show me the money

What happened in Vegas, this time, didn’t stay in Vegas. There, 2 out 3 houses are upside down: they owe more than their homes are worth.


the number of borrowers who are underwater climbed to 20.4 million at the end of the first quarter from 16.3 million at the end of the fourth quarter. The latest figure represents 21.9% of all homeowners, according to Zillow, up from 17.6% in the fourth quarter and 14.3% in the third quarter.

What can a trillion dollars buy?

A stimulus package of about $800 billion, plus another $350 billion or so as financial bailout. A trillion dollars, just like that. These are big numbers, even Dr. Evil got confused. has a series of graphics showing what 1 trillion dollars actually mean.

That’s the GDP of Australia, China and Spain combined.

If you laid one dollar bills end to end, you could make a chain that stretches from earth to the moon and back again 200 times before you ran out of dollar bills.

One trillion dollars would stretch nearly from the earth to the sun.

It would take a military jet flying at the speed of sound, reeling out a roll of dollar bills behind it, 14 years before it reeled out one trillion dollar bills.

A million dollars a day for 2,000 years is only three-quarters of a trillion dollars.

How does it look like?

A man and 1 trillion dollars

A man and 1 trillion dollars

Comparing bears

Comparing bears

An useful and interactive graphic from the New York Times comparing historical bears. Current one has been considered “epic“.

But as the movie below shows, there is hope. Some even say the worst has already passed

Robert Shiller, one of the guys behind the S&P Case-Shiller Index, spoke at Seattle Pacific University; his presentations focused on the role that psychology plays in economic markets. The primary thesis is that economic markets are strongly influenced by psychology that seems rational to individuals, but on the whole is “collective madness”.

During the session, Shiller mentioned a localized Los Angeles housing bubble in 1885, describing the mentality in 1885 Los Angeles as people thinking “Los Angeles is special!” He quoted from an article in the LA Times which was published during the aftermath of the collapse in 1886:

We Californians have learned something. And that is that home prices can’t just go up forever—they have to be supported by something. Never again will Californians make this mistake. has the notes of the presentation and even the audio. Interesting.

The bursting of the housing bubble is arguably the main factor behind the current recession. So it makes sense people would be checking the housing market and looking for a sign of reversal of the downward trend. Even back in 2007, BusinessWeek was already hoping for a reversal of fortune.

Last time I checked, it seemed the crunch would take longer than expected. Yet six months later there are signs prices are returning to where they should be. at least according to a housing affordability ratio based on median household income and median house prices.

Last data for the median household income from the Census Bureau is from 2007. Applying the nominal Home Price Index from S&P Case-Shiller (last data is for the 2008 Q4), and adjusting for inflation using the Consumer Price Index from BLS, we are reaching again the 3-3.5 range.

Median Home Price / Median Income

Median Home Price / Median Income

The question now is whether there will be a soft land or an overshoot, with prices drilling down the historical range. With the deepening recession, there is no reason for prices not to go beyond current bottoms, especially in specific markets. Detroit, for example.

Blockbuster is getting ready to go belly-up. According to auditor’s assessment, the company might not be generating enough cash to fund its operations:

Even if the amended credit facility is funded upon the terms contemplated, we may not have sufficient liquidity to finance the ongoing obligations of our business, which raises substantial doubt about our ability to continue as a going concern.

In other words: even if they get some loans and refinance existing ones, they simply are not making enough money to pay their bills.

One of the culprits is Red Box and their kiosk-style movie rental structure. Cheaper to maintain than college kids.

The Federal Reserve Bank of Philadelphia produces a state-level coincident index combining four indicators: nonfarm payroll employment, average hours worked in manufacturing, the unemployment rate, and wage and salary disbursements deflated by the consumer price index (U.S. city average). This index has been around since 1979.

And since 1979 (thanks to Calculated Risk for pointing out), throughout four recessions, there was a never a moment when indexes for consecutive months were negative for all 50 states… until now.

Number of states with positive growth

Number of states with positive growth

Recession is widespread, no state is spared:

Red states

Red states

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