Bits Bucket For July 12, 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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Did Bloomberg just say “run on the bank”?
“…to be seized by U.S. regulators after a run by depositors left the California mortgage lender short on cash.”
Can you say that?
I don’t see what the big deal is with Indymac. They went away a long time ago. It’s sort of like an old guy is on his deathbed for months and then it’s big news when he actually passes.
“In what regulators called the second-largest bank failure in U.S. history.”
The markets and bank runs are a confidence game. Many ppl never even heard of Indymac, much less followed their stock. However, those same ppl, if worried about their accounts at banks such as Wachovia will further lose confidence causing domino runs and think twice about their investments in financials. I think headlines “SECOND LARGEST BANK IN US HISTORY” has an impact on confidence much greater than falling stock prices with respect to a bank I would say most ppl have never heard of. It is pretty big news.
“BANK IN” = “BANK FAILURE IN”
Well, I lived through a time when every single major bank in Texas failed. All of them. Think about that. I never even saw an Indymac bank until I visited Pasadena recently. Again, big deal.
Someone has to be first, and that first impacts existing confidence making ppl more prone to future runs. What effects home prices most is ppl’s confidence in future appreciation. The same is true of the markets. There is a major deviation between what news impacts ppl directly, and what news impacts ppl’s confidence. If I did a poll last Wed regarding what percentage of ppl heard of IndyMac I doubt I would get many positive responses. If I did a next Wed. if they have heard of any recent bank failures, I suspect the response would be high. With respect to herd mentality, that is what is important.
Reading between the lines of today’s lead WSJ article, I get the impression IndyMac was a big provider of Alt-A financing of jumbo loans, which could potentially be a big deal going forward for the price of high-end coastal California housing if a substitute source of financing does not materialize.
IndyMac was set up by Countrywide in 1985, but the two companies severed ties in 1997 and became direct competitors. The company’s name stands for Independent National Mortgage. It was created to specialize in jumbo mortgages — those that are too big to be sold to government-backed Fannie Mae and Freddie Mac. In 1997, under the direction of Chief Executive Michael Perry, a protege of Countrywide chief Angelo Mozilo, IndyMac set off on its own.
The company grew quickly, pioneering the issuance of so-called Alt-A mortgages to people with blemished credit histories. The loans have gained notoriety as an example of the type of lax lending that came to characterize much of the mortgage industry.
Ben:
“Well, I lived through a time when every single major bank in Texas failed. All of them. Think about that. I never even saw an Indymac bank until I visited Pasadena recently. Again, big deal.”
You happened to be in the worst-hit financial area by far, as Texas took the brunt of the price of oil collapsing.
Banks in California @ the same time were doing just fine.
Imagine the 1980’s Texas scenario, countrywide?
That’s more realistic…
Cash sort of looks good now, don’t you think?
What part of mutually assured monetary destruction would cash come out, unscathed?
Would people still respect rectangular pieces of paper, promise sorry notes?
Combotechnacrat;
I agree with you most of the time but a voice in my head asks what do we do if dolla’s ain’t worth nuthin’?
I know my rent and bills will be paid with dollars but….
Who will be next? WaMu or Wachovia?
People who stand in line at banks or peer through the windows aren’t there because their “dolla’s ain’t worth nuthin’”.
Take a look around you and tell me what you see. Do you see people desperate for cash to pay their bills, to buy gas, to make their mortgage payments? That’s what I see.
Money is appreciating in value because money is tight, because deflation is at hand. Those with money aren’t eagar to let loose of it; this statement can be verified by examining a chart that shows money’s velocity, the rate at which it is changing hands.
Also, money is is appreciating in value because money is being destroyed on a daily basis via writedowns. This make the remaining money scarce thus more valueable.
Official writedowns aren’t the only way money is being destroyed; the “wealth” of people’s homes is evaporating as is the wealth reflected in their stock holdings - their IRAs, their 401Ks, their mutual funds.
Cash remains king.
People complain about the high price of gas and food, but if the dollar isn’t worth anything why should they care how many dollars it takes to get these things?
They only care because to get gas or food they to forego getting something else. They have to make choices.
Lots of money translates into lots of choices and vice-versa. Lately the coices are becoming fewer and fewer.
coices = choices
“People complain about the high price of gas and food, but if the dollar isn’t worth anything why should they care how many dollars it takes to get these things?”
Price of Gas 9/10/01… $1.50 a gallon
Price of Gas 7/10/08… $4.50 a gallon
You lost 2/3rds of your buying power and don’t even realize it, do you?
You sound like a “whiner” according to John McCain’s chief economic advisor.
We’re A “NATION OF WHINERS” according to Phil Gram…the big Texas oil man who wrote John McCain’s economic plan.
Nowadays, when you hit somebody in the head with a Truth 2×4, all it does is faze em’…
Ain’t it the truth.
Today’s WSJ says IMB is No. 3:
1. Illinois National Bank & Trust Co. (1984) $40 bn in assets (1984 dollars?)
2. American Savings & Loan Association of Stockton, CA (1988) $30 bn in assets (in 1988 dollars)
3. IndyMac Bank (2008) $32 bn in assets (2008 dollars)
Looking at some of the photos from this morning, depositors outside the bank branches, looking in through the glass doors, not quite understanding what happened, these people may also be shocked to find out that the value of their home has gone down.
I didn’t even know IndyMac was still in business — I thought they had imploded some time ago.
Same here, I’ve read posters dissin’ Indy Mac for so long - I can’t imagine that the friends or relatives of any HBBer still had any dough parked there by now.
IndyMac was quite the player in the L.A. area, and forget about interest rates and other numbered criteria that used to tell you what is happening financially.
It’s all about the psychological now, which tends to not be very logical. A panic mentality, which means more banks will be going bk, whether they deserve to or not.
My mom called me in a panic a week ago about the library where she volunteers, as they had $40k in IndyMac.
This is the same mom that I couldn’t talk any sense to about what was going to happen (I pleaded with her to turn stocks into Gold, starting last summer) to all stocks real estate or financially oriented.
This is the same mom that watched her Fannie Mae stock go from $60, until she saw the light and bailed @ $17
This is the same mom that watched her paid off house fall 35% in value in the past year.
The only question I have for you exceptionally bright people is?
Why is your money still in any American Bank?
To be safest, if you don’t put your dough in an American bank, where should you stash it? Seriously. At least we have some protections. But when you send it overseas, what do you have then, considering Europe’s probably 3 steps behind us in this spiral, right?
This is no time to be a trarian, in the way one thinks.
I’d love to witness a lively, but civilized, debate as to why anyone should expect the Eurozone or the Asian Tigers to fare better than us. The E.U. has some serious problems - but they hide them well in those lovely gingerbread houses. As for the Asians, they work for less and and their economies are growing - but they too are “up against it” with regards to oil and other resources.
Where is proof of the Great Decoupling? Despite the current lag in events - this will be a global event.
We are all tied together in a fashion unimaginable, just 50 years ago.
Chains are only as strong as their leaky wink.
Comment by aladinsane
2008-07-12 07:31:28
This is no time to be a trarian, in the way one thinks.
Or Rotarian, Optimist or Odd Fellow, neither!
How’s the paper biz treating ya, joe?
Say it ain’t so, joe?
There really was wide-spread fixing of games, in this World Series of misadventures in real estate?
edgewater: Asians will fare better (than the average American, or non-Asian, for that matter), because they are more intelligent, have a healthy skepticism of democracy, and are physically healthier and more attrractive individuals.
test
Aside from Paul’s tongue in cheek reply - I hope. (I do not think I have ever been called attractive, so maybe he is right.)
The Asian countries have the highest savings rate in the world - from China and SouthEast Asias ~40% to a low of 23% in Japan. A lot of money to weather a downturn.
The net current surplus in Asia is approximately $6T. A lot of buying power.
The US is not the largest importer of Asian goods. If US demand for goods from Japan drops by 20% - an enormous drop - the Japanese GDP drops by 0.5%. Most of Japan’s exports go to China, Korea, Europe and South America. Most of China’s exports go to Europe, not to the US. Most of China’s imports come from the Asian countries including Japan, Thailand, Korea, Vietnam, Malaysia and India, followed by imports from North America and South America.
There is decoupling, but it is not total decoupling China’s growth will slow from 10.5% to 8.5%. For China that will be like a recession!
As a dirigisme, China is concerned with one thing, the ability to provide 5MM jobs every year. China has $2T to play with.
Not tongue-in-cheek at all, hoz. Americans used to be more physically fit, energetic, intelligent - therefore more attractive - and less democratic. Unchecked democracy, especially in non-heterogeneous societies like the U.S., is very economically debilitating.
Paul in Florida= formerly Paul in Jax
non-heterogeneous= non-homogeneous
Why is your money still in any American Bank?
Because I remember 1980 when we were threatened with Nuclear Winter, high inflation, enormous deficits, and an energy crisis, yet it really was morning in America. Gold reached the equivalent of $2000 per ounce in today’s dollars and dropped down to the equivalent of $600 in 2000. In 2016 we will get our next Ronald Reagan in the Oval office and we will feel good again.
No, that’s next year, with Obama
Bill in Maryland…
We tried to make you see the light last summer, when you were plowing into t-bills and stocks.
Is the picture coming into clearer focus, now?
Alad, yeah I remember last summer and I also remember all the haters beating me up here too.
Uh uh, I’m still blind. Yeah seemingly more severe problems abound now than in 1980. But waiting in the wings are a growing number of people who left the Republican Party and are overwhelmed by the bailouts and out of control spending on the Iraq war and the traditional Demoncrat baby - medical benefits, namely the Prescription Medical Benefit.
But at age 21 in 1980 I was very impressionable. Fortunately I had no money to invest, otherwise I would have followed Howard Ruff’s advice and buy up gold even at $799 per ounce.
Moderation is virtuous. With several years of living expenses in metals and much more than that amount in government securities, I can afford to keep buying stock mutual funds. Note 20% of them are international, including Vanguard Emerging Market international fund (VEIEX).
This is only 1980 in your mind, because sum of the parts look familiar, but don’t caught in the trap of thinking that history has to repeat itself in the same fashion.
We are in uncharted territory…
Indymac’s failure is not the story. It’s the machinations behind the scenes. Did a certain senate member pull the plug on the insolvency farce? In response, did a washed out retiree start a chicken run on a well known entity?
after a run by depositors left the California mortgage lender short on cash
If a bank becomes short of cash due a run on deposits, the Fed can just lend the bank money to make up for it. In effect the Fed would just replace the lost deposits with its own deposits.
That’s a liquidity problem, and dealing with them is what the Fed was created for.
If a bank’s liabilities exceed its assets, that’s a solvency problem. You can’t fix that by loaning money.
“…a solvency problem. You can’t fix that by loaning money.”
It appears the Fed has been learning that lesson on an ongoing basis for ten months now.
Guess I picked a pretty bad week to give up solvency sniffing?
Paulson: No Shareholder Bailout
Treasury Secretary Paulson is insisting that any potential rescue plan for Fannie Mae and Freddie Mac not benefit the companies’ shareholders.
It sounds as though yesterday offered some high drama for the PPT.
Worst fears ease for now on mortgage giants’ fate
By Stephen Labaton
NEW YORK TIMES NEWS SERVICE
July 12, 2008
WASHINGTON – A day that began with a stomach-churning drop in stock prices for the two largest mortgage finance companies ended with a measure of relief, after government officials and lawmakers managed to calm investors worried about the two companies’ health.
…
Earlier in the day, Paulson sought to calm investors concerned that the stock of Fannie and Freddie could be wiped out if the government took over one or both of the companies and placed them under the control of a conservator, as the law permits. The administration has prepared such a plan if the companies continue to decline, people briefed on the plan have said.
“Today, our primary focus is supporting Fannie Mae and Freddie Mac in their current form as they carry out their important mission,” Paulson said.
Officials said Paulson wanted to convey the message that even under a conservatorship, the companies would not be nationalized. Instead, a conservator would have to prepare a plan to restore the company back to financial health, much like a company in Chapter 11 bankruptcy proceedings.
Federal Reserve officials took pains to dismiss rumors swirling through the markets and in Washington that the central bank was considering a new program to lend money directly to the companies through its so-called discount window. The Fed began two such programs to lend money to the nation’s largest investment banks in March.
“Fed officials are following the situation closely,” said Michelle Smith, the Fed’s chief spokeswoman. “We’ve had no discussions with the companies about the discount window. We don’t discuss the range of options we are considering.”
No discount window borrowing huh?
http://www.marketwatch.com/news/story/fed-can-lend-just-about/story.aspx?guid=%7B4127A735%2DEDF4%2D48B6%2DA964%2D214F589EECB7%7D
That was the point I have been trying to make, intervention (I am hesitant to use the term “bail outs”) in fact can be targeted at stemming financial crisis while letting what some view as the culpable take a major hit, and that’s the correct view to have when implementing a course of action.
I am worried, however, that the financial upheaval will cause more politicans to push for homeowner bailouts and assistance. This of course is futile and extremely harmful. The markets are unsustainable because housing is not affordable, letting them fall to affordable levels, and using smart intervention to try to lesson some of the impact on the innocent is the only way to get us back on track.
The question of whether the GSEs have an implicit guarantee appears to be coming to a head. I am guessing the question will be resolved by this time next week.
“The crisis has been exacerbated by the strange hybrid nature of the two companies, which have prospered because they are seen as having the implicit backing of the U.S. government. Chartered by Congress to ensure a steady flow of money into housing finance, they can borrow cheaply because investors believe the government probably would rescue them in a crisis. Yet they are owned by private shareholders who want profit growth and dividends.
The implicit guarantee has allowed the companies to borrow at lower rates and buy more mortgages, providing a benefit to shareholders. There’s a belief among many politicians and officials that it is the shareholders — not taxpayers — who should bear those risks because they benefited greatly in the past from the implied government backing.”
I’m a little concerned about a money mkt fund that holds a lot of GSE paper. Is it just a matter of (even) lower returns or the principal itself declining?
Depends on the market’s valuation of the implicit governmental guarantee. Im sure we will hear more details in the near future.
Oh boy, looks like it’s back to the treasury fund for me…
“…back to the treasury fund…”
A day late and a dollar short…
A CREDIT TALE
Once upon a time, a young man and a young woman met and fell in love. The man proposed to the woman and she accepted. They were married in 1993.
In 1995 they bought a modest house. The man lived within his means, and over the next 10 years he made the mortgage payments on time every month. Their equity grew until they owed 25% of what the house was worth. During this time the man and woman conceived two wonderful children.
One afternoon in December 2007, the wife came to her husband with a strange look in her eyes. She needed money in a bad way. She was in debt. The husband didn’t understand. They both had good jobs. He had money in the bank and for the first time in his life felt secure that their retirement needs would be met. Why was she in debt? How much money did she need?
The wife told her husband that she had $20,000 in credit card debt. The husband was shocked. The husband was angry with himself for not monitoring his wife’s spending habits. He wondered where the $20,000 went. “With all of that debt, why don’t we at least have nice leather furniture and a plasma TV?” he asked himself. He paused to consider the annual trips to Europe his wife had been taking over the past few years with her friends. She never asked, she just told him that she would be doing it (”You only live once!” were her exact words.) The husband gave her the $1,000 budgeted for Christmas, plus another $2,000 in cash.
One day in January 2008 the wife came to the husband again. “I’m screwed,” she said. Checks had bounced. By this time the husband was paying all of the bills, including the utilities. All of the wife’s income was going to pay off the credit cards. “I owe $30,000,” she told the husband. “I went to the bank and they said we could take out a home equity line of credit.” The husband refused. The husband said she should talk to a debt counselor because there are things she could do to reduce the amount owed. When the husband told his wife “no” she had a desperate, feral look in her eyes. The wife didn’t want to do this because it would damage her credit rating. Her credit was the most important thing.
The wife shut off the husband. She became distant. No longer did she snuggle up to her husband. She took a second part-time job and rarely saw her husband or the children. She worked the second job for 5 months. When the couple’s economic stimulus check came, the husband gave it to her.
One morning in late June, the wife announced to the husband that she was filing for divorce. She had used the economic stimulus check to hire an attorney and file the papers. She already had a new apartment lined up. The wife wanted the husband to give her half of everything that he had worked for. The husband didn’t take expensive vacations to Europe. The husband drove a beater car. The husband didn’t have the latest expensive cell phone. But that didn’t matter, and the husband was soon presented with the divorce decree. The husband was shocked to discover in the decree that the wife didn’t owe $30,000 to the credit card companies. In fact, she had over $50,000 in credit card debt.
Now the husband is forced to sell the house in a depressed market and he is very, very upset. No longer does he see the children every night. All of his plans for the future have been torn to shreds. He is a grown man who cries every night in an empty house, pining for the life he once had.
THE END
Well, this guy is still better off than that weird uncle we all have that never dated.
Nah. Poodles dont use credit cards and are very loyal.
“Nah. Poodles dont use credit cards and are very loyal.”
Pet Essay Writer!!
Damn!
That is a sad commentary on the state of U.S. divorce law, which is rigged to screw men.
I hope that is not your anonymous tale…
Actually it’s rigged to screw the financially responsible partner. That is not necessarily the man. I speak from experience.
Fair enough. Sorry for the sexist remark, but I have a couple of close (male) friends who never have the opportunity to see their kids (blocked by ex-wife) and still pay child support through the nose, thanks to our divorce law and court system.
Settlement and custody are two very separate issues in the courts. I agree that many times men get the shaft where kids are concerned. However, once again my situation is unusual. I agreed to accept only 75% of the child support the state said was due (that was the most my ex said he wanted to pay) and even then, he never sees his son (his choice - I’ve never denied access). He lives about an hour away (he moved away, not me) and hasn’t seen his son since January 2006.
Exactly correct. The identical story happened to me, but with the genders reversed, and it was $60k in credit card debt, not $50k. His entire income went to pay those monthly installment payments; I was left to pay the mortgage, household and child expenses. But at divorce, our assets were divided 50/50, even though I never owned a credit card nor used one during the marriage, and I put him through school and worked 2 jobs. Divorce favors the irresponsible partner.
My story doesn’t involve debt, just my own stupidity. I paid all the bills (he never helped with anything - not rent, not utilities, nothing) even though he made two times my salary. He wouldn’t open a joint bank account with me and I eventually found out he kept his ex-girlfriend on a credit card. When I’d finally had enough of supporting him (and he refused to help), I filed for divorce. I figured there should have been a ridiculous amount of money in his bank account after all those years of not paying one red cent in bills. But it was not there. To this day, still no explanation. I spent too much already in lawyer fees to investigate so I just threw in the towel. Seriously, I paid more to my lawyer than she got for me.
He might be single now. Any responsible women looking for a responsible man with an ex who has serious spending habits?
Nice guys get screwed-and not in the fun way.
Seriously, that sounds like my first wife.
AC,
Sad and this story is happening all of the time.
IMO the husband needs to get over it, get in shape, get a couple of new GF that are younger and prettier that the ex, and “act” like he’s living the life that’s better than he ever had it. That way his ex might see what she once saw in him, see the error of her ways, and then seek to come back.
Lip
PS: phillygal I owe you an apology. I flew off the handle yesterday and called you something when I didn’t realize you were being sarcastic. Please accept my apology.
Why would he want her back?
So he could tell her to “F—” off.
Not worth it. Just stay with the younger/prettier girls and learn from the mistake (PRENUP people, PRENUP).
If the woman (or man) was a harpy once, they will be a harpy again, even if it seems like they “fell back in love” all they really love is your looks/money/power/status/etc.
The “less affluent” partner needs to realize that their lifestyle is dependent on staying with the “more affluent” partner. I have a good friend who left his wife of 5+ years, both had/have good jobs, her’s however, is MUCH better. He went from living in a 5000sq/ft home in Sarasota to living in a 2100 sq/ft home outside of town. However, I respect his attitude, why should he get her money, or have her support him? It makes no sense, which is why divorce law is so screwed up. How does living with someone rich automatically entitle me to a life of riches? If I want to be rich, how about earning it? If my husband/wife is rich, that DOES NOT make me rich, no matter how much the courts try to make it so.
“That way his ex might see what she once saw in him, see the error of her ways, and then seek to come back.”
“… and then seek to come back.”
Yeah, that’s what he needs, he needs her to come back. Lol.
““That way his ex might see what she once saw in him, see the error of her ways, and then seek to come back.”
WTF?
Waste of time and energy. Why would he want HER back.
What he should do is:
1. Insist on a PRENUP if he chooses marriage again.
2. If she says no, then swallow hard and move on.
Met a fellow who worked his ass off for 35 years. His wife just decides she wants her freedom. Fine. Only problem is, she wants half of their assets AND half of HIS retirement. He’s f**ked now.
If you’re the higher income spouse to be, you should absolutely insist on a prenup IMO, man or woman. If the future spouse says no, then walk. Remember, if the relationship goes south and things get nasty (which is unfortunately highly probable statistically), you’ll be thanking your lucky stars for that prenup you insisted upon.
My girlfriend has a higher income than I do and I will still insist on a prenup. She’s a very independent, strong willed woman, who unfortunately, has a difficult time saving and handling money. I already know she’ll insist on financial decisions that are contrary to my money values and that’s fine, I just choose to insist she’s responsible for her own decisions through a prenup. If in the future choose to help “correct” any of her financial decisions that go awry, it will be MY CHOICE, not her attourney’s. The same “choice” should be afforded to her if I make a financial blunder.
No matter how “solid” a mate seems to be, we must always remember humans are unpredictable and can change their minds anytime.
DOC
Anybody know of any “happy” long-lasting marriages with a prenup? Not sure, jes askin! A lawyer once told me they’re the kiss of death and always lead to divorce. I had pondered the question back at the time, but decided marriage had to be something of a leap into the unknown … same with kids.
But then I’m the one with the day-to-day leaky wallet in our union … wife’s practically a tightwad, which has been a good thing! Then again, I’m paying the insurance, am the only one making 401(k) contributions at present, thinkin on the big-picture stuff while I read words of wisdom here. Man, I tell ya, the stress of all this practically requires the overpriced takeout at work and the occasional bar stop-off on the way home!
“A lawyer once told me they’re (prenups) the kiss of death and always lead to divorce.”
LOL
Leave it to a Lawyer to say prenups “always” lead to a divorce. The only way you can correlate “always” with “prenups” is, Lawyers ALWAYS MAKE LESS FEES with prenups, IMO. I might listen if he/she said “more often.”
Besides, are we to believe all these couples he/she’s referring to summed their divorce up with, “yeah, it was the prenup that killed our marriage.”
Ask a Lawyer how many divorced spouses who retained his/her assets instead of getting reamed–because of their prenup–feels like they made a mistake in having one in the first place.
Just my .02
DOC
That is a terrible story.
Yeah, terrible. Is it true?
And what kind of “marriage” is this where one partner takes off for Europe with her friends like that? I can see successful old marrieds taking separate vacations like that, but that kind of behavior in a younger couple spells trouble to me.
I had a girlfriend like the wife in that story. Thank goodness we were not married. She came up with all these crisis stories, come sobbing to me that she needs $, and each time these sobbing episodes occurred, the money she needed grew exponentially.
$20,000 plus spent on her. Part of it was a business loan which she promised to pay me back. Fortunately again, no divorce attorney needed. And I kept both halves of my earnings (after taxes). Best part is I helped a county sherrif deputy track her down. Turned out she swindled lots of people and stole cars. I didn’t know she was like that at all, seriously!
Moral: Don’t get married.
“Moral: Don’t get married.”
…and so it goes. Nearly everyone that I grew up with either did not get married, or got married-then no kids-then divorce. And EVERY guy has heard the horror stories of women cleaning them out in divorce procedings.
So we get the inevitable (some say planned) result of marriage (at least as we knew it) disappearing, along with kids, and along with this country’s (and most of Western Society’s) future.
Not necessarily. I know of a couple who were not married and produced a child and waited ten years before they finally did get married. Tax policy was a big issue.
You don’t have to have marriage to have a good family life. It takes maturity in all parties involved and a recognition and agreement that either one can opt out if the other person changes so much that he or she becomes a totally different person (and hard to live with) than when they started living together.
“Moral: don’t get married”
After watching an older sibling go through a second money-draining divorce, I have come to the same conclusion.
Being poor has it’s advantages. At least I don’t have to worry about the wimmens wanting me for my money.
Someone tried shooting me down before on this one. But you are not necessarily financially poorer if you are single and productive. In fact you tend to be more adaptable, more likely to rent, and more able to take advantage of good financial opportunities thousands of miles away.
Some people are members of a certain political party because their parents were in that party. Some people get married because it was the common thing to do.
I cannot think of those as good reasons at all.
Moral: Pick wisely.
Exactly.
Yes, and don’t settle. Patience is golden.
I was pissed at myself for 10 years cuz I thought I screwed up by walking away from my best bet. Then I met the guy I’d been holding out for. There’s quality out there. But you have to be able to size people up and trust your gut.
That first person would have definitely ended in divorce as I was 3rd in importance behind his friends and his ‘vette. Not so w/this guy.
Stories like that one make me very appreciative of my financially-responsible wife.
A heart felt “AMEN” to that…
Having two financially responsible people (and responsible in all other areas) is very rare these days though.
This is what kills marriage and enrichens divorce attorneys.
Two of my sisters are divorced. One was cheated on while the other had a husband who was very irresponsible (financially, and drug use). The other sister stays single but her boyfriend fathered twins 9 years ago from another woman while my sister and him were together. They are still together but not married.
There, 3 for 3 failures of marriage. Bad track record kept me out of tying the knot with a wonderful woman 8 years ago. Statistics are convincing to me. Better to have non-marriage.
my apology bill. but i am just curious, it is bad luck or something else.
I’m not a believer in luck, but my sisters and I met too many dishonest people. Perhaps we kept finding bad samples of fish in the pond.
But with the lack of honesty in our society and a propensity to privatize profits and socialize losses (have others be responsible for your own problems), I think think we have found typical samples.
Americans, in general, are liars and cheaters. This does not make me an anti American. I’m a patriotic Constitutionalist, you know. But it’s just the way we are these days. I’d rather be alone than to be with a dishonest person.
‘Tis only 2 years in jail if he kills her in a fit of rager. A lot cheaper in the long run.
Bad hoz! Bad! Stand in the corner and think about what you’ve done.
And seriously, it is quite rare that you can fix negative energy with more negative energy. Sometimes forgiveness is not for the one forgiven, but for the one who is doing the forgiving in order to move on with life.
lol
exactly….what’s the saying? something along the lines of, not forgiving is like swallowing poison and expecting the other person to die.
There must be more to it. That guy acted as if his finances were somehow seperate from his wife’s.
I agree, Joey. My first thought on reading that was that they were not partners and were living separate lives. The line “The man lived within his means, and over the next 10 years he made the mortgage payments on time every month.” was the kicker. This was no marriage and the fault was not all the woman’s. I suspect he alienated and isolated his wife and didn’t think of her as an equal partner.
She blows off 50 large and he’s oblivious? Didn’t bills from attys, collection agencies, etc come pouring through the mail slot or they have different mailing addresses?
Did they have seperate bank accounts?
Trips to europe without him.. wtf was going on.
We didn’t live separate lives. We simply agreed on who would pay for what, and we didn’t co-mingle our finances. I paid for the mortgage, property taxes, insurance and child care. She agreed to pay the utilities. If we had co-mingled our finances, perhaps then I would have known about her credit card spending and have been able to control it. That’s water under the bridge. But there comes a point when adults should be able to know right from wrong. I shouldn’t have to point out that lavish credit card spending is dangerous.
Have you ever been in a relationship with a selfish person who will do what they want, regardless of what you think is right? I think most of us have. My problem is I married one. I was young and naive, that’s my only excuse. And as someone pointed out, men are just as guilty of this as women.
It’s refreshing to see you are wise enough to share part of the blame.. through wisdom lies peace.
Speaking of your only mistake being young and naive, do you recall your parents advising you on whether or not to marry that particular girl?
I am so sorry to hear of your pain.
Myself, I’ve been staring down divorce for the past year, and I think we have come to an agreement to live separated the majority of the time but stay married and function as a family.
But there is one thing I wish to say.
At some time in the process of grieving and moving on, you will need to let go of Pining for what you thought you once had. You see, during that time, you had lies and deception in addition to the things you remember. You will eventually come to grips with that, and make that something to improve upon next time.
Just curious Anonymus,
Was there any red flags for you before you got married? I know when your young you can be blinded. People usually don’t change their behaviour overnight. Did you notice any gut twinges as your marriage progressed?
I hope you find some peace Anonymous. I’m sorry about you not being able to see your children as often as you like.
I know a man whose life sounds exactly like this. After a few years of thoughtful introspection, he was ready to move on. Found a beautiful (and thrifty) young woman (14 years younger) who loves him with all her heart (I know, because she is my friend). They had two more children together, and have been very happily married now for 10 years.
I’ve been married for going on 14 years now, and there have been all kinds of things that didn’t go the way we would have liked, but we are both committed to seeing it through. I keep the books online and everything is corporate. No secrets.
Did Anonymous Coward flake out or did we get trolled.. or both..
SteveH,
And right there is the biggest reason we can’t see any changes in our divorce laws (sorry folks, whether you like to admit it or not, the LARGE majority of these cases screw men/fathers - not just the financially responsible parnter - the fact that eastcoaster is receiving any child support at all makes that plain - try paying child support when you support your children far more and have them equal time if not more).
Steve H has ASSUMED the problems in the relationship MUST have been caused by the man and NOT by the self-absorbed, privilege princess AC unfortunately married. All the court systems, legislatures, relationship counselors, etc., etc., make the same erroneous assumption, and that’s why we have messed up divorced laws that won’t budge.
AC,
I know your story, only the dates were smaller and the amounts larger. There is life and hope on the other side. A clean sweep is like a new life. New dreams are a wonderful thing.
Skye
Do long-time marrieds actually maintain separate checking accounts and credit cards? The only time my wife ever had a separate account and credit card was when she was an active realtor, and that was on the advice of our accountant (to more easily track her business expenses).
If my wife suddenly told me she had racked up $20K in CC debt, I’d be the one initiating divorce proceedings, even after 30+ years of marriage.
My wife and I have never argued over one red cent…
One of the keys to staying together for a lot of years.
Ditto Alad - 27 wonderful years in August.
Leigh
It’s hard to trust anyone these days. Peaple are too busy to communicate, even couples. You cannot depend on your spouse having the same values or looks in 10 years that you admire her for today and which keeps you together.
Americans are exercising their civil liberties much more today than before. I think it’s a good thing. The bad thing is that people change over the years. If you marry someone for their looks, you will end up wondering why you married that person in the first place.
Not good if you think marriage is an important institution. But is it important? I think not. Better to realize we are each sovereign individuals who are always growing and changing.
“Change” is the key word. Americans do not like change, whether climate change, economic change, lifestyle change. It’s useless to battle change because it’s a battle against reality, which includes human nature.
It’s much easier to embrace change full throttle. Climate change? Don’t plan on living in the same geographical area for the lifetime of your mortgage. Job shortage in your city but not the city 2500 miles from you? If you had several years emergency funds and are renting, you can get the job fast.
Harry Browne’s book “How I Found Freedom in an Unfree World” has a very good chapter on Non-marriage and how it embraces change. I wish A.C. would have read that book before he ever considered marriage.
But now the divorce and this is an opportunity for A.C. to be very conscious of change and very accepting of it. Plan for change and you will prosper.
My wife and I have been together nigh 11 years and maintain completely separate finances, except one joint savings account where we both contribute equally for our future house.
Combined accounts exacerbate overspending, in my opinion, and really screw the frugal partner. Instead, we keep a ledger with all joint expenses and track who pays them, and just assign a running total of who owes whom how much. At the beginning of every month, we settle up. Purely individual expenses (car, insurance, taxes, student loans, clothing, lunch at work, etc.) are simply paid for out of our personal accounts. We find it keeps incentives in the right place. But still, I save most of my personal extra money, she spends hers.
In college my wife was a financial mess. Credit cards, no savings, using loans to pay for things. Even had a credit card or two behind my back after trying to work with her. One time I almost left her over the money issues, but we had a long talk and it worked out okay. I had a few years to think of how we would manage money before deciding to move in together. I am still not sure if she was on her own if she would be okay.
And I am very concerned that if she ever left me, the courts would entitle her to half of my savings but I would never have enjoyed half of her consumption over the time we were together. On the other hand, would be perfectly happy to split up all jointly purchased assets including the savings account we both contributed to dollar for dollar.
“If my wife suddenly told me she had racked up $20K in CC debt, I’d be the one initiating divorce proceedings, even after 30+ years of marriage.”
Good for you, Bill. I’d want to do the same…Unfortunately, if she racked-up that $20k on the sly, you can bet she’s going to go for the jugular in the divorce…That’s the painful kicker. Sneaky spenders aren’t usually brimming over with integrity or accountibility, no?
DOC
BIC: Do long-time marrieds actually maintain separate checking accounts and credit cards?
In the Far East, that’s actually the norm.
Ah yes, another first hand account that steels my resolve to never marry (if ever) without an iron clad prenup.
Marriage is so weird. I hate being single but not sure i am a team player. Your wife is kind of selfish and the only way to get money from you is to divorce. Puke.
Sounds like a friend of mine.
Except the roles were somewhat reversed.
Mike
1. He’s much better off without her
2. I, personally, am glad I’m not married to a woman!
And women thank you everyday Reuven.
And what makes you think that gay couples dont’ take advantage of each other?
A lesbian friend once explained to me that every couple has a “sh!t on” person and a “sh!t upon” person. Apparently, homosexuals are not exempt from abusive relationships.
Sorry to be so crude, but this is best said crude and I tried to keep it gender neutral.
A friend once told me about divorce:
It’s the Fu–ing you get for the Fuc-ing you got.
Nothing in this world is for free.
Nice one simi. There is a price to everything and that includes love and the physical expression of love. Age old. Even us single heterosexual guys with no current girlfriend have our needs and we find ways to satisfy those needs, but that costs money too!
I like being single. I do have confidence that I will meet a woman who has my same eccentric values of my politics, masters swimming, non-marriage, Darwinism, atheism, thrift, enjoyment of flight and vacations, and disdain for those who do not accept full responsibility for their thoughts and actions.
Until I meet said woman, I will continue enjoyment of the single uncompromising life.
Bill,
Trust me when I say even us single heterosexual gals with no current boyfriend have our needs and we find ways to satisfy those needs, sometimes it costs, sometimes it doesn’t.
Text For Cash… July 11 (Bloomberg) — Veli-Pekka Kaipainen needed cash in a hurry to pay off gambling debts. So he started texting.
Wonder how long it will take for this phenomenon to hit our shores? Or has it already, I don’t know. The interest rates are mind boggling.
http://www.bloomberg.com/apps/news?pid=20601109&sid=a3NIrOQIKs8I&refer=news
Hmm.. Well, if anyone finds out, please let me know, I want to get LONG the companies that are doing this. This is a wonderful idea; and the rates are obscene, even if 1/2 of them don’t pay, you still make a killing.
“It’s a vicious circle,” Kaipainen said. “You take out one loan to pay another and in, say, two months, you have five at the same time, and soon you can’t pay them all.”
Suppose more than half don’t pay? Who gets killed then? How are these text-loan companies any different than bubblicious lenders.. do they not lend to strawberry pickers?
Senate OKs mortgage rescue plan; House plans to rewrite key details
By Julie Hirschfeld Davis
ASSOCIATED PRESS
July 12, 2008
…
The new program would let the FHA insure as much as $300 billion in new mortgages, helping an estimated 400,000 homeowners.
More pesky mortgage math (Mole Man, please feel free to jump in here and check my arithmetic!):
As much as $300 billion in new mortgage insurance for an estimated 400,000 homeowners amounts to as much as
$300,000,000,000/400,000 = $750,000 in new mortgage insurance per loanowner helped. Am I the only one who thinks that is a heckuva lot of insurance???
Assuming 120m households in the US, that’s $2,500 per household.
It is mighty nice of those myriad U.S. households to provide free insurance for Congress’s bailout scheme without screaming about it. (And as to Barney Frank’s assurance that nowhere near $300,000,000,000 in insurance will actually be needed, I suggest reducing the insured figure down to the size of an amount in line with what might actually be needed.)
That’s not how insurance works. The insured figure is already so small that it may not be significant. The refinances that may be insured that way involve large write downs from the lenders and come after borrowers have gotten in trouble, so both borrowers and lenders are paying through the nose for their mistakes. You love the word bailout because it allows you to wallow in your woundedness, but experience suggests this principal correction helps everyone and comes at relatively low cost. Capitalism is about return on investment, not your zero sum game fantasies.
I am not wallowing in woundedness. In fact, I care little about the bailout scheme, because I agree with Ben that it is pointless and will not serve the intended purpose of stopping the home price crash in progress. I am merely concerned about the thought that $300,000,000,000 in guarantees are getting appropriated to (supposedly) help 400,000 homeowners, which sounds like $750,000 of bail per homeowner for some financier with friends in Congress to figure out how to arbitrage.
Please correct my arithmetic if I am messing it up:
$300,000,000,000 / 400,000 = $750,000
I keep getting the same answer no matter how many times I try.
You keep criticizing my arithmetic, but you don’t have any alternatives to offer. Your silence is deafening to my question about why $750,000 in guarantees is a reasonable figure to help 400,000 loanowners. Name calling is childish and reveals that you can’t formulate a response.
And speaking of how insurance works, insurance is supposed to provide protection against a contingency which has not yet occurred (i.e., death, disability, survival beyond one’s life expectancy, auto accident, fire, flood, etc). By contrast, the mortgage rescue provides funding to fill a liquidity gap between loanowners and lenders created by an event which has already occurred, which is a large and unprecedented drop in U.S. housing prices. Thus the rescue plan is more of a Congressionally-mandated wealth transfer from taxpayers to lenders and loanowners than an insurance program. The insurance label appears to mainly serve the purpose of making the rescue more politically palatable, though Congress’s current unprecedented single-digit approval rating makes me wonder whether the plan is working.
My other question (one shared by the WH) is how much of the $300,000,000,000 in guarantees will end up going to the lending industry and also back to the Congressmen who wrote the bill to make sure that lenders get a large chunk of dough?
I hope the WH gets a satisfactory answer to this line of questioning before GWB decides whether to carry out his veto threat.
Prof you almost beat the “most times posted ” to your own post !
I would love to figure out for myself, how to look up and see if someone responded to either my silly posts or my serious questions.
So far, as a computer misfit, I just keep reading on.
Maybe that is what happened to the guy you want to dialogue with you about the MATH!
Or not.send instructions to ellisisland1athotmail
i’m on my first cup, but there’s something odd about the numbers.
My auto insurance co insures the value of my car (valued at say $20,000) for a tiny fraction of that amount, perhaps $500 a year.
1/40 of the cost of the asset (the car).
While the average cost of each of the 400,000 properties is $750,000, how much does that $300,000,000 in insurance actually cost?
There’s another HIDDEN cost in Barney’s handout plan.
He wants the banks to cram-down 500,000 mortgages to a price “15% below current values” (whatever that means) in order to give these people instant equity.
Figuring a 15% drop in house prices since the peak, and the additional 15% he wants, with the median price at $285,000, that’s a $75,000 tax-free gift to 500,000 irresponsible Americans.
Let’s assume 30% federal tax, that’s $11,250,000,000 down the drain!
Barney Frank never mentions this burden that you and i will have to pick up.
A related topic:
George W. Bush proudly signed into law a bill forgiving income tax on forgiven Mortgage Debt. (I think Republicans support these things because they know they won’t get the $$$ anyway, and it makes them look compassionate. And it helps his buddies in the R-E and mortgage businesses)
Anyway, there’s no reason the STATES shouldn’t collect their share.
But California State, even though there’s NO LAW in place to prevent collection, will not be collecting their share of income tax on forgiven mortgage debt.
And, get this: The CA state legislature is considering RAISING MY STATE INCOME TAX to 11%! Why don’t they start by collecting taxes that are already owed to them by dishonest greedy people instead of going after folks like me who CREATE JOBS?
i’m not arguing for or against Frank’s proposal.. all i want to know is “While the average cost of each of the 400,000 properties is $750,000, how much does that $300,000,000 in insurance actually cost?”
as for Calif raising income taxes, they need a 2/3 majority in both legislative houses to do it..
If they manage that, it’s because we elected enough tax-n-spenders, and we only got ourselves to blame.
“…how much does that $300,000,000 in insurance actually cost?”
It is not properly termed ‘insurance’, as the price declines which would be covered by tax dollars have already occurred. It is rather hard to estimate the cost, as nobody has perfect information about how far housing market values have dropped,
but the fact that lenders would have an adverse selection incentive to dump their dodgiest loans and keep the good ones suggests the cost might end up to be ‘larger than expected.’
well, without my having the vaguest idea of how much it will (or could) cost us, it’s hard for me to formulate an opinion of whether I should be fer it or agin’ it.
We are not going to escape unscathed. Nobody can rightly expect it. If supporting banks results in less financial pain for everyone, lets do it. But if some hairbrained idea will cost more than it helps, flush it.
The banks are taking the hit for the renegotiated principal. The insurance is for the reduced amounts, so the government has plenty of reason to want the insured amounts to be as low as possible.
The reason for the 15% figure is way more obvious than that, though. All of this is happening because these loans are underwater, and there is still no bottom to the market. Requiring the refinanced values to be lower than the current market helps avoid a situation where the loans go right back under water.
As for your other issues, why not actually look at where the money went? Californians want lots of big roads everywhere because we drive way too much. That is expensive. Then we drive huge trucks way too fast on these roads, causing them to need vastly more aggressive maintenance than they would otherwise, and cranking down the time before full replacement is needed. All you have to do to fix that is drive a smaller vehicle fewer miles or ask for more taxes on vehicles such as the VLF that CA ditched a while ago. Don’t like paying for the level of service you insist on? Too bad! And what about three strikes? That program alone is nearly as expensive as elementary school education. Which do you think provides more value? Yet you get to have both without any tax increases. Not. Welcome to reality, typical greedy math is hard taxpayer.
Well, *I* drive about 2500 miles a year. In fact, I traded in an 11 year-old-car (a compact American car) for a new (American) car last year. After 11 years, that car had 28,100 on the speedometer.
I’ve been in CA since 1989. All that time, I’ve have only voted YES on one ballot initiative: to legalize medical marijuana. Every budget, every bond issue, etc, I have vote NO on.
I’m not part of the problem, but I’m paying for the solution.
Ah, a libertarian. The world sorely needs another billion of you.
“…insures the value of my car (valued at say $20,000) for a tiny fraction of that amount, perhaps $500 a year.”
They can do this because
1) the insurance contract is incentive compatible: You and your auto insurer both fully understand that it is in your best interest to avoid having an auto accident next year;
2) they spread their risk by insuring many drivers prospectively (before crashes have occurred), so that even if there are some high-risk drivers in the pool, the risk is offset by low-risk drivers, and they can charge a premium at the average risk;
3) they don’t have to insure drivers whose risk is excessive, allowing them to avoid adverse selection.
By contrast, the Congressional housing rescue plan is rife with adverse selection, and the event that it supposedly insures against (housing price declines) has already occurred, making the insurance label highly suspect.
Actuarial science is messy and difficult and always highly contested. The first step is an invariably infuriating morass of assuptions that are necessary to make the calculations work. That is the stage where what is likely is separated from what may happen. Disaster scenarios used to be taken lightly until the last hurricane swarm almost wiped out the insurance industry. Sizing of reserve funds must be based on disaster scenarios and not what is likely to happen.
The $300 billion figure is a disaster scenario. There was a poster here who claimed that the OMB was predicting most borrowers were flunkies who would fail on their loans, but that is just an assuption used for calculating the scale of the disaster scenario which is used to size the reserve fund. If you can compete with OMB actuarial calculations then you have a highly marketable skills.
“The first step is an invariably infuriating morass of assuptions that are
necessaryoften rigged tomake the calculations workto paint lipstick on the pig.“Judge rules that Hulk Hogan must close on a Vegas condo. Some believe this was an attempt to be imprisoned in the Pinellas County Jail to check on his son. Paging Dr. Hiaasen!
http://www.baynews9.com/content/36/2008/7/11/364473.html?title=Judge+rules+Hogan+has+to+close+on+Las+Vegas+condo
What’s faker?
WWF or FED
Fannie, Freddie, Fascist…When you think about the current Fannie Mae-Freddie Mac crisis, you must remember Mises’s theory of intervention. Reporters will not, but you must, provided you want to understand what is going on. President Bush is considering a fateful step in a 60-year-old problem: the nationalization of these mortgage companies. He wants to guarantee the $5 trillion (that’s trillion with a “t”) in debt owned by these companies. Another option would be to put these monstrosities under “conservatorship,” which means that you and I will pay for their losses directly.
Either way, it turns out that there is no magic way to put every American citizen, regardless of financial means or credit history, in a 3,000 square foot home. Someone, somewhere, sometime has to pay. No matter what rescue plan they are able to cobble together, that someone is you.
http://www.lewrockwell.com/rockwell/fascist-creations-fdr.html
That was pretty much implicit anyway and how the market always valued mortgages backed by them, and the underlying assets do have substantial value although they are declining daily. I am not sure what you see as the increased exposure. The real shock was to the shareholders, because the government said we were going to bleed all other money out of the entities first before we step in. The government took the most conservative position they could.
facist? FNMA began life as a govt agency.. FDR’s New Deal.
You wonder how much raising the conforming limit to 700K accelerated the failure? It was such a fundamentally stupid thing to do. In fact, if house prices were dropping, they should have lowered the limit! Duh!
maybe so.. but what’s with the fascist reference?
Soaring UK food prices:
http://tinyurl.com/5sd4ze
“Tesco, Asda and Sainsbury’s have ramped up the price of many products by between 22 and 32 per cent over the past 13 months, hitting customers at a time when the cost of living is soaring, The Independent can reveal.”
“The soaring figures illustrate the level of food inflation heaped on consumers, as they face spiraling petrol prices, rising utility bills and stagnating house prices. The revelation comes at a time when grocers are as active as ever in claiming that they are delivering millions of pounds of price cuts to consumers.”
“On a sample of 17 products, Sainsbury’s has hiked prices by 31.6 per cent, Tesco by 27.5 per cent and Asda by 21.6 per cent between 11 June 2007 and 11 July 2008, according to grocery price comparison site, mysupermarket.co.uk.”
Back in the 70’s, I remember television stations in Kansas City doing a weekly “market basket” survey of grocery prices tracking a like basket of goods week after week. Is there any place that still does that in the U.S.?
This is for NOVAwatcher.
Yesterday I commented that my 39 yo brother makes $125,000 as a high school history teacher and NOVA commented:
Comment by NOVAwatcher
2008-07-12 04:44:50
I call BS. No 39-year-old in a public school in America makes $125k solely as a highschool history teacher.
He has been with the same district for around 16 years and during that time earned his master’s degree. He teaches in Bucks County PA. See this article: http://www.phillyburbs.com/pb-dyn/news/111-01072008-1466866.html. No b.s. Sweet gig.
Wow. My husband makes $50,000 in Sacramento as a public school teacher. But the health insurance comes with no premium, which helps.
No wonder you guys back east pay such huge taxes.
For the poster in last night’s Weekend Topics thread who wanted more info on the GSEs, here are a couple of NY Times articles that appeared in the SD U-T business section today:
What’s next for Fannie, Freddie?
Consumers wondering if pain will be passed along
By Ron Lieber
NEW YORK TIMES NEWS SERVICE
July 12, 2008
* Giants have played huge mortgage role
The stock market swoon over Fannie Mae and Freddie Mac this week has left many consumers scratching their heads, wondering if buying a home is a worse idea than it was seven days ago or whether to take down the “for sale” sign in the yard.
“The stock market swoon over Fannie Mae and Freddie Mac this week has left many consumers scratching their heads, wondering if buying a home is a worse idea than it was seven days ago”
Lol.. That’s like asking if today is a “good day to pick up a nasty crack habit”. No, buying a home isn’t a worse idea today, but it’s still an awful idea in most markets. There will be a good time to buy a home, but it’s still years out. Until then, pick up the crack habit, it will cost less.
Have you ever seen donkeys and elephants play chicken? It’s a dangerous game. Perhaps cooler heads will prevail.
http://www.washingtonpost.com/wp-dyn/content/article/2008/07/11/AR2008071102535.html
I have a $50K CD with IndyMac. I knew several months ago this bank could fail but since I am well under FDIC limits and don’t need this money for a while, I didn’t do anything about it. I am not worry at all, it is not that big of a deal as long as you are under the limit.
You might get lucky because F.O.F.I.(first out, first in), is the position i’d want to be in, for a chance at the $52 Billion in the FDIC kitty.
Interest payment is not guaranteed nor insured.
>Interest payment is not guaranteed nor insured.
This is not correct. This is from the FDIC website:
Why Is FDIC Insurance Important to You?
All FDIC-insured banks must meet high standards for financial strength and stability. The FDIC, with other federal and state regulatory agencies, regularly reviews the operations of insured banks to ensure these standards are met. Even with these safeguards, some insured banks fail. If your insured bank fails, FDIC insurance will cover your deposits, dollar for dollar, including principal and any accrued interest, up to the insurance limit.
News to me. I know when the Texas banks went under no interest was paid on CDs.
October 13, 2006 law went into effect covering deposits made after that date. Cool. What happens if your moneys are in the CD and 2000 other banks go under? (Mr. Wilbur Ross believes only 1,000 others believe up to 6,000).
Well then that’s the end of the US banking system and pretty much the USA as a country. I am not going to make that prediction.
head-in-the-sand thinking isn’t going to make the hurt go away.
Perhaps I lucked out, but I recovered interest plus principle from a high (above-market) interest CD from an S&L that went bust in the 1980s. I.e., the FSLIC ultimately made good on principle and interest, at least in my case, though I recall having a moment or two of doubt at the time.
>head-in-the-sand thinking isn’t going to make the hurt go away.
I chose not to live my life and make my investment decision based on extreme doomsday scenarios. Some people do that and all the power to them, but I don’t want to live like that.
My interpretation of the statement “…including principal and any accrued interest…” would be payment of interest accrued up to the point of failure; any interest already earned would be paid, but there would be no continuing interest earnings even though your money is locked up by the failure.
There is a FAQ section in LA Times regarding IndyMac failure today that said FDIC can reset the interest rates going forward if it wanted to but I had the impression that it rarely ever did that. I also got the impression that the customer can withdraw the money if you didn’t like the new rate.
But since I only have 1.5 months left on the terms of the CD, I am not worry at all in any case.
Anyone see “Fast Money” on CNBC yesterday? Matthew Simmons was phone interviewed. The financial gurus on that show still don’t get it. I noticed how some of them made faces when Mr. Simmons made some scary predictions.
See, one point Simmons made is that even if we open up the continental shelf to drilling now, it will be a decade before we see that oil. It takes a lot of preparation. Simmons said we should have done this 15 years ago.
The last of the supergiant oil fields was discovered in the late 50s or early 60s. With more advanced geological methods (spaced based radar, imaging, sonic detection), there has been no major discovery since.
Matthew Simmons said that there will be short term boosts in supply and short term price drops that convince people that this oil issue is a speculation problem. Simmons said that the biggest mistake pundits are making is by labeling this a speculation problem. What will happen is this: There will be more severe times when there will food shortages in the U.S. if we are not proactive. By going after speculators, we won’t solve this ever decreasing production of oil. But if we identify this as a demand / supply issue instead, it will take 7 years to get around the issue by producing alternative forms of energy.
There are no alternatives to petroleum that scale up in any significant way. we have turned 1/3 of our corn crop into ethanol to supply maybe 2% of our liquid fuels. The only solution to this issue is CONSERVATION. One way or another the US will be consuming 50% less oil in 5 years. We can get there the easy way or the hard way. The easy way is to have massive conservation program, insulation of homes. We need leaders from the top down being honest with the american people and telling them that times are changed. Buyuing a small car or moped is a virtue, driving a F350 or a Expedition is a sin. Long commutes out, walkable neighborhoods in.
If we dont have leadership promoting massive conservation, what we will get is millions of poor people shivering in the dark because they cant afford heating oil and electricity. The entire wealth of our nation (is there any left), will be transfred to OPEC in the next 10 years.
Things like ski vacations, ORV, power boats, college students flying 3000 miles for spring break, trips to las vegas; all finished and over with.
Big houses, out; vacation homes, out; hawaiian vacations out.
Next time you go to the airport imagine 2013, there will be half as many flights and half as many passengers. The cheapest coach ticket will be $1000 (infltion adjusted).
Any airport that is building new runways or terminals is crazy; the year of peak air travel was 2007 (or perhaps 2000). Any transportation agency that is expanding roads is also crazy, the year of peak car travel was 2007.
I just wonder how many hammer hits to the head it will take before this reality sets in.
The timetable might be drawn out a little longer than 2013, especially with a significant enough economic downturn in between. However, you may otherwise be much closer to being correct than many Americans would like to believe.
As far as energy goes, this is not the 70’s again. We are facing a very different energy future. We can either begin to make the hard choices now or be left with a worse set of options in the not-too-distant future. We need not panic, but there must be a sense of urgency in our actions.
I think most americans learned the wrong lesson from the 70s and 80s. The lesson most learned is that oil shortages are temporary. All we need to do is more drilling and more technology and the oil will come. Add is some Reagan style deruglation and tax cuts and everything will be fine. Conservation is only for enviro-wackos.
This time it really is different. We have allready gone to all corners of the globe and to the depths of the ocean, theres just not that much oil left. We arent going to drill our way out this time.
The demand side is also different with china and india rapidly increaing demand.
Professor Bear and most Americans think oil is in a bubble the same as housing. WRONG!!!! The difference between a house and oil is inelastic demand. Most americans could trade their 3000sf house for a 2br apartment and still live almost just as happy as before. But not many americans could cut their petroleum use in half. This means moving, changing cars, walking, going cold, shivering in the dark.
But not many americans could cut their petroleum use in half.
I’m not sure I buy this. Didn’t someone post yesterday (or in the last few days maybe) that gas consumption was down significantly already due to high gas prices?
I hear people all the time talk about how they “can’t afford” or can’t do this or can’t do that. Then when times get tough, whadya know but those same people are now doing the things that were impossible before.
People will adapt. Always have always will.
WRONG!!! Petrolenum consumption is NOT way down, its down about 5%.
Gas prices have tripled, gas consumption is down 5%, pretty inelastic. Changes to demand take awhile. As people replace their vehicles they will tend to get more economical. As people realize that energy prices arent going back down, they will tend to choose to live closer to work and in smaller houses, but these changes take years, and only after people realize that the energy price spike is not temporary.
So maybe there is a trend towards less consumption in the future, but it hasnt happened yet.
I think most people CAN reduce their consumption by 1/2. Get used to leaving the thermostat at 82 instead of 72 (I’ve done this all my life - you get used to it and don’t sweat if you have a fan), switch to cfl bulbs (this cut my power bill in half in winter (I live on the gulf coast)).
Most people can drive less, and better. I went from 15mpg to 17.5mpg in my full-size pickup (95% city driving) by just removing the spare and hitch, inflating the tires, and accelerating slower. Heck that is a 16% consumption reduction right there without even changing the amount of driving i’m doing. I could also easily cut out plenty of random car trips and make them part of my commute.
The way most people drive I can’t believe they get any better than 11-12 mpg in full size SUVs and 19-20 even in midsize cars, not to mention having to replace brake pads every couple years due to the massive energy dumps they do at every red light. I kinda understand this because I can’t keep my foot off the go pedal when I drive my LS1 Camaro, but at least its a lightish aerodynamic fast car not a pig SUV. It sips gas on the highway (28 mpg with the 6spd is pretty good for a v8 musclecar, better than most 4-cyl “sporty” cars like the s2000 or solstice).
Gas consumption is down, and public transporation ridership is up, IIRC,40%+.
When in Chicago, I noticed lots more riders.
FWIW the oil “shortage” of the 1970s had nothing at all to do with the amount of currently-retrievable oil in the ground. It had to do with a politically-motivated embargo. We could cause greater chaos than that by getting two other countries to agree to embargo grain shipments.
Agreed.
Conserving is important, including downsizing from the enormous (now decadent) McMansions where your voice echoes to 700 square foot apartments or lofts.
You did not mention recycling. Recycling is very important. Your cleaning supplies come in plastic bottles. Those are oil-based products. Even new glass bottles take much more energy to create than to use old crushed glass (recycled). Cardboards and newspapers (who reads newspapers anymore?).
If your company has no policy for alternative Fridays off, contact your HR office and enourage your colleages to do the same. That’s an automatic 10% reduction in gasoline used for commuting.
Don’t throw away your old notebooks or PCs. Upgrade them instead. The PCs use a lot of plastic, therefore oil-based.
Keep your old color TV and put off buying the modern stuff. Use a converter for HD. My 26 inch color TV I bought in the 1980s works well for me.
The time to start is now.
i think people overemphasize the benefits of recycling. Using recycled newsprint uses about 60% of the energy and resources of virgin pulp paper. Similar for cans and bottles.
Swithing to reading online or drinking water from the tap uses 1% of the energy. And tap water doesnt have all the concentrated useless calories of soda, juice, energy drinks, etc…
This recycling comment really irks me. Many people i know including my grandmother are green at heart and wont let someone not recycle a single peice of paper in their house. but at the same time she uses tremendous amounts of energy in a big house and lots of discretionary cross country travel.
If we assume the environmental impact of recycling 1 pound of material is equivalent to saving 1/4 pound of gas or 1/32 of a gallon. Her discretionary traveling has about 1000 times more inpact on the environment than all her recycling.
Is her name Gore, by any chance?
The most environmentally responsible thing you can do, bar none, is to not have children.
Not exactly true, boomers are running out of time and they want to see the planet before the check out. Travel is booming.
I ran into a nice older couple from Texas, that were experiencing Yosemite and Sequoia-Kings Canyon National Parks for the first time.
I asked them what they thought, and the first thing they said was, how rare English was spoken amongst the other tourists, lots of European accents, they said.
It’s been a very cosmopolitan summer in the High Sierra with all that interaction of cultures on vacation…
I lived in those parts during the last major economic crisis - The Jimmy Carter Malaise. Observed the same lack of English spoken from white people in the same parks in those days.
What goes around comes around Mr. Aladinsane.
One subtle difference between Carter and ’ssshrubery…
Carter always upheld our and law and constitution.
Man the lifeboats!
p.s.
Carter wanted to get us out of Iran
’ssshrubery wants to get us in Iran
I have to give credit to the “cheshire cat” only because he had Volcker as head of the Fed. Volcker first turned the wrench of inflation during Carter’s “malaise” term. It took a few years to take effect and Reagan coasted on the coatails of the good that Volcker did.
That’s the only good thing about Carter, besides being nice to social liberals, of which I am an extreme social liberal (Darwinist, swinging single male, sacreligious, decadent, but responsible!).
During hottest summer months, the number of visitors to Death Valley is the highest ever. Every summer, tourists from Scandinavia, Germany, Denmark etc love love love the heat. July and the peak time for those european visitors is August.
Would be nice to be a worker at the resorts there. I understand the Europeans go nude in the resort swimming pools.
It doesnt matter what boomers want, there isnt the petroleum there to do it. In five years are share of exportable petroleum will be about 70% of today. If it take gas at 100$ a gallon to reduce demand 30%, 50% or whatever, that is where it is going to go.
It will likely acompany further declines in the US$. I also see unemplyment at 20%, becaquse for a huge percentage of the workforce,commute costs more than the paycheck. Add to this a 50%+ decline in the airlines, auto manufacturers, home builders, mortgage brokers, furniture stores, ski resorts; and were talking a huge number of jobs.
And we all know what is happening to the HELOC ATM, its shut down. So a huge number of boomers that dream or touring the nation in an RV, or flying to florida 5x a year, may find themselves staying home and eating a bowl of rice.
High prices = conservation.
But what politician has the balls to propose a federal $4/gal tax on petroleum-based gasoline (with the proceeds to, say, pay down the federal debt and offset the military spending protecting access to oil and freedom of the seas)?
$4/gal tax on gasoline would castrate the arab swine, while letting the market and technology do their thing. If someone really needs a big gasoline-powered work vehicle, let them deduct the price of fuel from their corporate taxes, but real work vehicles use diesel.
The fact that 9/11 didn’t make this as obvious to everyone else as it did to me gives me little faith in the citizenry.
“The last of the supergiant oil fields was discovered in the late 50s or early 60s. With more advanced geological methods (spaced based radar, imaging, sonic detection), there has been no major discovery since.”
If this is true, how is it that Brazil just discovered, within the past 2-3 years, enough new oil to more than quadruple their known reserves and shoot them up to fourth or third place in known reserves?
While it is the perpetual problem of proving a negative, I believe that there is a lot more oil out there. The easy oil is gone, and Chindia screwed up the normal exploration timetable, but a correction is coming. If Israel doesn’t get us into a war with Iran, our cutbacks and China’s - as soon as the Olympics are over - should cause oil to fall noticeably. People talk about the pain of $5 gas but don’t yet calculate correctly the decrease in usage that would result from long-term $4 gas coupled with diminishing subsidies in other large-user nations. IMO.
The easy oil is gone
You answered the question.
Every Time I Try to Crawl Out, They Pull Me Back in!
Mr. Brad DeLong
“…I HATE YELLING SHOWS!!!!
Called on forty minutes’ notice, I trot over to the J-School studio to be a talking head on BBC/Newsnight about Fannie and Freddie. I have my talking points ready:
* The interest payments they have coming in are greater than the interest payments they have going out.
* Their government guarantee is itself a very valuable asset that they have made a lot of money off of in the past and will make more off of in the future.
* They are not even in liquidity trouble–unless they begin to have problems rolling over their discount notes…
* As long as it is generally understood that they are too big to fail, they should not even have liquidity problems–absent a depression that bankrupts many currently-solvent homeowners, that is.
…
And what do I find also on BBC/Newsnight when I get there?
I FIND THAT I AM ON WITH GROVER-FRACKING-NORQUIST!! I FIND THAT I AM ON WITH GROVER-FRACKING-NORQUIST!!! WHO HAS THREE POINTS HE WANTS TO MAKE:
* Barack Obama wants to take your money by raising your taxes and pay it to the Communist Chinese.
* Oil prices are high today and the economy is in a near recession because of Nancy Pelosi: before Nancy Pelosi became speaker economic growth was fine–and she is responsible for high oil prices too.
* Economic growth is stalling because congress has not extended the Bush tax cuts. Congress needs to extend the Bush tax cuts, and if it does then that will fix the economy, and if it doesn’t then the economy cannot recover.
I am not paid enough to deal with this lying bullshit. I am not paid enough to deal with Grover Norquist and his willful stream of defecation into the global information pool. …”
http://delong.typepad.com/
A good rant.
Feel better now Hoz?
Always feel better after a night of fighting off the mosquitoes by the lake with beers in cooler and brats on the grille.
Heheh, spent part of the evening myself in a ramshackle little bar built on stilts over the water at the marina, watched the turtles (dozens of big one), downed some cold ones, and then went home and slept like a baby…
JWhite,
That justs sounds heavenly. Love that type relaxing.
“I am not paid enough to deal with this lying bullshit.”
Awesome!
Was reading the “Valley Voice” yesterday, and there was a small article about 500 people applying for 1 bank teller’s job in Visalia, Ca.
There was some discussion yesterday about what is the fundamental value of a stock like Fannie Mae. In this case its really a call option on FNM somehow magically recovering. I think everyone here is convinced thats not going to happen and thus its value is zero.
But what is the underlying value of the DJIA, the S&P 500, a bank stock, or a house in California? A pessimist would say that their profits are evaporating, their liabilities exceed assets, and their value is approaching zero.
But a gold bug would also argue that the value of the US$ is also approaching zero. The US government liabilities exceed assets and the income is negative.
So the number for a stock value is the value of the business divided by the value of the US$. We all learned early on that you cant divide by zero, its an error. However in advanced calculus there was a study about division of numbers approaching zero. If you divide by a number approching zero, the result is a number approaching infinity. So maybe infinity is the underlying value of the DJIA. However the calculus gets really interesting, if you divide one number approaching zero by another number approaching zero. Then the results can be zero, infinity, a real number, or anything in between depending on the relative rates at which the numbers approach zero,.
So how does this apply to a stock like FNM or the DJIA. In the short term there is money to by arbitrating the decline in company value relative to the US$. In the long term, all the prices will be infinity, because the US$ will be worthless; but in the short term the individual companies may become worthless before the us$.
I personally have made some good money with put options and sell shorting bank stocks thanks to this blog. But what good is a big brokerage balance if its denominated in us$, and held by a firm (E*trade) that likely itself is insolvent.
Focusing on the value of a stock, the market as a whole, or the value of the housing market or a specific house, is all really a mathematical abstraction game.
TO preserve wealth for the long term, you need something who’s value isn’t approaching zero, such as gold, an oil well, or perhaps a secure place to live.
For a very short and quick guide to the GSEs, I reccomend this paper presented by Mr. Gregory Mankiw to the White House
“…This symbolism is the point. Together the various charter privileges give rise to an implicit subsidy for the GSEs. The privileges signal a special relationship between the GSEs and the federal government. They feed market perceptions that GSE debt has the backing of the U.S. government. This notion is inaccurate—the charters do not require the federal government to bail out a troubled GSE. But, given the perception, investors are willing to accept a lower yield on GSE debt than on the debt of other private companies. This funding advantage is the implicit subsidy to the GSEs….”
http://www.whitehouse.gov/cea/gsemankiw_speech_nov_6_2003.pdf
13 pg pdf
“This notion is inaccurate—the charters do not require the federal government to bail out a troubled GSE. But, given the perception, investors are willing to accept a lower yield on GSE debt than on the debt of other private companies.”
Sounds like GSE investors were Congress’s dupes.
Sweden Housing may be about to tumble
Pär Magnusson
“Home Precious Home
• The one-off effect of the transition from an accommodative, high inflation and high interest rate monetary policy regime prior to the early 1990s to the current inflation-targeting low interest rate regime had a huge discount factor effect on the real estate market that has now come to an end.
• High loan-to-value ratios among first-time buyers and higher interest rates combined with negative real income growth is a poisonous cocktail for the housing market. Swedish home prices could be headed for a fall!
• A discontinuation of home price increases, or even a price decline, will reduce home equity withdrawal among Swedish homeowners. This may have a significant effect on consumption and construction investment in the Swedish economy.
• Lower house prices would, ceteris paribus, be a negative factor for mortgage bonds, as the collateral pool would deteriorate. However, we must also point out that Swedish covered bonds have already suffered significantly during this financial crisis and are fundamentally undervalued.”
7 pg pdf
http://danskeresearch.danskebank.com/link/20080709HomePreciousHome/file/20080709_HomePreciousHome.pdf
Sean Hannity yesterday was playing soundbites about Obama saying in some speech that gas could go to $12 per gallon. Realistic? Probable? Why?
If I was China and wanted to put a bullet in our head, and become top dog, i’d bleed us at the pumps…
Transportation IS our country’s Achilles’ heel.
“An Achilles’ heel is a fatal weakness in spite of overall strength, actually or potentially leading to downfall. While the mythological origin refers to a physical vulnerability, metaphorical references to other attributes or qualities that can lead to their downfall are common.”
http://en.wikipedia.org/wiki/Achilles‘_heel
There is some bad historical precedence about cutting off another country’s oil supply…
It’s what we did to the Japanese, that provoked them to attack Pearl Harbor.
As far as i can see, energy price is no different than house price.. it must be affordable to be sustainable. Rule of thumb is that the cost of a house should be about 2 or 3 X income, max.
Energy involves many things beyond gas prices.. for instance, the costs of transportation make many prices rise… goods and services. Plus the cost of manufacturing those things also rises.
I don’t know where it originated, but the only estimate I’ve come across on the upper limit of affordability regarding everything energy related is 12% of income, and that was supposedly reached at around $150/barrel oil. Gasoline at $12/gal may not be economically feasible.
Re-work your calculations using some other measure of “value” than the dollar. If everyone in the US is broke (no assets of interest to those with oil) then they will go without oil.
I think that the only thing potentially more important than oil/energy is food/water/shelter. However you cannot feed/water/house our population w/out oil. This means that oil/energy will continue to rise as a percentage of our budgets until we can start producing more real wealth with less energy.
The outlook isn’t so good.
Dan
ok.. substitute dollars with anything an employer might trade in return for an honest day’s work… how about gold.
You still can’t devote all your income to housing.. you’d starve. You can’t devote it all to food.. you’d die of exposure without a roof over your head. We need certain things to survive. Those things have some general priority.
It’s not a matter of being broke. We’re talking about productive, working people.
There is an average amount that the average person can spend on necessities of life, and spending too much on any one thing (like fuel) might mean s/he won’t survive.
I don’t see how the “dollar” enters the picture.
SeanHannity and the ever lovely Faux News most likely, as they did for Mrs Obamas speech, took it out of context.
I am just saying, Fauxnews has a bad habit of cutting/editing to their own corporate whims.
No. Not realistic and not probable. The marketplace won’t support prices anywhere near that high. Even that proported $7 dollars a gallon is one hell of a stretch.
Who, among those driving 20+ miles one way to work each day, would bother going in to work? Would going to work and shelling out $800-1000/month just for the sake of showing up at work make any sense?
Who could afford that and pay three times as much for groceries? Three times as much for public transportation? Three times as much for utilities? Where will the Feds, states and locals get money to provide so-called essential services (police, fire, hospitals) when there’s no tax money coming in?
No - our economy will collapse - as will most of those in Europe, Asia, South America and Oceania - before prices are anywhere near $12/gallon. That figure, and a 36,000 Dow, will get you nowhere.
The fact that Obama would even make such a statement underscores once again what a bumbling twit he actually is. So much mindless prattle.
Time for comrade Paulson to pull the plug on the Fannie and Freddie charade
“…There are many forms of socialism. The version practiced in the US is the most deceitful one I know. An honest, courageous socialist government would say: this is a worthwhile social purpose (financing home ownership, helping my friends on Wall Street); therefore I am going to subsidize it; and here are the additional taxes (or cuts in other public spending) to finance it.
Instead the dishonest, spineless socialist policy makers in successive Democratic and Republican admininstrations have systematically tried to hide both the subsidies and size and distribution of the incremental fiscal burden associated with the provision of these subsidies, behind an endless array of opaque arrangements and institutions. Off-balance-sheet vehicles and off-budget financing were the bread and butter of the US federal government long before they became popular in Wall Street and the City of London….”
Mr. Willem Buiter
http://blogs.ft.com/maverecon/2008/07/time-for-comrade-paulson-the-pull-the-plug-on-the-fannie-and-freddie-charade/
Even the airlines got caught up in Auction rate bonds…
http://www.marketwatch.com/news/story/continental-write-down-87-million/story.aspx?guid=%7B24C5F395%2DA23F%2D4C3F%2DA2BF%2DE29169A12855%7D
The fun isn’t over yet……
ALREADY
-50% of Chinese exporters demand payment in euros
-imported laborers in Dubai demonstrated/demanded wages in euros
-Vietnamese bought gold so much that the Govt prohibited gold imports
FURTHER FALLOUT
:businessmen, exporters, oil producers will increasingly demand payment in euros
:herd mentality throughout Asia and the Mid-East is to hoard food, gold and unload dollars
——–
ALREADY
-the head of Gazprom (Russia’s giant oil/gas co) predicted oil price of $250 a barrel for next year
-OPEC II (Russia, Iran, Venezuela, Libya) will ensure a higher oil price –Libya said it would cut production if necessary
$250 - $145 (current oil) = $105 increase = 72% predicted increase in oil price
FURTHER FALLOUT
:oil is tied to the dollar and if this oil prediction comes true, for every $8 increase in oil price, the dollar will lose 1-2% of its value
(according to the head of OPEC I)
$105 divided by $8 = 13
this means the dollar would lose between 13% to 26% of its value
————-
ALREADY
-the dollar has steadily cheapened since 9/11
FURTHER FALLOUT
:the loss of the dollar will accelerate
:oil, foods and many commodities will go higher
:many Americans will join in in buying gold (I expect gold to rise much more than the corresponding
13-26% loss in the dollar)
:US “official inflation” rises/real inflation goes 40% (my guess)
:USA sees severe unemployment and sudden Depression/World Recession (-Depression ?)
———-
ALREADY
-Panic on Wall St
FURTHER FALLOUT
:World sees that the World Financial and Economic Crisis growing worse and worse
:World/US stocks, Real Estate, and bonds decline
Houston_Bug or Gold_Bug?
There are some that would busy themselves on their last walk-accompanied by the authorities, and inquire as to whether the noose was 600 count or 700 count strands, as they are testing the drop-floor mechanism…
Speaking of hanging, the zen master hung by a vine on the edge of the cliff.. tigers above and tigers below.. So he reached out to pluck and enjoy a sweet strawberry.
Where even to begin with this doomsaying? The modern world has always been driven by great change. People will still live and work together to service their needs. Things will change, and yet they will remain exactly the same.
The biggest mistake you are making is with understanding money. You seem to think that currencies are something other than artifacts that enable trading. Dollars aren’t for saving, they are for spending. The only real value is with productive human beings. If you can do something for people that they value or give people something that they value then you can get what you need in exchange. Currencies are somewhat more sophisticated than raw barter, but they are essentially the same. No money can ever have any kind of lasting value. The only use money has is in facilitating trade.
You think you retain value because you have gold outside the US, and I think I retain value because I am a participating member of extensive networks of highly productive people inside the US. Game set and match. Even if we both do well I’d take my path over yours any day. Knowing you can work with teams to help many others as needed in a broad range of possible futures is not only valuable, but much more rewarding than hoarding some objects in some location which is perceived safe until it isn’t.
It’s almost comical…
Those of you holding Dollar-denominated instruments of mass deduction have been so wrong, for so long.
If it was a baseball game, Gold & Oil are leading by a score of 11 to 2 over the Dollar, heading into the bottom of the 9th, and you’ve got the bottom of the order (’ssshrubery, paulson & bernanke) coming up to bat.
In 1964 one quarter bought a gallon of gas. In 2008 one 1964 quarter will still buy a gallon of gas.
..mighta been true a few months ago.. Unless i’m mistaken that old quarter needs to have a little added collector value.
A pre-1965 silver quarter weighs 6.25 grams.
31.1 grams in a troy oz, so it weighs about 1/5th troy-oz.
Silver is currently around $18 an oz, and 1/5th of that is $3.60.
amazing how clear your mind suddenly gets just when the cursor is poised over the “add Comment” button.
i did screw up.. the quarter is only 90% silver by weight, so it’s worth something less than $3.60… maybe $3.25.
My 1965 Quarter buys me just a little over 5/100’s of a gallon of dinosaur juice.
Grisham!
Yeah, I guesstimated today! To friggin lazy to do it correctly. I am paying $4.049/gl - so I’ll fudge by throwing a little inflation into the equation to make it right.
I think the point is still valid. lol
“If it was a baseball game, Gold & Oil are leading by a score of 11 to 2 over the Dollar, heading into the bottom of the 9th, and you’ve got the bottom of the order (’ssshrubery, paulson & bernanke) coming up to bat.”
quote of the week!
I like the phrase “dinosaur juice” and will vote for that as phrase of the week. We need to hear that more often so to counteract the nuts who think oil is rapidly replaced.
From dinosaur to dinosaur juice in just 6,000* years…
* 65 million years if you lack dogma
oh good.. we have some bloggers who know about oil..
cause i have some Questions:
How much of a one kilo mass of dead plant or animal turns into oil?
Was there enough mass of dinosaurs and vegetation to account for all the oil that ever existed?
Have all the animals and plants that lived and died since the dinosaurs roamed the earth been turning into oil too?
If so, is oil even now being newly created just as it always has been created? ..by the death and decay of plant/animal life throughout time?
Of course we know for a fact that oil is not created by any abiogenic processes and cannot be found on lifeless planets, even where there exist hydrocarbons like methane. That’s just too weird to be possible. I was taught where oil came from and nothing will change my mind.
Fed to bar prepayment penalties. Of course the mortgage industry will fight it.
http://bloomberg.com/apps/news?pid=20601087&sid=axD1nVft5dN0&refer=home
Ridiculous.
If someone has bad credit, they need someone else to take a bigger risk to loan them money, correct?
If someone comes up and offers to cover the risk with a loan, they want a higher return, and they want enough of a return over time to offset other risky loans they’ve lent.
Prepayment penalties give the investor a guaranteed return which helps offset those who aren’t going to pay. It is terrible reasoning to prevent prepayment penalties, and will only reduce the loans that people with bad credit can get.
..it.. will only reduce the loans that people with bad credit can get.
Sometimes you reach a point where you really gotta reign in the horses a little..
As long as the horses are allowed to eat all the poisonous berries that they want to, with no help from the other horses, let them do what they want to do.
I find it ridiculous that I can’t charge someone 100% interest a year. If they can’t get money anywhere else, I’d be willing to take a huge risk on almost anyone for the right return. At 100% interest on a $500 loan, the person who is desperate for $500 only pays me around $90 a month for a year. Not a big deal. But I can’t do it. If 1 out of 2 people I loan $500 to stop paying, I still get my money back. Considering that most of these people with bad credit truly are deadbeats, I think the risk is much higher of default, so even 100% interest is a bad deal for me. Maybe I’d go for 200% interest, and hope that most don’t default.
What you do with your own money is your business. If you want to be a bank and put OPM at risk, you’ll need to abide by the fed’s rules.
Usury laws vary by state.. Congress hasn’t gotten itself involved in private transactions. Virginia has no interest limit when lending to businesses or corporations..
IF you really want to go for it, here’s a few more ideas from Washington State:
Exceptions to the Usury Law
http://www.dfi.wa.gov/consumers/interest_rates_exception.htm
JW: Fed to bar prepayment penalties.
I suspect this means an end to teaser rates.
Trarian = Carrion
Contrary to what people used to think…
To BanteringBear, re: Slumlord discussion yesterday. No I’m not a slumlord; haven’t ever had investment real estate. I’m just a free-market idealist, and I believe that you get what you pay for, at least in an ideal world. Given the option between living in a slum for $N, living in a non-slum for $Nx2, or living under a bridge or in the woods for free - many people rightly choose to live in a slum for $N. That being the case, IMO being a slumlord is not inherently scummy.
Obviously it’s not that simple, and certainly there are tons of scummy slumlords out there that truly give not a whit for their residents. I wouldn’t generalize that all should be waterboarded though. “Slumlord” is an objective observation, and (something I often state) I hate generalizations.
In my opinion, a slumlord is an infestor who doesn’t maintain her properties. Just buys them and collects the rent.
IMO, my previous landlord, Paradigm Properties (North Central Florida) was a slumlord. The property may have originally been nice, but Paradigm only maintained the outside. Serious plumbing and drainage problems went unfixed. Broken appliances were not replaced or repaired. I was too busy with work to sue (not worth it) so I just moved, but, having read Florida law, I’m pretty sure they were skirting the edge of what was legal.
I live in older, smaller, less luxe digs now, but the LL actually does maintenance and pays the bug man to come around (Paradigm was infamous for skipping out on this for months at a time, which allowed cockroach problems to occur in their larger buildings).
There are more complexities than this (especially with Sec. 8 and also who you rent to) but in my mind, a slumlord is someone who just collects rent and never performs required maintenance and repairs on the property.
The joys of condo living:
http://www.azcentral.com/business/articles/2008/07/12/20080712biz-landmark0712-ON.html
This is a building near downtown PHX with lots of flipper owned units, several of which are now short sales or foreclosures. It’s an OK building with nice views, but the condos are nowhere near worth the $400K+ prices being asked at the peak of the bubble. Many of those are now foreclosures or short sales with asking prices about half of that. The new $800/mo fee to repair the building AC probably won’t help attract buyers.
Ouch! $800 per month! That stinks! You did not mention what the HOA fees are! Ha! The Azzure structure in Marina Del Rey has $900 per month HOA fees.
Fortunately other high density condos / lofts are being built in the Phoenix light rail corridor, so there will be a lot of price categories to choose from.
$700 per month HOA fees, according to that article. Wow! $1500 per month for air conditioning and HOA for a $400,000 condo!
Outrageous!
The HOA fees vary by size/location of unit. They run around $250-400, but include AC/heat (possibly not at the moment), basic cable, water, and the usual building maintenance items.
2/2 1300sf condos in that building rent for around $1500 1/1s for about $1200. That barely covers the new HOA fees, so those out of state “investors” are in a bit of a bind.
I meant, they USED to run $250-400. A year or so ago I considered renting a condo in that place. It’s very close to where I work, and, maintenance issues aside, the building is solidly constructed and has outstanding views. With updated electrical/plumbing/HVAC it would be a decent place.
Cane Fu Fighting
“…The cane has a rich history as a weapon, notably in the U.S. Capitol. A number of 19th-century canings at the Capitol included a brutal 1856 attack on the Senate floor by South Carolina Rep. Preston Brooks on abolitionist Massachusetts Sen. Charles Sumner, who had mocked a relative of Mr. Brooks in a speech. Mr. Sumner was carried away unconscious and bleeding. It took him years to recover….”
WSJ
A few hundred Congresspeople need to be caned.
“Bad congresswoman ZOOT! She has lit the grail shaped beacon again! She MUST be tied to the bed and spanked! Then - spank ME! (and Me! and Me!) Yes! You must spank us all!”
Apologies to Monty Python…
CONgress is sitting on a 9% approval rating, and ’ssshrubery’s is 3x as high as that lowly number.
I’m not sure America can wait until there’s a 2-for-1 pitchfork sale @ Wal*Mart, to act, can they?
http://tinyurl.com/68mho5
While Peter Grandich says even his family will be severely affected in the coming bad years, I think of Howard Ruff’s book around 1980. I’m a lifelong atheist but think the Mormon religion’s idea of stockpiling dry food and water is a smart idea. You don’t have to be a homeowner or a religionist to be able to stockpile. You don’t even have to rent a SFH and can still rent in a multiple unit dwelling. Especially if you have a garage - lots of space. Good airtight containers to keep out bugs.
We have 3 different sources of freshwater on our property. (well, river, creek)
It’s no different than a commercial airliner having 4 redundant systems, independent of one another, as far as oxygen goes, is it?
Plan for failure, hope it never happens.
You don’t even have to be a Mormon to buy at their warehouses, which sell water drums, food stocks, and other assorted survivalist goodies. Personally, I am thinking of simply offering a cash payment to a Mormon friend to allow us access to his stocks if the SHTF.
You may want to think about what you’re going to offer him after the SHTF as well.
You may want to think about what you’re going to offer him after the SHTF as well.
I liked it better the first time you said it 3 seconds ago.
The Mormon church leaders also offer sage advice about debt avoidance. Too bad a large number of their membership ignores their leaders.
My favorite line I ever heard about credit markets was from a General Authority at a church conference talk: “Them that understands interest, gets it. Them that don’t undertands interest, pays it.”
Stop living in fear, people. This next couple of years are going to be rough, but this housing downturn is not going to bring about the apocalypse.
We here are really getting excited about house prices falling. We (Ben Jones and us bloggers), understand that the best thing to happen to America will be falling house prices. 32% of the public are renters, many of whom are responsible savers. Some of us will pay cash for $800,000 houses (peak prices) that are really worth $300,000 (and pay the $300,000).
We will win in the end. This $300 billion bailout will backfire because the loan interest rates will increase. But the CongressIdiots don’t care because they are all looking for votes. House prices will continue to fall during this bailout and because of this bailout. I’m not sure about wanting a permanent location, necessarily. I’m a fence sitter on climate change. I don’t want my new place in a 130 degree temp no-man’s land or under 1,000 feet of ice. Lots of volatility in climate adds another reason to stay out of real estate. But is the climate more volatile than in the 1970s or do we just read more media cases of record cold and record heat? Is volatility the norm? Maybe I should should stop worrying and go for the 15 year mortgage i n 2012.
Peak Country
http://www.youtube.com/watch?v=wSv5383Dpvs
Bill, I am a Mormon. The church leadership has really been pushing this fact to do recently, as well as for members to get financial house in order. Thanks for making the nice comment and recommendation our church has been espousing. These principles are for everyone, not just our church members. And certainly a lot of Mormons has not followed this advice, to their own demise also.
Housing Market Crash: Is There a Silver Lining?
“builders are going to have to start building what people want to buy and live in, rather than what it is easiest to provide for an investment-hungry futures market”
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/07/12/cnhousing112.xml
“Morgan Stanley, the second-biggest U.S. securities firm by market value, has packaged corporate loans into a new structure that can be swapped for financing from the Fed.”
American Banker
July 11
Free moneys for everyone.
I heard the FED is no longer accepting anything less than 2-ply wipe for collateral, as they have high standards to uphold.
“External objects produce decided effects upon the brain. A man shut up between four walls soon loses the power to associate words and ideas together. How many prisoners in solitary confinement become idiots, if not mad, for want of exercise for the thinking faculty!”
Jules Verne
http://en.wikipedia.org/wiki/Image:AhuTongariki.JPG
Eastern Islanders wasted all their energies in building rows of monuments to themselves, and are we really so different?
http://www.tdot.state.tn.us/plango/images/pictures/landuse.gif
Six days until closing. I’ll be holding my breath until the house is gone.
I have to admit that I believe things are going to get worse, significantly so, before they get better. So I feel like someone who caught the door just as it was closing and managed to (or is in the process of) squeaking through to my escape.
Courage, free thinkers, lest the terrorists win the battle for the hearts and minds of people who live in the free corners of globe.
When you think, the terrorists win.
“…a devout Christian, added fuel to a mounting political furor by revealing the existence of a previously secret bureaucratic body, called the Interdepartmental Working Group on Cartoons.”
I see we are exporting “Shadow Gov’t” fear…
Bugs: “Hey Daffy, have you ever read the “fine print” on your Warner Bros. contract?”
Daffy: “Well not really Bugsy, should I be worried?”
Bugs: “Eh, could be…if eBay is selling Lonney Toons DVD’s in Islamic countries.”
Daffy: “page 63…Daffy gets tortured again!”
If it were not for the laughter…it would not be the Tao.
Can anyone explain the status of 16.3m (18.6m-2.3m) U.S. homes that are vacant and not on the market? In particular, I am interested in knowning how many of these homes are likely to soon return to the market as either for sale or for rent?
Finance & Economics
American housing
The wrecking-ball response
Jul 10th 2008
From The Economist print edition
How to deal with a glut of empty homes
TUMBLING house prices in America, rising foreclosures and a glut of unsold homes have produced a variety of unusual, even desperate, responses from policymakers. Of the 129m housing units in America, 18.6m stand empty. At 2.9%, the home-owner vacancy rate, which measures the share of vacant homes for sale, has reached its highest point since measurement began in 1956. At the end of the first quarter there were 2.3m empty homes on the market, an increase of more than 160,000 from the end of 2007. There is a vicious circle: the huge number of houses on the market pushes home prices down, and as prices decrease, mortgages become harder to refinance, leading to more foreclosures, vacancies and so on. The more homes are on the market, the less chance that prices will stabilise.
There was a thread about this a couple months back. The related article broke 16 or 18M vacant properties down into categories. I remember reading that only about 4M of those homes were somehow distressed, and it stuck because it seemed to be a very low percentage..
The rest were 2nd homes, vacant long term rentals and vacation rentals.. and one or two other things.
I tried to search it the otherday during another conversation but couldn’t find the article or the stats.
Will the WH stay the course on its veto threat?
White House renews veto threat on housing bill
Sat Jul 12, 2008 12:45am BST
WASHINGTON (Reuters) - U.S. President George W. Bush would veto Senate housing legislation if it includes $4 billion in block grants to states to buy foreclosed homes, White House spokeswoman Dana Perino said on Friday.
After weeks of wrangling and growing concerns about wobbly housing markets, the U.S. Senate passed a plan to save hundreds of thousands of American homeowners and their families from foreclosure and sent it to the House of Representatives.
The Senate measure also overhaul regulation of Fannie Mae and Freddie Mac, the nation’s largest mortgage finance companies, which have come under tremendous pressure in the last few days amid concerns about reserves.
“The Senate bill would provide for $4 billion in block grants to states to purchase already foreclosed homes, which just helps lenders who now own these properties, not people trying to stay in their homes,” Perino said in a statement.
“If this provision is in legislation that comes to the president’s desk, he will veto it,” she said.
Bingo!
I so want to see Dana Perino in a mud wrestling contest with Condi…
No no no! It helps the neighborhoods and citys. Because, … well, Just Because!
July 13, 2008
Fears grow of a global plastic meltdown
Experts fear the western world’s mountain of debt on credit cards is about to crack under the strain
Iain Dey
TERRY DONOHOE arrived for work at 10am on Friday morning. By 11am the 41-year-old debt adviser had spoken to seven different people, all battling with huge credit-card arrears.
“I’ve just spoken to one guy who has £22,000 on five different cards,” said Donohoe, one of some 400 helpline advisers who work at the Consumer Credit Counselling Service’s headquarters in Leeds.
“He was only earning £12,900 a year as a part-time hospital porter. It would take him about 30 years to pay that off.”
From The Sunday Times
July 13, 2008
Panic as Fannie Mae and Freddie Mac dive
America’s biggest home-loan lenders have lost half their value and if they are allowed to collapse the whole world will suffer
Dominic Rushe in New York
BACK in 1938 America was still reeling from the Great Depression when President Franklin Roosevelt came up with a scheme to kick-start the US mortgage market.
Home ownership, it was argued, was a social good — improving schools and reducing crime. The government-sponsored Federal National Mortgage Association, soon dubbed Fannie Mae, would buy up mortgages and sell them on to investors, providing stability and liquidity for home-loan firms.
Today Fannie and its younger sibling, Federal Home Loan Mortgage Corporation, AKA Freddie Mac, guarantee about $5 trillion (£2.5 trillion) of mortgages, nearly half of all US home-mortgage debt.
Last week, with some speculating America is on the brink of another Great Depression, Fannie and Freddie were plunged into crisis — a crisis fuelled by rumour and speculation that has threatened to push the US economy over the edge, taking the rest of the world with it.
Gramm’s words were an outrage; his actions have been worse
Saturday, July 12th 2008, 6:46 PM
The outrageous statements uttered to reporters by ex-Sen. Phil Gramm - in which he publicly called the faltering economy nothing more than a “mental recession” and those complaining about hard times “a nation of whiners” - weren’t just dumb.
The callous, stunningly inaccurate rant also highlights two huge problems faced by Republican presidential contender John McCain, who relied on Gramm for guidance on economic matters and named Gramm chairman of his campaign.
Problem One: Propping up the clueless Gramm as a savant, as McCain did for months, underscores the fact that the candidate - in his own words - “doesn’t really understand economics.”
Problem Two: Graham, who chaired the Senate Banking Committee in the 1990s, was an architect of the deregulated banking system that pushed our economy to where it is today - on the brink of collapse.
Two arrested in scam using vacant homes
By Kristina Davis
UNION-TRIBUNE STAFF WRITER
2:14 p.m. July 12, 2008
CARLSBAD – Police unraveled an elaborate scheme Friday involving two men who allegedly posed as landlords and then collected up to thousands of dollars in payments from unsuspecting renters, authorities said.
According to police, the men entered at least two vacant Carlsbad homes that were in foreclosure and then listed them for rent on the Web site Craigslist.
They collected possibly thousands of dollars in security deposits and rent from several people, according to paperwork that officers found on the men.