Bits Bucket And Craigslist Finds For February 8, 2008
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The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Creators of Credit…
http://www.nytimes.com/2008/02/08/business/08trader.html?_r=2&ref=business&oref=slogin&oref=slogin
The Debt Peddlers that are around me at work are not as bright and cheerful these days. They are constantly complaining that they can’t get deals done. It pi$$es them off that their deals don’t get the big old rubber-stamp any more. They grew to believe they were entitled to $300,000 per year for acting as matchmakers in the Debt Machine marriage contest.
The Debt Peddlers don’t realize that the golden days are gone. I think they all believe that we will go through a slow year or two and it will all boom once again. They are in for a rude awakening. I wonder how many will be able to adjust their lifestyles to the new reality. I’m guessing that it will be a painful transition for many.
NYCityBoy,
I know what they are thinking. I went through the same thing during the mid 80’s oil decline. Oil consumption was falling and supply was increasing. Prices held for a little while at $28 on the contract $32 on the spot. They then went to $9.60 contract for La Sweet Crude. I kept thinking that this will not last long. Just give it another year and things will be back. They never really did in New Orleans. I took some time for me to get it. I did get it, though. They will, too.
Roidy
John Devaney is an assh@t as per these friends of mine who live in New Canaan, CT.
He sent his private jet over from FL to CT to pick up some family to fly them down for the weekend.
Speaking of OIL..
The TEAPOT DOME SCANDAL.. book on story of how Harding was picked to be pres in order for Oil men to take oil from the navy. Good book.
Not different from today, except for the lobbyist mess to wade through.
NYCityBoy -
When I think about the “Debt Peddlers” you described, I can’t help but think of that south park episode “Scott Tenorman Must die.”
“Mmmmmm let me lick your tears, scott. Mmmmm they’re so delicious….”
Bob Pasani of CNBCs Hack Box went to the meeting and came back very somber. He spoke of larger and larger number of prime borrowers “just walking away”, and large number of option ARMs going into default while they are still in the 3%, negative amortization period.
I think it was his own “oh sh it!” moment.
It isn’t just sub-prime. It can’t be fixed by increasing the loan limits. It isn’t about ARM resets.
It is about poor people buying houses they could never afford, on a gamble those houses would go up in value. If the houses do not go up in value, then THEY WILL ALL WALK AWAY.
Just getting prices to flatten is not enough. Making money cheaper is not enough.
Unless prices go up forever, at a rate significanlty higher than inflation, then most of the houses bought in 2005-2007 are heading for foreclosure.
I think Cramer had his own “Oh Sh it!” moment over the last few months as well. When he started his “just walk away” talk 6 months ago, I think he assumed that the houses would just be bought back from the lenders with a 10% or so loss.
You know… the estimates at teh time were 2 million foreclosures and a loss of $25K each = $50 billion in losses. He wanted to get the losses rolling, get the fed rate cuts, and emerge out the other side. He could talk of bulldozing tracts in San Bernadino or Sacremento, becasue in the back of his mond, he didn’t really believe it.
Then over the last month or so it hit him. It isn’t $25k loss per. It is $200-300K loss per in FL and CA. $100K loss per in AZ and NZ.
And, it isn’t 2 million. It is 10s of millions.
$50 billion??? HAH!!!! Try $2 trillion minimum!!!
Now he is spewing the lies of “housing shortage in 3 years”. We need interest rates under 1% to FORCE people to buy MBS, or the whole system is toast.
BUT, even at 1.5% FFR, 30 year mortgages will be 4% for highly qualified buyers. $500K at 4% is $2400 a month PI… Call it $35K a year when taxes, insurance are added.
On a $50K income?
And, if the 1.5% FFR causes inflation, pushing up long-term interest rates?????
Darrell — I think it will be interesting to observe this “walk away” attitude blossom as a watershed in the social/moral philosophy of this country. It seems inevitable to me. While I am not caught in it and to my knowledge have honored every major commitment I ever made, sometimes to my great detriment, neither am I prepared to condemn all those who were screwed by the Fed-fed easy-money system and now are belly-up in their houses. Flippers - - not an ounce of sympathy. But only-one-home owners who are totally underwater - I won’t be disparaging them if they walk.
“Flippers - - not an ounce of sympathy. But only-one-home owners who are totally underwater - I won’t be disparaging them if they walk”.
I agree… We drove by a KB homes devl. yesterday that has dropped the prices from the 180’s to the 150’s bet the folks that bought in the 180’s are lovin that. I am not talking about flippers.
I keep hoping that out of all this, the people (like myself) who didn’t do anything financially stupid/suicidal, kept their financial noses clean, and demonstrated some patience, will eventually be rewarded in some way.
But the more I see, the less I think it will happen. The foxes hold the mortgage on the henhouse.
I keep hoping that in the end, those of us that honored our commitments, didn’t do anything financially stupid/suicidal, and demonstrated some patience will eventually be rewarded.
I’m not betting on it, though. It seems that the foxes own the mortgage on the henhouse.
I keep hoping that in the end, those of us that honored our commitments, didn’t do anything financially stupid, and demonstrated some patience will eventually be rewarded.
I’m not betting on it, though. It seems that the foxes own the mortgage on the henhouse.
Yeah, I know…………posts seemed to disappear, then reappeared. Just like magic.
I think that will happen- even though the codependent Fed is punishing savers. What these foreclosures mean is cheaper houses EVERYWHERE. That is great for some people who plan to retire before an eventual upswing… that is, if they have other secured savings or funds invested in something else besides their house. Right now, we can’t even think of California or anywhere that pricey as a retirement area- but we have about 100K liquidity and no debt except our comfortable mortgage. What this mess means to us is that we’re stuck here in Pleasantville (when we’re ready to scale down) while our overspending, “in-a-bind” neighbors give their houses away or foreclose. So, we’re going to pull up a chair and wait it out… stashing cash as we go. Hi ho, hi ho-
a-stashing cash we go…
I keep hoping that in the end, those of us that honored our commitments, didn’t do anything financially stupid, and demonstrated some patience will eventually be rewarded.
Had a conversation about this with my boss. We both concluded that the outcome of masses of people walking away from their houses/debts will be a change in how FICO scores are formulated.
I’m betting that those with good credit and no deficiencies will get very low rates while those with marginal credit and/or deficiencies will get hammered. I think a much wider rate spread is coming…
Damn I hope so, but somehow I think the government will soup up some plan and drop all of us in the meat grinder…
“I keep hoping that in the end, those of us that honored our commitments, didn’t do anything financially stupid, and demonstrated some patience will eventually be rewarded.”
You are rewarded and will be rewarded. The way I see it–even with the asshat government trying to use every trick in the book to kick us in the cajones by making “conservative” investments less attractive, the bottom-line is–we (savers) are STILL IN THE BLACK because we used our brains and did the exact opposite of the American Idol watching, TV drone consuming robots who are now in debt up to their eyeballs.
So CD rates suck, SO WHAT? I’d rather be cash-flush (w/a little gold/silver on the side) than the multitudes of credit saturated house-poor dumbasses out there. That reality ALONE is a reward IMO.
I’ve kept my powder dry and have no doubt there will be homes at prices at PITI equivalent or less than rent in my neck of the woods sooner than most believe…not to mention fire sale prices on many other items (albeit I don’t frickin’ need them and won’t buy them).
DOC
if you look at the Federal Flow of Funds report they say there was ~$4T of net mortgage lending 2003-2006.
The way I look at it, 10% of that is a certain loss . . .$400B.
20% is entirely possible . . . $800B.
30% is on the outside . . . $1.2T.
This is just ballpark thinking but the second-order effects of $800B in ‘capital punishment’ before this all plays out is simply inconceivable.
How can you even guess w all of the fraud that went on? In addition to no doc, interest only ect you have the assessor’s getting paid for giving high estimates.
We know real estate agents have demonstrated something less than intelligence and integrity when calling the housing market. How’s this for their keen political insight:
As a Real Estate Agent I had seen more than 3700 foreclosures and growing each day. Gov. Romney is the only one who can clean up Washington and turn the US Deficit to Profit just like what he did in the Winter Olympics.
Magic Mitt - waves a wand, deficit gone! poof it’s about six or seven comments down the page
The same way GW Bush did, yeah right. What the heck does conservative mean anyway: Extreme complainers! They had control for 6 years and did NOTHING!! We need a revolution.
Mitt had no chance. This will give them an excuse when the shit hits the fan - “we told you to vote for Mitt, blah, blah..”
Oh, don’t worry, that loser will be back.
Vice president slot on the ticket perhaps?
Nah, maybe it’ll be “McCain - 9/11″ ‘08
Wanna see what “bill” ole Barrack and McCain have in common? Read it and weep. BOHICA baby!
http://opensourceactivist.org/2008/02/06/bill-to-improve-health-care-in-mexico/
For a little, but useful, historical perspective,
remember that FDR campaigned initially on a platform of greatly shrinking what was then perceived to be a burgeoning Federal bureaucrocy. Of course, after he was elected, government agencies multiplied. Remember that FDR also promised that Social Security would always be voluntary and self sufficient. Between himself and LBJ, it was transformed into a mega trillion $$$ compulsory national debt. I’m not bashing Democrats. I’m not promoting Republicans. I am telling you that campaign promises and platforms in America have a history of being suddenly and irreversibly forgotten once the votes are cast. Question for the scientific minded - what is the average half-life of recorded human democracies? A few dozen generations? Or less? Does anyone here think that the electorate of the USA has actually progressed beyond the “promise them bread and circuses” politics of the Roman Empire?
Social Security was solvent until the 80s when Reagan at Greenspan’s urging doubled the SS witholding - this served to make SS solvent until at least 2053. Problem is all the presidents since have been raiding the fund and not putting the money back. It’s BS to call SS a cause of debt - it’s the only part of the government that’s solvent.
The money was raided by every president, since the day it was started. THE entire point of Social Security was a way to make people buy government bonds during peace time.
Solvant through 1980? Sure, by doubling the withholding every decade.
http://www.socialsecurity.gov/OACT/ProgData/taxRates.html
1% in 40s,
2% in 50s + add on self-employed,
3-4% for the 60s + add Medicare.
The problems started in the 70s when the rates ONLY went from 4% to 6%.
In the 80s we were saved by… bringing self-employed up to the full 2x W2 (both sides), PLUS the baby boomers being in their prime earning years….
And, most importantly, the fake, debt based economy triggered by Reagan’s supply-side economics. Reduced savings and mass debt = party economy that produces larger tax revenues until the party ends….
Social Security was solvant from 1937 until 1939 while it was a pay in, get back system. In 1939 it became a pay out now more than the people collecting paid in. That made it a ponzi scheme that required constant population growth, constant improving economy, and constantly rising tax rates.
Social Security has a retirement side and a disability side better known as SSDI, and it’s this disability side that’s out of control; it’s the new welfare.
Darrell, I have heard (not verified by me) that the first person to collect SS was a lady who paid in something like 2k and lived a long time to collect something like 20k. Were SS payouts ever really limited to what was paid in?
From 1937 to 1940 only lump sum payments were made in order to allow the trust funds to build up.
“The earliest reported applicant for a lump-sum benefit was a retired Cleveland motorman named Ernest Ackerman, who retired one day after the Social Security program began. During his one day of participation in the program, a nickel was withheld from Mr. Ackerman’s pay for Social Security, and, upon retiring, he received a lump-sum payment of 17 cents.”
http://www.ssa.gov/history/briefhistory3.html#firstcheck
http://www.ssa.gov/history/briefhistory3.html#idamay
“On January 31, 1940, the first monthly retirement check was issued to Ida May Fuller of Ludlow, Vermont, in the amount of $22.54.”
“Ida May Fuller worked for three years under the Social Security program. The accumulated taxes on her salary during those three years was a total of $24.75. Her initial monthly check was $22.54. During her lifetime she collected a total of $22,888.92 in Social Security benefits.”
Social Security was solvant until 1939, when people got back what they paid in. It was ammened in 1939 to hand out much more than was paid in.
Pre-1939. Pay in. When you retire, get back what you paid in.
Yes, in the initial years you got back lump sum, and it had built in plans to become a monthly pay out, once there were enough people working long enough to have paid in enough to make the monthly payments meaningful.
There were actuary tables backed in. You will probably live to 70. If you die before, you get less than you paid in. If you live longer, then you get the money of the people that died early.
Well, as the time to start getting check approched, people realized they were still going to be tiny. And what of widows that never worked? Kids whos fatehr died? They got nothing.
Yeah… that was all baked in to the actualry tables. Based on this amount going in, you can get this much out, and if you die early, there is nothing for the widow/kids.
So, they just changed it. They made the payments start sooner, they made the payments larger, they continued to make payments to widows/kids once the payer died.
At that moment it transformed from a pay-in/get-back system into a ponzi scheme dependant on ever increasing population, ever increasing economy, and ever increasing tax rates.
The amount paid in by people that died before they collected was given to two people…. the widows/kids AND the people that did not die young.
It has been broken worse many times since then. During WWII they delayed a rate increase. COLAs. Disability.
Still, the fundamentl break was 1939 when they changed it from a pay-in/get-back to a pay-in/get way more back than you paid in system.
But are you acknowledging that the Gov keeps “borrowing” and not paying back the loan?
Or is that Forgotten.
THAT doesn’t count?
” they changed it from a pay-in/get-back to a pay-in/get way more back than you paid in system.”
And how does that part differ from the normal company retirement plan (talking ‘defined benefit plans’). In most of these plans the retiree gets everything he/she paid in back in the first year to first year and a half. When calculating total net worth you might call the retirement base ‘phantom income’ because you never own the base amount. Example: Someone drawing $60K per year would have to have $1.2M saved and drawing 5% premium to earn that $60K. When the primary owner dies the surviving spouse gets 60% of that until they pass. Granted you can not pass that $1.2M onto your heirs, but a pretty sweet deal when you paid less than $100K into your account and live on retirement for another 30yrs and your spouse another 10 yrs after. (and yes I realize that your employer has contributed some matching funds).
“And how does that part differ from the normal company retirement plan ”
It doesn’t. In the beginning, a company puts in way less than is needed. The older the company gets, the more it has to put in, to cover current retirees and future. Then the company get undercut by a young company that doesn’t have current retirees it has to pay on.
Look at the airlines. The old ones were getting killed by the young ones, so one-by-one they went bankrupt and dumped their pension obligations. Then they came back and could compete again.
Not shockingly, the 401(k) is pretty much the same. Huge run ups in markets as the money comes in, but much of it gets siphoned off by Wall Street, or pi ssed away on bad ideas. When we go to get teh money back, we will find the gains are not actually realizable.
Retirement was a dream that lasted for a couple generation after most of the civilized world destroyed itself in WWII, perpetuated by the ability of the Baby Boomers to support their parents and grandparents during the debt fueled false economy created by supply-siders. When the party ends, the illusion of 40 year vacation at teh end of your life currently called retirement will disappear.
(1) Only real direct democracy of any size was the Athen of Socrates.
(2) If you mean a Republic (elected representatives), then it is the Republic of Rome before Augustus. Started 509 BC and ended in 27 BC when Augustus consolidated his power and elminated hhis rivals.
That’s it for ‘democracies’ or ‘republics’. There are variations on types of democracies.
I think it was about 50 or 75 years after the official fall of the Roman Republic that Caligula tried to make his favorite horse - Incitatus, I think - consul, or priest (or maybe even Senator?). By that standard, it looks like our Republic fell around the time of FDR. Sounds about right…..
Not even close.
Get over the neo-con world view which warps the facts into unrecognizable positions. You are obviously uneducated in the social, economic and political history of the US - particularly that of 1870 - 1945.
Go read “Only Yesterday” by Fredrick Allen Lewis (published 1931) It is now availabe online as the copyright expired. http://xroads.virginia.edu/~HYPER/ALLEN/Contents.html
Read about the unbridled greed of financers immediately after WWI and how
“Prices still rose, employers resisted wage increases with a new solidarity and continued to insist on long hours of work………But the American business man …… had come out of the war with his fighting blood up, ready to lick the next thing that stood in his way. He wanted to get back to business and enjoy his profits. Labor stood in his way and threatened his profits. He had come out of the war with a militant patriotism; and mingling his idealistic with his selfish motives, after the manner of all men at all times, he developed a fervent belief that 100-per-cent Americanism and the Welfare of God’s Own Country and Loyalty to the Teachings of the Founding Fathers implied the right of the business man to kick the union organizer out of his workshop. ……..For the professional super-patriots (and assorted special propagandists disguised as super-patriots) had only begun to fight. Innumerable patriotic societies had sprung up, each with its executive secretary, and executive secretaries must live, and therefore must conjure up new and ever greater menaces. Innumerable other gentlemen now discovered that they could defeat whatever they wanted to defeat by tarring it conspicuously the Bolshevist brush. Big-navy men, believers in compulsory military service, drys, anti-cigarette campaigners, anti-evolution Fundamentalists, defenders of the moral order, book censors, Jew-haters, Negro-haters, landlords, manufacturers, utility executives, upholders of every sort of cause, good, bad, and indifferent, all wrapped themselves in the Old Glory and the mantle of the Founding Fathers and allied their opponents with Lenin. The open shop, for example, became the “American plan.” For years a pestilence- of speakers and writers continued to afflict the country with of “sinister and subversive agitators.” Elderly ladies in ornate drawing-rooms heard from executive that the agents of the government had unearthed radical conspiracies too fiendish to be divulged before the proper time. Their husbands were told at luncheon the clubs that the colleges were honeycombed with Bolshevism. A cloud of suspicion hung in the air, and intolerance became an American virtue.”
For Lenin and Bolshevist - insert “islamic terrorists”.
Rather sounds like we are having a replay of a very bad movie.
BTW way, before the Roman Republic, there was the kingdom of Rome - so add another 244 years to get back to 753 BC for the date of the founding of Rome .
North American continent settled by Caucasians around 1609 (comparable to early Roman tribe.) Add 244 - now it is 1853 or treat 1776 as the founding of the Republic comparable to 509 BC (and only 165 years instead of 244.)
If using 1853, add 509 years which woud bring it to 2362.
If using the compressed timline, that would be about 325 years from 1776 which would be 2101. Now in the century before the fall of the Republic there was enormous political conflict between those who wanted to prreserve the mos morium (ie: if that is how great-great-great-grandfather did it, acted or believed, that is how it should be today) and those who wished to develope new solutions and include those who were not Roamn cicitzend but lived on the Italian penninsula and parts of Gaul (France.) It was this conflict that eventually lead to Augustus grabbing power portraying himself as a moderate conservative but in actuality, reverting to pre-509.
It’s funny that you mention the neo-con world view then have a nice selective cut and paste job talking about Bolshevism and the Red Scare. Trotsky anyone?
Both sides play the same game.
That was the paranioa of the 20’s. Led to the same excesses and intolerance and self-righteousness as we are seeing in the 80’s (nasty Commie’s) and now (those terroists will get you if you don’t watch out.
Go read the whole book. It is a fascinating look at the 1919-1930ish before the New Deal.
Just ignore that big hole in Manhattan, it’s the paranoia of the 21st century.
The “democracy” of the Athens of Socrates time was another oligarchy. What was exceptional was that so many were allowed to participate, yet still women had no direct voice & a big chunk of the population was considered sub-human.
I agree, I don’t think we have progressed. It is still about bread and circuses mostly because the average human being is really not all that intelligent. There have been so few republics in the course of human history that I am not sure a half life is even a valid measurement of our chances. I do believe that any government that consistently bails out bad financial decisions and punishes work and thrift is ultimately doomed. The line between civilization and chaos is finer than most think.
“Question for the scientific minded - what is the average half-life of recorded human democracies? A few dozen generations? Or less? Does anyone here think that the electorate of the USA has actually progressed beyond the “promise them bread and circuses” politics of the Roman Empire? ”
Genuine direct democracies are very very rare. I think the Greek city states of 500-300 BC had some forms of it( E.G.,
Athenian democracy in the Periclean age 480-430 bc). The emergence of British/American Parliamentary democracy/republic is a rarity in history. Most of human recorded history seems to be rule by despotism or oligarchy with the proletariat masses groveling at the bottom .
The level of intelligence and evolution of the American populace is little better than past populations of ‘civilized’ empires such as the Romans, Chinese, Indians, Greek, French, Russian, British, ect. Americans are suscepitible to appeals to gut emotion and baser course instincts , a chilling but unfortunate fact borne out by past historical events.
That is why bread & circuses works rather well as opiates to calm masses. In US it is TV sports for males, shopping malls for females.
Angels and ministers of grace defend us!
MY Gawd. Thanks for just wrecking my whole morning!
I mean, everything you said is absolutely true, but good grief…..how sad for our great nation. And on a friday no less….
Americans are suscepitible to appeals to gut emotion and baser course instincts , a chilling but unfortunate fact borne out by past historical events.
I’m appalled by what I’m hearing from people re: the prez elections. Normally I don’t talk politics but every now and then it comes up in conversation. One friend’s mom, an 80something is going for HC “because she’s a woman”. Another friend wants BO because they share roughly the same skin tone. A co-worker is devastated over MR loss , because they’re of the same faith. I’m beginning to get this picture of the American voter wandering around with their finger up their nose saying “DUH I vote for XYZ cause s/he just like ME!”
It really is some primal, childish impulse.
Well, if you were writing out your mall shopping list and setting up your TiVO like a true patriot, you wouldn’t have seen this!
Please check out this link and know that SSI is the welfare part of SS.
http://www.harp.org/fed-primer.htm
Best,
Leigh
Speaking of CorpGov, Auger’s “tin foil” submission for the day:
http://www.progressive.org/mag_rothschild0308
“He urged InfraGard members to contact the FBI if they “note suspicious activity or an unusual event.” And he said they could sic the FBI on “disgruntled employees who will use knowledge gained on the job against their employers.”
In an interview with InfraGard after the conference, which is featured prominently on the InfraGard members’ website, Mueller says: “It’s a great program.”
The ACLU is not so sanguine.
“There is evidence that InfraGard may be closer to a corporate TIPS program, turning private-sector corporations—some of which may be in a position to observe the activities of millions of individual customers—into surrogate eyes and ears for the FBI,” the ACLU warned in its August 2004 report The Surveillance-Industrial Complex: How the American Government Is Conscripting Businesses and Individuals in the Construction of a Surveillance Society.”
Not tin-foily Auger!
http://www.infragard.net/
Thanks for the link,
Leigh
“We’re putting new cover sheets on all of our TIPS reports now before they go out.”
“Did ya get that memo?”
I wish they would make a sequel to that movie.
A bit of a moot point right now, don’t you think?
In another question, both Dems have had RE scandals of one kind or another in their past… what about the remaining Republicans?
I still don’t know how people can differentiate between two different strains of pond scum.
It’s not your vote that matters, it’s your wallet.
“What hand is in your wallet?”
Correction: Which hands are in your wallet?
Take a look at the list of taxes on your telephone bill. At least in California, you see a long list: multiple Federal taxes, State tax, City tax, and the idiot tax if you have anything other than basic service.
Vonage, skype.. flat fee. Best money saving ever.
“two different strains of pond scum.”
Goldman Sachs is the top donator to Clinton, Obama, Mcain, and even drop-out Romney.
When I mention this to Republicans they are not shocked and when I mention it to Democrats they are(?).
The fix is in, all this “real change” talk is just that …talk.
But they not only were not the top donor to Ron Paul, his money did not to my knowledge accept a nickel from any PACs, banksters or large corporations. That was true change, but the machine is pretty adept at squishing anything close to true change.
With regard to anyone other than Paul (or a 3rd party or write-in), I don’t think you’re really voting in the sense that what you do matters. You’re just made to think you’re voting.
People only want change if it doesn’t come with bad news. Paul (and even Kucinich) deliver bad news, but with a prescription to fix it.
But the bad news part wins out, and so they go with a person who makes them feel good. Kinda like The Matrix.
Yes, it’s like some of the choices in the grocery store… different packages, same brand, same ingredients.
I’ve said this before. After living 7 years under the failed Presidency of G W Bush, with 6 years of a Rep. controlled Congress. To say that there is no difference between the two Parties is beyond me.
Iraq, Tax Cuts for the Rich, Historical Deficit., Reactionary Supreme Court Justices, TORTURE, Katrina aftermath…..
Do you see any of that if Gore had been given his victory in 2000.
The Dems are far from perfect, but please….
HA! I could see increasing tax hikes, even bigger deficits, an even more reactionary supreme court, draconian scam “green” laws. Etc. ad infinitum.
Torture? Sure why not. I’m sure it went on during LBJ’s term.
Katrina aftermath? I can say it would be worse under Gore? Why? Why not, I can’t prove it would be worse just as you can’t prove it would have been better!
Good lord edhopper, substituting one scumbag for one less obnoxious scumbag does not make a good system.
As far as Republican controlled congress, look at the voting records of most of your dems. They just loved the Iraq adventure didn’t they.
Democrats and Republicans, you both f’ing suck!
Ed - no offense, but I do not think things would have been noticeably different if Gore had been elected. He is part of the same machine.
I don’t think we would have continually allow Waterboarding, ie; not torture if done by US to others.
We wouldn’t have Mukasey, Alberto Gonzales, or
Condi-Ican’taccomplishanythingbut play a piano-Rice.
Get a grip. Waterboarding was done to US soldiers (Special forces) in training during the Viet-nam era to give them an idea of what they might experience if captured.
Anybody ever consider how similar “waterboarding” sounds to “surfing”, all outdoorsy sporty-like.
1984 wasn’t 24 years ago.
The Obama scandal was only a “scandal” because the Chicago Sun Times thought they could make something out of it. At the time, the Sun Times was focusing everything they could on corruption cases. It turned out to be a fairly good project, they actually uncovered some good stuff - sent people to jail, city contracts were canceled, people fired, etc. Yet all they could manage with Obama was an allegation of wrongdoing. Everyone involved in the two transactions (realtors, previous owner, etc) said that nothing unusual happened, and after a couple weeks of not being able to find a shred of evidence to the contrary, they dropped the story and moved on to the next scandal.
You don’t have to trust me, it’s all in the Sun Times archives, searchable via Google News.
I definitely think Obama used some bad judgment in continuing to associate with Rezko, but he didn’t do anything illegal.
More trumped-up puffery from the scandal mongers, in my estimation.
Well, McCain was implicated as a member of the Keating 5 back in the 80’s S&L disaster. I have serious doubts about his financial intelligence quotient, FIQ(Hey, I kinda like that! I’m gonna start using it, like FYI, CYA.) so I’m not sure he really knew what was going on. He’s a schmuck, but likely a clueless schmuck.
McCain was cleared in the Keating Scandal ,but Keating was sure getting his way with many Senators regarding banking regulation changes back in those days .
After all the court trials ,the Investors that really lost all the money ,didn’t really get their money back, in spite of Keating going to jail ,(a lot of seniors loss major money ).
I remember before Lincoln S&L went BK , Keating use to place full page ads in the newspaper trying to get investment money by offering 3 or 4% yields over normal FDIC insured saving accounts . Apparently Keatings undoing was that the Investors thought those accounts were FDIC Insured accounts ,(in part because they were sold and marketed by a Savings and Loan ).
The reason why I keep thinking about this ” Keating Law Case ” is because that case is very much like the problem with the ratings on the sub-prime high risk loan paper being over -rated .A lot of the evidence presented in the Keating Court Trial involved how the investors were “sold ” that paper ,that was high risk junk paper backed by Hotel real estate in Arizona .
Also ,you would of thought that many of the Senators that were around at the time ,who are still around today ,would of remembered that high profile case in the 80’s that involved investors not getting what they thought they were getting by the way the investments were sold that were backed by real estate .
So, yes I guess investors are dumb and borrowers are dumb . I remember when I use to read those full page ads by Lincoln Savings I use to think that a yield that high had to have risk ,so I stayed away from that tempting lure of high yields at the time .In fact , I use to say all the time that something was wrong because how could the S&L offer that high of a yield .
Sorry ,that I’m ranting on ,but this is a law case that relates to legal points of faulty investment selling . It’s also interesting that McCain was involved ,(but cleared of any wrongdoing apparently ). McCain should have a lot of knowledge about real estate investments going awry, and that could be a positive or a negative ,depending on your political position .
Did you hear his Sayonara speech yesterday? OMG.
The guy can’t speak a truth if it was biting his lip.
WHERE is this guys brain, and I didnt’ see a “package” so it aint there.
I feel like I am on a Ferris Wheel that has gone crazy/broken and won’t stop, just keeps turning faster and faster the more these pols speak gibberish.
From the street.
Had dinner last night with high end jewelry salesperson. Conversation eventually turned to the economy, housing etc. Disclaimer … “not my doing, I’ve been very quiet lately as the levels of animosity seems to be rising amongst the common folk”.
She’s tells us she was speaking with the company’s estate buyer and he said that he was receiving so much second hand jewelry that he didn’t have enough in his budget to buy it all despite the value.
Then is if on que a lady comes in and wants to sell a handful of jewelry. They get talking and she reveals (You’ll love this part) that she is/was a realtor.
When you’ve already sold your soul selling your jewelry isn’t that big of a deal.
Truer words were never spoken.
I have a piece of gold my grandma got in the yukon.
I was going to give it to my nephew but I think I’ll wait till I pass away.
Won’t you have trouble lifting it, then?
on my lunch hour a few weeks ago my wife emptied out her old jewelry (has not worn it in years) some gold bracelets and a chain. well $1000 cash for basically crap laying around the house. btw a few weeks ago i posted an old black leather recliner on craigslist (5 YEARS OLD) we bought new furniture last year (all cash of course) and it was just taking up space in my office so i sold it for $200 cash in 1 day
i am preparing for anything at this point and doing everything i can to reduce my monthly outgoing expenses and stock piling cash for any thing that may come up
The message I got from your post?
Cash is king.
That, and ex-realtor jewelry has cooties.
LOL
Cash = monopoly money
I have a bit of a jewelry weakness and am always looking for deals. Not yet finding the type of price desperation I’d like to see.
A lady may or may not have taste in jewelry…but she certainly cannot have a “weakness” for jewelry.
I think I jumped the gun about a month ago and bought a loose gemstone on ebay. The prices for tanzanite are already coming down, and I couldn’t wait.
oh well.
Knifecatcher.
i know…maybe I’ll get a better deal later on the companion stones and the setting and it’ll be a wash
Mr. Buffett: “Money flows from the impatient to the patient”.
Look around and notice the desperate need lots of people have for cash. If these people are loaded with jewelry and other bling symbols and need cash then they will need to unload their stuff into a saturating market.
Remain patient while the economy falls apart around you. Think in terms of a very, very few pennies on the dollar.
IMHO.
It’s gonna have to be a very few pennies on the dollar with my taste. Champagne taste, beer budget.
“I’ve been very quiet lately as the levels of animosity seems to be rising amongst the common folk”.”
Message to PTB……Disregard this fact at your own risk.
Out here in CA we are getting tv ads saying to send in any of your jewelry and they will send you a check. How many people are going to be surprised when they think that their gold jewelry is only gold plated? How many are going for the gold price and the buyer will be getting the stones for free because the seller doesn’t have a clue? These little cameos spun off from the housing bust are getting quite fun to read!
You have to love that stimulus package. More B.S. in the CityBoy’s opinion. Here’s an angle I haven’t seen mentioned on this blog. I have seen posts that anybody making over $100,000 shouldn’t be eligible. That’s bullsnot. The commies in Congress set the limit at $150,000, I do believe. They want to raise Fannie and Freddie limits in high dollar areas. Why didn’t they graduate the income limit for rebates to address high expense areas.
Under no metric are Mr. & Mrs. CityBoy rich. We live in a high dollar area and pay a fortune in taxes. We also don’t qualify for the handout. What a fooling joke. I will never vote another nickel to another politician or locality. It will be a flat “no” on every bond referendum I ever see. I’ve really enjoyed Ben’s blog but it has made me realize just how f—ed up this world really is.
We don’t qualify either. I would have at least liked a credit against this year’s annual robbery.
At least give us a small jar of Vaseline.
uh . . . I think Astroglide is the current substance of choice.
Is that like Astroturf?
google it
Tee hee. I had conversations like this in college. The standout one was trying to explain “douche”.
Let’s leave David Lereah out of this.
And you explained it as Realtor®, right?
I knew it.
Yes, I believe Astroglide’s new found popularity is due in large part to Kathy Griffin, who told a little story about her last (and I mean last) appearance on the “The Dried Up Old Hags” (a.k.a. The View) in which the head hag revealed her preference for said lubricant, (like I care if/how chicken neck stays moist).
Wait a second, back it up…
who is Kathy Griffith?
head hag = Babwa? And why does she put noogie lube on her chicken neck? Is that where her man likes to put it?
The problem is, Cityboy (and I am being serious here) is that you actually are rich, you just don’t know it. If you want wifey don’t qualify, that means your probably making about 175K combined or so (no need to comment, I’m just using this as an example anyway).
175K, using new fooked up math, “entitles you” to a 1.5M dollar home, and at least a few BMWs, not a bit less!
The problem is that you are unwilling to take on your required debt load. You make plenty of money to live the high life, you just need to get off your a** and start spending other peoples money!
Now, I say this in jest, but, in all seriousness, this is really what is going on. I also don’t qualify for the rebate (good, keep the stinking money, and the 30+K that I paid in federal taxes this year; keep all that too you a**holes), so I know exactly where you coming from. However, when I tell people what I make (bankers, car dealers, accountants, etc) they all tell me that I am “rich” and need to start living it up a bit. The thing is that everyone (in the MSMs eyes) making over 100K (personal) is rich; and therefore should not be included in any stimulus packages. This, of course, as well all know, is total and utter BS; with a decent home in my area running 400K+; I am SO RICH, that I can’t even afford to buy a median home.
The problem is that the numbers are all jumbled up (as is this post, I am realizing every second more and more); people look at a 100K income as supporting AT LEAST a 600K home, as well as AT LEAST one high end luxury car (50K+) in the front yard. When, in fact, a 100K income supports a 300K home, and a mostly paid off car in the front yard. People just have NO clue how much money it takes to really afford these homes; and therefore (because they live here too; and can somehow “afford” it) no concept of what kind of stimulus is really necessary (multiply everyone’s salary by 2) to make this equation work again.
Finally, the FRE and FNM thing REALLY peeve me off. In my area, I think this limit will get up to about 700K or so; which means that we are using government enteties to SUBSIDIZE people making 225K per year? What kind of special madness is this? Frankly, I think the limit is already too high, why should we subsidize 125K HH incomes??
Once again, this is people acting without thinking. Yes, you can make the loans cheaper.. However, does this in any way fix and/or repair the problem? Of course not; the problem is that the homes are FAR above the historic norms, and are still totally unaffordable to those making median income amounts (40-60K HH).
That makes me feel a lot f—ing better Michael. Thanks. I’m going to go discuss the situation with my financial adviser, his name is Jack Daniels.
I’m sure you don’t feel rich, but if you live in Manhattan, you are rich. I live in Queens, and my wife, son and I live on 50K a year. We do not consider ourselves poor. We don’t go hungry, and we have health insurance. But if you live in Manhattan, then you are rich. You choose to spend your money on the extremely high rent or mortage and have little left for other things, then you are still rich, you just spend all your dough to live in the one of the world’s busiest shopping malls.
I don’t blame you, Queens is a drag. But you are rich.
wow knockwurst 50k for 3 people you are good
i live in queens too, we could swing the manhattan place but choose not to although commuting blows
queens is a drag but i have a huge apt 3 bedrooms 2 baths hardwood floors granite-stainless etc etc and i am
less than 5 miles from midtown
i pay $1700 with heat + hot water and i have a car which i can park for free in front of my house (no opposite side) beautiful park 2 blocks away and transportation as well, i would love to live in the city, i used to in the mid 90’s but now it is cost prohibitive for us
Don’t worry, I’ll be in front of you in line buying the JD. I am in exactly the same situation; rich, but unable to buy a decent home in my area for a fair price.
Don’t despair, trust me, your income will come again to be actually “feel” wealthy, not just look wealthy on paper. Remember, you’re 6 figure salary (that you actually earn) was competing with a FLOOD of dumb money (all thanks to AG, and all the credit card, HELOC, mtg companies, etc) that didn’t earn it, and therefore were much less frugal when spending it.
You can’t compete with dumb money.. You can only wait for those supplying it to get smart and shut off the faucet. And that’s exactly what is happening.. Keep your power dry.
Maker’s Mark. Good Kentucky bourbon. Much better than that JD stuff.
You pay more in taxes than I or most of my friends make in a year. But you’re “not rich.” Pardon me while I wipe back the tears. Shouldn’t you be drinking aged scotch rather than JD?
It is NOT what $100K or $150 K or $175 will or will not buy, it is that:
$100,000 is the top 15% of households
$150,000 is the top 6% of households
$175,000 is the top 4% of households.
“Wealth” is relative.
$100,000 would be upper-middle class.
$150,000 is past upper-middle class and in the well-to-do class and ditto $175,000.
Hard to claim that when income is in the upper 15%, and more to the point, upper 5%, that one has a ‘middle class income’ Mathematically, middle still is the 50th percentile.
Those with incomes over $120,000 (90th percentile) have seen their incomes increase more than inflation during the past 6 years. It is the other 90% who have had their incomes stay flat or fall the past 6 years.
$150,000 and up may not be in the league the top 1% ($520,000 and up) or of Bill Gates and others in the top .01% ($6,600,000 and up) but sure is a hell of a lot more than the other 95% have. Would you prefer to be in the 50th percentile at $48,200?
Wow. I’m actually doing quite good for the area I live in, but of course housing is still overpriced. I’ve starting to get a bit obsessive about saving money. I figure my job is good, my income is good, and I don’t count on it being good forever. I figure while I’m doing okay I’m going to put as much money as possible into savings for retirement and what not. I want to see savings grow! There are a few hobby toys I would like to pick up (mostly diving equipment that is on the very expensive side) but I’m being patient. Meanwhile I’m not having great luck selling my odd stuff that I have sitting around… I’m trying to fund toy purchases by getting rid of other stuff and not touching savings.
yes but 150k in kansas is alot different than 150k in manhattan
True, but its a LOT harder to land a 150K job in Kansas than in NYC.
So don’t live in NYC - or don’t live in the most expensive areas of NY and downscale. GO move to Brooklyn or some other place that is lower in price than the gentrified areas or NJ and commute,
You CHOOSE to live in an area where you spend your DPI on housing and other upscale amenities. Don’t complain if you don’t want to move somewhere else where the pay if 50-60% of what yo are getting but the housing costs are also 50-33% of what you are paying.
Point is national policy can not be held hostage to the vagaries of a handful of places which deviate susbstantially from the norm.
And $150,000 doesn’t go far here where the properties tumbling into foreclosure include $1,300,000, $1,500,000 and $1,900,000 homes. Median list price in the county was pushing $500,000 18 months ago. And we don’t even have an interstate or an airport with a terminal larger than a football field.
Right, and that’s why there is a roughly 6-8 year cycle in NYC.
People “do their 20’s” in New York. Hopefully, make some money, and then they move elsewhere.
The “stable NYC” population, either born here, or calling this their permanent home is quite small.
It’s like the cicadas except with half the time length.
Thanks, Ann,
“would you prefer to be in the 50th percentile at $48,200.”
I don’t feel so good.
This is the story in my own family. Sis & BIL combined make about what I do, maybe a little less. They live in a very nice huge house with a large debt overhang. I live in a small rented house and don’t have any interest payments on anything. They will be paying for decades for things they’ve already consumed. I could live for years on what I’ve saved. Still, they pity my condition, being a renter and all.
Define rich.
Define Rich.
This would make a really interesting thread all on it’s own. I’ll take a few stabs at it:
1) Being able to afford most things you want. Note- this doesn’t mean actually buying/having it all. Rich is knowing that you could. Not understanding this is what keeps a lot of people from ever getting rich.
2) If you worry more about net worth than cash flow, then you are rich.
3) Rich is when money doesn’t determine how you spend your time. To some degree, Gordon Gecko had it right when he said rich was not having to waste time.
“Define Rich.”
1. Rich is having your health.
2. Rich is having a great mate to share your life with.
3. Rich is having a roof over your head in a safe neighborhood.
4. Rich is having food on the table.
5. Rich is having a supportive family.
6. Rich is having great friends through good times and bad.
7. Rich is being to laugh, enjoy nature, and give thanks for the good times and to know when enough is enough.
8. Rich is knowing who you are and accepting it.
If you have all of the above you are not only rich you are blessed.
Rich is when you can afford a housekeeper that does not demand cash under the table.
Rich is when you own your vacation house outright, and can afford to pay for someone to take care of it when you aren’t there.
Rich is when you can afford to fly private instead of bending over for the anal probe at the airport.
Rich is when you can afford to donate money to charity and not care about the tax deduction.
Rich is when you are asked for your advice on making the rules, rather then being told what the rules are and how you will comply.
Not many people are rich.
Define rich.
Anyone who makes more money than you do.
Rich is when you can give the finger to the boss (or to yourself, if you’re your own boss) and there’s nothing they can do about it.
Why do the people in the “land of freedom” voluntarily turn themselves into debt slaves?
” None of the circuits involved in conscious reasoning were particularly engaged. Essentially, it appears as if partisans twirl the cognitive kaleidoscope until they get the conclusions they want, and then they get massively reinforced for it, with the elimination of negative emotional states and activation of positive ones…. Everyone from executives and judges to scientists and politicians may reason to emotionally biased judgments when they have a vested interest in how to interpret ‘the facts’.”
Neural Bases of Motivated Reasoning: An fMRI Study
of Emotional Constraints on Partisan Political
Judgment in the 2004 U.S. Presidential Election
http://tinyurl.com/2mu8dx
caution pdf
It is partially hard wired in the brain.
You’re right (as always, darnit-to-hellsville aka NJ!)
I’ve seen the above. I’ve argued about this debt bubble with “absurdly smart” physicist types, and they just couldn’t for the world of them see the pattern. They kept insisting on “hard data” not realizing that a certain kind of “semi-soft data” has its place as well.
For example, they simply couldn’t see the consequence that you can only go off the “gold standard” once, or that rates can only drop from 18% to 1% once, and so on and so forth.
Whatever.
There are many kinds of evidence, and they need to be judiciously weighed. This is hard.
Sociology study published in WSJ about about happiness 2 years ago found that happiness is linked to most 2 things—sex and socialization. What was most interesting to me was that purchases of durable goods gave only a transient happiness for about 3 months …hence unhappy people buy again when this fades and propel themselves into debt spiral. Most people (80%) said they would take a 10% paycut to have more friends at work.
I make more than most but was happier when I was making less cuz I had more time to socialize.
IMO rich is happy…and happy aint only money.
Aparently, sadness is linked to… shopping.
Heh. If you make over $100K - why in the world do you need $600 back other than on principal?
And you may not be rich, but compared to the “average” American you have a very high income stream. A typical middle class service job brings in anywhere from $25K-$45k on the high end. My sister works a good job, my BIL works a good job plus a side job and they earned about $70 last year.
Don’t you think there is at least something positive in being able to pay in taxes what a more typical person earns in a year?
Tell ya what, let’s trade places. We’re a family who earns a more typical amount. I get a tax credit for having a couple of mini-mes and my taxes are pretty darn low. I’m sure I’ll eventually belly ache about it, but I think I could swing (somehow) living off your income left over after paying the tax bill. And just remember, on my income the tax bill is low and you get $600 periodically as a bribe!!!
(And seriously, I don’t think you should have to pay that amount in taxes because it’s mostly just pissed away… I’m not for social engineering or high taxes at any income level. )
$150K annual income and not “rich.”
BWAAHAHAHAHAHAHAHA! Good thing I’d already drunk all my coffee.
However, if you are being forced to live in NYC against your will then I apologize.
living on 150k in nyc is not rich anyway you want to slice it
living on 150k in nyc is not rich anyway you want to slice it
I agree. Cost of living is the key… according to the CNNMoney Cost of living calculator, if MGNYC99 made $150K living in Manhattan, then he would have to make $66K in Des Moines, IA and $98K in Boston to have the same lifestyle.
Object lesson here is not how much you make, but what is your income vs. your cost of living. Also, MGNYC99 could downsize his expenses by living in another part of NY, but the tradeoff may be time commuting, quality of life, etc.
http://cgi.money.cnn.com/tools/costofliving/costofliving.html?step=form&x=50&y=12
The point is, to make that $100k salary he has to live in NYC. He could live elsewhere but would not make the same money. In either case, he’s not rich.
I live in DC and my wife and I make about $175k. Believe me, we’re not rich. Part of the reason is that she brought to our relationship an unreasonable amount of debt (I’m getting over it) that we’re working through. But much of the reason is the expense to live in this area. It’s a catch 22 though. If we don’t live here we would make far less or maybe even be unemployed. I live in a high cost area because it offers me the best job stability.
I agree that you have to be careful with location specific exceptions. That’s why I hate the conforming loan limit increases. If you give California/DC/Boston/NY a high loan limit are you helping them or contributing more to the income disparity. If I lived in Nebraska I guarantee you I would look at it as the latter.
“Believe me, we’re not rich. Part of the reason is that she brought to our relationship an unreasonable amount of debt (I’m getting over it) that we’re working through.”
Is her name Suzanne?
Sorry, couldn’t resist…:-)
DOC
High comedy from NYC this morning… You need to be gentle with the “not rich” Manhattanites.
I make about 75K as a test engineer with a wife and two kids and as the last of the vanishing middle class I will take the rebate. Now high wage earners at over 100K per year double income ( 200K) they still have a good chance of pulling out of the housing crash, poorer but wiser. If they keep their jobs …
Is it fair high income housholds don’t get a rebate? no not really, but as a worker I would rather the rebates went to extended unemployment insurance anyway.
I don’t see how this package does anything either. Reminds me of the “package” GWB showed when he landed on that aircraft carrier. All stuffing, no substance.
I also know what you mean about “high expense areas.” $600 will barely pay for dinner for two at NY’s most expensive restaurants.
“I also know what you mean about “high expense areas.” $600 will barely pay for dinner for two at NY’s most expensive restaurants. ”
..which, of course, we’re all entitled to. Minimum twice a week, right?
gold up:
Feb. 8 (Bloomberg) — Gold advanced in London, adding to a weekly gain, on concern South African power shortages will curb output in the world’s second-biggest miner of the metal. Platinum jumped to a record.
Gold rose for a third straight day after AngloGold Ashanti Ltd., the world’s third-largest miner of the metal, yesterday said output this year may be 400,000 ounces lower than earlier forecast because of the electricity cuts. The company last month lost 200,000 ounces of production because of outages. South Africa generates about 11 percent of world gold production.
http://tinyurl.com/28z2dw
The power shortage is old news.
Maybe the tables are turned. The Euro has been sliding.
The gold is still there, power shortage or not. If they don’t dig it out today they will tomorrow.
Not without power they won’t. Eskom has some serious problems and the mining sector is being hit hard and will continue to be hit hard.
http://www.moneyweb.co.za/mw/view/mw/en/page1329?oid=192000&sn=Detail
Gold isn’t like an agricultural crop where there is a time window that dictates when it has to be harvested. Gold in the ground will stay nice and safe in the ground until it is dug out. If not today then some other time.
Yes, but South African mines require a lot of power. Lots and lots of power to be productive. That is my only point. Yes, it will be there, but without the means to get to it, the gold might as well be on Pluto. With South Africa appearing to be going down the path that Zim has taken, in 10 years the gold may be easier to get to if it were on Pluto.
This all sounds like bubble talk, on the order of “They’re not making any more land”.
Sure you can believe that if you want. Personally I would like to see all of the Central Banks of the world sell their gold to the public in an open auction. Only then will we find the true price of the metal.
The “true price” is still only (and will always be) what people actually pay for what is actually available. All else is imaginary.
It’s simple. Gold is MONEY.
You cannot artificially expand gold supply at will like you can fiat currency.
When people understand gold as a last resort of a medium of exchange, then they can understand that there is no “bubble” in gold. There’s certainly noise in the shorter term, but gold priced in 1980 terms adjusted for inflation should be at over 2K/ounce, and we’re not even at half that. Since inflation will only get far worse, you can see it at 5-10K before the “bubble” bursts.
Over 50,000 miners have been laid off in South Africa, and the power shortages are expected to go on for years. They don’t anticipate digging it out any time soon.
Sounds a lot like a De Beers style “shortage”.
I study gold mining as a hobby (and have some friends who are actual gold mine spelunker-types who go to the actual locations), and the problem with the statement that “they’ll dig it out tomorrow” is that the cost to extract gold is tied often to the price of energy.
Gold extraction is a massive undertaking. Probing for gold veins is very hit or miss, you may drill an area and think you have 1m ounces of gold, but you hit a fluke region and in reality there is only 100k ounces of gold.
Preparing for extraction means taking out tons and tons of rock, processing said rock with chemicals, and then extracting the gold from the chemicals. If you read mining reports, the amount of gold in one TON of rock is minimal. When they have an idea of how much gold is there, they budget the extraction.
As each day progresses, even a week or two can make a difference in the profitability of extraction. Being closed for a day or two with dozens or hundreds of workers can turn a profitable extraction into a loss, and you still have a risk that your extraction will be LESS than what you estimated (rarely has it been more).
Also, the depth of extraction is increasing, which means more equipment is needed. Safety provisions change as you dig deeper. You need to remove the rock further from the dig to prevent a cave-in or collapse. You need more workers to oversee the process.
Gold mining is not as simple as people think. It is amazing that companies still take a risk to try to get it out, even with gold at US$900/oz, energy prices often times are making it barely a 10% profit. A few mining companies that I am close to have only profited when they were bought by the large mining companies — running losses for years in hopes of finding enough digs that their stock asset value goes up because of the finds, because they don’t have the infrastructure to perform the digs and extractions themselves.
At US$900/oz of gold, gold is still VERY cheap to me. I keep track of every ounce I buy, as well as what the price is at the purchase date in Euros, Yen, Swiss Francs, and also what the comparative price is between Gold/Oil, Gold/Silver, Gold/Wheat and Gold/Utilities. So far, the price of gold has been growing a little faster than some of these prices, but not as much as it would see.
I charge quite a bit for my charts now (used to give them out for free on my blog), and I’m not fearful of even a 30% drop in the price of gold since I’m already factoring in a loss if it should happen. The key is that I am not afraid of my liquidity in a pinch, but I love the fact that I am relatively illiquid in day-to-day operations because it is hard for me to WANT to sell gold just to go out and buy the latest Playstation 4, Samsung 200″ LCD or a fancy schmancy Hummer H7.
Are you charting the gold / DJIA ratio? Might be worth while to include this data set in your tool kit.
http://home.earthlink.net/~intelligentbear/com-dow-au.htm
Yes, I also plot that information as well. It’s funny to watch things “go up” when you can generally confirm that it’s just the dollar going down.
I also plot crude oil versus DJIA, crude oil versus dollar, crude oil versus euro and crude oil versus yen (as well as a ton of other comparisons).
Lastly, I created my own variations on “basket of goods” so I can look to see if trends are flat even if regularly reported charts show upward or downward movements. No matter what chart I look at, the dollar is dead. I couldn’t use dollars in Europe or India this past December as I could 1 and 2 years ago (Dubai of course took whatever we had). Sad.
Luckily for me, I have income in Euros now so I feel relatively protected against more of a dollar downfall, but the Euro is also dropping, just not as quickly.
It’ll be fun to see where gold ends up in 2008, since I know quite a few wealthy people with gold hoards who are running into financial constraints and may liquidate. If the wealthy people liquidate, deflation is a very likely scenario.
We have a friend that has a Gold mine in the motherlode, near Columbia, Ca.
It’s 10 miles from town, down a dirt road, and up a sketchy, hilly dirt road to his mine, and there it is.
It was a productive hard rock mine from the 1890’s, til WW2, when it, along with most others, were closed down, to shift everything to the war effort.
The stamping mill was dilapidated, a rusted antique.
We went there one time with 4 other friends, and he’d paid something like $200k for the hole in the ground, and was constantly hitting us up all weekend to be investors in his venture.
Once a hard rock mine’s pumps stop, water creeps in everywhere.
The main tunnel went back about 200 feet, and you could see where they’d blasted out promising areas, in search of.
I did some mental math, and figured it’d cost a million or 2, to get it going again.
I’m sure there’s plenty of mellow yellow yet, in the mine, but who wants to invest all that loot, to find out?
Ah, I love ‘technical’ analysis. Let’s just draw some lines and make up crap. I particularly like the lower purple line that completely ignores 1979. Regression-smession…
Not that I’m saying that there might not be some mass-psychology that can be read from the patterns in the charts — there certainly might be — but that ‘technical’ analysis seems to be the least technical method there is out there.
Lad,
What is your obsession with calling gold “mellow yellow?” Just call it gold!!!! Besides, Silver is kicking the pants off gold in appreciation this year–just like in 2006.
You are so harshing my mellow…
It’s a lot easier moved, than your metal of choice, which is barely precious and almost industrial.
A million $’s of yours weighs in @ 58,445 Troy Oz’s, or 4870 Troy Pounds.
A million $’s of mine weighs in @ 1087 Troy Oz’s, or 90.6 Troy Pounds.
(full disclosure: all my mellow lies the over the ocean, far away)
And I thought it was ‘cuz of your natural affinity to Donovan
“So mellow, he’s so yellow”
Gold can’t tarnish, in any fashion.
When you hold one of these in your hands, one that was buried in a clay pot in somebody’s backyard, almost 2,000 years ago, and it’s as fresh as the day it was minted, you get a feel for it’s longevity.
http://en.wikipedia.org/wiki/Aureus
Ah, you mean gold is indestructable? Does that mean that all the gold ever dug out of the ground still exists?
If so, then there will always be an ever growing supply of the stuff as long as people continue digging it out of the ground.
Kind of like the ever growing supply of people that want money?
Not to mention more and more places are passing environmental laws that do not allowing cyanidation leaching. In the future it may not be allowed at all anywhere.
The slaves of Africa don’t get paid much, maybe in food, if they don’t get killed. Same for diamond mines, and tin, and other ores. It would seem that the natives are totally screwed if a ORE is found in their region.
I really like that diamond and gold bracelet on you! I brings out the sparkle in your eyes.
I like my preciouses, stained in blood…
Almost every last pennyweight of Gold has a little bit of drama included, most certainly.
the boys party on in Vegas:
LAS VEGAS — It was Monday night on the Strip, and John Devaney was giving a party for himself and fellow connoisseurs of risk who have seen their hot hands go cold.
Skip to next paragraph
Multimedia
CNBC: Risk and the Vegas Convention In a gilded ballroom at the Venetian, the revelers sipped cabernet, dined on surf and turf and crowed as the Blue Man Group put on a private show.
http://tinyurl.com/29p6cl
Each of them had their very own deck chair…
What else will be found in homes?
http://www.foxnews.com/story/0,2933,329506,00.html
It seems like a car would be a better buying incentive than a corpse. But that’s just me. Maybe a trip to Hawaii? Of course some guys like cadavers.
A friend of mine once found a sack of silver coins in the attic of a house he had just bought. I think it was worth $2000 at the time (mid 80’s).
pain in the UK
The average family’s mortgage burden has now equalled the peak it scaled during the last housing crash almost two decades ago, according to research by a key adviser to Gordon Brown.
The latest news and analysis of the UK and world economy
Households now face paying the biggest part of their disposable income on mortgage capital and interest payments since 1990, according to David Miles of Morgan Stanley.
http://tinyurl.com/39cp2o
is lobster coming down hard yet
was $3.50 a pound in the early 90’s
LOBSTAH in Bahstin
Even $3.50 a pound is a lot of money for amounts to a giant bug. (Lostah was poor people food in the colonial era for stated reason.)
Lostah=Lobstah=lobster *sigh* Time to do some work…
I have never understood the fuss over lobster. I much prefer shrimp.
September/October is the typical time that lobster gets cheapest due to highest supply and lower demand. Definitely not in February.
Humph. Dungeness crab so much better. Lobster, overrated.
It’s all good baby
price weakness in London:
UK house prices are now lower than they were three months ago and the weakness shows signs of spreading to London which has appeared resilient up until now, according to the latest FT House Price Index
http://tinyurl.com/ywlg5x
We couldn’t believe the London prices when we were there in 2003. I can’t imagine what they look like now. New York City is cheap compared to that madness.
very true
my buddy went ot london for the led zep show
$20 american for tea and a tiny pastry-
they were complaining and they are really rich
so it must be pricey as hell in the uk
‘thanks’ to the weak US currency. Europe is really a nice place to visit for all the rich history and culture but the falling $ is killing us.
Now I understand why Dr. Who never has trouble finding travel companions. Free lodging in the TARDIS must seem very compelling to any Londoner who didn’t buy when it was “cheap”.
MBIA sells stock:
Feb. 7 (Bloomberg) — MBIA Inc., the world’s biggest bond insurer, raised $1 billion by selling shares at $12.15 each in an effort to protect its AAA insurance rating.
The 82.3 million shares were sold at a 14 percent discount to Armonk, New York-based MBIA’s $14.20 closing price today, according to data compiled by Bloomberg.
http://tinyurl.com/29×4k8
That’s a winning investment. Who in their right mind would buy stock in a bankrupt company?
Bank of America ?
Moody’s Ratings Pain Hurt Results
“Moody’s Corp. posted a 54% drop in fourth-quarter profit on a year-earlier gain, amid declining revenue as the credit ratings and research company was hurt by continued weakness in the global credit markets…
New York-based Moody’s has been trying to rehabilitate its reputation while heading off more draconian changes that could be forced on credit-ratings firms by lawmakers and regulators fuming over mortgage-bond downgrades criticized as too little, too late.”…
http://online.wsj.com/article/SB120238708861950569.html?mod=googlenews_wsj
Duh!
Leigh
two things to note:
1) These rating agencies are paid by the banks to rate their bonds.
2) The rating agencies are invited into the discussion when banks are creating algorithms for developing these structured securities.
Basically it’s like 1) attorneys paying a judge’s salary and 2) before a trial, the judge gets to suggest what would be helpful to include when presenting a case.
I’ve often wondered if their wouldn’t be a “market” for a truly independent ratings agency. Sort of a conusmers report for the investment world; pledged to not be funded by and/or influenced by the companies who’s products they are rating. After the current debacle, I would think the door is open for somebody to try it.
no different than having aurthur andersen did the auditing on enron and provide ‘consulting’ as well.
I always point this out as the reason I didn’t go into public accounting after school. Most accountants are too dense and/or biased to “get” the conflict of interest.
Most accountants are too dense and/or biased to “get” the conflict of interest.
Each profession has interesting conflicts of interest that its practitioners ignore or even deny.
Finally, someone comes out and dispells the mortgage application index:
NEW YORK (CNNMoney.com) — The good news: mortgage rates are down. The bad news: it’s much harder to qualify for a refinanced loan these days.
What’s more, the borrowers who need to refinance the most - because their adjustable rate mortgages (ARMs) are resetting to higher interest rates - are among those having the most trouble winning approvals.
“I’m turning away about 60% to 75% of the clients who come to me for a refi,” said Bob Moulton, president of Americana Mortgage Group on Long Island, N.Y. “Some don’t have enough equity and others have bad credit scores.”
During the boom years, lenders approved most anyone with a pulse. Not so today. Mortgage brokers recognize this and are now being very selective about the clients whose applications they choose to submit to the likes of Wells Fargo or Bank of America.
If an applicant has poor credit, or a home whose value is rapidly deteriorating, they’re just not going to bother.
“If the person is Sweet Polly Purebread - good income, good assets, high credit score - there’s money out there,” said Moulton. “But if not, then it’s harder.”
Looks like someone at CNN isn’t aware that Sweet Polly is a dog. It’s “Purebred”.
Talk about trying to make money on a ‘flip.’ They bought it March ‘06. It has been listed for sale since Aug. ‘06.
Here is the MLS listing: http://www.taar.com/mlssearch/
MLS#: 1679497 Price: $2,700,000
Address:
5415 E SUGARBUSH LN
Leland, MI 49654
Township: Leland
County: Leelanau
Loan going into foreclosure is $1,907,990.24 at 8.875% interest,
They started off asking $3,900,000 - down now to $2,700,000.
And yes, if you load the 2nd and 3rd pictures of the water (Lake Michigan), it really is that beautiful here. The other pictures are of the inner lake that the property backs onto.
They conveniently forgot to post pictures of what it’s like in winter.
Oh the ’summer folks’ never come here in the winter. And less .05% of the locals might be able to pay for it (using real income and conservative loans.) That kind of place (and there are a lot of them) are an incredible indulgence - get used about 2 -2 1/2 months a year unless you like skiing and snowmobiles.
Can’t wait to see what the lender ends up dumping it for.
Actually here on the shore, it is a 6B growing zone for gardens - think southern part of Virginia and nothern NC. Average winter temp is upper 20s-low 30s and the snow skips over us and goes inland 25 miles. Down state gets hit with the ice and snow but the bad storms that make the news pass about 100 -150 miles south of us.
I sail to Frankfort every summer! That is a beautiful and a lot warmer than Lake Superior.
So what do you do without snow?
So far we’re up over 140″ whee.
Another hit for McMansions,
Spoke to a friend who works for the town’s electrical company (town has it’s own power co).
Traditionally, the Elec Co. put 1 transformer Box on a pole for every 4 houses. For the last few years, they have had to put up 1 box up for every 2 houses. In his words, “these monsters use so much juice…”
I just hadn’t added transformer boxes to my list of grudges.
I feel compelled to reply. My 3300sqft 2001 constructed house uses 80% less electricity than my former 1300sqft 1994 constructed house. I believe the improvement is due to more-efficient appliances, water heaters, hvac, ‘thermal barrier’ decking for the roof, and ‘triple’ pane windows.
If anything, it is the older structures that waste more energy. I’d say construction is moving in the right direction on energy efficiency, not the wrong way.
It depends on the construction.
McMansions are notoriously lacking in common sense, low-tech energy efficiencies (appliances excepted).
They tend to have lots of double height ceilings.
It may be that houses are being turned into rentals. More people per house in houses divided up into multiple units mean more juice needed.
Was on Zillow yesterday looking at homes in the 32827 zip code in Central Florida. Still amazes me (although I guess it shouldn’t) but many of the houses for sale have a wish price that is anywhere from $50k to $100k over what Zillow has them estimated at. Anybody else seeing that in your area?
We saw that on our recent trip to Sarasota. In the free real estate magazines, the wishing prices are still at/near 2005-2006 peak levels. But the houses that have sold got 2001-2002 prices.
(http://www.homes.com/Content/Sold-Homes-Prices.cfm)
I live in 32817 and those people with “make me moves” with a 20-30% premium mostly aren’t looking to move. They’re just hoping a sucker comes along and wouldn’t mind moving for an extra $50k.
Someone in yesterday’s Bits Bucket was asking about turntables to record LP’s.
For the record, I use a Stanton ST-100 (sorry, I forgot what needle) to make the transfer. It has a SPDIF output, so the there’s only one Analog to Digital conversion, inside the turntable itself.
I have a couple crates of 12″ singles and imports, mostly from the ’80s (and my DJ days), and am slowly working my through them. I’m only bothering with the ones that never made it to CD (most of the 12″ singles, and B-sides). If there’s a CD somewhere, I don’t bother. Space is cheap, so I also archive the raw 16-bit recording before any processing and compression.
It’s really relaxing to leave the physical media behind.
Sir, step away from the processor/compressor. Do it now!
Even my 60+ year old ears (tinnitus and all) can hear the difference between MP3 and high-sampling-rate WAV files.
So can mine.
I Use EAC and a Plextor drive to get a perfect digital rip. I use Lame on the highest VBR setting for MP3 conversion. There is a difference in compressors, even at the same bitrate. For me, acceptable.
Also note that I keep the original recording of the LP, before any cleanup and filtering/equalizing. Just in case I’m not happy with it and want a do-over.
Funny, I work in the digital realm and have had lossless audio files of most of my music for years.
I’ve gone back to buying LPs in the last couple of years. Vinyl is still more pleasing to my ear, and hell, it’s more fun.
Three words of advice for you:
backup
backup
backup
My home setup is a 1.5TB Raid 5 array on a dedicated server and UPS, and a backup up the server (admittedly refreshed only twice a year) sitting in a safe deposit box.
Decent for a personal/home setup.
That was me. I have a bunch of old vinyl from the pre-cd era that I would like to hear again. Some of it is pressed on virgin vinyl, and a fair amount of it never was remastered to CD , or was remastered very poorly. Some of the albums are ones that I had a hand in making, so there is a nostalgia factor operating for me.
I like Terastations in RAID5 mode for online storage, and USB drives in safe deposit boxes for last-ditch backups. Warning about backup disk drives: you have to spin them ever year or so to prevent stiction and get maximum life.
http://en.wikipedia.org/wiki/Stiction
That may have been the case years back, but I regularly pull drives off shelves and put them into machines without problem.
However, keeping your backups on drives alone is a bad idea. For a storage system of many hundreds of gigabytes, a robotic tape drive system and a GFS backup pattern is best.
Hey, Deep, glad you posted on this topic again! I couldn’t get into the Bits Bucket after it filled up–I was the one who asked the question about whether or not it was a good time to sell my vast vinyl collection after I digitize it. I just downloaded this software called Golden Records that seems to work great. Am also only transferring the discs that have not made it to CD. BTW how do you clean your records? I’ve read about these fancy systems. Are they worth the $$$?
A house in my neighborhood was just marked down. From $550K to $450K, bang, just like that. It’s good to see a seller getting a reality (realty, ha,ha) check, but what urinates me off is that some realtor actually listed this house at the original price. If stupid people (read: most realtors) are going to hold themselves out as experts, they should be held to some professional standard such that people who rely on their pricing (j6p would-be buyers) can do so with full knowledge of whether they are catching a falling knife.
I’m thinking of starting a RE buyers’ agent company that gets paid a percentage of the difference between the listing price of a house and the actual selling price.
…urinates me off…
Now that’s just funny!
Leigh
Mikey(2), which one is that house?
It may be the seller, not the realtor.
When I had to sell in 2004 (loss job due to department shut down) I told my sales guy that I wanted to sell ASAP, and wasn’t interested/couldn’t afford to carry the house for 6 month to pick up an additional 5%.
He suggested a price that made sense, house sold to the first people that looked at it, closed 45 days after it was first listed. Yeah, maybe I left money on the table, but I accomplished the goal of getting out from under the house/mortgage ASAP.
It could be that the seller is driving the listing price, or is not being assertive enough to tell the sales rep what they want done (deferring to their “expertise”)
It’s a different market now. I sold a house in 2003 and again in 2005, both to the first person who walked through.
My current house has been on the market for 3 weeks with no offers. (and I am the lowest priced - $3000 less than 2 comparable REO’s on my street) People are looking, no takers yet.
By the way, I am getting some ugly looks from the neighbors lately and one has stopped waving. I think they are not too happy about my listing price. I am fortunate in one respect that I currently have wiggle room. I put a sizable down payment and I bought low. The builder did a $30,000 increase after I bought.
One Realtor who brought clients through said my house was competitively priced and would be the house of choice if anyone was to buy in the community. It’s just that nobody is buying.
If you bought in 2005 you did not buy “low”
Not only that but unless your house is listed for less than 100K, that 3K reduction is but a drop in the bucket. You should be 10% below nearest comp and pray for a sucker.
This has been debated, but I think the opinion is a fresh look.
Sovereign wealth funds: China’s potent economic weapon
http://tinyurl.com/2vfm9s
Good Read,
Leigh
I don’t give a rat’s a__ about either party. I hold my nose and vote for the individual(s) I hope are the least full of BS. I believe the game is really controlled by plays that favor the interests of corporations/lobbyists/partisanship politicking (read:ego gratification)/self-enrichment, with the crumbs tossed to the little people. Why is our great country going backward faster than ever? How has ‘me pluribus unum’ replaced ‘E plurlis unim’? Is this not at the heart of what transpired in the housing bubble?
I have the following clipboard note which I cannot find the source of, but I’d like to verify the source of:
“The National Debt now stands at $9.2 trillion. This is the accumulation of all our annual budget deficits since 1776. Of this, nearly 85% was racked up under Republican Administrations – indeed, nearly 75%* under just 3 of our 43 presidents: Reagan, Bush, and Bush.”
*It’s more like 72% now but will be 75% be the time Bush leaves office.
Anyone here gotta answer?
I don’t vote anymore. They ALL suck. They say what they need to say to get elected, then do whatever their biggest campaign contributors tell them to do.
Voting only encourages them.
Doug Casey fan?
How about the fact that the larger part of the debt has been racked up in the last 40 years and 7 out of 10 administrations during that period were Republican? In addition, Congress has a wee bit of influence on how much debt is taken on; pork from both parties seems to be the credit card purchase of choice.
GOP: Borrow and spend
Dems: Tax and spend
in the end, they both spend like drunken sailors.
But, during most of that time the Senate and House were controlled by Democrats, who actually VOTED for these budgets.
The legislators of both parties don’t care how much money they spend to buy votes, since it isn’t their money, and when they subsidize BIG business, they get endless kickbacks in the form of campaign contributions, trips, dinners, hired cars, and cushy jobs for their friends and relatives.
Those are some interesting facts Ria. It’s a sad state of affairs that those who promise adherence to conservative fiscal budgets are in fact those that spend the most money.
Can you say hypocrisy?
The internal resource wars begin:
http://tennessean.com/apps/pbcs.dll/article?AID=/20080208/NEWS0201/802080435
You just gotta love how Georgia did nothing to prepare for increased water requirements as its population doubled from 4 to 8 million. Maybe its time the US turn on the “No Vacancy” sign.
Lack of fresh water will become an ever greater issue as our population continues to boom. I can’t begin to imagine it when we reach 500 million by mid century.
Big biz wants immigration (both legal and illegal) to continue at its current breakneck rate, after all more customers means more profits. What do they care if J6P has to drink recycled waste water?
We’ve always been drinking recycled waste water, whether we like to admit it or not. The cleanliness of the water we drink is the only thing that matters.
Right, and this rah rah for population increase is so contrary to the message in the 60’s-80’s of conservation and population control . The quality of life goes down in so many ways when a population increases to much ,but they need those people to spend spend spend . All the roads in America are getting so jam-backed these days that I wonder when that issue is going to be addressed in a meaningful way ,however water issues are even more vital .
Ease Capital Requirements for Fannie?
Senators Suggest Easing Capital Restraints on Fannie in Exchange for Helping Homeowners
http://biz.yahoo.com/ap/080207/fannie_freddie_congress.html?.v=3
I don’t know if non-subscribers can read this link from the WSJ, but here goes anyway:
The Rise of the Mortgage ‘Walkers’
“In most cases, once a homebuyer splits, the mortgage-securities investors are stuck with the loss. In some states, including California and Arizona, this provision is the letter of the law.”
__________________________________________________________
I’m often opining on here, that people ought to take a hike, but who knew they’d be so enthusiastic about it?
“No man should go through life without once experiencing healthy, even bored solitude in the wilderness, finding himself depending solely on himself and thereby learning his true and hidden strength.”
Jack Kerouac
Ditto for women.
Loved the little graphic in the article. Blissfully tossing the keys.
KB Home Customers Sue Over Pricing
Thursday February 7, 9:20 pm ET
By Alex Veiga, AP Business Writer
Lawsuit Claims KB Home, Countrywide Inflated Home Prices
http://biz.yahoo.com/ap/080207/kb_home_countrywide_lawsuit.html?.v=2
Boo-hoo! They MADE me pay more than it was worth.
Here’s the latest bit of ‘wisdom’ from Yun over at the NAR (from the Seattle paper this morning):
Seattle-area home prices are manageable for typical workers, according to the chief economist for the National Association of Realtors.
“You may even say Seattle is underpriced if you believe Seattle is becoming a superstar city,” Lawrence Yun told area brokers in Bellevue on Thursday. “Seattle is underpriced in relation to other West Coast markets.”
The percentage of income a typical family would have to pay for a typical home dropped from the low 20s in 1990 to the high teens through the early 2000s and has returned to the low-to mid-20s, according to Yun.
Yun’s “superstar” comment echoed his assertion at the National Association of Realtors annual conference in Las Vegas in November that Seattle might be joining the ranks of cities in which housing prices shed their typical relationship to incomes.
—just FYI, King County median price is $435K and city of Seattle is significantly higher than that….meaning that Yun’s definition of the “average worker” must be someone making around 130K a year! What a dip.
Holy crapola batman, what a complete f^cktard this guy is. I don’t know about King County proper, but in the little burb a few miles north of the king county line that I live in, the median income for a houshole in the 2000 census was $47,238.
I really don’t think it’s gone up much, if at all.
Median house price here is in the $300k’s I think.
It’s different here.
BTW, can anyone point me to where I can find better stats on median sale price for my area? How about median household income?
Thanks!
Last night I was doing some surfing and came across a CNN Money article that listed 25 ways to get rich. One of the items said to never spend more than 2.5 times your income on a home and always put at least 20% down. Decent advice, I thought everyone knew that, but I guess not. OK… The page included a handy mortgage calculator so you could figure out how much you could afford. Typed in the info and it said a “conservative” estimate was $1.1 million for a house and an “aggressive” estimate was $1.3 million. Turns out that I’m not suddenly rich, the mortgage calculator just ignores all the advice CNN Money gives.
I truly believe all those mortgage calculators on the web are somehow hardwired into Realtors brainstems, hence the disconnect from reality.
Back when we bought our house in Sunnyvale, Ca, 17 years ago, the realtors kept telling us we could “afford” a lot more house than we wanted.
We stuck to our guns.
Our little house is 100% paid off, our property taxes are below $5000/year. Our energey bill is zero, thanks to the small size of the house and about $25K of solar electric equipment.
I’m glad we “underbought.”
They will ALWAYS tell you that you can afford more than you really can or feel comfortable with. They have no qualms about giving you all the rope (and then some) you need to hang yourself, financially.
When my mom bought, she felt comfortable buying at 130k and having a $1300/mth(with taxes, insur, etc included) payment on $60k/yer salary. Know what the sales counselor told her? $350
These people are not your friends.
I am thinking off paying off my house as well but afraid of the mortage interest write-off. is it better to pay off or use the mortage interest deduction. I only have about 170K left for payoff.
Two things to keep in mind (esp. if you don’t do your own taxes and haven’t been paying attention)
1. The way loans are amortized, the ratio of interest vs principal changes over time. Near the end of the loan, it’s mostly principal.
2. The deductibility of mortgage interest phases out, through a mechanism separate from AMT, when your income exceeds $150K (in 2006, at least. The number may have gone up in 2007).
So any tax advatage of holding a mortgage may be less than you think. The real question is, with rates so low, can you do better elsewhere.
I just like eliminating as many monthly expenses as I can. I get comfort knowing that, if I had to, I could survive on 25K/year!
You are my hero-
“Our energey bill is zero, thanks to the small size of the house and about $25K of solar electric equipment.”
Actually your energy “bill” is about $250 per month or $3K per year. $1K is the lost interest you could be getting on the $25K investment, and $2K is to cover repairs and the ultimate replacement you’ll need.
I tried my local bank’s online mortgage calculator, and the potential mortgage amount they showed for a 25-year amortization with 5-year fixed-rate terms was about 2.5 times my gross annual salary.
THE NEXT SLUM?
There’s an article in this month’s ATLANTIC (Sorry, not available online), that starts off:
The Subprime crisis is just the tip of the iceburg. Fundamental changes in to American Life may turn today’s McMansions into tomorrow’s tenements
I’ve personally been saying this for years. I don’t think the next generation of homebuyers want a “McMansion”. They want a mobile urban lifestyle with little to tie them down, and everything they need available on their iPhone. Who needs a big room for a big TV if you can watch anything, anywhere?
The article continues:
The fate of many homes on the metro fringes will be resale, at rock-bottom prices, to lower-income families and eventual conversion to apartments
We’re already seeing boarded-up homes in some of the lower-end McMansion neighborhoods (Lake County, FL). It’ll spread!
Pick up the ATLANTIC (March 2008)
(it looks like the Atlantic puts last month’s issue on-line, so I’ve set a reminder in my calendar to post a link to this article a month from now)
Atlantic Monthly is probably the most trustworthy and intellect packed publication I’ve read. I will pick up my used copy from my buddy.
Much of The Atlantic is now available online.
“The only people for me are the mad ones, the ones who are mad to live, mad to talk, mad to be saved, desirous of everything at the same time, the ones who never yawn or say a commonplace thing, but burn, burn, burn, like fabulous yellow roman candles exploding like spiders across the stars and in the middle you see the blue centerlight pop and everybody goes “Awww!”
Jack Kerouac
Hmm, let me try again:
Good, Mike Fink! It is comforting to see someone who understands the ground level issues. We cannot support this much crap even at $100K per year.
Geez.
Now, let me put my hand in the fire. I do not want to detract from the time honored tradition of griping about taxes. However, if we are to have: 1) good roads, 2) good schools, 3) world class higher education, 4) an adequate military, 5) help for those of us who are less fortunate or impaired, 6) a first class society that is humane and kind, then we have to pay taxes.
Waste and abuse of taxpayers money? Sure, that happens and should not be tolerated.
As a real world example of gov’t failure, do we want the mentally ill wandering our streets, getting into trouble, not getting care, going to jail to get medical attention? That is what is happening, and it does not speak well of us. Iraq? “Subprime”? Enron? Vietnam? 70’s Stagflation? 1930’s? 1920’s? WWI, WWII, Civil War? Jim Crow? All of this crap is a lack of proper gov’t oversight of a properly “over-sawn” government. The word is “proper” and not some nanny gov’t bureaucrat. So, I pay my taxes and work to hold my gov’t accountable for the results. That’s my plan.
Someone should convince me that Republican Conservatism isn’t ” I’ve got mine, screw you!” and Democratic Liberalism isn’t “I’ve got yours, screw you! ” I really can’t tell the difference. Can you? Both want to interefer in my life as a US Citizen. BTW, I servered honorably in the USMC. I do believe in my country.
.. and so I just have this to add:
I AM NOT A CONSUMER!
Roidy
“Both want to interfere in my life as a US Citizen.”
Think: Amish…they’re Americans too and they are not violating any Gov’t tax laws!
While I admire and respect the Amish as fellow Americans, I just don’t DO Amish.
Roidy
“Now, let me put my hand in the fire. I do not want to detract from the time honored tradition of griping about taxes. However, if we are to have: 1) good roads, 2) good schools, 3) world class higher education, 4) an adequate military, 5) help for those of us who are less fortunate or impaired, 6) a first class society that is humane and kind, then we have to pay taxes.
How can I say this? I agree with you wholeheartly about taxes but we are not getting any of those things. It used to be Californians paid high taxes but we had the best schools, the best roads etc. Now we pay but we don’t get the services. Our streets are full of potholes and the mentally ill (Thanks Ronald Reagan). I used to have to straddle two freeway lanes driving into downtown San Diego because the damn street was so rutted. I’m pretty good at dodging the potholes still I’ve had my car damaged more than a few times. Our schools suck. I can’t remember the last time I saw a street sweeper. I’m going to shut up now cause it’s pissing me off.
For those interested in how they will feel the collateral damage, in addition to rising taxes and collapsing public services, the insurance cycle has turned.
http://www.bloomberg.com/apps/news?pid=20601109&sid=a8At2fhowyOw&refer=home
“Allstate Corp. and Progressive Corp. are leading the push by U.S. auto insurers to raise premiums in at least 20 states as the $160 billion industry moves to end two years of price reductions.”
And why? “Insurers say they need higher prices to counter climbing repair and medical costs. Allstate, ranked second by premiums, said collision bills rose 2.2 percent in the fourth quarter from a year earlier and payouts for injuries gained 9.3 percent.”
Oh yeah? And how are your INVESTMENTS doing, Progressive an Allstate?
You’re in inflation hands, with Allstate.
I could use a little help with some research I’m doing from the good folks here. I live in the Bay Area, in a fantastic 2-bedroom+ flat with my fiancee in San Francisco. The rent’s a little steep, but completely within our budget. She has lived here all her life, and for the last several years (since before she met me) has been fixated on buying a home. I thought it was a great idea, too, until I started doing some research to see what we could afford, and stumbled on sites like this one to discover the massive speculative bubble that has been happening. That was enough to convince me that this is the worst time to buy, since I’m not emotionally invested in it, but the problem is that she very much is. Not only that, but we have three friends who have bought recently or will buy soon. It’s difficult for me to argue that they are making bad decisions, because I don’t know their finances and don’t think it’s polite to find out, and because she’s known some of them far longer than she’s known me. All I know is that, based on our own situation, it’s not a choice we can afford to make now, not when we are in our late 30s with a new baby, and need to be saving for education/retirement. So I have realized that I actually need to put together a lot of information and make a presentation for her, to try to put this argument to bed for a couple of years. Last night I was told that I was “crushing her dreams”, and I need to make sure she realizes that it’s not *me*, it’s the *market*. I have tried to convince her with things like the New York Times’ rent vs. buy calculator, but when she has a friend who has bought a $700K home (on a single income!) this isn’t enough to convince her by itself. I am put in the unfortunate situation of having to convince her that her friends are wrong.
So, anyway, I’ve been able to find a lot of sources already, for things like San Francisco population over time (”people want to live here/people are moving here!”), number of homes on the market over time (”good homes are being bought up!”), and projected declines in SF house values from MSM sources like Fortune (they somehow carry more credibility than blogs like this, unfortunately). However, there are a few bits that I haven’t been able to track down yet, like the types of mortgages sold in this area and when they will reset. National data and graphs are easy to find, but I need things that are exclusive to San Francisco and the East Bay (and *not* outlying areas like Manteca) to make my case, because of course “it’s different here.”
“Crushing her dreams.” I feel for you man. I couldn’t deal with that kind of emotional crap.
Why don’t you show her a few stories about others whose “dreams” were crushed when they were forced out by foreclosure or having to walk away.
To be fair, she is no emotional manipulator (I have been with those, and there is a reason she is my fiancee and not them), and this comment was unusual, and she already apologized for it this morning. It just goes to show how emotional the whole home buying ideal is for some people. Personally, I’m unashamed to be renting if it’s the more financially responsible course of action, but I can also see the attraction of wanting to able to personalize your own space in a way that you can’t while renting, when you are ready to settle down in one area long-term.
And yes, I plan on including some case studies in the slide show, since they are nice and visceral. She needs to see how the dream has turned into nightmares for some (and might for her friends–I know one of them ended up with a broker-promoted liar loan shortly before those vanished as an option).
moravec,
I identify with your situation on a personal level. Please consider the possibility of futility in putting together an overwhelming logical presentation to “convince” your partner of the economic conditions. For one thing, if she is emotionally motivated to own a house, your “logic” will only offend her as it is an attack on her feelings. There is another card that should be put into play and that is your “feeling” and “aprehension” about the timing of a home purchase. You “believe” that this is a time of great risk and impending change that you “fear” might put the “two of you” in financial danger. If you are going to have a marriage, you both need to accomodate the other’s beliefs, fears, instincts and choose a path that fits all best. It’s about respect, not logic. So tell her you are sensitive to her need for a house, but tell her you “need” her to be sensitve to your desire for caution and that you “need” her to wait with you for a couple of years to see what happens. If you want to kick it up a notch, tell her that you wake up in a cold sweat sometimes at night, from a nightmare that you are a prisoner in an underwater house and cannot provide for her and the child!
Forget the slide show.
Just my 2 cents, appologies for being OT.
Given that she can toss lines like “crushing her dreams” at you I don’t think any amount of analytical effort will save your hide. You’ve given her too much power. Your relationship sounds very much unbalanced, stacked against you. Man up, tell her you will in no way mortgage your and your child’s future to her unaffordable fantasies and if she wants to buy a house she can buy it in her own name, with a contract that she will be fully responsible for the mortgage in case of divorce. Personally I would never get into a situation like yours, but in my opinion there is no option for you other than holding your ground and refuse to jump out with her without a parachute.
Tell her to dream better dreams than financial suicide. And try to get her away from her ‘friends’ - distract her, fill up her free time with activities that don’t involve her friends. Weekend trips to Stockton and Manteca might help.
FWIW, I live in East Bay, am in my mid-30’s and have a 2-month old child, paying a relatively steep rent for a 4BR house in Fremont. Just realized you are not married. I’m shocked she has tossed that “dreams” line even before tying the knot.
“I’m shocked she has tossed that “dreams” line even before tying the knot.”
LOL. I guess it’s not all bad. After all I don’t see that a wedding was one of her dreams, unless having a kid was a way of getting someone to marry her and then having a ‘big’ wedding will be next on the agenda. My older son was engaged to a lady who had friends that bought $700K houses upon marrying and had $50K and up weddings plus the leased Mercedes, and then one day he came out of the trance and moved on. Today he is dating a well grounded lady that takes her cues from her mom and dad and all is well.
There are more lofty goals in life than home ownership. The SF bay area is one of the most beautiful areas in the world. Go look at the Pacific. Take a hike at Point Reyes. Stare up at the redwoods. Nobody can own space. We are but temporary dwellers in this space, and trying to make it our own is a fruitless expedition. Enjoy the time you have been granted. Things like arguing about home ownership fade away when confronted with the scenic beauty of this area.
Unsolicited advice from a guy who has “been there”……
-Don’t be in a rush to buy the house because of the kid…….they don’t know/care where they live, and (assuming he/she will go to public schools), it’s not important to be in a “good school district” until they are actually in school.
-People ARE NOT in a rush to move to San Francisco, especially those with families. Buddy of mine quit his job, rather than accept a transfer to the Bay area. Why? Pay adjustment didn’t come CLOSE to covering the cost-of-living increase. Equivalent house in the Bay area, (in comparable neighborhood) was FIVE TIMES as much as what he has now (in KC, Mo. area).
Let her run the numbers, and have her SHOW YOU how it is affordable. The numbers “are what they are”.
-And…….has she thrown this “crushing her dreams” stuff in your face before? Is it “your job” to “make her happy”? Don’t fall into that trap (like I did with the ex). A marriage is a partnership; when one side of the partnership feels pressured into doing something against their better judgement, believe me, at some point in time you are going to start resenting it…….especially if events eventually justify your view of things.
Eventually, you will get tired of trying to “make her happy”
-People ARE NOT in a rush to move to San Francisco, especially those with families.
I grew up in NYC, and I like city life. I live 40 miles south of San Francisco now.
I would NEVER consider living there!
Too many homeless people, too many wacky liberals running things, too many violent/aggressive bicyclers, and too much crime for a city that size.
I hate having to go up there on business. I prefer the days when I have to get on a plane for a meeting in Burbank then when I have to drive into SF. Complete pain in the ass driving and parking.
I’m not so sure there’s a huge market of people who want to live there.
My thoughts are that all of the advice to try and rationalize “the numbers” is wishful thinking. This is purely an emotional argument… and one that “moravec” could lose - no matter what information he provides.
For some reason, many native Bay Area women have a very bad case of “Keeping up with the Joneses” - and I am afraid this situation may be no different.
For some reason, many feel entitled to live here, no matter if they and their spouses incomes reflect reality, or not.
“Good luck!”
Dump her!
I know this is hard-edged and ruthless what with a sprog and all but tell her that if you are “crushing her dreams”, she should come up with the downpayment dough herself, sign a pre-nup, and agree to pay for it all on her own.
See how far that flies.
This is all BS, Suzanne-style.
Life is hard enough without having to go through emotional nonsense like this.
I agree and then offer to pay rent for your portion based on prevailing rental rates. That should put an end to the wear and tear of a time sponge.
Economic compatibility is really really important in any relationship. It’s a bed rock at the end of the day along with love, respect and intellectual compatibility, and all that jazz they talk about.
Aah, the things you learn when you are no longer in your 20’s. Sigh.
Well that explains why I’m still single. The only woman who’s my economic equivalent is that homeless lady the next street over, but she’s smarter than me, so there goes intellectual compatibility. Plus I’m pretty sure she doesn’t respect me either.
All of these homeless folks you meet are hundreds-of-thousands dollars richer than your typical FB in Elk Grove or Stockton whose net worth is negative $150,000 or more.
Maybe you can come to a compromise. Like maybe make an agreement to save like crazy and the buy the house when junior is ready to start school. It’s likely that even if the bottom hasn’t hit by then, the majority of losses will have happened.
Yeah, that’s pretty much the plan in my head. We know where we’d like to live already (Albany), and could easily just rent a house there if it’s not the right time to buy yet. I simply need to provide her with the info to come to the same conclusion that I already have. Like Steve Jobs giving a new product presentation.
Hi Moravec- Just wanted to say that it’s good not to immediately dump one’s significant other, every time they say something irrational or hurtful. While love does NOT mean never having to say you’re sorry… there’s a lot of stuff that transpires in the course of a long and stable relationship. One of the best ways to accumulate wealth is to have a long-term partner you can trust to have your back.
Thanks, and no kidding. I didn’t come here for relationship advice, so I’m sure as hell not listening to folks who think they know someone enough that they must be dumped based on one anecdote. I’m in it for the long haul with this woman, and just needed to find some more of the info I needed to show her what I’ve learned (rather than avoiding the topic because it was a tender subject). She’s a reasonable person, and it wasn’t fair to be telling her that I’m right without backing it up with some evidence. No one likes a know-it-all.
She’s a reasonable person, and it wasn’t fair to be telling her that I’m right without backing it up with some evidence. No one likes a know-it-all.
Denial and excuses will not benefit you. Bitter medicine will. There is alternative to dumping her. Read my earlier post again.
“but I need things that are exclusive to San Francisco and the East Bay”
Median house price, year over year, select California counties and cities:
http://www.dqnews.com/ZIPCAR.shtm
“Map of Missery” showing what percentage of new and refinanced mortgages have ‘payment options’ (such as option-ARMS, to ‘enhance’ affordability).
http://www.businessweek.com/common_ssi/map_of_misery.htm
Business Week article (from Sept 2006!) detailing what troubles could (and did) happen with these types of “affordability products”:
http://www.businessweek.com/magazine/content/06_37/b4000001.htm
Lastly, just give in and go house shopping…but get pre-approved for a loan first. Se what sort of payments you would have to make, how much down you would have to put in, and what sort of scary loan program you would have to take in order to “afford” it. Interest only? Option-ARM?
Explain to here the lifestyle changes you would have to make in order to pay 40%, 50%, 60% of your income on housing costs. Could you eat out any more? Go out to movies? Vacations?
Lastly, when you see the friends that just bought, express angst that you really would like to be a homeowner, but you just can’t make the numbers work with the loan amounts, down payments, monthly outlay on a conventional 30 year fixed rate loan. Then ask them how they did it…what loan programs did they use, how much did they put down, etc. The conversation should be interesting, and might give you something to talk about with your fiance..ie, does she really want to take that kind of risk?
If you can hang on for another 6 months, I think it will be easier for her to agree to wait.
Thanks so much–this is what I was looking for. She’s a rational person, so when faced with the hard numbers I don’t think there will be a problem. I just hadn’t marshaled them because *I* was already convinced. Putting together a Budget While Renting and a Budget While Paying Large Mortgage (and Maintenance, and House Insurance, etc.) should make the situation crystal clear.
Maybe I should introduce her (and you) to my sister who probably lives a few blocks away from you.
She will b!tch-slap your woman seven ways from Sunday.
I know, I know, I’m proud of my sister that way.
However, if your point of comparison is Steve Jobs, you’re a lost cause. We make ruthless fun of the little-loser-Applets who work for him.
I can relate. My wife recently said I “ruined her life” by selling our McStucco shitbox in Sacramento in Jan. 2005 (in flood-plain Natomas, no less) and moving to New Mexico.
It’s pretty much ruined the marriage, and when the bottom in the market does come, I don’t think buying a house together will be a particularly smart move (we have two young daughters, who make putting up with such vebal abuse worthwhile). On the bright side, it has been a wonderful “growth experience.” Things like this are good to find out what’s important/not important to people. Too bad they usually come only after you have signed a legal document pledging to live with the person the rest of your life! Good luck!
Watch out for people who say things like “you ruined my life” and “You’re crushing my dreams” - they refuse to take responsibility for their own happiness and are typically expert blamers. If they can get you to be responsible for them, then they can blame you for whatever happens. The are expert victims. I run like hell from such people and would never marry one. Just sayin’…
Has she heard of the “Subprime crisis”?
People like her single friend who bought a 700,000 dollar house are the reason for that crisis. They eventually lose their houses.
You’ve got to find 30 year mortgage payment tables. There will be 360 entries. Show her the numbers for a 700K home.
My fiancee and I had a similar conversation recently, except she was just floating the idea of buying sometime in the next year or two. We’ve had many talks about the market and she understands that “now” is a bad time, but still wants to think about a place in the near future. We both make good money, and live in the bay area as well, and it’s certainly possible to afford a small house/condo with traditional debt/income ratios and what not. In fact we have 20%+ down saved already and stable jobs in stable companies. I provided all the logical stats and reasoning why this year and maybe the next couple would be bad times to buy, but it was easy to see the sadness/pain in her face. After all, her coworkers and friends have been buying houses on shakier finances and we are crammed in a tiny apartment. Well, to lift her spirits, I outlined what we might do instead of buying now… instead of buying a starter home/condo and strapping ourselves to a 15 or 30 year mortgage, we’d save up some serious dough and buy a starter home outright in a few years. OR, we buy a real nice place (the kind we may stay in till retirement) with a whole lot down + reasonable mortgage, and skip the starter cracker-jack box all together! Heck we’d save on housing transaction costs and we’d get to the nice house much faster this way.
Sometimes it just takes a larger “dream” to accept delaying gratification… she perked up on the thought of buying a much nicer home later. I don’t even mind her looking at the million dollar homes on craigslist, because it’s not just a dream if those drop 30-40% from peak and we bring a huge down.
MSM speaking directly to the koolade induced denial of home debtors. Pretty amazing.
http://money.cnn.com/2008/02/07/news/economy/homeowners_views/index.htm
American Century Investments Survey Indicates Many Americans Will Save or Invest Tax Rebate Money
Friday February 8, 12:45 pm ET
http://biz.yahoo.com/bw/080208/20080208005590.html?.v=1
Bo!!ocks.
Will believe that when I see it. Americans will spend every penny and then some if given half a chance.
Invest in what? 6-8 hundred bucks isn’t going to make them rich. I bet most blow it within a week.
4 out of 5 dentist recommend Trident.
Challenges posting URLs on HBB today. This is a short video that I hope links out correctly.
Craiglist: An economic indicator?
tinyurl.com/yro6rm
After floating around this blog for a few years i thought i might contribute my 2 cents on how us extremely poor do i make 800 per month my G/F make 1500 we are both on SSDI and we are not just cruising or able to work but choose not to. We are both disabled due to different conditions mine is a failed lumbar fusion which has left me unable to walk without aids i have to take 7 different pain relievers daily plus nerve blocks and other things. So you can see we know how reality is for us my g/f just paid off her townhome this year. Now i do not have any type of HD nor do i want it but it seems the gov and the corparations want me to spend money i do not have food has gone up more then we can really afford and get this i do not qualify for food stamps. This blog really points out a lot of problems with things but after reading how much some of you make and your talking about rich or poor some of you are rich beyond anything i could ever imagine. For further info i would love to work but cant i am only 48 and still have a ton of time left. So sometimes i might let you know what i see in our town and how prices are going here this being a suburb of Chicago right now i see almost 4 for sales signs for every 10 houses and have watched prices drop over the years at one point our home was worth around 150,000 and its now worth less then that. So just to close all those that think they have it bad just imagine being us.
If her home is paid off, surely you can move in and contribute to the food, etc., no?
My honest advice would be to learn to cook. Most of the cost of food is really the “processing” which basically comes down to oil and not the cost of food (processing = transformation, packaging, marketing, and transport.)
I will be happy to provide specific advice. However, that may mean changing your “pre-conceived” notions of what constitutes food. Plus, I’m a mean bitch so you will have to deal.
For the record, I do believe that you can eat very very well for quite little. I’m a serious cook, and I lived in Chicago for many many years so I can even give specific advice.
On that amount, it may be slightly tough but far from impossible.
Cheerio!
Not so easy to cook when you can’t even stand up.
Any contrarians out there?
http://www.bloomberg.com/apps/news?pid=20601087&sid=ap5RXayJzChk&
Where’s the profit? Those subprime mortgages are already pricing in armageddon. Bear is two years too late to make money on this.
It is not to late. Some of the most profitable shorts are from stocks that go from $100 to under $10. Bottom pickers abound resulting in liquidity, if there is sound reason to short, do so.
When there is liquidity, I regard everything with the intention of shorting. If there was liquidity in the CDOs I would consider shorting before buying. The haircut requirement % is the same for shorting after an 87% drop as if it is for shorting at par.
Everybody agrees that Subprime CDOs are worth zilch (or worse)…….so it must be the time to buy!
At this point, isn’t this like trying to “hedge” the Titanic AFTER it hit the iceburg?
Look at all the closet space!
Founders of bankrupt mortgage company starting (you guessed it) another mortgage company:
http://www.azstarnet.com/sn/biz-topheadlines/224169
Even more on this story at:
http://www.azstarnet.com/sn/firstmagnus/
Think nobody has any money?
http://cgi.ebay.com/5-000-000-5-09-GIA-FANCY-PINKISH-PURPLE-DIAMOND-RARE_W0QQitemZ120218127330QQihZ002QQcategoryZ3824QQssPageNameZWDVWQQrdZ1QQcmdZViewItem
A former jeweler once told me that that stuff is worth 18% of the GIA appraisal, if you want to sell it fairly quickly.
http://tinyurl.com/22nm6k
I like this one better. And its cheaper
Blue Nile
“…will take her breath away…”
Must be a “her” thing. All I think when I see it is….”meh”
Hehe. Did you see the part about “no payments for 90 days” right under the price? Also, you can get up to $2000.00 of buyer protection from Paypal. Quite the “Power Seller” there.
Yup, I know I’d buy something like that on eBay - NOT.
“No man should go through life without once experiencing healthy, even bored solitude in the wilderness, finding himself depending solely on himself and thereby learning his true and hidden strength.”
Jack Kerouac
..sounds like Henry Thoreau-think to me sans the mind-altering drugs that Kerouac and his Merry Pranksters copiously partook of.
..as for all those ‘walk away’ from my signed legal mortgage responsibility slackers, well perhaps our society should renew the debtors prisons of old. Let’s see how quick those irresponsible mopes would be then to walk away from their legal responsibility if they knew they had years of confinement stamping out license plates and having a big nasty bubba take their cafeteria tray away from ‘em. Hey! Criminal Justice and the U.S.Prison system is one of our few booming growth industries.
Unfortunately (and I know this is rather too simplistic), the ones walking away really aren’t screwing the banks; they’re screwing us, their neighbors, whose Middle America deposits in said institutions went towards their inflated loan. We can all say
%$&# the establishment; they got what they deserved all you want… but God forbid that everyone who has a savings account would ask for their account monies right now. I tend to understand the walk-away mentality from a common sense point of view, without being too judgemental about it. But… it is something that my generation would have been ashamed of doing. If a society that is based on contracts suddenly supports the notion that contracts are meaningless, we are just a few short steps away from anarchy.
It’s not the contracts that were meaningless. The contracts were that they would either pay the mortgage, or their houses would get taken and their credit would suffer. Well, give them a choice between being shackled to a depreciating asset and suffering through several years of bad credit (which apparently doesn’t hurt that much any more, as I’ve heard anecdotally), it should be pretty clear what the rational person would do. What amazes me is that these banks, entrusted with the life savings of all sorts of people, didn’t bother to even think about something that was so easy to see for many. Easy money corrupts, and distorts borrower behavior. This has been true since, I think, the beginning of time. I really don’t think it’s a generational thing; the controls over money lending just broke down in this cycle.
“Well, give them a choice between being shackled to a depreciating asset and suffering through several years of bad credit (which apparently doesn’t hurt that much any more, as I’ve heard anecdotally), it should be pretty clear what the rational person would do.”
Absolutely… if there is no unpleasant sanction at the end of the line. But the money well- it is a-dryin’ up. I’d imagine those anecdotal instances of a happy post-default life are going to become fewer and far between as the pissed off masses retaliate, either formally or informally.
Yes. Put them in prison. The solution to everything, it seems. The real problem is idiots keep lending to deadbeats. Irresponsible mopes, put ‘em in prison… The idea of a mortgage is that if you don’t pay, they take the house. That should be the big punishment. Problem is, the idiots kept lending these people money even though they knew that the house would be worth less than what they were lending them. This is why you ask for 20% down! What’s the point of a secured loan if the collateral you’re securing it on is worth less than the loan? If the house becomes a liability, what do you think people are going to do? I can’t understand that there are people on this blog who saw the bursting of the bubble coming, but couldn’t predict the behavior of the upside down homeowner. People keep bringing up this “responsibility” thing. What then, would they do if they were in that situation and they had a choice between one financially better situation and another worse one?
I would never put myself in a situation where foreclosure would be a better choice, but I can definitely understand the logic of people walking away from their loans.
Was listening to a Fresno radio station and apparently there have been more cars broken into, this month already in Clovis, than last year’s entire February.
These are the chinks in the armor, i’m always on the lookout for…
Breaking into a car is a coward’s crime. It requires no special skills,(a rock through the window) and often you can perpetrate it, when nobody’s around.
This type of crime has quadrupled in Clovis, from just one ago.
someone ransacked my car a couple of weeks ago. all they got away with was a sack of boston baked beans that i had in the glove box!!! pissed me off!!
A Coast Guard friend of mine had his Honda’s seats stolen once from his office parking lot near the wharf in Seattle. Bad news was they dumped the car a half mile from where he lived. Turns out he had special seats he hadn’t been particularly aware of. Took several months to get the right ones sent (nothing local and they sent the wrong ones first.)
After that, he put in an alarm and parked it under his second story apartment window, and slept with a 9mm under his pillow. The “I pity da fool” strategy.
This is fun (I imagine it’s been posted before ;(, from Jan 28 )
http://seekingalpha.com/article/62275-new-models-show-700-billion-in-credit-losses
Several back-of-the-envelope-tongue-in-cheek ways to estimate about $700B for the cost of the credit crisis.
Also:
I overheard a couple arguing recently: Husband: “Listen honey, I promised Angelo Mozilo that I would pay him back every dime that he lent us at that 1% teaser rate that just jumped to 14%. Angelo is a good man! We can’t screw him! He trusted us!” Wife: “Husband, you are an idiot. When we got married you promised to love, honor and cherish ME! Not Angelo Mozilo! We have kids! We can just rent for a couple of years and buy a new house at half the price of the old one.” Husband: “It is morally wrong!” Wife: “You are an idiot. I am taking the kids and moving in with my Mom, I hope that you and Angelo have a great time sunning yourselves by the pool that we can’t even afford to heat. Dumb ass!”
and:
Don’t ask yourself what millions of people will do when they can’t make their mortgage payments. That is the easy question. Ask yourself what tens of millions of people might do when they can make their mortgage payment but just don’t want to anymore.
Thats why it’s in the best interest of the lenders that will lose to re-write that 14% rate down to a manageable loan interest for some of these borrowers .
Angelo Mozilo is not the party that put up the funds ,but it might be some pension plan that put up the funds . Angelo Mozilo just made money making the lousy loan and selling it to the pension fund and Cuntrywide might be servicing the loan only .
Countywide got caught with a bunch of unsold loan paper they made I believe when the credit market exploded ,but that was just toward the end .
I just think that borrowers should try to work with the lenders first before they just walk .
I really don’t think that the banks are going to be able to do very much with liar loan speculator loans that are currently vacant .