Friday, January 29, 2010

Debt Ceiling, Foreclosures, Economy

The senate passed legislation to increase the federal debit limit by $1.9 trillion to $14.3 trillion. There is beyond comprehension to add this amount without any bipartisan support. I am concerned that we will spend this debt money faster as a result versus taking prudent steps by increasing it incrementally. I can only hope that the house will take a pause on this one. We have moved outside human understanding with this amount of money and I don't think we have the ability as a country to come to terms with what we are doing given our current level of consciousness.

The economy showed a large increase as companies replenish their inventories. This looks like an anomaly, yet it is growth.

Foreclosures statistics are still my main reference point in determining when we have made the final turn to solid recovery. Same real estate sales were down almost 17% and new real estate sales down almost 7%. If we follow the path of what we did for the banks, home owners would be given a principal reduction along with a smaller interest rate. I don't see any other way to
stop the flood that is picking up momentum. I don't agree with taking this approach, yet given the direction congress and the president are taking, this may be part of the pie too.

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Thursday, January 21, 2010

Scott Brown

I looked at this man's background and think that he should run for president as an Independent in 2012. Here is why: He worked his way up the civil servant path from the bottom, starting as a member of the board in his hometown in 1995 to the state's House of Representatives in 1998, to the state's Senate in 2004, and now the Senate seat in Washington. As a Republican he knows how to work with opposing views given the Democrats tenure in this state of close to 40 years. He has a wide breadth of government experience that I haven't seen in any of the former presidents, in my lifetime, or our current one. Also, he has been in the state's Army National Guard for 30 years, working from the bottom up.

His path shows qualities of perseverance, self-discipline, integrity, and a clear path for us to see what he is all about. I can relate to his truck that has over 200k miles. :) He is a person who has experienced life in the trenches. I listened to his acceptance speech and liked his sense of humor and firm conviction on what he considers important for those who he serves. I see him as having humbled his ego through his upbringing and the way he has lived his life, and is ready to lead this country without a self-serving vision.

We need a radical change to how our federal government operates, and I encourage him to stay independent of the Democrats and Republicans and vote for what he knows to be the right way by listening to the citizens of this country.

On a different note, President Obama's speech today on tightening banking restrictions to limit bank size is a breath of fresh air. It sounds like he listened to Mr. Volker after all.

Also, there is a new phrase for the 1 in 4 homeowners who have negative equity. It is called 'strategic defaults'. These are the homeowners who are walking away from their home loan even though they have the income to pay it because in some cases the loan is $100k or more higher than the value of the house, especially those purchased since 2006. Here is an obvious flag that this housing market and rising foreclosures will continue as the market forces play out, regardless of the government's continued attempt at intervention. In the long run, this is a good thing.




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Thursday, January 14, 2010

Federal Government's Return on Investment, Google

The FDIC sold $1 billion of troubled loans from 22 banks that failed in the last 2 years to the highest bidder for $90.5 million. The portfolio are commercial real estate loans that are 70% delinquent. That means 30% are not late. Seems like a great deal for the buyer.

Paul Volker, the fed chairman in the 1980s who pulled us through a high inflationary time said that Wall Street i.e. banks, had 40% of all the profits in the country and its contribution to the welfare of the country doe not approach that. Today, the president said he is going to tax the banks billions of dollars. Remember these banks are profit motivated so this tax will be passed on to us, who use these banks.

Google's founders appear to have put integrity as a priority over profits since they are threatening to pull out of China in defense of free speech and its users' privacy rights, after hackers from China tried to get into activists email accounts. China said Google must abide by China's laws. It will be interesting to see if Google follows through or China changes its policy.

Another interesting statistic is that 1 in 45 households received a foreclosure notice in 2009; 2.8 million homeowners. With that ratio, I'm sure we all know someone who has or had this challenge on their path.

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Thursday, January 7, 2010

Interesting Pointers to Start 2010

Some interesting threads that provide insight for this year:

* The FDIC is going to double its staff, adding 1600 people. It handled the closure of 150 banks in 2009. I would estimate they plan on closing at least 400 banks this year. Commercial foreclosures this year will definitely have a huge impact on the vulnerable banks. There's a current 10.6% vacancy rate.

* Foreclosures on Trulia continue to be the majority of new home listings in the areas that I track.

* The Public Pension Fund has a $2 trillion deficit and they don't use market-to-market accounting, so the assets are over-inflated and the deficit is bigger than being reported.

* Chris Dodd's retirement after over 30 years in congress is unsettling. I think it goes beyond the fact that he may not get reelected. Keep an eye to see what unfolds.

* The 'behind closed doors' health care negotiations is so contrary to our system and nonsensical that it stands out. Even more so now that the head of CSPAN has asked to be put the cameras in place to record what is happening for public view. Again, as I have said before, this seems to be a one-term president for continuing to allow this kind of behavior.

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