Friday, May 30, 2008

I Know Home Prices Are Falling Fast ...

I know home prices are falling fast, but really, I expected better from the Economist. Just the like our fair Senator Dodd, the Economist tried in earnest to compare the current epidemic of foreclosures to the Great Depression. From CNN, I expect this kind of populist reporting, but not from the Economist.

It's sad to see people trying to evoke a response by trying to tie our current economic maliase the Great Depression. However, as with dear Senator Dodd, the context is all wrong. 100% wrong.

During the Great Depression people were being foreclosed because our economy failed. Businesses failed, jobs were lost, people were truely in need. There were no jobs to be had. People were truely facing homelessness though no action of their own. Today, every Tom, Dick and Harry who is sweating their ARM reset is in that prediciment because they stupid, ignorant, irresponsible and probably greedy too. Unlike during the Great Depression, the people being foreclosed still have jobs, still have prospects for a rich and full life. Yet bleeding heart liberal (note: I am not right winger either) media outlets like the New York Times and CNN continue to lobby for foreclosure relief which flies in the face of common sense. The people who are at risk of foreclosure today have jobs and means to rent a new and possibly nicer home. Hell, they even have the opportunity to own a home again, once their credit rehabs, provided the current legislation proposed, does not pass in any way, shape or form.

The bill is coming due, the dumb ones who over spent are going to have to pay the piper. Nobody dances for free, we all knew that before the mortgage market began to unravel. The Foreclosure Relief Act will forsake significantly more people than it helps out. When I say "significantly more", I mean TONS MORE. Perhaps 10% of the population will benifit from this legislation while 20-30%, perhaps more will be harmed by the Foreclosure Relief Act.

No Bailout for the stupid, ignorant, irresponsible or greedy.

Tuesday, May 20, 2008

I Knew The NY Times Was Left Leaning ...

However I had no idea that they were in the business of promoting out and out socialism.

The Times rails against the President and Senate Banking Committee for not stepping forward and just throwing money at the problem. Ironically the Times is advocating using Federal money to support prices and insure mortgages. If that sounds like price control efforts that Richard Nixon advocated in during his tenure as President, your right. And coming from such a liberal media outlet, I am almost confused.

The Times cites the levels of decline over and over again in an attempt to inflame its readers and urge action to save a bunch of wildly irresponsible home owners and borrowers. The Times editorial even tries to apply the law of supply and demand, yet it ignores the basic premise of this most basic of economic theories. The editorialist believes that prices just fall and people start buying. However, this anonymous editorialist ignores the fact that real estate markets from coast to coast were dramatically over priced and over bought.

Historically, home prices double every 20 years. The nine years have seen home prices increase 85%. If this market were to reach some kind of equilibrium, prices would have to retreat a good 40% if its gains, before it could realistically start moving upwards again. The Times cites a 7.6% drop from February 2007 thought February 2008. That percentage drop represents a fraction of the correction needed to bring the market back to equilibrium so that the law of supply and demand could begin to work again.

When prices fall to levels which buyers think are reasonable, they will start buying again. Instead The Times home price levels like they are Constitutional Rights. The fact is, even in foreclosure, many homes are still priced above what is a reasonable valuation against historic real estate cycles.

In a final move of cowardice, The Times closed off its interface for readers to provide comments. The overwhelming sentiment of those comments was in deference to the anonymous editorialist. Quite frankly, I think it’s shameful for a public forum to provide an opinion on a given subject and then when it doesn't like the backlash it runs away and hides, but I guess you have to cut your losses sometimes when your DEAD WRONG!

Wednesday, May 14, 2008

Tuesday, May 13, 2008

You Heard it Here A Long Time Ago

A Bloomberg article details how banks still have billions of dollars in unrealized losses related to the sub prime meltdown. Fortunatly? Unfortunatly? The foreign sovereign wealth funds from places like Abu Dhabi are probably going to cut their losses and see if they can cherry pick some low hanging fruit later on.


The Wall Street Journal is reporting that the Democrats may face the rath of voters because they are pushing so hard for a housing bailout. Thankfully our President, in his first sound decision since 2002, is vowing to veto the measure. Not that the Republican plan is any better.

There are some great Youtube clips of the Republicans coming out and blasting this bailout. How could any level headed, objective person be in favor of this bailout? Nearly a 1/3 (32%) of the population rents their home, 27% of people own their home free and clear and have no mortgage, another 33% of the population is living within its means and are current on their mortgage. Which leaves another 8% of the population who are behind or in foreclosure. So, basically the Dems are going to stick 92% of us with the tab for a small fraction of the population who were, dumb, ignorant and selfish. Now granted, a small portion of the people who are still current on their mortgages must be shitting their pants, so lets say that half of the 33% who are current on their mortgages will not be without a bailout at some point. I am certain that it isn't that much, but lets cut the dumb some slack. If you assume that 25% of the population needs a bailout, your still talking about sticking it to 75% of us. Including a large portion of the renter population who were royally horned over by the dumb 25%. And its not really 25%, but that’s a nice round number, and here's what it comes down to ... The Democrats want to shaft 1/3 of us to save another 1/4 of us someplace else. This kind of thought process is just plain broken. Really, its populist, so what can any of us expect from a bunch of politicians.

Tuesday, May 06, 2008

For Sale : The Fed Chairmen

And for that matter most other appointed and elected officials.

Ben bailed out Bear Stearns in the dark, behind the tax payers backs and got nothing for it. The American people will forgive a lot, but not the out and out corruption of its leaders and decision makers. Had Ben done this deal in full view, it might not have set off the amount of resistance that it did, but time would not allow for that. Where I think Ben failed in bailing our Bear Stearns was that he got nothing for the US tax payers. A number of times in recent history, the US government has bailed out big business and received an equity stake in return. Chrysler in the 80s comes to mind, so do the airlines following September 11th. Bailing out Bear Stearns was the right thing to do, all be it highly toxic and unpopular, but it was undeniably the right thing to do. In much the same way as George Bush shot his global credibility to hell when attacked Iraq, Bernake shot his credibility down the drain when he failed to get anything in return for the Bear Stearns bailout.

Now with no credibility for making another potential corporate bailout, Ben Bernake is reduced to pan handling for the big banks in the form of begging for an individual home owner bailout, since the administration’s soft dollar policy has failed to do anything to arrest our slide into recession. In fact, its probably contributing to our current predicament.