Deleveraging...

The media seems to be very fond of stating that "Wall Street is deleveraging".  They all seem to think that this is good.  I happen to agree with this fact....but...why aren't they in the same breath mentioning that the US Goverment is simply Re-Leveraging in return?  We are spending money that we do not have in the hopes that we get a good return in the future.  Isn't that the same thing as buying on margin/credit?  This is going to be a mess in about 5 years.  Let's assume that in 2 years things start to turn around...guess who will be knocking at our door:  Mr. Inflation of course.  What do you use to fight inflation?  You raise the fed discount rate.  What happens when you do that?  You stiffle the economy again (but at least you have an economy to stiffle so the theory goes).  

I heard Sec. Geitner on the talking shows this weekend keep insisting that this administration was interested in fixing the issue...not just pushing the problem off and creating more bubbles in the future.  I beg to differ.  This administration is simply using different levers (the past administration gave you money back in the form of tax cuts and rebates to delay the pain).  This administration is playing with the value of the USD to accomplish the same task.  Either way we are simply "Cross-Leveraging" the issue from the Financials to the US Gov't.  I guess the taxpayer is more forgiving than I imagined.

Now that hurts...

Top 10 declining metro areas

• Cape Coral-Ft. Myers, Fla., down 50.8 percent, to $110,900
• Saginaw-Saginaw Township North, Mich., down 41.4 percent, to $43,900
• Riverside-San Bernardino-Ontario, Calif., down 40.8 percent, to $201,300
• San Jose-Sunnyvale-Santa Clara, Calif., down 37.7 percent, to $525,000
• San Francisco-Oakland-Fremont, Calif., down 37.4 percent, to $487,100
• Sacramento-Arden-Arcade-Roseville, Calif., down 36.9 percent, to $187,900
• San Diego-Carlsbad-San Marcos, Calif., down 36.4 percent, to $332,800
• Phoenix-Mesa-Scottsdale, Ariz., down 35.5 percent, to $155,900
• Grand Rapids, Mich., down 35.2 percent, to $80,500
• Sarasota, Bradenton-Venice, Fla., down 35 percent, to $178,100 

Many of the sales that did occur involved distressed properties. Foreclosures and short sales accounted for 45 percent of all transactions nationwide during the fourth quarter, up from about 38 percent in the third quarter.

Are you hoppin' mad?

So it appears the housing stimulus plan works out to be $275B to aid 9 million families.  Last time I checked that worked out to be about $31K per family.  We better take a closer look:

It looks like $200B is aimed at " 'rescuing families who have played by the rules and acted responsibly,' refinancing traditional mortgages for up 5 million homeowners who now are close to owing more than their homes are worth."  Personally I would like to see what's their  definition of "played by the rules and acted responsibly".   $200B/5M means they are giving ~$40K per family to apparently compensate them because they are upsidown in their home.  Huh?  If you buy a home and the value goes down...don't you just stay in the home and suck it up?  What does lowering their payment accomplish?  Seeing as how the average price of a home in the US is now $175K...that means that the taxpayer is effectively subsidizing ~22% of these homes. Grr...

Now for the other $75B...that is going to people "stuck in sub-prime mortgages they can't afford as a result of skyrocketing interest rates or personal misfortune"...apparently all 4M of them.  $15K for each of them.  Grrrrrrrrrrrrrrrrr...

It's a damn shame us hardworking folks who "buy houses they can afford with mortgages they understand (say the 30 year fixed kind)" are the ones getting screwed.  But just remember...it is in YOUR best interest...HA!  What a joke.  Do they even know what our interests are anymore?  Apparently not because they feel a high speed train from LA to Vegas is in my best interest...

History Course: Great Depression

Now I am not comparing the curreny meltdown directly to the Great Depression...but it is important to know thy past.

1. Dow fell from ~400 to ~40...~90%.  Currenly we are only down about 40%.  Just imagine how you would feel if this were just the halfway point...

2. It took the Dow about 25 years to recover to par value (1929 to 1954)

3. From the low of ~40 it took only 3 months for the market to double back to 80...and then stabalize at 60.

4.  If you had waited for the market to stabalize and then invested in Q4'32 (DJI=60), you would have made 500% (6X your money) by the time the market returned to pre-crash levels.  You need to invest once a bottom materializes. It is less important that you find the exact bottom...you can wait for some stability before pulling the trigger. 

Presidential Tax Braket Estimates

I saw this the other day and figured I would pass it along without too much commentary:

One interesting thing to note...while the statement Obama keeps making that "Only the top 5% (above $250K) will experience an increase" is technically true...this shows that anyone making over $100K actually will fare worse with Obama.  Something I am sure McCain would love to say but obviously can't since he will still piss off the 90% of America who makes <$100K. 

And remember...the top 5% of the earners already pay 60% of the taxes...I guess we will see how long the top earners will tolerate ~70%.

Forbes on Taxes

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The road to $1,000

This past weekend I cleaned the other 2 air conditioners --> $70.  Although, I did have to have the A/C guys come out and fix one anyway which ended up costing me $35....so let's call it +$35.

Total:  $342

Oh yeah...and I bet your 401K is down a hell of a lot more than $342...but at least I have $342 more dollars than I would have had.  When the great depression strikes and apples are selling for $0.05...I will be able to feed the family for a while!

The road to $1000

Yesterday I decided to reconcile all my recent Aetna insurance claims (believe me I did not want to).  Since we are in CR, I need to pay in cash at the time of service and then get reimbursed later.  Due to recent workload isses, I ended up submitting about 12 claims at the beginning of this month.  Guess what...they had "missed" a few items...total ~$55.

Total: $307

PS - I liked Flogger's comment on the last $1K post.  It really is amazing that something as simple as just changing your mindset in small ways can pay off substantially in the long-run  (includes more than just financial matters)

$700B

So I really wanted to stay out of this because it is being talked about to death...but...I heard something troubling today. I heard that the pricing that was being used to purchase the bad loans was something OTHER than fair market value. I certainly hope that this is not true. If we (the taxpayer) pays one cent more than the fair market value for these loans then we are getting ripped off and our money is effectively subsidizing the banks.

At the end of the day I think it is bad enough that we are buying bad debt. I understand that we *HAVE* to or the whole market may "collapse"... but it certainly is not something that most of us would ever contemplate doing with our own money...oh wait...this *IS* our money (or should I say our debt since this will simply be written against the national debt).

In the end, it will be done...we just need to ensure that we get the best deal possible. I recommend we have someone like Warren Buffet step in and negotiate a good deal on behalf of the American Taxpayer. He has a great track record of driving a great deal...let's use our national resources here on this one!

The road to $1000

Day 3 (Friday): coffee at home, skipped lunch and did not buy a bag of candy that I wanted --> $4

Day 4 (Sat): nothing ;-(

Day 5 (Sun): opted for the "$115/night" room at Las Palmas vs. the "$165/night" room saving a total of $150 over the three night reservation...plus...we figured out that Payton was an "infant" and not a "child" saving another $60. Total for day 5: $210 (Jen assisted on this one)

Total: $252