Bits Bucket For November 1, 2009
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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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Name:Ben Jones
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Don’t forget to reset your clocks. Now go fire up that coffee maker. Now!
Extra hour - WOO!!!
But seriously, they should just abolish this absurd concept.
Couldn’t agree more. They should not only abolish it, but they should put us on perm “double daylight savings” time. Yes, it wouldn’t get light until 10AM in the winter. But, at least in the evenings, you wouldn’t have it dark before you get home. I hate the getting home in the dark thing; it’s just depressing. And I don’t really care what time the sun comes up, typically, I’m at work by then anyway.
And, for the greenies out there, I understand that it has some energy saving effects as well!
I once suggested this in the “if one hour is good, then two must be better, and three must be superlative”, right?
The audience of mostly smart scientists were flabbergasted because they are not trained to think like that. What a waste of a roomful of minds!
I was listening to NPR the other day and they quoted a native American about daylight savings time. He said the white man thinks he can cut off one end of a blanket and sew it to the other and thinks he has more blanket. Oddly enough, the only area that observes DST in Arizona is a reservation.
I wouldn’t mind splitting the difference and having a year-round “standard” time that’s half way between the current two.
“Man is the measure of all things.”
Protagoras
This is the solution that if I remember correctly, India has implemented. They have a “half” clock running down the middle so they only have one time zone for the country.
Of course, there’s also the absurd Chinese solution about which the less said the better.
No, scientists are trained to think just fine. The sheeple may believe that all graphs are linear, but scientists know all about induction and saturation, and that maxima often lie in the middle. They had listened to your idea, processed your idea, and rejected your idea in a single beat. Their surprise was that you had suggested it at all, thinking that you must be a sheeple.
At least, that was the reaction of this scientist.
I thought daylight savings time was set up to make sure that kids walking to school or waiting for busses wouldn’t be wandering around in pitch black. So doing three hours instead of 1 when kids do leave for school at 7 AM, but don’t leave for school at 5 AM is just stupid.
Of course, these days, all the kiddies seem to get driven to school so I’m not sure how important the rational is, but that is what I was always told.
No, scientists are trained to think just fine.
I think you missed the point. It’s a st00pid idea even for one hour let alone three.
“I was listening to NPR the other day and they quoted a native American about daylight savings time. He said the white man thinks he can cut off one end of a blanket and sew it to the other and thinks he has more blanket. Oddly enough, the only area that observes DST in Arizona is a reservation.”
I can’t speak to native American values. But for myself, I would rather have an extra hour of sunlight while I am awake, out and about, than an extra hour while I am either asleep or otherwise indoors. Daylight savings time gives me the extra hour, but why again do they want to take it away from me again during the darkest, shortest days of the year?
while I am either asleep or otherwise indoors
You sleep? You post in your sleep?
“You post in your sleep?”
I worked a lot overnight this weekend. And I blogged a little to break up the monotony of working so hard…
People don’t like sending their kiddies into the dark on their way to the school bus stop. It’s a ’safety issue’ concerning the kids. Good luck ever changing that.
Have the school begin later in the winter.
Or ensure that school bus stops are under bright lamps that get switched on by timer 10 minutes ahead of the bus.
Wasn’t this whole daylight savings stuff something to do with farmers?
Gotta get the kids out the door before the folks go to work, and get them home before rush hour. Could make everything start later in the wintertime. I’d be up for that. But then we’d be getting home in the dark again.
Kids still gotta walk through the dark to their well-lighted bus stop.
It started for the farmers, now it’s for the kids, and energy savings, supposedly.
So there’s no real reason just a buncha BS that has been piled on with ever-changing rationale. Sounds real “scientific”.
There is some value to DST. When your body is tuned to the sun but has to get to work by the clock, it makes some sense to try to adjust the sun to the clock, especially in the morning.
Or is it a silent killer?
Walter F. Shughart II
…the medical profession — as Dr. Osvaldo Bustos of George Washington University’s School of Medicine pointed out to me recently — has known for years that shifting time forward or backward has negative, and possibly deadly, health consequences.
A Swedish study published in The New England Journal of Medicine on Oct. 30, 2008, reports increases in the incidence of myocardial infarction (heart attack) after the beginning of daylight-saving time and the subsequent return to standard time. Depending on whether the shift occurred in the fall or spring, men and women were found to vary in the extent to which their heart attack risks were increased, but the study’s authors concluded from the clinical evidence that time change triggered more myocardial infarctions in the two groups overall than they would have suffered otherwise.
Maybe we should give the kiddies flashlights and send them to school in the dark.
“People don’t like sending their kiddies into the dark on their way to the school bus stop.”
Our school district solved that one.
1) School generally starts after daylight.
2) No buses; everyone rides to school in SOVs or car pools.
It is hard for sex perverts to abduct and abuse young children who are riding in their parents cars. If sexual abuse were 100 percent verifiable, I personally would opt for castration, but that is my own preferred solution — not for everyone…
My preferred solution, too…
——————
I would also like to have the extra hour in the afternoon when we’re all out and about. Tonight, after a long day of playdates, I thought it was really late and started getting the kids ready for bed before realizing how early it was, so had to let them stay up later. We were so ready to have them down already.
Can’t we get an extra hour each week? This is great.
Yeah, my coffee maker is a cup of water in a microwave, and a spoonful of Taster’s Choice. Mmmm! Works for me.
But you’d expect that sort thing from the Palmster.
Microwave? You fancypants. True instant coffee is made with hot water off the tap. Mmmm. (I bet that’s how Rancher makes his.)
Yeah, I’m a real wussie. There are some swamp rats here and in Georgia who dip their water from places like the Okeefenokee. Looks like dirty tea, but more healthful (depending where you are when you dip it) than tap water. The tannins that leach into it kill the microbes.
My dog drinks out of the toilet. Whas new
I recommend you not let your dog lick your face. Of course, even dogs that don’t drink out of toilets put their noses and tongues places which would make me quite reluctant to having them ‘kiss’ me…
Instant coffee? Not in decades and we woke up
at our normal time to find it was 4am…Sheesh.
And folks, 67 tomorrow and that doesn’t mean
the temperature….laughing.
Happy Birthday tomorrow, Rancher!
Why not just skip the water in the microwave and swallow the spoon of Taster’s Choice? Sine TC isn’t really coffee anyway, you’ll save water AND energy, and get essentially the same effect.
a pinch between your cheek and gums, and you’re out the door…
“Yeah, my coffee maker is a cup of water in a microwave, and a spoonful of Taster’s Choice. Mmmm! Works for me.
But you’d expect that sort thing from the Palmster”
That works well for me sometimes too Palmy.
Morning HBB!
Fire is warming the homestead and the coffee is fresh!
Watched the sunrise this Nov 1st morn - all is well.
Leigh
Still enjoying your new house, Leigh?
BTW, my DH was in Wisconsin the other week and now thinks we ought to move there.
November 1st already; wishing all HBBers a safe and healthy last 2 months of 2009!
Support Ben with a donation if you can. This blog has been of great value to many the past few years.
Amen!
Going to do that right now…
Ain’t nobody going after GS, they own the joint.
How Goldman secretly bet on the U.S. housing crash.
November 1, 2009 McClatchy DC
WASHINGTON — In 2006 and 2007, Goldman Sachs Group peddled more than $40 billion in securities backed by at least 200,000 risky home mortgages, but never told the buyers it was secretly betting that a sharp drop in U.S. housing prices would send the value of those securities plummeting.
Goldman’s sales and its clandestine wagers, completed at the brink of the housing market meltdown, enabled the nation’s premier investment bank to pass most of its potential losses to others before a flood of mortgage defaults staggered the U.S. and global economies.
Only later did investors discover that what Goldman had promoted as triple-A rated investments were closer to junk.
Now, pension funds, insurance companies, labor unions and foreign financial institutions that bought those dicey mortgage securities are facing large losses, and a five-month McClatchy investigation has found that Goldman’s failure to disclose that it made secret, exotic bets on an imminent housing crash may have violated securities laws.
“The Securities and Exchange Commission should be very interested in any financial company that secretly decides a financial product is a loser and then goes out and actively markets that product or very similar products to unsuspecting customers without disclosing its true opinion,” said Laurence Kotlikoff, a Boston University economics professor who’s proposed a massive overhaul of the nation’s banks. “This is fraud and should be prosecuted.”
Ain’t happenin’.
Agreed. Goldman Sachs is literally above the law and they know it. So do their bought-and-paid-for Republicrat stooges.
Surely a Chicago-educated fellow recognizes the flaw in this reasoning. I am quite sure almost everyone would have said Enron would never collapse, or Bernard Madoff would never turn out to be a Ponzi schemer, or Richard Nixon would be run out of office for the Watergate burglary, up until when these things did happen. What makes Goldman Sachs so special that they are above legal scrutiny? A heavier level of infiltration of the US government, you say?
I say the US Constitution still stands above the Fed and Goldman Sachs, and somebody (maybe Ron Paul, maybe someone else) with a conscience and at a high enough level of political power, will eventually subject the situation to the level of scrutiny it properly deserves. I have more faith in the US Constitutional system of government than I do in the Megabank, Inc scam, which is destined for the dustbin of the history of high level fraud.
Anyone who challenges the “vampire squid” of Goldman Slacks (and JP Morgan) will be “disappeared” or otherwise neutralized. They have their slimy, blood-sucking tentacles in every corner of the government now.
Might not be any prosecutions, but I smell me some class action lawsuits a-brewing.
I’m a’ prayin’.
I have a Q: where did the Triple-A rating come from? If it was from Golden Sacks itself, then they get nailed for…something. If the rating was from Moody’s, but GS paid for it, there’s conflict of interest. If Moody’s independently decided that real estate always goes up and rated it AAA by itself, then, isn’t it buyer beware?
GS was paying the ratings companies to rate them.
You can google it.
The rating agencies were PAID to rate them.
You can google it.
(sorry if this ends up a double post)
WTH
Figures that would post.
The ratings agencies were paid. (is there something about those combination of words that is a problem?)
“… it made secret, exotic bets on an imminent housing crash…”
Were these “secret, exotoc bets” perhaps hedges, comparable to, say, stock puts, something that is totally legal and even considered prudent?
As a matter of fact, I think they were. There was news a few months after the crash that Goldman’s internal processes had actually managed to get the information that there were huge risks in the housing market and that they were exposed to those risks up to the head of the firm. He made a decision to hedge the risks despite the substantial expense. That is why Goldman was hurt less.
If the crash hadn’t happened it would have been an expensive mistake. As it was, it made them huge amounts of money. I expect a lot of that money came directly from the US taxpayer as it probably was connected to the bailed out AIG credit default swaps. I have said over and over that the AIG bailout should have been done piecemeal and Goldman should have been excluded since there is no way they didn’t understand the counterparty risk of the bet, but they made it and Treasurey blinked and messed up and their bet paid off.
Exotic makes no difference. It is who made it possible for them to be paid that matters.
As for the fraud accusation? Only if Goldman gave its own opinion somewhere along the way that the rating on the bonds was appropriate. Bet they didn’t. The seller has huge obligations to make disclosures about risks to certain investors - generally the smaller ones. They weren’t peddaling these bonds to grandma, though. Large, sophisiticated investors are on their own. If you want banks to have to disclose their own trading position in a particular security before they can sell it to “qualified” investors like pension funds, you are going to have to pass a new law.
By the way, passing that new law is pretty much the fastest way you could ever find to make them split up the firm so the investment bank part and the trading part were separate entities. The fastest way. But it would never pass. They would spend everything they have to prevent it. Everything.
“There was news a few months after the crash that Goldman’ internal processes had actually managed to get the information that there were huge risks in the housing market…”
Lol. Goldman wasn’t alone in seeing these risks. Anyone reading this blog could have picked up on that.
Something about strawberry pickers in Stockton buying $700,000 houses might have offered a clue.
There was news a few months after the crash that Goldman’s internal processes had actually managed to get the information that there were huge risks in the housing market
Goldman’s “internal processes” probably stumbled onto the Housing Bubble Blog and saw the light.
Too big to fail is toast. It may take quite a while for the reality of the situation to sink in, though…
Say it ain’t Joe. Goldman $ucks actually taking advantage of people?
Must be misinformation or “mis-remembering.”
Here’s more on GS from McClatchy…..
http://www.idahostatesman.com/newsupdates/story/949993.html
Before they bought pools of thousands of mortgages, Goldman and other Wall Street firms hired contractors to comb through sample batches of the loans to weed out unsound or fraudulent applications….
Melissa Toy and Irma Aninger, among scores of contract risk analysts who thumbed through mortgage files for the San Francisco-based Bohan Group from 2004 to 2006, said that supervisors overrode the bulk of their challenges to shaky loans on behalf of Goldman and other firms.
They couldn’t recall specific examples involving loans bought by Goldman, but they said their supervisors cleared half-million-dollar loans to a gardener, a housekeeper and a hairdresser…
Toy said she concluded that the reviews were mostly “for appearances,” because the Wall Street firms planned to repackage “bogus” loans swiftly and sell them as bonds, passing any future liabilities to the buyers. The investment banks and mortgage lenders each seemed to be playing “hot potato,” trying to pass the risks “before they got burned,” she said.
“There was nobody involved in this who didn’t know what was going on, no matter what they say,” she said. “We all knew.”
Told ya they knew. They ALL knew.
From the loan officer to the BOD of the big boys, they ALL knew.
This kind of story highlights some of the really big problems with too big to fail banks:
1) They are big enough to buy off regulatory scrutiny.
2) They are big enough so that if they engage in fraudulent activities and get shut down for them, the aftermath will threaten to bring down the global economy.
3) They are big enough to believe they are above the rule of law, increasing the moral hazard for committing fraud and (correctly) assuming they will get (most likely) away with it.
GS bought ‘insurance’ from AIG. Why would Paulson have approved 80 billion from Treasury to AIG. Oh, Paulsons $700 million pension at GS ? GS got 15 billion from AIG and Deutsch Bank got 8 billion. Moodys and Standard and Poors rated the paper AAA. They should slowly hang from the Hanging Bridge.
“Goldman’s sales and its clandestine wagers, completed at the brink of the housing market meltdown, enabled the nation’s premier investment bank to pass most of its potential losses to others before a flood of mortgage defaults staggered the U.S. and global economies.”
And then there was the TARP, which handed Megabank, Inc (aka Goldman Sucks) a nice chunk of freshly-printed liquidity to snap up financial assets at fire sale prices. And they cashed in on the real estate crash. Heckuva job, boyz and grrrls!
Try reconciling the the above with this:
‘The book makes clear how close Goldman came to death: if Morgan Stanley went under, its arch-rival was “30 seconds behind”, reckoned its boss, Lloyd Blankfein.’
Faced with extinction, these firms tried to change the very rules under which they had thrived for so long. They lobbied successfully for a ban on short-selling. Morgan Stanley’s John Mack hypocritically branded the practice—which his firm had long financed as a prime broker—“immoral if not illegal”. For all the fear, Mr Mack seems to have been exhilarated by the experience of battling to save his firm.
I smell illegal activity at the highest echelons of government and private enterprise, where there is no regulator big enough to stop it. The former chair of the Princeton Department of Economics is in the middle of it all, too.
“Ain’t nobody going after GS, they own the joint.”
I hope they enjoy their ‘too big to police’ status while it lasts.
Anything which cannot go on forever will end.
– Herbert Stein –
I am quite confident that Goldman Suck’s ‘too big to police’ status will not go on forever. The future viability of the US government may depend on its ending soon.
The future viability of the US government may depend on its ending soon.
From your mouth to God’s ears.
I’m just stating the obvious, but most people are either too dense, cowardly or practical-minded to acknowledge it. I suppose I am cowardly, too, or I would be sending in editorials in my real name to the New York Times, The Wall Street Journal, The Economist and The Financial Times stating the same.
But there really is no need to do this. Whether it takes one year, three years, five years, whatever, when Goldman’s financial engineering strategy finally basks in the bright light of legal scrutiny, the MSM will talk on and on and on about it, just like they did about Richard Millhouse Nixon, Ken Lay, Bernard Madoff, Charles Ponzi, etc etc etc. It’s just a matter of time, folks…
Is Dr. Williams’s complaint valid? “The three branches of our federal government are no longer bound by the Constitution as the framers envisioned, and what is worse is American ignorance and acceptance of such rogue behavior.
“Look at the current debate over government involvement in health, business bailouts and stimulus packages. The debate centers around questions as whether such involvement is a good idea or a bad idea and whether one program is more costly than another. Those questions are entirely irrelevant to what should be debated, namely: Is such government involvement in our lives permissible under the U.S. Constitution?” American Idea
If the U.S. Constitution is a pointless, invalid document why do politicians still solemnly swear to uphold it?
Oh-ho! You’d see CONgress and the prezzy start braying about their “Constitutional protections” fast enough if the stark realization hit them in the ass that they could be handed over to international courts or other countries.
I’d like to offer a number of banksters, CONgresscritters and admin officials to China in exchange for wiping out the debt. Works for me.
BTW, a Federal madate to purchase health insurance is completely against the Constitution, since the federal government is forbidden to mandate the purchase by citizens of any good or service.
Where is that written? I searched on those words at:
http://www.usconstitution.net/const.txt
“I’d like to offer a number of banksters, CONgresscritters and admin officials to China in exchange for wiping out the debt. Works for me.”
It sounds like China’s getting the short end of the stick on that deal. What else do ya got?
Ah, the usual lib baiting. As dependable as the morning coffee posts.
Why is insistence on the Constitution lib-baiting? It happens to be (or should be) the foundation of US law. I find both parties/philosophies, etc. capable of ignoring it if it suits them. I believe Bush the Younger trashed it as an insignificant piece of paper. But you’d have heard Bush screaming about it if someone had bundled him into an international flight and dropped him in the middle of some desert in Iraq.
It may not be perfect, but it has protected many who would seek to destroy it.
“Why is insistence on the Constitution lib-baiting”?
It isn’t of course, there is no such thing are a ‘perfect’ system, as we all know. However our Constitution is one hell of a fine foundation, and should be abided by IMO no matter what party a person leans toward. Libs do tend to be very thin skinned though, I will say that. Glad I am not a member of either party, they can keep the elephants and asses.
Are you saying we should legalize the constitution?
Great idea
Glad I am not a member of either party ??
Ditto here…
“Are you saying we should legalize the constitution?”
+1million.
Someone sued FDR and Regulators in the 30s over ‘mandates’. Took it to the Supremes and won. Was a chicken processor in the Bronks if I remember.
Are ‘too big to fail’ powers just too big?
As lawmakers reshape financial rules to stop firms from getting too big to fail, one thing is clear: The White House gets more power. That scares some people.
WASHINGTON (CNNMoney.com) — As Congress starts debating how to deal with financial firms deemed “too big too fail,” some lawmakers and advocates are worried about giving the executive branch expansive new powers over the financial sector.
“Mr. Secretary, I’m not a man that fears this administration or you,” Rep. Paul Kanjorksi, D-Pa., told Treasury Secretary Tim Geithner this week. “But I do fear the accumulation of power exercised by someone in the future that can be extraordinary.”
Indeed, draft legislation that was released this week by the House Financial Services committee would give the Treasury a lot of new clout.
For example, the bill would create an oversight council to watch over big financial firms and require some to shore up their capital reserves. The Federal Reserve would have a big role in determining those levels, but the Treasury secretary would serve as chairman of the council. And that troubles some lawmakers and experts.
“The idea that the Treasury should assume such a large role is, in my view, a problem, ” said Jane D’Arista, for Americans for Financial Reform, a coalition of consumer advocate groups and labor unions. “The council should have more responsibility, and I don’t think it should be under the thumb of the Treasury.”
Telegraph co uk
High street banks to be broken up
Three new banks are to appear on Britain’s high streets as part of a major break-up of the sector to be announced by the Government this week, The Sunday Telegraph has learned.
By Kamal Ahmed, Business Editor, and Patrick Hennessy, Political Editor Published: 8:30PM GMT 31 Oct 2009
…Treasury sources have told The Sunday Telegraph that the move will be announced to the House of Commons after the European Union made it clear that the state aid pumped into Lloyds Banking Group and RBS meant that they had to be reduced in size.
Officials said the move would increase competition on the high street and would mean a better deal for customers looking for mortgages or current accounts which did not charge fees.
They added that the announcement would mean the break-up of the established “monopoly” over retail banking of the high street giants – whose numbers also include Barclays, Santander (owners of Abbey) and HSBC. …
…Under the deal, the new institutions will not be allowed to be taken over by any purchaser which currently owns a British retail bank. Ministers will stop this happening using their powers as controlling shareholders in Lloyds, RBS and Northern Rock, rather than by new regulations.
Instead, likely purchasers will come in from the US, Australia or the Middle East. The Daily Telegraph revealed that nearly half of all current accounts held in Britain, some 3.7 million, now involve fees for those who use them. …
…The official said that any sale of the new banks would take a considerable period, and that nothing would be completed before the next general election which must be held by June next year. The sale should generate considerable profits for the Government but officials are remaining tight-lipped on the possible amounts. …
Yeah, we’ll see,
Leigh
I’m not going to wait. I am sending all of my money and things to Tim Geithner and I will call him every day to ask if he can help me with my needs on a daily basis. I feel I can no longer be trusted with my money. Timmy is the only one who is qualified.
You have now become a model serf on the incorporated global plantation.
“Are ‘too big to fail’ powers just too big?”
Too big to police.
Hi gang. Have not read or posted in about a month. Exciting news for me. My nice white collar job and others in the professional services firm where I work are being offshored. Been job hunting and looking at alternative options. FORTUNATELY for me this is not a tragedy. I can be mobile (I have even considered going to one of the low cost markets to follow my job - have never lived internationally. You get local pay but enough to live. Could be an adventure.) I have no debt, plenty of savings, can live off much lower income - that no likely is coming, no matter what I do. Be prepared !
India does not allow foreigners to come in and take their jobs. Go figure.
That is completely not true. If your company demonstrates a need for hiring you and if you follow the paperwork, you can get a residency permit. No different from the US or China or just about any other country.
You are both wrong. In India if you bribe the right people you can get any rule or law broken or changed in your favor.
That is probably true in any country.
Just ask those who work on K Street.
Come now - there’s a big difference between the K Street lobbyist who offers campaign contributions and other blandisments to on-the-take Republicrat politicians to secure a favorable vote, and passing a bribe to some bureaucrat in Mumbai. That difference is…
Um, er….
Okay, disregard. A bribe is a bribe no matter how you slice it. And our politicians are no less corrupt as the ones in India.
that no likely = that likely.
Time for coffee.
I am so sorry about your job situation. I have worked overseas a few times, for more or less money. They were adventures.
Was the job cuts expected, or were they a shot out of the dark?
Thanks for your kind words. There was some warning depending how close one’s ear was to the ground. The amazing thing is how undisturbed I am about the whole thing. Really is a blessing in diguise for me. I have lots and lots of breathing room and will try something new, perhaps return to school, etc… One of my co-workers was the major breadwinner for the family. She is also a recent cancer survior. For her getting a job quickly with decent health care could be a problem. Cobra for family of 4 is $1500 a month. That’s what churns my stomach.
P.S. Have to add we were asked to stay until the end of year. The severence package I think is generous. There’s help with job hunting /outplacement. I have no complaint. Some of the firm’s competitors offshored long ago. For the people left, though I think it’s matter of time until their jobs will go.
Too bad about your job but I’m really glad you have a good attitude about it. Do think of relocating - it will be a fantastic experience. No doubt it will have its ups and downs (and many downs) but in balance it will be hugely educational for both you and everyone you interact with. Unless you have something tying you down to your current location (mortgage, kids, family unwilling to move) I urge you to follow your sense of adventure.
If you can get by on a local salary, even better. If you are in the tech industry the local salary will be more than sufficient to ensure a reasonable standard of living. Try to work any of the extras (such as schooling, trips back home etc) into your contract. You won’t forget your experience and it will be a big plus when you return.
“Severance?” What is this “Severance” you speak of?
Seriously, good luck to all of you.
For her getting a job quickly with decent health care could be a problem ??
“Were Number 37″….
If you’re young and with few family obligations going abroad for a while might be an adventure.
However, be sure to get a very clear agreement with your employer and make make sure you know the tax situation.
I work down the hall from an HR person who deals with our people who go overseas. There are significant complications to such a situation and there are people who have had years of trying to straighten out taxes and other problems after they return. Be sure to have it looked over by your own lawyer and tax people before you sign.
Also be careful of the health insurance situation when stationed abroad- apparently temporary and “permanent” relocations can be treated differently benefit wise. And see if any health insurance covers evac to US if needed… depending on where you are, if diagnosed with a serious illness you don’t want to have to foot the bill for coming back to the US.
Hi, yes single and relatively young 43. And have even been carded when buying alchohol within the last year !
Sound advice thanks !
Ah! Good for you! Probably did not do any sun worshipping like I did. Some young woman at work told me I look like I’m 37, although I’m 50. So I am far from being carded.
I am footloose and would go overseas in an instant if it’s not in a war-torn nation. I’d take Europe, the orient, South America, Australia, or New Zealand.
OK, Bill, are you looking for a girlfriend? This week you’ve talked about how you swim two miles in record times everyday, and that you look like you’re 37 though you’re 50. The yenta in me senses that you’re in the market. Any ladies interested out there?
Geez you figured that out just now?
Judging from what Bill has written here, I don’t think any woman is worthy of him.
Nah! I want to be alone.
I don’t thinkhe thinksanyno woman is worthy of him.Bill you sound like my brother has a 3 bedroom house almost paid off 2 cars in the garage and of course no GF…well nothing to take home to mom.
No mom and no dad. You little children are laughing harder now?
If you’re young and with few family obligations going abroad
Enroll the kids in the local montessori or good local school. The kids will be forever rewarded with the language skills, insight and future for their lives with that experience. Do not send them to an American school in a foreign co. Why?
Excellent advice!
And yet another tier of American workers being outsourced. First it was manufacturing. The blow was softened by Reagan’s deficit spending. Then it was construction and H1B insourcing. The blow was softened by the internet and increased productivity under Clinton. Since about 1999, the same Internet has been threatening any job involving a computer. The blow was softened and even disguised by the housing bubble, and by tax cuts which only rewarded more outsourcing.
What now? These are no longer unskilled bolt-tighteners in union Detroit (everyone’s favorite whipping boy). This is an entire middle class with largely unapplicable four-year college degrees. And there is no more money for bubbles.
“This is an entire middle class with largely unapplicable four-year college degrees.”
That’s why you get the Ph.D. in Elizabethan History.
“This is an entire middle class with largely unapplicable four-year college degrees. ”
Not really. The unemployment rate, today, for college graduates is 4.5%. Those degrees are applicable somewhere obviously. But why use facts when emotion makes a better argument?
The operative word being “today.” The white-collar outsourcing hasn’t had years and years to ramp up. What is there to prevent it?
I’ve been hearing the same tired off-shore is going to kill all the jobs garbage for 10 years. And over the past 10 years unemployment for college graduates has been between 2 and 5%. It’s xenophobia like all others. The Mexicans are stealing our jobs. The Indians are stealing our jobs. The Chinese are stealing our jobs. Everyone’s always stealing our jobs, those damn foreigners, I tell ya!!
If you disagree, please explain why you think “outsourcing jobs” doesn’t affect American workers.
Eddie, in this point I think you are right. The unemployment rate for people with college degrees is far lower than those without degrees.
So the “official” unemployment rate of 9.2% means the unemployment rate for those without college degrees is 14% while those who have degrees between 4 and 6%.
Masters degrees in engineering probably at 3%.
Watch *Close to Home- lots and lots of college degreed, mostly white ‘professionals’ outsourced, layed off for long periods of time. Watch them and get prepared. pbs I think or frontline.
If there are jobs being gotten rid of, where will those degreed personnel go to? No jobs. I doubt seriously that # of unemployed. Sounds to low. Or it is that “official” made up # that the msn puts out.
Masters degrees in engineering probably at 3%.
Friends who are Masters in SE just got layed off last monday.
Being adaptable is the first valuable lesson. The second lesson is knowing that software can be written anywhere in the world. There are some good Indian software engineers.
This I knew from the mid-1990s. Fifteen years of savings later my parachute is ever more safer.
I moved to a niche area in software six years ago. The next four years in this area look strong.
The key point is to never drop anchor. My MSCS degree did not say that I have a right to expect 40 years in the same company.
Which leads to another reason why I am posting a link near the bottom of the page in a minute
The unemployment rate, today, for college graduates is 4.5%.
LInk? And I hope it breaks it down by disipline. I bet the unemployment rate for liberal arts is higher than the rate for engineers….
Yeah. Stupid liberal arts. Teach you worthless stuff like history, where you learn about prior economic and military catastrophes, and how to avoid them ,if you so desire.
I guess all the quants on Wall Street were liberal arts majors. And all the ratings agency guys too.
Let’s outlaw liberal arts.
In January 2009 looks like 4.5% to 5% for college graduates and 15% to 16% for those who did not go to college. Graph here.
http://tinyurl.com/mzaank
For bachelor degrees the unemployment rate was between 2% and 4% until a year ago. I saw a link where those with Masters degrees had a percentage lower unemployment rate, 1% to 3%.
Masters degrees are the new bachelors degrees these days. The best areas are engineering.
So get a double degree: Liberal arts and Electrical engineering. Too costly? Go to a state university instead of an Ivy league. Over time, it does not matter where you studied. In the last five years my total gross income was $1,000,000 for that period. And I went to a lowly California State University for my bachelor’s and a different CSUC for my MSCS. I had no loans.
P.S. Excelling in a lot of liberal arts classes does not make you a socialist. It makes you a critical thinker. I took over 120 units of general ed classes, partly because I could not make up my mind. Several English literature classes, several history classes, anthropology, and so forth. Those were very memorable classes and I learned a lot from them.
My pocket book mattered. I left the small farm town in central California as soon as I got the sheepskin and never looked back.
Don’t discount liberal arts degrees so quickly.Look at the roster of PWC, KPMG (the non-accounting side), Accenture and you will see a ton of history and English BAs. And look at the CEOs of Fortune 500 companies, again a lot of liberal arts degrees.
Stupid liberal arts. Teach you worthless stuff like history…
History, yeah, what could anything that happened in the millenia of human civilization have to do with us? And literature is even worse - like history it’s mostly about dead foreigners, but it isn’t even real.
Languages & cultures, the study of religion, who needs them? I mean, shoot, I can learn all about Islam and Muslims from the experts on this blog who pronounce almost daily - and of course, from Uncle Jim back in Kansas.
So why would anyone want to spend years learning Arabic or Urdu or Persian? I mean, it’s hard. And oh yeah, learning about other peoples’ history and culture and religion must mean that you sympathize with the worst things that their tyrants or thugs or terrorists have ever done - so hanging on to uninformed certainties is actually superior to learning and knowledge.
Down with liberal arts! (Bombs and boobs, not books!)
Bill in LA,
Actually in a macro sense it very much does matter where you went to college. The education is no better or worse at Yale than it is at UConn. But the difference is the people you meet at Yale will open many more doors than at UConn, or CSU, or U of Florida. That’s why it’s worth the $40K a year to attend an Ivy League school.
From an article by Forbes that detailed the top schools for getting rich. The numbers are median salary 10 years after graduation. Dartmouth was 1st at $134K.
“The only public college to appear on our list of the top 20 schools was the University of California at Berkeley. It ranked 12th with a median salary of $112,000.”
I’d post the link but it will get eaten up since the URL is so long.
So Eddie, which Ivy league school did you attend?
I used some of the same mathematics books and computer science books those Ivy league schools used and I did not have any loan! So I was a step ahead in being able to save for retirement.
As for meeting people at those “top” places: Do they just stay in those places and never go to industry where state college graduates work? Not. I met a few Ivy league alumni, as well as the upper tier California colleges - the UC graduates, and USC graduates. Some bright people, some too emotionally unintelligent to be productive, although their SAT scores probably hit the ceiling. I’m not impressed with some of those Ivy graduates: George W. Bush, Hank Paulson, et al.
Coming from a humble background and humble college is something I regard as precious, that no silver spoon limousine socialist can understand. It makes me strong and them weak. It’s about drive.
To earn the big bucks as an engineer, you have to have a good job history.
If you are a wage slave, then yes, Eddie, I agree. Best to have spent $50,000 per year for four years so that you can earn $130,000 per year down the road.
But the difference drops off fast after that, I can assure you. Experience is very important. I’m a contract engineer and had to do a lot of OJT. For this decade alone Green Hills, VxWorks, the Rational Suite (Rose for Use Cases, designs, sequence diagrams, Test Realtime for unit testing and integration testing), various custom cross compilers and custom IDEs, custom simulation with software in the loop, Half a dozen configuration management tools, CMM process tools. For the previous decade, all sorts of development tools.
Most of this you don’t learn in Theory of Computing or Compiler Theory, of course. But you have to learn quick and not be shy to ask questions. You have to be efficient at thinking.
It takes experience and time to get efficient in this career. And people stopped asking me where I earned my masters degree more than a decade ago. I don’t ask anyone the question either.
It does not matter, particularly as a high tech nomad. Companies want results, not framed certificates on your cubicle wall.
Hmmm, and just what will those without college degrees do for food and shelter? Or will they just quietly die off?
Somehow, I don’t think so…
I know! LET THEM EAT CAKE!
I’m a state university product (UM and UC), liberal arts B.A. What made the difference was the high GPA that enabled me to get first into a PhD program with full fellowship followed by a cheap UC MD. Being at the bottom of your class at Harvard ain’t gonna help you - being at the top of any school gets you professional degrees minus debt.
I’d post the link but it will get eaten up since the URL is so long.
eddie, find out about bitDOTly and Tiny URL.
you already knew that, right?
OK let me try again. Just what are some of those white collar folk doing in their jobs? For example, does a degree in English help the floor manager in the Gap? Or do you need to learn Arabic or Farsi in countless clerical jobs? What about all the hedge fund people who went to Wall Street? If it doesn’t matter whether your liberal art was classics or history –then maybe you don’t need either, and you would be better served by two years of clerical/accounting at a CC.
And ironically, what good would a history degree do you at Goldman Sachs? They would probably fire you the moment you tried to use that history to think long term. (and don’t forget that the non-history people at HBB predicted this downturn too.)
Telemarketing and customer service…medical receptionist…sales rep, marketing…I suppose I could think of more. The point is, what you truly need for the job could likely be learned with less fluff and less debt — and in fact, I think many older folks at CC’s are learning that lesson now. But young people are getting a four year degrees, and then they need to learn a real skill on top of that anyway. The only reason it seems they need the four year degree is that everyone else has one. As our resident swimmer’s body says, masters are the new bachelors — because master’s is where the skill is.
(ps, it’s a little different in sci/eng.)
Bill,
I sense some hostility here. Read my post again. I said the level of education is the same everywhere you go. Difference is at Ivies, 7 sisters, Duke, Stanford, MIT, etc you meet the right people which are worth 100X the actual education. Do you think it’s a coincidence that pretty much every one who runs Wall St, Silicon Valley or DC these days is a product of those schools?
You’re a contract engineer making lots of money. Kudos to you. You’ve bucked the trend. Again, read my post. You are not the typical example. The average person who graduates from a run of the mill state school will be making $60K a year while his counterpart from Dartmouth or Princeton will be making $130K a year. And this is 10 years after graduates, meaning $130K at 32 or 33 years old. Not too shabby.
During your contracts, who are the people making the decisions? Are they grads from no-name state school? Or are they from well known respected schools? And I don’t mean the mid-level manager types. I mean the Sr. Directors and up. I doubt many of them went to NE Tennessee State.
Not being hostile.
But those senior managers who you think are from the Ivy league schools are hiring this state university graduate!
The most another contract engineer I know made more than me was $6,000 per week for 9 months. Now he’s back to $70 per hour. And he is a graduate of ASU.
The direct hire senior engineers have overhead costs, bringing them to the $200 per hour range. My job shop is undercutting that by quite a bit, and I earn more than the senior engineers. I don’t know which universities they are from. But contract engineering has been the second stage launch of this three stage rocket known as my career.
Comment by ecofeco
2009-11-01 15:39:55
Hmmm, and just what will those without college degrees do for food and shelter? Or will they just quietly die off?
Somehow, I don’t think so…
I know! LET THEM EAT CAKE!
I am very much a J6P, yet I am not quietly dying off. I haven’t achieved the airy heights that Bill in LA and Eddie have, yet I have more than enough for a fairly comfortable existence. I have been a technician for the last 40 years. I have worked in avionics, instrumentation, SCADA, rotating machinery, rail roads, oil exploration, and emission controls over the years. Besides working on hardware, I have cranked out a lot of assembly language and C, especially for PICs these days, and ladder logic for PLCs. The only degrees I have are from a community college. Oddly enough, my current employer is attempting to hire more technicians, and in this time of high unemployment we have had zero qualified applicants after having the job announcement up for 10 months. This for a job that pays close to $100,000 with a little OT. Not in the same league as Eddie or Bill in LA, I know, but more than enough to live comfortably just about anywhere in the US. What happened to all of the technicians ?
Anon,
Good luck to you. If I might ask, what is your age?
Oops, just saw your post about being 43…
Wishing you the best of luck, Anon in DC!
There’s some good advice above WRT traveling and working abroad. I say, “go for it!”
Good luck!
Retail gas prices highest in a year; up 17 straight days
AP ~ Energy
Retail gasoline prices chugged higher Friday to a new peak for the year, forcing consumers to dig deeper into already-thin wallets to pay for fuel.
At the same time, natural gas prices also were moving up again and have now climbed 16% in the past two months — just in time for furnace season to kick in.
The worst part: Supplies of oil and gas are plentiful. In fact, storage points for gas are so jammed, producers are running out of places to put it and crude supplies are well above average levels.
Your Government Sachs at work.
We caught a ride with AZ_Lender last night. I commented that gas was $2.87 when we passed a gas station. I don’t see many gas stations so I don’t normally know what the price is. She commented that it had been going up on a daily basis. Green shoots, people. Keep smoking the green shoots.
sounds like a good time to short oil…
But I thought high gas price was a good thing since it made us all use less oil and save the world from global warming, or climate change or whatever that’s called these days. Can’t ever please you people.
With every incremental increase in fuel prices, the economy takes another hit. The adverse effect of the spike in oil prices on the health of the economy was never fully appreciated, much less talked about. This is just bad news for “green shoots”.
So when oil prices fell from $147 per barrel to $38 the economy got better? And what I did not see any praise of oil companies for giving “the little people” a break.
Wait. It must have been something to do with a concept most nattering nabobs don’t understand: supply and demand.
Do you think the economy turns on a dime or something? Insofar as $38 per barrel oil is concerned, yes many businesses felt relief due to a decrease in their variable costs which had risen dramatically and squeezed margins. But, the damage was already done. It takes years to recover from such events, not months.
Praise oil companies? Please….
To go from $147 to $38 is a drop of about 75%. I doubt that supply and demand can really explain a change of that size. As the world fell into a recession, demand for oil dropped, by not so tremendously. Speculation must have played a role there.
http://media.ft.com/t.gifMarkets
Saudis drop WTI oil contract
By Javier Blas in London
Published: October 28 2009 20:27 | Last updated: October 28 2009 20:27
Saudi Arabia on Wednesday decided to drop the widely used West Texas Intermediate oil contract as the benchmark for pricing its oil, dealing a serious blow to the New York Mercantile Exchange.
The decision by the world’s biggest oil exporter could encourage other producers to abandon the benchmark and threatens the dominance of the world’s most heavily traded oil futures contract. It is the main contract traded on Nymex.
The move reveals the growing discontent of Riyadh and its US refinery customers with WTI after the price of the price of the benchmark became separatedfrom the global oil market this year.
The surge in oil inventories in Cushing, Oklahoma, where WTI is delivered into America’s pipeline system, depressed the value of the WTI against other global benchmarks, throwing the global oil market into disarray.
In January, WTI, which usually trades at a premium of $1-$2 a barrel to Brent, fell sharply, leaving it at a discount of almost $12 - a record gap. This dislocation in the market continued well into the summer.
From January, Saudi Arabia will base the price of oil for its US customers on a new index developed by Argus, the London-based oil pricing company.
The Argus Sour Crude Index will track the price in the physical market of a basket of US Gulf Coast crudes, including Mars, Poseidon and Southern Green Canyon.
Argus said the change in policy reflected the “increased importance of the US Gulf coast sour crude market, in which both production and trading activity was rising sharply”.
Paul Horsnell, head of commodities research at Barclays Capital in London, said Saudi Arabia’s decision was likely to reflect a “wider discontent” from its customers in the US about WTI performance.
ExxonMobil, Marathon and Valero are among the US’s biggest buyers of Saudi crude oil.
Edward Morse, chief economist at LCM Commodities in New York, said: “It is a recognition by large players that WTI sometimes does not reflect the true value of crude oil in the waterborne market.”
Saudi Arabia has priced its oil using WTI since 1994.
The price was based on quotes from the physical market which were compiled by Platt’s, a unit of McGraw-Hill.
Oil companies then covered their exposure to WTI using the futures market on Nymex.
Bob Levin, managing director of market research at the CME Group-owned Nymex, said the exchange was ready to move with the market.
“We plan to introduce a cash-settled futures contract tracking the new Argus index,” he said.
Mike Vinciquerra, equity research analyst at BMO Capital Markets, said the new Argus index would not replace WTI. “It’s more a supplement,” he said.
Copyright The Financial Times Limited 2009. Print a single copy of this article for personal use. Contact us if you wish to print more to distribute to others.
Speculation must have played a role there.
The only role.
Supply/Demand, well when it went to $4.00 pgal, and everyone slowed down driving, we should have seen the price decline. But it doesn’t work that way. It is all speculation.
End user “supply and demand ” and oil have NOTHING to do with each other.
Supply and demand among traders, however…
Wage stagnation pinches millions of U.S. workers.
THE KANSAS CITY STAR • October 31, 2009
Has your boss cut your pay? Taken away overtime? Reduced your workweek? Eliminated raises? Chopped your benefits? Put you on an unpaid furlough?
Join the millions who have seen their take-home pay flattened by the double whammy of recession and its 9.8 percent-and-still-rising unemployment rate.
Compensation in 2009 has been cut by the largest amount in nearly two decades, with a government index of real average weekly earnings down 1.9 percent since its high point last December. And the average workweek — now down to 33 hours — is the shortest on modern record.
Some pay cuts have gone far deeper than the aggregate data indicate.
James Pastine, a 35-year-old Kansas City, Mo., architect, and his wife, Laura, also an architect, have both taken 20 percent pay cuts this year.
“We’re struggling right now, but we’re making it through with the children and day care and trying to make ends meet. It’s definitely a lot tougher,” he said.
Typical of many, the Pastines accepted the sacrifice.
“It was the right thing to do, going with a pay cut rather than let people go,” Pastine said. But, “Once you set a standard of living, it’s hard to take a 20 percent chunk out of that.”
Sounds a wee bit like deflation, no?
Yes.
May not be deflationary, in fact may even be inflationary if they are pulling in less business than before so their per-unit charges are higher now than earlier despite their overall pay cut.
Yes 2
Wage deflation, sure. Price deflation? I haven’t seen it.
Houses? Sure. And what else? (okay, in some places, rent) Food? Utilities? Taxes? Medicine? Insurance? Gas? Repairs?
Oh wait! Building supplies! But, uhm, the building industry is dead for now. But yours and mine daily needs?
Hell no it ain’t “deflationary!”
“Typical of many, the Pastines accepted the sacrifice”.
What was their option? To not “accept” it.
LOL
This idea of “acceptance” is interesting. I have chosen not to “accept” certain things over the past couple of years, despite the fact that I have lost income as a result. But these were intolerable terms of service and employment, for me.
Would it have been easier just to “accept” them? Maybe over the short term. But I saw problems down the road if I did.
I’ve had people I know say “but I have to feed my family”. I understand and am sympathetic to that. I have no family to feed. The decision I made is right for me, but maybe not for them.
But, “Once you set a standard of living, it’s hard to take a 20 percent chunk out of that.”
Not if your’re the town or state government. All they need to do it raise sales, property and state income taxes.
“All they need to do it raise sales, property and state income taxes.”
Which drives those on the margin out of business, which ultimately results in less tax revenue, not more.
“Which drives those on the margin out of business, which ultimately results in less tax revenue, not more.”
Precisely.
Saw this happen with the USPS, which absurdly decides to raise rates each time its revenue declines. Causes online sellers, for example, to ship less, or ship smaller items, or even go out of biz all together. Because by the time you pay online fees, payment processor fees, shipping and handling fees, etc., you just can’t afford to sell a $5.00 piece of memorabilia. Even in volume.
“Once you set a standard of living, it’s hard to take a 20 percent chunk out of that.”
Maybe this recession will teach some people the idea of savings. It doesn’t make sense to have a standard of living that consumes every last penny of your take home pay.
Mike, J6P’s wages have been stagnate for 30 years and many have event taken pay cuts over those same 30 years despite relentless inflation.
Within their means? Sure there are plenty of idiots out there, but most folks don’t actually have the “means” to begin with. (what they do have is an almost psychotic “think positive” mass media driven attitudes that are insane in the face of reality. Besides, nobody wants to be Cassandra. Not a lot of fun at parties, ya know?)
You see, in a 75% consumer driven economy, if your workers’ wages don’t keep up with inflation, what has to eventually happen?
Yeah. “Uh oh”
nobody wants to be Cassandra
Well, our Cassandra wants to be a Cassandra, I presume. But that’s us…
You see, in a 75% consumer driven economy, if your workers’ wages don’t keep up with inflation, what has to eventually happen?
Yeah. “Uh oh”
————————
Nah, that’s TOTALLY wrong, eco.
Clearly you didn’t get the memo that explained how housing prices would magically rise, then all these underpaid workers could “extract” equity (never mind the debt component — that’s not important because you can always refi before you have to pay it off)…so they can buy more goodies at Wal Mart. See, problem solved!
No overtime for me here. This is why I do absolutely nothing on weekends in this paradise, compared to the years 2003 to 2006 when I last lived here. I used to be socially active, had girlfriends, drove all over the southland.
But no OT. Part of the reason is the customer is not buying as many products from the company I work at. It’s not just the boss whimsically saying no overtime, I will keep the money for myself. There just ain’t revenue.
But didn’t the Press/ PTB just state that the average wage in 09 increased by 1.5%?
Gosh we just had one of us post this earlier this week.
What is it, this hand or that hand?
Compensation in 2009 has been cut by the largest amount in nearly two decades, with a government index of real average weekly earnings down 1.9 percent since its high point last December. And the average workweek — now down to 33 hours — is the shortest on modern record.
That 1.9% doesn’t tell the whole story. The cut to discresionary income is probably 5-10x that.
And housing prices are going up! Better buy one before you’re priced out…FOREVER!!!
You never know, Ford may end up with it’s hand out to uncle nanny at some point…
Ford’s Union Workers Said to Reject Givebacks U.S. Rivals Got.
Nov. 1 (Bloomberg) — Ford Motor Co. hourly employees have rejected contract concessions the automaker said it needed to remain competitive with its U.S. rivals, said two people familiar with the outcome of the voting.
United Auto Workers and Ford leaders have conceded the contract changes were defeated, said the people, who asked not to be identified disclosing results before they are announced tomorrow. About 75 percent of members voting nationwide rejected the deal, one of the people said. It called for a six-year ban on strikes over wages and benefits.
“It’s mathematically impossible at this point for this to pass,” said Gary Walkowicz, a member of the UAW bargaining committee at a Dearborn, Michigan, truck plant that rejected the deal on Oct. 30 with a 93 percent no vote. “Even if they had a 100 percent yes vote at the rest of the plants, it still wouldn’t pass.”
A truck plant in Louisville, Kentucky, rejected the deal by 84 percent the same day and a Michigan engine factory also turned it down, Walkowicz said. An Ohio assembly plant voted yesterday and another Michigan factory votes today. The UAW, which represents 41,000 Ford workers, is scheduled to announce a final vote tomorrow.
Ford, the only major U.S. automaker to avoid bankruptcy this year, sought concessions similar to those secured by General Motors Co. and Chrysler Group LLC. It’s unclear what will become of the work Ford promised that would create or preserve 6,000 UAW jobs, said one of the people. The deal also had a $1,000 bonus and a wage freeze for new hires until 2015.
May the Best Car Win
They know they’re going to get a bail out. Just like little kids. Everyone else got one, why can’t I, mommy?
If Americans keep buying the UAW made junk, then the UAW will keep getting hand outs. Only way to kill off GM, Chrysler and Ford once and for all is for people to stop buying their crappy cars. I mean come on, who in their right mind buys a Ford?
I thought you had some good ideas up to this point. Fortunately you don’t speak for all of us.
I never claimed to speak for anyone.
Been happily driving Ford and Mercury products all my life. Very affordable and dependable, except for our ‘72 Pinto. That was a big mistake - my dad traded in our ‘70 Maverick for a Pinto. Oy.
Gave up on formerly Big Three cars when our ‘91 Taurus needed a new transmission in less than 65,000 miles. Twice.
Is there any way to find out what kinds of cars the fed govt is buying these days for its fleet? I wonder if they’re all GM cars.
Well the current government makes spending decisions that are the absolute worst possible outcome for the taxpayer. So I think you’re right, they are buying the worst POS money can buy in terms of cars….GM products. Union made junk that will last 50K miles then need to be replaced. It’s part of the stimulus package, replace the fleet every 2 years and keep $73 an hour union slobs employed a few more years before Michigan finally turns the lights out for good.
Hair-Raising Money Tales
by Bankrate.com
Tuesday, October 27, 2009
Opt-Out Alarm
I had a credit card with a high balance. The company informed me that I had two options. I could continue to use the card while the interest rate increased. Or, I could stop using the card and the rate would stay the same until I paid off the balance. I opted out — stopped using the card and kept the old rate.
It seemed easy in principle. But I forgot that more than two years ago, I had used that card to register at Blockbuster; when I forgot to return a movie, they charged the card! My rate went up instantly and now I’m stuck.
–Emily
Frightening Fraud
In 2008, my 86-year-old mother had her MasterCard compromised to the tune of $43,000. She had a “premier” MasterCard with a credit limit of $40,000 that had the benefit of “special” monitoring.
It’s bizarre that she would be given that credit limit. My mother did not use her credit card very much — $500 maybe in three months, and she paid off the balance.
Once, she used the card to charge $45 for groceries and it was rejected. She thought they were kidding her. She went directly to the bank and they pulled up her account and found all of this activity, over 15 pages worth.
She lived in New York and the charges were from Nevada. The bank never called her or tried to contact her to check to see about the activity on the card.
You can imagine how upset my mother was; she thought she was responsible for this bill. When I talked with the bank manager — who was supposed to monitor these “premier” accounts — he just said it slipped through. I told him I thought it was an inside job.
– S.R.
Student Loan Outrage
For a year, illness left me unable to pay my bills. I owed the Department of Education for a student loan. I kept them informed of my circumstances and tried to make payments as long as I could. I usually paid double my agreed-upon sum, so the government decided double was my new contractual obligation — without clearing that agreement with me.
I was able to work very little as I recovered. The government told me it was illegal for them to hold my tax refund or garnish wages as long as I was making payments, so I made sure to do so. Lo and behold, the Internal Revenue Service held my tax refund anyway.
Neither the IRS nor the Department of Education can account for the thousands of dollars they have kept. I refuse to send them any more money until they can tell me what happened to the money they lost. And who is hurt because of that? Me and my FICO score. I hired a lawyer to help me get this sorted out. After a year, he quit because he said it was too frustrating.
–Katherine B.
HELOC Hell
In 2003, when the economy was going gangbusters, my home was valued at $700,000 and I had a 20-year mortgage for $170,000. My home was only three years old and was purchased for $250,000. Talk about building equity!
In January 2004, my husband and I foolishly bought a franchise business. We took out a home equity line of credit of $70,000 and a $50,000 small-business line of credit. A few months later, the bank officer recommended we take out a home equity loan of $125,000 and pay off the credit lines, but keep them open (just in case). Then, the bank officer upped the HELOC to $108,000.
The franchise did not do well and I kept borrowing from the lines of credit to pay business expenses. Then, my husband and I split up. Eventually, the credit lines were maxed out. I now have three mortgages totaling close to $400,000. The home was put on the market late last year with an asking price of $650,000, which was lowered in August to $499,000.
So, in 2003, I had more than $500,000 worth of equity and six years later I have less than $100,000. Foolish …
– Michelle, Virginia
Receipt Revenge
I throw all receipts and correspondence for the year in a plastic grocery bag. At the end of year, I date the bag and hold it for two years. My husband hated saving those pieces of paper and sometimes threw them out.
My car insurance company paid damages for my new car three months after it was totaled. I didn’t make payments for those three months even when the finance company called because my insurance company told me not to.
Two years later, we were unable to get a mortgage. In those days, your credit score was top secret and banks did not explain why you were turned down. After I cried in despair, one banker (in a whisper) told me I had been rejected because I never made three months of payments on my car loan and it was then written off as a loss!
I told my husband if he threw out the papers for that car he was dead or newly single. I found the papers and proved the date of the accident, produced the letter saying “don’t make any more payments” and showed it was paid in full. We got a house.
– Dee
In January 2004, my husband and I foolishly bought a franchise business.
lol
Credit card companies boosting payment requirements
Business ~ Nov. 01, 2009
A number of credit card companies have issued notices to cardholders carrying balances that minimum monthly payments are being re-calculated - which means they’re headed higher.
That minimum is as high as 2 percent of the balance, which for a $50,000 balance means a monthly payment of $1,000.
That can be triple what minimum payments used to be.
For cardholders who budgeted minimum payments, that throws them off budget, and in some cases now unable to pay their credit card minimums.
The solution to this problem isn’t easy. Either pay the new minimum or face a damaged credit report and lower credit scores.
A cardholder can try to shop for another card - perhaps one offering balance transfers at a lower introduction rate that could allow the cardholder more time to save up for higher payments.
For homeowners who have enough equity in their home to borrow from, a home equity line of credit can be a good source of funds to pay down or pay off credit cards. In addition, the interest paid on a home equity loan is tax deductible, while credit card interest is not.
“A cardholder can shop for another card…”
Or …
“For homeowners who have enough equity in their home to borrow from, a home equity line of credit could be a good source of funds to pay down or pay off credit cards.”
Or …
(Door number three) Stop playing their, the lender’s, game of always being in debt and learn to pay-as-you-go using cash.
I’ll take door number three Mr. Combo.
I must say that my life would be much more complicated without my credit card…I use it a lot…Pay it off each month…
“…Pay it off each month…”
Deadbeat!
I thought that higher minimum payment was required by the new credit card law that went into effect in the last year or so.
Yes, two percent of the balance is now the minimum monthly payment required by law.
People in Kansas City taking a 20% pay cut? That is almost exactly what has happened to me out here in Los Angeles.
Funny thing is that real estate prices have been going up since April. On top of that we have a 12.7% unemployment rate, and yes prices of property are going up!
We are still renting, people think it is insane that I haven’t bought. I did get my self approved for a loan. That was interesting
Found out what they ment by tight credit. I found out that my medium credit score was 715. I had a collection for $250 from the Illinois gas company ,paid 4 years ago, and $25.00 from some unknown company also paid. And I swear that was all, and it lowered my score that much! I don’t understand what peaple are going around saying that a foreclosure only stays on your record 2-3 years!
Then I found out that I was qualified for a Fanny Mae loan for $400,000 if I put down 35% ($140,000), and paid off my car loan ($9,000), and my credit card $6,500. and paid two points for the 5% loan. Total: $160,000
I am starting to see what they mean by tight credit.
I am curently renting a 1600 sqft house, and put an offer for a 2400 sqft house that is up the street, it is a nice neighborhood, but the grade school isn’t quite as good as the one our kids are using.
I pay $1850 per month as a renter the house I was trying to buy would have been $2,016.67 with taxes and insurance and association fee, but I would have been tying up $160,000 dollars to get it plus an additional $18,000 in repairs and the school wasn’t quite as good. Yes the house was bigger, but I guess I really didn’t like tying up $160K, Right now I get a better school and I only have to tie up $3k.
The house was listed at $380,000 which I really liked, but a bidding war started we won the fight at $401,000.
Boy they were pissed when after inspection I asked for $21,000 for repairs. So no deal.
Basically it was the school and tying up $160k that changed my mind.
Just curious what any one here think of the situation.
I’d say you dodged a bullet, Greg.
Out of curiosity, did you check into FHA loans? They only require 3.5% down, so that might remove your concern about tying up your money…
Bite your tongue, Prime. FHA, are you kidding me?
I’m not saying that he _should_ buy… Just pointing out that if what he was seeing on the ground was “tight credit”, that there were options that are by-design not very tight. I was curious if he had looked into them, just as a contrasting data-point.
To be clear, I think it is way too early to buy, and the recent several-month turnaround is a heavily manipulated head-fake. It should end in tears, if we’re right that the market can’t remain manipulated forever.
Hi Greg. I was perusing Sept. LA house prices on Dataquick this morning. Wow, it’s still ridiculously overpriced - 200-400 per square foot. I firmly believe that they will come down. Wait 1-2 more years and it will be worth it. Hang in there until your monthly payment equals your monthly rent. You are a HBBer - you can do it, man!
“The reason this country continues its drift toward socialism and big nanny government is because too many people vote in the expectation of getting something for nothing, not because they have a concern for what is good for the country.”
~ Lyn Nofziger
No, the reason this country drifts toward socialism is becuase companies insource/outsource (see anon in DC), corporations take advantage of tax benefits and monopoly status (bailouts) to run competition out, more and more jobs require expensive but unnecessary college degrees, and health insurance companies take advantage of their decidedly UNfree market to profit off the sick.
I don’t see these corporation acting “for the good of the county.” If anything, companies buy off Congressmen to achieve the exact opposite. They simply act in their own self-interest. As a result, small business, the job engine, has little chance. Most families need two incomes to make ends meet, which results in too many people looking for too few jobs. Young people are hamstrung by debt. People self-ration their own health care. Government appears to be only entity preventing the US from turning into a banana republic like Venezuela. The middle class (in general) is so squeezed that they need the nanny state to survive.
“The middle class (in general) is so squeezed that they need the nanny state to survive.”
I couldn’t see your argument until the last line. I disagree completely. Us “middle class” don’t need the government to survive. They are at present the largest threat to our survival. What we seem to “need” is ever increasing debt to maintain our phony “middle class” lefestyle.
I agree with you and wmbz. Socialists, your paradise is in Sweden. Why don’t you go there and stop pushing for the responsible people to pay for the irresponsible?
Here’s the sad reality, Bill: our march to Idiocracy means we’ve got record numbers of stupid, ignorant people who vote, drive, and breed at a far higher rate than their more intelligent and responsible betters. Both parties pander to these fools by promising ever-increasing entitlements in exchange for perpetuating another four years at the trough. Responsible, thinking people are nearing political extinction in this country.
And so the answer is? I’m still trying to find the answer. Because this phenomena is happening in most, if not all developed countries.
Hint: Step will chime in: Muslims seem to be breeding at the fastest rate.
And I’ll chime in with the filthy disgusting rap and hip hop music that is flooding the airwaves.
I wouldn’t be so angry if there was at least 1 outlet in NYC that played the old school stuff without all the searing and N words and they wer’nt so incredible proud of bring Ghetto
heck we need a country station again.
You should probably claify that. You don’t need the government? Does that mean you want to eliminate governments at all levels - federal, state, local? Do you not need police, fire departments, etc.?
A red herring wrapped up in a strawman.
Fire and police is one thing. Life long cradle to grave nanny statism is a whole other beast. And you know that.
As a life long member of the middle class member I say BS. I don’t need the government. I don’t want the government’s help. I want the government to get the hell out of my life and leave me (and my money) alone. I will fend for myself thank you very much.
The reason we are drifting to socialism is because given a choice between doing nothing and getting stuff from Uncle Barrack vs. working and getting stuff on your own, most people will choose the lazy way and vote for socialism.
+100
You know, I’ve always wondered what would happen if the US offered some kind of self-banishment. Where they give you back all of the Medicare and SS money you’ve paid in, in a lump sum. In return, the person agrees to renounce citizenship and leave the US, forever. For a 20 year white collar worker, that would be about $150K.
Where would you go, what would you do?
You know, I’ve always wondered what would happen if the US offered some kind of self-banishment. Where they give you back all of the Medicare and SS money you’ve paid in, in a lump sum. In return, the person agrees to renounce citizenship and leave the US, forever. For a 20 year white collar worker, that would be about $150K.
Where would you go, what would you do?
I’ll worry about that later. Where do I sign up?
The only damn socialism I see is for Goldman Sachs, et al.
+1
ITEM: Nobel Prize-winning economist Joseph E. Stiglitz said the U.S. recession is “nowhere near” an end and the economy’s third-quarter growth rate of 3.5 percent, the first expansion in more than a year, won’t carry into 2010.
< For several days media have been misleading us about the 3rd quarter growth of GDP. “It grew 3.5 percent in the 3rd quarter,” they proclaim.
No it didn’t! It was up less than 1 percent. That 3.5 percent number is the annualized rate. That is, if the growth continues at that rate for a full year it would be 3.5 percent. Let’s hope it continues…but Stiglitz and other experts don’t expect it.
That 1% was probably a lot less than Gov’t spent trying to goose us. The economy is still imploding.
prime is contained,
I didn’t get a quote on a FHA loan. 3.5% down would be great, but It would make the payment to high. What I really would consider a good deal is if I could get a house with 20% down and the total payment is the same as my rent or lower and I wouldn’t be taking a hit on the school district or have large repair bills.
The other problem is that I only get 1.5% by keeping my money in the bank, but I hope a good business opportunity would show itself to me that I could invest that money in. I don’t think interest rates are going to stay that low forever. Cash right now dosn’t earn you much.
As for buying a house my thougts right now are that in California the market is way to manipulated by the banks and the government. Inventories are way too low, the banks are not foreclosing and the government is stimulating way to much. Small business is crippled, The big powers are keeping real estate prices high in California.
My real wish would be to buy a house and substantially reduce my over all payment so that I could save some money, or use my savings to buy into a business or investment that would make me an extra monthly income.
Greg,
You will not save money by borrowing it. Think about it.
The same politicians who are working to keep housing prices high will talk out the other side of their mouths about “affordable housing initiatives”. Basically the goal is to make housing a government run enterprise where nobody can buy without subsidies.
Basically the goal is to make housing a government run enterprise where nobody can buy without subsidies.
——————–
It’s not about govt control. It’s about BANK control. As long as we’re in debt, banks make money. The higher home prices go with as little down payment as possible, the higher our debt. It’s as simple as that.
Greg, I agree with you on almost all points. I concur that the market looks heavily manipulated at the moment; I cannot reconcile the foreclosure stats of the past year with the dearth of bank-owned inventory on the MLS.
“What I really would consider a good deal is if I could get a house with 20% down and the total payment is the same as my rent or lower ”
For a true apples-to-apples comparison, you should compare rent-to-own while factoring in the earnings on your downpayments. And I agree that rates will not be this low forever. The way you stated it, it sounds like you’d be happy to accept a 0% rate-of-return on the downpayment that you are parking in the house. I woul dnot.
And Blue Skye has a good point; I would state it slightly differently, though: the best way to be able to save money with low monthly cash-flow right now is to limit your monthly commitments. If your rent is less than your payment would be, you are in a better position to save while remaining a renter.
Best of luck with finding the right trade-offs for you…
Bitterroot Valley foreclosures skyrocket.
“The clerk and recorder’s office also has seen more people looking to buy up foreclosed properties at bargain prices.
“People say they kind of feel like a vulture, but it’s not their fault” for looking to invest profitably in real estate, Plettenberg said.
Many Bitterrooters who have lost their homes to foreclosure are in the building and real estate industry.”
Ya don’t say.
Winters in Hamilton are 7-months long; rain, cold, snow, still cold, slush, cold, rain, more slush, etc., too much mother nature for me. FWIW, it is pretty for 3-months of summer, and I like swimming near Como dam, but the area was never worth going in debt up to your eye teeth. Head north up the valley, and the closer you get to Missoula the stronger to koolaid.
Shiller and some guy from FT were just on Fareed Zakaria’s show. Both pretty much said that Bernanke especially, and the Fed, had saved us from a Great Depression-like crash, and deserved our praise(!) Both were also very dubious about there being any real growth in the near future, so they weren’t exactly rah-rahing.
They both thought the bonuses the Wall Streeters are giving themselves are being made with taxpayer money, and Shiller in particular pointed out that they are weakening the social contract.
Shiller also called for a tax system that increased its rates on high earners whenever income disparities were increasing. He said our society can’t handle extreme wealth disparities, and if they continue to increase in the next 30 years the way they have the last 30 years, America will be a place that even the super-rich won’t want to live in. Sounds reasonable to me.
“pointed out that they are weakening the social contract.”
Let’s stop pretending, shall we? Parasites do not have a “social contract”.
That’s just damn socialeest/commie thinkin’! We have to keep the talent! And we need to PAY to keep them!
Put yourself in the shoes of someone making $10M a year. His tax rate right now is 35%. He works his ass off for $7.5M while Uncle Barrack gets $3.5M. Now you raise that tax rate to 70 or 80 or 90 and guess what? He stops working. Uncle Barrack gets $0 from him.
But you and the rest of the socialists feel mighty good that the rich are getting soaked.
Only a fool feels sorry for someone making over a million year.
And BTW, the tax rate used to far, far higher in the past. So “boo hoo!” They look more like whiners to me.
Also, anyone “working their ass off” and making that kind of income isn’t very good at time and resource management.
But we all know they aren’t really working their asses nor actually paying their taxes, are they? Perhaps you missed that memo about having their corporation reimburse them for their personal taxes.
Oh dear.
Only a fool perpetually makes foolish and antagonistic remarks.
“Put yourself in the shoes of someone making $10M a year.”
From whom should I imagine myself to be stealing?
Put yourself in the shoes of someone making $10M a year. His tax rate right now is 35%.
Oviously your 10m a year bread winner doesn’t have an accountant. He or she most likely earns most of their money via capital gains and dividends both of which have a much lower tax rate. I posted data a week ago that showed those in the top 0.5% pay a lower total effective tax rate than people making 60-100k a year. Buffett said he paid a lower effective federal than his secretary.
6.5M. Not 7.5M.
First of all, how do you know he works his ass off? Do you think his ass gets worked off 100x more than someone earning 100k? Do you really truly believe his combined physical and mental effort is 100x that of a software engineer, for example, working 60 hours a week? Or is he really expending 1000x as much energy as a strawberry picker earning 10k?
Secondly, why do you think the only solution is to raise the tax rate from 35% to 70%? What happened to 45, 55, 65%? You should have raised it to 100% in order to make a REALLY strong argument.
Thirdly, I don’t give a damn if he stops working. And neither should the govt. That’s 10 MILLION DOLLARS that the taxpayer has potentially saved (since in most of these cases it’s taxpayer money that is directly or indirectly funding these pigs). And since there is no demonstrated value-add that megabank CEOs (for example) provide to the US, we lose nothing in terms of productivity. On the contrary, we get rid of some of the people who have presided over some of the worst decision-making (in terms of the impact to the US taxpayer, eg. the CIT CEO) in history. So losing 3.5M in tax revenue because Mr too-big-to-fail “stops working” is more than made up for by the cessation of all parasitic infestation of the nation due to his continually being employed.
Fourth, there have to be dozens (if not hundreds) of able and qualified people currently earning, say, 500k, who would be willing to take over his $10M job at a 90% tax rate and double their salary, and not lose billions for the company and the taxpayer in the process.
Fifth, I did put myself in this asshole’s shoes. I saw my annual take go from 6.5M to 1M. Sure I was pissed that I lost all that income. But I looked around and realized that I couldn’t get that income anywhere else either because the rule applied at other companies too (gee, what a surprise). So I rationalized that $1M was better than the ZERO DOLLARS I get if I stopped working.
You really expect us to believe that if the tax rate is increased to 90% then everybody earning more than, say, 5M STOPS WORKING COMPLETELY? If that’s true then we should implement this plan post-haste, so that we get rid of all the bastards in one fell swoop. The IMMENSE amount of capital that this has to free up will be reutilized and will either contribute to useful growth of business or be discharged as wages or other tax-generating vehicles for the govt.
Excellent post, Lesser Fool!
I posted data a week ago that showed those in the top 0.5% pay a lower total effective tax rate than people making 60-100k a year. Buffett said he paid a lower effective federal than his secretary.
————-
That claim by Buffet has been debunked numerous times. It’s one of those myths out there like 3X the number of women get abused by their husbands on SuperBowl day than any other day. Completely untrue yet repeated every year.
You all can spin this as much as you want. The fact is the higher the rate of taxation, the lower the incentive to work. I don’t expect any of you to understand or care. After all in your world, all the rich are all thieves and need to be punished. For you this isn’t about tax policy it’s about some bizarre punishment for achieving success.
Yet at the same time you all moan about lack of “jobs”. Who do you think creates all these “jobs”? Is it poor people? How many poor people have you ever worked for? Personally speaking everyone I have ever worked for or anyone who has ever signed a check to me has been at least somewhat successful and yes dare I say it rich.
And as some of you mistakenly argue, the effective rate is irrelevant. Econ 101. Marginal rate is what counts along with marginal revenue. And don’t get so wound up with the $10M a year income. That was at the extreme.
Here’s an example that is more every day:
at $200K a year the marginal tax is 31%, at $250K it goes to 50% if the new Obama tax laws are enacted and the SS cap is removed above $250K.
Someone has just earned $245K and it’s November 15th. This person can now keep working for another 6 weeks and give 50% to the govt. Or he can say, screw it, I’m taking 6 weeks off instead of working the next 3 weeks for Uncle Barrack and Aunt Nancy’s health care bonanza give-a-way.
Granted this is not the case for salaried people. But for independent contractors, lawyers, doctors, anyone who charges by the hour or by the project, it’s a very real situation.
Plus as Bill in LA said, there is always the option to leave. I could live anywhere in the world and do the work I do. I choose the US because - for now - it’s still the best place to live. But if my marginal tax rate goes to 60 or 70, I’ll be out of here in a heartbeat. There is absolutely no reason for me to stay. I have a friend who is building a second home in Guatemala. It’s a home he expects will be his main residence in the not too distant future if things keep going the way they do.
Stick your heads in the sand and assume people will just sit back and take 50 or 60% tax rates. I’m telling you it won’t happen and people will stop working completely, or stop working as much or leave. And the result will be less productivity and less revenue to the government. But you’ll be sticking it to the rich and you all will feel good.
If they keep increasing the taxes, the rich people will take their wealth and themselves, and their businesses elsewhere. Do you think they would charitably keep their employees? I don’t.
Be careful what you wish for. The war against business is the war against employment. There is no coincidence that unemployment in Europe has been in the double digits for decades.
If they move anywhere else in the western world, they’ll be paying even higher taxes. If they move to Singapore, they’ll get caned for chewing gum. They all gonna move to Barbados? Good luck.
I say let ‘em all move away to Galt-land. We’ll see just how irreplaceable they are. We’d be better off without them. This idea that they’re the great source of all our wealth is a crock. They’re the vampires of our wealth.
If they keep increasing the taxes, the rich people will take their wealth and themselves, and their businesses elsewhere.
bs.
It’s a two way street BIll. Without customers, there is no “business.” Current events perhaps?
As for Europe’s double digit UE, that’s only because they report the numbers more honestly than we do. We’ve had the same double digit UE, along with double digit inflation. We just lie like dogs about it.
If they keep increasing the taxes, the rich people will take their wealth and themselves, and their businesses elsewhere.
Don’t let the door hit them on the ass on their way out!
Good-bye, parasites!
If the parasites all left the country, it might become far more politically viable to stop passing “Welfare for Parasites” legislation like the TARP.
While I have a lot of respect for FT, not everyone over there has their head on straight.
To give FT credit, they more often than not, present both sides. (not always, but what the heh..)
checking back in after 6 months in my house…i have been so busy i did not hook up cable tv and internet….and actually not missed either. anyhow, bought the house in phoenix at 40thst and sweetwater. new costco just opened at the paradise valley mall that is nice. anyhow, in 6 months, i removed all the popcorn ceilings, rewired the house for copper-with all new lights, switchs, outlets, added switched outlets, fans, breakers….basically anything electric is brand new in the house, painted the whole interior and ceilings, new carpet in bedrooms, new wood flooring from costco in rest of house, replaced bathroom sinks, and working now outside on landscape with 22 bushes in back yard to cover walls and views of neighbors roofs! anyhow, i made fast use of that tax credit and figure i am close to 12k in spending so far. and 6 months of over 40 hours/week on the house. the house could have been left as is as a rental down the road, but i decided i want to live in a really nice place. this house will never be rented! i figure if it works out i’ll buy a second and make that a rental. my electric bills, only me living in the house, hit $200/ month in summer but i was doing alot of power tools during that time…now it is down under $60. my month bills are now down to $20/gas $60 for water, $50 for electric, $140 taxes and insurance. so i figure my bills will be under $400/ month total! and, i still plan to make use of the energy credit and replace the windows and maybe add insulation in attic. anyhow, i plan and over the next 2-3 years making everything new in the house. but, most will be done in the first year! oh, and i paid $82000 for the house! first time buyer. there are bidding wars going on here now, but i’ll buy my time fixing my house up and see if a deal comes along after the tax credit and all the propping up ends! but, then we are 1/2 through the foreclosures and i believe this flushing out of homeowners will only leave the stable owners intact and we will not see this again in the future. i also think the cheap dollar will pull in more foreign buyers. i would not stay a bear forever although i am not in the bull camp. i figure i will not ever lose in my buying decision…i get a great place for cheaper that renting and could spend $4000/yr on the house above the monthly bills and i will only be spending what i spent renting a 400 sq/ft studio…now i have 1500 sq/ft. good luck to all
Wow Jay, you were fortunate indeed to have $100,000 cash to buy a slice of the heaven that is Phoenix. It sounds like the house is willing and able to absorb all the money you can pour into it.
As for the dollar, I hope you are wearing a neck brace.
I don’t know if this has been mentioned or not; CIT group files for bankruptcy.
here’s the link http://www.washingtonpost.com/wp-dyn/content/article/2009/11/01/AR2009110101470.html?hpid=topnews
Wow. Sooner than I expected.
Thanks MTA.
“In the San Francisco Bay Area many run-of-the-mill homes are still in the $600,000 range and that’s after price reductions. The minimum downpayment on an FHA loan is $21,000–that’s a lot of money. Even 10% down is a small fortune. The ability to use the tax credit as part of the down payment is obviously very helpful.”
Found this little gem over at the WSJ. Obviously posted by a POS realtor; this statement really says much of what is wrong with the “system”.
600K home is INCREDIBLY expensive (just to get that off my chest), and should not be a “run of the mill home”. But, so be it, let’s just accept those numbers and move on.
21K is a lot of money? Yes, it most certainly is. And 60K is “a small fortune”? Not so sure about that one, but, let’s accept that one as stated as well.
For most of America, he may be right, but we’re talking about a 600K home here, and that most CERTAINLY is NOT for the most of America.
To have a reasonable shot at affording a 600K home, you should have a salary >200K/yr (3X income). When you take that into account, let’s start to look at the numbers this moron has thrown around.
21K is a “lot” of money? Not if you’re making 200K a year; your monthly income is almost 16K, of which you probably take home about 10-11K. So, 21K about 2 months of salary (take home), or about 6 weeks (gross). Obviously, Mr. 200K has other expenses, so let’s just say 21K should take about 3-4 months to save when your making that kind of money. Not a “lot” at all, not even a real drop in the bucket (income wise) for someone >200K in income.
10% down is a small fortune? 10% down is 60K, which, to much of America, may indeed be a “small fortune”. But our hypothetical (qualified) buyer makes almost a 1/4 MILLION dollars a year. 60K isn’t that much money, I can almost promise you that someone with that kind of income has 2 cars that cost more than 60K.
The problem with this whole statement is that this moron is qualifying people making 60K for a 600K home. Frankly, NOBODY buying a 600K home should qualify (or have qualified) for the 8K credit, they certainly should have been limited out by income. The bubble is still with us when people are making statements like this; people still aren’t putting together the idea that a 600K home is for the top 3% (yes, only 3% of all households in the country make >200K) of the population, who CARES if they have trouble coming up with 10-20% down? They are at the very, very top of the income ladder, do we need to help them subsidize their down payments? It’s nuts; nobody seems to be able to do the math anymore!
Micheal, if we did the math we would find our people, society and country bankrupt beyond recovery.
This would immediately lead to Very Bad Things. And that’s no joke.
And to add insult to injury, you’d likely be accused of “calculator abuse”
Eco,
See, there I disagree. Yes, many individuals are toast, and are setup to be debt slaves for the rest of their lives. They need to default/BK and start their lives over. And yes, if they did that, every major bank in the country would go under.
But are we as a society bankrupt beyond recovery? I don’t think so. We need to STOP SPENDING and start saving, both personally, and as a nation. And oh man, will it be painful, we have many very, very lean years to live through as a nation (to pay down our national debt). But can we do it? Absolutely! Paying down the national debt and our personal debt would lead to significant deflation; but would finally put us on a firm footing again as a country, and as individuals. And no, I’m not one who thinks that loans/banks are inherently evil; they’ve just run wildly amok. We’ve had MTGs in this country for 100+ years, and have never had a problem like we have today. And, likely, will NEVER have this problem again (as trillions of dollars are vaporized by this disaster unwinding).
I agree that we are BK, I just don’t agree that it’s beyond recovery. We are an incredibly rich nation, and we certainly can/could dig our way out of this debt. But we have to display the will (and/or even show that we understand the problem) before we have any change for the better. Will we do it? Unforunately, I’m not sure, the damage is severe, and nobody (in power) seems to be willing to discuss the real solutions; just more band-aids on the gaping wound.
This post was to illustrate a point; we have lost all reason over what is, and what is not affordable. Just a “sniff test” on those numbers reveals them as totally nuts, there’s NO way that’s a sustainable level of price to income, and it’s NOT normal that people making 200K can’t come up with 20K down payments.
I’d like to see a blanket law that NOBODY can write a loan to anyone at greater than 3X their income (for primary residence). It’s simplistic, and can be overly conservative, but, frankly, we’ve gotten to the point where the financial illiteracy in this country demands we use a very simple formula to arrive at “affordable”.
Well said Michael. Good food for thought.
Another bites the dust. No big surprise here.
CIT files for 5th largest U.S. bankruptcy
Small business lender seeks court approval for a debt reorganization that has approval of bondholders.
NEW YORK (CNNMoney.com) — CIT Group Inc., one of the nation’s leading funders of small and medium-sized businesses, filed for the fifth largest bankruptcy by assets in U.S. history Sunday as part of a reorganization plan that has the support of an overwhelming majority of debtholders.
In a statement, the company said it is asking the U.S. Bankruptcy Court for the Southern District of New York for a quick approval of the prepackaged plan. CIT said none of its operating subsidiaries would be affected by the filing, allowing them to continue operations.
“The decision to proceed with our plan of reorganization will allow CIT to continue to provide funding to our small business and middle market customers, two sectors that remain vitally important to the U.S. economy,” said CIT (CIT, Fortune 500) chairman Jeffrey M. Peek.
In the bankruptcy filing, CIT said it had $71 billion in assets and $64.9 billion in liabilities. Only Lehman Brothers, Washington Mutual, Worldcom and General Motors had more in assets when they filed for protection.
http://money.cnn.com/2009/11/01/news/companies/cit_group/index.htm?postversion=2009110116
It looks like the Fed has started believing their own bull sh*t. An economic recovery has begun. Give me a break.
Fed’s Rate-Boost Cycle is Coming Into Focus
Central Bank Debates How to Communicate to Financial Markets
An economic recovery seems to have begun, and Federal Reserve officials are thinking mostly these days about how to unwind the unprecedented stimulus they’ve pumped into the economy. Eventually that will mean raising interest rates.
What will a Fed tightening cycle look like? When will it begin? Fed officials don’t have answers to either question yet, and investors would be wrong to think they do. But the contours of what a rate-boost cycle could look like are beginning to come into focus as the Fed’s next policy meeting approaches Tuesday and Wednesday.
Three points emerge: First, an internal debate on tightening
http://online.wsj.com/article/SB125711582994221579.html
Geppetto Bernanke regarding the Pinocchio economy: “It’s a real boy.”
Demographics and Depression:
http://tinyurl.com/lzqlb8
Once again my disclaimer: I’m an extreme social liberal atheist.
The article is from a conservative point of view but is one of the first conservatives to make a link between the lack of traditional families and the continuing collapse of housing prices, suburbia, and the economy. He ends up concluding that the current administration’s stimuli of the housing sector will fail miserably because it only affects a symptom and ignores the cause - no traditional families means no need for traditional households means no need for suburbia.
Mea culpa (shared, however). It has been far more advantageous for me (note disclaimer) to be single than to be married and to be a father.
Bill, that article makes some profound points. Thanks for bringing it to our attention. I’m a little surprised to see you linking it, but maybe it will nudge you and/or others of your cast of mind to reconsider your views. Sample quote:
The declining demographics of the traditional American family raise a dismal possibility: Perhaps the world is poorer now because the present generation did not bother to rear a new generation. All else is bookkeeping and ultimately trivial.
Personally I realized a few years ago I cannot have more than two of these three: great health, a wonderful family, and financial security. Not as a salaried engineer in California. I’ve been a health fanatic for over 33 years and it’s always topped my list. And I made it my next goal to maximize my 401k and IRA contributions and invest beyond that. Leaving nothing for a wife/kids.
If I was born with a silver spoon I’d have room for all three. There are a lot of guys here in the South Bay who have been born into money and hav all three.
The comments are interesting.
Dependent Adults: Victims or Spoiled Brats?
Last week, Room for Debate published a discussion on “The 40-Something Dependent Child.” Readers responded with their own thoughts on why it has been increasingly difficult for younger generations to support themselves without family help.
Did it begin in adolescence, with parents too quick to meet their children’s every need? Or in the economic changes of the last 20 years?
http://roomfordebate.blogs.nytimes.com/2009/10/31/dependent-adults-victims-or-spoiled-brats/
How come our offspring (all of whom are of that age) are all doing well? We sent them off to college, they graduated in four years, and they never came back. Our only gift- we paid for a majority of their college expenses. Work-study jobs and grants covered the rest. We’ve never given them any assistance since.
My wife and I were quite disturbed to see the neighborhood where a daughter was living a year after graduation, but she refused our help, saved her bucks, eventually got a better job, and moved on and up. Finally got married well into her 30’s.
Betcha the majority of older posters here can share similar stories. “Failure to launch” or “boomerang babies” is NOT the way the majority of that generation ended up.
“How come our offspring (all of whom are of that age) are all doing well? We sent them off to college, they graduated in four years, and they never came back. Our only gift- we paid for a majority of their college expenses. Work-study jobs and grants covered the rest. We’ve never given them any assistance since.”
You asked and answered your own question. Without your assistance, they probably wouldn’t be doing so well. Although college costs were almost nothing 20+ years ago compared to today.
But speculation aside, you provide only an anecdote. While the majority are not hurting, it only takes a certain amount of those who aren’t to cause a critical mass event. Current events perhaps?
And BTW, those who are college educated are still a minority in this country at less than 30%.
I read the last comment at the link. Hilarious and shocking at the same time.
America is doomed to get even worse. More of an entitlement mentality. Grizzly, Measton, DD, we need your help to make us into more of an irresponsible society - tax the few remaining productive to give to the “will nots!”
I know of several Trust Fund kids/adults who aren’t productive citizens. Some are, some aren’t.
Then there is ParisHilton and others not as famous. No real jobs, no real contributions.
America is doomed to get even worse. More of an entitlement mentality. Grizzly, Measton, DD, we need your help to make us into more of an irresponsible society - tax the few remaining productive to give to the “will nots!”
FYI
I am against well fare but believe in works programs that pay minimum wage. I am pro Social security which is not an entitlement it is an insurance plan. I am for a public insurance option that people have to pay into as I understand it is much cheaper than the current plan and costs a lot less. I understand that our society is going to function better when basic health care is covered in the clinic and not in the ER, where people get vaccinated and get their communicable diseases treated.
I am pro taxing the elite particularly banking CEO’s they didn’t earn their money, they are not productive they are wealth strippers big difference. I think Steve Jobs earned every penny, while Bill Gates is a gov sanctioned monopoley. I certainly think the elite should pay a total effective tax that is at least as high as my total effective tax rate. They don’t they pay less than I do and I find that offensive.
Stanley and Danko in “The Millionaire Next Door” called this “economic outpatient care.” One relative was a homemaker, married, and three children. Husband was a manual laborer. So my parents gave everything. Food, clothes. Mom died. Sister got separated a few years later.. Dad continued the giving. Dad died six years later than mom.
Inheritance. $30,000 for that sister. No job still. Someone stole her $500 cashier’s check. She called me. I told her to call the police and get a contact for social services to lend her money.
Sis finally got a job. Her son is 33. Only worked one year in his life. He’s living with the sister and the niece who is still in college. So now it’s payback. Sis now knows what economic outpatient care is all about.
The black sheep of families always tend to be the most successful.
The black sheep of families always tend to be the most successful.
Think much of yourself?
The generalities are amazing. I hope you and ed make a happy life together.
go along now and play … with yourself
play … with yourself
Now we’re talking—um, never mind!
Did the Stimulus Work?
Many economists attribute the rise in the gross domestic product in the third quarter to the $787 billion federal stimulus package approved in February. But skeptics say the growth may be short-lived because government efforts to encourage consumer spending like the “cash for clunkers” program are expiring. At the same time, unemployment is still rising, though the Obama administration says 650,000 jobs have been created or saved by the stimulus funds.
How sustainable is this growth? Is there less need of government intervention going forward?
http://roomfordebate.blogs.nytimes.com/2009/11/01/did-the-stimulus-work/
“our 7 bedroom house”
This jackass is talking to me about how he is a hippie and doesn’t embrace crass consumerism!? GAAH!
Whoops, comment goes to SUGuy’s other post right above.
How is the baby doing Muggy.
I might like this bill
US Senate to introduce draft financial bill
One person involved with the talks said the week of November 16 had been pencilled in for the mark-up of the bill, which would address derivatives, systemic risk, resolution authority for failing companies and consumer protection.
As currently structured, the bill envisages a consolidation of the four banking regulators, stripping powers from the Federal Reserve and creating a single prudential supervisory body. In systemic risk regulation, the central bank would also lose power to a new council of regulators, in contrast to the administration’s plan to empower the Fed with new authority.
http://www.ft.com/cms/s/0/e6ed36d2-c725-11de-bb6f-00144feab49a.html?nclick_check=1
The Achilles Heel of this “recovery stimulus”
After a $15 trillion reduction in asset values, Americans are now saving as much as they can. Of course, if everyone saves and no one spends, the economy shuts down, which is precisely what is happening. The trouble is not that aging baby boomers need to save. The problem is that the families with children who need to spend never were formed in sufficient numbers to sustain growth.
- David P Goldman, Demographics and Depression
stimuli won’t get us out of this mess. The problem has been the birth dearth all along.
Yup.
I’ve said it this way a few times: there aren’t enough of us to meet Boomers at Boomer pricing.
Can’t raise a family if you can’t afford it, now can you?
BTW, that whole premise is cum hoc ergo propter hoc, Correlation does not imply causation.
illegals!
Dear Prime and Rehobbist,
Thanks for your comments.
One big fact I just can not reconcile is the fact that Unemployment in LA county is 12.7% and rising. Defaults have been at record levels all year, Credit is tight and realestate prices are rising!
If the definition of a market bubble is the disconnect from fundimentals, then this is a classic example.
I fully understand why realestate prices are rising at present, it is because there is very little inventory on the market. I fully understand that the banks are not foreclosing, and the government ( which owns controlling interest in many of the largest lenders is putting enormous pressure on the banks not to foreclose.
Here is a little inside information I got recently. A friend of the family has a very old friend who is a V.P. at a major bank, she is advising our friend not to buy now, she says that their bank {and thus infering all banks) are under enormous pressure from the Federal Gov. not to foreclose and especially not until after Christmas. Which explaines to me why there is little forclosure inventory on the market. She is also saying that the foreclosures will start up again in 2010 and that she feels the time to buy will be in fall 2010.
Everybody I hate waiting , I want my own house, but the realestate market is so heavily manipulated by the banks and government that we have very little choice but to not play along. This is not a free market.
Something is going to give eventually, I am not sure what it is, but we will see who is stronger, The Government, the dollar, or the market. I just hope it is not the dollar that pays the price. I mean that would be terrible if Wall St. banks stock prices and home prices stayed high and we lost our savings to pay for all of this.
“Something is going to give eventually, I am not sure what it is…”
Google-up “mortgage reset chart” and stare at it for a while and you’ll get a strong hint what this “Something is going to give” is.
…she says that their bank {and thus infering all banks) are under enormous pressure from the Federal Gov. not to foreclose…
——————–
I’ve heard similar stories about the govt telling banks not to foreclose.
You’re right. This market is 100% manipulated. We’re seeing it down here in San Diego, too.
Mother of all carry trades faces an inevitable bust
By Nouriel Roubini
Published: November 1 2009
This recovery in risky assets is in part driven by better economic fundamentals. We avoided a near depression and financial sector meltdown with a massive monetary, fiscal stimulus and bank bail-outs. Whether the recovery is V-shaped, as consensus believes, or U-shaped and anaemic as I have argued, asset prices should be moving gradually higher.
But while the US and global economy have begun a modest recovery, asset prices have gone through the roof since March in a major and synchronised rally. While asset prices were falling sharply in 2008, when the dollar was rallying, they have recovered sharply since March while the dollar is tanking. Risky asset prices have risen too much, too soon and too fast compared with macroeconomic fundamentals.
So what is behind this massive rally? Certainly it has been helped by a wave of liquidity from near-zero interest rates and quantitative easing. But a more important factor fuelling this asset bubble is the weakness of the US dollar, driven by the mother of all carry trades. The US dollar has become the major funding currency of carry trades as the Fed has kept interest rates on hold and is expected to do so for a long time. Investors who are shorting the US dollar to buy on a highly leveraged basis higher-yielding assets and other global assets are not just borrowing at zero interest rates in dollar terms; they are borrowing at very negative interest rates – as low as negative 10 or 20 per cent annualised – as the fall in the US dollar leads to massive capital gains on short dollar positions.
Let us sum up: traders are borrowing at negative 20 per cent rates to invest on a highly leveraged basis on a mass of risky global assets that are rising in price due to excess liquidity and a massive carry trade. Every investor who plays this risky game looks like a genius – even if they are just riding a huge bubble financed by a large negative cost of borrowing – as the total returns have been in the 50-70 per cent range since March.
http://www.ft.com/cms/s/0/9a5b3216-c70b-11de-bb6f-00144feab49a.html
Excellent link. Thanks for posting it, SUGuy.
Talk about airing your dirty laundry
Rethinking Laundry in the 21st Century
On college campuses, in subdivisions, hotels and even prisons, efforts to transform the way Americans do their laundry are steadily building. Save energy, save money: what’s not to like? It turns out that it takes persistence and research.
Should Americans have the right to hang their laundry outdoors, even if many of their neighbors oppose it and community rules ban clotheslines as unsightly threats to property values? Legislators in Colorado, Hawaii, Maine and Vermont have prohibited anti-clothesline rules, and similar action is being considered in several other states. (Catch up with the issue on The Times’s Green Inc.) How do college students do their laundry, without hanging a lot of clothes in the quad? How do hotels get their guests to reuse their towels? And how do prisons balance their sanitation and security needs yet reduce laundry costs?
http://roomfordebate.blogs.nytimes.com/2009/10/25/rethinking-laundry-in-the-21st-century/
I wonder if they will be so cheery about using a clothesline when it is 30 below?
I have my wooden foldable clothesline that I place outdoors in sun, or in the garage, or bring it indoors. I get better laundry every time.
Speaking of property values, the HOA just repaved 2nd time in 4 yrs. So, here is the ?, do you suppose it is to “look good/fluffing” for high season and potential buyers to think this is a really high end and worth the expensive condos?
It is a really nice gated dev, but I think the repaving/painting of stripes etc is a little over the top, 2x in 4yrs?
I say long live the housing bubble. We can get our news the old fashioned way by word of mouth from the HBB society.
Business Is a Beat Deflated
Forbes, a magazine that sells a beau idéal of capitalism, announced last week that it was cutting a quarter of its already decimated staff. The Wall Street Journal’s Boston bureau — historically a hothouse of game-changing business coverage — is being closed.
Fortune magazine had already cut back to 18 issues a year from 25 and this week will be whacking anew at staff along with other Time Inc. magazines. BusinessWeek was sold for parts to Bloomberg a few weeks ago.
So, while the business of business may be back, the business of covering it with heroic narratives and upbeat glossy spreads most certainly is not. And probably never will be.
http://www.nytimes.com/2009/11/02/business/media/02carr.html?ref=business
I hope the 25% of Forbes that goes includes the people who write the RE-pumping “10 best cities for …” articles.
Dammit! You owe me a new keyboard!
This is about six weeks old, so please forgive me:
http://tinyurl.com/
Option ARM resets have already begun taking their toll on high end-priced houses in the gay area:
“Fitch said that new payments average 63 percent higher than the minimum payments, but could be more than double in some cases.”
“When option ARMs recast, the payment shock is much more intense than we’ve seen (with other types of loans, such as subprime),” said Brown. “That makes them potentially much more damaging.”
Unlike subprime loans, which were more commonly used for entry-level homes, option ARMs started out with high balances. In the five-county San Francisco area, option ARMs average about $584,000 and were used to buy homes averaging $823,000.
I had some bloggers on another site in AZ laughing at me and said resets don’t matter since interest rates are below 1% and will stay there for several years. They don’t understand the nature of the Option ARM resets. The interest rate does not have anything to do with why the payments are going up. Read the FRIGGING contract!
” The interest rate does not have anything to do with why the payments are going up. Read the FRIGGING contract!”
huh?
No. He makes a good point.
Good reminder Bill.
Sounds like Congress gets the point of reform perfectly: Chickens, meet foxes!
Congress misses the point of reform
By Clive Crook
Published: November 1 2009 18:38 | Last updated: November 1 2009 18:38
More than a year after the US financial emergency went critical and threatened the global economy with its worst reverse since the 1930s, the underlying causes have yet to be addressed. When it comes to improving financial regulation, the crux of the matter, there has been a lot of talk – usually about the wrong things – and next to no action.
Last week, a committee of the House of Representatives, which has been co-operating with the Obama administration on this front, released a draft bill. It has some good ideas, such as creating an early resolution regime for non-bank financial institutions. It has some crazy ideas, such as aiming to keep secret a list of institutions subject to special oversight. Above all, it has plenty of material to get Congress riled up – especially the proposals to enlarge the supervisory role of the Federal Reserve.
Nothing matters to Capitol Hill so much as apportioning responsibilities and the power that goes with them. But who makes the rules is less important than what the rules say. Here the bill mostly opts out, granting discretion to regulators left and right. On issues of substance as opposed to form, it is vague to the point of silence.
…
I propose the assets of bankrupt firms be evenly divided among all Main Street USA households. Wall Street households would be exempt, as they already are the recipients of plenty of too-big-to-fail bailouts.
“Another one bites the dust…
Another one bites the dust…”
The Financial Times
CIT in bankruptcy filing after bail-out move fails
By Aline van Duyn in New York
Published: November 1 2009 21:35 | Last updated: November 1 2009 22:15
CIT Group, the troubled US commercial lender that has been in business for more than a century, on Sunday filed for bankruptcy after attempts at a restructuring or bail-out failed.
In a statement, CIT said it had asked the bankruptcy court to quickly confirm its prepackaged bankruptcy plan, which has broad support from its debtholders and on Friday received backing from Carl Icahn, the billionaire investor.
Mr Icahn, who had been critical of the CIT plans, has agreed to provide a $1bn line of credit. The company said it would aim to emerge from bankruptcy by the end of the year.
Under the plan, the lender, which has $71bn in assets, said it expected to cut debt by about $10bn, reduce liquidity needs over the next three years and boost its capital ratios. Some bondholders would receive a mixture of new debt and equity with others getting only equity.
The US government’s $2.3bn capital injection made in December is likely to be wiped out.
…
“The US government’s $2.3bn capital injection made in December is likely to be wiped out.”
Grrrrrrr…