Las Vegas' Losing Streak - Unemployment highest since 1993 - Homelessness growing

Las Vegas is facing one of the deepest slumps in its history and it's being felt across the board - from the worst real estate market in the country, to falling gaming revenue, weak retail sectors, construction shutdowns, slumping tax base, budget deficits, high unemployment, etc.

For many of Economicrot's regular followers, this news is not new, as we've been documenting the LV downturn since 2006 (see "Las Vegas Downturn links" - scroll down right sidebar to locate).

Anyway, it's been a while since this Blog has covered anything related to Vegas, so allow me a few minutes to bring you up to date - a snapshot in time if you will.

Big Business Woes:

Yahoo News - Oct 2nd :

In Las Vegas these days, even billionaires are getting their credit checked. On Sept. 30 Las Vegas Sands founder Sheldon Adelson announced that he would ante up $475 million from his personal fortune to buy preferred stock in the company, which will pay 6.5% interest over five years. Adelson's notes will convert at $49.65 per share, a considerable climb from the $31 at which they currently trade. The move shored up Las Vegas Sands' balance sheet. Without the extra cash, the owner of the marble-lined Venetian resort, with its Canyon Ranch spa and indoor gondola rides, would have found itself in violation of its bank loan agreements.

It's like that all over Sin City right now, as the casino industry there faces the steepest slump in its history. In July, casino revenues on the city's famed Strip fell 15%, to $820 million. They are down 7% citywide so far this year. Shares of many top casino operators have sagged 70% from their peak last year. Las Vegas Sands' stock dropped 13% on Oct. 1, after Standard & Poor's said that despite the cash injection, the company remains under review for a possible downgrade because of weak business conditions and a potential slowdown from Sands' Macau operations.

Next door to the Venetian, mogul Stephen Wynn has been busy negotiating with his bankers. With profits at his flagship Las Vegas resort down 28% in the second quarter and a new $2.3 billion casino hotel due to open in December, Wynn paid $4 million in fees and persuaded his grumbling bankers to change the covenants on his loans in mid-September. The moves allow Wynn Resorts to maintain a higher debt-to-cash-flow ratio without having to pay higher interest rates to lenders. "We wanted to make sure the banks didn't have too high an expectation for us," Wynn explains, "just in case things get worse."

Wynn's old company, MGM Mirage, is busy trying to raise the additional $500 million it needs to complete a $3 billion bank financing for its giant CityCenter project on the Strip. The $9.2 billion resort, due to open in December 2009, is the largest private construction project in the country. MGM and its joint venture partner, the investment firm Dubai World, may end up kicking more of their own money into the project. But the partners may face more hurdles next year if they can't sell all the condominiums they hope to at the site. UBS casino analyst Robin Farley figures CityCenter will still have as many as one-third of its 2,600 condominiums unsold by opening day, meaning the cost to MGM and its partner will rise by another $600 million.

The tough financing environment has prompted some operators to delay projects. In August, Boyd Gaming shelved its $4.8 billion Echelon resort after encountering difficulties financing a mall and two hotels with joint venture partners. Nine floors of the main tower had already been built.

Casino operators are trying to lure gamblers with discounts and other promotions. Anthony Curtis, who runs Las Vegas Advisor, a magazine and Web site for bargain-hungry Las Vegas visitors, says the discounting is most evident in room rates, some of which are down as much as 30% from last year. Casinos are throwing in other perks as well.

Reached on Sept. 29, shortly after the House of Representatives voted down the proposed $700 billion bailout package, Wynn was furious -- but not because Congress failed to pass the proposal. "I am totally disgusted as an American by the leadership shown by both parties," he said. Wynn thinks Washington should force bankers to renegotiate loans to troubled homeowners, much as they have for the big Las Vegas operators. "Those assets should stay where they were created," Wynn screamed. "Bankers will say tomorrow, 'O.K., let people stay in those homes.' (Home prices) will go back to $250,000. The people that live in them will pay what they can afford." And then, just maybe, they'll plan Las Vegas vacations again.


Wall Street woes hit on, off Strip - Oct 3rd

Wall Street financial woes have played havoc with the Las Vegas real estate and development community, but even with a congressional bailout package, the future remains dicey for some projects.

The national credit crisis has hit all sectors of the development community from housing to office to retail.

The postponement in August of Boyd Gaming's Echelon, which was under construction when it was halted, reflects the tough conditions in securing financing.

The current environment is going to create challenges for all sectors of the economy, especially the development community that needs capital, said Brian Gordon, a principal with Applied Analysis. Not only have there been delays in projects on the Strip, but projects valleywide could be pushed back because of limited access to capital, he said.

"There are a number of planned office, retail and industrial projects throughout the valley that are not only competing with existing product on the market today, but also with financial markets for limited capital," Gordon said. "That will likely cause a shift of timing or cancel plans altogether."

Las Vegas has been at a greater risk than the rest of the country because its housing meltdown was greater than the rest of the country's with homeowners losing more value. The city is also at risk because it relies on tourism and any economic slowdown cuts into travel.

Many homebuilders have had their lines of credit called back from the banks even when they are in full compliance with their loans, Sullivan said. Without that access to capital, they have to cut back their operations and halt projects. It has been a challenge for six months and gotten progressively worse, he said.

Monica Caruso, spokeswoman for the Southern Nevada Home Builders Association, said in addition to all the challenges homebuilders face when it comes to lenders, the current crisis makes it tough to sell a home when someone with a credit score exceeding 700 can't get a mortgage.


Las Vegas Job Market Woes:

Harrah's Entertainment plans to lay off more workers - Oct 4th

Harrah's Entertainment confirmed it is preparing another round of layoffs and hourly reductions at its Las Vegas properties.

Company officials late Thursday declined to say how many workers will be let go.

"The country is experiencing a historically difficult economic period," said Jan Jones, senior vice president of communications and government relations for Harrah's. "The gaming industry, as nearly all consumer business in the country, has been negatively impacted by the difficult circumstances of the economy."

The casino operator, which owns and operates Paris Las Vegas, Bally's, Bill's, Flamingo, Imperial Palace, Harrah's, Caesars Palace and Rio locally, has already cut nearly 1,500 Las Vegas jobs this year, according to an article published last month by Reuters.

The decision comes as revenue and visitor volume to the Strip continue to drop.

Harrah's is not alone in continuing to cut jobs and adjust employees' hours as businesses across the valley continue to adjust to the economic downturn.

Bill Lerner, a Las Vegas-based gaming analyst for Deutsche Bank, said some properties have been closing off gaming table pits for extended hours, cutting restaurant hours and even closing rooms in hotel towers.

"All of those carry employment," Lerner said. "Over the last two to three weeks, the behavior of visitors to Las Vegas has changed noticeably. They're spending very differently, and less, than they were prior to that. It's 100 percent related to the things people are watching on CNN and CNBC with the economy and the credit environment."

MGM Mirage, which owns 10 properties on the Strip, has cut nearly 1,500 jobs this year locally, according to the Reuters article.

Station Casinos conducted another round of layoffs in early September, saying the number of employees who were affected represented "a very small percentage" of the workers at its 17 properties.

Las Vegas' unemployment rate hit 7.1 percent in August, the highest rate since July 1993 when the rate was 7.2 percent, according to the Department of Employment, Training and Rehabilitation.

Jacob Oberman, director of gaming research for CB Richard Ellis, said the housing market will need to rebound before consumer spending returns and the job cuts slow.


Nevada's jobless rate will increase - Oct 3rd

Economic forum told state is in a recession - CARSON CITY -- Unemployment in Nevada will jump to an average monthly rate of 8.6 percent next year and remain at that rate in 2010, state economists told the Employment Security Council on Thursday.

"This is sobering news," Employment Security Division Administrator Cindy Jones said after economists on her staff made the prediction.

If Nevada's unemployment reaches 8.6 percent in 2009, it would be the highest rate since 9.7 percent in 1983. The state's jobless rate in August was 7.1 percent, the highest in 23 years.

Anderson and economist David Schmidt said the state economy has been sputtering because of the crash of the real estate market, the decline in home values and the reluctance of residents to spend what money they have.

Anderson said that in the past, employment jumped dramatically after the opening of each megaresort in Las Vegas, but this isn't happening anymore. The City Center project on the Strip is expected to employ 12,700 people when it opens in November 2009, but the state's jobless rate will increase even with this project, he said.


Poor Economy Translates Into More Las Vegas Layoffs - Oct 3rd

Las Vegas' tourist driven economy is feeling the impact of tighter budgets as local businesses are forced to layoff workers.

Westgate Resorts books time shares for Planet Hollywood but today the nation's largest timeshare company shed hundreds of workers. They've been saying it for years, "Build it and they will come." However, the financial crisis has put the construction of some new Las Vegas resorts on hold.

Kahndijah Carter and Ashley Simms were laid off. "We are all laid off. I have been at this job almost a year so it's really hard," said Carter. "No one is safe right now. I never though this would happen," Simms said.

Simms and Carter both worked in the call center, selling timeshares and vacation packages. But Westgate officials say the occupancy numbers just weren't looking good in Las Vegas and the economy is to blame.

"A lot of people aren't going to be able to travel in and you don't need to make as many reservations," Froehlich. He couldn't say how many people were laid off. Simms says it was at least 200.


Layoffs Hit Sunrise Hospital - Oct 2nd

Sunrise Hospital laid off 57 people Thursday, citing money as the reason. They came from all over the hospital, from medical to administration, and this may not be the end. The cuts equate a two-percent reduction of the overall workforce.

The two big reasons were more uninsured patients needing treatment and fewer insured patients electing to have procedures done. The State of Nevada also announced last month it was cutting Medicaid and more than half of the patients in the children's hospital here are on Medicaid.


Las Vegas Housing Market

Metro U.S. Home Prices Fall on Higher Foreclosures - Oct 2nd

Home prices dropped in 24 of 25 U.S. metropolitan areas in July, led by declines in Las Vegas and the coastal cities of California, as foreclosures depressed prices and accounted for a fifth of all sales.

Las Vegas had the biggest drop on a per-square foot basis, falling 33 percent in July from a year earlier, New York-based real estate data company Radar Logic Inc. said in a report today. Los Angeles, Phoenix, Sacramento and San Francisco each dropped about 28 percent. Three of the five worst-performing markets were in California.

``Buyers are increasingly reluctant,'' Radar Logic Chief Executive Officer Michael Feder said in an interview. ``There has been an awful lot of talk about the declining of the housing markets.''

Foreclosures/Homelessness

Addressing the Las Vegas foreclosure crisis - Oct 2nd

One of the unfortunate outcomes of the housing slump in the Las Vegas Valley is the effect the record number of foreclosures is having on neighborhoods. Entire city blocks resemble checkerboards of properties for sale or in foreclosure mixed with homes that aren’t on the market.

Sadly, many of the foreclosed homes have yards that have not been kept up. Multiply that by several homes on a block and you have a neighborhood many prospective buyers may want to avoid.


New face of Valley homeless - 3 times the number of homeless vs same time last year

The struggling economy continues to hit Main Street hard. More and more families are losing their homes, forcing some to live on the streets.

Catholic Charities says they've noticed that within the last several months, the face of the homeless has changed. It isn't just the single male sleeping on the streets anymore. Now, it's the family who was once living on easy street.

"Mary" is a mother of three. She and her husband both have jobs, a large mortgage, and a car payment. And, like many valley residents, they are just trying to make ends meet.

"Bills were due - we just needed a little help for today," says "Mary." "It's costing us more because we have a $1,295 mortgage, car note, kids expenses, diapers..."

Phillip Hollon with Catholic Charities says their role of helping only those people without shelter has drastically changed over the last year.

"Last year at this time, we were serving about 50 families on any given day. Now we're serving about 150 families on any given day," explains Hollon. "‘It's a very different clientele than we've seen in the past. Many years ago, people were on the street walking to us. Now they're driving to us."

Because of the housing crash, high gas prices, and inflation, more and more families are asking for help. And some are even ending up on the streets.

"The types of individuals we're seeing are struggling to make ends meet," says Hollon. "They're forced into making decisions - whether they can pay their rent, or their car payment, or putting food on the table."

Within the last few months, Catholic Charities has seen the number of hot meals they serve dramatically increase from around 600 to over 800 every day.

"We've been struggling ourselves to try and help the community," says Hollon. "With all the needs that are out there, it has tripled in the past year."

Linda Lera-Randle El runs "Straight from the Streets." She says the increase is so great, that the state needs to step in and help out because things are bound to only get worse.

"Poverty is usually last on the list," explains Lera-Randle El. "It's the hardest hit and it's going to cost the most. It's just like a natural disaster almost - only it's with us always."




Regards

Randy

Will the MASSIVE Gvt bailout plan work?

Our Global economy is currently teetering on the edge of a cliff - caused by a complete collapse of the American Debt bubble and unwinding of the global derivatives complex.

Had American financial policymakers allowed us to take our medicine earlier, we probably could have gotten through this mess, but Alan Greenspan and the Boyz instead decided to follow a consistent policy of delaying our day of reckoning. By lowering rates/increasing liquidity at any inkling of global economic stress (see some of the examples below), they merely covered up the economic problem of the day with more easy credit/debt - which successfully delayed, but significantly increased the size of the problem...

- US Stock Market Crash of 1987
- Japan's Economic Crash of 1990's
- LTCM Hedge Fund Collapse 1994
- Asian Currency Crisis 1997
- Russian Bond Default 1998
- NASDAQ Bubble/Bust

The latest example was the Housing Bubble

Most uninformed Americans actually think the housing bubble created all of our current economic ills, but what they don't realize is: the housing bubble was merely the delayed symptom of easy monetary policies and laxed lending standards - created in large part by Alan Greenspan and his cronies by not wanting to take the harsh economic medicine after the dot-com implosion and 9/11 crisis. Therefore, they delayed the much needed/necessary hardship by lowering/holding rates at 1% (40 year low) - providing the volatile fuel mixture used to inflate the housing bubble.

So, here we are today, sitting on the MASSIVE cumulative effect of all these corrective delays and the problems are GARGANTUAN.

Thus far, in an attempt to save our crumbling foundation of debt, Gvt financial experts (AKA: Plunge Protection Team) have tried three different mortgage work-out plans, pushed through a massive economic stimulus package and simultaneously resorted to a myriad of unprecedented Fed Reserve lending facilities. That wasn't enough, so Bear Stearns was bailed out with your taxpayer dollars, followed by Fannie Mae/Freddie Mac and most recently AIG. Each of these attempt to stop the systemic debt implosion has been more drastic than the previous and each attempt has failed.

It's now being said the proposed $700 Billion Bailout package (a new taxpayer funded Government structure used to buy up the bad debts of sinking US and International banks) will save the day.

So, will it work?

Before answering this question, ask yourself: How many times during this developing economic crisis have our appointed financial wizards told you the crisis is contained - and have they been right even once?

NOT!

Much to Greenspan's despair (because his legacy will now forever change) our inevitable day of reckoning has finally arrived! The problems we now have are far too big for any repair effort - Deleveraging of debt must happen and there is nothing, aside from delaying the inevitable, that Paulson, Bernanke, Cox, Lukken and the rest of this lying band of taxpayer pirates can do about it.

Our system is Hemorrhaging badly and the band aids will slow, but will not stop the massive bloodletting to come.

If you'd like to know more about how we got here and what our future is likely to hold - see link: US Economic Outlook 2008-11+

Lastly, we should never discount the negative implications these bailouts create for the US Dollar - as the World's Reserve: Dollar: Faltering Foundation of US Economic Strength

Regards

Randy

Karl Denniger Videos - Must Watch!

Late July 08 Karl Denniger video - from The Market Ticker - EXCELLENT - A MUST WATCH!!

Stop The Bailouts!




17 Sept Karl Denniger Video - The Potential End Of America's Government

AKA: Hyper Drive Engaged - Destination Zimbabwe (Hat tip FoFoa)

Ron Paul: The Mother of All Bailouts!

Ron Paul talks about the bailout out of the housing industry and how it really just destroys the dollar and adds enormously to the debt. Also, slipped into the bill, was the stipulation that ALL credit card transactions must now be reported to the IRS.

Nevada's fiscal woes among worst in Nation

The bad news just keeps pouring in for the once thriving, and once believed to be, "bullet-proof" Nevada economy.

Though I've been warning folks of the looming downturn since early 2006: Las Vegas—A House of Cards Bound to fall, many disregarded the info and/or considered me a nutcase.

Anyway, since that time, I've been trying to keep readers abreast of the unraveling situation as I see it.

A few of my situational awareness posts:

Las Vegas housing downturn is leading the Nation:

Nevada Tops in Foreclosures AND Price Declines!


Home to 15 of the top 20 zip codes hardest hit by the housing/foreclosure meltdown:

Las Vegas Tops Foreclosure List


Four years of housing gains lost in one:

We Ain't seen nothin Yet


Fewer flights mean less tourists and less gaming revenue:

Airlines: More problems for Las Vegas Strip


Las Vegas Gaming revenue is falling fast -- faster than post 9/11:

Las Vegas: Gaming Revenue down > 16%


Casino layoffs have just started:

The Las Vegas Economic Downturn Has Started


Vegas locals flat broke:

Las Vegas: All flash and no cash


High-end Auto Repo Business is booming:

Las Vegas Economic Downturn Increasing "High-line" Auto Repos.html">


Local Banks are having difficulty coping:

Local Banks Effected by Las Vegas Real Estate Crisis



Well, if the situation weren't dire enough already, it's now being reported that Nevada is among the top three in the nation for state revenue declines:

Nevada's fiscal woes among worst in nation


CARSON CITY -- As if you needed more bad news, Nevada's economic downturn now ranks as one of the worst among the 50 states.

A National Conference of State Legislatures report released Wednesday found that tax revenue in Nevada fell by 7 percent in the fiscal year that ended June 30 compared to the previous year.

Nevada ranked No. 3 among the 17 states that reported revenue declines, led by a 7.5 percent drop in Oregon and a 7.3 percent decline in Florida.

Twenty-eight states, including Nevada, expect further declines in the current fiscal year, according to the NCSL report. Nevada already has approved measures to reduce spending by $800 million in the current fiscal year.

"We are all going through the same problems," said Ben Kieckhefer, a spokesman for Gov. Jim Gibbons.

He said there is no magic tax that can snap Nevada and other states out of the economic doldrums. Gibbons remains committed in his opposition to any tax increase, Kieckhefer said.

"When the economy is struggling, it is not a good time to raise taxes," he added. "We need to cope with the revenue we have and weather the storm. If there were a recession-proof tax that didn't hurt people, then someone at MIT would have thought of it."

Kieckhefer said Nevada faces a special problem because of its tourist-based economy.
"It is not surprising that we are faced with economic problems when the national economy experiences a downturn," he said.

Since November, Nevada has cut spending in its two-year budget that ends next June 30 by $1.2 million. That is equivalent to 17.7 percent of its $6.8 billion two-year budget.


Bottom Line:

There's no end in sight to the bad news and (I believe) this bad dream will soon turn into a nightmare -- when the casino layoff's begin in earnest.

Note: I honestly get no joy out of seeing my local economy fall apart and watch neighbors/co-workers and friends lose their homes, jobs and previous way of life, but I do get a sense of "I-told-you-so".

What really bothers me though is: If a simple telecommunications manager and lay-economist (me) could plainly see this train wreck coming over two years ago, why couldn't the so-called "experts" see it -- and possibly do something to better prepare?

Randy

Peter Schiff on Fox: Fannie and Freddie

Peter, once again, telling it like it is.

Click "play" twice to load

Fears Grow over Fannie and Freddy

Fears Grow Over Mortgage Giants -- Stocks of Fannie Mae and Freddie Mac are hammered as the housing slump spreads. Future of these two giants being debated. Gvt takeover required?

Fannie and Freddy -- walking dead

I've been hammering Fannie and Freddy since my very first post in 2005 and have always suspected that they were merely walking dead, but the Gvt. couldn't allow the public to know this, so they propped up their carcass of a body just like the characters did their boss in "Weekend at Bernie's"

Well, it now looks like the cat is out of the bag, as former St. Louis Federal Reserve President William Poole said Freddie Mac and Fannie Mae are insolvent and that the government might need to step in to rescue the struggling lenders.

“Congress ought to recognize that these firms are insolvent, that it is allowing these firms to continue to exist as bastions of privilege, financed by the taxpayer,” Poole said Wednesday.

In other words, he believes they're virtually bankrupt!

Fannie, Freddie Tumble on Bailout Concern

July 10 (Bloomberg) -- Fannie Mae and Freddie Mac, the two biggest providers of financing for U.S. home loans, fell to the lowest levels in 17 years in New York trading after a former Federal Reserve president said the companies may need a government rescue.

Fannie Mae tumbled as much as 24 percent and Freddie Mac slumped as much as 34 percent in New York Stock Exchange composite trading after UBS AG analysts said in a report today that Freddie Mac's decline creates ``challenges'' for the company's plan to raise $5.5 billion

Chances are increasing that the U.S. will bail out Fannie Mae and Freddie Mac because they don't have enough capital to weather the worst housing slump since the Great Depression, former St. Louis Federal Reserve President William Poole said in an interview. Freddie Mac owed $5.2 billion more than its assets were worth in the first quarter, making it insolvent under fair value accounting rules. The fair value of Fannie Mae assets fell 66 percent to $12.2 billion, data provided by the Washington- based company show, and may be negative next quarter, Poole said.

The companies, created to boost homeownership and promote market stability, own or guarantee about half the $12 trillion in U.S. home loans outstanding. In addition to those obligations, Fannie Mae has $831 billion in company bonds outstanding, while Freddie Mac has $644 billion, according to Bloomberg data.

Government Ties

Congress created Freddie Mac and expanded Fannie Mae in 1970 to promote home buying in the U.S. The companies' charters give the Treasury the authority to buy as much as $2.25 billion in each of their securities in the event of possible default.

The government will likely be forced to take over the companies because of the mortgage meltdown, Poole said.

``We know in a crisis the Federal Reserve tap would be open,'' said Poole, now a senior fellow at the Cato Institute.

The bailout of Bear Stearns Cos. by JPMorgan Chase & Co., arranged by the Fed, demonstrates the government's unwillingness to allow ``large, systemically important'' financial institutions to fail, he said. Bear Stearns collapsed after customers fled amid speculation the company faced a cash shortage.

``I worry about those institutions,'' retired Richmond Fed President Alfred Broaddus said. ``They are huge. They dwarf the Bear Stearns issue. In the very worst case scenario, I don't know how you do it other than extend money and the public takes the loss.''

Bottom line:

This is huge folks! If Fannie and Freddy were allowed to fail (won't be allowed), we would quickly fall into an ECONOMIC DEPRESSION (i.e. lack of new home loan credit = lack of new money circulating, destruction of debt/bond/equity markets, a complete lack of home sales/swiftly building inventories, MANY times more home loan defaults than expected and an ABSOLUTE COLLAPSE IN HOME PRICES -- compounding several times over the current banking/financial system crisis and significant economic pains that we are now experiencing).

If the GVT indeed does bail them out (likely) expect a HYPERINFLATIONARY Spiral -- followed by a depression anyway. We're talking TRILLIONS of new dollars quickly added to a bloated fiat system that is already creating new money at a near 20% annual rate -- adding explosive fuel to a raging forest fire and increasing the velocity of US Dollar decline and ultimately Dollar hegemony collapse.

Once again, the Plunge Protection Team and Gvt are stuck between a rock and a hard-place, and the days of easy fixes have long since past... We should have taken our harsh medicine after the Dot.com crash, but the Maestro (Greenspan) wanted to leave his chair on a high note. Though honored, knighted and revered around the globe, Alan Greenspan (when history is written/analyzed) will likely go down as one of the WORST Fed Chairman EVER! I hope he can sleep well at night, knowing what he hath wrought.

As an aside: for those who don't understand the word hegemony (used above), I highly suggest you read a superb Ron Paul article written back in 2006: The End of Dollar Hegemony

All the best

Randy

We Ain't seen nothin Yet

Since the end of the housing boom in 2005, I've been stating the housing correction in Las Vegas would be significant and we'd likely see a 50% haircut (peak to trough) in home prices. Thus far, odds are looking pretty good that I'll ultimately be correct (Maybe even too optimistic).



Four years of gains wiped out in just one.

Home prices across 20 major U.S. cities have dropped a record 15.3% in the past year and are now back to where they were in the summer of 2004, according to the Case-Shiller home price index released Tuesday by Standard & Poor's.

Las Vegas saw the biggest declines, with prices falling 26.8% in the past year.

With so many homes on the market and foreclosures rising, prices are likely to keep falling, said Patrick Newport, an economist with Global Insight

"We expect the 20-city Case-Shiller composite to fall another 15% to 20%, to a bottom at the end of 2009, translating to a peak-to-trough drop of 30% to 35%," wrote Michelle Meyer, an economist for Lehman Bros.

After accounting for 4.5% inflation over the past year, real home prices are down in every region in the nation.

Closing:

Thus far, the decline in bubble-region home prices has been quick, but I still feel we've got a long way to go. Significant banking/credit issues will soon to come to light again while unemployment numbers are due to increase significantly. Combine these issues with billions in Option Arm Resets, massive inflationary pressures and soon-to-be crucified equities markets and the result is a toxic Witch's Brew of economic misery that will continue to force massive downside price pressures across the nation.



Bottom Line: We ain't seen nothing yet!

Regards
Randy

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

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.

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.

HERE COMES THE ALT-A CRISIS

Subprime resets were bad and wreaked havoc throughout global financial/credit markets. Could Alt-A be worse? I suggest you watch this really good explanation for the answer... Well worth your time

Mr Mortgage - HERE COMES THE ALT-A CRISIS

$6 Trillion Housing Loss

A Washington think tank is warning that housing prices are falling at an accelerating level, destroying wealth at a pace that will cost the average homeowner $85,000 in lost wealth this year alone.



The projections by the Center for Economic and Policy Research are based on the numbers in Tuesday's Case-Shiller home price index, which showed accelerating price declines in most big cities.


The annual rate of price decline over the last quarter was 24.9% in the 20-city index and 25.8% in the 10-city index," the center said in its Housing Market Monitor today. "At this rate of price decline, the excesses of the housing bubble will have largely disappeared by the end of the year. At the same time, the price decline implies an incredibly rapid loss of wealth.


In real terms, the rate of price decline in the 20-city index would imply a loss of almost $6 trillion in real housing wealth over the course of the year, an average of $85,000 per homeowner."

Disappearing now: $6 trillion in housing wealth

No one is immune from this collapsing bubble

The Encino, California home of former U.S. baseball star Jose Canseco is shown in this undated publicity photograph from the syndicated television program 'Inside Edition' May 1, 2008.



Baseball star Canseco loses home to foreclosure


LOS ANGELES (Reuters) - Former U.S. baseball star Jose Canseco said on Thursday he had lost his California mansion to foreclosure -- one of the first celebrities to publicly admit being a statistic in the U.S. housing crisis.

Canseco, 43, one of the most flamboyant U.S. baseball players until his retirement from the major leagues in 2001, told the celebrity TV show "Inside Edition" that it did not make financial sense to keep his 7,300 square-foot (678.2 sq-metro) home in the Los Angeles suburb of Encino.
"Inside Edition" said it had foreclosure documents showing Canseco owed a bank more than $2.5 million on the house.

"I've been out of the game for about eight or nine years and obviously this issue with the foreclosure on my home," he told "Inside Edition."

"I do have a judgment on my home and it to me is very strange because it didn't make financial sense for me to keep paying a mortgage on a home that was basically owned by someone else," he said.

Canseco said the foreclosure was not a difficult issue emotionally. But he sympathized with the millions of other Americans who have already lost, or face losing their homes, because of soaring interest rates on sub-prime loans.

"I decided to just let it go, but in most cases and most families, they have nowhere else to go," he said.

It was not clear from the "Inside Edition" report where Canseco was now living.

U.S. home foreclosure filings jumped 23 percent in the first quarter of 2008 from the prior quarter and more than doubled from a year earlier, real estate data firm RealtyTrac reported this week.

Canseco was one of the first Major League Baseball players to admit using steroids in his tell-all 2005 book "Juiced." His personal life has also been controversial with two divorces and several run-ins with the law for violence.

Canseco said a good portion of the money he earned in his heyday went to pay for his divorces. "I had a couple of divorces that cost me $7 or $8 million," he said.

San Francisco Federal Reserve Symposium

I'm reposting this article back towards the top of my Blog--for those of you who haven't yet read. If you have the time, take a look at the comment section also.

Last Thursday afternoon (April 10th) I had the opportunity to attend a three-hour Fed symposium at UNLV and meet three representatives of the Federal Reserve Bank of San Francisco. This symposium is held biannually and is geared towards providing Undergrad and Grad students with a better understanding of the operations of the Federal Reserve Banking system.

I’m a friend of someone who is enrolled in an executive MBA program and we often discuss current economic conditions and the Fed Reserve System, so when he became aware of this symposium, I was the first person he thought of and invited.

The symposium started with welcome introductions and was quickly followed by a 24-slide presentation/briefing from Karen “S” (Manager of Administrative Services, Banking Supervision and Regulation, FRBSF) on current banking conditions and trends.

Karen has worked for the Federal Reserve Bank of San Francisco for over 20 years and prior to that, worked for Barclays bank for 10yrs, so one would surmise she is well seasoned in her field.

Karen discussed the regulatory role of the Fed and several other regulatory agencies (FDIC, Office of Thrift Supervision, Comptroller of the Currency—Administrator of National Banks, etc) and then moved on to cover the Top-3 current Banking Risks:

1) Subprime & Residential Lending
a. Mortgage underwriting weak
b. Consumer Disclosures questionable
c. Property values continue to decline

2) Commercial Real Estate
a. Loan concentrations high
b. Properties unoccupied

3) Liquidity Risk
a. Non-core funding dependence increasing

Each of these areas was covered with slides/charts/graphs etc, but there were really only a few takeaways worth sharing:

1) National home prices have already dropped 9% (Peak-to-trough) thus far, but the briefing suggested we should expect to see a total drop of 20% by Spring 2009—Sub-prime resets, falling home values and tight credit conditions being the main factors (1 of every 4 subprime residential loans is in past due status)

2) National Foreclosure rates are at a 27 year high and expected to worsen

3) 12th District Bank Construction and Land Development Loan Concentrations at all-time highs (% of equity vs. Allowance for Loan and Lease Losses); much higher than even before or during the 90’s California RE collapse

4) Many bankers are “in denial” and not acknowledging problems; loans are being downgraded to “substandard” or worse; bank loss rates rising sharply

5) Bank Construction and Land Development loss rates likely to go much higher

6) Many issues on the radar screen for Banking Risks—Credit Risks, Compliance, Market/liquidity Risks, etc.

During her briefing, Karen heaped most of the blame for our current housing crisis on relaxation of underwriting standards, mortgage fraud, predatory practices, etc, but she spoke not one word about partial responsibility being tied to fed policies. After listening and twisting in my chair for some time, I finally asked: “You’ve placed much of the blame for our current housing predicament on all these factors, but you’ve not once addressed Fed policy and the fact that Greenspan held interest rates at a 40 year low for far too long… Don’t you think the Fed deserves part of the blame for this crisis?”

After a somewhat long pause came the words: “Well yes, Fed policy was partly to blame.”

Karen then searched for thoughts/words to make her answer seem less “Fed-negative” than it was, so she tried to refocus and babbled on for quite some time about how these ultra low rates and Fed policy provided the opportunity for millions to live the “American Dream of home ownership -- even if it was just for a short time. "

I was incredulous and couldn’t believe my own two ears. The whole time she spoke of this, I was thinking: Sure, inept Fed policy/easy money allowed MILLIONS to “taste the American Dream” -- but now MILLIONS will lose their homes, ruin their credit, ruin family relationships, lose jobs, etc, but she felt it was all worth while… "They tasted the Dream.”

Bottom Line: Her reply was absolutely ludicrous. But what else should a person expect to hear from a Fed employee who drinks the Kool-aid?


Next up was Renee “C”, a rather young, attractive Fed Research Analyst who presented a briefing on the Federal Open Market Committee (FOMC). Renee spoke with a bubbly/positive outlook on things, but seemed a bit naïve – she struck me as a regurgitator of data that has been heard/learned over time, but really incapable of independent thought or an understanding of the “Big-Picture”.

She did however appear to be very enamored/proud to be employed by the SF Fed -- a true Fed Soldier.

Renee discussed:

1) Her Group’s Role at the Fed
a. Public Information
b. Economic Research

2) US Monetary Policy Goals
a. Maximum sustainable output and employment
b. Stable prices

3) Tools of Monetary Policy
a. Open Market Operations
b. Discount Window
c. Term Auction Facility
d. Primary Dealer Credit Facility
e. Term Securities Lending Facility
f. Reserve Requirements

4) Monetary Policy Meetings
a. Eight times a year in Washington DC

5) Monetary Policy Decisions
a. National in scope
b. Forward looking
c. Tradeoffs of between short-term and long-term goals

6) Fed Policy Statements
a. A secondary policy instrument (first is the Federal Funds Rate)

7) Economists at the Fed—who they are/what they do
a. Fed is the largest employer of economists
b. Economists conduct and publish research
c. Produce economic briefings for FOMC members

Early on in the briefing, Renee put up a cartoon depicting Bernanke holding a balloon inscribed with the word "inflation" in one hand and a rope tied to a dollar sign tilting off a ledge in the other, and then asked if anyone can interpret what the cartoon is trying to say.

I stated the Fed is worried about inflation, which is rising, but can’t do much about it by cutting rates and therefore risks allowing the dollar, the world’s reserve currency, to fall off a cliff—and added: “He is in quite the pickle right now…” Renee politely giggled and said, that’s good, but I’m actually using the dollar to depict the US economy, and as for the balloon, inflation always needs to be positive, but not too high… It must be a delicate balance and the fed walks a fine line…

Later, when discussing Monetary Policy she stated that: “Monetary Policy Lags and needs time to take effect” which I agree with, but I stated “Inflationary Policy also lags.”

I don’t know if she really understood my point: Using the numerous new Fed Tools to inject while cutting rates is highly inflationary and we consumers are already feeling the first wave. With the many recent/deep cuts yet to take full effect, it’s only going to get much worse (while the dollar gets creamed)…

I also asked if Fed decisions are politically influenced. (e.g. reporting to the public that the glass is half full vs. half-empty). Renee was firm in stating that analyst research and the sharing/publishing of data is NOT politically motivated and she highly doubts that the FOMC public release is either.

My thoughts were: Move along now, nothing to see here… Continue drinking the kool-aid and all will be fine…


Yelena “T”, Ph.d. Economist of Russian decent, gave the last economic briefing. Yelena was pleasant, seemed to be very intelligent (far more so than the other two), but you could sense that she was only providing surface-level, somewhat optimistic forward looking data, and seemed to be holding back on what could be said to the audience.

Yelena discussed:

1) Current Economic Outlook
a. GDP is dropping faster than earlier Fed Predictions
b. Personal income is flat/dropping slightly
c. Consumption expenditures—a noticeable drop
d. Unemployment is increasing; employment fell for 3rd month
e. Weaker Dollar (Note: she stated a weaker dollar is good for US exports. I chimed in: “That’s good, but we’ve exported most of our manufacturing capacity and until we get it back we’re still going to continue running MASSIVE trade deficits.” Oil yesterday hit $112 and the Yuan broke 7 to the dollar and is gaining speed. Inflation can mainly be attributed to a weak dollar — she nodded/seemed to agree with all)
f. Real GDP Growth has been reduced by a decline in Real Residential Investment
g. Inflation is a source of concern (depicted charts of Core PCE, Total PCE and CPI rising above trend line: I wanted to state that her "understaed" numbers were all completely bogus, but it would have been inappropriate in this collegiate setting)
h. Mixed Signals for long-term inflation expectations

2) Federal Reserve Board of SF National Forecast
a. Little GDP growth in first half 2008, but likely improvement in 2nd half
b. Monthly GDP forecasts have fallen every month since Aug 07
c. Inflation should decline going forward due to slower economy
d. Housing inventories climbing; >2x higher than normal; downward price pressures

3) Potential Risks to their Forecast
a. Continued home price declines may impact construction and consumer spending more than anticipated
b. Continued tightening of lending standards may make housing situation worse
c. Jumbo mortgage rates remain high; increased spreads between 10yr Treasury rate and Mortgages rates -- even conforming mortgages
d. Increased Credit Market Stress

When the briefings were finished, the forum was open to questions. A few relatively easy questions were asked by audience members and were promptly answered.

I later, after much internal consternation, asked how we can sit here and discuss rate cuts, stimulus packages and Monetary Policy, yet fail to address our ailing US Dollar and it’s faltering status as the World’s Reserve Currency. I highlighted that back in 1971, US total monetary aggregate was merely $700 Billion, but now it’s > $14 Trillion and is growing by 18% annually.

I then stated numerous countries have already pulled or are discussing pulling their currency-dollar pegs (due to high domestic inflation rates—as they have to print money as fast as we do). I also opined that Treasury Secretary Paulson and Bernanke’s “Strong-Dollar policy” is preposterous/laughable. How can they continue to cut rates/inflate while the dollar falls to all time lows around the globe, yet “claim to support a strong dollar?” (Note: I was getting a little worked up by now)

I was told this “Dollar Exchange Rate” issue isn’t really taken into account when discussing Monetary Policy, but there are departments internal to the Fed that do study monetary exchange rates/etc. Additionally, I was told that monetary aggregates aren’t important or studied. (Internally, I laughed at the ignorance).

I had many, many more questions/concerns boiling inside of me, but at this point, I had already been the most vocal audience member of the day and had taken far too much of the forum’s time… It wasn't like I was getting intelligent answers anyway… So I bit my lip and said no more.

In closing, what more can I say -- except that I expected more from this symposium. Here were three Fed Bank employees with many years of economic experience, yet their answers seemed uninformed and absolutely baffled the informed mind. I guess that’s what Fed programming/propaganda does to a person. Drink the misinformation Kool-aid for too long and become part of the problem -- passing on ignorance as fact and supplying high school level, nonsensical answers to those with valid questions/concerns.

If these three folks actually represent a typical cross-section of Fed employment/knowledge base, then God help us all, because the misinformation/ignorance problem we have is much bigger than even I thought.

Best regards and until next time

Randy

Economicrot Homepage

How The Banks Bet Your Money UK & US

If you really want to understand the current Housing, Banking & Credit Crisis, this series is an Absolute Must Watch

A global credit crunch has put Britain's banks in a crisis that threatens the future of jobs and businesses and may even trigger a wholesale recession.

Private equity financier Jon Moulton delivers a stinging rebuke to the banks for causing this financial meltdown and explains why the British taxpayer will now pay the price.

America has been hit hard by the sub-prime crisis. The social cost of financial failure has been enormous. An epidemic of home repossessions has left thousands of houses abandoned and boarded-up: whole suburbs are falling into disrepair and dereliction.

Financial institutions in America and in Britain had poured billions into investments backed by these mortgages. As more and more people have defaulted on their mortgage repayments, financial markets have collapsed, causing a crisis that has rippled across the Atlantic, sending the City of London into turmoil and pulling the plug on one now infamous British bank.

The question is: will it stop there? This is a story about the destructive power of finance: what happens when banks are driven by short-termism; when bankers are rewarded with vast bonuses, free to operate under inadequate regulatory supervision, and with the complicity of a government too in awe of big business to step in.


Part 1



Part 2


Part 3


Part 4


Part 5

Las Vegas Preforeclosures Hit Record

Back in February 08, I told you that Las Vegas was #1 in foreclosures, and then showed you how we (unfortunately) captured 15 of the top 20 spots on the National Foreclosure List: Las Vegas Tops Foreclosure List.

Well, as I stated then and have been predicting all along, things aren't going to get any better anytime soon -- this was some bubble and we've got a long way to fall.

From the Las Vegas Review Journal Today: Bad news mounts in housing

The number of Clark County homes that entered preforeclosure status reached a record 6,152 in March, up 52 percent from February and more than double the 2,813 preforeclosures in the same month a year ago, Sacramento, Calif.-based Foreclosures.com reported.

The county has 15,937 preforeclosures through the first quarter of the year, or 3.11 percent of its 512,253 households, the online foreclosure source reported.

Nevada leads the nation with 2.42 percent of its households, or 18,087 homes, in preforeclosure through March, followed by Arizona (1.96 percent), Florida (1.87 percent) and California (1.05 percent).

Staggering foreclosure numbers are the result of a multitude of factors, including a meltdown in the mortgage lending industry, fraudulent appraisal values and overzealous speculators.

Real estate-owned, or bank-owned, homes in the county also rose substantially in March to 1,937, up from 1,640 the previous month and 1,763 in January. The three-month total is three times more than a year ago.

Jeanette Young said she's now faced with possible foreclosure on her home after losing her job at National Alliance Title, which closed in December.

President Bush's plan to give $600 tax rebates to help homeowners is a "joke," she said.

"I don't know anyone that has a mortgage that is $600, unless they've had the same loan for 10-plus years," she said. "Mine is $2,200 plus all the other bills associated with a home. I do not see any relief in sight for those of us who have lost our jobs, cannot find comparable income and now cannot make our house payments."


So, how is this foreclosure issue impacting the broader Nevada economy?

Nevada's January gambling revenue falls 4.8 pct

Nevada casinos won $1.06 billion from gamblers in January, a 4.8 percent decrease from the same month a year earlier, Nevada's Gaming Control Board said on Friday.


Hooters Hotel sees fourth-quarter decline

Hooters Hotel's management said the economic downturn late last year drove fourth-quarter revenue down as the property saw department wide declines.

Fourth-quarter net revenues declined 11.5 percent to $14.8 million from $16.8 million in 2006.
Casino revenues dropped 10.1 percent, food and beverage fell 12.1 percent, and hotel revenue fell 8.4 percent for the three months ended Dec. 31.

"The challenges presented by the current economy have eroded consumer confidence," said Mike Hessling, president of 155 East Tropicana, LLC, Hooters' parent company, during a conference call Tuesday. "It has caused certain customers to reduce their spending on leisure and entertainment."

States taxable sales plummet 5% in January '08

Nevada's funding problems worsened Friday when the state Department of Taxation announced that taxable sales for January plunged nearly 5 percent from the year before, the biggest drop of the state's current economic slowdown.

Every major component of the taxable sales base was down in January, from auto sales to restaurant purchases.

In a separate report issued Friday on Nevada's February unemployment rate, Bill Anderson, chief economist for the Nevada Department of Employment, Training & Rehabilitation, suggested that an upswing in the economy isn't expected immediately.

Governor Gibbons Dealing With Major Budget Cuts

Concerns are mounting that the $900 million state budget crisis could get worse. Thursday Governor Jim Gibbons was in town and he outlined how he intends to decide what to cut.

So far the conventional wisdom has been correct, it's going to get worse before it gets better. The governor said some departments will be spared from further cuts, while everyone had better get used to the same old, same old everywhere else.

K-12, public safety, corrections and juvenile justice. Should it stay or should it go? These are the decisions haunting Governor Gibbons. $900 million is looming and more programs want more money than ever before.

Nevada governor says budget shortfall is nearly $900 million

CARSON CITY, Nev. — Nevada Gov. Jim Gibbons said Monday that the state's budget shortfall could reach $900 million by mid-2009 and he'll work with legislators to find more ways of reducing spending beyond the 4.5 percent cutbacks he ordered in January.

After two closed-door meetings with both Democratic and Republican lawmakers, the GOP governor also told reporters that he hopes to avoid layoffs of state workers. However, there's still a possibility of additional budget cuts of up to 3 percent for some agencies next fiscal year.

The projected $900 million shortfall amounts to 13 percent of the nearly $7 billion state budget approved last year for the current two-year budget cycle, which runs through June 2009 - and if the revenue slump continues, the shortfall estimate will grow even larger.

City of Las Vegas Faces Historic Budget Deficit

The city of Las Vegas is in the red and facing one of the largest budget deficits in city history. The mayor and the council called an emergency meeting to come up with solutions.

The city finance director says the Las Vegas housing market and consumer spending are in a recession although overall the city is not in one yet. Still, it means huge cuts that will affect every department and Las Vegas residents waiting longer for services.

"Only an idiot would say that everything is going to be hunky dorey. It is not. We are just going to have to do what we can with the money that we have," said Mayor Oscar Goodman.


So, where does Las Vegas go from here?

For lack of better words than those I've already written, I'm going to repost some of my closing thoughts from a December 07 Las Vegas Housing Bubble Post, as they still apply

Las Vegas’s economy has been completely dependent on the discretionary spending of vacationers (Airlines, Hotels, Restaurants, Shows, Gambling, Drinking, Strip Clubs, etc) and the city lacks any real or substantial diversification. When tourism & discretionary spending finally start to decline (due to National negative savings rates, rising inflation and falling home values), gaming revenues will drop, hotel occupancy rates will fall, and thousands of layoffs will follow.

Those locals who find themselves unemployed will quickly find that they have very limited options, as the entire hotel & gaming industry will be feeling the same economic pains. The lack of industry diversification in the city will be a killer!

Currently, with housing values falling, the wealth effect is under strain and many people are having difficulty understanding what has happened to the housing market, while most are still holding on to the false hope it will recover somewhat quickly.

In the meantime, these folks have a mortgage that must get paid, all while coping with higher gas, food prices, tuition, insurance, energy bills, etc. Many are already strained to the max and the black hole of upcoming teaser rate mortgage resets will finally set them over the edge. (Note: refinancing will not be an option for those who have purchased within the last 3 years because they are already underwater; additionally many who have owned for decades used the cheap rates and housing boom to extract available equity--to live beyond their means; so they too cannot refinance).

This same issue is beginning to impact millions from across the nation!!!

Additionally, the home ATM machine that people used to draw money out of regularly has finally dried up, so they have ended up resorting back to the credit cards (the same ones they paid off with that home equity line of credit last year) just to make daily ends meet.

This is going to end horribly (on a national scale)!

BOTTOM LINE: When tourism starts to wane, due to people running out of discretionary cash, gaming/hotel industry layoffs will follow, cascading the impacts of the already doomed Valley housing market, as more locals will be unable to meet their monthly mortgage obligations.

Reduced spending levels, increasing layoffs, magnified home foreclosures and tightening credit conditions will cause a doubly painful domino effect on the Commercial real estate market and in due time, the impacts will be extremely painful to the entire economy. .. State Tax revenues will fall, budget cuts will follow and the increasing number of government layoffs will only exacerbate/compound the situation.

I think one of my readers summarized the situation best: “ Las Vegas lives off the margin. Good times, fat margins; lean times, no margin. LV has no plan B, there's nothing to take up the slack from a decrease in visitor volume. Even dollar rich foreigners aren't going to hold up employment that is based on a volume service industry and housing construction.”

Randy

Is the Credit Crunch Over?

The recent stock market & dollar rally, coupled with the massive commodity/metals sell-off, has led many to believe that the Fed & Plunge Protection Team (PPT) were able to sucessfully restore liquid credit markets and the turmoil is now over.


My Thoughts:

Aside from unprecedented/wide-scale PPT market manipulation, and a mere slowing of the credit implosion helped by new Fed lending apparatuses, nothing has been resolved. Homes are still foreclosing in record numbers, legislators are now calling for new regulations to prevent future “similar” banking/credit issues, lending standards are getting tighter, financial institutions still have no market (aside from the Fed monetization window) for their gargantuan off-balance sheet/tier-III toxic waste piles, and American consumers (trying to cope with huge inflation waves, combined with a collapsing wealth-effect brought about by falling home values and lack of available “new” credit) are starting to pull back on discretionary spending. Note: 70% of the US economy is consumer spending

Bottom line: Recent sentiment change created by Financial Wizard market manipulation is all smoke and mirrors – the PPT is trying to re-establish faith and trust in markets (and a currency) that are ready to implode.


What manipulation am I talking about?

Let’s look at the recent precious metals sell-off: Gold and Silver took their worst beating in years during the recent commodities smack-down. How in the world could these metals get crushed so badly when dealers are overwhelmed with orders and can’t get or keep enough products on their shelves?

Must see this link (and pictures below) to understand what I’m talking about: Silver Shortage: 19 dealers reported "Sold Out"

Bullion Direct

Kitco

Additionally, I received this message via email from APMX just yesterday:

Due to the OVERWHELMING demand for precious metals, our online ordering system has been unable to keep up with our customers’ needs. We have had to disable the APMEX ordering system to allow us ample time to upgrade our site to accommodate the increased demand. We apologize for this temporary problem. In the mean time, we will be accepting telephone orders for the following items only as we have them available:1 ounce Gold American Eagles1 ounce Gold Canadian Maple Leafs1 Ounce Gold Krugerrands100 oz Silver BarsMisc Generic .999 Fine Silver90% Coin SilverDuring this time, we will have a minimum order of $5,000. We regret we have had to make this drastic change to our ordering process and rest assured, we are working expeditiously to correct the problem. As soon as we have our new site up and running, we will notify you via e-mail when you can again place orders online.

Or how about this one:

High Demand for 2008 Silver Maple Leafs: The Royal Canadian Mint has found itself unable to fully meet the unprecedented demand for silver Maple Leaf coins with its current supply, and has temporarily suspended shipments. This situation is temporary until more of this fine bullion product can be struck and shipped. Because many of our customers want to purchase this product at today's prices, Northwest Territorial Mint will accept orders now for shipment when the product becomes available, which we expect will exceed 30 days. If the wait for product proves too lengthy, we reserve the right to substitute a similar silver product.

OK, if there is such a supply shortage, why did PM prices crash this last week?

It was a PPT manipulated paper smack-down (through engineered margin call selling of futures, options, etc – to fry the longs, destroy prices and signal an end to the commodity boom) that has changed none of the underlying precious metals supply/demand/inflation-hedge/flight-to safety fundamentals.

But it did provide a great buying opportunity – could be a very good time to back up the truck and load up w/physical…

Take a look at who is taking advantage of this smack-down:

Asia jewellers on buying spree as price sinks-- It probably won’t be too long before PM prices regain their footing..

Jewellers across Asia rushed to buy gold on Thursday after prices tumbled more than $100 an ounce since spiking to a record above $1,000 an ounce this week, pushing up premiums in key bullion trading centres. Gold fell more than 2 percent to hit a 1-month low of $920.30 an ounce as funds sold bullion after pushing up the price to a lifetime high of $1,030.80 on Monday.


Superb comment from a reader at a PM blog I routinely visit -- summarizes the situation perfectly: Somebody took advantage of a short trading week to slam PMs - on options expiration week (saving the shorts' shorts!) - and by the same token make a "double-top" appear out of the blue - to signal "an end to the commodities bull" and "an end to the bearish dollar" - based on NO REAL PHYSICAL TRADING - just "PAPER"...

With our manipulation discussion out of the way, what about the credit crisis being resolved?

Bloomberg Today:

Goldman, Lehman Rating Outlook Cut to Negative by S&P (Update3)

March 21 (Bloomberg) -- Goldman Sachs Group Inc., the biggest U.S. securities firm, and smaller rival Lehman Brothers Holdings Inc. had their credit-rating outlook cut to negative by Standard & Poor's, which said Wall Street banks' profits may fall as much as 30 percent in the coming year.

``Our current expectation is that net revenue could decline'' at least 20 percent for independent securities firms, S&P said in a statement today.

Or this one:

Big U.S. finance company faces credit crisis, and shares fall

The crisis in the credit markets is threatening to engulf one of the largest commercial finance companies in the United States.

The CIT Group, a century-old company that lends money to small businesses and midsize corporations, drew on $7.3 billion of emergency bank credit lines on Thursday, causing its shares and bonds to plummet.

CIT, whose businesses range from making student loans to financing purchases of airplanes and railroad cars, announced that it would try to sell some assets or businesses to raise cash and repay its debts. Analysts said the tightening credit squeeze could drive the entire company into the arms of a bidder.

The developments at CIT suggest that the credit troubles that felled Bear Stearns this week continue to spread, despite efforts by the Federal Reserve to encourage banks to lend to other financial companies.

Another:

Credit crisis puts vise grip on leveraged companies

There are 93 US companies at risk of defaulting on $53 billion in debts, a new report shows, marking a 50 percent jump since last June, when the credit crisis started. Many of these debt-laden companies were involved in giant leveraged buyouts.

Standard & Poor’s ‘‘weakest links’’ report is forecasting that 75 US companies will default on their debts in the next 12 months. Of the 93 companies at risk, more than half were involved in takeovers by big-name private equity firms, including Boston’s Thomas H. Lee Partners, Bain Capital, and J.W. Childs Associates.

The sectors worst hit are media and entertainment, and consumer and retail. Many of the names are familiar to consumers, like Uno Restaurant Holdings Corp., the Boston-based pizza restaurant group; Linens ‘n Things Inc., the home goods chain; and Univision Communications Inc., the Spanish-language television and radio company.

‘‘This is just the beginning,’’ said Diane Vazza, managing director and head of Global Fixed Income Research at Standard and Poor’s in New York. For companies struggling with debt payments, she said, ‘‘There’s no way in a slowing economy, potentially a recessionary economy, to grow out of that.’’

I could go on with additional links to illustrate the depths of this credit crisis, but I think you get the point—the recent smoke and mirrors caused by PPT market manipulation has solved nothing. Our banking system is still insolvent and the fed is pumping money into a bottomless pit.

BOTTOM LINE: A one or two day turn around for stocks and commodities means little.

NOTHING, absolutely nothing regarding underlying fundamentals has changed from last week, except the titanic has taken on a bit more water, and the captain is desperately trying to reassure us by saying -- "it's only a small leak and lifeboats (PM's) won't be needed."

Go ahead and trust the captain -- but at your own peril...

OK, my doom and gloom is out of the way -- how about some closing funnies?

Regards and happy easter to all!

Randy