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Articles
Aspen Ideas Festival: Is the Financial Crisis Over? Depends, AT
ASPEN IDEAS FESTIVAL — Three financial experts gave an audience at the Aspen Ideas Festival on Friday wildly different views on whether the financial crisis is really over.David Stockman, former budget director for President Reagan, told the crowd to find a cabin in the mountains, stock it with canned beans and bottled water and prepare for even tougher times. The financial crisis will worsen instead of improve, said Stockman, who labeled himself “right-wing libertarian.” He was only half-joking.“We're not going to get out of this for years and years,” Stockman said.Chris Hyzy, a chief investment officer with a subsidiary of Bank of America, called himself an optimist and said he sees slow but steady annual economic growth returning in 2012. The United States has moved from recession to recovery. Now it's going to require patience to move from recovery to expansion, Hyzy said, but expansion will surely come.In between was Roger Ferguson, a member of President Obama's Economic Recovery Advisory Board, who said he is in the “sensible middle” in economic policy.Ferguson said he sees a “low probability of a double-dip recession” and a “gradual but volatile improvement.” In that sense he agreed with Hyzy that the United States is out of the woods in the short term. In another sense, he agreed with Stockman that federal debt poses serious long-term problems. Fortunately, Ferguson said, Obama realizes the problems posed by federal debt and plans to address it once the economy is stronger.
By Scott Condon, July 10, 2010 Aspen Times
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Biggest Defaulters on Mortgages Are the Rich, NYT
Walking away from million dollar mortgages...The delinquency rate on investment homes where the original mortgage was more than $1 million is now 23 percent. For cheaper investment homes, it is about 10 percent.
LOS ALTOS, Calif. — No need for tears, but the well-off are losing their master suites and saying goodbye to their wine cellars. The housing bust that began among the working class in remote subdivisions and quickly progressed to the suburban middle class is striking the upper class in privileged enclaves like this one in Silicon Valley. Whether it is their residence, a second home or a house bought as an investment, the rich have stopped paying the mortgage at a rate that greatly exceeds the rest of the population. More than one in seven homeowners with loans in excess of a million dollars are seriously delinquent, according to data compiled for The New York Times by the real estate analytics firm CoreLogic. By contrast, homeowners with less lavish housing are much more likely to keep writing checks to their lender. About one in 12 mortgages below the million-dollar mark is delinquent. Though it is hard to prove, the CoreLogic data suggest that many of the well-to-do are purposely dumping their financially draining properties, just as they would any sour investment. “The rich are different: they are more ruthless,” said Sam Khater, CoreLogic’s senior economist.
By David Streitfield, July 8, 2010 NYT
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Hedge Funds `Frozen in Headlights' Cut Trading, BB
Hedge-fund managers, Wall Street’s best compensated and supposedly smartest investors, are dazed and confused.
Reeling from the worst second-quarter performance in a decade, hedge funds have scaled back trading as they struggle to figure out where markets are headed amid sometimes vicious crosscurrents in stock, commodities and other markets, according to brokers and managers. “There’s a degree of being frozen in the headlights, of not knowing what sectors to emphasize, of what securities to emphasize,” said Tim Ghriskey, chief investment officer of Solaris Asset Management LLC, a firm in Bedford Hills, New York, with $2 billion in hedge funds and conventional stock funds. Hedge-fund managers, who oversee $1.67 trillion in assets, are reluctant to put money to work as they are buffeted by a wide range of often conflicting political and economic forces, from fiscal policy in Europe and the U.S., to what regulations will be imposed on the financial-services and energy industries, to the growth prospects in China. In turn, smaller and fewer trades may make it harder for funds to rebound from losses incurred since May, when the industry suffered its worst decline in 18 months. “For many people, it’s a frustrating market given the high volatility and low volumes,” said Aaron Garvey, portfolio manager at MKP Capital Management LLC, a New York-based hedge fund overseeing $3.5 billion. “We are seeing strong opposing forces in the markets, which makes generating strong convictions difficult for the medium- and long-term.”
By Saijel Kishan and Katherine Burton, July 8, 2010, Bloomberg
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Luxury Vacation-Home Sales Fade With Pace of Economic Recovery, BB
Demand for homes in expensive resort towns surged in the first three months of 2010, according to local tallies. Sales in the Hamptons on New York’s Long Island more than doubled in the first quarter from a year earlier, reported Miller Samuel Inc., a New York property appraiser. In Aspen, Colorado, transactions rose 43 percent, said Tim Estin, a broker with Mason Morse Real Estate.
Iain Heydon traveled to Colorado’s Rocky Mountains three times during the past year looking for a vacation home in Grand Lake, where waterfront properties list for as much as $3.95 million. After seeing more than a dozen houses, he has yet to make an offer.“I’m watching to see what happens to the U.S. economy,” said Heydon, 46, who lives near Basel, Switzerland. “The market for these homes may not have reached its bottom.”Demand for U.S. luxury vacation properties may be fading along with prospects for faster economic growth, after an early 2010 rebound. The government last week reported slower growth in private-sector jobs and manufacturing and a decline in factory orders. While rates on jumbo mortgages used for many expensive homes have dropped, it’s harder to qualify.“There is a lot of concern about a double-dip recession that’s keeping people on the sidelines, especially at the high end,” said Mark Goldman, a mortgage broker with Cobalt Financial Corp. in San Diego.
By Kathleen M. Howley, July 8, 2010 Bloomberg
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The Hamptons for Procrastinators, NYT
Summer is in full swing in the Hamptons. On the beaches, surfers and piping plovers vie for sand space, and at the Bridgehampton Polo Club the games have begun. In East Hampton, the fresh lobster salad at Claws on Wheels is selling briskly at $60 a pound. Every weekend, the parade of cars from the city snags horribly in Watermill. And renters have returned in large numbers to snap up houses from Southampton to Montauk.For those who wish to join this sun-bleached and sandy set, it is not too late to rent a place: options are still available in every price range. And this year they are down from prerecession heights, and owners are being more flexible on the lengths of rentals.Brokers said they were relieved to see a return to a “normal” market just one year after the post-Lehman summer of 2009, which some referred to as “catastrophic.” Some houses stood empty of renters all season long.“What a difference a year makes,” says Judi Desiderio, the president of Town and Country Real Estate. She described 2009 as the worst Hamptons rental season she had experienced in 28 years in the business. And she says her company has done three times the number of rentals it did last summer.
By Sarah Maslin Nir, July 1, 2010 NYT
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