Thursday, December 31, 2009

My New Year Video

Russia May Send Spacecraft To Deflect Astroid Away From Earth

Russia May Send Spacecraft To Knock Away Asteroid That Could Hit Earth

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VLADIMIR ISACHENKOV | 12/30/09 09:34 PM | AP

Russia Kazakhstan Space

MOSCOW — Russia's space agency chief said Wednesday a spacecraft may be dispatched to knock a large asteroid off course and reduce the chances of earth impact, even though U.S. scientists say such a scenario is unlikely.

Anatoly Perminov told Golos Rossii radio the space agency would hold a meeting soon to assess a mission to Apophis. He said his agency might eventually invite NASA, the European Space Agency, the Chinese space agency and others to join the project.

When the 270-meter (885-foot) asteroid was first discovered in 2004, astronomers estimated its chances of smashing into Earth in its first flyby, in 2029, at 1-in-37.

Further studies have ruled out the possibility of an impact in 2029, when the asteroid is expected to come no closer than 18,300 miles (29,450 kilometers) from Earth's surface, but they indicated a small possibility of a hit on subsequent encounters.

NASA had put the chances that Apophis could hit Earth in 2036 as 1-in-45,000. In October, after researchers recalculated the asteroid's path, the agency changed its estimate to 1-in-250,000.

NASA said another close encounter in 2068 will involve a 1-in-330,000 chance of impact.

Don Yeomans, who heads NASA's Near-Earth Object Program, said better calculations of Apophis' path in several years "will almost certainly remove any possibility of an Earth collision" in 2036.

"While Apophis is almost certainly not a problem, I am encouraged that the Russian science community is willing to study the various deflection options that would be available in the event of a future Earth threatening encounter by an asteroid," Yeomans said in an e-mail Wednesday.

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Without mentioning NASA's conclusions, Perminov said that he heard from a scientist that Apophis is getting closer and may hit the planet. "I don't remember exactly, but it seems to me it could hit the Earth by 2032," Perminov said.

"People's lives are at stake. We should pay several hundred million dollars and build a system that would allow us to prevent a collision, rather than sit and wait for it to happen and kill hundreds of thousands of people," Perminov said.

Scientists have long theorized about asteroid deflection strategies. Some have proposed sending a probe to circle around a dangerous asteroid to gradually change its trajectory. Others suggested sending a spacecraft to collide with the asteroid and alter its momentum, or hitting it with nuclear weapons.

Perminov wouldn't disclose any details of the project, saying they still need to be worked out. But he said the mission wouldn't require any nuclear explosions.

Hollywood action films "Deep Impact" and "Armageddon," have featured space missions scrambling to avoid catastrophic collisions. In both movies, space crews use nuclear bombs in an attempt to prevent collisions.

"Calculations show that it's possible to create a special purpose spacecraft within the time we have, which would help avoid the collision," Perminov said. "The threat of collision can be averted."

Boris Shustov, the director of the Institute of Astronomy under the Russian Academy of Sciences, hailed Perminov's statement as a signal that officials had come to recognize the danger posed by asteroids.

"Apophis is just a symbolic example, there are many other dangerous objects we know little about," he said, according to RIA Novosti news agency.


AP Science Writer Alicia Chang contributed to this story from Los Angeles.

Property Values In The US Could Drop 30% More Before We Hit Bottom

Property Values: The Numbers Still Say 30% Down 30% Left To Fall

2009 DECEMBER 30
by Michael David White

It’s very nice that values achieved a gain of .013% in October, but we still have a 30% fall ahead of us and, as you know, we have a 30% fall behind us. Better send in your mortgage payment.

The S&P/Case-Shiller Home Price Index released Tuesday is up 5.6% from April. Besides the movement up since April, the severity of the annual decline has steadily decreased in the last nine months.

October prices of real estate were down 6.4% from the previous year. January prices this year were down more than 19% from the year-earlier period.

“All in all, this report should be described as flat.” says David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s, the publisher of the index.

Average home prices are now equal to prices in Fall 2003. The headline estimate of a 30% fall still to come is based upon a trend line derived from data between 1987 and 2000. The presumption is that the values after 2000 are bubble values and that they should be excluded.

If you think this can’t happen, consider Las Vegas. They have naked dancing girls and values which are still up from January 2000. The gain is all of 5% from that time. Now that 5% up isn’t as good as it used to be over there. At one time our desert community swam in real estate appreciation of 135% from January 2000. Most professionals refer to the Vegas real-estate investment environment as whiplashy.

Some reality does break through the clouds of the economics profession. “Foreclosure and delinquency rates, which hit a record high at the end of the third quarter, are likely to continue to rise, perhaps sharply,” said Patrick Newport, US economist at HIS Global Insight, quoted in TimesOnline. “In addition to this, the inventory of homes for sale remains near record highs.”

Others think the bottom is done and we are moving up from here. “We would not be surprised to see some weakening in prices through the winter months, when demand is generally low and as distressed properties continue to get dumped onto the market,” wrote Michelle Girard, economist at RBS PLC, and quoted in the Wall Street Journal. “However, with every passing month it looks like the bottom in home prices has been put in.”

We are in a Goliath versus Goliath match. The multi-prong attack against falling prices by the United States government includes radical intervention via Fannie Mae, Freddie Mac, FHA, the home-buyer tax credit, the purchase of mortgage-backed securities, the purchase of treasury bonds, and the provision of an equity credit line at Fannie and Freddie — the mortgage monsters who will lose more money than any institution in the aftermath of the financial crisis.

Well, somebody might lose more in some version of an infinite loss in the derivatives market. Maybe Fannie and Freddie can come out ahead – of somebody? We may have even hit a bottom in real estate prices.

With interest rates at zero percent, the people who can borrow borrow for free. If major banks can borrow and it costs nothing, that’s a darn nice way to try to make money by borrowing and buying. Does anybody remember the word “leverage”? Our government policies have replicated the method of creating a credit bubble.

If real estate values don’t return to a norm, which predicts a huge fall, it means that a new breakable bubble is gathering strength. Fraud begets fraud. Only failure will end the fraud. Given the heroic effort required to quiet the current-crisis fear, the failure we are building up cannot be measured. It’s too big to count. Numbers don’t go that high.

Michael David White is a mortgage broker in Chicago.

3 Responses leave one →
  1. 2009 DECEMBER 31

    I see home prices dropping by only another 15% according to my calculations i posted on Economy page. Using historical data going back to the 1930’s

  2. 2009 DECEMBER 31
    Liam Palmer PERMALINK


    Nice article..except the basis for the trend. Sorry…don’t get it. There were two housing bubbles during the time you chose to use as “normal”…1989 and by 2000 there was a second bubble. In such a cyclical market you need a hypothesis to work off rather than just time series “eye balling” – try taking out inflation then trending gdp, earnings and leaving in the time series eyeball. Having done this for the UK I think you will find that illuminating, as well as giving a very clear view of what cheap looks like.


  3. 2009 DECEMBER 31
    zorland PERMALINK

    Your assessment seems fairly honest. I find that refreshing. So used to sales numbers and figures that I can’t tell you how much just a plain statement of facts. Makes it worth reading this. I will bookmark you.

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Wednesday, December 30, 2009

The British Heroin Dealer Executed In China

Some More Notes On The British Drug Dealer Executed In China

Wed 30 Dec 2009, 20:59 0 Comment(s)
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I got a response from readers about this story. I do not like the death penalty because it is always arbitrarily applied and there is a good chance that an innocent person will be executed.

On the other hand, if you commit a crime punishable by death in some other country, it is your sad luck then. You do not deserve special treatment because you are a foreigner from a country without capital punishment.

I am sure that the Chinese authorities gave serious consideration to the international implications of executing a foreigner for the first time in 50 years. I'm sure they were swayed somewhat by British Prime Minister Gordon Brown.

On the other hand, this man had 4 kilograms of heroni. Each kilo of heroin has a street value of $175,000 US (.In the US, one would face life in prison without parole for such a quantity of heroin.) Our British drug courier was carrying $550,000 US worth of drugs. One kilo of heroin will be cut up and diluted. It will offer thousands of doses to addicts. For centuris China was cursed by opium addiction. They have a lot of bad experiences with drug addiction.

I also believe the drug courier was offered leniency in return for a lighter sentence, if he informed on who gave him the drugs and who was supposed to buy it. His refusal to cooperate cost him his life, in the final analysis.

Predictions For 2010

It has been said that "the only thing constant is change." While this is true, the rate of that change is anything but constant. If you pause to reflect on how rapidly things are changing all around us, you will realize that momentum is building and the change is picking up pace.

While some may view this phenomenon with fear, I welcome it and believe that although difficult times are ahead, the accelerating change provides an opportunity to transition into a better societal structure. Not only will the economic and political breakdown clean the slate and allow for a better system to be built, but the rapidity of this change means that we may actually be able to see the changes manifest within our lifetimes. While this is exciting to think about, it makes predictions such as these a bit more difficult to pen.

I've managed to get about 8 of 10 right in the past few years, but admittedly did not anticipate how quickly or strongly the stock market would rebound in 2009. I was also early to predict that deflation would subside and inflation would materialize, although there are some signs of the coming storm.

Here are my 10 predictions or best guesses for what will transpire in 2010:

1. Deflationary Pressure Continues I know this may come as a surprise to gold investors, but I believe the U.S. and world economy will likely experience a continued deflationary dip during 2010. Banks are still not lending and the expansion of the monetary base is not keeping pace with the massive contraction in the credit markets. With the commercial real estate shoe yet to drop and a glut of production capacity, deflation is the more likely and immediate threat to the economy. I believe the Fed and government pull out all of the stops to fight the deflationary threat. With new consumer stimulus programs, tax rebates, government lending, pressure on the banks to lend and the printing presses running overtime, all of the newly-created money will eventually work its way into the system and as the velocity increases, deflation will subside and inflationary pressures will materialize. This could easily spiral out of control and lead to hyperinflation during 2011-2012, as no matter how confidently Ben Bernanke speaks of his abilities, once the money is created and flows into the economy it multiplies via fractional reserve banking and becomes very difficult to soak back up. So while I view widespread inflation as inevitable, I don't think it will happen in 2010.

2. Stock Market Rangebound I believe the plunge protection team will continue to support the stock market during 2010, although the growth will slow considerably. As stocks are mainly a cash market, the deflationary impact felt in the credit markets will have little impact on stocks. The market is due for a correction and there may be short volatile swings as investors lose confidence, but I think the market will end the year little changed (+/- 5%). The market is on life support, with a fat IV injection of liquidity via the government and Fed. Absent this meddling, the market would currently be much lower and I would be predicting new lows for 2010.

3. Fed Funds Rate to Remain Near Zero While many are anticipating a rise in rates during 2010, I believe the Fed will be forced to keep rates low due to deflationary pressures. Any rate increase would wreak havoc on the markets and this is the Fed's biggest fear. At most, a small increase could occur towards the end of 2010. Higher rates are certainly on the horizon, but I think we need to see much higher inflation before the Fed changes course.

4. Real Estate Prices Flat to Lower Real estate prices are likely to flat-line or decline during 2010. As real estate is heavily reliant on the rapidly-contracting credit market, deflation will trump any inflationary pressures created from the expansion in base money. There is an over-supply of housing and the high rate of foreclosures is likely to continue or increase during 2010. I believe real estate will be an excellent buy at some point in the next 5-10 years, but it is nowhere near a bottom yet.

5. Unemployment Remains High Officially-reported unemployment (U-3) will hang around 10% for most of 2010, but could rise to as high as 12% nationwide. Of course, true unemployment that counts marginally employed and discouraged workers is closer to 20% currently. Government will be the major source of any new jobs, as private enterprise and small businesses continue to struggle. Of course, any wealth or jobs the government claims to create is really just a wealth transfer and not true or sustainable growth.

6. U.S. Dollar Rallies, but Drops to New Lows by Year End With rates likely to remain near zero, I anticipate more dollar weakness during 2010. The Fed doubled the supply of base money during the past year, deficits are at record levels and Asian countries have already begun diversifying out of dollars. There have also beenreports suggesting Arab countries, China, Russia, Japan and France want to end oil dealings in dollars. If the dollar begins to lose its status as world reserve currency, look out below! The current bounce could continue a bit longer before the plunge, but by the end of the year the dollar index will be at or below 70.

7. Gold and Silver to Make New Nominal Highs While some are claiming gold has peaked, I believe gold is nowhere near a top and will reach a new nominal high between $1,300-$1,500 during 2010. Silver will outperform gold reaching $24 or higher as the gold/silver ratio dips towards 55. Remember, gold can perform well during periods of inflation or deflation. While I believe deflation is the greater threat during 2010, this will occur primarily in credit-based markets such as real estate. Cash-based markets such as precious metals are likely to experience inflation as record amounts of new money have been printed during the past year. Look for more central bank purchases during 2010, as well as significant purchases from China and other countries that are eager to diversify away from dollars. The gold/silver suppression story will continue to gain steam and with more and more investors demanding delivery, pressure will increase on shorts and COMEX regulators. There will be some type of rule change or restructuring at minimum and the potential for default is possible. Lastly, the Dow/Gold ratio will decline after bouncing in 2009.

8. Energy Prices to Push Higher With the strengthening economy, increasing demand from China and India, plus declining supplies, I expect energy prices to move much higher during 2010. Oil will trade most of the year in the $75-$100 range, but will break above $100 for some time. I think natural gas will generate even greater returns than crude oil as it bounces off oversold lows. In addition, I expect clean energy companies to rebound during the 1st half of 2010 and think lithium and rare earth miners will benefit from this trend.

9. Agriculture Prices to Rise Sharply One thing that is certainly not in over-supply is agriculture. With a very poor harvest season, lack of water in key agricultural areas and exploding demand from a growing middle class in China and India, I believe prices for many food items will shoot dramatically higher in 2010 and subsequent years. Investing in quality fertilizer companies should prove very profitable over the next few years.

10. More Bank Failures, Political Tension, Voter Discontent I anticipate more banks will fail during 2010, allowing the largest banks to scoop up smaller competitors at bargain prices. Tensions will increase in the Middle East and between the U.S. and China/Russia. A major attack will be attempted on U.S. soil, the electorate will turn against corporatist politicians of both parties and a third political party will begin to emerge. Faith in the political system will continue to wane causing a growing movement towards restructuring society under a better system. People will become less apathetic as government meddling and banker exploitation will finally begin to hit everyone in the pocketbook. Look for more frugality, local buying, community organization and a move towards becoming self-sustaining.

While many are fearful of the political and economic climate at the moment, I remain optimistic that the current crisis is a necessary cleansing of the system and will allow for the rebuilding of a better society. The transition will undoubtedly be difficult as jobs become scarce, prices rise and crime and civil unrest flourish. However, there are common sense steps that you can take to protect yourself and your family. Besides diversifying out of dollars, moving your money out of banks and owning precious metals directly, you should also consider becoming more self-sufficient, learning to garden, stockpiling food and supplies which might become scarce, continually educating yourself and encouraging others to stop supporting a failed ponzi-based system. As it collapses under the weight of its own hubris and corruption, there will be enormous opportunities to profit individually and collectively as a society. The better prepared we all are to weather the storm and facilitate the transition, the better our future promises to be.

Programs To Fight Home Loan FOreclosures Are A Failure

Billions to Fight Foreclosure, but Few New Loans

Published: December 29, 2009

They milled about the hallways of the cavernous State Supreme Court building in Jamaica, Queens — 42 homeowners whispering, studying old bills, waiting for a court officer to call their names and wave them, one by one, through a door.

Ángel Franco/The New York Times

Borrowers meet mortgage firm lawyers at State Supreme Court in Queens to revise loan terms, but few leave with new deals.

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There, in a dusty, high-ceilinged room with a steam radiator that never stopped wheezing, they took a seat across a table from a lawyer for a mortgage company. Then their work began: trying to persuade a stranger not to foreclose on their home.

The Obama administration’s plan to rescue Americans from foreclosure plays out day after day in rooms like this. On this day, as on most, nothing happened. One lawyer, visibly bored, put in a brief, token appearance. A few others seemed barely familiar with their cases. Another asked for more records, hinting that maybe next month the lender might talk about a settlement.

Ismail Ali, a silver-haired immigrant from Guyana, hoped to save his home in Ozone Park. “If it takes you another three months to evaluate me, and I keep paying, will I get a new mortgage?” he asked, almost pleading.

The lawyer shrugged, not unsympathetically. “I can’t answer that for you,” he said.

Ten months ago President Obama announced a $75 billion program to keep as many as four million Americans in their homes by persuading banks to renegotiate their mortgages. Lenders have accepted more than one million applications and cut three-month trial deals with 759,000 homeowners. But they have converted just 31,000 of those to the permanent new mortgages that are the plan’s goal.

In New York City, where 20,000 homeowners faced foreclosure this year, a recent study by the Center for NYC Neighborhoods found that lenders have offered new or trial mortgages to just 3 percent of the homeowners who have sought help.

Big mortgage companies — servicers, in the parlance of the industry — stand at the heart of this program. Many of the servicers that have agreed to participate are subsidiaries of the nation’s largest banks — Wells Fargo, Bank of America and JPMorgan Chase.

They say their performance is improving. “We ourselves stated that we fell short of our customer service goals,” said Mary Coffin, executive vice president for loan servicing at Wells Fargo. “Now we are doing three modifications for every foreclosure.”

But a drove of critics, including homeowners, nonprofit loan counselors, legal services lawyers and court officials, say these companies are also at the heart of the problem. Servicers, they say, pile delay upon delay, and too often steer homeowners into new mortgages with onerous terms. Some companies have insisted that homeowners waive their right to sue before getting a new mortgage, even though the Obama plan prohibits such demands.

Administration officials have vowed to shame servicers into action. And New York State lawmakers, like their counterparts in a few other states and cities, have tried to slow the headlong hurtle toward foreclosure by requiring lenders to negotiate with troubled borrowers in court.

Leonard N. Florio, a court-appointed referee, oversees such sessions in that dusty room in Queens. He is a chatty man and punctilious about not taking sides. But as he watched Mr. Ali, the Ozone Park homeowner, load his piles of bills and receipts back into his shopping bags, he could not help noting a pattern.

“I have yet to see an attorney for a servicer cut a deal,” he said. “Update this, update that. I mean, what’s the holdup?”

Loan servicers argue that homeowners are as often to blame: Many cannot show proof of income, and fail to make payments even on modified mortgages. And millions are in bigger trouble than the public realizes, burdened with monthly payments so exorbitant that even a reduced mortgage payment will not save their home.

The servicing companies make money either way. The Obama program pays them $1,000 for each loan modified, and another $1,000 per year for three more years if the borrower avoids foreclosure. On the other hand, the companies make large sums charging late and legal fees on overdue mortgage payments, and sometimes it is cheaper to foreclose than to cut the mortgage payment.

These same companies turned billions of dollars in profits during the fat years of the bubble. Four years ago, lenders strung banners from storefronts in Jamaica and Cypress Hills and Bedford-Stuyvesant, promising “You will not be turned down!” A no-documents-needed mortgage was easily obtained, often accompanied by the flimsiest of appraisals.

Now the lenders toss up daunting hurdles. Homeowners say they send and resend thick piles of documentation, only to be told that their papers have been misplaced, or that their pay stubs are out of date. Housing counselors dial a dozen times just to get a servicer on the phone.

“It’s a constant Catch-22: They never give you their name,” said Gerald Carter, a counselor with the Parodneck Foundation in New York City, which receives city and state money to advise homeowners. “You call back and say, ‘No, I was talking to Bob last time,’ but Bob wouldn’t give his last name — not even an employee ID number. So you start over.”

Last month, the Legal Aid Society of New York sued the federal government and a mortgage servicer, Aurora Loan Services, on behalf of four Queens homeowners. Aurora, which has a $116 billion loan portfolio, was a subsidiary of Lehman Brothers before that firm went bankrupt; it offered loans with interest rates just a bit lower than subprime rates, which are typically a few percentage points higher than rates on conventional mortgages.

The lawsuit charges that Aurora, and by implication many other servicers, systematically denied homeowners access to the federal rescue program. And, the lawsuit asserts, the Obama plan provides far too few safeguards for homeowners.

“The servicers ignore their obligations, and are throwing unaffordable agreements at people and setting them up for another default,” said Oda Friedheim, a staff lawyer with the Legal Aid Society.

Asked to respond, an Aurora spokeswoman e-mailed a statement saying the company tries to prevent foreclosure for its customers.

Tom Vellucci, 54, is one of the four plaintiffs in the lawsuit, and a soldier in this army of the potentially dispossessed. Once a maintenance man for an insurance company, with a modest home in Floral Park, Queens, he lost his health and then his job. When a tenant stopped paying rent, he fell behind on his mortgage. A so-called rescue firm offered to negotiate better terms and wheedled Mr. Vellucci and his wife, Maria, out of $8,000 in fees.

When the inevitable foreclosure notice arrived in March, the Velluccis called Aurora Loan Services and asked for a break. The company, he said, responded by piling on legal fees and giving them a four-month trial agreement that did not reduce their monthly payment.

The Velluccis say they drained their savings making payments. Then the couple asked Aurora if they could revise their mortgage terms under the Obama rescue plan. They say the company refused, saying their mortgage was not eligible because it was owned by investors.

Aurora makes a similar statement about investor-owned mortgages on its Web site. These claims are not true. The Obama program requires companies to make an effort to modify such mortgages.

Sitting on a bench in the Queens courthouse, where he has become a regular, Mr. Vellucci ran his fingers through thick black hair and shook his head. “We kept trying to pay on faith, all faith, so we could prove we were honest people,” he said. “Now all we look like is stupid.”

Phyllis Caldwell, chief of the Treasury Department’s Home Ownership Preservation Office, is not inclined toward tough talk about servicers, perhaps because the Obama plan, which she oversees, lacks enforcement teeth. Asked about Aurora’s refusal to consider modifying investor-owned mortgages, she suggested a reporter call the program’s compliance unit.

“If it is reported in The New York Times and someone chooses to audit it, that’s important,” she said.

She sees a brighter day coming. “We are holding the servicers accountable to report to us,” she said. “They are being much more transparent.”

For now, however, the Velluccis and thousands like them dangle perilously close to calamity.

Born in Italy, Mr. Vellucci and his wife migrated here as teenagers. They raised children, bought a house, lived their dream in Technicolor. Then his kidney gave out and their economic slide began. After court on this day, he would go for dialysis. The couple hope the lawsuit might give them one more shot at the Obama plan.

“I don’t sleep at night, I don’t sleep at all,” he said, rising slowly. “I tell Maria, ‘If we lose the house, I want to stop my dialysis.’ I want to die, honestly.”