Daily Archives: September 20, 2010

Tulip mania in China

Chinese go crazy for jade. Worth more than gold, in China, while in Poland, where there’s plenty, it’s so cheap that it’s not worth mining. Seems like there’s an arbitrage opportunity here. In the meantime, maybe we can interest our friends to the east in some collateralized securities.

From PBS’ Frontline, here’s a time chart on the original tulip mania:

Perhaps the most famous example of a speculative bubble is the “tulipmania” that struck 17th century Holland. Known for their passionate love of flowers, the Dutch highly prized the tulip upon its introduction to Western Europe in the mid-16th century. Dutch collectors devised a hierarchy of tulip varieties based upon their species and coloring, assigning values to the various flowers. Because it was impossible to determine which variegation would bloom from a particular bulb, the tulip became an object of speculation. During their earliest years in Europe, the bulbs were primarily of interest to the wealthy, but by the mid-1630s the craze caught on with middle-class and poorer families. The increased demand caused the price of the bulbs to soar.1

The market reached its height in late 1636 and early 1637, after the bulbs had been planted to bloom the following spring. People mortgaged their homes and industries in order to buy the bulbs for resale at higher prices. Charles Mackay, in his definitive history of early financial bubbles, Extraordinary Popular Delusions and the Madness of Crowds (1841), published a list of objects (and their prices) which were exchanged for “one single root of the rare species called the Viceroy”:

Two lasts of wheat (448 florins)

Four lasts of rye (558 florins)

Four fat oxen (480 florins)

Eight fat swine (240 florins)

Twelve fat sheep (120 florins)

Two Hogsheads of wine (70 florins)

Four tuns of beer (32 florins)

Two tuns of butter (192 florins)

One thousands lbs. of cheese (120 florins)

A complete bed (100 florins)

A suit of clothes (80 florins)

A silver drinking-cup (60 florins)2

In February 1637, as spring drew near and the bulbs were close to flowering, consumer confidence evaporated and the market suddenly crashed. As the price structure collapsed, Mackay reported that “hundreds who, a few months previously, had begun to doubt that there was such a thing as poverty in the land suddenly found themselves the possessors of a few bulbs, which nobody would buy, even though they offered them at one quarter of the sums they had paid for them.”3 Litigation ensued, and a government commission ruled in May 1638 that tulip contracts could be annulled upon the payment of 3.5 percent of the agreed price.

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Rent vs. sell

According to this article in Greenwich Time, rentals have soared as sellers who can’t sell their homes turn to renting instead. The reporter uses statistics supplied by Russ Pruner so I’m sure she’s right – Russ gives great statistics.

Of course, if you do choose to rent, it means you still own the house. That’s not such a problem, if prices ever go back up. If they go down or stay where they are, what have you gained? But judging from prices lately, sellers are an optimistic group.

Another real estate agent pointed out to the reporter that, once you rent a house, you can no longer show it to buyers or new renters (most leases permit the owner to show it during the final month of the term, but tenants often make this such a pain that you as seller should pretty much count on the house lying fallow for a month or two after the tenant leaves.

UPDATE:  A reader sends along this link: Internal fraud at GMAC is being uncovered, and it’s worried.

Sept. 20 (Bloomberg) — Ally Financial Inc.’s GMAC Mortgage unit told brokers and agents to halt evictions tied to foreclosures on homeowners in 23 states including Florida, Connecticut and New York.

GMAC Mortgage may “need to take corrective action in connection with some foreclosures” in the affected states, according to a two-page memo dated Sept. 17 marked “urgent.” Ally Financial spokesman James Olecki confirmed the contents of the memo. Brokers were told to immediately stop evictions, cash- for-key transactions and lockouts, according to the document, addressed to GMAC preferred agents.

The suspensions will “allow time to address a potential issue that was raised in a number of existing foreclosures challenging the internal procedure we used for executing one or more judicially required forms,” Ally spokeswoman Gina Proiasaid today in an e-mailed statement. Foreclosures won’t be suspended and will continue with “no interruption,” she said.

Lenders and lawmakers have been trying to slow foreclosures and keep people in their homes as U.S. seizures set records. Bank repossessions climbed 25 percent in August from a year earlier to 95,364, according to RealtyTrac Inc., the Irvine, California-based data provider. Detroit-based Ally, the auto and home lender formerly known as GMAC Inc., is 56.3 percent owned by the U.S. after more than $17 billion of taxpayer bailouts.

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I don’t believe Metro North

They claim service is back to normal, then admit that maybe commuters will have to be bused over the river while the bridge is inspected. Sure sounds like the old New Haven Railroad that tormented my father for thirty years. Up in Stamford, passengers waiting to take trains into the city were informed by a reporter about the fire and suspension of service – the railroad itself couldn’t be bothered to mention it.

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Market activity

Still somnolent. One sale, no contracts, plenty of price cuts.

2 Owenoke, RVSD

Asked $2.3 in 2008, sold today for $1.7.  Assessment, 1.364.

24 Upland sold for $2.150 in November, 08, was relisted, unchanged or improved, for $2.595 in July, dropped its price today to $2.495. That’s just silly.

My brother Gideon seems to have clients who “get it”. They listed their Stanwich house – a really nice home of 10,000 sq. ft. on four + acres, renovated in 2008, for  $7.4 million back in May or June and, finding no buyers, reduced it today to $6.595. If a thing t’were done, ’tis best done quickly.

540 Stanwich

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Yeah it’s a markdown, but it not “the biggest ever”.

That title, for now, belongs to David Ogilvy and Leona Helmsley’s estate ($125 to $30 = $95),  but this one’s in the running at $70 million,  especially because it’s bound to get whacked again (and again). Heart mansion knocked down to $90 million from $165. The owner declared bankruptcy last week. It’s a title Mr. Ogilvy will probably be glad to relinquish.

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Don’t hold dinner

Huge fire on Harlem River Bridge has shut down all Metro North service from Grand Central. Service restoration eventual, but probably not tonight.

UPDATE: Uncle Ugly reports that, according to Metro North’s website, service is normal. “Normal” is a low bar for Metro North, but I assume that means trains are running after all.

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Price it, sell it

36 West Brother

Listed at $6.2 in early 2009, sold  Friday for $3.9 million.

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This is no way to run a railroad

Bella Nonna and Chase are suing all members of the P&Z individually for the denial of their application to open a Chase branch in Cos Cob. That’s silly enough, especially considering that Fudrucker voted in favor of the application, but I am shocked to learn that the town does not indemnify members of our commissions, so Frank is facing a $50,000 – $100,000 legal bill (as are all other members of the P&Z) for making a good faith decision in their service of the town.

If we as citizens want to avoid having every developer run roughshod over us, we’d better address this. So far, the town seems prepared to cave. In which case, why have a P&Z at all?

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Steph and Peter reconcile!

Reader Greg sends along this shocker: the Brant divorce is off and our unhappy Greenwich couple will stay married, for now.

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