Saturday, May 31, 2008

The Coming Consumer Credit Crisis

The Credit Crisis is FAR from over!

Interview with Meredith Whitney of Oppenheimer and Co.: Securitization Has Dried Up, Consumers Face Liquidity Crisis



Video above corrolates nicely with the post I put up last weekend: Credit Card Credit Lines to be cut in half by 2010


Randy

OPEC and the Dollar Peg

As I've pointed out in the past, the 1974 US-Saudi Arabian Joint Commission on Economic Cooperation established the Dollar as the sole Monetary Instrument for the purchase of oil through OPEC and this action reaffirmed the US Dollar as the World's reserve currency after the years of currency turmoil brought about by Nixon yanking the gold-dollar peg in 1971.

This agreement has allowed the US Dollar to flourish for many years, as countries who needed oil had to earn or borrow dollars to buy oil and trillions of these Petrodollars were eventually recycled through New York and London banks -- allowing for the creation of new credit, holding dollar interest rates lower than they would have been otherwise, and helping to expand our credit/debt bubble economy.

I have also pointed out that: (with the exception of IRAN and mainly due to inflation pressures internal to their domestic economies: 1) Vietnam removed their dollar peg; 2) IRAN (an OPEC Nation) no longer accepts US Dollars for oil and opened their own Oil Bourse this year; 3) Kuwait (an OPEC Nation) has pulled their dollar peg; 3) Venezuela (an OPEC Nation) has been very vocal about moving to price oil in other currencies.

Well, the OPEC rhetoric is heating up:

U.A.E., Qatar May Drop Dollar Pegs Within Months

May 26 (Bloomberg) -- The United Arab Emirates and Qatar could abandon their currency pegs to the U.S. dollar in favor of a basket of currencies within months, and Saudi Arabia may follow the move late next year, The National said, citing a Merrill Lynch & Co. report.

Gulf states have been under pressure to drop their dollar pegs after inflation hit record levels. Kuwait dropped its currency's peg to the dollar last May, but others have all kept their links, citing the need to keep currencies fixed until they form a monetary union in 2010, and the limited inflationary impact of the weak dollar.

The heat is on, so today Henry Paulson, US Treasury Secretary and leader of the US Plunge Protection Team, met with Saudi's Finance minister to reiterate his typical B.S. propaganda about supporting a "Strong Dollar" and publicly stated that any dollar-peg transition would be a "sovereign" decision... Yea right! I wonder what is stated behind closed doors?

Paulson says strong dollar in US interest, Saudi peg 'sovereign decision' UPDATE

JEDDAH Saudi Arabia - US Treasury Secretary Henry Paulson reiterated his support for a strong dollar today after meeting with Saudi Arabia's finance minister, but he also said the decision on whether to maintain the Saudi currency's dollar peg is entirely up to that country's government.

Asked about increasing talk that Saudi Arabia and other Persian Gulf countries might decide to remove their currency pegs to the dollar, given the effects of its plunge, Paulson signalled the US would not try to deter them.

'That is a sovereign decision,' Paulson said, adding, 'the dollar peg I think has served this country and this region well.'

On the same question, Saudi Arabia's finance minister Ibrahim al-Assaf said 'We have no intention of de-pegging or revaluation.'

Well folks, as I see it, it's only a matter of time. We have very few barganing chips left and our geopolitical goodwill is completely shot. When the dollar peg is eventually removed and then when oil is priced against a "basket" of currencies vs just the dollar, we'll be praying for the God-send of $4 gal gas.

Hold on to your hats!

Randy

Friday, May 30, 2008

New Overdue Home Loans Swamp Effort to Fix Defaults


Regardless of what the shills are saying, now is NOT the best time to buy a home. Sit tight and watch as home prices continue to plummet -- and eventually fall through 2000 price levels.

Why? Mortgage resets and the credit crisis -- less credit for new borrowers causing foreclosures to rise, inventories to build and prices to fall.

New Overdue Home Loans Swamp Effort to Fix Defaults (Update3)

May 30 (Bloomberg) -- Newly delinquent mortgage borrowers outnumbered people who caught up on their overdue payments by two to one last month, a sign that nationwide efforts to help homeowners avoid default may be failing.

In April, 73,880 homeowners with privately insured mortgages fell more than 60 days late on payments, compared with 39,584 who got back on track, a report today from the Washington-based Mortgage Insurance Companies of America said. Mortgage insurers pay lenders when homeowners default and foreclosures fail to cover costs.

Foreclosure filings surged 65 percent and bank seizures more than doubled in April compared with a year earlier as rates on adjustable mortgages increased, according to RealtyTrac Inc. Lawmakers and Federal Reserve officials are trying to ease the worst U.S. housing slump since the Great Depression through tax rebates, expanded federal mortgage insurance and other programs.

``It's going to take a while before you see the impact of the government's plans, if you can even see a discernable one,'' Steve Stelmach, an insurance analyst at Friedman, Billings, Ramsey Group Inc. in Arlington, Virginia, said in an interview.

In April, a record 183,000 homeowners were able to work out new borrowing terms with lenders and avoid foreclosure filings, according to the Hope Now Alliance, a mortgage industry coalition formed last year at the urging of U.S. Treasury Secretary Henry Paulson.

`Getting Worse'

The same month, foreclosure filings were reported on more than 243,000 properties, a 65 percent increase compared with April 2007, said Irvine, California-based data provider RealtyTrac. One in every 519 U.S. households is in some stage of the foreclosure process, RealtyTrac said.

The Hope Now program has so far proven insufficient, Sandra Braunstein, the head of consumer and community affairs at the Fed, told the Conference of State Bank Supervisors at a meeting in Florida last week.

The mortgage crisis ``is bad and it's getting worse,'' Braunstein said, repeating the central bank's plea for lenders to consider forgiving portions of mortgages.

Last month's 54 percent ``cure ratio'' among defaulted mortgages compares with 80 percent a year earlier and 87 percent in March. Comparisons with previous months may not be valid because one lender changed the way it calculated defaults and cures reported to the insurers.

Mortgage insurers say they've raised prices and stopped selling policies to the riskiest borrowers or covering loans in areas such as California and Florida with the highest default rates.

The value of new mortgages privately insured by borrowers rose 12 percent from April 2007 to $19.4 billion last month, according to the mortgage insurance group, even as the number of policies issued fell 27 percent to 108,322. The top three mortgage insurers have lost more than four-fifths of their market value in the past year as the housing recession deepened.

The Senate Banking Committee last week approved legislation to create a program at the Federal Housing Administration to insure as much as $300 billion in mortgages for struggling borrowers after lenders agree to reduce the loan amounts.

Modifications

``Modifications are not occurring nearly at the numbers necessary to stem the foreclosure crisis,'' Allen Fishbein, housing director for the Consumer Federation of America in Washington, said in a May 19 interview. ``People are still going into foreclosure when, with a writedown on existing principal, they could still stay in their homes.''

Part of the problem is that so many of the loans were securitized, making it difficult to determine who has the legal authority to modify them, or even who owns them, Fishbein said.

About 90 percent of subprime loans have been bundled into securities, according to Inside Mortgage Finance, a Bethesda, Maryland-based industry newsletter. Borrowers with subprime mortgages, which were available to those with poor credit histories, are behind in their payments at more than five times the rate of prime mortgage borrowers, according to the Washington-based Mortgage Bankers Association.

Falling Prices

The median home price fell 8 percent compared with April 2007, a report last week from the National Association of Realtors said. Falling prices increase the odds of homeowners walking away from their property while decreasing lenders' chances of recouping their costs by seizing the property, ultimately leading to higher mortgage insurance claims.

The three largest mortgage insurers, Milwaukee-based MGIC Investment Corp., Walnut Creek, California-based PMI Group Inc. and Philadelphia-based Radian Group Inc. lost money in some or all of the past three quarters as they paid more claims and boosted reserves for future losses.

Standard & Poor's last month cut the claims-paying ratings on PMI's mortgage insurance units in the U.S. and Europe to A+ from AA. S&P also downgraded MGIC and Radian, citing the prospect of underwriting losses for all three until 2010.

Local Banks Effected by Las Vegas Real Estate Crisis

LV bank shuts down - Nevada officials say voluntary closing a first for state

A Las Vegas bank voluntarily shut its doors in late April due to worsening economic conditions, a first for Southern Nevada's usually vibrant banking community. Fifth Street Bank had been operating for about a year before bank officers decided to notify depositors and state officials of the decision.Neither state regulators nor bank Chief Executive Officer Philip LaChapelle knew of any instance in which a bank had voluntarily closed, although bank regulators periodically take over and shut down failing banks.

The bank was finding it increasingly difficult to find borrowers with good credit.

Fifth Street used short-term, variable rate deposits to make long-term fixed-rate loans, according to two other bankers, who spoke anonymously.


Silver State Bancorp reports $14.4 million first-quarter loss

Silver State Bancorp of Henderson reported a $14.4 million first-quarter loss because of problem loans, which reversed net income of $5.6 million, or 39 cents per share, a year ago.

Silver State charged off $9.7 million in loans and counted $78 million in nonperforming loans. About two-thirds of Silver State’s loan portfolio is construction and land loans, and those loans account for approximately 82% of the company’s $78 million in nonaccrual. Nonperforming loans represented 4.8 percent of outstanding loans, compared with 0.01 percent a year ago. The company related the increase of bad loans to project delays on residential construction and land loans.

The other two publicly traded banking companies headquartered in Southern Nevada, Community Bancorp and Western Alliance Bancorporation, also are struggling with problem loans because of the local economic slump.

Silver State Bancorp Announces Resignation of Douglas E. French, Executive Vice President

Silver State Bancorp (Nasdaq: SSBX) today announced the resignation of Douglas E. French, Executive Vice President of Commercial Real Estate Lending, for personal reasons.


First National bank of Nevada posts $7.3 million loss

The real estate bust is hammering banks in the state, but First National Bank of Nevada, an affiliated bank in Arizona and their holding company are getting dinged more than most.

"A number of other financial institutions are facing the same issues, and we are doing the same things that other financial institutions are doing," said Joel Gottesman, executive vice president and chief administrative officer of the banks.

First National's banks are working to raise capital and reduce the size of the balance sheet, he said.

First National Bank Holding Co., a $4.6 billion-asset company based in Scottsdale, Ariz., reported a first-quarter loss of $140.4 million, compared with profit of $9.1 million last year, according to the Federal Deposit Insurance Corp.

Most of that stemmed from its $2.8 billion-asset First National Bank of Arizona, which reported $131.3 million in first-quarter losses compared with profit of $1.8 million in the first period last year.

Nonaccrual loans at the Arizona institution totaled $260 million, compared with $50 million a year ago.

Bankers classify loans as nonaccrual when the borrower has defaulted on interest or principal payments or is expected to default.

The $1.6 billion-asset Nevada bank employs 210 workers at 11 branches around the state. The Nevada institution reported a first-quarter loss of $7.3 million, compared with $6.8 million in profit in the same period last year.

Problem loans weighed on the Nevada bank's performance. It reported $62.1 million in nonaccrual loans, compared with $231,000 in nonaccrual loans at the end of the first quarter last year.

Looked at another way, nonperforming loans and loans more than 90 days past due equaled 4.28 percent of total assets at the Nevada bank, up from 0.61 percent at year-end and a miniscule 0.02 percent a year ago.

At the Arizona bank, nonperforming loans and loans 90 days past due totaled a 10.92 percent of assets, which bankers privately call staggering.


Closing Thoughts:

This housing/credit crunch ball-game has just started, so I expect to see several more Nevada banks fail within the next 12 months.

Randy

The Oil Problem, Part II

Excellent article by J. R. Nyquist posted over at Financialsense.com (a couple of snippets below)

The Oil Problem, Part II

It may be argued that Federal Reserve policy is responsible for a commodity bubble, just as Fed policy previously sparked bubbles in the stock market and real estate. Perhaps we are approaching the hour in which there are no safe havens because every haven has, in turn, been “bubbled.” Is the civilized world about to suffer the greatest, most total “correction” in economic history? As our civilization has lost its sense of reality, its taste for truth, recent economic growth may have been more fictional than real. We think there is money in our pension funds. We imagine that our homes are worth twice their previous value. We believe our stocks and bonds are worth holding onto. But thinking, imagining and believing in wealth doesn’t make it real. Perhaps we are on the brink of the greatest revaluation of economic values in all history. And it’s all connected to oil.

Consider the fate of the dollar: If the dollar is doomed, what will replace it? Perhaps the new global currency is the hydrogen bomb. As the free world is shaken the dictators arise. In their world power isn’t measured in dollars. It is measured in missiles, bombs and guns. Someone recently suggested that the Fed won’t exist in a decade. Perhaps the Fed won’t next year. If oil prices continue to rise, if the recession worsens, if the red flags indicating defaults on car loans, housing loans and credit cards plays out: we will be living in a different world come January 2009.

How quickly we have forgotten, and how quickly we congratulated ourselves at getting out from under the stock market debacle of 2000 and the financial hit of 9/11. What we managed, I suspect, was a postponement. More recently the Fed spent half a trillion in support of teetering financial institutions; and American citizens are losing billions more in higher gasoline prices. To avoid catastrophe we have weakened our currency. And now we’re at the end of the tether.

The addiction to easy money comes to grief, as all addictions do. Yet there’s been no panic, no crash, no Great Depression. Instead, a giant pillow has been applied to the financial sector, smothering the gasping victim quietly. We cannot let the air out of the Great Bubble. We forget that one must exhale as well as inhale. And so we continue to suffocate. The dollar will continue to fall and oil will continue to rise.

Thursday, May 29, 2008

Absolutely Staggering Housing Chart!

May 29th - Economist.com

America's house prices are falling even faster than during the Great Depression



AS HOUSE prices in America continue their rapid descent, market-watchers are having to cast back ever further for gloomy comparisons. The latest S&P/Case-Shiller national house-price index, published this week, showed a slump of 14.1% in the year to the first quarter, the worst since the index began 20 years ago. Now Robert Shiller, an economist at Yale University and co-inventor of the index, has compiled a version that stretches back over a century. This shows that the latest fall in nominal prices is already much bigger than the 10.5% drop in 1932, the worst point of the Depression. And things are even worse than they look. In the deflationary 1930s house prices declined less in real terms. Today inflation is running at a brisk pace, so property prices have fallen by a staggering 18% in real terms over the past year.

Economic Funnies









Tuesday, May 27, 2008

Airlines: More problems for Las Vegas Strip

Fewer Flights to Las Vegas may mean fewer tourists and pain for resorts


The nationwide economic downturn, combined with extremely high fuel prices and declining profit margins, has caused five airlines with services to/from Las Vegas to file for bankruptcy or cease operations since December. Additionally, US Airways recently announced it would reduce flights servicing the valley by some 20% come August, while American stated it would cut some flights after the peak season is over.

All this bad news leads to less airline competition and fewer available seats, that when combined with new fuel surcharges and luggage fees will soon put an end to cheap flights to and from Las Vegas -- reducing the number of tourists visiting and cutting into the discretionary budgets of those who decide to come anyway -- compounding the situation we're already starting to see:

- Gaming revenue falling
- Casino layoffs starting
- State tax revenue down 9%

"It wouldn't surprise me to see a lot more capacity drawbacks in Vegas over the next year," said Darryl Jenkins, former director of the George Washington University Aviation Institute. "This isn't an economic cycle. This is a cost increase. It is the worst one any of us have ever seen."

Though Las Vegas was able to thrive in previous economic downturns, I believe this one is very different and our non-diversified gaming economy, which is completely reliant on the discretionary spending of vacationers, will get hammered this time around.

The Las Vegas Economic Downturn Has Started

Economic Troubles Affect the Vegas Strip

Regards

Randy

Monday, May 26, 2008

More writedowns on the way?

Consumer Confidence and New home sales data will be released tomorrow (10:00 EST)... This data could make for a very interesting day, as consumer confidence is already at a 15 year low and new home sales (viewed as a leading indicator of the housing market) hit a 17 year low last month... I expect any lower indications tomorrow to possibly roil the financials once again.

Markets: Tough Days

US shares had their largest weekly fall in almost four months last week as investors rediscovered the real US economy and realised the credit crunch and housing slump had not somehow been vanquished by the rescue of Bear Stearns in March.

And that will be bad news for market sentiment here were a 1% fall has been tipped on the futures market.

Worryingly, the big drivers of Friday's 146 point fall on the Dow were the likes of Lehman Brothers, Morgan Stanley and Merrill Lynch; the big, troubled investment banks that had stabilised in the wake of the rescue of Bear Stearns by the US Federal Reserve. Goldman Sachs dropped for a ninth day in a row.


UBS warns of more losses

LONDON (MarketWatch) -- UBS on Monday warned that that it may have to record losses on non-U.S. real estate as it seeks nearly $16 billion from shareholders to repair a dented balance sheet.

UBS last week said it's going to sell $22 billion of subprime and Alt-A U.S. residential-mortgage-backed securities to BlackRock for $15 billion, with UBS providing the fund manager an $11.25 billion loan in the process.

But as the subprime troubles cool down, others have sprung up. UBS's exposure to auction-rate securities, used mostly in municipal financing, increased to 11 billion francs ($10.7 billion) from 6 billion francs during the first quarter.

UBS said its loss-making positions in real estate markets outside the U.S. "could increase," the Swiss bank said in the prospectus.

All told, UBS has taken about $19.2 billion in write-downs and losses to an $82.6 billion portfolio of securities tied mostly to the U.S. housing market.

UBS already has issued 13 billion francs of convertible notes to sovereign wealth funds in Singapore and a Middle Eastern country it hasn't named. It's now selling 16 billion francs of stock to existing shareholders at a 31% discount to Wednesday's close.

Shares of UBS, which on Tuesday will trade without subscription rights, dropped 5.8% in Swiss action and are down more than 60% over the past 12 months.


Writedown bug could bite Lehman

The brokerage firm's accounting is back under scrutiny.

Lehman Brothers has some explaining to do (My thought: The next Bear Stearns?).

Shares of the big brokerage firm have dropped 13% over the past three days amid renewed questions about the health of Lehman's balance sheet. The setback comes just over a month after finance chief Erin Callan led a public relations blitz that aimed to dispel worries about Lehman's financial standing following the collapse of rival Bear Stearns. Callan's efforts were aided by a surprisingly solid first quarter earnings report and a $4 billion preferred stock sale that was strongly oversubscribed.

But David Einhorn, the manager of the Greenlight Capital hedge fund, reopened the case against Lehman in a speech Wednesday. Einhorn, who along with any number of other value-oriented, long/short hedge fund managers is short Lehman, says the firm hasn't taken sufficient writedowns on its $6.5 billion collateralized debt obligation book to account for the sharp decline in the value of this sort of paper. Einhorn laid out his argument in a speech at the Ira Sohn Investment Research Conference.

A Lehman spokesman declined to comment, although the firm has made clear that it dismisses Einhorn's claims root and branch because of his short position.

But based on price-checks in the secondary market, Einhorn appears to have a good point. It seems highly unlikely that the $200 million in writedowns Lehman took in the first quarter - representing just 3% of the CDO portfolio's value - begins to account for the hit that this paper would take were it to come to market.

The CDOs Einhorn is scrutinizing include various asset-backed securities, primarily auto- and credit-card loans, with some small business and franchise loans. There is no mortgage-bond exposure in these CDOs, but that's not to say the bonds are pristine. About 25% of the portfolio, or $1.62 billion, is rated noninvestment grade, with ratings of BB-plus or below.

Not to put too fine a point on the matter, but merely finding a buyer for a $1.62 billion portfolio of sub-investment grade loan CDOs would be an achievement in this market. There is, in fact, an excellent chance that no buyers exist for these securities, given the apparent problems with the underlying collateral. Portfolio managers in contact with Lehman's own trading desks told Fortune that the firm appears to value such "scratch and dent" loans held by other firms at deeply discounted levels, with no guarantee that the Lehman desks would even bid on this paper themselves.

All that said, two dealers say a reasonable bid, could one be found, might be 10 cents on the dollar. That suggests Lehman could be looking at a writedown of more than $1 billion on this portion of its holdings alone.

To be fair to Lehman, the rest of the portfolio isn't nearly as problematic. Still, these CDOs - nearly $5 billion worth - could also be subject to discounts beyond the 3% Lehman seems to have decided on, and the discounts will only get deeper if the rating drops lower.

Of course, according to its 10-Q filing, at the end of the first quarter Lehman had $786 billion in total assets. So the decision of whether to write down a billion dollars or two could easily fall short of materiality. But it's nearly impossible to carry off an argument that the 3% haircut Lehman has taken so far on its $6.5 billion portfolio is remotely adequate. Were Lehman to seek a buyer for the entire portfolio at once, a bid of 50% of face-value might be generous. Whatever Einhorn's motivation, it appears clear that the firm's investors would do well to brace for at least one more round of asset writedowns.

Memorial Day

Let us not forget the reason for this holiday that we enjoy today.

Regardless of piss-poor national leadership and fiscal policy, many of our patriots have died and will continue to die supporting our way of life... It's really too bad many of them don't even understand what it's all about. May God bless them all!






Glenn Beck: Cooked Books on Inflation Numbers

The real rate of inflation is a big unspoken Gvt lie, but the Gvt is in bed with the bankers and coorporations who grew up around us... We were warned however (below).

"If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation,(i.e., the "business cycle") the banks and corporations that will grow up around them will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered." Thomas Jefferson, President of the United States 1801-1809

"When a government is dependent upon bankers for money, they and not the leaders of the government control the situation, since the hand that gives is above the hand that takes. Money has no motherland; financiers are without patriotism and without decency; their sole object is gain." Napoleon Bonaparte (1769-1821) French emperor

"It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning." Henry Ford (1863-1947) Founder of Ford Motor Company

" The banker's credit money system is now everywhere as are their resultant unsustainable debts; and those who profit by that system, the bankers (and the corporations that grew up around them) now control the media, the political process, and the agencies charged with overseeing and regulating the economy - the US Federal Reserve Bank, the SEC, the US Treasury, and indeed the US government itself: the Presidency, the Congress, and the Supreme Court." Dr. Darryl Robert Schoon, Economist/Author


Sunday, May 25, 2008

Energy Expert: Gas could reach $15 gal

Robert Hirsch says that gas could reach $15/gallon within a few years because it is “essentially certain” the world has reached the maximum levels of oil production.

“The problem is that there’s not that much oil left in the ground,” Hirsch says. “What we’ve done is been very fortunate to have oil production increase as our economies have developed over the past decades. And now we’re reaching a point where we’re about to get, or we may be, at the maximum world oil production. After that, oil production will then decline and prices, of course, will continue to do what they’ve been doing recently. So what we’ve got today may be the ‘good old days.’”

Hirsch addressed the timeframe in which the US could see $15/gallon gas: “It could happen within a matter of months. It could happen within a matter of a few years. But it’s essentially certain that we are at the maximum of world oil production. And after that, we’ll go into decline, and when there’s much less oil available, then, of course, the price of oil is going to increase dramatically.”

Fuels, heating oil, and consumer products that rely on petroleum will all be impacted by the decline in world oil production. Hirsch estimates the world GDP declining at the same rate as oil production.

This video is from MSNBC’s News Live, broadcast May 24, 2008.

Las Vegas Unpaid Property Taxes Mount

I've previously reported on some negative Las Vegas economic indicators -- as related to the nationwide housing bust and economic downturn.

NEVADA:
- Real estate companies going bust
- Tops nation in preforeclosures AND foreclosures
- Near top of list for home price declines (> 22% YoY)
- Slowing construction industry
- Sales tax revenue down 9%
- Gaming revenue down4%
- Casino layoffs have begun

As if these issues weren't enough, Clark County Treasurer Laura Fitzpatrick states her statistics are starting to show big gains in the percentages of parcels with unpaid property taxes.

From the LVRJ:

The number of delinquent parcels advertised in a public notice in Wednesday's Las Vegas Review Journal rose 51.2% when compared with the number of lots published in the paper merely one year ago.


Fiscal year Delinquent parcels
2007-2008 32,626
2006-2007 21,581

What's more, 2.3 percent of the county's properties in Wednesday's notice were in arrears, compared with 1.4 percent a year earlier.

That's $51 million -- plus $7.7 million in penalties and interest -- Clark County property owners still owe for fiscal 2007-2008, which runs from July 1 to June 30.

That could mean less money for public schools and libraries, two of the functions financed through property taxes. But Fitzpatrick said the vast majority of landowners will likely pay up quickly, so the economic impact shouldn't be significant.

If they don't portend hardships for public services, the treasurer's figures do somewhat signal the state of the local economy.

Forty percent of property owners on Wednesday's list owned five or more delinquent parcels, a lot count that often indicates ownership by a builder, investor or bank. Just 15 percent of property owners listed a year ago owned five or more parcels. The change could come from troubles in the building and mortgage industries.

"Without going out and polling (late payers), I think the numbers are certainly reflective of the economic challenges that we've seen over the last several months," Fitzpatrick said. "Builders, developers and investors certainly have had a difficult time, as have some of the individuals experiencing challenges with (exotic) mortgages."

Astoria Homes claimed the single-biggest number of parcels on the list, with taxes due on about 1,300 pieces of property in the county.

Astoria President Tom McCormick noted it's the first time in the local builder's 13-year history that the company missed the deadline on property-tax payments.

"It's very embarrassing," he said.

But it's what happens in a credit crunch, when banks stop lending construction financing, McCormick said.

Astoria, which has eight actively selling neighborhoods in Las Vegas and five more under development, had secured agreements for construction funding from three lenders who have since decided they want out of residential real estate nationwide. Astoria officials met this week with prospective new lenders, and McCormick expects fresh funding within the next two months or so.

In the meantime, what cash flow the company has is going toward paying subcontractors "to keep everyone employed," McCormick said.

"We just got caught temporarily in a cash squeeze while the banks all sort things out," he added. "We're not worried about finding money, but the timing of it is embarrassing."

Avante Homes also owns a considerable share of properties on the treasurer's list. Avante owes levies on roughly 315 lots in its Denali subdivision at Mountain's Edge in southwest Las Vegas, as well as fees on 220 home sites in its Monticello community at Providence in northwest Las Vegas.

Avante officials didn't return a call seeking comment.

Other notables named on the past-due roster include Lennar Homes, Celebrate Homes and Vantage Lofts.

The banking sector is well-represented on the list as well. GMAC Mortgage, U.S. Bank National Association Trust, Wells Fargo and Wells Fargo National Association Trust, Citimortgage, Deutsche Bank National Trust Co. and even Freddie Mac and Fannie Mae, the federal mortgage guarantors that buy and sell home loans on the secondary market, all appeared on the delinquency register.

Many banks on the treasurer's list have no control over tax payments, two industry representatives said.

Teri Charest, a spokeswoman for U.S. Bank, said the delinquent parcels credited to the company fall under its trust entity, which bundles and resells home loans as securities. Trustees, though listed as owners per se, don't service the loans and thus aren't responsible for property-tax payments, Charest said.

Natalie Brown, a spokeswoman for Wells Fargo, said of the bank's corporate-trust services unit: "As trustee, Wells Fargo does not have authority over how an individual loan is originated, serviced or foreclosed upon, nor do we have the authority to resolve any delinquent tax issues on these properties."

So where a banking trust company is named on the treasurer's list, the servicer who's supposed to make the tax payments remains anonymous.

Property owners have until June 2 to pay their taxes. If they don't come up with the cash, the clock starts ticking on a redemption period that gives them two more years to make good on the debt, plus penalties. Owners who still can't deliver a payment in two years will lose their property to an auction.

Closing:

Expect Gvt layoffs to start within 6 months.

Randy

Watch Out Below!

Very good Forbes article confirming much of what I've been saying: "We ain't anywhere near done yet."

Watch Out Below

Oil prices continue to surge to new records. Gold prices climb. Stocks retreat in the U.S., Europe and Asia. The dollar goes south. Housing prices continue to fall. Consumer confidence erodes. The banking crisis has not hit bottom. Fed action is not enough. Congressional intervention is necessary.

So says Thomas J. Barrack Jr., chairman and chief executive officer of Colony Capital, a California-based hedge fund, in his April letter to Colony partners.

It may come as a shock--but Croesus believes we are only a third of the way through the credit crisis, and investors should get ready to experience more pain. As Barrack put it to Croesus quite directly this week: "The denial is beyond belief--at every level."

No one wants to deal with the losses on Alt A mortgages, which are greater than subprime. Or the prime mortgages which in total dollar terms represent twice as many dollars as subprime. What about the regional banks wasted by lousy real estate loans? Then there's the unwillingness of European banks to lend to each other, or the vast amount of assets running from troubled institutions like UBS, not to mention the Swiss investors demanding delivery of gold bullion rather than gold certificates. Still, the recession deniers are everywhere.

Croesus has some advice for everyone. Buy yourself two recently published books that will explain how we got to this fragile place and what public policy steps have to be taken to make sure the financial system doesn't still implode--on a step-by-step basis.

Charles Morris' The Trillion Dollar Meltdown, Easy Money, High Rollers, and the Great Credit Crash explains in clear narrative style how the credit bubble developed and had to burst. We owe a debt to Morris for underscoring how the power of vastly deregulated financial markets--and the development of mortgage-backed securities markets was eventually going to lead to the "great unwinding" that is only partly over. For all of you who have been bewildered by reading about CMOs, CDOs, CLOs and the other toxic waste of 21st century finance, here's your handbook to comprehend the fallout.

Morris makes sense of the process by which the stock market crash of 1987 and the failure of hedge fund Long Term Capital, cured by the easy money policies of Alan Greenspan, led eventually to excess leverage and massive losses in the financial system. Listen up. Morris' prickly definition of the so-called "Greenspan put" explains the mystique that kept the markets from massively tumbling--"No matter what goes wrong, the Fed will rescue you by creating enough cheap money to buy you out of your troubles."

Morris calls all this folderol "the last gaspings of the raw-market Chicago school brand of financial capitalism that moved into the vacuum created by the 1970s collapse of the Keynesian liberal paradigm."

And fabled investor/speculator George Soros has neatly carried this theme forward in his brilliant analysis of the crisis, which he warns everyone and everywhere is deepening into a more serious matter. Soros' The New Paradigm for Financial Markets, The Credit Crisis of 2008 and What It Means is a clever explanation of why "financial markets are always wrong."

Soros made his fortune by understanding how to take advantage of how markets overshoot on the upside and then on the downside. He goes short when we're in bubble mode, bidding shares or commodities to unrealistic prices. And he buys when prices are unrealistically low. Investors, Soros proves, "base their decisions on incomplete, biased and misconceived interpretations of reality, not on knowledge."

Under the new paradigm, investors will have to base their decisions on less leverage. In fact, Soros, like others, is calling for the regulation of limits on the use of leverage by investment banks and hedge funds. Come the revolution, Croesus thinks this will only happen on a voluntary basis. But Soros is adamant that "credit creation has to be a regulated business. The financial industry was allowed to get far too profitable and far too big." Avoiding asset bubbles should be a priority, Soros suggests.

Croesus scoffs at this nonsense as Wall Street's political power and influence in Washington is too strong. Even if Obama gets in the White House, his hedge fund buddies will tell him the score. Don't mess with Wall Street.

Be clear, though. The asset bubble that is still bursting will be severe enough to cause a serious recession, Soros believes. He is negative about the economy and the stock market. He has more vision and understanding than your run of the mill Wall Street expert who thinks every capital raising is the turning point for the market to improve.

You may find Soros' public policy solutions to be anathema. But you can learn one invaluable investment lesson from this book. He proves that "reflexivity" is an intellectual insight that can be a framework for successful investing. All you have to know is when prices get too high (out of whack with reality) or when they get too low (out of whack with reality). Reflevity signaled Soros when to sell the conglomerates in the late 60s, when to sell the REITs in the 1980s--because they got up to crazy unrealistic levels. Soros knows how to take advantage of the crowd's wishful thinking. And let him be a philosophe about it. Why not.

This super bubble took 25 years to develop, Soros writes. It can't be over in one year. Expect home prices to drop another 20%. Expect credit contraction to continue. Expect new bubbles to develop like in the commodity area. Soros wants to bet gold, oil and other commodities will fall in price. It's just that his "reflexivity" button hasn't lit up.

Regards
Randy

Saturday, May 24, 2008

Weekend Funnies








Bailing out in flood of debt

Regardless of what the mainstream shills are saying, the credit crisis is far from over and a myriad of future economic troubles continue to brew on the horizon.

Home sales (and prices) are still falling, foreclosures are increasing, the Fed remains the sole buyer of toxic waste/securitized garbage, credit remains tight, the economy is shedding jobs, gas and food prices are rising, state tax revenues falling, and the consumer -- who is already starting to pull back on discretionary spending, is barely staying alive by charging daily necessities on credit cards, but this will soon change...

Up to around 12 months ago, millions were able to use the paper equity from rising home values to pay off old credit card/auto debt, but falling home values (in many cases) has now turned that once fat equity cushion into an upside-down household liability. Overall household debt levels are now higher (due to the refinance or HELOC), and the recent consumer inflation wave has now driven our payday-to-payday consumers back to the credit cards -- just to put food on the table and gas in the car.

With credit card delinquencies at a 16 year high, Oppenheimer analyst Meredith Whitney is warning that we should expect to see banks strip away 45 percent of the card credit now available — about $2 trillion, by 2010.



Bailing out in flood of debt

Credit card companies and banks are worried that people are drowning in debt and will fall behind on payments. With home values declining and banks wary of handing out loans, outlets for escaping overwhelming debt are limited.

Consumers are finding themselves caught. Card firms are getting tougher, sometimes canceling unused cards or raising rates seemingly for no reason. And 30 percent of banks said in a recent Federal Reserve survey that they had tightened standards on consumer loans.

People who depend on loans and credit cards are likely to feel increasingly strapped in the future. Oppenheimer & Co. analyst Meredith Whitney has estimated that by 2010, credit card issuers will be so pressured by financial concerns and regulation that they will strip away 45 percent of the credit now available—about $2 trillion.

Already, many credit card users are running into trouble. If they miss payments or are late even a few days, interest rates often go up for that card—and others. Some are running up balances without realizing that they are inadvertently damaging their credit scores and making it more difficult to get the best rates on a car or mortgage loan.

"The rules have changed," said Gerri Detweiler, author of the "Ultimate Credit Handbook" and analyst for Credit.com.

And delinquencies on consumer credit are rising. According to the American Bankers Association the level of delinquencies—or people behind on payments—for certain loans recently was the highest in almost 16 years.

Closing thoughts:

With increasing job losses, a higher cost of living and far less available credit, how will J6P and his family survive?

Our next Democrat President will be in office by then (McCain can't win it for the Republicrats), so expect to see far more monetary printing and taxpayer funded social programs instituted to help them out.


Regards

Randy



Curb on Coin Sales Angers Collectors

WSJ Online: U.S. Begins Rationing Popular 'Silver Eagles'; How $1 Fetches $19


The government rationed food during World War II and gasoline in the 1970s. Now, it's imposing quotas on another precious commodity: 2008 dollar coins known as silver eagles.

The coins, each containing about an ounce of silver, have become so popular among investors seeking alternatives to stocks and real estate that the U.S. Mint can't make them fast enough. In March, the mint stopped taking orders for the bullion coins. Late last month, it began limiting how many coins its 13 authorized buyers world-wide are allowed to purchase.

"This came out of nowhere," says Mark Oliari, owner of Coins 'N Things Inc. in Bridgewater, Mass., one of the biggest buyers of silver eagles. With customers demanding twice as many as they did last year, Mr. Oliari would like to buy 500,000 a week. But the mint will sell him only around 100,000.

The mint, a bureau of the U.S. Treasury, has offered little explanation beyond a memo last month to its dealers. "The unprecedented demand for American Eagle Silver Bullion Coins necessitates our allocating these coins on a weekly basis until we are able to meet demand," the mint wrote. A spokesman declined to elaborate.

The rare shortage offers a glimpse into the growing love of a commodity known as "poor man's gold." With more silver mined than gold traditionally, silver has always been far cheaper than gold and today has less than 2% of gold's value.

But silver is growing in popularity, and some investors are betting that its value will surge as inventory shrinks. Big investors are loading up on silver eagles, which are the only American silver coins allowed in individual retirement plans. For small investors, they are an accessible way to get into the metal boom.

"Unlike gold, these coins can be bought by regular citizens," says J.R. Roland, a Brownsville, Tenn., judge who recently began buying the coins -- and trading them on eBay. "In these economic hard times, silver coins are a great way to invest."

The coins are made at an armored facility in West Point, N.Y., alongside the military academy. Dealers say they heard the mint had run out of planchets -- round metal disks ready to be struck into coins. The disks are used for various coins, and the companies producing the blanks also are busy, limiting the mint's ability to increase production. The mint won't comment on the planchets.

Each Monday morning now, the mint divides its silver coins into two pools. It divvies up the first equally among authorized purchasers. The second is allocated proportionately, based on the buyer's past purchases. The mint limited purchases once before -- in the late 1990s, when investors loaded up on silver, wrongly anticipating that a failure by the world's computers to adjust to the new millennium would cripple the economy.

Jim Hausman, head of the Gold Center in Springfield, Ill., one of eight companies in the U.S. authorized to buy silver eagles, estimates that the rationing will cut his expected annual sales of four million silver eagles in half

Wednesday, May 21, 2008

Daily Economic News

It's been a long day and there is so much I want to say, but there just isn't enough time.

I just got in... Attended my son's H.S. Graduation Awards Ceremony tonight and I'm proud to report that he's graduating with High Honors (4.2GPA).

One wonders, with the economic situation being what it is, what opportunities will be available to him 4 years from now when he has a B.S. Degree in hand. Scary to even contemplate...

Anyway, much happening in the markets of late. The US Dollar index is plummeting again. Will it make another historic "all-time low" this time around? I think it's quite possible, though 70 will provide very tough downside resistance.


And how about that Oil? Holy Crap--Light Sweet Crude Oil just broke through $135 in Asian Trading tonight! The Chart below hasn't even had a chance to catch up yet.... Anyway, with that said, I want you to note the severely overbought condition in Oil. Don't be surprised to see a pullback sometime soon, but I honestly don't think it will fall below $110 and when it does, it won't stay down for very long. Expect $150 tops before a nice correction.


Gold, as I've been forecasting for weeks now, is rebounding nicely. It has cut back through the 50DMA and the MACD has decidedly turned upwards. I still stand by my earlier comment: $1,200 gold by end of 2008.


The DOW on the other hand is looking pretty ugly -- it sliced back through its 50DMA and the MACD is also turning down. I don't think we'll test the March lows just yet, but think it's inevitable over the longer run -- and when we finally do: look out below!


I expect tomorrow to be a very interesting day also... All the Asian Indexes are currently in the red on inflation concerns, and existing home sales data gets released tomorrow at 10:00 EST. Consensus expects the numbers to come in at 4.85 Million (annualized) sales -- keep your eye on market reactions.

With that, I'm going to have to call it a night (told you I didn't have much time). I hope all of you have a great evening.

Regards

Randy


Tuesday, May 20, 2008

UPDATED: US Economic Outlook 2008 -2011+ Briefing

Recently, as part of a broad based financial education class for younger folks (in their 20's-30's), I was asked to provide an economic outlook assessment/briefing to help these young adults gain a better understanding of the very complex problems the US economy is dealing with -- both current and future.

Other people will provide generic information w/regard to: balancing a checkbook, living within your means, using credit wisely, investment options, compounding interest, etc... My main objective is: try to make a very complex issue (economic problems/future forecasting) easy to follow, so that these young people can make wiser decisions based upon the knowledge they have gained.

With that said, I have yet to give the actual briefing (it's scheduled for early June), so I thought I'd take advantage of the available time and ask some of you smart folks to review and provide feedback w/regard to content, complexities, general flow/digestibility, accuracy, missing content, etc...

Please remember -- this briefing was tailored for folks who know little about the history of money, the broader economy, inflation or the many issues in play. Additionally, I plan to expound upon many of the points made in the briefing (when presenting it).

Would really appreciate your comments/feedback.

NOTE: briefing updated based on reader feedback and 207 reads today -- very much appreciated!

The following topic's were added/corrected:
- 20% annual growth = 4 year doubling of money supply
- Short history on Federal Reserve
- US Dollar as World's Reserve Currency
- Oil/OPEC issues (imbedded w/Dollar and Current/future outlook)

US Economic Outlook Briefing (Use full-screen mode for best results)


Thanks in advance!

Randy

Saturday, May 17, 2008

Gold Charts

At the beginning of May, I pointed out that gold was likely in an oversold condition and may have found a bottom (~$850). I then illustrated how the Price Oscillator (PPO) was starting to turn upwards and how the 200 Day Moving Average (200DMA) was providing strong resistance for any further downside movement.

Well, the updated gold charts below confirm (somewhat) my earlier intuition as gold is gaining on the 50 Day Moving Average (50DMA) while the PPO is making positive strides.


Daily Gold



Weekly Gold


Bottom Line: Updated charts are further confirmation of my previous closing comment: As credit crunch phase 2 kicks in, people will once again flock to gold and it is likely we will see it reach $1,200 by the end of 2008.

Regards

Randy

Las Vegas Valley Economic Index Decreases

University economist says indicator foretells more weakness by middle of 2008

Las Vegas, regarded in the past as a city that has been somewhat immune to downturns in the national economy, failed to make Forbes.com's list of the nation's top 10 recession-proof cities.

Clark County business activity index peaked in October and has drifted lower since.

Recent activity has been "rather tepid," especially compared with the torrid pace of 2005 and 2006, said local economist Keith Schwer, director of the Center for Business and Economic Research at University of Nevada, Las Vegas .

The county's tourism index turned in another "lackluster" peformance for February, even with an extra day in the month for leap year, he said. Evidence suggests that some weakness lies ahead, reflected in lower average room rates and slower convention bookings.

Clark County gross gaming revenue dropped 4 percent from the same month in the previous year to $866 million and taxable sales declined 3.1 percent to $2.76 billion

(SIDE NOTE: This really is Huge, because gambling revenues have fallen ONLY ONCE since 1970 -- in the aftermath of the Sept. 11 terror attacks they dropped a mere 1 percent from 2001 to 2002.
So far this year however, they've fallen 4 percent, the number of conventions {where the big money is at} has dropped 10.4 percent, and average daily room rates are down 3.8 percent in the first two months of 2008).

YoY Snapshot of several leading economic indicators below:


- New Home Permits (Down 80%)
- New Residents (Down ~20%)
- Total Employment (Down slightly)
- Unemployment Rate (up over 1%)
- New Home Sales (Down 30%)
- Commercial Permits (Down 50%)
- Existing Home Sales (Down 30%)
- Median New Home Price (Down 18%)
- Taxable Sales (Down 3%)
- Gaming Revenue (Down 2%)
- Visitor Volume (Down 1.5%)
- McCarran Passenger Volume (Down ~2%)




The Las Vegas Economic Downturn Has Started


Regards

Randy


Open Thread

Feel free to share your thoughts, comments, links etc in this post.

Oil, credit crisis & the wider economy

Alan Blinder, an economics professor at Princeton University and former Federal Reserve vice chairman, talks with Bloomberg's Kathleen Hays from Princeton, New Jersey, about the impact of record oil prices and home foreclosures on the U.S. economy, the outlook for growth and Federal Reserve monetary policy.

As a Fed insider Professor Blinder can't admit that we're actually in a recession, but he certainly admits we are dealing with major, major problems.

Thursday, May 15, 2008

Las Vegas Economic Downturn Increasing "High-line" Auto Repos

Back in the day of cheap credit, rising asset values and booming real estate markets, many wanted to "Live the Las Vegas Dream" so they charged top dollar for flashy new and expensive toys -- to show others how smart/successful they were...

Well, times are beginning to change and these "dreams" are turning into nightmares for thousands.

The recovery agent & debt collection business however is thriving from these personal nightmares.

Henri Leleu from Automobile Recovery Bureau (ARB) of Las Vegas say's business is booming.

"It seems like no one is really exempt from this cycle," says Leleu.

"We're pulling cars from mortgage bankers, real-estate firms," Leleu says. "We're talking about upper-echelon people. It's like nobody seems to have that savings or extra borrowing ability to get them over the hump."

From November 2006 to March 2007, ARB was averaging a recovery of 43 high-line cars a month. For the same period a year later, ARB averaged 55 high-line cars a month. These figures include brand names such as Mercedes, Porsche and Bentley.

Leleu says that a year ago, approximately 75% of the cars recovered were C- and E-class Mercedes Benz, carrying sticker prices of $35,000 to $80,000. A year later, the numbers are up by 28% or so, but the true picture here is that now 75% of the high-line cars ARB is recovering are valued in the range of $100,000 to $500,000.

Leleu's says that since October-November last year, ARB Las Vegas has gone from handling 18 to 20 accounts daily to 40 to 45 accounts. The amount of items for each account varies; it could be one car or two street sweepers or several pieces of construction equipment.

As for cars, which are still the most frequently recovered item, Leleu says his company is seizing as many as 160 a month, up from 100 a month last year. He has two agents earning as much as $2,000 a week, or between $65 and $100 per car. ARB Las Vegas charges creditors an average of $300 and $325 for a repossession and an additional $125 to $150 for the vehicle's keys.

That increase in volume isn't exclusive to Leleu's region, either. He says he has met with other recovery agents from across the country, and they've reported the same -- from Oklahoma to Virginia, Colorado to Florida.


Closing Thoughts:

Just think about it for a moment: This significant repo increase is taking place while we enjoy a very low (official) 5% unemployment rate in Nevada. Can you imagine what the repo business will be like when the hotel/gaming/state, etc layoff's really pick up steam (from declining tourism/gaming revenue/taxable sales base)?

The Las Vegas Economic Downturn Has Started

Ok... Move along now, nothing to see... We have no recession here...

Regards

Randy

Economic News Roundup

Bush to press Saudi king on oil prices, Iran

JERUSALEM, May 16 (Reuters) - U.S. President George W. Bush heads for Saudi Arabia on Friday to renew his appeal to help tame record oil prices and try to shore up Arab support for containing Iran's growing regional clout.

After a three-day trip to Israel, Bush will fly to Riyadh to see King Abdullah, who for the second time this year is expected to rebuff the president's face-to-face call to get OPEC pumping more oil to world markets.

While oil prices are a source of friction, Bush and Abdullah will find some common ground on Iran, which they both see as a rising threat to stability in the Middle East.

Bush ratcheted up his rhetoric toward Tehran in a speech to Israel's Knesset on Thursday, saying critics' calls for talks with Iranian President Mahmoud Ahmadinejad were comparable to the "appeasement" of Adolf Hitler before World War Two.

He vowed that Washington would stand with Israel in opposing Iran's nuclear ambitions, saying it would be "unforgivable" if Tehran were allowed to get the bomb.

For his part, Abdullah will be looking for reassurances of Bush's commitment to push a $1.4 billion U.S. arms sale through an opposition-led U.S. Congress.


Builders: No signs of housing recovery

NEW YORK (CNNMoney.com) -- Homebuilders' confidence fell once again in May and their view of the state of the battered market hit a record low.

The National Association of Home Builders/Wells Fargo monthly index fell to its second lowest reading on record, ahead of only last December's reading.

Only 6% of the builders surveyed believe the current market is good while 69% view it as poor. Builders also reported a lower level of people looking to buy new homes.

And 51% of the builders said they now expect conditions to remain poor six months from now, up from 47% who were expecting a poor outlook in the previous reading.

"The message is very clear: The single-family housing market is still deteriorating and Congress and the Administration must move immediately to enact legislation that will help reverse the trend," said NAHB President Sandy Dunn, a homebuilder from Point Pleasant, W.Va.


U.S. Economy: Manufacturing Weak as Expansion Falters (Update2)

May 15 (Bloomberg) -- The slump in U.S. manufacturing deepened while the economy skirted recession, reports today showed.

Industrial production declined 0.7 percent in April, the Federal Reserve said in Washington today, more than twice the drop forecast by economists. Separate figures from the New York and Philadelphia branches of the central bank indicated the slide may continue this month.

``There is no question about whether or not there is a recession in manufacturing -- there is,'' said Michael Gregory, a senior economist at BMO Capital Markets in Toronto, who correctly anticipated the drop in industrial production.

``There's certainly no sign of a turnaround in the economy,'' said James O'Sullivan, a senior economist at UBS Securities LLC in Stamford, Connecticut. ``Even if the worst is over in the financial markets, the economic effects are still playing out.


Bernanke Says Banks Need More Capital

Ben S. Bernanke, the Federal Reserve chairman, pushed banks on Thursday to keep raising capital in the aftermath of losses from the credit crisis to avert deeper damage to the economy.

“Firms are hunkering down,” Mr. Bernanke said at the Chicago Fed conference on credit markets. “They have at least partially replaced the losses with new capital raising, but not entirely. They are being rather conservative in making new loans, which has implications for the broader economy.”

Mr. Bernanke’s remarks reflect concerns he and other Fed officials expressed this week that financial markets had yet to return to normal. The Fed chief also said the central bank was considering strengthening its guidance to banks on how they manage risk after “weaknesses” that contributed to the crisis.


US foreclosure filings surge 65 percent in April

LOS ANGELES (AP) — More U.S. homeowners fell behind on mortgage payments last month, driving the number of homes facing foreclosure up 65 percent versus the same month last year and contributing to a deepening slide in home values, a research company said Tuesday.

Nationwide, 243,353 homes received at least one foreclosure-related filing in April, up 65 percent from 147,708 in the same month last year and up 4 percent since March, RealtyTrac Inc. said.

Nevada, Arizona, California and Florida were among the hardest hit states, with metropolitan areas in California and Florida accounting for nine of the top 10 areas with the highest rate of foreclosure, the company said.

One in every 519 U.S. households received a foreclosure filing in April. Foreclosure filings increased from a year earlier in all but eight states.

The combination of weak housing sales, falling home values, tighter mortgage lending criteria and a slowing U.S. economy has left financially strapped homeowners with fewer options to avoid foreclosure. Many can't find buyers or owe more than their home is worth and can't get refinanced into an affordable loan.

Efforts by government and the mortgage industry to stem the tide of foreclosures aren't keeping up with the rising number of troubled homeowners.

The April data show nearly half of the properties received an initial notice of default, suggesting many homes were new entrants to the foreclosure process.


California man losing nine homes in mortgage mess

LOS ANGELES (Reuters) - A California man who has defaulted on nine homes and expects banks to foreclose on all of them, forcing him into bankruptcy, says he now considers it a mistake to have invested in the real estate market.

Shawn Forgaard, a 37-year-old software company project manager, bought one home for his family to live in and nine more as investments. He stands to lose all the investment houses in the mortgage meltdown but says he has come away wiser from the experience.

Forgaard bought a house in Santa Cruz, about 60 miles (100 km) south of San Francisco, in 2000. Four years later, using $800,000 in stock options, he began snapping up investment properties, putting 10 percent to 40 percent down on negative amortization loans -- in which payments do not cover the interest so that a borrower's balance grows over time.

It was those "neg-am" loans, which include triggers causing payments to balloon if the debt reaches a certain percentage of the original balance, that would come back to haunt him.

"I knew I was sitting on time bombs," Forgaard said. "I knew the market was going to go soft and I knew that property values would decline. But I figured that I had enough equity to survive the storm and sell or take the loss and refinance.

"I didn't anticipate a downturn of epic proportions such that home values are 40 percent less than they were," he said.

"It really wasn't until five months ago that I realized, 'Hey, you know what? Not only am I going to lose everything I have invested but this is going to force me into bankruptcy," he said.

"I'm going to lose my car and my primary (home) and we're not going to be able to live in Santa Cruz, where I was born and raised, and live by the beach. And that was pretty tough to take."