TESTOSTERONE PIT

WHERE THE TRUTH COMES HOME TO ROOST

Recent Publications

Favorite Reads

The Softer Side

INDEX

DEBTOR NATION

Chapter 1 ♦ AIRMAIL FROM AFTERLIFE

1976

One rainy summer day, I packed my backpack and went to America. I was seventeen. I knew what I was doing: I was escaping from the debacle at home. And I was looking for something. For what exactly, I didn’t know, but I’d go look for it in America. There, the heat burned in my nostrils. Lawns were brown. Cars were big and air-conditioned. Girls went gaga over my accent. Guys thought I was cool. And I fell in love with it all.
          Three years later, I was paying my way through college in Texas when the notion of home, distant and convoluted as it had become, blew up with gratuitous violence. A Boeing had crashed into a mountain in Turkey, killing all 155 people aboard. I heard about it on the radio. But I didn’t connect the dots.
          A few days later, I found a message from the operator in my campus PO Box. Telegram, call Western Union, it said. I called from one of the pay phones. My heart was pounding in my temples, and I had trouble hearing the lady on the other end.
          “I’d read it to you,” she said. “But it’s in German. I think you better come by and get it.”
          “I’m fixing to go to work. Can’t you try to read it to me?”
          “Oh dear.”
          “Is it long?”
          “Two lines.”
          “Can you spell it?”
          “Well, I guess I could. Are you ready?”
          I pulled out a notepad and pen. “Ready,” I said, though I knew that I wasn’t ready, that I’d never be ready for whatever she was about to spell.
          “E-L-T-E-R-N new word,” she said, “A-M new word M-O-N-T-A-G new word M-I-T new word F-L-U-G-Z-E-U-G new word I-N new word D-E-R new word T-U-R-K-E-I—”
          “Stop! Please.” I couldn’t write anymore. Parents on Monday with plane in Turkey.... German sentences, even in abbreviated telegram style, had the main verb at the end, but I didn’t want to hear the main verb, didn’t want to hear it spelled out letter by torturous letter. “Thank you. That’s enough.”
          I’d escaped the debacle at home and had gone as far away as possible. But this wasn’t what I’d had in mind. I stood there in a daze, brain deadlocked, numb, clutching the receiver, drowning in abysmal emotions.
          Then I went to work. It was just a part-time job, but now I needed the money more than ever. Afterward, I drove to the Western Union office and picked up the yellow slip of paper with twelve lines of all-caps alphanumeric gibberish and two lines of readable text. It was from my sister, sent from the town where she was staying with friends. But it didn’t include their phone number. And my brother was on vacation somewhere. So there was no way to reach him either.

Next....

TESTOSTERONE PIT, the novel

Wolf Richter

Chapter 1 ♦ Circle Jerk

It was Saturday, the biggest day of the week, and everyone was working bell to bell, over forty salesmen, though Ferronickel didn’t know exactly how many he had because some hadn’t shown up and might have started selling cars some other place, and because he’d hired a bunch of new guys an hour ago.

“It’s a beautiful day,” he sang in a basso profundo voice as he marched across the showroom in his asymmetric gait. He was the general sales manager at the Ford Superstore. His Tabasco Sauce tie was loosened, his collar unbuttoned. His gut that hung over his belt strained his shirt. He had puffy eyes and was full of mean energy, ready to explode, ready to force things to happen. He blew out the door, came to a halt on the porch that surrounded the showroom on three sides, and lit a cigarette.

Al Millikin, one of his four sales managers and perhaps the best closer in town, was watching Mad Boxer work a customer on the truck lot. Potential deal.

“Why can’t he bring that guy inside and write him up?” Ferronickel said.

“He ought to tell him we got free pussy on the showroom,” Millikin said.

“Don’t give me any ideas for our next live remote.”

“Come to think of it, that would be a hell of a lot more effective than the classical rock-and-roll shit we’ve been doing.”

“For our male customers.”

“We could alternate. Free pussy one day, free Godiva chocolates the next. We’d have both ends of the spectrum covered.”

“You’re a fucking Einstein, Millikin.”

Reginald Pierce, another sales manager, a big guy with a shortish Afro, was jumpy and his eyes darted about. He fretted about Whacker Packer, Hackman Jones, JoAnn Delouche, and several other salesmen who’d formed a dope ring by the plate-glass window. If left alone, they’d make up rumors, complain about dealership coffee, and infect each other with morale problems. He singled out a young guy.

“Freddie T, are you going to participate in a circle jerk?” he growled. They called him Freddie T because of his unpronounceable Greek last name. “Or are you going to sell something?”

It startled them; they’d forgotten all about selling. And they drifted apart.

Lou Massago gesticulated on the phone in one of the closing booths. He wore a white button-down shirt, a red and blue tie, slacks, and ostrich-skin boots. A scar curved upward from the right corner of his mouth, giving him a lopsided grin even when he was serious. His eyes were set close together and peered out from under his bushy eyebrows with ferocious intensity. But he had a soft voice when he wanted to, and now he wanted to because he was talking to a customer about a 15-passenger van that had come out of the rental fleet. There were ten of them. They were scratched and dented and had too many miles on them, and they were overpriced, and no one could sell them, but he was king of sales, and if he could sell them, it would prove he could sell anything.

He hated working the phone. He needed his customers in front of him, needed to stare into the whites of their eyes. But no one had sold any of those vans yet, and to prove he was king of sales and could sell anything, he’d decided to sell them all. Besides, the Saturday rush hadn’t begun yet, and calling old customers was more productive than standing around waiting for something to happen.

Next....

Tuesday

Jan032012

Construction Spending And The Housing Quagmire

Tuesday, January 3, 2012 at 4:21PM

Among the “good” economic news today was private residential construction spending, which rose 2% in November and 3.4% year-over-year, according to the Census Bureau, confirming similar trends in building permits and housing starts reported earlier. Construction creates lots of jobs and contributes significantly to GDP. Everyone, from the President down to local politicians, wants it to grow. It gets them reelected. But for homeowners, banks, and tax payers, these trends are costly.

Today's housing market is a consequence of the credit bubble that the Greenspan Fed engineered. It sparked a speculative boom. Developers went crazy. Lenders made liar loans. Values soared. People bought houses sight-unseen to get rich. Cities and states collected taxes. Everyone was happy. When the construction bubble peaked in January 2006, housing starts hit an annual rate of 2.3 million units. But after years of overbuilding, the frenzy dried up. What was left was a housing glut. And vacant units became the root cause of the decline in home values.

There were a lot of them of vacant homes: 18.8 million in 2009, according to the Census Bureau. While reasonable people may have quibbles with that number, everyone agrees that the inventory of vacant units is immense. Whether it's 18.8 million or 12 million units only changes the duration of the healing process, not the problem itself.

But the healing process is in trouble. If you rent or buy a home and move into it, you also move out of the property you’re in. Hence, no net impact on the inventory of vacant homes. What impacts it are wildfires, hurricanes, or rot. And household formation. Household formation is a demographic force that can mop up vacant homes in a hurry. Yet, it has declined over the last few years and was even negative for a while. In 2011, only 600,000 households were formed, a far cry from a range of one to two million a year in prior decades.

A blip caused by the financial crisis? Probably not. At least not entirely. Researchers have put their fingers on a number of issues, including the record low marriage rate and record high median age for first marriage (Pew Research Center)—a trend that has also manifested itself in other developed countries and is unlikely to reverse.

So, if the industry builds homes at the current rate rate of 685,000 units in 2012, and household formation stays at 600,000 for the year, then the inventory of vacant homes will grow by 85,000. OK, some of those homes may replace teardowns, but still. Any increase in residential construction spending simply worsens the problem.

In March 2011, the Case-Shiller Home Price Index hit a preliminary low—down 33.4% from its peak in June 2006. After a slight uptick over the spring and summer, the index started to decline again. The most recent data, published on December 27, reflected price levels of August, September, and October: down 3.4% from last year. As the index picks up seasonal price declines typical for the winter months, it will likely hit new lows. And so it will continue: periods of false hope followed by declines and new lows.

Price declines entail foreclosures, already a horrendous problem. Over 6 million borrowers are currently delinquent more than 30 days, and two million homes are in foreclosure. It’s a vicious cycle: foreclosure sales put downward pressure on prices, which causes further delinquencies and foreclosures. Banks are getting hit with losses—and so are taxpayers through the never-ending bailouts of Fannie Mae and Freddie Mac. For that whole debacle, read.... Bailing out Zombies, Again.

The solution to the housing quagmire, as unappetizing as it may sound, is for residential construction to fall in line with demographic realities—if you’re in a hole, stop digging. And then, maybe, the inventory of vacant homes can be mopped up over time.

Follow @testosteronepit

4 Comments | |

Email Article

Reader Comments (4)

One thing you don't mention is that a lot of the bubble homes were built in locations that have no economic value. In other words, most of those in south Nevada and inland California will probably never be used. You can wipe them from the inventory; they are worthless. This makes the problem somewhat less than the nationwide figures indicate. Hard to quantify obviously.

January 3, 2012 |

burt

In Switzerland, bankers reduced many mortgage rate under 1%: difficult to be under water!
Swiss Bankers think: better win 1% then loosing money and having 99% against me!
USA bankers are stupid!

January 6, 2012 |

Jean-Francois Morf

This article is well crafted the content is really good you will really learn a lot from it thank you so much for sharing this wonderful article.

March 13, 2012 |

Q Works Construction

Q Works - thanks!

March 14, 2012 |

Wolf Richter

Post a New Comment

Enter your information below to add a new comment.

Author:

Author Email (optional):

Author URL (optional):

Post:

↓ | ↑

All HTML will be escaped. Hyperlinks will be created for URLs automatically.