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    Daily Digest – May 17

    by Davos

    Sunday, May 17, 2009, 3:37 PM

  • US prices fall most since 1955
  • Awesome interactive map of job losses (H/T CM)
  • Not So Shovel-Ready Projects?
  • Road Work and ASPHALT
  • Construction Today, Asphalt and Oil
  • EWI Dollar Video
  • The Bailout Bubble – The Bubble To End All Bubbles…
  • Green Shoots, Google Trend, Chart
  • Zillow: High Percentage of Homeowners Waiting for a Market Turnaround
  • Foreclosures(H/T CM)
  • Shelters in NY charge homeless families, pay or get out!
  • TARP USA Interactive Map
  • NY Times Economics Reporter: "My Personal Credit Crisis"
  • Steve’s economic forum (H/T KemoSavvy)
  • "The Worst Is Yet to Come": If You’re Not Petrified, You’re Not Paying Attention (Video on page, Repost, H/T CM)
  •  A few A(H1N1) Links Dr. Henry Niman’s Map 6,031 U.S. Cases as of this wrtitng, A(H1N1) Current Timeline, CDC Cases 


US prices fall most since 1955 

But core prices, which exclude food and energy and are the measure by which economists judge the risk of general deflation, rose by 0.3 per cent from March and were 1.9 per cent higher than in April 2008. More than 40 per cent of the monthly increase, however, was due to a 9.3 per cent jump in the price of tobacco which has been driven by a government tax that recently took effect.

Awesome interactive map of job losses (H/T CM)

The economic crisis, which has claimed more than 5 million jobs since the recession began, did not strike the entire country at once. A map of employment gains or losses by county tells the story of how those job losses first struck in the most vulnerable regions and then spread rapidly to the rest of the country. As early as August 2007, for example—several months before the recession officially began—jobs were already on the decline in southwest Florida; Orange County, Calif.; much of New Jersey; and Detroit, while other areas of the country remained on the uptick.

Not So Shovel-Ready Projects? 

Reader John L tells us that, at least in Vermont, shovel-ready projects aren’t as ready to go as the very nature of the term would suggest. The Wall Street Journal described some reasons for delay back in March:

It turns out, though, that shovel-readiness is in the eye of the beholder. Soon after his visit, Mr. Biden found out that his model stimulus project wouldn’t see a shovel for almost four more months, possibly longer, knowing how such timetables slip….

States are quickly assembling their construction wish lists. But it takes time to advertise for contractors, collect bids, check the numbers, pick a winner and get work underway. A typical paving project — easy roadwork — takes close to three months from the time the money is approved to the arrival of work boots on the ground, according to the American Association of State Highway & Transportation Officials. "It is not an instant process," says a spokesman.

However, an additional complicating appears to be the vagaries of the bidding process. John L describes the local situation:

I was talking with a construction firm that was supposed to oversee a large ($9 million) civil project in VT.

The bids on the project came in and there were 2 that were below $7 million. The $9 million was the engineers estimate. Take 20% off that, and that is roughly the cost of the work for the contractor, or $7.2 million. So the bids came it below what the costs for the project were likely to be.

This situation is very bad. The municipality does not want to let the work out if the contractor is going to go broke during the project, even with bonding it is a royal mess to have a contractor go bust in the middle, and to get someone else to go in and finish it is even harder. At the same time, getting rid of low bidders on government projects is very difficult. Lots of lawyers and obscure bidding laws, but it is possible to not let the job to the lowest bidder. It depends on law mostly, but smaller municipalities will usually throw out the entire bidding process, and start over in a few months. This is a simplification of the process, obviously. Lots of law behind the scenes that I only have seen in practice.

I have hear this is happening a lot, all of the "shovel ready" projects are not going anywhere because of bidding problems. This particular project was in a small town in VT, dig up main st and replace all of the water, sewer and gas line, and then re-do the entire road and drainage, as well as sidewalks. Very good work for a stimulus, lots of labor, as compared to say a new road.

The construction season is relatively short in the Northeast. If it doesn’t get started soon, it will have to wait till next year.

I wonder if this is a sign of how desperate some contractors are, that they will put a bid that is bare minimum because they really need the work, and are too optimistic about what it will take to get it done (ie, they implicitly assume everything will go right, which never happens). This may just be a local fluke, but John L suggests it is broader based. I’d be curious if any readers have insights into this, or the more general question of whether these projects are moving forward as fast as hoped.

Road Work and ASPHALT

On average, about 5,500 barrels of liquid asphalt are needed per mile of paving…[emphasis added, mine]

Construction Today, Asphalt and Oil

Generally speaking, asphalt requires about 8,981 gallons per mile (GPM) for production and 1,737 GPM for hauling and placement. [enphasis added, mine]

EWI Dollar Video

The Bailout Bubble – The Bubble To End All Bubbles…  

"All of this terminology is econo-jargon," said Celente. "It’s like calling torture ‘enhanced interrogation techniques.’ Washington is inflating the biggest bubble ever: the ‘Bailout Bubble.’ "This is much bigger than the Dot-com and Real Estate bubbles which hit speculators, investors and financiers the hardest. However destructive the effects of these busts on employment, savings and productivity, the Free Market Capitalist framework was left intact. But when the ‘Bailout Bubble’ explodes, the system goes with it."

Green Shoots, Google Trend, Chart

Zillow: High Percentage of Homeowners Waiting for a Market Turnaround (Chart on page) 

Press Release: Homeowner Confidence Shrinks; Most Americans Now Believe Their Home’s Value Has Declined (ht broward, Jonathan)

The following table gives an idea of the number of homeowners waiting for a market turnaround to sell. Since about 6% of owner occupied properties turnover per year, this is a substantial shadow inventory.

On shadow inventory:

As for selling activity, it’s clear a significant number of potential sellers are holding back due to the current market. When asked about future plans to sell, 31 percent of homeowners said they would be at least "somewhat likely" to put their homes on the market in the next 12 months if they saw signs of a real estate market turnaround.

"Also interesting is the information we have for the first time this quarter on the levels of ‘shadow inventory’ – homes that people would like to sell but that aren’t currently on the market, and thus aren’t captured in the official number of homes on the market. With almost a third of homeowners poised to jump into the market at the first sign of stabilization, this could create a steady stream of new inventory adding to already record-high inventory levels, thus keeping downward pressure on home prices." [said Dr. Stan Humphries, Zillow’s vice president of data and analytics].

Foreclosures(H/T CM) 

Lenders receiving U.S. government stimulus money are required to offer distressed homeowners reasonable loan workouts to prevent more foreclosures. But critics say that’s often not happening.

Claiming lenders aren’t working with borrowers, Weston attorney Jonathan Kline is in state court trying to block the first of dozens of foreclosure cases.

Kline has asked judges to dismiss or delay about 10 cases. He argued the lenders — including Bank of America, which now owns Countrywide; Wells Fargo, which owns Wachovia; and Washington Mutual, now owned by JP Morgan Chase — are not complying with the Emergency Economic Stabilization Act of 2008, the bailout bill that originally authorized the Treasury Secretary to spend $700 billion to purchase distressed assets of the largest U.S. banks.

“In many of these cases the bank is not responding to modification requests or they are saying something like, ‘send us two payments and we will consider a loan modification,’ and when it comes time to modify the loan they lower the payment by $100,” Kline said.

“Some of these banks are offering Band-Aids where surgery is required,” he added.

Shelters in NY charge homeless families, pay or get out! 

The Bloomberg administration has quietly begun charging rent to homeless families who live in publicly run shelters. A flier posted in one shelter last week warned residents in bold, underlined type, “Failure to make the required contributions could result in the loss of your family’s temporary housing.”

City officials said the new rent requirement had been in the works since a 2007 state audit that forced them to pay back $2.4 million in state housing aid that should have been covered by homeless families with income. They argued that homeless people with income should be expected to pay for a portion of their shelter costs, a model that echoes the federal Section 8 housing voucher program.

“They are taking money from them that could otherwise be used to help themselves get out of the shelter system,” agreed Arnold S. Cohen, the president and chief executive of the Partnership for the Homeless. “We’re dealing with the poorest people, the people who are the most in need, and we’re asking them to pay for a shelter of last resort.

“Families have been told to pay up or get out,” said Steven Banks, the attorney in chief for the Legal Aid Society. “The policy is poorly conceived, but even more alarmingly, it’s being poorly executed. What is happening is that we have seen cases of families being unilaterally told, without any notice of how the rent was calculated, that they must pay certain amounts of rent or leave the shelter..

Source: New York Times

TARP USA Interactive Map

NY Times Economics Reporter: "My Personal Credit Crisis"

From Edmund Andrews at the NY Times: My Personal Credit Crisis

If there was anybody who should have avoided the mortgage catastrophe, it was I. As an economics reporter for The New York Times, I have been the paper’s chief eyes and ears on the Federal Reserve for the past six years. I watched Alan Greenspan and his successor, Ben S. Bernanke, at close range. I wrote several early-warning articles in 2004 about the spike in go-go mortgages. Before that, I had a hand in covering the Asian financial crisis of 1997, the Russia meltdown in 1998 and the dot-com collapse in 2000. I know a lot about the curveballs that the economy can throw at us.

Both Tanta and I linked to articles by Andrews over the years, and I’m amazed by this story …
But in 2004, I joined millions of otherwise-sane Americans in what we now know was a catastrophic binge on overpriced real estate and reckless mortgages. Nobody duped or hypnotized me. Like so many others — borrowers, lenders and the Wall Street dealmakers behind them — I just thought I could beat the odds.

Patty [his new wife] discovered a small but stately brick home in a leafy, kid-filled neighborhood in Silver Spring, Md. We sent in an offer of $460,000 and one day later got our answer: the sellers accepted.

The only problem was money. Having separated from my wife of 21 years, who had physical custody of our sons, I was handing over $4,000 a month in alimony and child-support payments. That left me with take-home pay of $2,777, barely enough to make ends meet in a one-bedroom rental apartment. Patty had yet to even look for a job. At any other time in history, the idea of someone like me borrowing more than $400,000 would have seemed insane.

But this was unlike any other time in history. I won’t spoil the story, but it should be obvious the numbers don’t work...

Steve’s economic forum (H/T KemoSavvy) 

Davos, I should probably forward along the "Two Beers With Steve" shows once we get them edited but I always forget. Anyway, here is the RSS feeds http://twobeerswithsteve.libsyn.com/

There are three shows worth checking out:

1. The Lowesville Seminar recap with members of the site who went.

2. The first BioDiesel episode with expert Graydon Blair (the macroeconomics of BioDiesel)

3. The second BioDiesel episode with expert Graydon Blair (the microeconomics of Biodiesel)

The Biodiesel episodes are loaded with great info and worth a listen. We are taping another episode this Sunday on Biochar with Steve Brick and possibly Johannes Lehman (the worlds leading researcher on BioChar) if he can make it.

Add this to your post anyway in which you like,


 A few A(H1N1) Links Dr. Henry Niman’s Map 6,031 U.S. Cases as of this wrtitng, A(H1N1) Current TimelineCDC Cases

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