Tuesday, July 28, 2009

Senator Dodd Looking More Guilty

As reported here, last year, Senator Dodd (D CT) and his good buddy, Senator Conrad (D ND) appeared to be in some hot water over their participation in the Countrywide VIP loan progam. The Washington Times is reporting, that the noose is tightening on these two hypocrites.

Our Delusional Senate

These guys must be out to lunch. Or they think we're all really dumb. Massachusetts Senator John Kerry, you might remember him from his pitiful attempt to unseat George W. Bush from the Presidency, has floated an idea to allegedly pay for Obama's bank breaking healthcare reform.

His idea is to tax the insurance companies on the revenue for their most expensive plans. This will surely get passed onto the consumers. It will likely even get passed onto the consumers who do not have that insurers most expensive plan. An indirect tax is still a tax.

Arizona Senator John Kyl must not understand the concept of contradicting himself.
“There’s very little evidence the tax on the insurer would have an impact on the insured’s behavior, which is the whole point,” Arizona Senator Jon Kyl said. “Secondly, it’s a tax on employment since it clearly would be passed on to employees.”
His first point is completely naive and probably inaccurate. His second comment is pretty accurate and makes my point while contradicting his first statement.

Employees who found it easy to elect for the top end PPO coverage through their employer will be faced with a tough descision when it comes time between shouldering the cost of good coverage versus making a cut in some other aspect of their family lives. The difference between PPO and the lower end POS & HMO plans is significant. There is a reason I have opted for the better coverage at every job I have ever had. Making health care something other than a dollars an cents descision is exactly what Obama is trying to do for the uninsured, but at the same time, he's just shifting the constituancy who has to make that descision. I will have to have less so someone else can have more. Its one thing when we are talking vacations, cars and big screen TVs. Its entirely different when when we are talking about healthcare.

Obama’s era will be recalled as the era of the indirect tax.

Tuesday, July 21, 2009

How About The Truth?

This US News/Yahoo article lists several reasons why foreclosures continue to rise and talks about the outlook for the markets. They are all valid reasons, but none of them are the actual reason. The author of this piece either works for the NAR or he's totally deluded.

His first argument is unemployment. I don't really buy into this reason. Every downward cycle in the economy has had its unemployment casualties. While I can't find any hard numbers, I am guessing the relationship between foreclosures and unemployment has been fairly closely related from one recession to the next. I feel for the casualties of the recession. These people are usually the innocent bystanders.

The author’s next contributing factor is plunging home values. I guess I see the rationale here. Why pay for something that is worth less, or even way less than you owe? However, I don't buy that there are massive hoards of people sending the keys to the bank and walking away from a mortgage that they can afford. If you’re walking away from a mortgage you can afford, I can understand the business rationale, but I still think you’re the scum of the earth for bailing on a contractual agreement.

Lastly, the author cites the end of foreclosure moratoriums. This is just camouflage. Someone who got a free ride for the last 6-8 months, finally getting foreclosed does not mean there is a rise in foreclosures. They should have gotten the ax months ago, but we decided to pause and look around and see if there was a way to avoid the inevitable. These are the exact fools who provided the fuel for this debacle. I despise you, because I am the person who you priced out of the market and I am the person who is now getting stuck with the tab for trying to bail you out.

Not once, not one single time in this 750 word piece did the author cite the one reason for all these foreclosures. An overwhelming majority of the people getting foreclosed today, are getting booted from their homes because they were fools who couldn't afford the house in the first place. Its that plain and simple. I don't know why our media and elected leadership in Washington can't get that through their thick skulls. Robert Reich said in his blog that we're basically playing a new ball game. Thats a pretty accurate apprasial of the situation. I believe that the more time and resources we devote to trying to get back to playing the old game, the longer and more difficult this recession will be.

Wednesday, July 15, 2009

Personal Rant

Lets see, where to begin. I rent my house. Correction, I rent a house I can afford, so every single time I have to read about a foreclosure moratorium or another bailout for people who can't afford their home, it just spikes my rage meter up a little.

I spent years educating myself. I took tough classes like calculus, organic chemistry, physics, cellular theory of finite automata. Yea, that last one was a mouthful. You should have seen the book too. I think it was at least 50 bucks, used, 15 years ago and it was only like 150 pages, that we didn't even come close to getting through in a semester. For easy classes, I took classes like micro & macro econ, geology, meteorology so that I would understand the way the world works when some day I had a child asking tough questions.

I've worked hard to build experience that will allow me to maintain employment in the tough times. This didn't always work, the dot com bust was, as String described it, a humiliating kick in the crotch. However, in the long run, I can't complain about the breaks and how they have gone for me. I know a lot of people have fared far worse. At the same time, I am not living in 5000 sqft McMansion or a real mansion for that matter. My wife and I have worked hard to build a good life for ourselves and the child who is coming in about 2 months.

Lately, every single time I tune into the interweb, I am bombarded with yet another politician reaching into my pocket to take away from me and my family to give to someone else who is at a disadvantage. More often than not, that disadvantage is self inflicted at one level or another.

Today I read that our President is considering mortgage aid for the unemployed. I feel for you, if you find yourself in a predicament where you’re unemployed. Its no fun, I have been there and I don't really care for it. Really, when do the entitlements end? We don't live in utopia; we live in the United States of America where resources aren't unlimited. There was nobody lifting a finger to help me, back in 2003, when the dot com bubble burst for me. There was nobody worrying about my ability to pay my rent, electric, phone or credit card bills. I lived on my credit card for a while. My credit took some dings in that period, but I have worked hard to get my credit back up into the high 700s. Nobody helped me do it. I lifted myself up by my own boot straps, because nobody else was going to help me.

Unemployment is a bigger whammy than anyone thinks, because once you find a job, in this crap economy, it’s not necessarily a good job or wage. Why would an employer pay anything other than market value today, which is a shadow of market value 2 years ago or 2 years from now? It took me years to recover my lost wage level. Nobody helped me get to where I am. I paid my way through school. I recently paid off my loans, by myself.

I refused to buy a Chrysler or GM car, because I thought the styling was lame, because I had questions about their quality, because I didn't think the price for the features & quality was competitive, but they still got my money. On the high side, at least I wasn't one of the secured bond holders who had a century's worth of bankruptcy law yanked out from under me. But once again, the President reached into my pocket and gave my money to someone else, who got themselves in a pickle on their own. The UAW rank and file continued to elect leadership who repeatedly held a gun to management's head and drove up the cost of producing cars. Everyone should read about unintended consequences.
The "law of unintended consequences" (also called the "law of unforeseen consequences") states that any purposeful action will produce some unintended consequences. A classic example is a bypass — a road built to relieve traffic congestion on a congested road — that attracts new development and with it more traffic, resulting in two congested streets instead of one.

This maxim is not a scientific law; it is more in line with Murphy's law as a warning against the hubristic belief that humans can fully control the world around them. Stated in other words, each cause has more than one effect, and these effects will invariably include at least one unforeseen side effect. The unintended side effect can potentially be more significant than any of the intended effects.
The really interesting question is this ... If the UAW and its members had known of the unintended consequences of their repeated wage and benefit grabs, would they still have done it.

I carry some balances on my credit card. A little high living here and there. My share of a wedding, because my family didn't help me out. To modest degree, I am guilty. I recognize and accept it. The part that gets me chapped is that I had a fairly low fixed rate on my card, because of my good credit. My credit card provider recently decided to tie my rate to the prime rate, which is near an all time low. I called them to sort out a fixed rate, because this adjustable rate can only go up. Bank of America acted like the idea of this rate actually going up was absurd. Its not absurd, its an iron clad guarantee. My 6 credits of econ tells me that. Common sense tells me that. Let’s not forget, BoA is a TARP recipient, one of the biggest. They are only liquid because of my tax dollars. In the mean time, while I was managing my credit and taking care of my credit score, hoards of idiots were out buying Sub-zero refrigerators, big screen TVs, vacations, etc. Those people are getting a reduced interest rate and reduced principal. In short, I was taxed to keep BoA in business and BoA turns around and sticks it to me while reserving its most favorable terms for its biggest and most irresponsible losers.

Then there is healthcare reform. Yet again, the President reaches into my pocket and yanks out a chunk of change to help out people who haven't done what they need to do to take care of themselves. Get an education, work hard, earn a living and hold down a job with benefits. Its not that hard, if you apply yourself. I am sick and tired of subsidizing other people’s poor life choices.
The bill would impose a 5.4 percent federal surtax on couples earning more than $1 million annually and a 1.5 percent tax on couples earning between $500,000 and $1 million. Households earning more than $350,000 would get hit with a 1 percent tax.
I am not buying the math. Just because the CBO said it added up, doesn't mean its really going to pay for itself, in my opinion.

Lastly, there are all the mortgage bailout plans. You've all read my blog, I think they are essentially using my tax dollars against me by propping up unsustainable home prices.

I've always considered myself to be a pragmatic person. That certainly applied to my politics. I have always been a centrist with certain liberal social leanings and conservative spending priorities. I think a diverse smattering of ideas and political interests is healthy. Following one paradigm limits you, in my opinion. 24 months ago, there was no chance I was going vote Republican. I thought GWB was intellectually challenged. I didn't care for his decisions, but I never felt like his plans were working directly against me. As the primary election was spinning up, Senator Obama put out an idea that I was aghast at. He proposed bailing out the fools who were in over their head on a mortgage. I found it a bad idea then and a worse idea today. In November, I didn't so much vote Republican as vote against Senator Obama. Today, 6 odd months into his grand social engineering experiment, the seeds have been sown to make me a life long and staunch Republican. I hate the idea of embracing the religious right. I hate the idea of over turning Rowe v Wade. I hate a litany of Republican ideologies. However, as I sit here, watching our President and Democratic Congress drive a stake through my American dream while they continue to fleece me for the betterment of a lot of people who might not be so deserving, I can't see how I can forgive this. In 6 months, not one single piece of legislation has been proposed which does not work directly against me.

Sunday, July 12, 2009

Why Nobody Wants CA's IOUs

The big banks are running from the idea of accepting the IOUs the state of California is issuing. Really, who could blame them given the year they have had. I'm not here to make excuses for the banks, but consider this from their standpoint.

In the last year, the banks have been subjected to what can, at a minimum be called arbitrary treatment, at the hands of the Obama administration. I am sure some would even call this treatment harsh.

In the last year the Obama administration has subverted more than century of bankruptcy law, in sticking it to the most senior debt holders in GM & Chrysler to benefit his friends in the UAW.

The banks have to be mortified at the prospect at accepting an unknown and at present, unregulated debt security with more than a passing chance that California could default or need a government funded bailout. It’s not much of a stretch to see the government bailing out California (The worlds 8th largest economy) and its Electoral College high 55 electoral votes that often elect Democratic Presidents. Even if the IOUs were made secured senior debt, it is still likely that Obama's whipping boys on Wall Street could be forced to forego their due in a bailout of California in much the same way as the senior debt holders in GM & Chrysler got dimes on the legally guaranteed dollar.

I have yet to see anyone do a serious analysis of what the long term implications are for corporate debt financing in the wake of the Detroit debacle which is the Chrysler and GM bankruptcies. However, my 6 credits of college economics tell that it is not going to be pretty or inexpensive.