Can Greece Buy Freedom From Debt For a Mere €3,000 Per Person?

Greek shipping heir Peter Nomikos has a plan wipe out Greek debt. His idea is to buy all the Greek bonds then forgive the debt.

Given that Greek bonds sell for 12 cents on the dollar, on the surface his plan may seem like a reasonable idea. First let's consider the idea, then potential problems.

Der Spiegel interviews Peter Nomikos who says 'For a Donation of 3,000 Euros, Every Greek Can Buy Freedom'

Greek shipping heir Peter Nomikos has taken matters into his own hands. While EU leaders wrangle for a solution to Greece's problems, Nomikos started a non-profit to wipe out the country's debt. If all of his countrymen do their part, he tells SPIEGEL ONLINE, they will be able to shore up the country's finances.

SPIEGEL ONLINE: Mr. Nomikos, you have just started a campaign to free Greece of debt. Your organization buys up Greek bonds and then forgives the debt. Are you serious?

Nomikos: Professionally, I deal with distressed debt. And it struck me that Greece has a historical opportunity. In the euro, the Greeks have a very strong currency, while the price of their government bonds has collapsed. That makes it possible to buy back debt at very low prices and reduce the Greek debt burden with relatively little expenditure.

SPIEGEL ONLINE: You are asking your countrymen for donations. What do you tell them?

Nomikos: If you break down the national debt, each Greek owes around €25,000 ($31,485). So I am telling my fellow citizens to make themselves debt-free. Greek government bonds with a nominal value of one euro currently trade for around 12 cents. For a donation of around €3,000, every Greek can buy his freedom.

SPIEGEL ONLINE: How many bonds has your foundation already bought?

Nomikos: We always buy those bonds that have the deepest discount. So far we have invested €273,000 ($343,816) and hold €2.2 million ($2.8 million) in Greek debt.

SPIEGEL ONLINE: And then you cancel the debt?

Nomikos: Not immediately. If we did that, we would decrease the impact of our project. When the GDP-to-debt ratio goes down, bond prices go up. If the movement becomes a great success, this could become a problem, because we cannot buy debt as cheaply on the markets. So we hold these bonds for a while and use any profits to buy more bonds. We plan to amass as many bonds as possible and then cancel the debt all at once.

Problematical Math

1. The population of Greece is 11,316,000. At €3,000 per person, Nomikos would need to raise nearly €34 billion. That is far lower than the €283 billion in bonds (at €25,000 per person), but it is hardly inconsequential.
2. Bond prices will not stay at 12 cents on the dollar if the program makes any reasonable headway.
3. Greek banks and pension plans are the biggest holders of Greek debt. I highly suspect neither has marked bonds to market. They certainly have not marked the bonds to zero. In other words there are severe implications should Nomikos succeed. 
4. Those depending on Greek pension plans have a vested interest that he not succeed.

I wish Peter Nomikos success, but point number 3 above suggests severe consequences. Points 1, 2, and 4 suggest that it will not happen in the first place, making point number 3 moot.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Music Producer Richard Perry Sells Sunset Strip Estate

SELLER: Richard Perry
LOCATION: Los Angeles, CA
PRICE: $12,750,000
SIZE: 5,935 square feet, 5 bedrooms, 8 bathrooms

YOUR MAMAS NOTES: Legendary music producer Richard Perry has quietly hoisted his long-time Los Angeles, CA residence, perched on a private knoll on a narrow, curving street just above the Sunset Strip, on the open market with an asking price of $12,750,000.

Mister Perry's high-flying, professional salad days were unquestionably the 1970s an 80s when he produced more than a dozen gold and platinum albums for music industry movers and shakers such as Rod Stewart, Barbra Streisand, Carly Simon, Diana Ross, Leo Sayer, Neil Diamond, Martha Reeves and Captain Beefheart. Although the septuagenarian still keeps his professional toe in the water, nowadays he's more likely to be most familiar with gossip glossy readers as the very tan man-friend of still-sizzling-at-75 Jane Fonda.

Property records aren't specific as to when Mister Perry acquired his Sunset Strip residence or how much music industry moolah he coughed up for it but current listing information shows the gated estate was originally built in 1942—for Ronald Reagan and first wife Jane Wyman—and occupies an elevated .72 acre hillock with nearly unobstructed 340-degree views over the twinkling lights of Tinseltown.

The main house, set high above the street on a steep bluff, measures in at a sizable but hardly huge 5,935 square feet, and includes a total of 5 bedrooms and 8 bathrooms; a paneled formal living room with fireplace; formal dining room; library; wine cellar; indoor and out door spas; and a master suite with fireplace and dual poopers. At least one room in the house has a boozer-friendly, built-in wet bar and walls lined floor to ceiling with scads of photographs of famous people and gold records.

Listing information shows the property offers upwards of ten off-street parking spaces along the wide, gated driveway that swoops up past the north-south aligned lighted tennis court and around the front of the house to a small motor court and three-car garage. The swimming pool and adjacent Balinese-style pool pavilion are somewhat awkwardly situated across the driveway on a large flat plateau.

Some of Mister Perry's nearby neighbors include English actor Michael York, decorator/restaurateur Lynn von Kersting—co-owner of showbiz industry eatery The Ivy on Robertson Boulevard—and movie producer John Goldwyn and his hotelier man-mate Jeff Klein who owns the chic, celeb-stocked Sunset Tower Hotel.

Miz Fonda decamped Atlanta a few years ago and rented an apartment in Los Angeles at the star-studded Sierra Towers building just off the Sunset Strip where other high-profile condo owners include (but are not limited to) pickled and preserved Showbiz and music industry icons like Sharon Osbourne, Cher, Joan Collins, Diahann Carol and Elton John.

The children may recall Your Mama discussed Miz Fonda's airy, art- and crafts-filled loft in Atlanta—with its mortifying Pepto-Bismal-pink, womb-like entrance hall—back in May 2010 when it was first put on the open market with an asking price of $4,500,000. Unfortunately for Hanoi Jane, the 4,764 square foot loft hasn't yet appealed to a buyer and the price has plummeted to $1,195,000.

Miz Fonda recently told former D-list turned B-plus-list comedienne Kathy Griffin that she hasn't spent a single night in her rented 1 bedroom and 1.5 bathroom rental, preferring instead to shack up at Mister Perry's pad from where she said she can see her (unused) apartment from the bathroom window.

listing photos: Coldwell Banker / Beverly Hills South

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Headline in Spain: Government 'sacrificed' Bank of Spain in Exchange for Financial Sector Bailout; ESM Agreement Raises More Questions Than Answers

In the wake of a huge market reaction on Friday, it's interesting to see how the headlines read other places, especially Spain.

Here is one such viewpoint by El Confidencial: Government 'sacrificed' Bank of Spain in Exchange for Financial Sector Bailout

The clearest conclusion to the European Agreement made by Spain and Italy is that our government has preferred to sacrifice the sovereignty of the banking supervision enjoyed by the Bank of Spain in exchange for the bailout of the sector does not compute as debt or deficit and that The European rescue fund to buy Spanish debt when things get as ugly as this week. However, many unknowns are open, including the timing of the operation. Therefore, the FROB who will initially inject capital to entities that need it in September, with funds from European loan subsequently permutarán MEDE the money.

"The government has chosen to advance the loss of competition in banking supervision, it was inevitable sooner or later if you go to a European Banking Union in exchange for breaking the feedback loop between the banking and public debt, which is very positive and not only for Spain, "says an analyst.

Officials of both Economy and the Bank of Spain claimed yesterday that has not yet been defined how will such a monitoring mechanism or what the status of the former Central Bank. Some sources believe that it is logical that national central banks are the arms of the central agency in each country and to continue in office today, but accountable to a higher power who will make the final decisions.

Other experts, such as Eurointelligence, say that "it is far from clear that Germany is willing to give up their own banks to supervision by the ECB." It is also unclear what will happen to insurance, which can not be monitored by the ECB according to the EU Treaty. Or if the conditions to be imposed in order to use the European Stability Mechanism (MEDE), conditions that likely will go beyond the financial sector despite yesterday again denying Mariano Rajoy.

A major uncertainty centers on the period within which this new monitoring system will come into force, which is the condition for the MEDE to inject money directly to banks. In principle, the idea is to reach an agreement in October to put in place before year end. But "it is unrealistic to expect an agreement by October? MEDE himself was delayed. The EU has consistently been too optimistic on the timing," adds the analyst firm.

The terms do not match

And although respected, there is an inconsistency between this term and timing of the rescue plan by Spain. This includes the signing of the memorandum with the conditions for the sector on 9 July, the end of the audit work in each state on July 31 and defining the specific needs of each in September, when performing the new stress test bottom-up (bottom up). Thereafter, viable entities that need capital will have nine months to get their media, and immediately nonviable may receive the loan proceeds Europe.

Therefore, various sources claim that the FROB will perform the first injection of capital until the conditions for you to do the MEDE. So initially counted as debt itself. So then have to do a swap between the FROB and MEDE. Another option is to wait until the system is willing, but the markets probably will not have much patience, and as mentioned, is likely to be delayed.

A priori, it seems very complicated to start with the FROB and replaced by MEDE, but the text of the Declaration of the Summit opened the door this way, referring to Ireland: "The Eurogroup will review the status of the Irish financial sector with a view to further improving the sustainability of the adjustment program is working well. Similar cases are treated in the same way. " That similar case would be Spain.

ESM Agreement Raises More Questions Than Answers

The above article certainly raises a lot of questions. Gavyn Davies at the Financial Times also says More questions than answers after the summit

In the wake of yet another summit, we need to ask our usual question: is this the eurozone’s game changer?

My fear is that, as so often in the past, the devil will prove to be in the detail. The more carefully one examines the text of the statement, the more questions are raised about how the proposed measures will actually work.

In particular, it is debatable whether there are any terms for direct eurozone recapitalisation of Spanish banks which will be acceptable both to the Spanish government and to the German Bundestag. (The latter will be empowered to “monitor” the new arrangement, according to Mrs Merkel’s spokesman.) And the shortage of remaining funds in the EFSF/ESM, which I discussed here last week, has certainly not been solved.

1. Direct bank recapitalisation by the ESM

This is clearly the critical new development which potentially allows the costs of recapitalising troubled banks to fall on the eurozone as a whole, rather than on an individual sovereign country. It could therefore represent a very large step towards debt mutualisation, and it directly addresses the point which the markets so disliked in the Spanish bank deal two weeks ago. The statement says that this can only be done after the eurozone’s new bank supervisor is “established”, and that this should only be “considered” by the Council before the end of the year. ... I suspect that Germany will be quite demanding is setting these terms. Otherwise, there could be great problems with the constitutional court in Karlsruhe. ...

3. ESM support for the Spanish and Italian bond markets

The final paragraph of the statement gives the strong impression that the ESM will in future be able to stabilise these bond markets in a “flexible and efficient” manner. This appears to be a major victory for Mario Monti, but actually it does not contain anything really different from the status quo.

4. The availability of funds for the ES

German Finance Minister Schauble emphatically said yesterday to the Wall Street Journal that there would be no increase in the size of the ESM, and that position has been maintained by Germany at the summit. Furthermore, Mrs Merkel has repeatedly stated that there will be no “joint financing” of eurozone debt (ie eurobonds, or eurobills) before full fiscal union has taken effect. Again, there is no change in that position. Indeed, that is the basis for the German government’s insistence that they have not taken on any extra “joint liabilities” as a result of this summit.

In summary, the summit has given the ESM some new tasks, but no new money with which to discharge these tasks. And many details are obscure.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Film and TV Writer Larry Levin Downsizes in Windsor Square

BUYER: Larry Levin and Sasha Emerson
LOCATION: Los Angeles, CA (Hancock Park)
PRICE: $1,595,000
SIZE:2,641 square feet, 4 bedrooms, 3 bathrooms

YOUR MAMAS NOTES: For almost two decades Tinseltown scribe Larry Levin (It's Garry Shandling's Show, I Love You, Man, Doctor Dolittle, Dr. Dolittle 2) and his film industry executive turned stylist/lady-decorator wife Sasha Emerson shacked up in an a customized and colorful post-and-beam modern tucked into Santa Monica's low-key but downright pricey Rustic Canyon.

Rustic Canyon happens to be one of Your Mama's fave 'hoods in Los Angeles where, one of Your Mama's friend's Mercedes-driving father who lives there (unscientifically) swears, there are more Prius owners per capita than anywhere else in all of Los Angeles.

We have no idea if the Levin-Emersons pilot a Prius around town but property records do show Mister Levin acquired the property in 1994 for $1,150,000 and sold the 6 bedroom and 5.5 bathroom house in early April this year (2012) for $3,700,000, or $3,671,170, depending on what online resource Your Mama consults. The buyer, as per our peep through the prop records, was up-and-coming (but obviously well-to-do) short film maker Elfar Adalsteins (Sailcloth, Subculture).

Where does a person move after selling a customized and colorful post-and-beam modern in Rustic Canyon for more than $2.5 million more than was paid for it? Well, it may surprise some of the children to learn, but in the case of Mister Levin and Miz Emerson, it's a downsizing to a much smaller and more modest English cottage-y crib all the way across town in the tree-lined, broad lawn-ed and historically affluent Windsor Square neighborhood.

Property records reveal the Levin-Emersons spent $1,575,000—or $1,595,000, depending on what online resource Your Mama consults—on their new house that was purchased from an L.A.-based restaurateur with a handful of successful, mid-priced Italian eateries Your Mama ain't never heard of or eaten at. But that's neither here nor there to the matter at hand.

Listing information from the time of the sale indicates the steeply and asymmetrically gabled, two-story house was originally built in 1922, measures a fairly modest but far from tiny 2,641 square feet and includes 3-4 bedrooms and 3 bathrooms.

A small den/office just off one side of the front entrance hall has custom-built, floor-to-ceiling bookshelves and storage cabinets while the "formal" living room off the other has dark chocolate-colored hardwood floors, a fireplace and a dizzying display of windows, some with square panes and some with diamond panes. Why didn't someone put diamond paned windows in all the windows in the living room? Bueller? Bueller? Anyone? Bueller?

The dark wood floors continue in to the dinner party-friendly formal dining room that opens through French doors to the backyard and sits adjacent to the country-style kitchen outfitted with dark-dark-dark lower cabinets, no overhead cabinets at all, Carrara marble counter tops, top-grade stainless steel appliances and a butcher block topped restaurant work table in the center of the room. A step-down room off the kitchen, at the back of the house, could be pressed in to use as a family room or bedroom perfectly suited to a live-in domestic or hormonally raging teenager.

Upstairs the two family/guest bedrooms share a hall bathroom while the master bedroom has its own pooper plus a walk-in closet and sitting area with wee, wood-burning fireplace. One of the upstairs bathrooms—an all black and white affair that we're really not sure is the master or the hall facility—has a most-unusual caning-weave pattern mosaic tile floor. The back wall of the tub/shower combo appears to be mirrored. Mirroed! We've never actually seen a mirror lined shower and, to be honest, the very notion makes us squeamish, shy and desperately insecure.

Anyhoo, the back of the house opens up to a large, rectangular-shaped backyard with circular brick bordered multi-level gravel terraces and a series of tree-lined terraced lawn areas where one might reasonably expect to—but do not—find an in-ground swimming pool and/or spa. What the backyard does have is a big ol', ugly concrete pad way out back, next to the two-car detached garage that about as inconveniently far from the house as it can be and is accessible only by a narrow alley.

If she hasn't already we fully expect Miz Emerson—as mentioned earlier, a much-published lady-decorator—will wave her decorative wand over the property and do it up in her own personal style that (now-shuttered) Budget Living magazine, where she was once the West Coast Editor, humidly but tantalizingly described as "Andy Warhol meets Sister Parish."

Windsor Square may be less lauded or well known than its hoitier, toitier and (generally speaking) more expensive neighbor Hancock Park but the historic 'hood none-the-less has more than a few fine and notable residences including the very grand, Beaux Arts-style Dorthy Chandler mansion on Lorraine Boulevard—currently on the market with an $11,250,000 price tag—and Getty House, an equally impressive English Tudor-style pile once owned by oilman John Paul Getty and now the official mayoral residence of Los Angeles.

listing photos: Keller Williams

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Time-Lapse Interactive Graph Shows Stunning Rise in Anti-Euro Sentiment in Italy

The rise of the Five Star Movement in Italy is the number one happening in Europe right now and mainstream media has not even begun to cover it in any depth. The movement is led by an Italian comedian, Beppe Grillo.

Main Rules for the Five Star Movement

• Not be an elected politician prior to 5 Stelle
• Commit to stay in charge for no longer than 2 terms
• Commit to take a minimum salary and give the rest back to the community
• Post a public platform on the internet
• Be willing to hold a public debate on the platform

Beppe Grillo's personal position, not a mandate for the Five Star Movement is "Get out of the Euro and default on debt"

For more on the Five Star Movement please see Six Reasons Why Italy May Exit the Euro Before Spain; Ultimate Occupy Movement

Time-Lapse Interactive Polls

Following are some time lapse polls of the Five Star Movement and other political parties in Italy. Please give the graphs extra time to load.

The polls are from data gathered by data gathered by Termometro Polico (one on the best Italian poll-makers according to a friend who sent me the link.) The important poll is in tab number four.

Explanations and Comments on the graphs appear below.

For now, please click on tab number four. You may also wish to go to the link above for additional information (in Italian).

Powered by Tableau

Graphs courtesy of Termometro Polico via tools from Tableau Software.

Explanations and Comments

The following comments are from Lorenzo, who lives in Italy. He is the person who sent me the link to Termometro Polico.

Hello Mish

In the first and third chart, red=centre-left (PD+Idv+Sel+others), blue= centre-right (PdL+Lega+Others), and yellow = 5 star movement. PdL = Former Prime Minister Berlusconi's party.

The third tab shows that a centre-left plus center (green) coalition could win the election, albeit with a relatively small margin. There is a catch however: (centre-left and centre-right) do not currently exist, except as theoretical coalitions rather than political parties.

Right now PDL and PD support the Monti government, while all the other parties that they commonly ally with (Lega, IDV, SEL, etc) do not. The two main parties (PD and PDL) scorn each other but are "forced to go along", while the minor parties in both "coalitions" bad-mouth them and Monti's government to attract the resentment created by Monti's taxes reforms.

This makes it pretty hard to predict the shape the two coalitions will take and how the voters' choices will change according to it. The situation is pretty fluid right now.

Italian politics is hard to make sense of for somebody used to a simple two-parties system situation.

Lorenzo

Coalition Building

For more on the difficulty of building a coalition in Italy, please see comments from Andrea in my post Reader from Italy Explains Why Early Elections Might Lead to "Deadlock".

Andrea is a reader who is from Italy but now lives in France. The pertinent section is labeled "Explaining Italian Politics".

Five Star Movement September 2011 vs. June 2016

This simple graph below shows the stunning rise of the Five Star Movement



Implications of the rise in popularity of the Five Star Movement from 3.7% in September 2011 to 20.6% in June 2012 are both massive and obvious. Yet mainstream media in the US and Europe have essentially ignored the phenomena.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

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Japanese Manufacturing Output Falls for First Time in 2012

The short term effect of Japanese stimulus following the earthquake and tsunami has now worn off. All Japan has to show for that stimulus is a bigger pile of debt, proving once again the Broken Window Fallacy.

In the real world, Japan has a debt-to GDP ratio of 225% and rising. Japan's export machine has stalled. So has Japanese manufacturing in general.

Markit reports Japanese manufacturing output falls for first time in 2012 to date

June data pointed to the first month-on-month reduction in manufacturing output since December 2011, as both new business and new export orders fell. Backlogs of work decreased as a result, while employment growth eased to only a marginal rate. On the price front, factory gate charges fell further in June, in response to a first reduction of average costs in 20 months.



After adjusting for seasonal factors, the headline Markit/JMMA Purchasing Managers’ Index™ (PMI™) dipped fractionally below the neutral 50.0 threshold in June, to post its lowest reading in seven months.

Commenting on the Japanese Manufacturing PMI survey data, Alex Hamilton, economist at Markit and author of the report said:

“June data suggest that Japan’s manufacturing sector upturn is fading into mid-year, with output and new business falling simultaneously for the first time since December 2011.

Growth in the year to date has been supported by earthquake-related reconstruction projects. The latest survey findings indicate that the boost from these efforts is starting to ebb, however, with investment goods producers noting a particularly sharp fall in output during June. This bodes ill for growth heading into the second half of the year, especially given the fragility of demand in external markets – highlighted by an accelerated fall in new export business during June.”

Japan Doubles Sales Tax

The AP reports Lawmakers in Japan OK hike in sales tax

Japan's lower house voted Tuesday to double the country's sales tax to 10 percent over three years in a bid to rein in a bulging national debt as an aging population burdens the country's social security system.

The vote, however, shook Prime Minister Yoshihiko Noda's grip on power because of strong opposition from a group within the ruling party led by power broker Ichiro Ozawa that believes the tax hike will weaken the economy. Ozawa and his supporters have threatened to bolt the Democratic Party over the tax issue.

The bill passed easily by a vote of 363-96, with support coming from the two biggest opposition parties. The bill must still pass the less powerful upper house to become law, which is expected.

It calls for raising the sales tax from 5 percent to 8 percent in 2014, and then to 10 percent in 2015.

Even Noda's government projects the tax hike will take only a modest bite out of Japan's deficit. The Cabinet Office forecasts that doubling the sales tax will boost revenues by ¥13.5 trillion ($170 billion) annually by 2015. Japan currently runs a deficit of about ¥45 trillion ($563 billion) a year.

Ruling party veteran Ozawa, who has often criticized Noda and controls a bloc in the ruling party, has suggested he may leave the party and take as many lawmakers as he can with him to form a new one. If 54 or more lawmakers join Ozawa, Noda's party would lose its majority in the key lower house.

Japan is in a very tight situation. The US will find itself in a similar situation down the road if it listens to misguided economists hell-bent on getting government to waste more money.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

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Home Prices on the Rise

For a few years now, consumers from Florida to California have been hearing more and more that now is the time to buy your home, or real estate in general. Well that time is now quickly passing by as home prices continue to push upward. The S & P home price index showed improvements for the second straight month in 19 of the 20 cities they are tracking. Tampa, Florida is high on the list of cities being tracked. Not only is our local Tampa real estate market our performing most, but as whole national prices rose 1.3% in the last month of the first quarter. It is indisputable that we are seeing the consistent upward movement in housing prices. The first time in over six months that national prices are also showing such an increase. This is the hottest real estate news this week! MSNBC and all major networks are giving this news its proper headline… Real Estate News: Prices are UP! Sales of newly constructed and re-sale homes are also up! People are viewing the purchase of a new home as a more significant sound investment. Another positive component is that stemming from home prices moving upward, many buyers are gaining confidence in regard to home appreciation; and are real estate buyers are more willing to make an investment in a home in which they clearly see value . The fear of falling prices has taken a back seat and is now in the rear view mirror. Increased buyer confidence, supply and demand are both fueling the rising prices. These and other factors directly impact new construction. So much so that last month builders requested more permits to build homes and apartments than in the last three in half years! Homebuilder stock spiked upwards after this data was released. Lennar, Pulte, and DR Horton all saw favorable stock increases from 3%-5%. Tampa, Florida is home to some of these major communities and has seen inventory drop in many of these new construction communities. The inventory of previously occupied homes is back down to levels we saw in 2006. In May 2012, there were only 145,000 new homes for sale. That figure is barely higher than April 2012 which recorded the least amount to new homes for sale since 1963. Buyer confidence coupled with record low mortgage rates are leading to an increased number of consumers ready to make a purchase. As home prices rise in major cities like Tampa, Florida, consumers are encouraged to analyze their real estate goals and make decisions that will help them in the future. SI Real Estate offers highly personalized, multilingual, full-spectrum real estate purchase and sales services. We are a boutique for sophisticated investors, select owners or renters who may be upgrading locally, or those making traditional relocations. We also provide turnkey landlord and tenant management. Blending comprehensive insight into the Tampa Bay area with international perspectives for a worldwide clientele, we like to think that “SI Real Estate is Global Real Estate in Every Way!”

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FHFA : Home Values Up 3% Since Last Year

The Federal Home Finance Agency's Home Price Index shows home values up 0.8% in April on a monthly, seasonally-adjusted basis.

April marks the third consecutive month during which home values increased and the index is now up 3 percent from last year at this time.

As a home buyer in Seattle , it's easy to look at the Home Price Index and believe that its recent, sustained climb is proof of a broader housing market recovery. Ultimately, that may prove true. However, we cannot base our buy-or-sell decisions on the HPI because, like the private-sector Case-Shiller Index, the Home Price Index is flawed.

There are three main flaws in the FHFA's Home Price Index. They cannot be ignored.

First, the FHFA Home Price Index's sample set is limited to homes with mortgages backed by Fannie Mae or Freddie Mac. By definition, therefore, the index excludes homes with mortgages insured by the FHA.

5 years ago, this wasn't such an issue because the FHA insured just 4 percent of mortgage. Today, however, the FHA's market share is estimated to exceed 30 percent.  This means this the HPI excludes more than 30% of U.S. homes from its calculations right from the start.

The index also excludes homes backed by the VA; jumbo mortgages not securitized through the government; and, portfolio loans held by individual banks.

Second, the FHFA Home Price Index is based on the change in price of a home on consecutive home sales. Therefore, it's sample set cannot include sales of new home sales, nor can it account for purchases made with cash because cash purchases require no mortgage.

Cash purchases were 29% of the home resale market in April.

Third, the Home Price Index is on a 60-day delay.

The report that home values are up 0.8% accounts for homes that closed two months ago, and with contracts from 30-75 days prior to that. In other words, the Home Price Index is measuring housing market activity from as far back as January. 

Reports such as the Home Price Index are helpful in spotting long-term trends in housing but data from January is of little help to today's WA home buyers and sellers. It's real-time data that matters most and the best place to get real-time housing market data isn't from a national home valuation report -- it's from a local real estate agent.

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Morning Real Estate Review

US cities now outpacing suburbs, new data shows (Slate) For first time in half a century, urban areas are outpacing their suburban neighbors in population and economic growth.

CitiMorgage launches program for soldiers on the move (HousingWire) To help soldiers who are stuck with existing mortgages while they move bases, CitiMortgage has introduced a Citi Military PCS (permanent change of station) transfer assistance program.

30-year fixed-rate mortgage rates unchanged, 15-year fixed-rate falls to new low (The Washington Post) While the 30-year fixed-rate average mortgage rate has continued holding steady, the 15-year fixed-rate average has found itself at a new low.

Cover story: Good manners a must during open house (The Washington Times) Though it may not be on the forefront of every seller’s mind, it’s important to remember to have good manners while selling a house.

Charting the market: Sellers’ prospects improving (The Washington Times) More demand and less supply, as this year is seeing, leads to a seller’s market.

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Laughable Text of EU "Memorandum of Understanding"; ESM Not Been Ratified Yet Already Requires Changes; How Much ESM Firepower Is There?

Futures are flying over a "breakthrough" that supposedly will lower borrowing costs for Italy, Spain, and Ireland.  The "breakthrough" is a modification to the terms of the ESM to allow "the possibility" to recapitalize banks directly.

Amusingly, the existing ESM agreement has not even been ratified. The agreement is still on hold in Germany (numerous other countries have yet to ratify as well).

Yet the "Memorandum of Understanding" worked out at the summit today appears to require changes to the ESM.

Other ambiguous statement from the eurogroup committee are simply laughable. Here is the complete text. Emphasis added in places.

EURO AREA SUMMIT STATEMENT - 29 June 2012 -

• We affirm that it is imperative to break the vicious circle between banks and sovereigns. The Commission will present Proposals on the basis of Article 127(6) for a single supervisory mechanism shortly. We ask the Council to consider these Proposals as a matter of urgency by the end of 2012. When an effective single supervisory mechanism is established, involving the ECB, for banks in the euro area the ESM could, following a regular decision, have the possibility to recapitalize banks directly. This would rely on appropriate conditionality, including compliance with state aid rules, which should be institution-specific, sector-specific or economy-wide and would be formalised in a Memorandum of Understanding. The eurogroup will examine the situation of the Irish financial sector with the view of further improving the sustainability of the well-performing adjustment programme. Similar cases will be treated equally.

• We urge the rapid conclusion of the Memorandum of Understanding attached to the financial support to Spain for recapitalisation of its banking sector. We reaffirm that the financial assistance will be provided by the EFSF until the ESM becomes available, and that it will then be transferred to the ESM, without gaining seniority status.

• We affirm our strong commitment to do what is necessary to ensure the financial stability of the euro area, in particular by using the existing EFSF/ESM instruments in a flexible and efficient manner in order to stabilise markets for Member States respecting their Country Specific Recommendations and their other commitments including their respective timelines, under the European Semester, the Stability and Growth Pact and the Macroeconomic Imbalances Procedure. These conditions should be reflected in a Memorandum of Understanding. We welcome that the ECB has agreed to serve as an agent to EFSF/ESM in conducting market operations in an effective and efficient manner.

• We task the Eurogroup to implement these decisions by 9 July 2012.

ESM Under Review by German Constitutional Court

Bear in mind that ESM ratification in Germany has already been delayed subject to Review by German Constitutional Court

Germany's highest court asked the country's president on Thursday to delay ratification of the permanent euro bailout fund, the European Stability Mechanism, and the fiscal pact into law next week. If he complies, the move could delay the implementation of the ESM by several weeks in the latest setback for Chancellor Angela Merkel.

The Constitutional Court, anticipating challenges to the legislation, wanted more time to review documents. German President Joachim Gauck, hardly three months in office, was already faced with an important decision. If he complied with the request from Karlsruhe, at least one piece of legislation proposed by Chancellor Merkel and her coalition government -- the permanent bailout fund known as the European Stability Mechanism (ESM) -- would undoubtedly be delayed. The ESM was originally scheduled to come into force on July 1, 2012.

More Challenges Coming

The proposed changes will put German taxpayers (eurozone taxpayers in general) at more risk. Thus, it's safe to say that more challenges to the ESM are coming.

However, let's assume for the moment that Finland, Austria, Germany, and the Netherlands accept more taxpayer risk. (Admittedly that's quite an assumption).

Is this a euro-saving breakthrough?

Van Rumpoy Calls Summit a "Breakthrough"

Please consider EU Leaders Ease Debt-Crisis Rules on Spain in Merkel Retreat

After 13 1/2 hours of talks ending at 4:30 a.m. in Brussels today, leaders of the 17 euro countries dropped the requirement that governments get preferred creditor status on crisis loans to Spain’s blighted banks, European Union President Herman Van Rompuy said. Banks can also be recapitalized directly with European bailout funds rather than being channeled through governments, he said.

Merkel left the summit, which continues at 10 a.m., without addressing specifics of the agreements. She said there were decisions on “future measures within the framework of our methods that we will have through” Europe’s two rescue funds. “I think we will have a successful conclusion.”

The euro rose to as high as $1.2628, the strongest since June 21. Euro-area finance ministers will enact today’s deal at a meeting on July 9, Van Rompuy said, calling the accord a “breakthrough.”

Breakthrough? Really? How Much Firepower is Needed?

Bloomberg reports ...

1. The EU’s two rescue funds may only amount to about 20 percent of the outstanding debt of Italy and Spain, limiting its ability to lower the nations’ borrowing costs.
2. The EU’s two rescue mechanisms, the European Financial Stability Facility and the yet-to-start ESM, may have 500 billion euros ($621 billion) available for purchases.
3. Italy and Spain have about 2.4 trillion euros combined of outstanding bonds, bills and loans.

For now, the market is pleased with this non-breakthrough. Let's see how long it lasts. I suspect not long.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Germany Blinks After All-Night Fight; Italy and Spain Still Not Happy; For Now, Futures Are

It's a love-fest in Asia futures once again, but will it hold on Friday or through the weekend?

One thing's for sure, sentiment was so sour about this 19th summit, that any bit of good news stood a decent chance of temporarily igniting the market.

You can actually credit German chancellor Angela Merkel for that sour sentiment because she repeatedly stated Germany would not give in. The latest reports suggest Germany did blink, but not enough to please Italy, Spain, and France.

The fact remains that Italy, Spain, and France all want something that is virtually impossible. They demand actions that are against the German constitution. Simply put, it's not going to happen.

Meanwhile, let's tune in to what has the futures all excited.

All Night Fight

Please consider the Financial Times report Eurozone officials in all-night aid fight

German officials gave their clearest indication to date that they were prepared to intervene to shore up Italian and Spanish borrowing costs, saying eurozone leaders should use existing powers with their €440bn rescue fund for short-term help.

After weeks of insisting they would not budge on short-term measures, the sudden German acquiescence led to a flurry of activity in Brussels, where EU leaders gathered for the latest in a series of high-stakes summits intended to solve the crisis.

Unexpectedly, senior officials from all 17 eurozone finance ministries met on the sidelines of the summit to weigh emergency plans for Rome and Madrid which focused on using the rescue fund to buy Italian and Spanish bonds to reverse the recent spike in yields.

That certainly isn't much.
Indeed this next snip seems far more meaningful in a negative sense.

The political stakes for Mr Monti also rose on Thursday. Giorgio Napolitano, the Italian president and a strong Monti backer, said that political support for his technocratic government was slipping – an implicit warning to European leaders that Mr Monti needed to return from Brussels with assistance.

“Conflicts and political polemics among the forces that support this government are increasing,” Mr Napolitano said a written statement.

Euro Surges After EU Leaders Renounce Seniority

Since the Financial Times does not have the rest of the story, let's look elsewhere.

In a move that will put still more risk on German taxpayers, and also what likely has the futures market excited (until the next problem hits), Euro Rises After EU Leaders Renounce Spain Loan Seniority reports Bloomberg.

The euro surged the most this year after European leaders agreed to drop the condition that emergency loans to Spanish banks give their governments preferred creditor status.

No Problems Solved

In isolation, renouncing seniority is certainly net positive for bond yields in Spain and Italy. However, it does not solve a single structural problem. Moreover, that move it is certain to raise ire of some in Germany and Finland who will have to bear the risk.

If this is all the summit produces (other then the expected fluff to agree to agree to do something five years from now), expect whatever gains  (if any) that come from this maneuver to be fleeting. 

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Monti Threatens to Halt the Game of Marbles Unless he Gets the Big Green One; Hollande Threatens to Remove Marbles as Well; EU Summit Deadlocked

Conditions at the EU summit are breaking down more than expected thanks to a position taken by Italian Prime Minister Mario Monti. Acting like a spoiled brat in a game of marbles, Monti refuses to let anyone else play unless he gets the big green marble he wants.

In less colorful terms, Bloomberg explains Monti Withholds EU Growth Pact Approval Unless He Gets Interest Rate Relief.

Italian Prime Minister Mario Monti may block the 120 billion-euro ($149 billion) growth initiative announced by European Union President Herman Van Rompuy without an effort to reduce its borrowing costs, two Italian officials said.

Italy is withholding its official endorsement as it pushes for collective action at an EU summit in Brussels to push down its bond yields, said the officials who spoke on the condition that they not be named.

EU Summit Gridlocked

Euroskeptics will be pleased to note the summit is gridlocked, at least for the moment. How do we know this? Easy. EU President Herman Van Rompuy said "talks weren’t gridlocked" and will continue through the night and later today.

Moreover, Hollande threatened to temporarily remove his marbles from the game as well.

Please consider this snip from Demands for Bond-Buying Agreement Roil European Summit

French President Francois Hollande said Italy and Spain ought to receive support from the euro area’s firewall funds and that their yields are still too high after the efforts they’ve made to reform their economies. Spain’s 10-year yields breached 7 percent and Italy auctioned 10-year securities at the highest yields since December yesterday.

Hollande said the growth remarks “aren’t enough” and that he’ll withhold endorsement of an EU fiscal pact, which was endorsed by his predecessor, Nicolas Sarkozy in December, at least until the end of the two-day summit.

“The euro zone cannot stay in the current circumstance, without a budgetary union and even more without a banking union,” Hollande told reporters.

Since German chancellor Angela Merkel will not agree to a banking union or a budgetary union, the EU summit is for sure deadlocked. It will remain deadlocked until Monti and Hollande change their opinions, effectively putting their marbles back in the game.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Eurozone Retail Sales Drop 8th Month; Italy, France are Down; Germany Retail Sales Up, Outlook Down

German retail sales bounced back for the second month, but not enough to prevent the aggregate eurozone sales from falling for the eighth consecutive month.

Summary of June findings:

The Eurozone retail sector remained in contraction mid-way through 2012, according to PMI® data from Markit. Sales fell on a month-on-month basis for the eighth successive month – the third-longest sequence in the survey history – and purchases of new goods by retailers declined at the second-fastest pace on record. That said, the rate of decline in sales slowed sharply during the month.



Germany, France, Italy Sales

The key sentence is "purchases of new goods by retailers declined at the second-fastest pace on record."

Will inventory liquidation continue or will retail sales rebound? Liquidation can only go so far, but that does not mean sales will rebound in a meaningful way. There is certainly no reason to expect a rebound in sales, but data seldom runs in a straight line.

Much depends on Germany. Yet, in spite of a two month rebound in sales, Germany alone could not pull aggregate sales up to even.

Italy Remains a Disaster Zone

Individually, Italy Retail Sales remain a disaster zone.

June sales were down sharply on levels seen in the corresponding month one year ago, which firms linked to lower consumer purchasing power and greater uncertainty over the economic outlook. The annual rate of contraction was, however, slower than May’s series record.

Targets set for June were missed by the majority of firms, with a lack of confidence among clients and unfavourable weather conditions among the reasons cited by those that registered lower-thanexpected sales. Although the narrowest for three months, the gap between actual and planned sales remained considerable.

As was the case in each of the previous two survey periods, retailers were downbeat with regards to the prospects of achieving July targets. In fact, the overall degree of sentiment in June was one of the most negative in the series history, matching that recorded last December.

Markets turn on extreme sentiment, yet sentiment can remain extreme for long periods of time. Here is an accurate assessment by Markit economist Phil Smith.

“Retail PMI data for June continue to underline the effects that decreasing real wages, rising tax burdens and greater job insecurity are each having on Italian households’ willingness and ability to spend. High street sales were again down markedly on the month, leading to further reductions in profitability and employment in the sector. Rates of decline were slower in June, though, given that this came on the back of some of the worst months trading in the series history, this was by no means a cause for celebration.”

Retailer Purchasing Falls at Record Rate in France

Inventory reduction is underway in France as Purchasing Falls at Record Rate

French retailers reported a slower decrease in sales during June. The latest drop was only modest and much weaker than in the preceding two months. However, the performance over Q2 as a whole has been the worst since the inception of the survey in 2004, as trading has suffered in the face of difficult economic conditions. With retailers attempting to prevent an unwanted build-up of inventories, the value of goods purchased for resale fell at a series-record rate. Meanwhile, intense competitive pressures led to another marked drop in gross margins, while retail sector employment decreased at an accelerated pace.

Jack Kennedy, Senior Economist at Markit and author of the France Retail PMI, said: “The French retail sector continued to struggle in June, as the tough economic climate led to another drop in sales. The failure to rebound from May’s severe weakness, when trading was impacted by a run of public holidays and the presidential election, underlines the strong headwinds facing retailers amid depressed consumer purchasing power and high unemployment. The overall sales performance over the second quarter has been the weakest since the survey began in 2004, and it was therefore no surprise to see accelerated falls in both purchasing and employment during June as retailers went into retrenchment mode.”

Germany Retail Sales Up, Outlook Down

Markit reports Stronger increase in German retail sales, but outlook is reported as weakest for 2½ years

German retailers indicated a further rebound in monthly sales in June, with the pace of expansion reaching a three-month high. At 52.4, up from 50.7 in May, the seasonally adjusted Germany Retail PMI was above the neutral 50.0 value for the second month running. The latest reading pointed was above the long-run survey average (49.9) and indicated to a moderate increase in month-on-month retail sales in Germany. Some firms linked the improvement to better weather conditions and higher consumer spending as a result of the European Football Championship in June.

First drop in goods ordered for resale in nine months

Retailers in Germany responded to worries about the outlook for sales by reducing the value of goods ordered for resale at their stores in June. This was the first reduction since September 2011 and in turn contributed to the slowest accumulation of stocks of goods for resale so far in 2012.

In spite of highly unusual reports of higher sales due to "better weather" as well as higher sales because of football (soccer) championships, Markit reports ...

Actual sales in June were generally lower than expected, as has been the case in each of the past three months. Moreover, German retailers signalled a marked degree of pessimism about the outlook for their sales in one month’s time. The balance of firms expecting to reach their targets in July is the lowest for two-and-a-half years. Anecdotal evidence widely cited concerns about the impact of weakening domestic economic conditions, alongside uncertainty related to the euro area crisis, as the main factors leading to downbeat sentiment in the retail sector.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Sandra Bullock Wants to Lighten Heavy Real Estate Load

SELLER: Sandra Bullock
LOCATION: Austin, TX
PRICE: $2,500,000
SIZE: 5,663 square feet, 3 bedrooms, 2.5 bathrooms

YOUR MAMAS NOTES: Just a couple years ago, according to the folks at Forbes (via The Hollywood Reporter), Oscar-winning actress and producer Sandra Bullock (The Blind Side, Crash, Miss Congeniality and etc.), was widely reported to be one of the—if not the—highest paid actresses in all of Hollywood who took in a knee-bucking and bank account filling $56,000,000 between June 2009 and June 2010.

Even if that income estimate is off by several million clams and even if—hypothetically speaking—her income has plummeted in the last couple of years, it should come as no surprise to the children the otherwise low-key superstar single-mommy of one has adequate funds to own an impressive property portfolio that bursts at the seams with more than half a dozen luxury residences from California to New York.

Since at least the mid-1990s Miz Bullock has owned a home (and numerous businesses) in the music-loving, lefty-liberal Texas city of Austin where a month or so ago she chose to lighten her considerable and no-doubt costly-to-maintain real estate load and hoisted a walled and gated estate southwest of downtown Austin on the market with an asking price of $2,500,000.

Property records reveal Miz Bullock bought the privately-positioned but somewhat oddly-located property way back in April 1997 for $575,000. The rear of the presumably heavily fortified property backs up to a greenbelt trail—good for those who enjoy jogging and other such torturous physical activities—but it's peculiarly if somewhat clandestinely situated just off the busy MoPac Expressway in a decidedly unpretentious enclave southwest of downtown that's bordered by chunky suburban-looking office buildings; a few handfuls of two-family and a few more handfuls of less impressive but hardly inexpensive single-family homes; and a slew of large rental apartments and condominium complexes.

Listing photos show only the sylvan grounds and rear exterior façade of the white stucco and smoked glass contemporary that overlooks Barton Creek but do describe the 5,663 square foot two-story house as sitting on 1.75 gently sloping acres and as having 3 bedrooms, 2.5 bathrooms. The back of the house opens to a multi-level scored concrete terrace, lap lane swimming pool, in-ground spa, and unobstructed views of the downtown sky line over the carpet of tree tops that shade the green belt that snakes along the rear flank of the estate. One of the gawd-awful nearby office buildings looms over a lighted tennis court tucked away in a far corner of the property.

The children should not confuse or conflate the Austin residence Miz Bullock just tossed on the market with her far more substantial 5.81 acre estate on Lake Austin. She bought her lake front spread around the turn of the century and subsequently spent millions to custom build a massive mansion only to move out just days after moving in over concerns about mold and shoddy workmanship. She sued the builder and, in 2004, after, an 8-week trial was granted $7,800,000 in damages. She razed the moldy mansion—but kept the back terraces and swimming pool complex that were built along with it—and the compound-like property now has several smaller residential structures plus a three-bay, two-story boat house.

Even when she off-loads her long-time Austin digs near downtown Miz Bullock and in addition to her Lake Austin compound will still own six (and maybe more) homes across the country including a dour but kinda legendary (and sadly neglected) Old Hollywood-style 8,110 square foot Tudor-style pile on 4.1 acres in Beverly Hills, CA (above). She bought the private perch in May 2011 for $16,190,000 from gaming, entertainment and telecom entrepreneur Reagan Silber.

At one point the great estate high above Bev Hills also encompassed a second, lower parcel with tennis court and guest house accessible by funicular and was previously owned but a slew of Tinseltowners and big business types including restaurateur Peter Morton, radio station tycoon Norm Pattiz (who split and sold off the lower section in late 2006 for $3.5 million to a non-celeb), multi-billionaire music and media magnate David Geffen and That Girl Marlo Thomas.

As far as we know (and can tell based on a quick perusal of property records), Miz Bullock still owns a much smaller 3 bedroom and 3 bathroom residence a few miles away in West Hollywood (CA), bought in early 2001 for $1,495,000 and located just up the road from the Chateau Marmont Hotel and next door to a house owned by Cammie Diaz who—we presume—has decamped for the 3-acre Bev Hills (Post Office) compound she bought from Candice Bergen in 2010 for $9,477,500.

About six months after buying the house next door to Cammie D., Miz Bullock spent another $1,495,000 on an eight (or maybe it's ten) parcel ocean front spread in Tybee Island, GA and in June 2009, just over a year before she was adopted a baby and dumped her philandering ex-husband Jesse James, she shelled out $2,250,000 on the historic Koch-Mays House, an elaborate mash-up of a Gothic Victorian and a Swiss Chalet-style confection in the Garden District of New Orleans (above), originally built in 1876 for U.S. Sentator and Ambassador to France James Eustis with 5 bedrooms, 4.5 bathrooms and a whole lot of lacy iron work.

Miz Bullock's impressive (and no-doubt costly to maintain) property portfolio, as far as we know and can tell from a perusal of property records, also still includes a townhouse in New York City's SoHo 'hood (above) scooped up in January 2000 for $3,350,000 as well as a two lot spread with a Rocky Mountain appropriate, log-style residence just outside of Jackson Hole, WY.

P.S. We know were the last celebrity property gossip to get to Miz Bullock listing in Austin having already been covered by everyone from the Austinist to Perez Hilton to the kids at Curbed , okay?

listing photos (Austin): Capital City Sotheby's Realty
aerial photo (Beverly Hills): Pacific Coast News
facade photo (New Orleans): Dan Callister for Pacific Coast News
facade photo (New York City): Pacific Coast News

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Obamacare Upheld; What Should Romney, Republicans Do?

Today the Supreme Court ruled in favor of Obamacare by a 5-4 margin. Here is the Full Text of the Supreme Court Ruling.

Romney has promised to overturn the ruling, saying "ObamaCare was bad policy yesterday, it’s bad policy today."

That statement makes Romney a hypocrite as the Financial Times notes.

“Obamacare places the government between you and your doctor,” said Mr Romney, who championed a similar plan while governor of Massachusetts but says he opposes its expansion at a federal level.

Why wasn't it bad policy in Massachusetts?

Obama Chimes In

Here are some quotes from a press conference of President Obama as reported by The Guardian.

• "Whatever the politics, today's decision was a victory for people all over this country"
• "It should be pretty clear by now that I didn't do this because it would be good politics."
• "Today I am as confidence as ever, that when we look back five years from now, or 10 years from now, or 20 years from now, we will be better off because we had the courage to pass this law and keep moving forward."

Clearly, Obamacare was not good politics.

The president took no questions to which the Guardian commented "What was interesting is that Obama – for the first time in a while – offered an unapologetic defense of the healthcare reforms. That's going to make for a different approach in the presidential campaign."

Small Likelihood of Overturning Obamacare

Even if Romney were to win, he would be extremely challenged to overturn Obamacare outright.

Senate filibuster rules are such that Democrats will easily be able to block it. Besides, Democrats have a majority in the Senate and do not even need a Filibuster move to block changes.

Given the Supreme Court ruled Obamacare is a tax, there would be some scope for Republicans to trash it in the once a year Reconciliation Process that limits Congressional debate. After all, that is how the bill passed in the first place.

Still, to use reconciliation, Republicans will have to elect Romney, hold the House and take control of the Senate. Is that likely?

Justice Robert's Opinion

Members of this Court are vested with the authority to interpret the law; we possess neither the expertise nor the prerogative to make policy judgments. Those decisions are entrusted to our Nation’s elected leaders, who can be thrown out of office if the people disagree with them. It is not our job to protect the people from the consequences of their political choices.

Pragmatically Speaking

We can debate all day whether or not the Supreme Court made the correct ruling. However, such debate is useless. It will not change a thing.

Like it or not, the Supreme Court ruled that we are stuck with Obamacare unless Congress changes it.

Pragmatically speaking, it would be more beneficial to have discussions on how to improve healthcare rather than howling at the moon against it.

However, I suspect Romney will keep howling at the moon even though he was in favor of essentially the same moon when he was governor of Massachusetts.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Your Next Place

I'll admit, I'm kind of an "old things" snob - I only wear vintage clothes, won't drink bourbon unless it's at least 12 years old, and don't like any movie made after about 1978.  But one new thing I really love is a new condo, especially when they're like this.  I mean, look at it!  It would be like living inside an iPhone.  What snob could resist that?

This two-level Logan Circle condo in the Metropole features a wide-open floor plan, high ceilings, and totally unique finishes.  The kitchen gets a ton of light from the massive wall of windows; there's also exposed ductwork, for that frisson of rough industrial edges, but also Bosch appliances and custom cabinets for that frisson of, well, living in a million dollar condo.  Both good frissons.

Upstairs are the fine, spacious bedrooms, and there are three, yes three, very fine bathrooms.  As with the rest of the house, the utmost care has been given to every detail - the cabinets, the towel racks, the light fixtures, even the shower curtain rods are cool.  This is a condo that's guaranteed to make all your friends feel inferior and lame when they visit, which in my mind is the real point of home ownership.

And of course, the location.  Everything you could possibly want is within a block; a gym, a salon, restaurants, half a dozen bars, Whole Foods.  The condo comes with a parking space, but only a very bad person would live here and still insist on driving.  (Just kidding, when I visit my parents in Iowa, I drive their car twenty feet down the driveway to get the mail.)

1515 15th Street NW #430
2 Bedrooms, 3.5 Baths
$999,999

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Simple Real Estate Definitions : Right To Cancel

As part of the federal Truth-in-Lending Act, refinancing homeowners are granted a 3-day "cooling off" period post-closing during which they retain the right to rescind, or "cancel", their recent refinance without penalty or cost.

The Right To Cancel is protection against surprises at closing and/or a change of heart. It's also a safety valve for homeowners signing paperwork under duress. With 3 days to revisit and rethink the terms of a loan, a homeowner can maintain tighter control of his/her financial situation. 

If you ever have the wish (or need) to execute your right to rescind, be aware that the process is a formal one. The required steps must be completed on-time, and in order, or else your request will be invalid.

The process starts with a document labeled "Right To Cancel". It's included in your closing package and lists the terms of a rescission in straight-forward language. Among the key points :

1. You have 3 business days during which to cancel your loan
2. When you cancel the refinance, the entire transaction is cancelled
3. You must submit your Right To Cancel in writing

"Business day" is defined by the government to be every day, save for Sundays and federal holidays. A loan that closes on a Monday, therefore, must be rescinded prior to Friday at 12:00 AM.

Typically, rescission requests are faxed to the settlement agent, notary, or title company assigned with the refinance. It's good practice to ask for an acknowledgement of receipt as proof of delivery, too.

There are some refinances for which the Right to Cancel does not apply, however. This includes refinances linked to an investment property, and loans not collateralized by residential real estate. There are other conditions, too, that may supersede your right to rescind so be sure to ask your lender.

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Morning Real Estate Review

Servicers cut principal on 10% of mortgage mods, numbers expected to rise (HousingWire) This year mortgage servicers included principal reduction on 10.2 percent of modifications during the first quarter, which is a raise of 3 percent from this past year.

Freddie Mac reduces mortgage portfolio 9.4% in May (HousingWire) Though Freddie Mac bought $30.7 million in loans this May, it sold or liquidated $46.7 million. As a result, the mortgage portfolio balance shrunk at an annualized rate of 9. 4 percent in the same month.

Pending home sales match two-year high (The Washington Post) Pending home sales rose last month and matched its highest level in two years.  Contracts on existing homes were up 5.9 percent in May compared to April and 13.3 percent from a year ago. 

Investors are putting cash to work in residential real estate (The Washington Post) Investors are  favoring residential real estate as investment opportunities, a trend that’s been increasing during the past few years.

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Bankia Valued at EUR -13.635 Billion; Spain Becomes Sole Owner, Shareholders Totally Wiped Out; Entire Bankia Board Resigns

Five days ago we heard from the Bank of Spain that Spanish banks only need between €16bn and €62bn in new capital.

For details, see Laugh of the Day: Stress Tests Show Spanish Banks Only Need Between €16bn and €62bn in New Capital; ECB to Accept BBB- Rated Debt (One Step Above Junk) as Collateral

In the same report we also heard that the three largest bank groups do not need any capital at all. Bear in mind that was allegedly in a "stress" scenario.

Today we learned that Bankia is Valued at EUR -13.635 Billion

The seven banks that founded Bankia be left out of the shareholders of the entity and the State will be made with one hundred percent of the group's parent, Bank Savings Financial (BFA), the latter having a negative value of 13.635 million euros According to the assessment commissioned by the state.

After the assessment, the FROB becomes the sole owner of BFA.

Thus, the seven savings banks that created the group, Caja Madrid, Bancaja, La Caja de Canarias, Caja de Avila, Laietana Caixa, Caja Segovia and Caja Rioja, stay out of the shareholders.

Finally, BFA proceed to recapitalize its subsidiary, Bankia, with an injection of 12,000 million euros. He will do through a capital increase in which existing shareholders will have preferential subscription rights. It is expected that the capital increase in Bankia be completed during October.

The European Commission today gave its approval temporary nationalization and recapitalization of the matrix BFA waiting for Spain to send to Brussels a restructuring plan of the institution in the next six months.

I strongly suspect that a valuation of -13.635 billion euros is on the wildly optimistic side.

Entire Bankia Board Resigns

Here is an amusing picture from the El Pais article The assessment shows a group of Bankia 13.635 billion hole



El Pais reports ...

The group Bankia worthless. Worse, his assessment is negative, -13.635 billion euros. That is the appraisal on the face of nationalization has been presented today to the board of the entity, sources of such advice. That means that the conversion of the 4.465 million of preferred shares of Bank Savings Financial (BFA) results in 100% nationalization of the matrix and, indirectly, 45% of Bankia, but the assessment does not directly affect the bank quoted. The BFA board of directors resigned en bloc.

The seven savings banks that are BPA was created without any equity in the state, leaving them no future dividends to be used for social work . The entities concerned are Caja Madrid, Bancaja, La Caja de Canarias, Caja de Avila, Laietana Caixa, Caja Segovia and Caja Rioja. The seven contributed to its financial business BFA and are now nothing more than the assets of the work were marginalized social integration.

Did they all retire with full pensions?

Looking back, Bankia has provided more laughs than I remembered.

May 7, 2012: Spain to Spend €7bn-€10bn (It Doesn't Have), Bailing Out Bankia, the Nation's 3rd Largest Bank; Liar, Liar Pants on Fire

May 9, 2012: Audit Shows Spain's Bankia Short 3.5 Billion Euros; PP says "We Must Help Bankia, It Has Deposits for 10% of GDP"

May 10, 2012: Spain Nationalizes BFA and 45% of Bankia; No Bid for CatalunyaCaixa, Bank Worth Less Than Zero; Der Spiegel: Germany Fears "Bottomless Pit"

The implosion in Spanish banks continues. On Wednesday, Spain nationalized BFA, the 8th nationalization since the start of the crisis.

After sinking 3 billion into CatalunyaCaixa, Spain tried to privatize the mess but there were no offers at zero euros. Clearly CatalunyaCaixa bank is worth less than zero.

Meanwhile Der Spiegel reports "Bundesbank has no idea of what is happening in Spanish banks". Mish readers do. The Spanish banking system is without a doubt bankrupt.

Emphasis added.
Today we see that Bankia and the entire group is worth less than zero.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Mid Week Floor Plan Porn: 965 Fifth Avenue

SELLER: Actually, we're not quite sure
LOCATION: New York City, NY
PRICE: $15,750,000
SIZE: 3 bedrooms, 4 bathrooms

YOUR MAMAS (UPDATED) NOTES: We were unexpectedly waylaid along the way today but as promised in our earlier discussion of financier Bruce Barnes' big digs at the Dakota on New York City's Upper West Side, we're finally following up with some more juicy floor plan porn in the form of a Fifth Avenue penthouse listed last week with a $15,750,000 price tag.

Property records we peeped indicate and reports from the time of the purchase state the deluxe duplex, perched atop a full-service pre-war building almost directly across Central Park from the Barnes apartment, is owned by the Kathryn Beal and Bruce Beal Jr., a bigwig executive at real estate juggernaut Related Companies.

However—buckle up butter beans because it gets a little bumpy here—we've just heard from someone in a position to know that the posh penthouse is not owned by Mister Beal Jr. Apparently, according to our informative source, Mister Beal Jr.'s actual address is similar to that of this penthouse at 965 Fifth Avenue but it is not this penthouse as we originally thought (and reported).

Mister Beal Jr. and his missus, for what it's worth, bought their apartment at 965 Fifth Avenue—whichever one it is—for $10,000,000 from his multi-billionaire boss, real estate tycoon Stephen M. Ross, the current Chairman, CEO and Founder of Related Companies and majority owner of the Miami Dolphins football team who persuaded a bunch of celebs like Serena Williams, Gloria Estefan and Marc Anthony to acquire, ahem, minority stakes in the team.

Confused? We are too. Let's all down another mid-morning gin & tonic and maybe then it'll all make sense.

Anyhoodles poodles, the owner/seller of the penthouse in question is secondary here to the floor plans included with marketing materials that shows one of the building's passenger elevators opens directly in to the penthouse's entrance gallery. Both the similarly-shaped but not-quite-equally-sized living and dining room have Parquet de Versailles wood floors, wood burning fireplaces and each has access to two of the three small terraces on the lower level.

The multi-windowed, park view kitchen, tucked between the dining room and an unusually-large-for-Manhattan laundry room (with service entrance and walk-in storage closet) is all dressed up and expensively equipped with mosaic tile floor; marble tile back splashes that extend clear up to the ceiling; slab marble and mahogany counter tops; white Shaker-style cabinets and stainless steel cabinets that conceal the fridge and freezer; and a brass-accented Euro-brand range and hood that together, Your Mama can assure the children, cost more than a suped-up Scion or mid-range Hyundai.

The lower level is completed by a petite library lined walls and ceiling with high-gloss wood paneling and an adjoining home office with custom-built, floor-to-ceiling book cases.

Upstairs there are three bedroom suites, each with private pooper and direct access to the wrap around terrace. One guest/family bedroom has a wacky, u-shaped walk-in closet and the the other guest/family bedroom has a small adjoining private study.

The Master suite has two closets—one a windowed walk-in; a sitting area with fireplace, dressing area and vaguely Art Deco-style bathroom with black marble floors; walls completely covered white marble separate; semi-opaque, bottle glass-enclosed stall shower; and a soaking tub set into a marble-lined niche.

A second, much smaller and somewhat (in)famous apartment on the 18th floor can be purchased concurrently to flesh out the lower floor with a combined asking price of $17,900,000. The 1 bedroom and 2 bathroom apartment was once owned by rock music manager turned legendary New York City real estate agent to the stars Linda Stein who was—brace yourselves—bludgeoned to death in 2007 by her assistant. Miz Stein's long-time residence at 965 Fifth was sold to its current owner in August 2008 for $1,045,000.

The smaller apartment doesn't appear to be on the open market but, according to rudimentary calculations on our bejeweled abacus, given the combined asking price ($17,900,000) and the price of the penthouse ($15,750,000) the value for the old Stein place has been placed at $2,150,000

listing photos and floor plan: Prudential Douglas Elliman

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