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"Main Core" database of potentially troublesome Americans like you, Rent multiples, declining rents, Obama, China buying farmland, food shortages and manual labor, Map of Misery, "discontinued items," Energy and Europe, VisualCalc housing charts, oil costs and biking, and more   (week of May 20, 2008)

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Jon H.

The Last Roundup: MAIN CORE
Harun I.

RE: Main Core:

I have not heard of this operation, however, the existence of such a database regardless of name is not without precedent and doesn't surprise me. What I find intriguing is that some many of my fellow Americans go about as if we are genetically immune from fascism, totalitarianism and all the other bad "isms". Power is more addictive than any potion crafted by man, and power loathes freedom. Drip by drip freedom is being stolen from us and the great thing about it (for those in power) is no one notices. There are those who even applaud less freedom as long as they are "safe".

On the short list of those that would be rounded up first are intellectuals and freethinkers.

I keep hearing discussions of biofuels. Mark my words, if we continue down this path there will be wars because of global famine.

Clean coal, wind farms, hydro farms in the ocean, solar power, we are essentially looking backwards. The lack of foresight is stunning. Nuclear power may not be ideal but it buys time. Unfortunately everyone has bought into all the negative propaganda. The US Navy has operated nuclear plants for half a century with no accidents. What could civilians learn from this?

Research?! We should be in the implementation phase of weening off fossil fuels. The fact is we are so far behind the curve our very existence is imperiled but only few realize this but everyone just thinks we are gloom and doomers.

Well I will tell you, when you are down to your last few rounds and you have more bad guys than bullets you become a realist very quickly.

There are no super heroes that are going to show up in the last minute and save us all.

We need some radical thinking fast but unfortunately we are too busy with My Space, PSP's and our flat screens to bother.

Incredibly, we find ourselves at the hope stage and you know what I think about hope.

Harun I.

A failed presidency. Some things are worse than death. The Republicans are trying desperately to frame a debate centered on conservative values, American values, which is sadly ironic considering the Patriot act, renditions, suspension of habeas corpus, preemptive warfare -- and the laundry list goes on. It remains to be seen whether we buy into more of the lies.

While globalization (the exploitation of cheap labor) was embraced as a way to forestall economic collapse, the unintended consequences of increased commodity demand caught everyone off guard(?).

Cogent energy policy is 50 years overdue and we still don't have one.

Poor Obama, if his presidency is a shambles it will be because he was handed and IED with 5 seconds on the timer.

The spin on Michelle Obama's comment about her pride in America is just that -- spin.

All the Republican ads show good (white Americans) professing their pride in America. But I ask, Were they proud of America when for 400 years human beings were chattel? Were they proud that almost a century after the Declaration of Independence it took another horrendous war to end this abomination? How far did your chest stick out when you learned that Native Americans were intentionally given blankets infected with small pox? Are we proud of the genocide we heaped upon them? Were we proud of the failed Reconstruction that was derailed by terrorists? And how about while we were defeating the Axis powers, our military was segregated and our country still embraced institutionalized racism. I bet those folks are just busting with pride that we interned Japanese Americans while German and Italian Americans roamed free. How proud we all must have been to know that black men could be lynched for no particular reason with impunity.

Were they waving their flags as they watched police turn water hoses and dogs on peaceful demonstrators?

How much pride is there for a war that wasted 60,000 lives and the soldiers that came home being discarded like worn out shoes?

I bet the Iraqis and Iranians were not enjoying all our heartfelt pride when they learned we were supplying both sides with weapons and intelligence during their war which prolonged the bloodshed and led to a stalemate (just what America wanted). (Not that our constant meddling in their affairs has anything to do with their hatred.)

And now we invade countries that have not attacked us based on what we believe.

My country tortures. My country has abandoned the rule of law for the illusion of safety.

And finally we are reduced to POTUS going hat in hand, like Oliver, to beg for more.

And this is the short list.

I love my country but I am not always proud of my country.


As far as I can see.- and it may not be very far - there is nothing sacred about the figures you give for housing values as a multiple of rental value They are historic, not intrinsic or immutable. I am particularly struck by the Japanese housing value decline as shown in the illustration "Feeling Homesick" in your article "More on Catching the Bottom in Housing" - I bet their multiples fell through the floor....any insights into that?

CHS: Excellent question, G.H., and will try to address this if I locate some data. Multiple compression does seem likely if the recession is deep and long-lasting.

Michael S.

Your article on rents seemed to infer that the rates might remain high in cities like San Francisco that didn’t see massive over-building like Miami. Unfortunately, I don’t think this is the case. Right now, places like San Francisco and Seattle (where I live) are just behind markets like Miami and Las Vegas. At the peak of a real estate market you see rents start to rise as landlords rush to cash in with condo conversions, and single family homes, which removes supply from the rental market. Once a market turns down, however, many owners of SFHs and condos will eventually be forced to place them on the rental market to try and staunch the bleeding since they are unable to find buyers at the prices they need (i.e. to pay off the mortgage).

We have seen this phenomena (i.e. of rising rents right at the peak, followed by declining rents 2 or 3 years after property prices start to fall) play itself out in many places. San Diego, Boston, and Manhattan, for example, all saw their rents rise right at the peak of their markets a couple years ago. Since then, however, they have all started to see weakness in rents now that many homes are working themselves back onto the "shadow" rental market. San Francisco will see rents fall too, it’s just going to take a while.

* * *

Another point I would like to make is that there is a pretty strong correlation between foreclosures and rental rates. I have never yet seen a case where rents rise at the same time as the number of foreclosures balloon. You just won’t see situations where 10% of the home sales are of foreclosed properties while rents are rising.

It’s no coincidence that the cities that still have tight rental markets also have fairly low foreclosure rates. However, this is likely just a matter of time. In the Seattle market, for example, (where I live) we have just now started to see year-on-year home price depreciation. When prices were appreciating foreclosures were extremely rare since any borrower in financial trouble could always just sell. Now we will slowly start to see the appreciation cycle reverse as negative depreciation leads to more foreclosures, which lead to even greater depreciation. We are well on our way to this in Seattle, with unsold inventories breaking all records.

Jim S.

Charlie, I have adapted something, in order for you to think about something:

Two black swans landed
Housing and credit markets
Next: dollar, stocks, bonds and the abdicacy

As you and many others are aware of now, Charlie, is that the US middle class has about $21 trillion of housing equity as of 2005 (much less now). Each drop of 5% of home equity takes a trillion out of the middle classes wealth base, out of which it has financed its 'living' beyond what low wages have provided. It is not inconceivable that a general drop of 60% plus is required before rent will support a mortgage, taxes, ins. and maintenance. A 60% drop of equity leaves only 12-13 trillion.

A severe, deep depression could take equities lower. As all political power in the US derives from financial contribution, with a global world ever increasing its direct and indirect financial contributory role to our election process, the middle class loses its critical mass required for relativity. I submit, a la Pareto, that a conceptual 'critical mass' level will be destroyed by the sequellae of the housing bubble, and that the 'L' shaped recess/depress will be so prolonged, that the middle class will have been permanently displaced from meaningful representation....widespread Sharia practices will destroy any chance of US middle class recovery, even if wages miraculously rise eventually, as Sharia is moving so rapidly now throughout the West, and welcomed by those who need an increase in illiquid assets to prolong their survival.

The BIS was quoted frequently just last summer as recognizing $470 trillion of worldwide credit derivatives. Late last fall thru early Jan 08 the figure announced had grown to $681 trillion...a 45% approx increase...WHAT A ILLIQUID BUBBLE GROWTH EXPANSION!!!...the biggest bubble in world history is now est'd. to be over $700 trillion, and the 'hedgies' can't get enough.

Relevance of the US middle class as a factor in the election of its own representatives is in open question. Obama already wants a 0.7% tax on the US GDP to fund poverty outside the country, even as a big fan is blowing on the raging of increasing poverty here...these are just some more thoughts for you.

Michael Goodfellow

I was reading some piece bashing Obama for being "messianic". I don't agree really. I think he's just coasting to the nomination. Why answer any hard questions or deviate from the scripted speech at this point?

But, I was thinking of your haiku's and Obama, and I remembered this short verse from one of Frank Herbert's Dune novels. I don't know if it's original to him.

Here lies a fallen God
His fall was not a small one
We did but build his pedestal
A narrow and a tall one.

Albert T.

China farming the world to feed its economy Critics cite strong-arm tactics forcing neighboring nations to grow crops

China's Appetite for Filipino Paddies Breeds Farmer Opposition

This story is even more puzzling its about phillipines leasing 1 million hectares agricultural land (out of total 10million) for food production. The idiocy of these stories is it creates of conflict of interest between the investor China and host countries for the supply of food grown on their own soil... Basically in my mind the conflict is severe because if there is no food shortage the huge industrialized farm operates at extreme efficiency and floods the market to cover operating costs hence lowering prices for all farmers, ergo undercutting home production farming by pushing out small inefficient farmers. Until there is a shortage, at that point they start shipping food to where it pays or where it is necessary by those who control the investment. Hence magnifying any impact on both ends, simply wonderful (sarcasm).

Riley T.

I am so fortunate to be able to spend my mornings surfing the net, drinking coffee and having a nice breakfast.

The seemingly new realization that there are energy and food shortages is getting more ink every day.

I believe that if you step back a clear picture is emerging. The modern economy includes things like plenty of food, good shelter, regular heat or cooling as desired, access to autos, toilet paper, hot water, soap, medical care etc.

Some of the countries mentioned on the Net as being short of food and energy include most of Africa, most of India, Argentina, Honduras, parts of China, Pakistan, Mexico and more. It's a pretty long list.

The clear picture that is emerging is that if an individual is a manual laborer then he-she is not productive enough to take part in the modern economy. This has been hidden by the various subsidies provided by the governments. As an example the three electricity companies in India are on the verge of shutting down as the government forces them to sell at a loss. Ditto diesel sellers in China.

The world's supply lines are stretched so thin and the infrastructure is so poor, your 64/4 pareto is ready to explode any day.

As far as this return to the small farm or relocalization crap is concerned, this is just another example of people who have had no actual experience at something telling others how to do it. I grew up on a small farm, the labor is back-breaking with just enough to eat if you're lucky.

As far as the idea that we will be all lovey dovey and get along, how about Haiti, Darfur, Burma or west Africa. These are great examples of making other arrangements when food and energy shortages occur.

Jed H.

Here's a link to USA Map of Misery, housing woes --- I think we are in only first 3, maybe 4th inning of 9 inning ballgame !! Still, maybe another 10 to 20 % drop of prices , depending on what ( if any ) Bagman Ben / FED can do with their last few $100 's of Billions of Bogus Bills !!. Judging from the last big inflation of late 1970 s & early 1980 s , I see oil & energy/ precious metals/ food prices ,& " Anything Tangible , useful for human survival " holding " relative value " !!.

I still expect that .... until/ unless the USA can get its current accounts deficits , savings up, spending on military etc under control , the Yankee $$ will keep heading South , into a Texas- sized sinkhole ;, and ..... eventually take with it the US Stock & Bond MKts ( the latter , via rampant inflation, & collapsing Bond Prices ) meaning that " Generic Interest Rates " , have ~ made their bottom & will be trending much higher , regardless of what Uncle Ben & Co want or think !!

Bill Murath

Here are some recent observations I have had. I can't do the in-depth analysis but I do observe. Many friends in the trade (construction) have asked me how has work been. I just tell them I've been chilling, pursuing other wor(while/less) things all to a one has said how bad things have been/are. They cannot get people to sign up if they are contractors or work if they are subs. Lately while shopping at King Soopers (Kroegers) I have noticed many things on sale and the tag says discontinued item. Really uncommon. These are food items and a bunch are from major name brands with up until now probably an ok sales. These are not core products but I guess stuff the companies use to garner shelf space, and extra sales. To me this is serious retrenching on the biz front. If all these companies start pulling the non-profitable items that would leave a lot of extra shelf space in stores.

On a fringe observation. I saw Phil at the Denver Fillmore on Thur and Friday. I haven't puffed up in 2 decades or so but I always know what's happening. Thursday show was way absent of the smell or precence of P-Lolo. The Fillmore is not very stringent about people doing things like that. It struck me as kinda of odd. The next day I was thinking that maybe it was just "dry". Then it dawned on me that it wasn't dry but people were broke. I ran this idea past a friend prior to the start of Fridays show and he said, yeah nobody's got any money for that stuff. He used his tax refund to get tix for the show. To be fair on Friday there was a lot more flowing throughout the crowd but this was the weekend and I figured everyone was letting loose. It was odd to witness the conservation mode of thursday's crowd.

Wayne H.

Your point that small changes at the margins can amplify catastrophically as they reverberate through a complex system is well taken, but this conclusion . . .

"Germany, France and Italy are on the verge of crashing, big oil users almost zero oil production. As go these three goes Europe."

. . . seems a bit simplistic. To begin with, Europe produces twice the GDP per unit of energy and the United States. Having had a longer history than the U.S. in being beholden to OPEC and having lived with high energy prices for many years may make the Europeans more adaptable to the economic dislocations in a post-peak world.

France may be especially well positioned. It derives 80% of its electricity from nuclear power; has a highly evolved mass transit system that mostly runs on that electricity; has converted far less of its arable land to suburban development; has mal-invested far less in suburban infrastructure; and has one of the lowest debt-to-GDP ratios among developed nations. The cumulative effect of these advantages will almost surely play a larger role in France's adaptability post peak than the fact that it does not have access to domestic oil.

No argument on Japan. Though the citizenry is thrifty to a fault, the government has run up a huge national debt trying to pull the country out of its 15-year bout with deflation. Thus Japan may be as ill-equipped as the U.S. to win the coming bidding wars for food with the BRIC countries, with no domestic energy capacity and far less in the way of agricultural resources than the U.S. to fall back on.

Gary K.

Here's a cogent rebuttal to *entomologist* Pimentel's life-long effort to be on the "other side" of renewables.

NB: He was already publishing anti-biofuels papers when I did my Masters at Cornell in the mid-70's.

Sigh. . . .

Response to David Pimentel Biodiesel Life Cycle Analysis.

Bioconversion blog.

Bob Bennett

Hello. As someone who covers the housing market, I thought you might be interested in a free, publicly available dashboard focused on the state of the U.S. housing market. This interactive dashboard provides easy-to-interpret graphs of key housing-related stats and trends. We formally launched the dashboard today, May 12, and you can now access it via the following link: visualcalc.

The dashboard shows four indicator graphs at a time. However, if you click on the "Analysis" link on the upper menu bar, you will see all of the indicator graphs that are available. Also, clicking on the "Analyze" link in the upper right corner of any of the indicator graphs will allow you to drill-down deeper into the data associated with that indicator.

The dashboard has been updated with the latest housing data, and we will continue to update it on a regular basis.

Feel free to use this dashboard for your own analysis, and you are welcome to share it with your readers.

Mark K.

Very informative posts this week on your Web site! Yesterday's post on oil was especially interesting to me. It really made me stop and think. I don't know what it's going to take before people wake up in this country. Even with gasoline prices rapidly approaching $4 per gallon, I still see just as many gas guzzling SUV's here on the roads as before. I guess other people simply don't care about their household budgets. Or, perhaps, they make a lot more money than I do? I shall continue to do my small part to help curtail global oil demand by bicycling, using public transportation and walking as much as possible. In fact, I rarely drive my automobile anymore just to save a few bucks. It's a win-win situation because I get more physical exercise this way too!

Larry G.

How can lenders make enough money? Simple. Businesses need to hire more employees and increase wages. Then, consumers can afford to borrow and make payments. The Fortune 100 are sitting on $500 billion in cash and short-term investments. I don't think it'll happen, but that "private equity" money needs to be invested somewhere so there's some hope.

Steven R.

Reading Harun's comments--such cogent thinking! Surely there are thinkers of the same caliber in office?

But Harun is right. For some reason, congress cannot even begin to face the work of overhauling the system. I was thinking... maybe just one more letter to my representatives ought to do it...for surely its about greater participation????

I work in/on periphery of the planning field, and it strikes me as something of a planning problem. The way to solve the problem, from a purely mechanical point of view, starts with the list of questions in Harun's comments (plus a few more). Follow on with a categorization of the questions into priorities, feasibility, uncertainties and opportunities. Then develop possible solutions, followed by a risk analysis for a final menu of implementation options.

Of course the thing that makes it difficult is that the whole process must be vetted by "stakeholder input". This would seem assured by the representative nature of our government, but the sincerity of the effort is a matter of perception by a diverse constituency.

It is true enough that many representatives take equivocal stakeholder support, for policy initiatives, as a license to ignore constituents and use their office for personal gain. And such cynicism compounds the problem. Similarly, "throw the bum's out" as a mantra may also be a cynical response. But cynicism is an option that must always reside with an activist electorate, and embraced by the representatives at their own risk.

If behavior of the electorate and markets is a proxy for "stakeholder input", then some additional trends could be added to the chart in the 5/14/08 post. Terms like "voter turnout" (or voter burnout?), consumer confidence could be used to measure stakeholder cynicism. But how such trends may impact the decision making process is difficult to ascertain. For now it appears the "stakeholder concerns" are either misunderstood or treated as outliers when making policy decisions.

Meanwhile, systemic needs (investment bank bailouts) are prioritized as if the stakeholder interests can be served from the "top down". Such "top down" modeling is only valid if we can say the systems being supported are responsive to and protective of or essential to stakeholder interests. Here again the diversity of perception obscures the validity of the top down model. But in thinking all this through, I recalled your post form yesterday about what we really need: junk food versus healthier fare; a walk downtown in the evening air versus American Idol; location location location versus locution locution locution...

The system is killing us slowly. But the stability of even a decaying system is more alluring than the uncertainty of emerging alternatives.

A trend we need to track is one that relates to the general awareness that we are better off without most of what the system has been supplying. True, we need the antibiotics, basic commodities, referees and a WELL REGULATED militia; and, the system is essential in provenance of all that. But the system needs us at least as much as we need it. If the people lead, then....?

a reader

Charles great work, always a fascinating read.

A little background here, I am in the investment world for the past twenty years, also have interest in the alternative world since many seem to think I am a right-wing environmentalist entrepreneur. I find now two of my many passions are overlapping, and an existing time to see the end of oil, uranium and coal. Albeit it might take twenty year to make the transition...

I post some of my insights here.

Global Investment cycles

There are many beliefs that the longwave cycle is a credit cycle a generational cycle or a price cycle, if you read his works it is actually a price cycle. Other cycle overlap one anther credit cycle, Kuznets cycle and generational cycle but in it pure form the reading point to a price cycle.

I do believe the credit cycle is much more important than the commodities cycle since we have the possible of a systemic contraction because of debt deflation. Now if the great unwind is occurring as I document (I also post on the longwave forum), then for the short term it will kill demand.

The reason are obvious, all credit cycle move back to their staring points, if you look at when the supercycle of credit started back in 1982, when interest peaked, then we know that most if not all of the demand was false, history does correct those imbalances. Also the current blowofff in commodities is affecting discretionary incomes and like all commodities cycle and inflation these are lagging indicators, the tsunami of debt deflation courtesy of home price contraction is exactly what caused the great unwind of the thirties and Japan.

The transitional phases during the generational cycle do benefit infrastructure and if commodities and oil do stay relatively high, then the alternative energy world be a further beneficiary of this transition.

Riley T.

I would like to look at interest and debt from a little different angle. The idea behind borrowing is that you will be able to make a profit larger then the rate of interest you paid to get the money. There are other things to consider like pay back and ability to refinance and more.

The thing that has produced our wonderful industrial economy is very simply oil. Cheap plentiful ever expanding oil. It's pretty clear that we are at or passed the peak of world oil production. The only people that seem confused about this are the news media and the shills for the various oil interests. What does this have to do with interest?

I am glad this question was asked, because if business doesn't expand then there is no profit to pay interest. This is not rocket science.

No oil expansion-no economic expansion-no profit to pay interest-no profit to pay back the debt

We are kidding our selves, wishing on a star with Jiminy Cricket or praying to some magical deity won't make it so either.

I recently reviewed " The peak of world oil production and the road to Olduvai Gorge " by Richard C. Duncan, Nov., 13, 2000.

He may not be exactly on point but it sure rhymes.

When I am up late at night I can hear the clipity clop of the "Four Horsemen ".

One day soon the toiling masses will lift thier heads and realize that they have lived through the best it will ever be.

Peter N.

"This classic analysis of Western liberal capitalist society contends that capitalism-- and the culture it creates--harbors the seeds of its own downfall by creating a need among successful people for personal gratification—a need that corrodes the work ethic that led to their success in the first place."

HI…what struck me upon reading this is that this isn’t so much describing capitalism’s flaws, as much as it is describing something more universal: human nature…no matter what social or economic system, individual behaviors and societies work in cycles, growth, prosperity, decline…it is as old as time…it describes the Roman Empire (growth, prosperity, and decadent decline, (although I think we judge Rome too harshly with the "decadence" issue)…when people or groups of people work hard for something and then get it, they naturally relax…so I think ascribing this trait uniquely to capitalism is in fact fallacious…


maybe you've read this gentleman's work, very astute....

Confessions of an “ex” Peak Oil Believer.

Thank you, readers, for such thoughtful contributions.

For more on this subject and a wide array of other topics, please visit my weblog.


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