Sunday Iconoclasm Blogging

Some irreverent souls have taken to Sunday blogging on a freethinking
themes.  I choose to Ozymandize* that which we worship the most:
our economic system.

That plant in the middle is href="">my
mimosa ( href="">Albizia
) tree, the one I am growing from seed.  It is,
literally, a green shoot (although the leaves close and droop at night).

style="display: inline;">i-b3740cadd0564438a7f476e511e6438b-mimosa-green-shoot.jpg

"They" say that green shoots are everywhere these days.  Do we
believe "them"?


spike on recovery hopes

Optimism from Fed chief Bernanke and jump in existing home sales
propel Wall Street to fresh 2009 highs.

By Alexandra Twin, senior writer

Last Updated: August 21, 2009: 5:50 PM ET

NEW YORK ( -- Stocks surged Friday, with the
Dow, Nasdaq and S&P 500 all ending at fresh 2009 highs, after Fed
chief Ben Bernanke said the economy is near a recovery and existing
home sales posted their biggest jump in two years.

The Dow Jones industrial average (INDU) gained 156 points, or 1.7%,
closing at the highest point since Nov. 4. The S&P 500 (SPX) index
added 19 points, or 1.9%, closing at the highest point since Oct. 6...

The National Association of Realtors has more, in their decidedly
upbeat manner:

Gain in Existing-Home Sales Maintains Uptrend

Washington, August 21, 2009

For the first time in five years, existing-home sales have increased
for four months in a row, according to the National Association of

Existing-home sales - including single-family, townhomes, condominiums
and co-ops - rose 7.2 percent to a seasonally adjusted annual rate1 of
5.24 million units in July from a level of 4.89 million in June, and
are 5.0 percent above the 4.99 million-unit pace in July 2008. 
The last time sales rose for four consecutive months was in June 2004,
and the last time sales were higher than a year earlier was November

Lawrence Yun, NAR chief economist, said he is encouraged. 
"The housing market has decisively turned for the better. 
combination of first-time buyers taking advantage of the housing
stimulus tax credit and greatly improved affordability conditions are
contributing to higher sales," he said. 

The monthly sales gain was the largest on record for the total
existing-home sales series dating back to 1999... [emphasis added]

We all are familiar with existing-home sales.  You drive down the
street, see a for-sale sign, call the number, see the house.  If
you like it, and have (or can borrow) the money, you buy it.  When
we read
about existing-home sales, that is the picture that comes to
mind.  But how many of the recent existing-home sales fit that

The Wall Street Journal has href="">an
article that gives the real story.  It's behind a pay wall,
if you merely Google the title, you may find that href="">someone
has posted the entire thing somewhere.  Or you may find that one
of the links to WSJ, direct from a news search, will get you past the
pay wall (especially if you clear your cookies).

A survey conducted in June of 1,500 real-estate agents
sponsored by the
trade publication Inside Mortgage Finance found that 36% of all sales
involve "nondistressed" properties. Of the nondistressed sales, only
31% were what the survey described as "unforced or optional." The rest
were sales by homeowners in some kind of financial or personal crisis.
"Think about that for a minute," John Mauldin of Millennium Wave
Advisors wrote this week. "Two-thirds of home sales are either
foreclosures or banks taking a loss on the mortgage."

And only a third of the remaining one-third -- roughly 10% of overall
sales -- comes from "something we could call a normal selling...
[emphasis added]

It other words, the blissful mental image of a young couple with their
golden retriever, out for a Sunday drive, and happening upon an
attractive home, is not the picture in about 90% of the cases.  The
increase in existing-home sales
is not good news
.  This is, in fact, dreadful.  Yeah, the
sales numbers are up.  But it is because people and banks are
capitulating.  They held out as long as they could, realized that
they are never going to make any money, and braced themselves to take a
loss instead, or to break even, at best.  Or they are selling, not
because they are delinquent yet, but they know they will be if they
don't get out now.

The Atlanta Journal Constitution -- in the heart of the area
where href="">so
many banks are failing -- has a story that illustrates this well.

unloading repo homes to clear bad loans

By Paul Donsky

The Atlanta Journal-Constitution

Wednesday, August 19, 2009

...Columbus-based Synovus is in the midst of a massive purge of
distressed property, mostly foreclosed homes and vacant lots.

Through auctions run by contractors, the banking company has sold
thousands of properties over the past four months as it works to
cleanse a balance sheet hammered by bad real estate bets, many in the
troubled metro Atlanta market...

...Many banks are selling repossesed homes, but the numbers for
Synovus are eye-popping

Synovus sold $400 million worth of distressed assets in the second
quarter alone and plans to sell $600 million more over the third and
fourth quarters.

The bank has recorded large losses on the transactions, including
$165 million in the second quarter. The bank, which is averaging
returns of about 45 cents on the dollar, expects to lose $300 million
more in the second half of the year through asset sales.

A Synovus spokesman said auctions have been a successful way of selling
assets, with five planned this quarter... [emphasis added]

The remainder of the article points out that this is necessary, even a
good thing, for the bank to do at this time.  But the "good" is
relative; it is like cutting off your leg, to keep from dying from
gangrene.  They sold $400,000,000 "worth" of stuff at a
$165,000,000 loss.  (Note that this number doesn't square with the
reported "45 cents on the dollar."  I cannot explain that.) 
It is likely that this kind of selling will
further depress prices; that is why they have waited so
long.  But they can't hold on any longer.

There is no way that this is good news.  What Lawrence Yun
economist) said about the news, is highly misleading.  While one
could argue that "greatly improved affordability conditions are
contributing to higher sales," these sales are not a green shoot. 
Unless you think of the century plant ( href="">Agave americana),
that sits patiently in the
desert, waiting for a good rain.  When the rain finally comes...

style="display: inline;"> href="">i-86d8a4a55b0a471d7163809b7ae1bc3b-century_plant.jpg

...the plant sends up an enormous, beautiful stalk, in a matter of
weeks.  Then it dies.


* I finally did it.  Usually, when I think I have come up
with a
neologism, I Google it, and find that someone else on the Internet came
up with it first.  But as of this posting, there are no citations
for "Ozymandize."


I met a traveller from an antique land

Who said: Two vast and trunkless legs of stone

Stand in the desert. Near them on the sand,

Half sunk, a shatter'd visage lies, whose frown

And wrinkled lip and sneer of cold command

Tell that its sculptor well those passions read

Which yet survive, stamp'd on these lifeless things,

The hand that mock'd them and the heart that fed.

And on the pedestal these words appear:

"My name is Ozymandias, king of kings:

Look on my works, ye Mighty, and despair!"

Nothing beside remains. Round the decay

Of that colossal wreck, boundless and bare,

The lone and level sands stretch far away.

--Percy Bysshe Shelley, 1818


Agave: dead and fallen.

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Your analysis is, of course, correct. However, I still think that it should be considered "good news", in the sense that people are now sacking up and taking their losses--i.e., de-leveraging. This is a necessary precondition to the resumption of genuine economic growth.

I think that having a plant nursery is a great idea! There are far too few people who care about nature and plant raising anymore. Nature never goes out of style.