Friday, November 30, 2007


After saying over and over he would not bail out speculators, Bush is bailing out speculators. I would expect this from Hillary. I would expect this from Obama. I had a hope, ever so small that the Idiot in Chief would do something right. How wrong I was. This is the crowning achievement of the Worst President Ever. Kudos Jorge, you've done it. You have gone to new depths. You have done the impossible and made Jimmy Carter look like a great leader.

This plan won't do anything to help anyone. Someone with a 500 FICO will still default eventually. Now instead of defaulting in 6 months it will take a year or a year and a half. All this will do is delay the inevitable. What the monkey who lives at 1600 Pennsylvania Avenue doesn't get is that this will actually hurt housing even more. What they are doing is essentially saying a contract no longer matters. The contracts signed stipulated a rate change after 2 years. Those contracts are now being used to wipe the ass of Republicans on Wall St after eating their $175 steak dinners.

However what this also does is spell the end of ARMs. If a lender knows he cannot expect a contract to be honored and enforced, he will no longer issue that contract. And without ARMs, fewer buyers will be out there. This will hurt prices as badly if not worse than the current situation.

WASHINGTON (AP) -- The Bush administration and the mortgage industry, trying to combat a massive wave of foreclosures, are hammering out a proposal to temporarily freeze interest rates on certain troubled subprime mortgages. If adopted, it would be the biggest action taken to cope with the unfolding crisis.

The talks have involved all the federal banking regulators and major players in the mortgage industry such as Citigroup Inc., Wells Fargo & Co. and Countrywide Financial Corp.

The major thrust of the proposal would be to get lenders to extend for a number of years the low, introductory rates that were offered on subprime mortgages, loans usually offered to borrowers with weak credit histories.

Let me translate that for you. Bush's message to anyone who has a fixed mortgage, who isn't a deadbeat, who's carefull with their money, who didn't didn't gamble and lose by being all of you....GO FUCK YOURSELF.

For English, Press 1

I got a call today from AT&T. It was a survey call asking me how satisfied I was with their level of service for a recent customer support call I made. OK I figured what the hell, I'll take the call, the woman who helped me was really nice and I'd give her feedback.

But the automated questions were bilingual. The question was asked in English then Espanol and then I was prompted to choose English or Espanol for my answer. I quickly hung up.

My message to AT&T: You want my help in analyzing the effectiveness of a call I made IN ENGLISH ask me about it in English.

Oh but at least English was option 1, so I guess AT&T does care after all.

Come again now?

Compare this to my post from yesterday re: worst housing market in 37 years.

Nationwide home prices rose 3.2% over last year while also dropping 13% over last year?

And the MSM wonders why nobody takes it seriously anymore.

Reporters like Joe Light were probably reporting on how was a great buy in 2001since pockets of the tech stocks will do very well.

CNN YouTube Idiocy

Turns out some of the questions from "Average" Americans on the CNN Republican Youtube debate were really questions from the Hillary and Edwards camp. Two of the "Average" Americans posting were campaign workers for the Hillary and Edwards teams. A third "average" American has a website up supporting Obama.

Hmmm. And CNN had no idea. Funny how not one Rudy or Romney campaign worker got to ask a question at the CNN Democrat debate. Just a coincidence I'm sure. This whole liberal media bias is just a figment of my imagination. The Democrats were smart when they refused to debate on Fox. If Republicans were smart (which obviously they aren't) they'd refuse to debate on CNN.

Even putting aside the liberal smear machine, this whole notion of Youtube debates is ridiculous. I don't really give a rat's ass what "average" Americans have to say. Average Americans can't name even one of their Senators. Why in the world would their opinion matter in deciding anything? Average Americans spend weeks on end watching Who Wants To Marry A Millionaire Bachelor who Dances With Stars. Thanks, but I don't think we need your input on this one.

I guess the whole premise is that these are undecided voters asking the candidates poignant questions and using their answers to make an informed decision. Bullshit. People who take the time and trouble to make a video know fully well who they support. These are nothing but attempts to embarrass the candidates or more likely get on TV.

The true undecided voters are the ones who have no idea there is an election going on. They will be undecided until about October 25th, 2008. And then they will make a decision based on some random issue like one guy's tie looks cooler than the other's.

Thursday, November 29, 2007

Oh My!! No seriously, WOW!

November 29 2007: 12:58 PM EST

NEW YORK ( -- The biggest plunge in new home prices in 37 years was not enough to revive October sales, according to the government's latest reading on the battered housing and home building markets. The sales pace for October was well short of economists' forecasts. The Census Bureau's latest report also sharply cut back on its earlier estimates for sales in August and September, when a meltdown in mortgage markets kept many potential buyers from getting the financing they needed. Also depressing sales and prices was a record 191,000 completed new homes on the market that have not yet been sold.

The report showed that the median price of a new home sold in October plunged 13 percent from year-earlier levels to $217,800. It was most severe year-over-year drop since September 1970, when the median price was only $22,600, or less han the cost of a typical new car purchase today.

And the price figure may actually be underestimating how the bottom has fallen out of prices in recent months. Most builders are trying to support prices by offering to cover closing costs or by adding free features on new homes. "We've gone beyond the stage where some of those incentives can work," said Mike Larson, a real estate analyst with Weiss Research, an independent research firm. "We're into the stage that home builders have to cut prices to move inventory."

While existing homes make up a majority of sales, the new homes report is closely watched as a more leading indicator of market strength, since those sales are recorded when a sales contract is signed. Existing home sales figures are collected at the time the sales closes, typically a month or two after the sales contract is signed.

Lies lies and more lies

If the head of GM said buying a Chevy was the best thing you could do, would you take him at his word? Or would you question his bias. Rational people would question his bias and ignore his views.

Lawrence Yun, the head of the NAR (National Association of Realtors) says you should buy a house now since blah blah blah. Does anyone question his bias? Nope. Not in the MSM at least. His advice is taken as gospel. Not even the slightest questioning of his advice. Notice also there is no data to support his findings, only his opinion that real estate is a good investment. Kinda like asking the CEO of GM why I should buy a Chevy over a Toyota and him replying because I think Chevys are better. Not a very convincing answer is it? Yet that is exactly what Yun is saying.

Never mind that Yun's predecessor, David Lereah was saying housing can't possibly fall. He even wrote a book called Are You Missing the Real Estate Boom?: Why Home Values and Other Real Estate Investments Will Climb Through The End of The Decade—And How to Profit From Them. It is available used for $0.68 on Amazon. Better buy your copy fast, since just like real estate this deal will soon pass you buy and you will priced out forever.

Aside from the world's longest book title, he was also dead wrong. He wrote this book in 2005, right at the peak of he housing bubble. And then he spent all of 2006 telling everyone the boom would continue for the rest of the decade. And finally earlier this year as he was so discredited by anyone with a 1/3 of a brain, he was finally fired and replaced with the new Liar in Chief, Lawrence Yun.

Now about SLC: here is the chart for the latest asking prices for homes: Would you buy into this declining market? If that is one of the top 10 markets, I'd hate to see what a bottom 10 market looks like. Oh wait, here's one. And another one here.

The difference is in a top 10 market if you buy now you will lose some money. In a bottom 10 you may very well be financially ruined. Either way, I'm sticking my my Toyota for now.


Looks like I was a little premature in betting against the retailers Monday. Should have waited one more day. I still have confidence this is yet one more in a long series of head fakes in a long term down trend.

$4 gas in the Midwest this morning should put a bit of a damper on the party. Sears earnings being way below forecast should be another. Sears is a retailer right? And when gas hits $4 people have less money to spend on useless shit at retailers right?

And maybe just maybe all the retailers are cutting prices too much in a desperate attempt to lure broke customers. And I'm no Wall St expert but isn't the idea to sell at a profit? Or is that old joke about losing money on every sale but making it up in volume back? Oh wait, that is a concern for some.

NEW YORK ( -- Are the nation's retailers giving away the store?

Blockbuster discounts have so far attracted hordes of shoppers this holiday season, which was officially kicked off the day after Thanksgiving. But analysts fear that many retailers - anxious about flagging consumer spending - might have sacrificed too much of their profit by cutting prices."We're surprised at how well the traffic numbers looked, especially on Black Friday," said Love Goel, chairman and CEO of Growth Ventures Group, a specialty retail private equity firm.

Side note: Love Goel...interesting name.

According to CNBC that is all irrelevant. Interest rates will be cut another 1/4 point. So the visa goes from 22.5% to 22.25% APR and spurs people to go to the mall.

We'll see who's right I guess in a few weeks/months when it all settles out.

Wednesday, November 28, 2007

Welcome Aboard Wall St Journal

Whatdaya know, the Wall St. Journal has finally figured it out. Only about a year late but better late than never I suppose. This is pretty much what I have been saying for months on end.

First there was a housing bubble. People went HELOC crazy and bought useless shit like 90" LCD on borrowed money. Money they figured would never have to be paid back since housing only goes up.

Then there was a housing crash. The HELOC party is over. That easy "tap your equity"money is gone. And the morons who tapped that equity are getting a shock. The shock is they have to pay back the money and their house is losing value. Ooops. These over indebted Americans can no longer afford to buy useless shit like 90" LCDs and/or Hummers. Not only that they owe so much money they can't afford to buy the basics anymore without using a credit card and going even more into debt.

Today the Wall St Journal wakes up and comes to the startling revelation. Who could have possibly predicted this? Not me.

A recession is coming and it will be a bad one. A significant chunk of the economy was built on nothing but buying and selling houses as sport. Millions of people's incomes was derived from nothing but being the middle man. Realtors, mortgage brokers, appraisers, escrow and title company employees. Other industries were heavily dependent as well. Moving companies, furniture stores, home improvement stores, landscapers, pool installers. All of these companies are doing significantly less business than 2 years ago. In some cases less than 50%.

And yet some people believe all this economic output loss will somehow magically not lead to a recession. They must all be drinking the Larry Kudlow Kool-Aid.

Tuesday, November 27, 2007

The Madness of Wall St

Today we learn that

a) housing prices fell the most in 21 years in the 3rd quarter

b) consumer confidence is at a 2 year low

c) Wells Fargo announces another $1.4 BILLION loss in mortgage junk

All that and the DOW JONES up up 200 points.

Yeah that makes sense. I bought some RTH puts this afternoon. I was actually hoping the madness would rise even higher so the puts would be even cheaper. Good enough though, as the holiday shopping season turns into Dudsville, I will be sitting nicely. I hate hoping for misery from my fellow man.. No wait, I don't hate it. I have no sympathy for those boneheads who live way beyond their means. They will get what they deserve and if it means they become destitute, so be it. Lessons are often learned the hard way.

I am also continuing to take advantage of the 0% offers. The banks keep sending me 0%, $0 balance fee offers and I keep taking them. I take the 0% and stuff it into the 5% FDIC bank deposits. My favorite part is when I use one bank's credit card money and deposit the money right back into the same bank. Ahh the joys of having no debt and a high FICO score, it's literally free money. Thanks banking dudes, you rock!

The masses still don't get it

When I was young and stupid I used to subscribe to Money Magazine. It dawned on me one day that pretty much all the advice in that magazine was wrong. It was the print version of CNBC with non-stop cheer leading for stocks, housing, etc.

Case in point:

Young married couple with $500,000 in student loan debt. Medical school debt, so they'll be OK. But this is the part that is amazing.

By the spring of 2006, as med school was drawing to a close, Meg and Chris had a total of more than $450,000 in debt. Soon they added $200,000 more: Matched with residency programs in the Chicago area, they bought a condo unit convenient to their hospitals. They didn't seriously consider renting, since they knew their residencies would keep them in one place for at least four years.
At the peak of the bubble they didn't consider renting because they would be there for 4 years? This is the kind of insanity magazines like Money preach. It is the mentality that real estate ALWAYS goes up. And in 4 years you will ALWAYS make money. That is obviously not the case is it Les Docteurs?

Let's analyze their "American Dream" purchase.

  1. 1% of closing costs = $2000 gone off the top
  2. Given that they seem like financial boneheads, they probably paid a point on their mortgage, another $2000 gone off the top
  3. They got an INTEREST ONLY LOAN so at 6% that is a payment of $1200
  4. 1% taxes is $2000 a year
  5. HOA for a $200K condo would be a minimum of $150 a month
So in 4 years they will have spent $76,800 or $1600 a month.

If they can sell the condo for $200K in 2010 (highly doubtful but let's play make believe) they will pay 7% in closing costs, realtor fees, transfer taxes, etc. So on top of the $76,800 they will spend another $14,000 bringing the total to $1891 a month. For that money they could have rented a bigger,nicer apartment than their condo.

Here is the chart for Chicago condos over the past year....not looking too good there Doctors. Let's now assume the price of their condo is worth 2% less when they try to sell. That is another $4000 spent or another $83 a month. At a 5% loss their total monthly cost of "owning" is $2100. For $2100 in rent they could live in the pimpest of pimp apartments and not have to stare at a 7-11 from their "owned" apartment.

Money Magazine will never break it down like that. All they do is preach the NOW IS A GOOD TIME TO BUY and renting is throwing your money away bullshit. Well these young doctors will quickly find out that it was not a good time to buy. It was actually about the worst time possible to buy. It was like buying tech stocks in late 1999. And renting in a down market is not throwing money away, it is saving money from being withered away.

It's getting hard to find a bank that doesn't disgust me

Due to the stupidity of mortgage lending, Citi is on the verge of death. It may lay off as many as 45,000 employees. And now comes news that a fund from Abu Dhabi will be buying up $7.5B worth of the company. Fantastic news. First we send the Arabs hundreds of billions of dollars a year in oil money. Now we sell them our banks in which to put that money. Maybe we'll sell GM and Ford to them as well, complete the oil circle of life for them.

Wall St will love it. Another head fake will take place today most likely. Just like the one 2 weeks ago, and the one on Friday. Once again, my advice is short on the pops. Unless you think $7.5B from Arabs will magically cure the TRILLIONS of bad debt sloshing around the world, in which case my advice is buy until you can't buy any more.

This makes the Bank of America illegal alien scheme seem minor by comparison.

And complete and utter silence about it from Dems and Reps. Why debate serious issues like these on the campaign trail when instead they could spend a year debating each other what they said and did 25 years ago.

Monday, November 26, 2007

Oopsie....More Mortgage troubles ahead

Lookey here E-trade was gonna be bought but then a funny thing happened. The suitor discovered that - SURPRISE SURPRISE - e-trade has a bunch of junk mortgage on its books. Aw shucks. Sorry e-trade. You almost pulled it off. Almost suckered someone into bailing out your ass. Unfortunately someone at TD Ameritrade and Schwab saw through your shenanigans.

That, almost $100 oil and the realization that retailers will eat it big time (as posted here yesterday by yours truly) lead to another big down day. S&P500 is getting dangerously close to breaking 1400 and from there look out below.

Over on the home builder front, DHI (D R Horton) was down over 6% today. This stock is at $10. It was at $45 two years ago. Does this remind everyone of something? Like say the .com collapse. The home builders were the first to fall. They stopped building. Then mortgage lenders since they stopped lending. Then the likes of Harley Davidson since they stopped selling bikes to non-HELOCed homeowners. Now the retailers will fall as nobody will be buying anything. And finally the techs will be last to fall, since when the recession hits they won't be able to sell.

And you can trace it all back to the housing collapse. The housing collapse that the so-called experts said was minor. Well yeah they were right. It will only be a severe recession instead of a depression, so in that aspect, right you were, it was minor.

Paris is burning once again

Despite the best efforts of the cowardly MSM, the real story is that once again Arab Muslims are rioting in Paris. You will not find the word Muslim or Arab in the AP reports or in the NY Times coverage. According to the AP they are merely French "Youths" rioting. Sure they are French, with names like Mohammed and Mustafah. It isn't Jean-Francois or Pierre out in the streets setting fire to cars.

It will be interesting to see if the new French prez pulls a Chirac and caves in or does what he should. Take a hard line, tell the media and the "world community" to fuck off and nip this thing in the bud before it goes on for 2 months like it did in 2005.

Not to make too much light of of a serious issue, but why do the rioters in Paris always target McDonald's? Yeah I know it is a symbol of evil American imperialism. But so is KFC, so is Burger King and Starbucks, of which there are plenty in Paris. Yet time and time again only McDonald's is attacked by the mobs. Wonder why that is.

You go grrrll!

Is this what Gloria Steinem had in mind?

Sunday, November 25, 2007

Here comes the stupidity

Look for a big gain tomorrow due to the so-called experts reporting all is well. The masses were out spending like madmen. They were buying TVs they don't need on the weekend. And this will lead to a 2% gain in stocks tomorrow which will also be the time for me to start the put buying game, this time on retailers.

It's pretty simple really. People are tapped out. They are hanging on only due to the fact their credit cards have not been fully maxed. Their houses are losing value by the minute. The dollar is losing purchasing power by the second and gas is well over $3 a gallon. It is simply illogical to think that given all that people will be spending more on useless shit this Christmas than the last.

If you believe people spend more when they have less, then by all means buy retailers. If you think people spend less when they have less, well, you know what to do.

RTH and XRT are two widely held Retail ETFs. Both will probably come flying out of the gate tomorrow morning.

RTH has done better lately, and by better I mean not as badly. It has some grocery stores like Kroger and Albertson's whereas XRT doesn't. If I were to short, I'd go with XRT since grocery stores will probably post better sales given the increased cost of food staples. No matter how much milk and bread costs, people will buy the same amount. As the econ geeks will attest, those are inelastic goods, demand remains constant despite price.

Home Depot - Short Opp?

I went to the Home Depot this afternoon. Had to buy some light bulbs and other stuff like that. I was there at around 1:00 and the place was D-E-A-D. I'm talking eerie silence. Aisle after aisle of no customers. There must have been more employees there than customers. So much so that I actually had 2 employees come up to me and ask me if they could help me. In all the previous times I have been to HD, I can't recall anyone asking me if they could help. Bizarre to say the least.

The stock has been battered and it can't go much lower so the thinking goes. If this store was any indication I'd say it has a lot more to go.

Us wacky Libertarians

As usual the MSM misses the point about why self-described libertarians now make 1 in 10 voters. Ron Paul is growing in popularity because the alternatives have been messing things up for decades.

We have a dollar that will soon be used for toilet paper as it will cost less.

We have a $10 Trillion debt that shows no signs of ever being reduced. Bush the so-called conservative has been spending money at a higher rate than LBJ. His pals in Congress, Nancy Pelosi, Kennedy and Harry Reid have been more than happy to assist in the spending.

We have a Social Security and Medicaid system that will be bankrupt in 20 years. The only solutions either of the two parties can come up with is tax tax tax and tax some more in order to save this FDR created monster that should have been slayed long ago.

We have 20 million illegals in this country and nothing being done about sealing off the borders. Instead every month a Democrat introduces an amnesty bill that Bush can't wait to sign into law. And where do the leading Dem and Rep candidates stand on the issue? More of the same.

We have politicians who continually attempt to muzzle free speech at any chance they get. We have other politicians whose holy grail is the confiscation of guns from the American citizenry. And finally we have a group of politicians who think Jesus should direct what happens.

All that and yet the MSM is surprised that a Ron Paul is gaining popularity? Shocking I know. A guy who wants to build a wall on the border, who wants to save the dollar, who wants to significantly cut government and who wants to let people ge out of SS....he is popular? Who woulda thunk it!

Goes to show how out of touch the MSM really is. They live in the Beltway and/or Upper West side bubbles. They have no contact with anyone outside that bubble. They have no clue what is going on in the 99% of the country that isn't DC or NYC.

Truth is the MSM wants a two party system slugging it out. The constant fighting is what sells papers and gets viewers to CNN and Fox News. The endless Hannity and Colmes format works best when you have two parties sticking to their talking points. The MSM doesn't know what to do with someone like Ron Paul. He is for low taxes, but he wants out of Iraq. Does he go on the left of the screen or on the right? Doesn't neatly fit into the script. And that is why the MSM tries its best to dismiss anyone who doesn't neatly fit into LEFT or RIGHT as a crank. A loon. A kook.

This may have worked pre-internet. Not anymore. Your days are numbered Washington Post. You too NY Times. You are in the dying days of your influence.

Saturday, November 24, 2007

$0 Trades

I came across this today and thought I'd share. I am not a client nor do I stand to make any gains from it. Scottrade charges $7 per trade which isn't bad. Fidelity charges $19.99 which is simply obscene. This place charges $0 for he first 10 trades each month and $4.50 after that. I may sign up and see how it goes.

Bernake is hell bent on destroying the dollar

Another rate cut is coming next month. Looks like Ben Bernake is ready and willing to do whatever he can to kill the dollar in the faint hope of saving housing. He will accomplish 1 of the goals. The dollar will be trashed and housing will also still tank. In 2001 and 2002 Alan Greenspan cut all the way to 1% in the hope ofa verting a stock market crash. And yet NASDAQ still fell 70%. In the 1990s The Bank of Japan lowered rates to 0% and still the Japanese housing market fell for 15 consecutive years from 1989 to 2004. Ben Bernake hasn't learned from either events. He has a PhD in economics and still can't understand that you cannot artificially prop up an asset indefinitely through low interest rates.

Oh well if you can't beat 'em join 'em. Start buying up gold and silver again. I honestly thought this madman had come to his senses and so I sold out of my gold and silver. I was wrong. He is a madman that is out of control.

When gas is at $6 a gallon remember who is responsible. It is not Exxon. It is not Saudi Arabia. It is one man and one man only and his name is Ben Bernake.

Friday, November 23, 2007

I am an awful American

I slept in 'till 8:30 today. I woke up at a decent hour, drank coffee, played with the dog, did a couple of hours worth of work and had some leftovers. That was my morning/afternoon on the day after Thanksgiving. I know, I know I should be ashamed of myself.

What I didn't do was this:



and that makes me a very bad American.

I didn't succumb to the endless commercials barking at me to shop till I drop. I didn't listen to the media tell me how exciting this all is and if I don't get down to the WalMart by 5:00am I may as well commit suicide since I am missing out on the greatest human activity ever known.

The same media that every Wednesday before TK tells us that airports will be packed and highways jammed. And then repeats the circus show4 days later with harrowing tales of airport delays on Sunday.

These sales items are available after Christmas every year and for even lower prices. However the media is so effective in manipulating people, they will go make fools of themselves in the middle of the night with the media cheering them on.

It is disgusting.

Thursday, November 22, 2007

Must Shop

Tomorrow will be the epitome of the American consumer gone mad. Lining up in the middle of the night in late November to buy shit you don't need at stores that will open a 4:00am. Ooooohhh look I can get a plasma TV for only $1500. Better get to the mall at 11:00 and sleep on the sidewalk so I'm the first in line. Wow what a bargain. If I keep watching the perfectly good TV I bought 2 years ago I might go blind.

I would love to see data on the demographics of the typical Best Buy lineup. What percentage of these people will be using credit to purchase the junk they don't need? And I don't mean use a VISA and then pay it off next month. I mean use a VISA and pay $20 a month until the $1500 is paid off, if it ever gets paid off that is. If that number is under 80% I would be shocked. These are the same people who then tell pollsters they want the government to give them free this and free that.

Hey Bubba, how about you keep the old TV and use that $1500 towards a college fund so that I don't have to pay for your urchin's education? Or how about using that $1500 to pay for your kid's health insurance so I don't have to pay for it via S-CHIP. Or here's a wild idea, use that $1500 to pay your mortgage so you don't foreclose on your house then come crying to me for a bailout. Or an even wilder idea, put that $1500 in an IRA so when you are old and gray you won't be penniless and ask me to feed and clothe you via the Ponzi scheme called Social Security.

Insane thinking I know.

Celebrating the defeat of socialism on Thanksgiving Day

As is the case in most colleges, the vast majority of my econ profs were socialists. But to their credit they were fair in both grading and presenting both sides. The tragedy of the commons is one of those lessons I remember from early on which explains in a very straightforward manner why communism doesn't work. And I was also surprised that Dr. Marx as he was often referred to spent a good amount of time discussing this topic (along with Coasian Theory which fellow econ nerds out there can appreciate).

Here is a recap by John Stossell and how it applied to the Pilgrims.

Wednesday, November 21, 2007

I am thankful for

1. Selling my house for about $75K more than it is worth today and about $150K more than it will be worth a year from now.

2. Not listening to any of the so-called real estate experts who told me I was foolish to sell because real estate always goes up.

3. Selling the vast majority of my equities earlier this year and missing out on the current stock market mini-crash.

4. Not listening to any of the so-called Wall St. experts whose only line is stocks always go up.

5. Buying gold and silver earlier this year in anticipation of the dollar's collapse.

6. Making the decision a long time ago to never owe any money to anyone again (potential future mortgage excluded). No credit card debt, no car loan, no nothing.

Now on to the eating....

NEWSFLASH: The economy is run by 1 man

So thinks Maureen Dowd. Speaking about Hillary, she says

Her Democratic rivals had meekly gone along, accepting her self-portrait as a former co-president who gets to take credit for everything important Bill Clinton did in the ’90s. But she was not elected or appointed to a position that needed Senate confirmation. And the part of the Clinton administration that worked best — the economy, stupid — was run by Robert Rubin.

Putting aside whether or not Hillary is qualified, what the hell is Maureen Down smoking? The economy is not run by the Treasury Secretary. Hey Maureen, as much as you and your fellow New York Times leftists wish it to be, this is not he USSR just yet. Nobody runs the economy. The economy runs itself. The government pulls a few levers here and there in hopes of steering some economic decisions in one direction or another. Sometimes it works, most of the time it doesn't. But that is all at the margin.

As far as I can tell, neither Bill Clinton or Robert Rubin created or expanded AOL or ebay or amazon or Siebel or Cisco or Intel or Lucent or Microsoft. I know Al Gore created the Internet but that's a whole different issue. Those companies as well as thousands of others were the engine of the 90s economy. Clinton and Rubin had as much to do with it as I did. No I take that back, I had more to do with it since I actually worked for a tech startup back in the day.

Tuesday, November 20, 2007

Living the "American Dream"

From the NAR (National Association of Realtors) website:

President Bush Signs American Dream Downpayment Act, One of Many Consumer Victories NAR Championed This Year

WASHINGTON (December 16, 2003) – Thousands of Americans will enjoy greater access to more housing opportunities under several pieces of legislation backed by the National Association of Realtors® and recently signed into law by President Bush. The legislation, S. 811, will provide an average of $5,000 in grants to approximately 80,000 lower-income families over the next two years to help them pay downpayment and closing costs on their first homes.

Fan-effing-tastic. Way to go NAR. Way to go President Jorge W. Arbusto. You made it possible for low-income families to live the American Dream. Never mind that these people were not qualified to own a plant let alone a house. Never mind that these people could barely make a payment on their 29% Sears credit card, let alone a mortgage.

Here is what that dream is in 2007 in Atlanta:

Eighty-five bungalows dot the cul-de-sac that joins West Ontario Avenue and East Ontario Avenue in Atlanta. Twenty-two are vacant, victims of mortgage fraud and foreclosure. Now house fires, prostitution, vandals and burglaries terrorize the residents left in this historic neighborhood called Westview Village. "It's created a safety hazard. And if we have to sell our house tomorrow, we're out of luck," said resident Scott Smith. "Real estate agents say to me 'We're not redlining you, but I tell my clients to think twice about buying here.'"
This is the Frankenstein the NAR and Jorge W. Arbusto created. They created an environment where everyone thought they were entitled to own a home. Didn't matter if you had a 500 FICO or $10 to your name. You were entitled to be a home "owner". The NAR and Arbusto made sure of that.

The NAR benefited of course. The more houses sold, the more Realtors earn in commission. Who cares if people making $20K a year are getting $500K mortgages? Housing only goes up and you can always re-finance. Or better yet move again in 2 years into an even bigger and more expensive house and pay another 6% in Realtor commission. The gift that keeps on giving.

Jorge W. Arbusto benefited. His biggest constituency - illegal aliens - got cheap loans. They got to live this so-called American Dream too. Never mind that they had no legal right to own a home. He also bought into the NAR nonsense that everyone should own a home. Everyone should not own a home. People who have no money for a down payment should not own a home. The government should not subsidize down payments. When the govt does that, bad things happen. Anyone with an ounce of gray matter could see that. Jorge W. Arbusto couldn't...or refused to. Either way he messed it up.

And of course the lending industry benefited for obvious reasons.

And this is the legacy that will be left behind once the housing crash is complete. Millions of unwanted, empty homes all over the country. Homes that will be vandalized and used by hookers and drug dealers. Homes that will either be bulldozed or turned into Section 8 ghettos. You've done a wonderful job Jorge, way to go.

Monday, November 19, 2007

Will the real socialist please stand up?

Current Federal Tax Rates in Canada:

$0 to $37,178 15.5%
$37,178 to $74,357 22%
$74,357 to $120,887 26%
$120,887 and above 29%

$150K a year worker will pay $34,500 in tax.

US Rates 2007:

$0 to $7550 10%
$7,551 – $30,650 15%
$30,651 – $74,200 25%
$74,201 – $154,800 28%
$154,801 – $336,550 33%
$336,551 and up 35%

Same $150K earner will pay $35,665. Already a middle class worker is taxed more in the US than in Canada.

US Rates in 2009 when Hillary and Charles Rangel get their way. Bush tax cuts are gone and revert back to 2001 levels of:

$0 to $27,000 15%
$27,001 to $65,550 28%
$65,551 to $136,750 31%
$136,751 to $297,350 36%
Over $297,350 39.5%

Same $150K earner will pay $41,483. This worker will pay $6000 more in 2009 than he/she does today. As disgusting as that is, he/she will also be paying $7000 more a year than his/her counterpart will pay in Canada.

What Hillary and Rangel don't understand is that this is 2007, not 1807 or 1907. It is a global economy where people are not constrained by geography. I could do what I do in Canada, or in the US or England or Slovakia for that matter. Corporations have been moving production off-shore to save money for decades. Soon enough individuals will be doing the same. I can legally live and work in Canada and the EU. I'm not booking any flights to Toronto just yet, but it is a definite possibility. And given the fact that the $USD is getting weaker and weaker, what incentive is there to stick around? So I can watch my money slowly be confiscated from me and given to those on welfare? So I can pay for illegal aliens and their children's education and health care? So I can fund things like the NEA which will indoctrinate another generation of children into socialist doctrines? Thanks but no thanks. I can get all that in Canada or Europe while paying less in taxes and getting the health care freebie on top of it.

Once upon a time the US was the lone beacon of capitalism in a sea of socialism and communism. No more. If the Democrats get their way - and they will - in 2009 the US will have the 7th highest tax rates among developed nations. Higher than France, Germany, Canada, Japan and Spain. About the only ones higher will be the Scandinavia and a handful of others.

The Reagan Revolution is officially dead. Ironic that Russia's top income tax rate is 13% while the US rate will be 39%. maybe ironic is the wrong word. Sad is more like it. Pathetic is even better.

Regression To The Mean

Reversion to the mean, also called regression to the mean, is the statistical phenomenon stating that the greater the deviation of a random variate from its mean, the greater the probability that the next measured variate will deviate less far.
In plain English it means if an asset appreciates by 6% a year for 100 years and all of a sudden appreciates by 20% a year for 5 years, it must depreciate in order to revert to the mean of 6%. That is what happened to housing. Historically over the 20th century housing prices have appreciated an an annualized 6%. So a house bought for $100,000 in 2000 should - by historical measure - be worth $179,000 in 2010 at 6% a year. But during 2001-2006 the house went from $106,000 to $250,000. So to regress to the mean, the house will have to depreciate back down to $179,000 over 4 years or a loss of 28.4%.

The so-called experts scoff at the notion of a 29% drop in house values. Impossible they mockingly sneer. Unprecedented they howl. Sure it is unprecedented. But so is a housing Ponzi scheme like we saw 2002-2006. So if the kind of lending we saw 2002-2006. The crash is happening. It will get worse before it gets better. Every prediction the so-called experts have made has been wrong. Lower interest rates haven't done anything. Foreclosures are setting new records every day. And the ARM resets are in full bloom.

By the time this is all said and done, some people will wish for a 29% drop in their house value. Reality of 35%, 40% and even 50%, while not the norm will certainly happen. As a renter with nothing but time on my hands and cash in the bank all I can say is bring that shit on!!

DOW and Housing

As yours truly predicted last week, the mini-rally of last week was nothing more than a head fake. We are in the sweet spot of red now. The DOW was a 14K a month ago. That's a 7% chop since. And we have a long way to go. 12K is a no-brainer. Once we get below 12K is when the decisions will have to be made. Buy in and take a chance or wait it out but potentially miss out on some rallies.

The performance of equities is a super fast version of what's happening with housing. The so-called experts such as Kudlow and Cramer said housing could never fall. And they also said equities were poised for big gains. Anyone who said otherwise was a naysayer, a doomer, a gloomer and gosh darn it, just plain old crazy. Equities had a small slide this summer and the Kudlows and Cramers of the world said the worst is over, buy, buy buy. And a dead cat bounce did occur, however short lived. Now where is that rally? In the toilet that's where.

Housing is doing the same thing only much much slower. 2006 was a plateau year. Early 2007 was the start of the crash. The so-callled experts said buy buy buy. Prices can't fall any more. And some did. And prices spiked just a little bit before continuing the downward trend.

Stocks like housing are priced based on fundamentals in the long run. The fundamentals say (as I have been saying) both are over valued. And as always happens fundamentals don't lie. Fundamentals don't skew. Fundamentals don't spin. Fundamentals have nothing to gain by lying. That is why your best bet is to ignore the salesmen, ignore the propagandists and focus on fundamentals which tell you we have a long way to go until both housing and equities bottom out.

Democrats: We need $1M mortgages

No you didn't misread. Chuckie Schumer is a NY Senator. He, like his fellow Democrat Hillary is a Wall St whore. Here is a top 10 list of the contributors to old Chuckie since he first ran for office in 1998. The data is from the SEC.

1 Goldman Sachs $458,440
2 Citigroup Inc $399,716
3 JP Morgan Chase & Co $325,200
4 Morgan Stanley $298,946
5 Bear Stearns $230,350
6 Merrill Lynch $226,150
7 UBS Americas $222,000
8 Credit Suisse Group $199,044
9 Lehman Brothers $181,450

And in totally unrelated news, Chuck Schumer, along with Chris Dodd (Dem from CT with a sililar top 10 as Chuckie) is the leading voice for a federal bailout of Wall St. He is the one who wants to bail out the $14K a year strawberry picker with a $720K house he can't afford. Of course Schumer couldn't give a rat's ass about homedebtors foreclosing. No, what he cares about is soothing the pain of Goldman, Merrill, UBS and the rest. His latest idea is to have Fannie and Freddie back mortgages up to $1M. That's right, the party of the small guy wants federally backed mortgages of up to $1M.

Of course the MSM is once again asleep at the wheel on this. They report none of this. All they tell is how Dems want to help the poor. Sure, since every poor person I know has $1M mortgage. One more sign of the decay in this country and one more step on the road to a Mexico style economy run by a small group of corrupt elites at the expense of everyone else.

Sunday, November 18, 2007

Global Warming....This old thing?

About 20 years or so I had a paper route. Imagine that a kid actually getting up at 5:00am to deliver papers instead of spending 24/7 on myspace and playing Wii. But like I said it was 20 years ago, might as well have been on the moon compared to where our society is today.

Anyway, on Sundays, part of the job was putting together the different sections that came separately. It was usually 3 parts that had to be combined into the whole massive Sunday paper. I'd usually take a quick read through it before starting. I vividly recall one Sunday the front page on one of the sections was the oncoming disaster that was coming due to G-L-O-B-A-L W-A-R-M-I-N-G. The oceans would swell, the east coast would be toast, we'd have no more winters, the plains would no longer be able to grow wheat. Death, disease and famine. And all this would happen within a matter of decades....unless of course we did something about it. And that something. For a 12 or 13 year old kid at 5:00 on a Sunday morning this was pretty scary shit.

Well, here I am 20 years later. And the same bullshit scare tactics are still being used. Yet another "study" came out this weekend saying the exact same thing. Death, disease and famine are right around the corner unless we do something. That something today -and 20 years ago - is a mix of high taxes and loss of freedoms. Loss of freedoms in driving cars. Loss of freedoms in owning the size of house you want. Loss of freedoms in living your life in peace. That something means bureaucrats in some distant office dictating to you how to live your life. The same bureaucrats who AlGore style, fly around the world in private jets and take limousines to and from the airports they fly to. The morons in the MSM of course don't question these studies. They don't ask any questions like how come all the predictions of 20 years ago have no come to fruition. Instead they just parrot the same ridiculous press releases over and over with no analysis. I mean I can't blame the MSM, if they did that, it would take time away from covering Lindasy Lohan's every move.

Saturday, November 17, 2007

In the belly of the beast

I've been in Washington, DC for the last few days, hence the lack of posts. In addition to being here for bidness, I've been checking out the sights and sounds of the town that steals and wastes a good chunk of my money. I haven't been in about 5 years and it's always nice to see the monuments, especially the ones celebrating what the US used to be....a free nation where 1/2 the citizens didn't depend on the government for their existence.

One thing that makes me smile about this cesspool we call the nation's capital (and it literally was a cesspool way back when) is that 80%+ of the residents here and in No.Virgina vote Democrat. And yet the airport they use most and drive by daily is called Ronald Reagan National Airport.

Went to Baltimore too, which I have never been to before. Rather impressed with the downtown area, much nicer than I was expecting. And the seafood was good.

Wednesday, November 14, 2007

So lemme get this straight

5 days ago the s0-called experts were saying the end of the world was here. Stocks were plunging, oil was almost $100 and recession was on the way. Then a miracle happened. WalMart said all is well. And Nasdaq is up 3.5%. Sorry but things don't turn around like that. Here's a hint so-called experts: Walmart sells cheap stuff. When people have less money they seek stores that sell cheap stuff. WalMart doing well is a contrarian indicator. The more people shop at WM, the worse the economy is getting.

The trend is down. In 2000 and 2001 there were lots of up 2% or 3% up days. We all know how that all ended up. This is a head fake. If you got 'em sell 'em.

Personally I will keep buying on the dips and selling on days like today.

Tuesday, November 13, 2007

War is Expensive

And the Dems are right. The new figure now thrown about is $1.5T. Lots of money, no argument. Chuckie Shumer along with Auntie Hillary is shocked about the cost. Never mind they voted for the war. They are shocked. And they are shocked that "our children" will be paying for it for many years to come because it was paid for by borrowing.

Well no shit. That's how all wars are paid for. WW2 was financed. As was WW1 and the Mexican-American war and the Civil War and the Revolutionary War. Iraq is just one more in a long line of wars that was paid for by borrowing money. It is intellectually dishonest for the Dems to use this as an argument.

And has anyone else noticed the anti-war rhetoric has moved on (no pun intended) from anti-Iraq to anti-Iraq and Afghanistan? The far left used to say Iraq was bad because it diverted resources from the real fight against terrorism, Afghanistan. Now all of a sudden Afghanistan is lumped in with Iraq. So fighting Al Qaeda anywhere is now verboten according to the Democrats.

Iraq? No good. Afghanistan? No good. Guantanamo? No good. Arresting muslims accused of plotting to blow up things in the US? No good. Monitoring the calls of said muslims? No good. So the question to Hillary, Obama and the rest there ANY fight against Al Qaeda you would support? You are against military action. You are against gathering intelligence. What's left? Only conclusion I can draw is that the Dems simply believe terrorism is not a threat. The Michael Moore, Keith Olbermann and Rosie O'Donnell insanity has permeated the Dems fully. Once again JFK and FDR are rolling in their graves at what has happened to their parties.

Alice in Wonderland

Oil is at $94 and that is being celebrated. The reporting in the MSM is phew, we dodged a bullet there. Thank goodness it didn't hit $100. The laziness and ignorance of the MSM is once again on display. The difference between $94 and $100 is less than 10%. But why bring context into the picture? It is still at $94. It is still insanely high. It is still due mainly to the dollar's plunge which is due mainly to the interest rate cuts. Nothing has changed, yet reading stories in the MSM you'd think $20 oil was right around the corner.

All is well now folks. Christmas (oops I mean winter non-denominational festival) is only a month away. You need to get out to the malls and spend spend spend. Remember, Jesus will only love you if you max out your credit card celebrating his b-day.

Monday, November 12, 2007

About this New Hampshire and Iowa bizness

Can someone explain to me why Iowa and NH have their asses kissed so much every 4 years? I know that is how it has always been done. But lots of things have been done for a long time for stupid reasons.

I suppose 75 years ago Iowa represented an iconic America where the family farm meant something. New Hampshire is the Live Free or Die state. 'Nuff said. But today farming accounts for 3% of employment in the US. And New Hampshire's state motto is as meaningful and Harvard's Veritas. The state voted for John Kerry, a man who would impose a 50 cent gas tax to fight global warming, right after wiping his ass with the 2nd Amendment. That ain't livin' free. Southern NH is nothing more than an extension of the Boston suburbs. This is not your father's Iowa and NH.

And yet still these two states more or less get to decide who the nominees for president will be. Combined they have 7 electoral voted. By comparison California has 55. Texas has 34, NY has 31 and Florida has 27. Yet by the time anyone in these states votes the contest is over. Sure the Little states should have some say in the nominating process. But not this much say.

Sunday, November 11, 2007

A message to home sellers


Yes de-cluttering helps. Yes curb appeal helps. Yes a new coat of paint works. But it is all for naught if you don't lower the damn price. It is not 2005. It is 2007 and in 2007 (and in 2008 and 2009) prices are falling. You have two choices. Either lower the price ahead of everyone else, or follow the price down.

Here are some examples of what not to do:

1254 BONSHAW TRAIL, Marietta, GA 30064 (MLS 3418613)
For sale since February. Started at $399,900 and now it's at $379,000. WOW!! And I can just see the discussion Mr and Mrs Homedebtor are having:

Mr: Gosh why isn't the house selling? It's worth at least $450,000, at this price people should be knocking down the door.

Mrs: Maybe we need some more de-cluttering and a new coat of paint

Mr: Yeah, and we also need to bake cookies so when people come to see it they'll get that warm feeling

Mrs: You don't think we should lower the price do you?

Mr: You nuts? We're giving it away as it is. I'll go bankrupt before giving it away even more. And don't you remember what our Realtor and mortgage broker said? Housing always goes up and we are entitled to at least a 10% a year increase for the rest of our lives.

Even more deluded homedebtors live at 4814 RIVERHILL ROAD NE, Marietta, GA (MLS 02079211). Their house has been listed since January and they haven't lowered the price by even $1. I mean come on people. 10 months for sale, it hasn't sold....can you not get the hint?

But the winners of most delusional sellers of the year award goes to 488 WHITLOCK AVENUE, Marietta, GA (MLS 3223392). For sale since February.....2006 that is. Yep, for sale almost 2 years and not even 1 price reduction.


President Obama to upper middle class: SCREW YOU

In typical Democrat word mincing fashion, Obama manged two speak out of both sides of his mouth in about 5 minutes. He will listen to all options on Social Security. But after politely listening he will ignore all options. All except eliminate the cap. But it will not be a tax increase. No, no no. It will simply be a few people paying a "little more" to help starving seniors. So if I pay an extra $5000 dollars in payroll TAXES it is not a tax increase according to Obama. If you say so Senator.

Obama at least is honest enough to say what he wants. He is dishonest in not calling it a tax increase, but he is a politician. He is a Democrat, he wants to raise taxes. Nothing earth shattering there. On the other hand Hillary WILL raise taxes but she won't publicly say she will. Given a choice between a lying Democrat who will raise taxes and a truthful Democrat who will raise taxes, I'll take the lesser of two evils and go with the devil I know. Unfortunately Democrats don't feel the same.

The only person running who has the right idea regarding SS is Ron Paul. His vision is pretty simple. Pay people what they've put in. Only allow those who paid in to get benefits (ie no benefits to illegals). He also has this crazy idea that I can save myself for my own retirement. He has this crazy notion that I don't need federal government bureaucracy stealing 12.4% of my hard earned money and giving it to 75 year olds in order for them to afford their tee times. and because I have this ability to do things on my own sans govt, I should be able to get the hell out of the system.

From his website

Imposing any tax on Social Security benefits is unfair and illogical. In Congress, I have introduced the Senior Citizens Tax Elimination Act (H.R. 191), which repeals ALL taxes on Social Security benefits, to eliminate political theft of our seniors’ income and raise their standard of living.

It is fundamentally unfair to give benefits to anyone who has not paid into the system. The Social Security for Americans Only Act (H.R. 190) ends the drain on Social Security caused by illegal aliens seeking the fruits of your labor.

We must also address the desire of younger workers to save and invest on their own. We should cut payroll taxes and give workers the opportunity to seek better returns in the private market. Excessive government spending has created the insolvency crisis in Social Security. We must significantly reduce spending so that our nation can keep its promise to our seniors.

Crazy isn't it? Might be why Ron Paul raised $5M in one day last week. Lots of crazy people out there with these crazy notions.

Saturday, November 10, 2007

Fair 'N Balanced

I appreciate having Fox News around. They are the island of conservative news in an ocean of liberalism. But man they can just be nutty sometime. I was watching Cavuto's show which I usually like. But the topics today were a) Hillary down in polls, good for Market$ and b) can the US survive a mall terror attack?

I mean come on. The economy is in the shitter for the reasons I have written about a million times...housing crash, plunging dollar/$100 oil, near-hyper inflation. So when retailers come out with a 20% drop in Christmas (I mean non-denominational, winter festival) sales the so-called analysts will blame fear of terrorists and justify their BUY ratings on retailers nonetheless.

As far as Hillary goes, I think you'd have a hard time finding someone who loathes that woman more than me. However, once again Fox News is delusional. Her polls went down a teenie bit because she said she wants to give illegals licenses (or she doesn't or she did and she doesn't now or she didn't not want to not do it). And this according to the Cavuto Bunch means buy stocks because she won't win and if she doesn't win Wall St will feel better and hence markets will rise. It's such nonsense. Stock markets will tank with or without her. Wise up Cavuto.

Hillary will win the nomination. Unless some really freaky photos of her Bill and Al Sharpton come out, she will be the nominee. And given this is the Democrats we're talking about, the photos might actually help. And unless some sudden shift of political winds occurs, she will win the election as well. Sad but unfortunately true.

Friday, November 9, 2007

Another day another credit implosion

This time it is Wachovia who surprise surprise has gazillions of junk mortgage debt on its books. And once again all the experts are shocked. And while Nasdaq and the S&P500 are plummet yet again, GLD and SLV are up. This is just getting boring. Same story over and over and over.

Thursday, November 8, 2007


Whenever there is a heat wave, the MSM falls over itself telling me how hot it is. And of course it is always played as yet more proof of global warming. They never do the reverse however. When there is a cold snap, you don't see CNN with a BREAKING NEWS banner about the cold. Of course not. That would be contrary to their global warming hysteria.

Either case doesn't prove anything. A few days of really hot weather doesn't prove global warming just like a few days of cold doesn't disprove global warming. I know that. You know that (I hope). But I'll play the MSM game nonetheless.

Today in my neck of the woods the high was 52 degrees. Last night it went down to 27. The normal high should be 65 and the normal low should be 40. Therefore using the MSM conclusion process, I am convinced a new ice age is right around the corner. I propose $500B of new taxes to fight this oncoming catastrophe. And we must elect Al Gore president too.

I'm sorry nobody can answer right now...

This is priceless:

Byrd, loss-mitigation team leader at Quantum Servicing, says they put out about eight to 10 calls on average to each delinquent borrower, and as many as 50 calls if they are having trouble reaching a borrower. To get more of their calls returned, the company recently began offering Starbucks Coffee gift cards and prepaid cell phones with 30 days of service, as lures to speak with one of its representatives. Many of those who answer the phone will hang up, or say the borrower is busy or not at home, Byrd says. Borrowers, she says, are afraid of speaking to debt collectors for fear they will lose their home. "
This is what it's come down to. Homedebtors being bribed with Starbucks to answer their phone. Yikes.

But but but but real estate only goes up. Renting is throwing your money out the window. You get all those great tax breaks. How's that tax break treating you now Mr. and Mrs. Up to Your Eyeballs in Debt America? How's that Hummer driving? You know the Hummer your bought with the equity you thought you had in your house? How's that 80" Plasma looking these days? Was it worth $6K that you will never be able to pay back?

So you are afraid of losing "YOUR" home? Newsflash morons. It is not your home. It never was your home. It is the lender's home. You are merely house sitting. Once you can't make the payment you are out on your asses. Until your mortgage balance is $0 you own nothing. I guess your brilliant mortgage broker forgot to tell you about this part of the real estate biz huh?

So stop being such little babies already. Own up to the fact you never should have lived there in the first place. Just accept the foreclosure and move on with your life. The sooner you do it the better. It's like taking a band-aid off. Why torture yourself bit by bit? Just rip the damn thing off and be done with it. You know very well there is no avoiding this. Unless you win the lottery or by some miracle your salary triples overnight, you cannot afford that house. It's over. Les Jeux Sont Finis.

When I buy your house from the lender at a 40% discount I'll be sure to thank you, I promise.

Wasn't there a Revolution against this?

Presidential tickets:

1980: Reagan/Bush vs. Carter/Mondale
1984: Reagan/Bush vs. Mondale/What's her name
1988: Bush/Quayle vs. Dukakis/Bentsen
1992: Bush/Quayle vs. Clinton/Gore
1996: Clinton/Gore vs. Dole/Kemp
2000: Bush/Cheney vs. Gore/Lieberman
2004: Bush/Cheney vs. Kerry/Edwards
2008: Clinton/? vs. Sacrificial GOP lamb
2012: Clinton/? vs. Sacrificial GOP lamb

In 32 years there will have been a Bush or Clinton on every presidential ticket. If it looks and smells like a monarchy....

Wednesday, November 7, 2007

Orlando we have a problem

If you want to barely break even over the next 5 years, buy a house in Houston, Dallas/Fort Worth, Kansas City, Cincinnati, Detroit, Indy (home of the evil Colts) or Cleveland. That is if you want to break even not accounting for the closing costs which would still put you in the red. See here for more on that.

If you live anywhere else and you feel like losing a ton over the next 5 years, buy a house.

The gory details and analysis from Fortune Magazine is here.

If you own a home in Orlando my only advice is SELL ASAP.

This is 3 MSM stories in one week about the oncoming crash. Welcome to the party boys and girls. A little late but nice of you to show up. Wonder what the Natioanal Association of Realtors will have to's a guess: NOW IS A GREAT TIME TO BUY!

First the WSJ now this...

another "renting is OK" article in the MSM. The message is spreading. Buying is a bad idea right now. Renting does not mean you are the scum of the earth. Sing it loud and sing it proud sister!!

The NAR's "now is a great time to buy" message is being discredited on a daily basis. I even noticed it on TV this week. There is a show called How I Met Your Mother. It's a sitcom about friends in NYC in their late 20s/early 30s,pretty good show. On a recent episode the married couple bought a condo and the message was BAD IDEA JEANS.

I have been asked a few times how will I know when the right time to get back in will be. The right time will be when everyone else thinks buying is the worst idea possible. When the very idea of buying is met with repulsion (kinda like the idea of renting was met circa mid-2006).

We're not quite there yet. The "don't buy" crowd is still a minority. A growing minority but a minoority nonetheless. I'd say another year or so and another 10-15% drop in prices and the time should be just about ripe to buy again.

From the "No Shit" files

They build a fence along the border and miraculously the number of people crossing the border illegally has fallen sharply. Who coulda thunk it? Of course putting up a fence works. Only people who say it doesn't work are the people who don't want it to work. The fence worked wonders in San Diego when it was built in the 1990s. And once again it is working in Texas.

Keep building this thing along the entire border and maybe just maybe the flood of illegals will be kept to a trickle.

The other argument of the open borders crowd is that it's too expensive. Wrong. If we can find $350M to build a bridge between two Alaskan islands with a combined population of 15,000, we can find the money to fully fund the border fence for crying out loud. The money saved in not education illegals' kids and treating illegals at the ER in one year costs more than building the entire fence.

So-called experts shocked once more

Headline today: GM Shocks Wall St with $39B Loss.

Shocks who? Not me. Just like I predicted Harley Davidson would crash and burn earlier this year, GM did the same. And so will Ford and so will Chrysler and so will every other car manufacturer. Sooner or later all of them will have these shocking days.

Reason: same old, same old. The end of the HELOC party. The millions of people who used their house like a personal ATM during 2002-2006 can't do that anymore. All those people buying $50K Escalades can't afford to buy anymore. Why is is so frickin' hard for the so-called experts to figure this out?

Remember back 10 or 15 years ago. Who drove a Cadillac or BMW or Mercedes? Rich people. That was the idea. Rich people drive expensive luxury cars. Yet all of a sudden around 5 years ago, every 2nd car on the road was an Escalade or a Hummer or a BMW. All of a sudden the cars of the rich became the cars of the middle class. Prices of these cars didn't go down. Incomes of the middle class didn't suddenly double.

The only reason for this phenomenon was occurring was the housing boom. Your house goes up $100K in value, you takeout $50K, and buy that Hummer. Easy right? Well sure except that money still has to be paid back. But who cares since housing will always go up or so went the theory. Well now that party is over. Joe 6 Pack no longer has the appreciating house, so he no longer has the money for Harleys or Hummers or Escalades. He also can't pay back his loan. Hence as we are seeing so evidently, banks are losing billions, GM is losing billions, Harley-Davidson is losing billions. And soon enough other makes of toys will lose billions like RV manufacturers, boat manufacturers, Sea-Doo, etc.

I am in the market for a boat myself and can hardly wait for the fire sales next spring.

Is the news sinking in yet? Is the fact we are heading into one hell of a recession starting to click? Oh sure the spinners on Kudlow's show will say no biggie. Just like housing was only 10% of GDP, GM is only 1% of GDP and doesn't matter. Sure thing Larry, sure thing.

Tuesday, November 6, 2007

Silver - the new gold

SLV was up 4.5% today to $153. And why not? Oil set a new record on the high side. The dollar set a new record on the low side. Wall St is still on some delusional high and pumping up equities while banks announce losses by the billions. Inflation is rampant and uncertainty is high. In times like these, metals is the place to be.

Silver has lagged gold for the past couple of years which really made no sense. Gold while historically the vehicle by which to hedge against inflation is not all that useful. Chinese and Indians have been buying it up for jewelry purposes. Yet Silver has been ignored. Until recently. And if you look at recent charts for GLD and SLV you'll see the tortoise is catching up to the hare.

I had a sell order for $155 but canceled it this morning. The way things are going $165 even $170 is realistic before the end of the month. That's when I will take the most excellent profits.

True cost of owning

A lot of the spin on real estate is that things aren't THAT bad. Prices are ONLY down 5% or maybe 10% in the worst hit markets. No biggie the spinners say. Well assuming 5% or 10% is right - which it isn't, not at all, - it is still a huge loss for most people.

Let's say you buy a $500,000 house and put 10% down. You pay 1% in closing costs when you buy. When you sell you pay 1% closing costs. And 1% is conservative it can easily be 2 or even 3%. Also when you sell you pay 6% real estate commission.

Now let's suppose the value of your house drops a scant 5%. You sell for $450,000. Your entire equity has just vanished. But in reality your selling price is only 93% of $450,000 since you pay 1%closing costs and 6% commission. So you are down to $418,500. That is a net loss of $86,500 or 173% of your initial investment.

At 20% down you are losing 86% of your initial investment.

At 5% down you are losing 344% of your initial investment.

Ahh yes but the tax breaks make up for all that will say the spinners. Not really. In general any tax savings received are offset by property taxes and HOAs. Keeping with the above example, a $450,000 mortgage at 6%, someone in the 25% bracket would save $6750 in taxes. For a $500,000 house, $5000 to $6000 a year would be a standard property tax bill. $100 a month HOA fees eat up another $1200. Add in some repairs and the maintenance required to keep up a $500,000 home and there goes your tax break.

Only time it makes sense to own is in a fast appreciating market like 2002-2005. Then owning is fantastic. However any time a market is flat or even declining just 5-10%, owning is a bad idea.

Holy Mother Effer

Banks may have $1 TRILLION in junk debt. To put that in perspective, the markets shat a brick last week when Deutsche Bank said they had $10B of junk. $1 TRILLION is 100 times more.

This is worldwide of course and it makes sense. The US housing market created an ear of banks lending money to anyone with a pulse. But the same happened in England and Ireland and Spain and E. Europe. And it is collapsing or about to collapse in all those places as well. The US boomed first and started crashing first. Europe is where the US was about 18 months ago. There is still plenty of head in the sand denial in Europe just like there was here.

And with all this news, the Dow is up at opening. All this does is open up opportunities for shorts. Invest wisely.

Monday, November 5, 2007

Please, no dead presidents.

If Supermodels and rappers can figure out the dollar has become worthless, why can't Ben Bernake?

Media Myths Monday

Today's edition: a shortage of workers is coming.

I started noticing this myth starting to percolate around 2002. This was at the tail end of the mini-recession we have following the implosion of the .coms. It was a nice way to tell the millions of laid off "knowledge" workers that all would be well. If not now, then eventually. Just hold on and keep hope alive.

Fast forward 5 years and the myth is still out there. All these boomers will start retiring soon. They will be out playing golf every day, sailing around the world, writing novels. Basically doing what all those Fidelity commercials say they will be doing. Only one problem with this scenario: boomers haven't got two nickels to rub together.

The average 401k balance for those 60 an over is $112,000 according to Fidelity. Sorry folks, but $112K is not going to afford your the lifestyle you are dreaming of. That has to last for 20-30 years. And all those golf tee times, cruises and art lessons don't come cheap. $112K over 20 years is $450 a month.

On top of the measly $112K, the average boomer has $15K to $20K in credit card debt. And of course millions boomers went HELOC crazy over the past decade. Millions owe more on their house than what it's worth....a house that is losing value as I type.

Given all that, do you really think there will be a shortage of workers? Or is it more likely that millions of these boomers will be working well into their 70s to earn the money they squandered away in their 40s and 50s? Put yourself in their position. You have $100K in the bank. You owe $15K to Visa. You have a house that you are barely breaking even on. You have a $5K a year property tax bill on your house. Are you going to quit your job and book that 'round the world cruise? I didn't think so.

It gets better all the time

Deutsche Bank said they will lose $10B on Friday due to junk mortgage debt. Now Citi says they will lose $11B due to junk mortgage debt. It's so bad the CEO is out. And to think Mr. Prince was the darling of Wall St. a mere 12 months ago. He was on the cover of Business Week and the rest being touted as what a CEO should look like. Yeah sure, give me $11B of play money and I'll get my face on the cover of BW too. Remember the good old days - like 3 months ago - when Merrill and Bear Sterns were announcing only $3B losses due to mortgage debt.

Is it starting to sink in yet everyone that the real estate crash is nowhere near done?

Sunday, November 4, 2007

Let's get in the way back machine.

Silver and gold are on a tear. SLV was up 3.5% Friday, which makes me very happy.

Inflation is rising.

The dollar is at all time lows.

Oil is at all time highs.

Iran is acting like a little bitch.

All we need is a disco revival and the 1970s will have made a full comeback.