A New Foundation? I am Not Buying it.

President Obama touted a new foundation for growth in his 100 day press conference. He blamed an economy built on sand for our current economic condition. Those were good analogies, courtesy of his speech writer. However, upon even distant observation, it’s obvious to anyone with an ounce of common sense, that the continued individual home owner bailouts, $75 billion at last count, are nothing more than adding more sand to the pile.

Can someone, anyone, please explain to me, how artificially supporting home prices will truly, in the long run, do anything to relieve the economic conditions which grip this country? Reworked mortgages are still failing nationwide. Banks are still holding billions, perhaps a trillion dollars worth of toxic paper that rides on top of hundreds of thousands of bad mortgages. It was a set of artificial conditions which got us in this mess and more artificial "fixes" will only prolong this mess as well as drive up the cost of fixing it. Einstein defined insanity as "doing the same thing over and over again and expecting different results".

The very best short term case is that this mortgage bailout plan supports prices for a short time and stalls our economic slide. It may even stall the slide long enough to get President Obama reelected. That’s the best case, with probably the poorest possible outcome as the slide at the end of any artificial stall will be far more precipitous than we are currently experiencing. In short, its good for him and bad for us. This is what we get, because we have allowed our politician's focus to become staying in office, rather than best serving the people.

Another Interesting NAR Tidbit

These guys are masters of misusing statistics. I was reading the Wall St Journal this morning when I came across this little nugget of information.

The NAR has been touting decent sales numbers over the last month, 360,000 sales versus 375,000 sales in the same month last year. Its the truth, but here is the real catch according to the WSJ piece ... Over half of those homes sold last month were foreclosures and short sales, while that number was under 20% a year ago.

Lies, damn lies and statistics.

Keeping Track

A lot of Republicans were drummed out of office, in some cases for lesser offences, yet the main stream media continues to provide obscene amounts of top cover. Where is the outrage?

Pennsylvania Rep. Jack Murtha - Faces allegations of steering defense spending to the consulting firm his brother works for and another firm that a former staffer founded.

New York Rep. Charlie Rangel - Currently faces no fewer than 4 House Ethics Committee investigations.

California Rep. Jane Harman - Is fighting allegations that she offered to help seek reduced charges for two pro-Israel lobbyists suspected of espionage in exchange for help from a pro-Israel donor, also suspected Israeli agent.

California Sen. Dianne Feinstein - Is accused of devising legislation that helped her husband get a federal contract to sell foreclosed properties at compensation rates higher than the industry norms. Her defense is that the legislation never became law.

Connecticut Sen. Chris Dodd - Continues to stonewall information requests in relation to allegations that he was the recipient of VIP loans from disgraced subprime lender, Countrywide.

North Dakota Sen. Kent Conrad - Continues to hide in Chris Dodd's shadow while he fights off the same allegations.

President Barack Hussein Obama - Continues to avoid scrutiny regarding the preferential treatment he received from TARP recipient Northern Trust Bank in negotiating a loan and purchasing his Chicago area home for beyond lowball discount of 15% under market prices at the height of this nations real estate boom.

So Which is it Timmy?

This morning, yesterday morning, by the time most of you get around to reading this post, I was perusing Bloomberg and I came across this article where Secretary of the Treasury, Timothy Geithner states, in testimony to Congress no less, that, “Currently, the vast majority of banks have more capital than they need to be considered well capitalized by their regulators,”. At no time did he question the levels which the regulators might use to yard stick these banks and their assets & liabilities. He goes on to state that lending is beginning to thaw. Thaw being his word not mine. Then, this evening I come across this gem on USAToday, recapping Turbo Tax Timmy's testimony in front of Congress. In this article titled, "Geithner: Toxic assets hinder banks' lending", our vacant Secretary of the Treasury says that toxic assets are still a problem for the banks and are preventing banks from lending to their fullest ability. Geithner's statements from this afternoon seem to be in conflict with his testimony earlier today.

So, I put it to you Timmy, which is it? The former or the later? It can’t possibly be both.

People used to complain about the Byzantine statements and testimony of Alan Greenspan, but he pales in comparison to Tim Geithner who stagers about with a blank, dog ate my homework look on his face whenever he is pressed on a challenging topic. A few months ago I questioned his intelligence and moral turpitude to hold the office of Secretary of the Treasury. Today, I am calling for his resignation. Its clear that he is not capable of holding the leash on the largest economy in the history of man, let alone guide it though the most troubled waters we have ever seen.

Have We Reached the Beginning of the End?

China is clearly trying to reduce its exposure to the dollar. I can't fathom that the Federal Reserve will be able to pick up the slack. I wonder if this is what it was like in Argentina before they defaulted.

Anecdotal Evidence

Relying on anecdotal evidence, The Washington Post is running a piece that is suggesting that the real estate markets are bottoming and the light at the end of the tunnel is not a freight train. This piece of cheerleading fluff does nothing but further erode the declining credibility of what was once one of the nation's leading news outlets.

The math and historical trends show that the bottom is no where in site, but why pay attention to the math, when you have anecdotal evidence? The article even seems to pay lip service to the recently received March housing statistics before dismissing them in lieu of anecdotal evidence.

Overall, I find this headline, "Housing Data Could Signal If Bust Is Over", from the Washington Post to be highly irresponsible.

Its Not Over By A Long Shot

Read this chart, understand it, analyze it. If you come to the conclusion that we anywhere, but a long way from the end of the road, please post your rationale here. While some, mostly in the Obama White House and from the National Association of Realtors think that we're coming out of this slump and now is the time to buy a new home. I differ, in examining this data from Robert Shiller, I conclude that most markets have a very long way to fall before they reach a proper parity. At present, the market is no where near approaching recovery and thus a real buying opportunity does not exist at this time. Ignore those pleas from the NAR on your local radio stations, telling you that now is a great time to buy because affordability is at a recent low.

Harvard Student Takes on Barney Frank

Link

How it is

The Washington Post is running a piece talking about how aid to lenders isn't helping reduce or prevent foreclosures. I find the theme of the article misplaced, but in lock step with our government.

It’s of course unfortunate when someone loses their home. I feel for the people who have done things the right way and because of the economic downturn are facing foreclosure due to unemployment or illness. However, in every downturn, there are casualties. You hope that you can avoid the bullet, but it is a fairly indiscriminate executioner.

I feel for the people who bought homes they could afford with traditional mortgages they could afford. They typically made sacrifices with respect to size, amenities and location. Now, those people are stuck in homes which have lost a lot of value and are perhaps even under water on their loans. I feel for them, because they did things the right way and their plans of upsizing in a normal progression are severely impacted. Their only mistake was allowing themselves to be over sold on the American dream by our media, realtors and the general hardwiring that makes us Americans.

I feel for the renters who were priced out of the market. Perhaps they wouldn't or couldn't sacrifice on location and couldn't stomach the reality of buying in close to the city. Renters are essentially having their tax dollars used against by any plan to bail out troubled debtors.

The people I do not feel for are the ones who over bought and are now being squeezed by a recasting ARM. Those people took a gamble, they have lost. I do not see how saving that <10% slice of the population is equitible, smart or a good idea, especially when such a high number of reworked loans are still defaulting. Its the bottom that needs to be found, not a false top or even middle that should be preserved.

There was no bailout for millions of tech workers when Bill Clinton's dot com bubble burst. Billions of dollars in unrealized equity gains were wiped out. People's lives, plans and aspirations were wiped out and there was no grand call to prop them up. There should not have been then, nor should there be today.

A little under a third of this country rents. Another 30% owns within their means and a similar number owns their home outright, without a loan. If the 10% are displaced, so be it, there are plenty of willing an able potential owners among the third who rent, provided the market is properly corrected.

The American Dream is Dead

80% of respondants in a USAToday poll think that the American dream is unattainable.

The question posed was this, "Are people who work hard and play by the rules being treated fairly as we try to fix the economic crisis?" 80% of respondants said no, 15% said yes (although there was no attention paid to what plant they were voting from) and 5% did not know.

Wake up Mr. President, stop meddling in complex economic systems about which neither you nor your advisors know anything about.

An April Fools Prank

An April fools prank got me thinking. Its a simple thought, so I will keep it short. Car & Driver ran a prank story that Obama was going to force Chevy and Dodge give up their NASCAR sponsorships, because they received so much government bailout money. That got me thinking, the banks have been pressed to give up their stadium and event sponsorships, because they took so much government money. In that light, I have to wonder why people aren't protesting out front of NASCAR tracks protesting against Chevy and Dodge's sponsorship.