More bad news. Those that I've talked to in the commercial and residential market say that the banks are telling them that they expect another hard dip, and have tightened limits on development lending.
I just got word that yesterday afternoon Tanner Consulting laid off the remainder of it's commercial and residential architecture and interior design staff with the exception of one architect to complete existing documents. I know all of those people and feel bad for them.
If anyone needs additional talented staff, let me know and I will pass it on.
A retired friend of mine owns a nice plot of land just off highway 97 north of Sand Springs with a great view of downtown. He was in the process of building a new house, had all the engineering and architecture work done but has not moved dirt. He's too concerned about the economy and being able to recoup his investment out of a custom home. I keep hearing rumblings here and there and I don't like what I hear as it contributes to the psychological recession where people, companies, and banks simply just horde cash and exascerbate the problem.
It's mainly a psychological problem, but the Fed isn't helping with their refusal to seriously address deflation through anything more than saying they are "concerned."
Ironically, Bernanke wrote a paper some years back about the lesson of Japan being the need for central banks to address deflation concerns swiftly and decisive action.
Good thing I'm working on a project that isn't scheduled for completion until early 2012. Hopefully things are looking a lot better then when I'm assigned to my next job.
Makes me glad I abandoned design in favor of construction management, although I'll probably jump back over once things get going again. If energy prices remain stable or go up, especially nat gas, that would be really good for our local economy.
Quote from: nathanm on July 22, 2010, 09:04:58 AM
It's mainly a psychological problem, but the Fed isn't helping with their refusal to seriously address deflation through anything more than saying they are "concerned."
Ironically, Bernanke wrote a paper some years back about the lesson of Japan being the need for central banks to address deflation concerns swiftly and decisive action.
it's hard to imagine what else the Fed can do... rates are at 0%, they have tripled the size of their balance sheet with quantitative easing, and we have mortgage rates at near all time lows. At this point they are pushing on a string.
While many are calling on banks to lend more their primary regulatory agency, the OCC, is taking a very dim view of credit quality making new lending difficult.
Like others have mentioned, those that I know in banking are taking steps to get out of real estate they own and are loathe to lend anything into the market.
Quote from: bokworker on July 22, 2010, 10:42:33 AM
it's hard to imagine what else the Fed can do... rates are at 0%, they have tripled the size of their balance sheet with quantitative easing, and we have mortgage rates at near all time lows. At this point they are pushing on a string.
While many are calling on banks to lend more their primary regulatory agency, the OCC, is taking a very dim view of credit quality making new lending difficult.
Like others have mentioned, those that I know in banking are taking steps to get out of real estate they own and are loathe to lend anything into the market.
All real estate or simply new development? Since the bubble burst in just about all markets, it seems real estate is good security especially if there's a good downpayment involved.
Quote from: bokworker on July 22, 2010, 10:42:33 AM
it's hard to imagine what else the Fed can do... rates are at 0%, they have tripled the size of their balance sheet with quantitative easing, and we have mortgage rates at near all time lows. At this point they are pushing on a string.
While many are calling on banks to lend more their primary regulatory agency, the OCC, is taking a very dim view of credit quality making new lending difficult.
Like others have mentioned, those that I know in banking are taking steps to get out of real estate they own and are loathe to lend anything into the market.
I think if the administration had taken a different approach in the beginning by laying the mantle on the private sector rather than growing public sector programs and demoralizing the financial section, things would be different.
I agree that there is a perceived, "us vs them" situation between the federal government and the private sector that is crippling the financial industry.
This perception was created by the initial demonetization of the financial sector by the president and members of congress. From the beginning there was very little "WE." All we heard about were the "Fat Cats" on Wall street, and the "irresponsible banking practices." The the government took very public action against them while at the same time attempting to support them.
It's like beating a dog with a newspaper and attempting to feed him a treat at the same time. Sure he's hungry, but he doesn't know if you are going to hit him or feed him. We have a table of treats laid out for the banks, but they don't want to get smacked.
Quote from: Gaspar on July 22, 2010, 12:44:37 PM
I think if the administration had taken a different approach in the beginning by laying the mantle on the private sector rather than growing public sector programs and demoralizing the financial section, things would be different.
I agree that there is a perceived, "us vs them" situation between the federal government and the private sector that is crippling the financial industry.
This perception was created by the initial demonetization of the financial sector by the president and members of congress. From the beginning there was very little "WE." All we heard about were the "Fat Cats" on Wall street, and the "irresponsible banking practices." The the government took very public action against them while at the same time attempting to support them.
It's like beating a dog with a newspaper and attempting to feed him a treat at the same time. Sure he's hungry, but he doesn't know if you are going to hit him or feed him. We have a table of treats laid out for the banks, but they don't want to get smacked.
The problem right now isn't what Obama is or is not doing. It's the still unresolved European banking problems scaring people all over again.
Quote from: swake on July 22, 2010, 12:58:21 PM
The problem right now isn't what Obama is or is not doing. It's the still unresolved European banking problems scaring people all over again.
(http://pacotraver.files.wordpress.com/2009/11/uroboros.jpg)
. . .and the European banks are fueled by US commerce and lending.
No one is taking a leadership role. Our federal government has made it very clear that banks are evil, and they are not about to reverse that. This thing is going to have to play out until someone cries "Uncle." I think that is probably why many see this recession lasting until their is a change in guard or at least a change in attitude.
Quote from: bokworker on July 22, 2010, 10:42:33 AM
it's hard to imagine what else the Fed can do... rates are at 0%, they have tripled the size of their balance sheet with quantitative easing, and we have mortgage rates at near all time lows. At this point they are pushing on a string.
While many are calling on banks to lend more their primary regulatory agency, the OCC, is taking a very dim view of credit quality making new lending difficult.
Like others have mentioned, those that I know in banking are taking steps to get out of real estate they own and are loathe to lend anything into the market.
I'd say real estate is fairly secure right now though lending is still very tight. Hence why construction/development has taken a hit and will continue to take a hit. If you can afford a decent downpayment and/or get by without financing (or very little financing) it is still a smart investment. That is one reason I bought a house now and locked into low interest rates. I just hope they're still low when the times comes for me to sell it.
Quote from: Gaspar on July 22, 2010, 01:08:33 PM
(http://pacotraver.files.wordpress.com/2009/11/uroboros.jpg)
. . .and the European banks are fueled by US commerce and lending.
No one is taking a leadership role. Our federal government has made it very clear that banks are evil, and they are not about to reverse that. This thing is going to have to play out until someone cries "Uncle." I think that is probably why many see this recession lasting until their is a change in guard or at least a change in attitude.
I think you should realize by now that the poor leadership meme isn't playing well with anyone here but you, myself, and our third member of the axis of evil: Guido.
Even in 20 years when President Obama's administration is viewed with a wince like the Carter administration is now it will all have been President Bush and the Neo-Cons' fault.
Quote from: Conan71 on July 22, 2010, 11:22:00 AM
All real estate or simply new development? Since the bubble burst in just about all markets, it seems real estate is good security especially if there's a good downpayment involved.
I was primarily speaking of real estate that the banks have foreclosed upon and now sit on their balance sheets. While there was a willingness to hold some of it for a while to protect the value I am sensing a growing impatience and an idea that if they don't sell now someone else will and drive the value down anyway. Hence I fear we could be looking at a lot of property hitting the market. Additionally, my sources have told me that traffic even looking at houses has slowed dramatically. My sample size is small so I could be getting a skewed outlook but I suspect they know what they are talking about.
Quote from: bokworker on July 22, 2010, 01:35:37 PM
I was primarily speaking of real estate that the banks have foreclosed upon and now sit on their balance sheets. While there was a willingness to hold some of it for a while to protect the value I am sensing a growing impatience and an idea that if they don't sell now someone else will and drive the value down anyway. Hence I fear we could be looking at a lot of property hitting the market. Additionally, my sources have told me that traffic even looking at houses has slowed dramatically. My sample size is small so I could be getting a skewed outlook but I suspect they know what they are talking about.
You think this could wind up looking like the "HUD Flood" in the 1980's and very early '90's? I can only assume traffic has slowed for a couple of reasons: One being the general eeriness in the economy right now and the other being the government incentive for first time buyers to buy ran out.
Quote from: Conan71 on July 22, 2010, 01:56:09 PM
You think this could wind up looking like the "HUD Flood" in the 1980's and very early '90's? I can only assume traffic has slowed for a couple of reasons: One being the general eeriness in the economy right now and the other being the government incentive for first time buyers to buy ran out.
I hope not but there are rumblings that more than one financial institution has way more OREO (other real estate owned) on their books than than they can stand...or maybe even enough to wipe out their capital. No doubt the expiration of the tax credit has slowed traffic as was expected but I think the hope was that as people saw housing prices stabalize that there would be more confidence in the future. If you look at some statistics, like the housing affordability index (which compares national income to house prices and interest rates), housing is more affordable now than in a very long time. But if there is a lack of confidence who wants to make that kind of committment. And everyone has redefined what kind of committment housing is. It isn't so much an investment now (not that it ever should have been viewed as such) as a utilitarian asset and as such, why take the risk of a declining home value when you can just rent.
SWAKE pointed out one factor hurting confidence but the entire list would be much longer than just what is going on in Europe. In general, I just sense a lot less optimism than in times past. Maybe it was because I was younger but I began working in the banking industry in 1982 and even when we were closing a bank every Thursday afternoon I don't remember pessimism being so rampant. Fear is an easy sell right now. Being an optimist is viewed as meaning you just aren't paying attention to what is going on.
Quote from: SXSW on July 22, 2010, 01:09:53 PM
I'd say real estate is fairly secure right now though lending is still very tight. Hence why construction/development has taken a hit and will continue to take a hit. If you can afford a decent downpayment and/or get by without financing (or very little financing) it is still a smart investment. That is one reason I bought a house now and locked into low interest rates. I just hope they're still low when the times comes for me to sell it.
It's certainly a good time to buy if you know who to talk to. Many of the developers I used to work with are literally throwing properties away to get them off the books. One such developer had his real-estate guy call around and offer models in his developments for 75% of their marketed price. It still took him a while to unload. The other builders trying to sell in his subdivisions were pissed, but what can you do?
If I had the money I might consider buying up some property, but again it's iffy as to where the economy is headed.
Quote from: Gaspar on July 22, 2010, 03:01:24 PM
If I had the money I might consider buying up some property, but again it's iffy as to where the economy is headed.
This brings up an important point:
Other people are doing the same thing. Are they waiting to get a better deal if the economy tanks further or simply worried about having liquidity issues should they need that money in a year or two?
Quote from: bokworker on July 22, 2010, 10:42:33 AM
it's hard to imagine what else the Fed can do... rates are at 0%, they have tripled the size of their balance sheet with quantitative easing, and we have mortgage rates at near all time lows. At this point they are pushing on a string.
They essentially quit the QE last year. I'd rather see action from Obama on another stimulus package, but since that's politically impossible at the moment, we need the fed to step up and start buying things other than Treasuries to get money into the economy. That's a terrible idea under normal circumstances, but the beginning of deflation is not a normal circumstance.
Conan: In a deflationary environment, nobody wants to spend money because it'll buy more next week.
Quote from: nathanm on July 22, 2010, 03:06:53 PM
They essentially quit the QE last year. I'd rather see action from Obama on another stimulus package, but since that's politically impossible at the moment, we need the fed to step up and start buying things other than Treasuries to get money into the economy. That's a terrible idea under normal circumstances, but the beginning of deflation is not a normal circumstance.
Conan: In a deflationary environment, nobody wants to spend money because it'll buy more next week.
Are you thinking we are in full on deflation right now or that it's simply a possibility at this point?
Quote from: Gaspar on July 22, 2010, 03:01:24 PM
It's certainly a good time to buy if you know who to talk to. Many of the developers I used to work with are literally throwing properties away to get them off the books. One such developer had his real-estate guy call around and offer models in his developments for 75% of their marketed price. It still took him a while to unload. The other builders trying to sell in his subdivisions were pissed, but what can you do?
If I had the money I might consider buying up some property, but again it's iffy as to where the economy is headed.
That has been said during every recession for decades. The economy will get better, it just so happens this particular downturn is lasting longer than in years past. There are some positive trends but overall it doesn't appear to be getting much better but it's definitely not getting worse. They said it may be 2011, 2012 or even 2013 (especially in the development/construction sector) until we see full recovery and I believe it.
Tulsa will remain fairly insulated as long as oil/natural gas prices remain stable (or increase).
Quote from: Conan71 on July 22, 2010, 03:08:13 PM
Are you thinking we are in full on deflation right now or that it's simply a possibility at this point?
Prior to the last release of CPI numbers, we were merely headed for it. The latest release was the first to show actual deflation by some measures. I think it's still early enough that we won't be stuck in the full on deflation trap if we can get action in the next month or two.
Either way, it'll be fun to watch. At least until my clients demand I decrease my rates.
Quote from: nathanm on July 22, 2010, 03:06:53 PM
They essentially quit the QE last year. I'd rather see action from Obama on another stimulus package, but since that's politically impossible at the moment, we need the fed to step up and start buying things other than Treasuries to get money into the economy. That's a terrible idea under normal circumstances, but the beginning of deflation is not a normal circumstance.
Conan: In a deflationary environment, nobody wants to spend money because it'll buy more next week.
What else would you have them buy? They were still buying agency mortgage backed securities until the end of March...a total of $1.5 trillion of them. Interestingly since they stopped buying them mortgage rates have fallen. I am not in total disagreement with you but QE in an environment of basically zero monetary velocity doesn't do anything but increase the risk profile going forward. Kind of like spending stimulus dollars that don't stimulate. All you are left with is a bigger deficit that has to be paid back during a slow growth period.
Quote from: bokworker on July 22, 2010, 03:23:18 PM
What else would you have them buy?
That's for economists to figure out, not me. Do you think our debt laden economy can survive a bout of deflation?
I don't think any of us want to be in the situation Japan has been in since the mid 90s.
Quote from: Gaspar on July 22, 2010, 01:08:33 PM
(http://pacotraver.files.wordpress.com/2009/11/uroboros.jpg)
. . .and the European banks are fueled by US commerce and lending.
No one is taking a leadership role. Our federal government has made it very clear that banks are evil, and they are not about to reverse that. This thing is going to have to play out until someone cries "Uncle." I think that is probably why many see this recession lasting until their is a change in guard or at least a change in attitude.
The European banks are sick because they haven't gone through a Tarp style reorg. They have never unwound the sick and dead assets owned by the banks there from the healthy assets. They've never really identified what banks are sick and what banks are healthy so they can fix the sick banks. Europe just keeps tossing money at the banks in hopes they will get better on their own.
http://www.dailymarkets.com/releases/2010/07/21/imf-calls-for-transparent-eu-bank-stress-tests/
http://www.guardian.co.uk/business/2010/jul/22/slovenia-bank-stress-tests
http://www.bloomberg.com/news/2010-07-22/political-meddling-may-undermine-european-bank-stress-tests-wyplosz-says.html
http://www.newsweek.com/2010/07/02/worse-than-wall-street.html
swake, didn't you hear? Austerity will fix everything.
Quote from: nathanm on July 22, 2010, 03:47:03 PM
swake, didn't you hear? Austerity will fix everything.
Might not have been a bad idea when things were steaming along just fine.
Quote from: Conan71 on July 22, 2010, 03:47:47 PM
Might not have been a bad idea when things were steaming along just fine.
Careful now, your inner keynesian will come out....
Quote from: nathanm on July 22, 2010, 03:36:49 PM
That's for economists to figure out, not me. Do you think our debt laden economy can survive a bout of deflation?
I don't think any of us want to be in the situation Japan has been in since the mid 90s.
Those of us that lived in Okalhoma in the mid-80"s and early 90's saw what deflation can do and no, our debt laden economy could not survive a debt liquidation driven deflationary cycle. The best we can hope for is a gradual reduction in debt levels, private and public, which will result in slower economic growth and higher unemployment. It will take a lot of sacrifice and an adjustemnt to lower standards of living in the future as debt repayment will come at the expense of current consumption. And when 70% of our economy is built on consumption (consumer spending) it will take a lot of time. I am ot one that thinks the outcomes are binary (either deflation or hyper-inflation) but the risks of both are elevated. Thats what leverage does, magnifies the good and the bad.
Quote from: Conan71 on July 22, 2010, 03:47:47 PM
Might not have been a bad idea when things were steaming along just fine.
Yeah, unfortunate we didn't keep up the surpluses when we had 'em. Then we could have had truly massive stimulus and still not been at the debt level we're at today.
bokworker, we actually are seeing an increase in repayments and less borrowing in the private sector. It's making Bank of America's numbers relatively crappy. This sort of demand destruction is driving us towards deflation, since there's not some other sector of the economy to pick up the slack.
Quote from: nathanm on July 22, 2010, 04:04:30 PM
Yeah, unfortunate we didn't keep up the surpluses when we had 'em. Then we could have had truly massive stimulus and still not been at the debt level we're at today.
Unfortunately money laying around to a politician is like whiskey to an alcoholic. I honestly don't think Congress could have kept it's hands out of a surplus for very long.
An article I just came across...
http://finance.yahoo.com/news/4-Reasons-To-Fear-usnews-2745725653.html?x=0
There is money to be made if you know what your doing.....
Isn't it ironic that a return to a simpler, more frugal lifestyle will most likely pro-long the current recession. It makes you wonder where our economy (& GDP) would be if we hadn't spent the last 20 years ramping up personal spending & debt.
Way to many "Consumer's" in these United States......
Quote from: Breadburner on July 22, 2010, 05:57:09 PM
There is money to be made if you know what your doing.....
Absolutely, there's money to be made in every economy, it's not like it all vaporized, just part of it. ;)
One problem we have is for every binge cycle, there's a purge cycle. We've had our finger down our throats a lot longer this time.
Brought some popcorn to this thread. A long, depressing good read. :)
If the banks think a bad dip is coming, it might be about time to buy and hold the FAZ (Direxion Daily Financial Bear x3). Unfortunately, it takes balls of steel to do that, but if you had done just that in Feb of '09, you'd have doubled your money.
Quote from: Hawkins on July 29, 2010, 05:06:34 PM
Brought some popcorn to this thread. A long, depressing good read. :)
If the banks think a bad dip is coming, it might be about time to buy and hold the FAZ (Direxion Daily Financial Bear x3). Unfortunately, it takes balls of steel to do that, but if you had done just that in Feb of '09, you'd have doubled your money.
And if I would have followed my gut and bought 10,000 shares of DTAG at .60 a share I'd have about $470,000 but nooooo, I was a wussy.