Not The Fault Of Schools Or Teachers

From today's NY Times:

WASHINGTON — Despite the addition of more than two million jobs last year, soaring corporate profits and continuing economic growth, income for the typical American household did not rise in 2012 and poverty failed to fall, new data from the Census Bureau show. 

“The poverty and income numbers are a metaphor for the entire economy,” said Ron Haskins of the Brookings Institution. “Everything’s on hold, but at a bad level.” 

Over a longer perspective, the figures reveal that the income of the median American household today, adjusted for inflation, is no higher than it was for the equivalent household in the late 1980s. 

For all but the most highly educated and affluent Americans, incomes have stagnated, or worse, for more than a decade. The census report found that median household income, adjusted for inflation, was $51,017 in 2012, down about 9 percent from an inflation-adjusted peak of $56,080 in 1999, mostly as a result of the longest and most damaging recession since the Depression. 

Most people have had no gains since the economy hit bottom in 2009. 

The government’s authoritative annual report on incomes, poverty and health insurance, released Tuesday, underscores that the economic recovery has largely failed to reach the poor and the middle class, even as the unemployment rate continues to sink and growth has returned.

In the past 12 years, there have been two recessions, one of which was the worst economic downturn since the Depression, two bubble bursts (tech and housing), two major wars that have eaten up a lot of tax money, an endless War on Terror that continues to eat up tax money, and most of the middle class jobs that disappeared in the last two recessions have been replaced with crappy service jobs.

This is an economic problem caused by capitalism, not an education problem caused by schools and teachers.

Market-Based B.S.

Global stock markets plunged overnight and here is how Reuters explained the moves:

(Reuters) - Share markets fell sharply on Thursday as investors piled back into safer assets, unnerved by the twin setbacks of unexpected weakness in China's economy and signals that the U.S. central bank may soon scale back its stimulus program.

The yen bounced sharply off recent lows and German Bunds rose, gaining support from a shift in sentiment that followed Fed Chairman Ben Bernanke's comment that the bank may trim its bond purchases at one of its next policy meetings.

A surprise drop in Chinese factory activity in May, followed by data pointing to a second quarter economic contraction in the euro zone, added to investors' worries.

The revived concerns about global growth sent Oil and copper prices lower, and MSCI's world equity index .MIWD00000PUS fell 1.2 percent, putting it on course for its worst day of the month.

Japan's main Nikkei share index .N225 earlier plunged 7.3 percent, its biggest one-day percentage drop in two years and calling a halt to a rally driven by aggressive stimulus measures that the Bank of Japan unveiled in April.

"All the global developments we see in the markets right now are purely liquidity-driven, they are no longer underpinned by fundamentals," said Tobias Blattner European Economist at Daiwa Capital Markets.

"We must learn to live with that kind of volatility."

Let's repeat - "All the global developments we see in the markets right now are purely liquidity-driven, they are no longer underpinned by fundamentals."

This should end well.

The next time you see Ben Bernanke claim the Fed is not creating bubbles, remember that statement:

"All the global developments we see in the markets right now are purely liquidity-driven, they are no longer underpinned by fundamentals."

Beware The Bubble

House prices have shot up over the last year despite a shaky economy, a stagnant job market and a whole host of other economic head winds.

Might there be another bubble?

There might:

Despite the green shoots reported by the Case-Shiller index last week that home prices rose a blistering 9.3 percent in February from 12 months ago, Edward Pinto, a former executive at the government-backed mortgage business, says another crash can’t be too far behind.

Pinto faults Uncle Sam’s housing policy of guaranteeing 90 percent of new loans in the gigantic $6 trillion market through Fannie Mae.

He goes on to say the feds are providing billions in fat trading profits to Wall Street banks and artificially — but temporarily — propping up housing prices.

Sooner or later, he says, economic reality will catch up with this fairy-tale market, which will lead to another depressing housing collapse.

The fundamentals that matter most are falling behind the latest house prices. These include job and wage growth. And that’s amidst a surprise loosening in lending standards and tightened inventory because of the snail’s pace of moving foreclosed properties to market, says Pinto, a resident scholar at the American Enterprise Institute.

Astonishingly, as much as 50 percent of all mortgages today are issued with zero-down payments, which includes many refinanced homes for the banks’ better clients.

In the meantime, Wall Street powerhouses reap their windfall gains, trading these complex mortgage-backed securities.

The Street makes out like a bandit. In this game, banks accumulate nickels and dimes on each side of the trade, profiting on shifting interest rates, mortgage prepayments and other variables — but not on the “real” value of the underlying mortgages.

“The Street makes millions and millions of dollars on these securities,” Pinto told The Post.

“That’s the dirty little secret. The government guarantees repayment of principal and interest payments on a timely basis, regardless of what the borrower does on an individual mortgage level.”

Borrowers also get another lift. The Fed, scrambling to lower mortgage rates, currently near 3.5 percent, buys up $40 billion monthly in these mortgage-backed securities.

But Pinto doesn’t buy it. The trends are remarkably clear, stretching back 150 years through American real-estate history.

“When interest rates go up, which they inevitably will — and we seem to be at the bottom right now — they go up gradually but deliberately over a period of 20 to 30 years,” Pinto said, noting this long-term trend.

When that occurs, the housing market will be hammered again.

By his calculations, if mortgage rates rise from 3.5 percent to 6 percent, incomes would have to rise by 33 percent, or house prices would have to drop by 25 percent, to stave off an otherwise inevitable housing disaster.

Since personal incomes have been static since 2007, that part of the equation is hardly guaranteed. So a home price bust is not far behind, says Pinto.

 Nah - I'm sure this will all end well.

Go ahead, bid up some real estate next weekend.

The market is BACK, baby!

Housing Market Bubbles Up Again Thanks To Wall Street

I'm sure this will all end well:

MIAMI — Big investors are pouring unprecedented amounts of money into real estate hard hit by the housing crash, bringing those moribund markets back to life but raising the prospect of another Wall Street-fueled bubble that won’t be sustainable.

Drawn by the prospect of double-figure profit margins on rents and the resale of homes whose prices plummeted in the crash, hedge funds, Wall Street investors and other institutions are crowding out individual home buyers.

If the chain of easy credit and dangerous leverage that started on Wall Street fanned the housing bubble and eventual crash, some analysts find it disturbing that major investors are the ones snapping up the bargains — and eventual big profits — left in its wake.

“There is the possibility that Wall Street and the banks and the affluent 1 percent stand to gain the most from this,” said Jack McCabe, a real estate consultant based in Deerfield Beach, Fla. “Meanwhile, lower-income Americans will lose their opportunity for the American Dream of building wealth through owning a home.”

Real estate executives say institutional investors — who in some cases are bidding on hundreds of homes a day — account for as much as 70 percent of sales in some Florida markets. Over the past two years, analysts say, they also have accounted for a majority of purchases in other parts of the country where housing prices are rebounding sharply.

The influx of investors may explain why home prices have been rising in parts of the country most affected by the housing crash, despite high jobless rates and relatively few new mortgages being issued by lenders. In the past year, prices have risen 23 percent in the Phoenix area, 15 percent in Las Vegas, 9 percent in Tampa and 11 percent in Miami, according to the Case-Shiller home-price indice. Nationally, prices are up more than 8 percent over the past year.
 
“I don’t know whether things are as good as they seem to be. A lot of properties are being occupied by institutional investors, not the end-user,” said Scott Kranz, co-principal of Title Capital Management, a firm that helps big investors scout, buy and manage homes in Florida. “The end-user would need to see a great increase in jobs, availability of mortgage money and a loosening of the reins that have been holding them back. But all the economic indicators are that we are not at that point.”

And of course as the housing market tightens and the rental market tightens, prices go up for both rentals and sales.

Too bad there are no jobs to sustain those kinds of levels.

This housing bubble ended so well last time that you have to ask, what could possibly go wrong this time?

One more example of how the 1% screw the rest of us.

Facebook Shares Hit New Low As Investors Flee

Falling, falling, falling:

Facebook's shares fell to new lows in early trading Thursday as insiders were freed to sell another 270m shares.

The expiration of a lock-up period for insiders increased the pool of available shares by 60%. Facebook's share price fell close to 7% in early trading to $19.73, a level that is more than 46% lower than the $38 IPO price set in May.

Goldman Sachs, Elevation Partners, which counts U2's Bono as a partner, and DST Global are among the early investors that will now be allowed to sell more shares. Goldman and DST were among the investors who increased the number of shares they sold at $38 shortly before the IPO.

Facebook's shares have been hit hard as analysts have worried the firm has yet to figure out a way to make money from mobile users, the fastest growing of their business. After such a precipitous fall in share price, analysts are split on whether investors will take advantage of the end of the lock-up to sell more shares.

One analyst, who wished to remain anonymous, pointed to Angie's List, a referral service, whose share price plummeted on Tuesday after its IPO lockup expired. "I wouldn't even think of buying this until the price comes down," he said

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A commenter at The Guardian writes the following:

Capitalism eats itself as a company that produces nothing fools the foolish and gets them to buy shares in it and then they are shocked when suddenly they realise a company that produces nothing can't actually be worth anything in real terms.......

Angie's List, Zynga, Groupon, Facebook - gee, feels like the Tech Bubble Burst all over again.