Besides polluting, ozone may contribute to global warming

How so? It inhibits plants ability to intake carbon dioxide, meaning more of it remains in the atmosphere. In addition, ozone can otherwise stunt plant growth

California home mortgage defaults at record pace

And the subhead in the Los Angeles Times’ online version of the story even uses the word “recession” in describing the problem:

Foreclosures soared to 17,408 for the three months ended June 30, an increase of 799 percent from the same period last year. The current rate handily exceeds the previous foreclosure peak set in 1996, when the state was in the final throes of a six-year slump.

“The economy will bend further under the weight of the mounting housing and mortgage problems, but it will not break,” said Mark Zandi, chief economist at Moody’s Economy.com.

That’s what passes for optimism these days. Others are more downbeat.

“All the artificial stimulus housing gave the economy is going to go away,” said Rich Toscano, a financial advisor with Pacific Capital Associates in San Diego who runs the popular Piggington.com real estate website. “There will be individual pain for people who made the wrong decisions. We all may end up in a recession.”

The good news, as seen by Toscano: “I don’t envision a ‘Grapes of Wrath’ scenario where we all have to pile in the family car and look for harvesting work.” ...

Most analysts say the housing market won't stabilize until 2008 or 2009. The so-called soft landing that was much talked about last year is rarely mentioned anymore.

The rising foreclosure rate is tied to stricter lending standards and weakening home values. With housing prices flat or falling, lenders are less willing to refinance loans — especially to borrowers with shaky credit who are most likely to miss payments. ...

One reason foreclosures are rising faster than defaults is that strapped owners are having a harder time saving themselves.

As recently as a year ago, most homeowners who had slipped behind in their payments found a way to get current again. Nearly 9 out of 10 defaulting borrowers got out of trouble by selling their house or refinancing, according to DataQuick.

Fewer than 6 out of 10 are able to do so now. “People have stretched their finances to the breaking point,” said DataQuick analyst John Karevoll.

There’s already a year’s supply of houses on the market in San Bernardino and Riverside counties, up from a three-week supply at the height of the boom, said Ron Barnard, owner of Home Center Realty in Norco. Many are foreclosures that banks are trying to unload.

Will this be an “as California goes, so goes the nation,” scenario? As I’ve posted in the past about this issue, even states like Texas which look good on paper aren’t so solid.

In the sense of not liking or wanting a recession, it gives me little comfort to have my analysis confirmed by a major seven-day daily newspaper. But, in the sense of confirming that I’m not Chicken Little, it shows indeed that I’m on the right analytical track.

A question or two for Lancaster ISD School Board President Ed Kirkland

Dear Ed:

Is Superintendent Larry Lewis still worth that big salary range, into the $190K area, that you pushed for him to get a couple of years back?

Given that LISD is above the state average and Texas Education Association guidelines for percentage of district funds spent on administration salaries, will you ask Lewis to voluntarily return part of his salary as part of LISD belt-tightening efforts?

Sincerely,
Steve Snyder

Subprime crisis moves right into prime-market loans

Countrywide Financial has prime-level mortgages at least 30 days late increase more than 250 percent:

Shares of Countrywide Financial Corp. tumbled today after the nation's biggest mortgage lender signaled that rising defaults and delinquencies are spreading beyond the troubled sub-prime market to higher-quality "prime" loans.

The Calabasas-based company reported a 33 percent drop in its second-quarter profit and slashed its outlook for the rest of the year, citing an “increasingly challenging” housing market. ...

Countrywide said payments were at least 30 days late at the end of second quarter on 4.56 percent of prime home-equity loans serviced by the company, up from 1.77 percent a year earlier.

Payments were late on 23.71 percent of sub-prime mortgage loans, up from 15.33 percent at the end of the same period in 2006, the company said.

Bill Clinton said, 15 years ago: “It’s the economy, stupid.”

I give you 1-3 odds we’re in a recession in 12 months. It will be the economy, again, as well as Iraq, on the presidential and congressional campaign trails.

I increase those odds to 1-2 by Jan. 20, 2009, especially if Bloomberg’s is right about $100/bbl oil. Whoever is elected president will have to deal with this.

Update: DuPont was among slumping stocks today, with profit projections tumbling due to a decline in housing starts, home remodeling and related business affecting demand for countertops.

Peak Oil alert: $100/bbl oil near?

So says Bloomberg:

The $100-a-barrel oil that Goldman Sachs Group Inc. said would prevail by 2009 may be only a few months away.

Jeffrey Currie, a London-based commodity analyst at the world's biggest securities firm, says $95 crude is likely this year unless OPEC unexpectedly increases production, and declining inventories are raising the chances for $100 oil. Jeff Rubin at CIBC World Markets predicts $100 a barrel as soon as next year.

I want to see how Saudi Arabia spins this once prices do start going up. Note that Currie says increased OPEC pumping would be “unexpectedly” happening.

That $100/bbl is already happening on some futures markets:

A record number of options have been sold that give the buyer the right to buy crude oil at $100. The contracts, covering 50 million barrels, only pay off should oil go above the target price. September crude futures fell 89 cents to $74.90 at 11:16 a.m. in New York today.

And, no, this isn’t just some traders trying to gin some numbers. Our own government is in some sort of agreement, without talking specific price increases:

”There are questions about whether the oil industry can keep up with demand,” U.S. Energy Secretary Samuel Bodman said last week, commenting on the Petroleum Council report.

Peak Oil guru Matthew Simmons thinks these projections are too low:

Oil prices could triple in three months to more than $200 a barrel, given the right circumstances, according to Matthew Simmons, chairman of Simmons & Co., a Houston investment bank.

“Oil is still cheap,” Simmons said. “In the 20th century, with a few exceptions, oil was almost free. The only exceptions were during 1973, 1979 and when Iraq invaded Kuwait.”

T. Boone Pickens also expects prices to zoom:

A pullout from Iraq may be the event that pushes oil to $100 a barrel, according to Boone Pickens, the Dallas hedge fund manager. Pickens predicted a year ago that $100 oil would probably occur by now. Today he is looking for $80 within six months, and he says growing chaos in Iraq would be a bad sign.

What’s this mean in gasoline prices at the pump? A year from now, the U.S. average would be $4/gal, with $5/gal gas in places like San Francisco and New York City.

House votes to end wives on campaign staffs

Voice vote approval given to a big ethics issue:

Spouses don't belong on campaign payrolls, the House says, voting to end a practice that has benefited some members of Congress for years.

Monday's action follows controversies in which lawmakers added many thousands of dollars to their family incomes by hiring relatives for campaign tasks, even if their qualifications were not always apparent.

But watchdog groups like CREW see dimmer prospects in Senate. Reading between the analytical lines, it seems likely somebody will put a “hold” on the bill.

But, in today’s blogosphere, “holds” have been quickly outed on some major pieces of legislation. This one shouldn’t be any different. So, when it gets to the Senate, let’s be alert.