diego, hit bottom earlier this year and are recovering, data last week showed. Yet there are many neighborhoods across the country where foreclosures and other financially distressed sales are still rising.

"It used to be a very infrequent thing that you did an appraisal and the value wasn't supported," says Scheri, who is based in San Diego. "Now, it's more common than not."

So, if you're trying to sell your home in a neighborhood where foreclosures and short sales are predominant, an appraiser could determine your home is actually worth less than what some buyers may be willing to pay.

Part of the problem, critics contend, is that many real estate appraisers are now hired under new industry rules. Designed to limit conflicts of interest that can bias an appraisal, the rules bar mortgage brokers from ordering appraisals themselves, forcing them to do so through a mortgage lender.

Lenders may order appraisals through in-house staff or appraisers hired by outside firms known as appraisal-management companies. But neither may talk to the appraisers about the value of the property they're evaluating.

The result, however, can mean that low-cost appraisers are hired from outside the area and don't have the local knowledge to find homes that can be a better benchmark for regular homes.

Chris Heller, agent-owner of Keller Williams Realty in northern San Diego, recently had the sale of a home nearly botched for the second time because of a low appraisal. The three-bedroom, two-bath house in the Poway suburb of San Diego was appraised for $55,000 less than what the buyer agreed to pay. The seller wasn't willing to drop the price down to $400,000, but knocked off $20,000 when the buyer agreed to come up with $35,000 in cash.

"The seller is taking less because of the appraisal," Heller said, noting that almost all of the comparable homes used to gauge the property's value were distressed sales.

Still, the buyer is paying a premium not to have to deal with the risks involved in buying a foreclosed home or a short sale, which can take several months to close.

So, should distressed homes sales be compared with other homes? Is one inherently worth more than the other?

A new analysis of foreclosure and non-foreclosure sales by Zillow.com found that even when most of the market is made up of bank-owned homes, non-foreclosures sell for as much as 30 percent more. Another study by Harvard's Joint Center for Housing Studies came up with a similar conclusion.

In Las Vegas, which has one of the highest foreclosure rates in the nation, the median sale price for bank-owned homes sold in September was about 23 percent less than other types of properties, according to the Zillow study.

"There are two markets, two very distinct markets," said Zillow economist Stan Humphries.

That doesn't mean foreclosures don't weigh down the value of nearby homes, although there's loud disagreement on how much.

The Joint Center for Housing Studies examined home sales over 20 years in Massachusetts and found that a foreclosure within less than 100 yards of a home lowers the price of that home by 1 percent.

So it appears that in neighborhoods with high foreclosure rates, values for all homes are being pulled lower than in areas where there are few or none. That means you can live in one area of Las Vegas and values can be down twice as much as they are in another neighborhood just a few miles away.

When it comes to appraisals, that leaves a lot of room for interpretation.

Demand for foreclosed homes dips as supply mounts

How the Financially Connected Prospered in a Decade Where Wealth Evaporated for the Majority

January 1, 2009

MyBudget360 - As we usher in the New Year the filthy rich are counting their blessings and must be very appreciative of the massive bailouts that protected their wealth.

The top one percent of this country control 42 percent of all financial wealth, so it shouldn’t come as any surprise that most of the bailouts went to Wall Street and those that are tethered to it for income.

As the stock market continues to rally, Americans collecting food stamps stands at the highest number ever at 37 million. We also have 27 million Americans looking for work or are simply stringing a few hours together to keep some sort of paycheck coming in. The vast majority of Americans are simply exhaling a sigh of relief that the 2000s are now a thing of the past. Yet if something isn’t changed radically in our system we are bound to enter another financial shock in the near term.

First, the S&P 500 is down a stunning 24.1 percent since the start of the decade. Yet Goldman Sachs managed to pull off almost an 80 percent gain during the same time:

So for the poor average American who simply dollar-cost-averaged into the stock market as every good corporatocracy banker would tell them, they would have fallen behind someone who simply dollar-cost-averaged into their mattress. Yet if you happened to dump your money with the government-sponsored and back-stopped Goldman Sachs, you would have done much better. Ironically these bankers are the same people who created the financial instruments that sent our economy into a tailspin.

The average American is finally realizing that much of the corporate power in Washington is doing very little for them and doing more and more for Wall Street.

So the stock market over the decade brought negative returns to Americans. How did the housing market do?

The median U.S. home price in November of 1999 came in at $137,600 and ended November 2009 at $172,600. This 25 percent gain is wiped out once we factor in the Federal Reserve inflating away the U.S. Dollar.

Housing over the decade is actually down 3 percent. This is where the largest store of the average American wealth is stashed and it went negative for the decade. Yet somehow the ultra rich seemed to make out like bandits with all the bailouts even though are economy was still fizzling out from two mega bubbles. There is a reason they call it a golden parachute.

Let us recap. The stock market brought negative returns both nominally and in real terms for the decade and housing is actually down in real terms.

So how did Americans do over the decade in the employment front?

The unemployment rate is the highest it has been since the early 1980s. If we look at the employment population ratio, we will see that our economy is still trending to the downside. Yet the corporatocracy is happy to feed the propaganda line that the average American is better off. Really? How so? Once the bubble decade wealth imploded, the typical American is now in a worse position. The national debt also exploded during this decade.

So housing values cratered, the stock market is still massively down, and employment is still in shambles. Yet we are to believe things are just fine. People are now finally waking up to the reality that the current system is designed to rip them off and steal from them at every point in the road.

Take credit cards and bailouts for example. Some credit card companies are hiking fees up on customers before new regulations hit this year. These are the same companies that benefitted handsomely from the corporatocracy bailouts. This money came from the average American yet they are sticking it to them each and every other way.

For example, last month I was stuck by a “savings withdrawal fee” from Chase. I never saw this before. So I called up the bank and asked them what this was. It amounted to a $12 fee for each transaction. As it turns out, the wonderful Federal Reserve through Regulation D yanks money out for people making more than 6 ACH transfers per month from savings accounts. So if you wanted to move your money from say your toxic too-big-to-fail bank to say a local community bank, make sure you don’t do more than 6 transfers for the month or you are going to be hit with a $12 fee for this. Insane policies like this make me realize that something is going to give in this decade...