It's just my opinion, I could be wrong

http://bigpicture.typepad.com/comments/files/HarpersMagazine-2008-05-0082023.pdf Read it, understand it, be less confused when the government is saying everything is just fine and you're looking around going "uh, that doesn't make any sense". Then wish the people had some say in the government, so that we (the people) could force the economic statistics to be computed and maintained by non-governmental entities without implicit conflicts of interest.

Another thought for what the government could do to help keep people in their homes who are struggling with their mortgages, without bailing out anyone. I submit this since the politicians seem to be incapable of coming up with a plan which accomplishes the goals instead of bailing out irresponsible people at taxpayer expense. So, first, identify people who are in trouble (behind on payments, etc.). To qualify for the new program, you must own only one house, and it must be your current primary residence (not interested in helping speculators). If you "own" multiple properties, you must sell all but your primary residence to qualify for help. Then, establish a criteria for what constitutes an affordable house in general. I would suggest 3x gross annual income, as that is reasonable historically and makes the math for an average loan work. If your house is worth more than 3x your annual gross income, you get no assistance, as you cannot afford that house. Sell it, and buy a ho...

If you're considering buying real estate because it's "such a bargain now", I highly encourage getting some perspective. For example, take a tip from the jewelery business, where they always mark up by ~500%, so they can give huge discounts and still make a good profit. You don't think the store is taking a loss when they sell you something for 60% off, do you? Likewise, why would you think housing is a bargain if it's 20% off from a 300% markup? Next, ask yourself this question when considering a real estate purchase: if the value declines by 25% and stays there for 15 years, and the refinance rate goes up to 15%, would I be ok? If yes, you can afford to make the purchase/investment. If not, you cannot afford it, and if it works out it will be by virtue of luck and not of prudent investment or forethought. Note that if you can afford it that doesn't mean it's a good investment; it just means you're not doing the investment equivalent of pushing al...

This rant devoted to this nearly content-free blog post: http://angrybear.blogspot.com/2008/04/syria-questions-integrity-of-our.html Maybe it's just me, but this doesn't seem like much in the way of news. Syria wants to build nukes, they have good reasons for wanting them, Isreal wants to stop them and isn't afraid of bombing a facility before it is 100% active, and Syria isn't rebuilding their facilities as fast/public after the bombing... that about sum up the story? News flash: North Korea has good reasons to want to have nuclear weapons too, and their building them, and they will have them because there's no Isreal equivalent with the balls to stop them in the region. All we can do is complain to the UN, argue about the merits of legitimizing terrorist organizations, and have purportedly legitimate presidential candidates tout the effectiveness next time of the yet unblemished by success foreign policy of saying "please don't do bad things". Those ...

Lots to rant about here, so be prepared. First, the panic people. Those are the sheeple buying up six months supplies of everything which could conceivably keep for six months, because, you know, there are food shortages and soon there won't be enough to eat. Get a grip: there's no shortages of general food in the US yet. Prices will rise with increased demand and reduced supply, but that's pretty much it. The US is one of the few countries that actually can produce enough food to feed itself (once idiots like the politicians who subsidize growing corn for ethanol are taken out back and shot); we're pretty unlikely to actually run out of food, as long as we allow the free market to work. There might be price gouging and commodities speculation, but there's unlikely to be widespread starvation. However, I'm just as pissed off at the "this is America, we can't have food shortages" crowd. Those people are just as dumb as the panic hoarders. If you thi...

Just linking it here is hopes that in some small part it causes more people to read it (maybe the google ranking will go up or something): http://money.cnn.com/2008/04/21/real_estate/bailout_backlash/

So I was reading this article, and thinking about how much it echoed a general sentiment that it's not the Fed's fault they missed and didn't prevent the asset bubble which is now correcting, and how they would be unable to do so in general, and by extension the bailout is unavoidable. That's BS, IMHO, and I'll explain why. It may be the case that the Fed will never be able to prove an asset bubble, but what they can certainly do (and absolutely should do) is ensure that banks and proxy banks have enough reserves to cover conceivable shifts in asset valuation. If any bank is in danger of failing and "too big to fail", it's a failure in the oversight of the Fed. You can absolutely project potential asset valuations based on historical averages and probability distributions. You can figure out what the worst-case scenarios are, and make sure any bank (investment or otherwise) which is "too big to fail" has adequate reserves for the worst-case ...

So imagine you eat food, and want to continue to do so. Somewhere someone grows food, sells it, and eventually you buy it, and eat it. What could go wrong there? Well, first, the American government (for the country which produces the most food) could be moronic, buy into the Church of Global Warming, and mandate (and subsidize) ethanol production. Nevermind that we would never be able to grow enough corn to significantly dent oil usage, or that it decreases the food supply; we must increase the corn growers' profits, the public demands it! This causes there to be less consumable food, which makes prices for the remaining food supply go up. Then, add a bit of US currency devaluation, a convenient side-effect of the government spending money without bothering to procure it from anywhere. Convenient, in the eyes of policy makers, because it helps mask decreasing value of US assets, and increases US exports, because other countries can buy more stuff with their money. Of course, we g...

Today's lesson of economic cause and effect, which may or may not be relevant soon: the effect of inflation on unrest, price controls, and the ultimate effects thereof. When inflation happens, people get upset. Mainly, this is because the government is in effect stealing their savings through taxation. Also, though, because the poor individuals are less able to afford basic supplies, as their income generally trails inflation (especially if the economy is stagnant at the same time). The general historical response to this has been price/wage controls. That is, the government will impose fixed prices on commodities, or fixed wages for people, in an effort to allow them to continue to purchase goods. Generally, this leads to increased costs for producers, as they cannot sell their goods at market even as their costs are rising. If their profit margin is small, they will soon be finding other lines of work, putting more people out of business and removing their goods supply from the s...

FDIC Chairperson: - Calls for more socialization of losses from the bad loans given by banks - Is surprised that banks are still offering bad loans (after all the bailouts and socialization talk) Los Angeles: - Considers new taxes to put drops in their bucket of uncontrolled deficit spending, under the guise of The Church of Global Warming - Proposes regulating the entire economy under carbon credits board, making success dependent on political favor Congress: - Crafts bi-partisan legislation to make housing less affordable, reward banks who made bad loans and builders who made bad gambles, and give more taxpayer money to people with bad credit who will never repay it - Considers more legislation to help the people who bought houses they couldn't afford, and to pay for the losses of businesses and individuals who gambled on the housing bubble Federal Reserve: - Gives another $50 billion to Investment Banks to socialize more losses - IMF says governments need to do even more to soci...

In the spirit of answering the question asked to Benny in the Congressional hearings, here's what Congress could do to help fix the housing crisis. No, I don't expect them to do any of these, or even anything in the right direction, but I figure at least one post in a sea of criticism should be what the right things to do should be. 1. Streamline the foreclosure process. Foreclosures take on average 15 months to process from first missed payment to eventual resale on the market, and some take much longer. The process should allow some time between initial delinquency and re-possession, but everything from that point on should be as streamlined as possible. Work with states to ensure that once a house is foreclosed on, it's sold at market price ASAP. 2. Force lenders and lien-holders to move on properties Some lenders are letting properties sit when payments are delinquent, so they don't have to take joint responsibility for them; this is very detrimental to the area and...

I'm not sure why it's ok to lie to Congress as long as you couch your statements in financial or technical jargon and sound important, but apparently that's the status quo. Evidence the recent SEC statement about Bear Sterns, where they say there wasn't a capitalization problem, there was a liquidity problem. Now liquidity problems certainly can exist. For example, if trading for a stock is halted on an exchange, and you hold shares, you have a liquidity problem. Or if you hold something which is in a time-lock safe, and you can't access it to sell it. Now, say your borrowing more and more money to pay off previous borrowing, and eventually you run out of people willing to lend you money because they don't think they will get paid back, or the collateral you're pledging is considered worthless. That's not a liquidity problem; that's a capitalization problem. Same as if you think you should be able to sell something for $100, and the market will onl...

From here (and many other places): The Senate agreed in principle to a new bill which would spend more taxpayer money to bail out participants in the housing bubble. The provisions include: - $100 million for counseling not take out liars loans with 100% LTV ratios, which will likely go to banks and lenders - $4 billion to help prop up housing prices, stem bank losses, and make housing less affordable - Approx $15 billion a year to reduce losses for banks which gave out bad loans and homebuilders who overbuilt chasing more profits - Expand the size of loans insured by the FHA, so they can absorb more losses for bad loans Contrary to the obvious feel-good propaganda about the legislation, this does nothing to help homeowners who bought houses they could afford stay in them, or anything other than put taxpayer money in the pockets of people who contributed to the bubble, while making housing less affordable for responsible people. It appears to be the strongest statement yet that politi...

I replied to a forum elsewhere, but I figured I'd copy here, since it's an easy-to-follow summary of how taxpayers will foot the bill for all the irresponsible speculation and billions of bonuses paid to IB executives. I believe the money trail in general goes something like this: - Bank gives liar loan for 100% value in 2006 for max bubble value of home, securitizes the loan, sells to investors as part of a package - Investors, who are not all idiots (contrary to current popular belief) buy what amounts to an insurance policy against losses of this very risky loans in the form of counter-party default swap agreements from investment banks (eg: Bear Sterns) - Investment Banks buy and sel these obligations, accumulate large potential obligations, and value them relative to estimated chance of loss (which is low during the bubble) - Bubble pops - Investment Banks get some margin calls, forced to call in other insurance policies, triggers systemic margin call (great phrase, btw) -...

Was watching McCain on Letterman last night, and came away with a feeling of missed opportunity. Personally, I would really like to see an election contest between two (or more) candidates who would both be good for the country, both uphold the ideas of the US, both have intelligent views and plans, with just differences in actual implementation or specifics. Unfortunately, it doesn't look like we're going to get a democratic candidate with any of those qualities, which is going to make the presidential race more of an ideological contest than a choice between two good options. There are certainly things about McCain that I don't like (his buy-in to the global warming religion, for example). I wish there was another reasonable candidate that I could measure him against, and be conflicted choosing between them. But as it is, it looks like the 2008 election is going to be a choice between utter idiocy, socialism, empty rhetoric, economic disaster, massive inflation, foreign h...

Had a good idea last night, wanted to write it down. The more I think about it, the more I think it's awesome. We can call it Nick's rule of disclosure: If the stock price of an public company declines more than 10% relative to the average for its industry, and/or public trading of the stock is suspended, and this event is not immediately proceeded by a public SEC filing of a disclosure or press release for a material precipitating event not related to the company's operations, the executives of the company shall be personally and jointly liable to the shareholders for the total loss in value, for failing their duty of adequate disclosure. * Safe harbor: - Companies and executives shall be exempt from this rule if they can show a concerted effort by an individual or group of individuals to artificially manipulate the stock price, and the SEC files charges as such. Why would this be great? Because there should be no case where something is revealed which causes a large decli...