Hi Tom-

I feel like not being there for you in 2010 was really letting you down. The Abyss feels awful about it. But you see, Tom, The Abyss must always go where it is needed most. And as you can imagine, on a global scale, I’ve been in very high demand. 

Most recently, though, I’ve taken my feel-good show to three countries that are feeling the icy-hot breath of an impending property/credit/mortgage collapse of epic proportions—China, Australia and Canada. They did all they could to stave off what is certain to be a gut-ripping reversion to the historical price mean (which will eviscerate their economies and citizens) just like the US and Europe. They published happy-talk stories in the media, their governments manipulated key data points, their bankers denied the possibility of a correction, their stock markets rallied, their elected politicians spoke in marketing platitudes designed to calm fears, they summarily dismissed contrarian positions and their ratings agencies assured the world that all their debt was solidly AAA-rated. 

They learned very well from the US and it truly hurt me to give them all the same horrifying glimpse into their future that you and I now know was clearly inevitable. But, WTF, Tommy boy, it’s a gig and I aim to keep it, what with U6 unemployment in California eclipsing 20%. 1 in 5, Tom. Say it quietly to yourself until you piss yourself over the realization that we are barreling forward into data milestones that define what a Great Depression is. And just like no real estate is ever meaningfully local if the national decline is more than 30% across the board, neither are sovereign debt calamities.

Here are some pics of Chinese ghost towns. They make Vegas developers look like the Amish. 

Anyhoo, I felt comfortable traveling this year because from everything I’ve been told in the press the US Recession is over (close one!), real estate has stabilized, banks have realized records profits, the Dow is back over 11,000 and the party of fiscal responsibility, the GOP, has recaptured the Congress. 

But then, I read the following, and I thought I need to get back to the good ol’ USA, because that place is super-fucked right this very minute:

Robert Shiller: If House Prices Keep Falling This Fast, the Economy is Screwed!

Highest Bank Failures Since 1992!

No Amount of QE Will Be Able to Keep the Current Stock Market Bubble From Busting!

So, in short, I’ve been called back home. And apparently not a moment too soon. 

I’ll be in touch.

Big Kick-The-Can Kisses,

The Abyss

(Mrs. Governator in her SUV on her cell phone.)

Hi Tom-

You might remember that The Abyss was a little skeptical about the Governator’s claims of solving Cali’s budget crisis. And maybe you recall that the state issued IOUs instead of actual payment to many of its (now mostly bankrupt) vendors. Well, it turns out that nagging little issue of the state essentially heading for a total shutdown seems to have re-emerged even quicker that many anticipated.»

“California’s finances have been so bad that the governor’s finance director, Mike Genest, told a budget forum in Washington last week that back in February he had combed through the U.S. Constitution to research whether California could legally declare bankruptcy — or revert to some kind of territorial status. (Neither was realistic, he determined.”

Seems bad, sure. But if we just keep hiking tuition on all the kids who are the state’s future it should all work out fine. That’s if there aren’t any university riots (which The Abyss says is a lock for 2010).»

Fears for the Future of the University of California

The University of California system has long been one of the gems of American education — a first-rate research university that was one of the most affordable in the country. But it’s future is uncertain,  Tamar Lewin reports.

On Thursday, the university’s Board of Regents voted to raise fees for undergraduates — equivalent to tuition — by 32 percent. That means students will be paying more than $10,000 a year, about three times as much as they did a decade ago.

Students staged demonstrations to protest the tuition increase. But for the faculty, and for many in the state who are concerned about education, the larger issue is the quality of the university and its reputation in the wake of an $813 million budget cut.

And that seems bad, too, Tom. But the good news is that Cali remains the nation’s trend-setting state, by remaining one of the country’s frontrunners in foreclosures, bankruptcy and unemployment.»

California unemployment rate hits 12.5 percent

The U.S. Bureau of Labor Statistics says California was one of 29 states reporting unemployment rate increases. Only three states - Michigan, Nevada and Rhode Island - had higher rates than California last month.

The rate is just slightly higher than September, when officials reported a jobless rate of 12.2 percent. It was 8 percent a year ago.

The national unemployment rate rose to 10.2 percent in October.

Anyhoo, Tom, it all seems good for 2010. Thank God for the stimulus, the bankster bailouts, the cash for clunkers, houses, gold, etc. and most of all the war in Afghanistan. Where would the world be without the fine work of the .gov?

Big California Dreamin’ Hugs,

The Abyss

Hi Tom-

Sorry it’s been awhile since I posted, but The Abyss has been vacationing while the world healed itself and everything returned to okey-dokey.

With The Great Recession ending in what is historically speaking an almost inconceivably short time, the .gov has made it clear it’s time to buy that house (with a tax credit that only costs each taxpayer $43,000 per transaction), buy some HDTVs and trade in your old SUV for a shiny new one.

Yep, America spent its way out of being over-leveraged. Kinda like holding your breath to keep from drowning. Forever. But whatevs, math is for doom & gloomers. And it’s time to move on.

Or is it…

Turns out, that little 3.5% tick upward in the GDP (which, very coincidentally, is exactly the amount needed to neither lose nor create jobs in America) was bought and paid for by the .gov.

And by .gov, I mean you. Yes, Tom, your tax dollars and generations upon generations’ tax dollars ended the Great Recession. For one whole quarter.

Big Buy Now, Pay Forever Hugs,

The Abyss

The recession may be over at last — so what now?

WASHINGTON – After a record four straight losing quarters, the economy finally grew again. It was hardly a boom, and it was almost all because of government spending. But it was enough to change the question from when the recession will end to whether the recovery will hold.

But the government help is only temporary, and without it, consumer spending is likely to weaken. If shoppers clam up as credit stays tight and jobs remain scarce, the economy could tip back into recession.

Hi Tom-

It turns out that letting the banks indefinitely delay the official accounting of their toxic mortgage loans has not brought out the absolute best in those fine folks who run them.

This is called “Shadow Inventory” and it is an explicit deal between the big banks and the .gov. The goal is to engineer a way to offload this toxic debt to the US citizen (like Fannie, Freddie, AIG). So, the banks are not completing the foreclosure process while they wait for Little Timmy to find a way to change more accounting rules that will enable them to walk away relatively unscathed later.

The banks themselves call this the “Extend and Pretend” plan. The US is guaranteed to wind up at least as bad Japan now. There is no exit.

Big Skeezy Bank Executive Kisses,

The Abyss

Wells Fargo  Mortgage Executive Uses Foreclosed Malibu Home For Private Parties

Wells Fargo & Co., seeking to distance itself from a company executive’s alleged personal use of a $12-million beachfront Malibu home owned by the bank, said Friday that it would “take decisive action” against any employee “who may have violated Wells Fargo’s policies.”

The bank’s strongly worded statement came as it faced a potentially embarrassing public relations imbroglio in the aftermath of reports that one of its senior executives had lived in the home that was surrendered by victims of Bernard L. Madoff’s massive fraud.

“I almost fell out of my chair” when reading about the Wells Fargo allegations Friday morning, said Jerry Swerling, director of public relations studies at USC’s Annenberg School for Communication. “That these folks could think this would not somehow become public astonishes me.”

The Times reported this week that Cheronda Guyton, a Wells Fargo senior vice president responsible for foreclosed commercial properties, allegedly spent weekends this summer at the home with her family. The paper cited eyewitness reports from residents of the exclusive Malibu Colony gated community.

Guyton has not responded to phone calls or e-mails seeking comment.

In a statement, the bank said that its rules of conduct prohibited employees from “personal use of properties held by Wells Fargo.” The company reiterated Friday that it had launched a full investigation into the allegations.

The San Francisco bank also said it regretted “the disruption to the neighboring property owners since these allegations were made.”

The property was transferred to Wells Fargo in May by the home’s then-owners, bank customers who were said to have suffered heavy losses in Madoff’s Ponzi scheme.

Neighbors recounted a summer evening during which guests arriving for a party at the plush modern home were ferried on a dinghy from a yacht offshore.

The use of the house, Swerling said, suggests that Wells Fargo has failed to ensure that executives “make concern for the company’s reputation an organization-wide priority. They need to ask themselves, ‘Is this consistent with who we want to be?’ If it’s not consistent, don’t do it.”

Kevin Stein, associate director of the California Reinvestment Coalition, an advocacy group for low-income tenants, said the executive’s alleged use of the Malibu house looked especially bad inasmuch as Wells Fargo and other banks often swiftly evicted renters from foreclosed houses to speed their resale.

“At the same time at least one bank executive was [reportedly] moving into a house in Malibu, I was imagining that scene a few miles away in the San Fernando Valley where people are getting kicked out because Wells Fargo says they have to put those houses back on the market immediately,” Stein said.

He said his group was working with Wells Fargo and other lenders to defer selling foreclosed homes that were occupied by tenants so renters could remain in them longer.

“I expect this is an aberration. I don’t know if it is widespread, but I hope it is not widespread,” Stein said of the Malibu situation.

Even if the incident was isolated, he said, the harm to the image of Wells Fargo and the banking industry is more broad. “It plays into the public’s distrust and skepticism about the role of large financial institutions in this crisis.”

Real estate agents contacted by The Times on Friday said they had not heard of similar cases, despite the huge increase in homes surrendered to lenders in the last two years as the housing market collapsed.

Most expressed surprise over the use of the home, and many echoed the sentiments of Adrienne Kessler, an agent with Keller Williams Realty, who said she was “appalled” by the alleged conduct and what appeared to be an obvious abuse of a position.

For Patricia Ruben of Sotheby’s International Realty, Los Feliz, the issue hit close to home.

“My saddest day this year was meeting victims of Madoff’s Ponzi scheme who were also forfeiting their home,” she said. “The idea that another family is frivolously frolicking around the home of a victim’s lifelong work leaves a second stain on humanity, a second robbery.”

An exception was agent Farrell “Burt” Bakman of Coldwell Banker in Beverly Hills, who said he saw no problem with a lender using a property “as some sort of a bonus.”

“It makes sense,” he said. “It’s thinking outside of the box for Wells Fargo. They just hold on to it as an asset.”

According to Coldwell Banker, the 3,800-square-foot home with direct access to the beach has been listed as a vacation rental since April at a rate of $60,000 a month.

One online listing describes the home as having “dramatic architectural” features and touts a “rare opportunity to lease one of the finest homes in exclusive Malibu Colony.”

Hi Tom-

I can’t begin to tell you how relieved and grateful The Abyss is that everyone has been rescued from the economic crisis and that the recovery has finally come. It’s truly amazing after the biggest expansion of credit and exotic leveraging in the world’s history (30 years in the making) and the most historic crash since the G-to-the-D, that it’s all good again after only a couple of nail-biting years.

What’s even better is that all this great stuff happened even while unemployment hit 12% (yup, the official, gubmint-approved U3 index) in California (22% if you count those who have stopped looking for work). And it’s super amazing that the all-clear was rung by the Mainstream Media and the .gov even as 1/3 of homeowners are already underwater across the nation!

So, I guess this whole recovery thing is because the banks are now super healthy since they got what amounted to a little north of $13 trillion in public funds. Or the equivalent amount of paying off all the mortgages in the US. Have to say though, it still feels a little odd, since the consumer is 70% of the economy, that the .gov didn’t try to help out the little guy just a little bit with the whole losing their homes and shelter thing and instead just covered the downside of a handful of hedge funds, er, commercial US banks, with what little cash the people had left.

But I guess there’s the rub. The people not only didn’t have that money to spare for banker bonuses and questionable trading, but are now facing a debt that could stretch out hundreds of years if it were ever to be paid down.

So it works like this, Tom. The consumer is and shall remain 70% of the economy whether the consumer has any money or not. If the .gov just commits that money to the corporate sector before it is even earned by the people, problem solved.

Nice and tidy. But, sadly, one of the reasons Omerica has abadoned the Public Option. Broke, homeless and sick is no way to go through life, Tom. I strongly suggest that everyone get rich right away. So, get crackin’! And by that, I don’t mean turn to street drugs.

Big Pay-As-You-Go Hugs,

The Abyss