Topic: US Economy

[Nemo888]

This time I am in complete agreement with you regarding the statistical shenanigans Thucydides. It gets even worse IMO. The number of US jobs has technically grown  by 2.5 million from Sept 2010 to Jan 2012.  The Treasury was depending on increased tax revues from new jobs to meet expenses. But the strange thing is revenue from income taxes is down by 1.5%. So good paying jobs are still disappearing at an alarming rate and they are rapidly being replaced by crap.
This while posting a GDP growth rate of 2.8% in 2010 and 1.8%(??) in 2011. WTF?


So if the old average American salary of 26k was not competitive enough what are we going to sell these paupers?

[cupper]

But the strange thing is revenue from income taxes is down by 1.5%. So good paying jobs are still disappearing at an alarming rate and they are rapidly being replaced by crap.

Many companies saw the opportunity to reduce the deadwood from their employment rolls, or just downsize overall using the excuse of the economic downturn. As a result, when it came time for them to ramp up again, they could move younger employees up and replace them with entry level positions.

OR

They used the savings from reduced payroll to invest in improved production equipment to make the existing workforce more productive.

Thus the diminished return of tax revenues, even though the GDP has increased.

[Thucydides]

Wow, more good news just when we need it [/sarc]. We will live in interesting times:

http://www.nationalreview.com/exchequer/290140/armageddon-strip-mall

Armageddon at the Strip Mall

By Kevin D. Williamson
February 4, 2012 4:00 A.M. Comments 26
Remember 2007? Glory days, right? Everything was booming, and nothing was booming quite as much as real estate — especially commercial real estate. Malls, hotels, warehouses, industrial parks: Everything was being built, and everything was being financed on ridiculously generous terms. Remember interest-only loans? Good times.

But commercial real estate is different from residential in one important way: Your standard residential mortgage goes 20 to 30 years. Your standard commercial loan goes for five years, at the end of which you either make a big balloon payment (what it is that balloons remind me of?) or you refinance, the idea being that five years is long enough to get your project built or developed, to secure tenants and leases, get your cash flow flowing, etc. Five years: Seems like it was only yesterday. By my always-suspect English-major math, that means that a whole bunch of commercial mortgages written at that poisonous sweet spot when prices were highest but lending standards were lowest are coming due . . . oh, any minute now.

In New York City alone, there’s about $70 billion worth of commercial mortgages — some of which have been sold off as mortgage-backed securities, naturally — coming due this year. The national total is more than $150 billion, or a bit more than 1 percent of U.S. GDP. That’s going to be a little awkward: The value of U.S. commercial properties has declined by an average of 45.7 percent since their all-time high in 2007, according to Real Capital Analytics. Those 2007 vintage loans weren’t exactly bulletproof: Typical terms included a 20 percent down payment and a five-year payment schedule that required little more than interest payments. An $80 million mortgage on a $100 million property is not so bad, but an $80 million mortgage on what is now a $60 million property is a problem. More than half of the 2007-vintage loans are expected to have trouble refinancing, and maybe well more than half.

This is true even for borrowers who have never missed a payment. Banks are required to take into account a number of factors when rating commercial mortgages. One of the most important is the loan-to-value ratio, which has a lot of borrowers over a particularly uncomfortable barrel: They may have the cash to make their payments, and they may have the cash flow to continue making payments on a refinanced loan, but their properties still are worth less than their mortgages, so nobody wants to refinance. And those are the lucky ones: Just as those loans were mostly for five years, most commercial leases are for about the same length of time. With retail and office-space rentals down, lots of commercial borrowers are sitting on largely vacant properties that are not producing much in the way of cash flow. Among the more high-profile cases, the WTC 3 tower at the World Trade Center still has not located an anchor tenant, which could put the much of the project on ice. Thousands of strip malls across the fruited plains have empty storefronts, and thousands of office buildings have floor upon vacant floor.

Standard & Poor’s advises: “One-third of maturing loans are for office properties, for which five-year lease terms are fairly common — and if tenants don’t renew these leases, securing new, long-term lease commitments may be more difficult in the current environment. Those leases [were] signed in 2007, at peak rents will likely reset to lower levels as five-year leases roll.” S&P’s bottom line: “50%-60% of the 2007 vintage five-year-term loans maturing next year may fail to refinance, and retail loans are at the greatest risk.”

Translation: Armageddon at the strip mall.

And it’s not just a problem for New York City and other big, coastal cities. Richmond, Va., has it worse than Manhattan, Washington, or Los Angeles, according to the local Times-Dispatch, which reports that a dozen large commercial properties have gone into foreclosure recently and that 12 percent of the commercial properties in the Richmond-Norfolk market are “distressed.” In Bergen County, N.J., commercial foreclosures are up 7 percent this year over last year. In the first year of the recession, there were 373 foreclosure actions filed in Bergen County, while in 2011 there were 1,586. Commercial foreclosures are up 10 percent for the state as a whole.

In hard-hit Phoenix, about half of the commercial mortgages backing securities are at risk of default, and a couple of hundred, mostly strip malls and other retail, office buildings, and apartments, already are in default.

Taking a look at the commercial MBS (CMBS) market, Standard & Poor’s issued this advice: “Buckle Up.”

Trepp, a CMBS-analysis firm, in its most recent report (data as of October 2011) finds that the delinquency rate for multifamily-property mortgages is 16.73 percent; for hotels, 14.12 percent and rising; for offices, 8.95 percent and rising; for industrial properties, 11.59 percent and rising; and for retail, a steady 7.61 percent. Trepp managing director Matt Anderson does not sound like a ray of sunshine: “Overall, we do not expect 2012 to be a repeat of 2008, but there will be more disappointments than pleasant surprises in the New Year. The banking sector has not yet returned to ‘normal’ despite two years of earnings growth. With increased regulation and the temptation for banks to take additional risks in order to preserve margins, 2012 should be a very interesting year.”

Not as bad as 2008 — is there a better example of damning with faint praise?

Trepp gets to the real concern here, which is that these mortgages and mortgage-backed securities are sitting on the balance sheets of a bunch of still-wobbly banks. How wobbly? About 100 banks went under last year, and about 250 are expected to go under this year. Trepp finds that, of the banks that went toes-up in 2011, bad commercial real estate accounted for two-thirds of their failing loans.

This is a textbook case for the Austrian business-cycle theory: Artificially low interest rates and loose money produce overinvestment, by both bankers and builders, in a bubble — this time, offices, apartment buildings, and retail space — that can’t be sustained once the artificial stimulation comes to an end, as it must. In this case, that malinvestment has to be worked out at two levels: At the financial level, among the lenders and borrowers, but also at the physical level: There’s going to be a lot of dark storefronts out there, with serious long-term consequences for nearby neighbors and for local real-estate markets: Foreclosures will put more property onto the market, driving down rents and subsequently making existing loans less tenable as the cashflow of commercial properties is diminished. They called the Depression-era tent cities “Hoovervilles.” The next time you see a mile of half-abandoned strip malls, think “Obamaville.”

Not as bad as 2008? Probably not — and let’s hope it is not even close. But there’s a $3 trillion commercial-mortgage market lurking out there, and a lot of CMBS investors — banks and insurance companies in particular — that Washington thinks are “too big to fail,” a problem we persistently refuse to address.

—  Kevin D. Williamson is a deputy managing editor of National Review and author of The Politically Incorrect Guide to Socialism, published by Regnery. You can buy an autographed copy through National Review Online here.

[GAP]

The Geography of Government Benefits
The share of Americans’ income that comes from government benefit programs, like Medicare, Medicaid and Social Security, more than doubled over the last four decades, rising from 8 percent in 1969 to 18 percent in 2009.

http://www.nytimes.com/interactive/2012/02/12/us/entitlement-map.html?ref=us

[Thucydides]

The Economist on US regulation:

http://www.economist.com/node/21547789

Over-regulated America
The home of laissez-faire is being suffocated by excessive and badly written regulation

Feb 18th 2012 | from the print edition

AMERICANS love to laugh at ridiculous regulations. A Florida law requires vending-machine labels to urge the public to file a report if the label is not there. The Federal Railroad Administration insists that all trains must be painted with an “F” at the front, so you can tell which end is which. Bureaucratic busybodies in Bethesda, Maryland, have shut down children’s lemonade stands because the enterprising young moppets did not have trading licences. The list goes hilariously on.

But red tape in America is no laughing matter. The problem is not the rules that are self-evidently absurd. It is the ones that sound reasonable on their own but impose a huge burden collectively. America is meant to be the home of laissez-faire. Unlike Europeans, whose lives have long been circumscribed by meddling governments and diktats from Brussels, Americans are supposed to be free to choose, for better or for worse. Yet for some time America has been straying from this ideal.
In this section
 
Consider the Dodd-Frank law of 2010. Its aim was noble: to prevent another financial crisis. Its strategy was sensible, too: improve transparency, stop banks from taking excessive risks, prevent abusive financial practices and end “too big to fail” by authorising regulators to seize any big, tottering financial firm and wind it down. This newspaper supported these goals at the time, and we still do. But Dodd-Frank is far too complex, and becoming more so. At 848 pages, it is 23 times longer than Glass-Steagall, the reform that followed the Wall Street crash of 1929. Worse, every other page demands that regulators fill in further detail. Some of these clarifications are hundreds of pages long. Just one bit, the “Volcker rule”, which aims to curb risky proprietary trading by banks, includes 383 questions that break down into 1,420 subquestions.

Hardly anyone has actually read Dodd-Frank, besides the Chinese government and our correspondent in New York (see article). Those who have struggle to make sense of it, not least because so much detail has yet to be filled in: of the 400 rules it mandates, only 93 have been finalised. So financial firms in America must prepare to comply with a law that is partly unintelligible and partly unknowable.

Flaming water-skis

Dodd-Frank is part of a wider trend. Governments of both parties keep adding stacks of rules, few of which are ever rescinded. Republicans write rules to thwart terrorists, which make flying in America an ordeal and prompt legions of brainy migrants to move to Canada instead. Democrats write rules to expand the welfare state. Barack Obama’s health-care reform of 2010 had many virtues, especially its attempt to make health insurance universal. But it does little to reduce the system’s staggering and increasing complexity. Every hour spent treating a patient in America creates at least 30 minutes of paperwork, and often a whole hour. Next year the number of federally mandated categories of illness and injury for which hospitals may claim reimbursement will rise from 18,000 to 140,000. There are nine codes relating to injuries caused by parrots, and three relating to burns from flaming water-skis.

Two forces make American laws too complex. One is hubris. Many lawmakers seem to believe that they can lay down rules to govern every eventuality. Examples range from the merely annoying (eg, a proposed code for nurseries in Colorado that specifies how many crayons each box must contain) to the delusional (eg, the conceit of Dodd-Frank that you can anticipate and ban every nasty trick financiers will dream up in the future). Far from preventing abuses, complexity creates loopholes that the shrewd can abuse with impunity.

The other force that makes American laws complex is lobbying. The government’s drive to micromanage so many activities creates a huge incentive for interest groups to push for special favours. When a bill is hundreds of pages long, it is not hard for congressmen to slip in clauses that benefit their chums and campaign donors. The health-care bill included tons of favours for the pushy. Congress’s last, failed attempt to regulate greenhouse gases was even worse.

Complexity costs money. Sarbanes-Oxley, a law aimed at preventing Enron-style frauds, has made it so difficult to list shares on an American stockmarket that firms increasingly look elsewhere or stay private. America’s share of initial public offerings fell from 67% in 2002 (when Sarbox passed) to 16% last year, despite some benign tweaks to the law. A study for the Small Business Administration, a government body, found that regulations in general add $10,585 in costs per employee. It’s a wonder the jobless rate isn’t even higher than it is.

A plea for simplicity

Democrats pay lip service to the need to slim the rulebook—Mr Obama’s regulations tsar is supposed to ensure that new rules are cost-effective. But the administration has a bias towards overstating benefits and underestimating costs (see article). Republicans bluster that they will repeal Obamacare and Dodd-Frank and abolish whole government agencies, but give only a sketchy idea of what should replace them.

America needs a smarter approach to regulation. First, all important rules should be subjected to cost-benefit analysis by an independent watchdog. The results should be made public before the rule is enacted. All big regulations should also come with sunset clauses, so that they expire after, say, ten years unless Congress explicitly re-authorises them.

More important, rules need to be much simpler. When regulators try to write an all-purpose instruction manual, the truly important dos and don’ts are lost in an ocean of verbiage. Far better to lay down broad goals and prescribe only what is strictly necessary to achieve them. Legislators should pass simple rules, and leave regulators to enforce them.

Would this hand too much power to unelected bureaucrats? Not if they are made more accountable. Unreasonable judgments should be subject to swift appeal. Regulators who make bad decisions should be easily sackable. None of this will resolve the inevitable difficulties of regulating a complex modern society. But it would mitigate a real danger: that regulation may crush the life out of America’s economy.

[Larry Strong]

U.S. gas prices, already high, set to hit spring record

Read more: http://www.ctv.ca/CTVNews/TopStories/20120219/united-states-gas-prices-120219/#ixzz1mqBtctDK

Shared in accordance with the "fair dealing" provisions, Section 29, of the Copyright Act.

NEW YORK — Gasoline prices have never been higher this time of the year in the U.S.

At $3.53 a gallon, prices are already up 25 cents since Jan. 1. And experts say they could reach a record $4.25 a gallon by late April.

"You're going to see a lot more staycations this year," says Michael Lynch, president of Strategic Energy & Economic Research, referring to people staying at home on their vacations. "When the price gets anywhere near $4, you really see people react."

Already, W. Howard Coudle, a retired machinist from Crestwood, Missouri, has seen his monthly gasoline bill rise to $80 from about $60 in December. The closest service station is selling regular for $3.39 per gallon, the highest he's ever seen.

"I guess we're going to have to drive less, consolidate all our errands into one trip," Coudle says. "It's just oppressive."

The surge in gas prices follows an increase in the price of oil.

Oil around the world is priced differently. Brent crude from the North Sea is a proxy for the foreign oil that's imported by U.S. refineries and turned into gasoline and other fuels. Its price has risen 11 per cent so far this year, to around $119 a barrel, because of tensions with Iran, a cold snap in Europe and rising demand from developing nations. West Texas Intermediate, used to price oil produced in the U.S., is up 4 per cent to around $103 a barrel. That's 19 per cent higher than a year earlier.

Higher gas prices could hurt consumer spending and curtail the recent improvement in the U.S. economy.

A 25-cent jump in gasoline prices, if sustained over a year, would cost the economy about $35 billion. That's only 0.2 per cent of the total U.S. economy, but economists say it's a meaningful amount, especially at a time when growth is only so-so. The economy grew 2.8 per cent in the fourth quarter, a rate considered modest following a recession.

Gas prices are already an issue in the presidential campaign. Republican candidate Newt Gingrich spoke several times this week about opening up more federal land to oil and gas drilling as a path toward U.S. energy independence -- and lower pump prices.

"Our goals should be to get gasoline to $2.50 or less so that working families can actually get to work and retired families can travel," Gingrich said at a campaign event in Los Angeles Thursday.

High oil and gas prices now set the stage for even sharper increases at the pump because gas typically rises in March and April.

Every spring, refiners suspend operations to switch the type of gasoline they make. Supplies of wintertime gas are sold off before March, when refineries need to start making a new formula of gasoline that's required in the summer.

That can mean less supply for service stations, resulting in higher gas prices. And summertime gasoline is more expensive to make. The government mandates that it contain less butane and other cheap organic compounds because they contribute to the formation of ground-level ozone, a primary constituent in smog. That means more oil, a costlier component, is needed to produce each gallon.

The Oil Price Information Service predicts that gasoline could peak at $4.25 a gallon by the end of April. That would top the record of $4.11 in July 2008.

The national average for gasoline began the year at $3.28 a gallon. The average price for February so far is $3.49 a gallon. That's up from $3.17 a gallon last February, a record at the time. Back in 2007, before the recession hit, the average for February was $2.25 a gallon.

Prices are higher on the East and West Coasts, where gasoline has risen above $3.70 in Connecticut, New York, Washington D.C. and California. This isn't unusual -- states on the coasts charge some of the nation's highest gas taxes.

High gas prices put a strain on many people's budgets.

Americans spent 8.4 per cent of their household income on gasoline last year when gas averaged an all-time high of $3.51 a gallon. That's double the percentage a decade ago. They could pay even more this year, even though demand is the lowest in 11 years as people drive fewer miles in more efficient cars, says Tom Kloza, chief oil analyst at OPIS.

Gary Goodman commutes into Manhattan from Edgewater, New Jersey, because gas, tolls and parking make the cost of driving prohibitive.

Goodman, an accountant, commutes by bus. He uses his car mostly for trips to the grocery store or for occasional nights out. He says he has no choice but to eat the higher gas costs.

"I already drive as little as possible," he says.

Paul Dales, a senior economist at Capital Economics says it would take a bigger shift in the global economy -- say, a deep recession in Europe or a slowdown in Asia's manufacturing -- for pump prices to drop noticeably. Either event would slow oil demand, depressing prices.

But experts expect demand to keep rising. World oil demand is expected to increase by another 1.5 per cent to 89.25 million barrels a day in 2012, according to the Energy Information Administration.

In the short term, tensions with Iran are feeding fears that oil supplies could be blocked.

The U.S. and Europe are tightening economic sanctions against Iran over what the West believes is Iran's attempt to build a nuclear bomb. World leaders fear Israel may be planning a strike against Iran, the world's third largest oil exporter.

In response, Iran has threatened to withhold its own oil deliveries and to block the Strait of Hormuz, a waterway along its coastline through which one-fifth of the world's oil flows.

On Friday, an international banking clearinghouse crucial to Iran's oil sales said it is prepared to discontinue services to Iranian financial institutions being targeted by the EU and U.S. sanctions. That could ratchet up the pressure on Iran, but also send oil prices soaring.

The price of Brent crude fell 53 cents on Friday to $119.58. WTI gained 93 cents to $103.24.

[cupper]

Anybody know what the difference between winter and summer blend is, and why we need two different blends?

[muskrat89]

Summer blend contributes less to smog.

http://www.theoildrum.com/story/2006/9/13/234043/431

http://blog.gasbuddy.com/posts/Winter-blend-gasoline-rolling-out-drops-in-MPG-possible/1715-422955-413.aspx

http://ask.cars.com/2009/02/whats-the-difference-between-summerblend-gasoline-and-winterblend-gasoline-does-it-affect-my-cars-pe.html

[Thucydides]

More on US employment. The long term unemployed will be a drag on the system for a long time to come; their work skills will have atrophied or become obsolete, and of course their income will probably be much lower starting in new jobs if/when the economy recovers. Wealth creation shold be the overarching goal of any government, since it drives everything else:

http://blog.independent.org/2012/02/19/private-employment-has-recouped-only-three-eighths-of-its-recent-loss/

Private Employment Has Recouped Only Three-Eighths of Its Recent Loss
By Robert Higgs | Sunday February 19, 2012 at 8:45 PM PST

As the most widely reported rate of unemployment (U-3) has fallen in recent months, people with a political agenda served by painting a rosy picture of the recovery have made considerable noise about this decrease. Their political opponents have responded that one reason for the decline is that the labor force has fallen as more people have given up looking for work, some of them going into retirement sooner than they would have if the labor market had been more robust.

The best way to avoid the parsing and cherry-picking that plague such debates is to look not at unemployment, but at employment. After all, it’s employment that contributes to the production of goods and services and generates earnings for the job holders. Employment is less subject to interpretive ambiguity than unemployment is.

The most recently reported data on private nonfarm employment, for January 2012, show that employment has indeed continued its recovery. Since reaching its current-recession trough about two years ago, it has increased by about 3 million persons. Before starting a celebration, however, we should recognize that private nonfarm employment is still about 5 million persons less than it was at its pre-recession peak in 2008.

Moreover, such private employment is currently more than a million persons less than it was in December 2000, more than eleven years ago, on the eve of the dot-com bust. So, at this point, we have suffered more than the proverbial “lost decade” in the private labor market—the one in which employees are hired to produce goods and services that consumers and investors have demonstrated they actually value (or for which producers are convinced that such demand will be forthcoming).

To be sure, labor productivity has increased during this period, yet the likelihood is slight that sustained economic growth can take place in the future without long-term growth in private employment. A very large recession-related loss of private employment remains to be recouped, however, before we can even begin to think about the long-term growth of employment. The situation has improved somewhat in the past two years, no doubt, yet the labor market has a long way to go—it has about 5/8 of its recent loss to make up—merely to get back to its pre-recession peak.

Addendum I: Some recent survey evidence on why small businesses are not hiring:

http://www.ncpa.org/sub/dpd/index.php?Article_ID=21618&utm_source=newsletter&utm_medium=email&utm_campaign=DPD

Although such evidence must always be interpreted with extreme care, giving due attention to how the questions are framed, what the sampling design is, and so forth, it seems clear that uncertainties related to the future costs of Obamacare and other regulations are a significant factor in deterring hiring. Note, too, that when businesses are not hiring because they do not foresee sufficient demand to justify expanding their payroll, this reason may also reflect indirectly the effect of regime uncertainty, which may depress demands by the surveyed small businesses’ potential customers.

Addendum II: U.S. population grew by 9.7 percent between 2000 and 2010. In recent decades the annual rate of growth has averaged approximately 1 percent per year.

[Thucydides]

Curves of death. The one graph that says it all:

[GAP]

More on US employment. The long term unemployed will be a drag on the system for a long time to come; their work skills will have atrophied or become obsolete, and of course their income will probably be much lower starting in new jobs if/when the economy recovers. Wealth creation shold be the overarching goal of any government, since it drives everything else:

http://blog.independent.org/2012/02/19/private-employment-has-recouped-only-three-eighths-of-its-recent-loss/

The chart shown in your post indicates that it takes 18 - 24 months for an employment recovery to start after a recession...

[Thucydides]

2008 was four years ago...

[GAP]

post partum depression.....

[Thucydides]

Actually a spike in US gas prices that shuts down consumer spending or any sort of upset in the Eurozone could set the US economy reeling and depress tax receipts to the point that the debt ceiling could lower on them by the end of summer. Another "black swan" could be a Capital Strike as business simply shuts down new hires, investments and expansion plans in response to escalating energy prices, coupled to ongoing uncertainty over taxes and regulations. That would certainly change the "narrative" for econmists and the political parties, especially as the election campaign will be in high gear by that point. A credit downgrade at that point would probably kill the Obama administration:

http://news.investors.com/article/602351/201202270822/national-debt-ceiling-congress-obama.htm

Debt ceiling limit looms months sooner than expected, during fall campaign

Remember that major political struggle last summer over raising the nation's debt ceiling? How President Obama said Congress simply had to do it, even though he voted against a similar maneuver during his brief Senate stay?

How Republicans said simply, No way!' without serious spending cuts, even though GOP President George W. Bush sought an increase in 2006?

It was great precipice politics, allowing both sides to grandstand and construct a Rube Goldberg compromise that left it up to a special committee to cut spending and that didn't work either.

One of the key calculations in that deal was that by raising the limit $2.1 trillion to $16.4 trillion, it bought enough time for the country to get through this fall's presidential election before the next big debt-spending confrontation over raising the national limit. (The limit was $12.1 trillion shortly after Obama took office.)

Well, maybe not.

A new study released on Friday now suggests that slimmer federal tax receipts than anticipated from the sluggish Obama economy along with continued abundant spending by the Obama administration will likely move the date of the next debt deadline considerably forward so that it comes during this fall's presidential election, with political debate beginning even earlier.

The Bipartisan Policy Center previously predicted the newly-enlarged borrowing limit would not be reached until well into the first quarter of 2013. But no more.

A new examination by the center, as reported in The Hill, now suggests the limit could be reached months sooner, possibly during the election month of November. That means the fall presidential and congressional campaigns would most likely contain highly-charged debt-spending debates in addition to other contentious issues.

Obama and his strategists have sought with some success to steer the early campaign discussion toward social issues such as birth control, abortion and education, where they feel Republicans are at a disadvantage, and away from the economy's stubborn sluggishness, which is Obama's major vulnerability.

The recently enacted payroll tax cut extension, unemployment insurance extension and Medicare fixes, all unfunded in the legislation, will cause further borrowing in excess of $100 billion, bringing the limit even closer.

Much of the timing depends on the federal government's tax harvest come April 15 and beyond, including business taxes. They could be severely affected if, as expected, this year's prematurely rising gasoline prices slow consumer and business spending, as well as confidence.

Once again, Obama could be expected to dodge the spending vs cutting argument in favor of how important it is to avoid default on the country's debts and protect the nation's credit rating, already reduced by credit agencies for the first time ever during his Democratic administration.

 

[GAP]

The latest in bulk buying? Houses
Reuters  Mar 1, 2012
 Article Link
 
By Michelle Conlin

When Vena Jones-Cox entered the foyer of the once-grand Colonial-style home in downtown Columbus, Ohio, she stepped onto a wood floor that was so moldy and mushy that it actually wiggled. As Cox proceeded down the basement stairs, they disappeared from underneath her.

“I found myself lying on the floor,” says Jones-Cox, 45. “Staring at a dead rat, by the way.”

The house tour from hell didn’t stop her from making an offer on the place. While she was at it, she bid on some other houses, too. Forty nine houses, actually.

She’s paying $3,000 for each, a bit more than the cost of an Apple Mac Pro. “We’re at a bottom,” says Jones-Cox. “I mean, where else is there to go but up?”

As the greatest real-estate fire sale in the history of the United States rages on, the bulk buy is the dead hot deal of the moment. In some of the most foreclosure-ravaged parts of the country, it is almost as if the housing market has become the new big box store, with investors wiping out whole shelves at a time.

The idea is to arbitrage other people’s misery. With the ranks of the rental class expected to swell, investors can buy houses at clearance sale prices, pour some money into repairs and then take advantage of the difference between their low cost of capital and the rent they receive. Often, they bank cash from day one.

Hedge funds and private equity shops like McKinley Capital Partners started to quietly become landlords by buying up inventory last year. Now Main Street investors are following suit.

“They aren’t just buying one rental property,” says Oak Park, Illinois realtor Kyra Pych. “This is a frenzy. They are loading up.”

Pych has five clients who are in the process of buying more than one condo in Forest Park. Illinois. Units that sold for $180,000 during the boom are now going for as little as $13,500. So instead of putting that money into a retirement account, her customers are putting the cash into homes and renting them out.

In Detroit, the Midwest’s aspiring Donald Trumps are buying bungalows for $500 each. In Atlanta, a group of Florida investors are in the process of buying the remaining 322 units in downtown Atlanta’s swank, Art Deco Atlantic Residences, with room service and maids, near Atlantic Station. The prices start at $180,000.

In California, Waypoint Homes, which has already purchased 1,000 single-family homes, got $250 million in funding in January from Menlo Park private equity firm GI Partners for more bulk buys.

“The floodgates are starting to open,” says John Burns, the founder of Irvine, California-based John Burns Real Estate Consulting. “There’s billions of dollars of capital, of my clients alone, (looking) to invest in single-family rentals.”

GETTING EASIER TO BUY

Up to now, the business of buying foreclosed homes was often an old-fashioned affair. They were usually one off deals, and often involved an auction on the courthouse steps.

But the recent news of Fannie Mae’s pilot auction of a bulk sale of 2,500 homes was a signal to many housing experts that bulk buying is about to undergo a quantum change. The coming auctions will not only put mammoth amounts of inventory up for bid; they will also streamline and automate current procedures.

Amherst Securities managing director Laurie Goodman, a major housing bear who expects further declines in home prices, believes such bulk sales are the key to cleaning out the foreclosure pipeline before any kind of housing recovery gains traction.

It is not hard to see why U.S. housing is turning into the new value asset class of the moment. In an analysis of the 325 major metropolitan real estate markets across the globe, the U.S. was home to the top 24 most affordable markets, according to Demographia’s 2012 International Housing Affordability Survey.

No one can argue with the landlord’s seductive math. There are bank accounts and bonds and annuities with their less-than-one-percent returns, and then, west of Boca Raton, there’s the string of newly-renovated two-bedrooms overlooking the golf course, pool and cabana, along with all the people who have been foreclosed on who are now looking to rent.

For $19,000 in cash, investors can pocket $300 a month, after taxes and homeowner association dues, on each, a 19 percent annual return that compares to the zombie yields from most savings accounts.
Advertisement

In Charlotte, North Carolina, Cheryl and Bob Littlefield, who have five children, are already making the bulk buy work.

Two years ago, the Littlefields inherited $200,000. They considered all of their investment options. Like a lot of people, they found the stock market to be a scary, bi-polar nerve frayer. Bonds and bank accounts offered nothing.

Then there was the lovely little house for $16,000. After putting in a few grand, they cleared $600 a month, after taxes. It went so well they bought another house. And then another. Now they own eight and are in the midst of exploring financing to do a bulk deal for several more.

“I know houses, I don’t know stocks,” says Cheryl Littlefield, who estimates rental income covers 40 percent of the family’s expenses, the rest being covered by her husband’s work as a contractor. “I don’t know what to do if something goes wrong with Exxon Mobil. I know what to do if something goes wrong with a house.”

CAN’T BUY, BETTER RENT

The cruel irony known to every aspiring homeowner is that there has never been a better time to buy a house. It is cheaper to own – based on the monthly payments at the current interest rates of under four percent – than it is to rent in just about every market across the United States. In Phoenix, for example, it is 21 percent cheaper to own than it is to rent. In Minneapolis, it is 28 percent, according to Burns.

But most who aspire to the property ladder are shut out of the homebuying opportunity. They have no access to credit. They are crushed by record-levels of student debt. A greater share than ever of their paycheck is already going to housing costs, according to Harvard University’s Joint Center for Housing Studies.

That’s where bulk buying comes in to play.
More on link

[Thucydides]

This isn't going to be good:

Biggest drop in factory orders, shipments in more than a year
POSTED AT 11:35 AM ON MARCH 5, 2012 BY ED MORRISSEY

   
So much for a fast start to the recover in 2012.  A week after announcing the worst durable-goods orders report in three years, the Commerce Department’s report on factory orders and shipments in January show the worst outcome in sixteen months:

New orders for manufactured goods in January, down following two consecutive monthly increases, decreased $4.8 billion or 1.0 percent to $462.6 billion, the U.S. Census Bureau reported today.  This followed a 1.4 percent December increase.  Excluding transportation, new orders decreased 0.3 percent.  Shipments, up eight consecutive months, increased $4.1 billion or 0.9 percent to $463.6 billion.  This followed a 0.8 percent December increase.  Unfilled orders, up twenty-one of the last twenty-two months, increased $5.4 billion or 0.6 percent to $917.9 billion.  This followed a 1.5 percent December increase.  The unfilled orders-to-shipments ratio was 6.10, up from 6.04 in December.  Inventories, up twenty-seven of the last twenty-eight months, increased $3.9 billion or 0.6 percent to $614.7 billion.  This was at the highest level since the series was first published on a NAICS basis in 1992 and followed a 0.2 percent December increase.  The inventories-to-shipments ratio was 1.33, unchanged from December.

Inventories, on the other hand, continued to increase — a bad sign as demand drops:

Inventories of manufactured durable goods in January, up twenty-five consecutive months, increased $2.4 billion or 0.6 percent to $372.5 billion, revised from the previously published 0.7 percent increase.  This was at the highest level since the series was first published on a NAICS basis and followed a 0.3 percent December increase.  Machinery, up twenty-two consecutive months, had the largest increase, $0.9 billion or 1.5 percent to $61.5 billion.  Inventories of manufactured nondurable goods, up four of the last five months, increased $1.5 billion or 0.6 percent to $242.2 billion.  This followed a slight December decrease.

Reuters actually nails the problem in its analysis:

New orders for factory goods dropped in January by the most in over a year and businesses cut orders for new capital goods, suggesting one of the drivers of the economic recovery faltered at the start of the year.

The Commerce Department said on Monday orders formanufactured goods fell 1.0 percent, a less steep decline than the 1.5 percent loss expected by private forecasters in a Reuters poll. Still, it was the biggest decline since October 2010.

Many economists think the expiration of some tax breaks on capital spending at the end of 2011 led businesses to bring forward investments.

The problem is that the gimmicky tax break in 2011 for capital investments — pushed by the Obama administration and many Republicans as well — didn’t address the key issues in the stagnation since the June 2009 end of the Great Recession.  Like so many other temporary tax changes, the one-year tax break on capital purchases only accelerated capital purchases that would have taken place anyway. This tax break was a larger-scale version of Cash for Clunkers, and it had the same effect, which was to steal demand from future quarters, and that’s exactly what we have seen from both January reports.

Thanks to the ambiguity of tax policy, energy prices, and regulation in the marketplace, perhaps especially the ambiguity in regulations like Dodd-Frank and ObamaCare, capital investors can’t price long-term risk at all.  That means that they can’t make informed decisions on capital investment for business expansions and new-business creation, and so their capital stays on the sidelines.  Until we quit tinkering with gimmicky, temporary tax breaks and reform the long-term tax codes, we’re not going to see robust and sustained economic growth.

Notice the last paragraph. This is essentially describing a Capital Strike similar to the conditions in 1937-38 (the worst years of the depression), and for the same reasons: uncertainty caused by ever shifting and unclear government regulations and tax laws. Of course no one will make long term commitments in these conditions, especially if your investment could be wiped out due to capricious government intervention or simply favouritism towards a better connected government crony. In this light, the banking of capital by US busines is the only rational decision, and companies like Apple Inc. that have tens of billions of dollars offshore will not risk that cash by bringing it back to the United States.

[Thucydides]

Clearing out the regulatory thickets will probably have an impressive effect on the US economy (or ours, for that matter):

http://www.theatlantic.com/politics/archive/2012/03/its-time-to-clean-house/253921/

It's Time to Clean House
By Philip K. Howard

America is basically run by dead people: We elect new representatives, but continue on with policy from decades ago. To go forward, Congress needs to confront the past.

This is the first article in a new series The Atlantic is publishing in partnership with Common Good, a nonpartisan government reform organization, devoted to remaking government within budget and without suffocating the American spirit. Each month, America the Fixable will identify a different challenge facing the United States -- regulation, school bureaucracy, healthcare, civil service, campaign finance reform -- and, drawing together a range of expert voices on the topic, offer potential solutions in articles, online discussions, and video reports. This month, the series tackles the scourge of obsolete laws.--The Editors

America is mired in a tarpit of accumulated law. Reformers propose new laws to fix health care, schools, and the regulatory system, but almost never suggest cleaning out the legal swamp these institutions operate in. These complex legal tangles not only set goals but allocate resources and dictate the minutest details of how to meet those goals. Most are obsolete in whole or part.

Running government today is like trying to run a business using every idea every manager ever had.

Nothing important can get fixed without remaking a coherent legal framework.

The flaw is not one that can be solved by deregulation. Almost no one, for example, would disagree about the need to provide education for disabled children. But special education law, enacted in 1975, was structured as an open-ended mandate, and soon spun out of control. Today, special ed consumes 20 percent of the total K-12 budget in America. Programs for gifted children get less than half of one percent, and pre-K education gets almost nothing. Is this a sensible allocation of education dollars? No one is even asking the question.

Congress treats most laws as if they were the Ten Commandments -- except they're more like the 10 million commandments. Most legislative programs do not codify timeless principles of right and wrong. They are tools of social management. These laws allocate social resources -- almost 70 percent of federal revenue in 2010 was consumed by three entitlement programs enacted a half century or more ago. Congress almost never goes back to rationalize these programs. Running government today is like trying to run a business using every idea every manager ever had.

At this point, Democracy is basically run by dead people. We elect new representatives, but society is run by policy ideas and political deals from decades ago. Congress has a tragic misconception of its responsibility -- it sees itself as a body that makes new law, not one that makes sense of old laws.

The problem of obsolete law is not theoretical. It's concrete, affecting daily choices across the country. It adds to cost, and slows productive activity to a crawl.

There are four problems caused by the accumulation of old law:

   1. Too much law causes paralysis. Over the past century laws have piled up, like sediment in the harbor, until it's almost impossible to do anything sensibly. Building a "green infrastructure," for example, is stymied by environmental processes that sometimes consume upwards of a decade.
   2. Laws have unintended consequences. Things never work out as planned. Sometimes a well-meaning idea, such as special education, ends up undermining other important goals.
   3. Priorities change. The more specific a law, the faster it becomes obsolete. In the 1930s, when many farmers were struggling, Congress enacted farm subsidies. The crisis ended by 1941. Now, 70 years later, farm prices are at record highs, and much of farming is done by corporations. But the farm subsidies continue -- $15 billion in 2010.
   4. Legal accretion is not coherent. The goal of law is to provide a framework for a free society. The idea of legal "codes" -- such as the Uniform Commercial Code -- is to provide uniform standards by which people can organize their activities. Federal law attempts no such coherence: the Government Accountability Office found 82 separate programs for teacher quality. The fact that the laws are generally well-intentioned cannot disguise the unavoidable resemblance to a huge legal junkyard.

Fixing what ails America is impossible, indeed illegal, without a legal spring cleaning. The goal is not mainly to "deregulate" but to restate programs in light of current needs and priorities.

As a practical matter, this requires Congress to authorize special commissions to make proposals, area by area. Using the base closing commission model, these proposals would be submitted to Congress for an up or down vote.

Going forward, Congress should incorporate sunset provisions in all laws with budgetary impact. The goal is not to end good programs but to impose a discipline that is essential for a functioning democracy that must constantly make tough tradeoffs.

Accumulated law is not a problem our founders anticipated. They made it hard to enact new laws, thinking they would thereby protect the open field of freedom against too much legal interference. But 200 years later, the land of the free is a legal swamp. It's hard to dredge, because those same checks and balances apply to repealing a law -- with one additional impediment. Once a law is enacted, it is immediately surrounded by an army of special interests. Not one word can be changed until a majority of Congress has run a gauntlet of special interests, flogging each member with campaign funding. That's why changing old law is so politically difficult as to be unthinkable.

"The difficulty lies not in the new ideas," John Maynard Keynes observed, "but in escaping from the old ones." American government is trapped in structures of its own making. The essential first step in rescuing America is a spring cleaning. It's hard to fix things until we can make fresh choices.

[Brad Sallows]

It is somewhat ironic that the people so much in favour of a "living constitution" don't seem to be able to breathe much life into stale legislation.

[Thucydides]

This is interesting for several reasons. First off, the Senators involved recognize that any political program needs to be done in a short time frame (i.e. five years) otherwise it will be overtaken by events. Secondly, it is focused on spending cuts; and rightly so. The insane increases in spending (5 trillion dollars added to the debt in just three years) can only be addressed through steep spending cuts. Lastly, it is a lesson for us, especially Ontarians. Mike Harris needed to make cuts totalling 3.9% to stabilize the economy and restart economic growth and balance the budgets in the 1990's. Dalton McGuinty has created such a mess that the Drummond report calls for cuts of 17%. Since Mr McGuinty seems set to ignore the report, the next Premier may have to start contemplating cuts on the order of 25% to reign in out of control deficits and tackle a debt load approaching 50% of Ontario's GDP at that point.

Given the US situation is far graver (debt is approaching the 100% of GDP mark, and unfunded liabilities for entitlements, pension and the like are in the hundreds of trillions of dollars range), either bold action needs to be taken very soon to make a controlled drawdown, or the equilibrium will be upset (most likely by an outside agency like the EU economic crisis or war in the Middle East; don't forget the "unknown unknowns" as well) triggering all kinds of negative economic, social and political consequences.

http://thehill.com/homenews/senate/215023-tea-party-senators-unveil-five-year-plan-to-balance-budget-reform-social-security-and-medicare

Tea Party senators unveil five-year plan to balance the budget
By Alexander Bolton - 03/08/12 02:16 PM ET

Members of the Senate Tea Party Caucus on Thursday announed a plan to balance the budget in five years, cutting spending by nearly $11 trillion compared to President Obama’s budget.

The plan, dubbed “A Platform to Revitalize America,” is a wish list of conservative policies, none of which have any chance of passing the Democratic-controlled Senate or being signed into law by a liberal Democratic president.

The ambitious blueprint would achieve a $111 billion surplus in fiscal year 2017.

“The whole point here is to show we can reasonably balance the budget within a five-year period,” said Sen. Jim DeMint (R-S.C.), one of the sponsors of the plan.

“This idea that we have to look 30 years out to balance the budget is not only unnecessary, but it’s improbable. We cannot continue to spend at our current rate for 10 more years, much less 20 or 30 more years.

“This is an urgent matter.”

Sens. Rand Paul (R-Ky.) and Mike Lee (R-Utah) also back the proposal, which would overhaul Medicare, Medicaid and Social Security.

The lawmakers said they would turn Medicare into a premium support plan that would give seniors the same healthcare plan as members of Congress. They say this would save an estimated $1 trillion over 10 years.

“What we’re doing is telling seniors that you can have the same plan that congressmen and senators have,” DeMint said. “They get the same premium support that we do.”

The trio would curb Social Security spending by increasing the retirement age over time and indexing benefits to individual incomes. High-income earners would see slower growth in their benefits while low-income workers would see increased benefits.

The proposal would fund Medicaid, the State Children’s Health Insurance Program, food stamps and child nutrition programs through block grants.

It would cut most discretionary spending to fiscal year 2008 levels but spare national defense spending from the deep cuts mandated by the 2011 Budget Control Act. (Interpolation. This is a bad idea. Everyone needs to feel the pain and change their institutional approach and culture. Focus the cuts at the Headquarters and Pentagon levels for the biggest bang for the buck)

It would freeze foreign aid spending at $5 billion a year and eliminate the departments of Commerce, Education, Housing and Urban Development and Energy and privatize the Transportation Security Administration.

Paul said some of the money saved could be used to pay for infrastructure projects.

“Our budget would actually eliminate the Department of Energy. I would take some of that money and put it into a bridges fund,” he said.

The plan would repeal the 2010 Patient Protection and Affordable Care Act and the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act.

It would also permit construction of the Keystone XL oil pipeline, and implement broad tax reform by establishing a 17 percent flat tax for individuals and corporations.

Note too the pension reform proposals and the use of block grants. Apparently Prime Minister Harper isn't the only one who sees the utility of these approaches. I am dubious on the projected surplus, especially since the so called "trust funds" for Social Security and Medicare are heading into negative balance starting in the projected time frame, but perhaps the Senators will re submit the proposals after November and redo the calculations based on a Jan 2013 start time.

[cupper]

This is interesting for several reasons. First off, the Senators involved recognize that any political program needs to be done in a short time frame (i.e. five years) otherwise it will be overtaken by events. Secondly, it is focused on spending cuts; and rightly so. The insane increases in spending (5 trillion dollars added to the debt in just three years) can only be addressed through steep spending cuts. Lastly, it is a lesson for us, especially Ontarians. Mike Harris needed to make cuts totalling 3.9% to stabilize the economy and restart economic growth and balance the budgets in the 1990's. Dalton McGuinty has created such a mess that the Drummond report calls for cuts of 17%. Since Mr McGuinty seems set to ignore the report, the next Premier may have to start contemplating cuts on the order of 25% to reign in out of control deficits and tackle a debt load approaching 50% of Ontario's GDP at that point.

Given the US situation is far graver (debt is approaching the 100% of GDP mark, and unfunded liabilities for entitlements, pension and the like are in the hundreds of trillions of dollars range), either bold action needs to be taken very soon to make a controlled drawdown, or the equilibrium will be upset (most likely by an outside agency like the EU economic crisis or war in the Middle East; don't forget the "unknown unknowns" as well) triggering all kinds of negative economic, social and political consequences.

http://thehill.com/homenews/senate/215023-tea-party-senators-unveil-five-year-plan-to-balance-budget-reform-social-security-and-medicare

Note too the pension reform proposals and the use of block grants. Apparently Prime Minister Harper isn't the only one who sees the utility of these approaches. I am dubious on the projected surplus, especially since the so called "trust funds" for Social Security and Medicare are heading into negative balance starting in the projected time frame, but perhaps the Senators will re submit the proposals after November and redo the calculations based on a Jan 2013 start time.

I don't know. Sounds more lik socialism than what Obama is accused of doing.

[Thucydides]

I don't know. Sounds more lik socialism than what Obama is accused of doing.

You're a funny guy cupper, I'll kill you last 

[cupper]

You're a funny guy cupper, I'll kill you last 

Thanks Man. I feel honoured.

[Thucydides]

Deciphering the US economy is becoming an exercise in Kremliology. The Administration and Legacy Media are spining stats like crazy, but the ground truth is not matching up. In an election year, people will start questioning why they and their neighbours are not particiating in this "recovery summer" (or the last two ones before), which may do more to sink both the Administration and the Legacy media than anything else. People will react pretty badly once they wake up and realize they were had:

http://online.wsj.com/article/SB10001424052702304537904577275261466314018.html

Something about the U.S. economy isn’t adding up.

At 8.3%, the unemployment rate has fallen 0.7 percentage point from a year earlier and is down 1.7 percentage points from a peak of 10% in October 2009. Many other measures of the job market are improving. Companies have expanded payrolls by more than 200,000 a month for the past three months, according to Labor Department data. And the number of people filing claims for government unemployment benefits has fallen.

Yet the economy is barely growing. Many economists in the past few weeks have again reduced their estimates of growth. The economy by many estimates is on track to grow at an annual rate of less than 2% in the first three months of 2012. The economy expanded just 1.7% last year. And since the final months of 2009, when unemployment peaked, the economy has expanded at a pretty paltry 2.5% annual rate.

How can an economy that is growing so slowly produce such big declines in unemployment?

The true answer is an entir ecadre of unemployed people (discouraged and not looking for work anymore) are not being reported (U3 is at about 11%); and the involuntarily underemployed are also not reported (U6 being 14%). By misreporting the labour participation rate, the Administration can make the false claim that unemployment is 8.3%.

[Thucydides]

"This American Life" host caught attacking the most successful American company in history. I think the more interesting story will be to track down the motivation behind this. 1% envy? Building the class warfare "narrative"? Following the Administration's attack on big business "narrative"?

Watch for the Legacy media to be all over this one [/sarc]

http://news.yahoo.com/blogs/lookout/american-life-retracts-apple-episode-says-daisey-fabricated-175638428.html

This American Life retracts Apple episode, says Daisey fabricated parts
By Liz Goodwin | The Lookout – 18 hrs ago
   
Daisey (MikeDaisey.blogspot.com)The public radio show This American Life has retracted an entire storyline told by comedian and self-described Apple fanboy Mike Daisey that aired in early January after Daisey's translator said he made up significant details of the tale.

In a press release, the show says the episode was the most popular in its history and was downloaded 888,000 times. The episode also sparked a petition for Apple to improve its working conditions that was signed by a quarter of a million people.

Daisey said in the 39-minute episode that he became curious about the conditions of Chinese factories where Apple products are made after he discovered photos of factory workers that were left onto his iPhone by mistake. He travelled to the factories in Shenzhen, China and interviewed workers there, who told him they endured terrible working conditions. Daisey described meeting workers whose hands were shaking after they were poisoned with the neurotoxin hexane and meeting several children right at the gates of the factory who were as young as 12 years old.

The China correspondent for the radio show Marketplace, Rob Schmitz, wrote that he decided to track down Daisey's translator after he found it suspicious for Daisey to ferret out some of the worst labor abuses reporters have been hunting for years in a six-day trip to the site. Translator Cathy Lee told Schmitz that she never saw the underaged or poisoned workers, and that she also never saw armed factory guards, which Daisey describes.

So why didn't This American Life talk to Cathy Lee earlier, before they aired the episode? In a press release, the show says Daisey told them he lost her cell phone number. "At that point, we should've killed the story," show host Ira Glass said in the release. "But other things Daisey told us about Apple's operations in China checked out, and we saw no reason to doubt him. We didn't think that he was lying to us and to audiences about the details of his story. That was a mistake."

This American Life said it did "weeks of fact checking to corroborate Daisey's findings," when airing his original episode.

A new episode explaining how the show was duped will air Friday at 8 p.m. According to Schmitz, Daisey admits on the show that he never talked to poisoned workers.

Daisey, however, stands by his original storyline. "It uses a combination of fact, memoir, and dramatic license to tell its story, and I believe it does so with integrity," Daisey said on his blog. On the show, he struck a more contrite note. "I'm not going to say that I didn't take a few shortcuts in my passion to be heard," Daisey says, according to the press release. "My mistake, the mistake I truly regret, is that I had it on your show as journalism, and it's not journalism. It's theater."

This American Life isn't the only outlet that has had to retract Daisey's claims. The New York Times added an editor's note to an op-ed by Daisey published after Steve Jobs' death in October. The paper removed a paragraph from the original op-ed about a factory worker with a gnarled hand whom Daisey said had never seen an iPad before he let him see his.

Though Daisey has been caught making things up, other reporting has turned up problems in some of the factories that help make Apple products. The New York Times published a series on Apple's business practices, including the working conditions in its suppliers' Chinese factories, later in January. It said more than 100 factory employees were injured after using a poisonous chemical to clean screens, and two explosions in separate iPad-making factories caused multiple deaths and injuries. Workers were packed into dorms and pressured to work 24-hour-a-day shifts, and some underage workers have helped build Apple products. Apple wouldn't comment for the Times article.

Correction: An earlier version of this article misidentified Marketplace as an NPR radio program. It's actually produced and distributed by American Public Media, not NPR. This American Life is distributed by Public Radio International.

[cupper]

"This American Life" host caught attacking the most successful American company in history. I think the more interesting story will be to track down the motivation behind this. 1% envy? Building the class warfare "narrative"? Following the Administration's attack on big business "narrative"?

Watch for the Legacy media to be all over this one [/sarc]

http://news.yahoo.com/blogs/lookout/american-life-retracts-apple-episode-says-daisey-fabricated-175638428.html

Here is a link to the retraction show.

http://www.thisamericanlife.org/radio-archives/episode/460/retraction

What get's lost in your article is the facts of what Apple and FoxConn are accused of, are in fact true. They have been independantly documented by other jounalists, Apples own audits, and other sources.

What was not true was Mike Daisey's own story. None of it ever happened. He based it all on things he's heard and read, not on his own personal experience.

It's just like every other hoax, it all starts with a grain of truth.