Wednesday, July 30, 2008
We're going to spend a couple of days down there at the Mid State Fair. Mike got some tickets to the bands that are playing - Steely Dan and Toby Keith are two he got tickets for. I'll probably pass and just drink beer and look at the pretty ladies. I'm easy to please! They've got some rodeo stuff as well that I might check out.
I'm bringing my laptop, so if I can post some YE HAW! pictures, I'll do it. Otherwise, see ya in a couple of day.
Labels: Life and Times
There's nothing more dangerous than a resourceful idiot.
It is people like this that are at the core of the sub-prime mess. Stupid, greedy people.
Things couldn't have looked better three years ago for Milton and Patricia Harper of Lake City, who giddily accepted the keys to a small castle, plus enough money to pay taxes on it for 25 years.They were given something for free - a home. The company that built the home raised a $250,000 fund for them to take care of their home maintenance for the next 25 years, and to provide scholarships for their 3 kids. They were set for life!
Now, the Clayton County house that "Extreme Makeover: Home Edition" built is a two-story, turreted example of how things can go wrong. It's in foreclosure.
The Harpers used the house at 5489 Ahyoka Drive as collateral for a $450,000 loan, Clayton County mortgage records show. Records at the law firm handling foreclosures for the lender, JPMorgan Chase Bank, say it is in foreclosure. The four-bedroom house with decorative rock walls and a three-car garage is scheduled for auction on the Clayton County Courthouse steps Aug. 5.
And they've pissed it all away. They took the money to start a construction business. They wanted something for nothing. And now they're homeless because of their greed.
On the radio this morning, they were talking about how we always assume that people that are poor are somehow noble beings that are penniless because they have given their lives to a greater good.
Perhaps a few. But I'm guessing most folks without two nickels to rub together are a lot more like these folks. I have found it usually to be a lack of taking advantage of our nation's free education system, a history that usually involves drugs or alcohol, or the perpetuation of a family history of dependence upon the state.
They are looking for the easy way out. No concept of 'earning'. Just taking.
My illustrious state continues to find ways for Nanny to shove her un-gloved hand up our asses and operate us like sock puppets. It really is stunning.
First, we have the proud distinction of being the first state in the nation to actually ban trans fats. Think about that - Sacramento is telling us what kind of fat we can eat. Arnold is a small-government Republican, right? Right....
Not to be out done, Los Angeles decided that a sub-set of their citizenry is too stupid to decide where to buy their food. If you live in a portion of the city - a portion that is poor and heavily minority - the city now assumes you don't have the mental wherewithal to decide where to eat all on your own. You choices must be narrowed, unlike the rich, white people who are apparently smart enough to know where to eat.
"While limiting fast-food restaurants isn't a solution in itself, it's an important piece of the puzzle," said Mark Vallianatos, director of the Center for Food and Justice at Occidental College.Could this be any more racist or classist or insulting? Yet you hear barely a bleat from the sheeple affected by this. [Sidebar - WTF is the Center for Food and Justice? A culinary school run by Judge Judy?]
Feeling suddenly unappreciated, the good folks in San Francisco, in their never ending quest to regulate every minute of every life in their fair city, have deemed it necessary to restrict the sale of cigarettes. Well, kind of:
City residents picking up prescriptions can forget about buying a pack of cigarettes at the drugstore checkout. The San Francisco Board of Supervisors voted 8-3 Tuesday to ban the sale of tobacco in pharmacies beginning this fall.Well, Nathan, thanks for taking away my need to think for myself. When I do want to find a place to go get cancer, at least I'll still have all of the other grocery and liquor stores. And gas stations. And corner markets. And bars. Oh, and smoke shops.
The measure amends San Francisco's health code to prohibit tobacco sales in any pharmacy, whether a small mom-and-pop store or a large retailer like Walgreens. Drugstores caught selling tobacco products in the city will be fined up to $1,000.
"A pharmacy should be a place you go to get better, not a place you go to get cancer," said Nathan Ballard, a spokesmen for the mayor's office.
Oh wait. This isn't about my health! It's about your posturing and preening. Trying to look like you're relevant. Trying to show your liberal, bleeding heart comrades that you know what's best for everyone.
Are you idiots still unsure why people and businesses are fleeing your city in droves?
Speaking of the City of Fruits and Nuts, the Minutemen are going to be holding a protest in SF today.
The founder of the Minuteman Project says he will camp out on the steps of San Francisco's city hall to call for the resignation of Mayor Gavin Newsom over his support of a "sanctuary city" policy for illegal immigrants.Let's sum that one up: An illegal alien had an illegal weapon (here in CA) and was a member of an illegal gang.
Jim Gilchrist, the Minuteman Project's founder, says he is absolutely appalled by the horrific slaughter of three San Francisco family members by an illegal alien wielding an AK-47 and boasting allegiance to the notorious MS-13 street gang. Edwin Ramos, a 21-year-old man from El Salvador, has been charged with opening fire on the three men -- a father and his two sons -- on June 22 as they sat in their car during a traffic jam.
Yet Newsom thinks it's hunky-dory to thwart all efforts by the Feds to round up and either deport or jail these criminals.
I'll ask again: Are you idiots still unsure why people and businesses are fleeing your city in droves? Unless you're an illegal alien, that is.
Tuesday, July 29, 2008
Our earth is degenerate in these latter days; bribery and corruption are common; children no longer obey their parents; and the end of the world is evidently approaching.
--Assyrian Clay Tablet, circa 2800 BC
That dirty dog-dick of a Senator from Alaska appears to be headed to prison. Or at least out of politics. It seems that Mr. Alaska was taking kick-backs.
Sen. Ted Stevens, the longest-serving Republican senator and a storied figure in Alaska's political history, was indicted today on seven felony counts of making false statements in a corruption case.This is the same prick who brought us the infamous, "Bridge to No Where". He's a big part of the reason that Alaska gets $1.87 in federal funds for every $1 in taxes paid.
Prosecutors said the 84-year-old Stevens, required to file financial disclosure forms with the Senate on gifts greater than $10,000, had accepted innumerable gifts valued at $250,000 from the oil services company VECO and its CEO from 1999 to 2006 without reporting them. The gifts included material and labor used in the renovation of Stevens' private vacation home in Girdwood section of Anchorage, including a new first floor, a garage, a wraparound deck, plumbing and electrical wiring, as well as a Viking gas grill, furniture and tools.
Last year, there was a big stink about how politicians had hidden $13 billion in pork in the Defense and Homeland Security Appropriations Act. It included the Bridge crap, and Stevens had made a big production out of it, promising to quit in protest if any of his pet projects were touched. Everyone caved in, and they all got their pork. As I wrote in March of last year:
Yeah, those pussies in both houses of congress hide their shit in defense and homeland security bills, knowing that no one will vote against them. Draw and quarter every fucking one of them.As the chairman of the appropriations committee, this bastard was the one who held the purse strings in the Senate. The special interests knew where to go to get their pieces of silver.
The indictment alleges that while he was receiving these gifts, Stevens "could and did use his official position and his office on behalf of VECO during the same time period." Among the company's requests, said the indictment, were federal grants from several agencies as well as help in building a natural gas pipeline in Alaska's North Slope region.I hope they lock this bastard up, and let his 84 year old ass rot in jail. THAT's a government expenditure I can get behind.
Monday, July 28, 2008
Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.
There are a number of articles on the Wall Street Journal that are discussing how much of the "Reagan Revolution" is being dismantled. This is a good representation:
The housing and financial crisis convulsing the U.S. is powering a new wave of government regulation of business and the economy.Ahh. You fix the problem by increasing regulation. So, if Nanny is growing, the economy must be booming, right? The amount of money coming into our federal coffers must be bursting the treasury box.
Federal and state governments alike are increasingly hands-on in their effort to deal with failing businesses, plunging house prices, worthless mortgages and soaring energy prices. The steps add up to a major challenge to the movement toward deregulation that has defined American governance for much of the past quarter-century since the "Reagan Revolution" of the early 1980s. In fact, some proponents today of a bigger oversight role for government are Republican heirs to the legacy of President Reagan.
Well, not quite.
The sluggish U.S. economy and the cost of this year's economic stimulus package will push the federal budget deficit into record territory in fiscal year 2009, the White House said Monday.Four Hundred and Eighty-two billion dollars over budget. Nearly a half of a trillion bucks. Our whole national budget is only $3 trillion.
The Office of Management and Budget said it expects next year's budget gap to soar to $482 billion, $75 billion higher than its previous estimate. The deficit for the current fiscal year, which ends Sept. 30, is projected to come in at $389 billion, $21 billion lower than the administration's February forecast.
What gets me insane is when some political wonk pats the public on the head and talks to us like stupid little children.
"These projected deficits are both manageable and temporary if spending is kept in check, the tax burden remains low and the economy continues to grow," OMB said in its Mid-Session Review of the federal budget.Spending kept in check!? You need to try out for 'Last Comic Standing'. Manageable and temporary. You must be shitting me. This is simply unsustainable. What magical event is going to appear that will allow Nanny to stay within budget? Who is stupid enough to think that if this magical event were to occur, Nanny wouldn't just expand in size to keep pace with the additional funds?
I would like to know if the "housing rescue plan" which is now waiting for Bush's signature, is included in the projected numbers. That little puppy is projected to set us back another $400 billion.
To make things even rosier, both of our presidential candidates are falling all over themselves trying to see who can throw more money at us to buy votes. What is universal health care going to cost? Carbon taxes? Increased farm subsidies?
We're so screwed...
I found a little nugget in the housing rescue plan that had not been reported before. As I wrote last Wednesday:
It will provide loan guarantees for people that want to refinance their homes because they stupidly got into a high-rate sub-prime loan. I've written before (find it yourself, I'm tired!) that I'll be surprised if anyone takes any of these loans.In the final version of the bill, there is some sort of provision whereby the banks must write down part of the loan. It's kind of hush-hush right now. I have no idea how much, but I'm assuming it would be at least enough to get the loan amount to equal appraised value so the property is no longer 'under water'.
Let's say you bought your home in 2005 for $300k. It only cost you $15k to get into it (if that much). Today, that same home is selling for $200k. Unless you absolutely, positively MUST live in THAT house in THAT neighborhood, why would you take out a $285k loan for a $200k property?
I wonder if the banks will be required by law to do this. Good Lord, this is out of hand. Can anyone say, 'Nationalized Banking'?
Friday, July 25, 2008
I, however, place economy among the first and most important republican virtues, and public debt as the greatest of the dangers to be feared.
Two more bank failures today.
First National Bank of Nevada, and First Heritage Bank in Newport Beach, CA.
Mutual of Omaha Bank will take over all of the deposit relationships, and "certain assets", whatever that means. From the FDIC press release:
The 28 offices of the two banks will reopen on Monday as branches of Mutual of Omaha Bank. All depositors, including those with deposits in excess of the FDIC's insurance limits, will automatically become depositors of Mutual of Omaha Bank for the full amount of their deposits. Depositors will continue to be insured with Mutual of Omaha Bank so there is no need for customers to change their banking relationship to retain their deposit insurance.My old bank had a relationship with First National. They're pretty big - bigger than the recently failed IndyMac.
The cost of the transactions to the Deposit Insurance Fund is estimated to be $862 million. The failed banks had combined assets of $3.6 billion, .03 percent of the $13.4 trillion in assets held by the 8,494 institutions insured by the FDIC.So the cost to taxpayers is equal to about 1/4 of the total asset size of the two banks. That doesn't make me feel warm and fuzzy....
You may have heard or read media reports about actions yesterday in Congress to deal with the housing debt crisis and to bail out two private lenders known as Freddie Mac and Fannie Mae.
The bill passed the House of Representatives and will be taken up in the Senate and once through that pork factory, President Bush has said he will sign it. If I were your President I would veto it so fast, heads would spin.
The bill - and that's exactly what it is - is a bill you are going to be expected to pay! It's for an estimated $400,000,000 [edit: This should have 3 more zeros at the end]. That is, of course, $400 Billion that we don't have, so more borrowing is ahead. Your share of this expense? About $1,300.
And that's on top of the more than $31,000 you already owe!
In 2001, the national debt crossed $6 Trillion. Today, it is closing in on $10 Trillion. Our debt is growing faster than at any time in our nation's history and there is no end in sight.
Yesterday I issued a statement to the media blasting their actions. Today I ask your help in getting out the message that President Bush and Senators Obama and McCain are wrong for bankrupting our future with more and more debt.
First I ask that you forward this email to as many of your friends as possible. The average American doesn't understand what's going on. They have a sincere, but misguided, desire to help people less fortunate than themselves at this time of economic crisis. But this bailout only rewards people who made bad decisions and bails out those who profited from them.
Second, please consider a campaign contribution to help fund our daily operations. Your gift of $5 or as much as the legal limit of $2,300 will make a difference.
I thank you for your consideration.
P.S. - You may also want to call your U.S. Senators to tell them to vote no on the big-bank bail out. And remember, if I were your President, this bill would be dead on arrival at the White House. Please help me change government. Thanks again.
You have to learn the rules of the game. And then you have to play better than anyone else.
Nothing seemed to go quite right yesterday. I was eating a piece of taffy and it popped off a crown. I went to the dentist to have it reattached, and she told me my gums are crap, you could park a bus in the sludge they've become and the tooth will probably have to be pulled. That's after some butcher dentist finishes slicing and dicing my gums in a manner that would make Saddam proud.
I had also planned on spending yesterday grinding wheat into flour and trying a bunch of different ways of preparing it. As I mentioned in yesterday's post, my beer grain grinder didn't work, so I drove around trying to find one in a store. More disappointment. None to be found.
So I did some prepping.
I picked up a grommet kit for repairs, more water purification tablets, a compass (been meaning to add one of those for a while) and a couple of flashlights.
These are great little numbers. They are made by Ray-o-Vac. I bought one a month ago and just love it. I picked up two more. They're made out of aircraft aluminum and have a one watt LED bulb that throws off 45 lumens. All for under $15.
I know that the be-all-to-end-all are the fancy $165 flashlights. Sure, they throw off 100 lumens, but my backyard looks like a scene out of Close Encounters Of The Third Kind when I turn on my $15 special. Plus the fancy ones eat those uber-expensive lithium 123A batteries that last for 2.5 hours. The Ray-O-Vac runs on AAs that last for 5 hours.
I don't clean my guns after each use. I usually run 250-300 rounds through them before a cleaning. My last little outing where I had my two sons and one of their friends tossin' lead had them pretty dirty. I finally got around to cleaning them yesterday.
When I finally cleaned my office about 2 weeks ago, my wife had mentioned that she smelled shoe polish. Every now and then, I'd get a whiff of it, but nothing major.
I found the source. It seems that my bottle of Hoppe's No. 9 had been put in my cleaning bag with a loose lid. Thankfully, it was an old gym bag that had been made for wet clothes, so the spill was contained to the bag.
Man, there's nothing like a clean gun, is there? All shiny and new, barrels gleam, cylinders spin effortlessly, slides rack as smooth as silk.
While I was at Wally World buying all of my stuff, I decided to stop by the portrait studio to get some pictures taken for my Utah Non-Resident Concealed Carry Permit (NO! I haven't sent it in yet.... It's only been 6 months since I passed the test, so back off!) and to update my passport, which had lapsed.
They were out of film. WTF? How does a portrait studio run out of film? Especially a joint as large as WalMart.
The girl said they have been inundated the past couple of weeks by people getting passports. Lines out the door. Again: WTF?
If it was just before summer vacation, I could understand it for families going out of the country. But what's this all about NOW? The girl said they will be getting a film shipment this morning after 10am, so I'm going to return to get my pix and ask some questions.
Just seem strange to me.
Thursday, July 24, 2008
Every now and then go away, have a little relaxation, for when you come back to your work your judgment will be surer. Go some distance away because then the work appears smaller and more of it can be taken in at a glance and a lack of harmony and proportion is more readily seen.
--Leonardo da Vinci
I checked with my boss, and I get to take a 'mental health day'. My boss is just the best... ;-)
Actually, yesterday, I just fried my brain and need to give it a break.
I decided to test out my grain grinder and make some whole-wheat food. Glad I decided to test this prior to the SHTF.
The grinder doesn't work.
I cranked open the throat to the adjustable rollers, filled up the grain hopper, attached my power drill to drive the rollers, and..... nothing. I tried closing the rollers, opening the rollers, nothing would work.
I think the problem is, the wheat kernels are too smooth. I have hard red winter wheat. When I grind barley for beer, it has first been malted. That is simply the process of watering the grains, letting them sprout, then throwing them into an oven. This obviously stops the growth process, and allows you to make a light roast for pale ales, or a dark roast for a stout.
When the sprouting happens, the shell (husk) cracks when the little sprout emerges. I guess this gives the grinding rollers something to grab onto. Not so with the wheat. Hell, they came out looking polished!
I tried running them first through my food processor, and they didn't even get dented. So, I'm off to the store to try and find a plate-style grinder or something with more heavily knurled rollers.
A couple of nights ago, I worked a bit on my homemade knife project.
In case you were confused, that's mine in the middle ;-)
I included a Ka-bar and my Buck Ranger pocket knife for size comparison.
I spent about an hour and put the rough bevel on the blade, and added the half-moon to the butt of the handle. It's tough to see, but the bevel goes about 3/8 of an inch up the blade. I need to make it a bit higher, so more grinding, perhaps tonight.
Looking for help: I have an 8" Ryobi bench grinder. It has two wheels. For this sized knife, when I move the blade towards the middle of the grinder, I have occasionally had my knuckles de-skinned by the other wheel. Not fun. Can I remove one of the wheels from the arbor without screwing the grinder up? The Ryobi site is no help.
Also, any ideas about heat treating? GuyK has discussed his adventures in knife making, but does anyone have any ideas about what kinds of companies might have some extra forge time? I have downloaded plans for a mini-forge, but building something that reaches 1,500+ degrees scares the hell out of me.
Labels: Life and Times
Wednesday, July 23, 2008
Success usually comes to those who are too busy to be looking for it.
--Henry David Thoreau
Busy day today. Lots of business deliverables completed. I'm bleary eyed...
I was also contacted by a head-hunter from LA today about a job in the Southland.
No. Damned. Way. I'd brush up on my, "Would you like fries with that?" script before I'd go to LA.
That's easy to say now, who knows what the future will hold....
Also did some prepping today. I emptied one of my 45lb buckets of winter wheat, and broke it down into 2lb vacuum sealed bags. I have another bucket that I need to do this with. My third bucket came from Walton's in the mylar/nitrogen packaging, so I'll just leave that alone.
Over on the right side of the picture is my grain mill and the bucket the grains fall into. Right now, I use it for grinding my brewing grains. It has adjustable rollers, so I can ratchet them down to produce flour.
I pulled 5lbs of the wheat out to try some recipes. I've never used whole kernel wheat before. I picked up an 'all about wheat' book with techniques and recipes. I'm going to try making the 'fake meat', bake some breads, probably sprout some for wheat grass, and try making a porridge.
Everyone has been asking me if I'm going to make a wheat beer. Nope. I've yet to find a Hefeweizen that I like. Seriously, I've probably tasted 30 brands, and haven't found a one that I like. And since I'm the one brewing, I get to pick what gets made!
Speaking of beer, I need to get cracking on my brewing. Our annual Oktoberfest party is coming up in, well, October. That is barely enough time for my 2 additional lagers to fully condition. The ales aren't much problem, as they can be fully brewed, fermented and conditioned in a month.
This party is a lot of fun. We have tons of food from all over the world (it's a pot luck) and I brew up 7 varieties of beer, and 3 types of soda (for the kids and non-drinkers). Take a look at this post for a picture of my 10-tap kegerator. It's a beautiful thing to behold!
Those whores in DC passed the 'bail out' bill - at least in the House. Not satisfied with providing a back-stop for Freddie and Fannie - which will be estimated to cost us $26 billion - they included a true bailout provision.... a little $300 billion in loan guarantees for the FHA.
As I said yesterday, I can live with the Freddie and Fannie 'rescue plan'. This $300 billion is a joke.
It will provide loan guarantees for people that want to refinance their homes because they stupidly got into a high-rate sub-prime loan. I've written before (find it yourself, I'm tired!) that I'll be surprised if anyone takes any of these loans.
Let's say you bought your home in 2005 for $300k. It only cost you $15k to get into it (if that much). Today, that same home is selling for $200k. Unless you absolutely, positively MUST live in THAT house in THAT neighborhood, why would you take out a $285k loan for a $200k property?
Why wouldn't you just go across the street or around the corner and get the same home, but only have a $194k mortgage with a 3% down payment FHA mortgage? And then walk away from your current home....
Tuesday, July 22, 2008
Constantly choosing the lesser of two evils is still choosing evil.
There has been a lot of talk from Treasury Secretary Paulson lately about a
I'll use Fannie to explain this, but it is virtually identical to Freddie.
The Federal National Mortgage Association - FNMA or Fannie Mae - is the big shot in the secondary market for home mortgages. They provide liquidity to your local bank to make home loans. It works like this:
You go to your bank and get a loan. We'll say it was for $200,000 at 7% interest. Your bank wants to make more loans, but has all of their cash tied up in loans on their books. They agree to sell the loan to Fannie, but continue servicing it (accepting your loan payments) for a slight fee. Instead of paying Fannie the whole 7% payment, they only send in 6.75%. This is called the 'hair cut' - you take a little off the top.
The bank gets the $200K from Fannie, and can make another loan.
Fannie now takes your loan and thousands of others with similar characteristics (fixed vs adjustable, etc.) and bundles them together into a specialized bond called a Mortgage Backed Security (MBS). They sell this to investors such as retirement companies, insurance companies, etc.
Now these investors know nothing about the individual loans that make up the MBS. While the loans themselves are similar in size and supposed credit quality, the investors want a sure thing. So Fannie guarantees them, for a price.
Instead of passing through the full 6.75% to the investors, Fannie gives the loans another hair cut, and only pays the investors, say 5.5% - or 1.25% lower than what they're receiving. In exchange for this hair cut, Fannie will guarantee that the investors will get back every dime they invested, plus the agreed upon interest. Fannie works into their hair cut percentage enough leeway for borrowers that end up defaulting on their loans. They've been doing this since the 1930's. They know what they're doing.
Or so we thought.
Fannie is what is called a 'Government Sponsored Entity' or GSE. There are a number of these things around. Sallie Mae for student loans. Farmer Mac for agriculture loans. Freddie and Fannie for home mortgages.
While they are sponsored by Nanny, they are not explicitly guaranteed by Nanny.
What does that mean, 'sponsored'? It means that Nanny cuts them some slack. Slack not given to the private markets.
For instance, Fannie pays no state and local taxes. They have a low-rate line of credit with good old Uncle Sugar. They have much less stringent financial reporting requirements. The value of these perks is valued in the tens of billions of dollars a year.
But the biggie is regarding capital requirements. A bank generally is required to maintain cash reserves of around 7% of their outstanding loans. It can go as low as 3% if you're a super-duper big swinging dick of a bank.
Fannie has reserves of 1.2%.
Supposedly, if something goes horribly awry, Fannie will use those reserves to continue the payments to the investors. To make good on their guarantees.
Let this sink in: Fannie and Freddie guarantee about one half of the nation's mortgages, or $5-$6 TRILLION dollars. If more than 1.2% of them go tits-up, they are bankrupt.
As a point of reference, every bank I've ever worked for has always maintained a separate Allowance for Loan and Lease Loss (ALLL) of approximately 1.25-2%. You are in essence pre-paying for expected losses. You put more aside for riskier loans (unsecured lines of credit versus a cash-secured loan), and allocate more when loans start going bad. The Feds only allow you to count up to 1.25% of this towards your capital numbers - the rest just comes out of your pocket. It is prudent banking.
No such requirements exist for Fannie.
So here we sit. Defaults on loans continue to soar. Foreclosures continue at record levels. The biggest player in the mortgage market is close to insolvency. Why the hell should we care?
It's all about the money.
The vast majority of American wealth is wrapped up in real estate. If you look at the personal financial statement of almost any regular American with a home, I guarantee you that 99% will have real estate as their number one asset.
This is not an inconsequential issue for Washington's politicians.
Follow the bouncing ball: If Fannie tanks, and defaults on the guaranteed loan payments, confidence will be lost in all MBS.
If confidence is lost, money will no longer flow to banks to fund more home purchases.
If it becomes more difficult to purchase homes because of lack of access to loans, prices will drop even further than they already have.
If values drop, average Americans lose their nest egg.
It's easy to say, "Bummer. Eat shit and die. You shouldn't have gotten tangled up in this sub-prime scam."
If if were that simple, I'd agree. But this has the potential to wipe out values of all residential real estate, regardless of when it was purchased. The perpetrators of this scan won't be the only ones getting slammed.
It is the 'Trickle-down effect' of gargantuan proportions.
Remember, this is not bailing out the greedy banks and greedy buyers. The buyers will still lose their homes to foreclosure. The banks will take their losses on the loans they still have on their books.
This will bail out the investors that help keep the cash flowing in this country. The same investors that are probably a part of your retirement account. Or your insurance annuity. This is incredibly important. For me, this is one of those times where I will hold my nose, and grudgingly give it a 'thumbs up'. I don't like Nanny bail outs, but I think this one is truly for the greater good.
[You may now start your assault on my Free Market beliefs.]
As an aside, there was a bit of disturbing information in the Bloomberg article linked above. More Bank of Nanny:
Mr. Paulson's speech comes a little more than a week after the Treasury Department unveiled a plan that would increase the government's $2.25 billion credit lines to Fannie and Freddie and allow the government to buy an equity stake in either company. Lawmakers on Capitol Hill are expected to wrap the proposals into broader housing legislation.Maybe Nanny should sharpen her regulatory skills before she delves into buying up the private banking system at discounted prices. Just a thought...
Monday, July 21, 2008
I hate all bungling as I do sin, but particularly bungling in politics, which leads to the misery and ruin of many thousands and millions of people.
--Johann Wolfgang von Goethe
I've written a number of times how Nanny at all levels of government should regulate, not operate. If there is a good reason to regulate something (which Nanny seems to find very easy to do), Nanny should lay out the requirements of the expected results, but NOT the way to do it. When you cross that line, you've gone from regulator to operator, even if you're not actually doing the work.
If Nanny wants higher fuel economy, don't mandate or encourage (read: subsidize) that everyone switch to ethanol or hydrogen fuel cells or electric. Set the requirements and get out of the way. Private industry will figure out the cheapest, most efficient way of meeting the nut.
When Nanny moves to 'operate' mode, it WILL get screwed up. Here's yet another example.
Back in 2001, the FDIC shut down a bank called Superior Bank. They were a big-time sub-prime lender. I don't know the specifics about why they were seized, but that's irrelevant to this issue.
The FDIC figured they knew what they were doing, and decided to run the bank for a while.
Rather than immediately shuttering or selling Superior, as it normally does with failed banks, the Federal Deposit Insurance Corp. continued to run the bank's subprime-mortgage business for months as it looked for a buyer. With FDIC people supervising day-to-day operations, Superior funded more than 6,700 new subprime loans worth more than $550 million, according to federal mortgage data.Who knows what these idiots were thinking. There was supposedly a good reason to shut down this bank. Why would you use the same employees, policies and procedures, and continue pumping out the same crap that got the bank in this mess in the first place?
Regulators get used to this God Complex where banks have to continually kiss their ass. You never tell your regulator that they are wrong. It's part of the game. The problem is, when they have to go outside of their comfort zone - regulation - they crash and burn.
So the Bank of FDIC originates all of these loans, using the same people and processes used by the failed bank. They then decide to sell all of these loans on the secondary market, along with a bunch of loans originated before the seizure.
Back in May, I wrote a piece called, Without Recourse. In it, I explained what the term means and how it is used in banking. In a nutshell, when you sell loans, you do it with a Recourse clause. You are telling the buyer that, except in the case of outright fraud, they now own that loan and can't force you to take it back. They are expected to do their own Due Diligence so that they understand the risks involved.
It seems Nanny doesn't do business like that. She didn't sell the loans Without Recourse, she sold them with guarantees! And one of the buyers, Beal Bank, is looking to get their money back.
Although the FDIC usually sells such loans on an as-is basis, the agency backed the Superior loans with extensive warranties about their quality, including that there was no fraud or misrepresentation in their origination. The FDIC says it included such guarantees, in part, to give Beal Bank the ability to sell back to the agency any loans that had fallen through cracks in the oversight process.Not only did the FDIC guarantee the loans originated under their watch, they also guaranteed the ones originated by the management of the seized bank!
They're using some lame excuse that, "the best way to maximize the value of the failed bank was to continue operating it under a new name while it searched for buyers."
Regardless of the fact that the FDIC has no experience in actually running banks, that still doesn't explain why they would guarantee the work of others. It's mind boggling.
Not surprisingly, you and I will be on the hook for this screw up. To the tune of another $70 million or so.
Suck it up folks, and pony up your share.
For some reason, the WSJ felt the need to show us the pain inflicted on 'the little guy' as a result of this mess. Keep this in mind:
For years, the government encouraged lending to low-income borrowers as a way to increase home-ownership rates. But the market got out of control after some lenders started doling out more aggressive loans, relaxing collateral requirements, and paying less attention to the ability of borrowers to pay.The government didn't encourage lending to un-creditworthy borrowers, it mandated it. Search my site for 'CRA' if you don't know what I'm talking about. It's another example of Nanny having a political agenda and forcing operational changes at banks.
Anyways, here's the plight of a poor minority who was stripped of all he owned because of the greedy bankers.
Twenty years ago, Mr. Hightower had purchased what he calls a "small, run-down house" with a tin roof adjacent to a trailer park. He worked with a cousin to fix up the interior, and added insulation, vinyl siding and a second bathroom. In December 2001, he refinanced it with a $120,700 mortgage from Superior, using the proceeds to pay off an earlier loan and some other debt. The 20-year mortgage carried a 10.75% fixed interest rate, compared with the roughly 7% rate then available to borrowers with good credit.Hmmm. How much 'other debt' did you pay off with the loan, Mr. Hightower? What was this debt? Car? Boat? Vacation? Credit cards?
And if you couldn't afford the payments, why in the hell did you agree to the loan? You're a 68 year old man. You're very unlikely to get a big boost in income any time soon. What were you thinking? Did ya get a little greedy? Did you get in over your head?
It sounds like it to me. Of course, like everyone else, he's got his arm outstretched, palm up.
Told that the FDIC was running the bank when it gave him the loan, Mr. Hightower says: "I wouldn't expect the government to rip me off...Can I get some money back?"Sure you can, Mr. Hightower. It's only fair. Just get in line after all of us tax payers that are footing the bill for this Nanny screw up.
At least you got some debt paid off. It seems like the rest of us just get the bills with no benefits...
Sunday, July 20, 2008
The welfare state is not really about the welfare of the masses. It is about the egos of the elites.
I'm in bachelor-mode for the next week. My wife just left for a week-long cruise to Alaska with two of her teacher girlfriends. It was surprisingly inexpensive. It must be off-season or they got some teacher discount, because the whole cost, including round trip airfare between the Bay Area and Seattle came out to less than $1,000. Hell, I'd easily eat and drink that much!
They'll spend some more money on side trips and the like, but still, it's a hell of a deal.
I finally heard back from the state unemployment insurance (UI) folks regarding my ability to start a business and still be eligible for payments.
Here's the logic of my fair state: If I start a business prior to being officially laid off (which won't happen until 10/1), it "will take you out of the labor market for other employment", thus making me ineligible for unemployment payments. Even if I don't make a dime, I'm SOL.
BUT, if I wait until I apply for payments, THEN start the business, I will get full UI payments, plus they'll spend extra money to help my business grow.
To summarize: If I take the risk of starting a business on my own while still employed, I relinquish my rights to the UI monies. If I wait, and first become dependent upon 'the system', I'll be rewarded with extra money and state resources.Entrepreneurship and self-reliance are clearly being discouraged. I wonder how many people that have a little side business - and that were stupid enough to actually register it with the state - have had the rude awakening of 'No UI Money For YOU!' when they apply for benefits after a lay off from their 'real job'...
So, no business start-up until I'm first on Nanny's teat. Any further questions on why this state is broke?
Excuse me for a minute, I'll be right back. My brain just exploded and I have to clean up the mess.
I told my wife that while I believe the new business has the potential to significantly increase my earnings, I would continue to look for a regular job. You know, salary, benefits, all that good stuff!
It's the old saw, "A bird in the hand is worth two in the bush" - it's better to have a sure thing as opposed to the potential of something better. You never get rich that way, but you can pay the bills. You don't generally go broke, either.
So, I told her that if I come across something that pays close to what I earn now, I'd apply for it. The few sites that cater to jobs I'd be interested in were pretty bare. Now, I'm running across them all over the place, and they're all with the same employer: Nanny.
The FDIC, Federal Reserve and all of the bank regulatory agencies are hiring, big-time. No need to read between the lines: Banks are in a bad way, and Nanny needs people that understand the system to help keep it afloat.
And they're paying a premium for people with banking experience. Like me and my 30 years...
Talk about a quandary. After all of these years having to fight these idiots who put a higher premium on regulation over sound earnings, I may actually consider this.
I have no illusions of being able to make even the slightest dent in the mindset of these massive bureaucracies. They are what they are, and I'm not in a crusading mood, at least not with this. I'm only considering this for the great benefits.
In the past 10 years or so, Nanny has significantly increased the pay scale specifically to attract people from private industry to join the regulatory agencies. The retirement packages are fantastic.
I have a buddy that used to work for the SF Fed. They wanted to down-size his area, and offered everyone an early retirement package. Something like 60% of your current salary. He was in his early 40's at the time, and jumped at it. He then went out and got a senior management job at the bank where we met 15 years ago.
So, for all of this time, he has been double-dipping, all with Nanny's blessing and encouragement.
My hope would be to get hired on, stick it out for the next 5 years or so, and once the heat is off all of this credit crunch, be offered a similar deal.
The thought of consorting with the enemy, though..... tough to get past that. But I have to consider it.
Friday, July 18, 2008
Any change is resisted because bureaucrats have a vested interest in the chaos in which they exist.
--Richard M. Nixon
The state government here in California never ceases to amaze me in the depths they will delve to ruin this state.
I've written a number of times quite recently about a $15 billion deficit they need to address. They haven't even thought about reducing spending. It doesn't even appear to be a consideration, even by our "republican" governor.
No, their answer is to increase taxes. Again.
The Wall Street Journal wrote a great piece on this yesterday. I think it's for subscribers only, so I'm going to liberally borrow from it.
New York City has long been the highest tax jurisdiction in the United States, but California politicians are proposing to steal that brass tiara. California faces a $15 billion budget deficit and Democrats who rule the state Legislature have proposed closing the gap with a $9.7 billion tax hike on business and "the rich." There's a movie that describes this idea: Clueless.This has been their modus operandi for as long as I can remember. Tax business, tax the rich. Tax business, tax the rich.
Here in California, you're considered rich - you pay in the highest tax bracket - as soon as you have taxable income of around $40,500. Yep, lots of yacht owners pull down forty grand a year.
The plan would raise the top marginal income tax rate to 12% from 10.3%; that would be the highest in the nation and twice the national average. This plan would also repeal indexing for inflation, which is a sneaky way for politicians to push middle-income Californians into higher tax brackets every year, especially when prices are rising as they are now. The corporate income tax rate would also rise to 9.3% from 8.4%. So in the face of one of the worst real-estate recessions in the state's history, the politicians want to raise taxes on businesses that are still making money.No problem. We over-flowing with rich folks and filthy rich businesses, right?
1,900 jobs and 1.3 million taxpayers, gone. Way to go, boys and girls.
This latest tax gambit was unveiled, ironically enough, within days of two very large California employers announcing they are saying, in the famous words of Governor Arnold Schwarzenegger, "hasta la vista, baby" to the state. First, the AAA auto club declared it will close its call centers in California, meaning that 900 jobs will move to other states. "It costs more to do business in California," said a AAA press release, in the understatement of the year.
Then last week Toyota announced it is canceling plans to build its new Prius hybrid at its plant in the San Francisco Bay area because of the high tax and regulatory costs. Adding to the humiliation is that Toyota will now take this investment and about 1,000 jobs to a more progressive and pro-business state: Mississippi.
There is already a reverse gold rush going on in California and the evidence points powerfully toward high tax rates as a culprit. Census Bureau data show that, from 1996-2005, 1.3 million more Americans left than came to California. And the people who are leaving are disproportionately those with higher incomes: the very targets the Democrats want to tax more.
From 1996 to 2005, the state's overall population grew by just shy of 4 million people. Do the math: That's a 5+ million person influx. It's not real difficult to read between those lines - People paying the bills are leaving the joint. The illegals are flooding in to all of the 'sanctuary cities'. Not surprisingly, we're out of money.
The liberal fairy tale is that the rich "don't pay their fair share." The reality is that there's no state in the country more dependent on six- and seven-figure earners to pay its bills. Those with incomes of more than $100,000 pay 83% of the state's income taxes, and the richest 6,000 of the 38 million Californians pay $9 billion in taxes. Every time a rich person like Tiger Woods departs, the state fiscal problem deepens.Do a little more math: Those 6 thousand people each averaged tax payments of $1.5 million. Hey, they're rich. They can afford it. If they don't like it, they can just leave. Oops, looks like they are.
Well, at least our leaders are only spending money on the necessities, right?
What the politicians in California refuse to address is their own overspending. State outlays were up 44% over the past five years [the same time frame Arnie has been our Guv], meaning that California is spending at a faster pace than even Congress. Minority Republicans in the Legislature say the solution is a hard expenditure cap – like 46 other states have. Yet even in the face of the giant deficit, Mr. Schwarzenegger and the Democrats want to pass a new $9 billion water bond, a $14 billion state-run health insurance program, and the most expensive climate-change program in the country.And that's just the stuff our legislators have come up with. We have a number of propositions to be voted on that could add another $11 billion to that total.
If this weren't so incredibly idiotic, I'd be laughing my ass off.
I have no doubt that most, if not all of the tax and spending increases will get passed. It's just the way things are done out here. Spend the money, wring your hands, increase taxes.
Perhaps they could throw some of that money towards the Employment Development Department. I have been trying for 10 days to speak with someone about how starting a business will affect my ability to get unemployment payments starting in October. From what I've read, as long as there is no profit, I should be OK.
But there is too much money involved for me to make a mistake. I've been calling for 10 days at different times of the day, and have gotten the same message every time, saying, "Sorry, we have more calls than we can answer. Please call back later. Good bye". And then it hangs up on you. You don't even get the option of staying on the line to wait. I've written email messages, with no replies. Fucking assholes.
Good Lord. I'm trying to do the right thing, and the 'system' blocks you at every turn. How people are able to deal with the government on a regular basis and maintain their sanity is beyond me.
Wednesday, July 16, 2008
I just had to share this.
Part of what I do each day is read security, risk management, banking and similar articles. I spend 2-3 hours doing this each morning. When I find something that ties into my new business, I save the article. These will then be used as examples in newsletters that will go out on a weekly basis to my target customer base.
One of the major points I will train and consult on is information security. Showing and training banks how to protect their data, and making sure only the right people have the right access.
So, this afternoon, I run across this gem:
And denied access to everyone else!
Prosecutors are arguing that Childs poses a major threat to public safety. Why?
Because he, and apparently only he, can access the city’s brand-spanking-new WAN network. It is the holding ground of emails, law enforcement records and payroll documents, as well as God knows what else, according to the Chronicle.
Oh baby! I can hear the sphincters clinching all the way across the bay!This is unbelievable. I have a former employee (I "grew" him from a tiny seed into a damned good network administrator) that now works for the San Francisco IT department. I need to touch bases with him and see what's up.
Hmmmm. Maybe I need to expand my target market to include stupid, socialist cities as well...
Labels: American Ingenuity
I know quite certainly that I myself have no special talent. Curiosity, obsession and dogged endurance, combined with self-criticism, have brought me to my ideas.
There were some beautiful strawberries on sale at the market this past weekend, so I picked up a couple of half-flats. Of course, I over-bought the amount we could eat. Not wanting them to go to waste, I decided to make jam.
I picked up an extra bag of sugar and some pectin, found a recipe on the Internet and whipped up a batch.
Oh. My. God. This puts the commercial stuff to shame! It is absolutely incredible. I had some with a toasted bagel and butter this morning. Heaven!
I jarred up 5 pints of the stuff in a hot water bath method (it lasts for a year). It was so easy - why have I not done this in the past?!
My shipment of dry flies arrived a couple days ago. Fly rod and reel showed up a week or so ago.
This weekend, trout and large mouth bass of Northern California, be afraid. Be very afraid. Remember, I'm not one of those 'catch and release' kinda guys.... ;-)
I have this little problem. I lean very heavily towards being a perfectionist. If you're gonna do it, do it right. This is good in many ways, and has served me quite well in my career. I think I may be going a bit over the top right now, though.
I'm becoming obsessed with my new business plan. I simply cannot tell myself it's good enough. I have read and re-read this thing 20 times. Every time, there is a tweak, a change, a re-format.
I'm getting bogged down in the minutia.
I had intended on having this done nearly 2 weeks ago. I had it pretty much wrapped up when I found a fairly large chunk of potential customers missing from the numbers. So, I went in and adjusted numbers and marketing strategies. Moved some stuff around, little tweak here, little tweak there.
It's been like that for the past two weeks. And we're not talking a couple of hours a day. We're talking regularly being up until the wee hours of the morning.
This obsession is delaying the completion of the actual service deliverable packages. The plan is trumping the product. You don't earn anything from 'the plan'. So I've given myself until this Friday to wrap it up. Come hell or high water, next week I move on to wrapping up the training and consulting deliverables I'll be selling.
Oh, I have changed the start date of the business. It was originally scheduled for August 1st. I'm pushing it to August eighth - 08/08/08.
Eights are good luck in many Asian cultures. I love Asian food. I own bamboo Asian steamers and Asian chopsticks. I'm almost an honorary Asian! I'll take all of the good luck, voodoo and Feng Shui I can get my hands on!
I was reading an article from the California Chamber of Commerce regarding the State Propositions that will be on the November ballot. The Chamber was discussing which ones they like and which ones they don't.
I found a link to the Secretary of State's page to see a listing of all 11 propositions. Suffice it to say, I will have lots of fodder for future blog rants based upon these proposition. Apparently no one is aware that our state is flat broke. Busted. Out of money.
When I got to the bottom of the list, there was a category called, "Initiatives Pending Raw Count of Signatures". There was one item listed:
Teacher and Administrator Compensation. Statute.I literally laughed out loud upon reading the summary:
Prohibits public school districts from paying any employee a salary higher than that paid to the highest-paid classroom teacher. Requires teachers and administrators to be paid on the same salary schedule according to their experience, education, and number of days worked.This is so wrong on so many levels. And so typical for The People's Republic of California. It's right up the aisle for the socialist/union ideology. Everyone is equal. Regardless of your skills, duties and responsibilities, we're all the same. What bullshit.
(1) It presumes a teacher is as valuable to a school as the principal. Let's see, the teacher is responsible for the education of 30 screaming rug rats. No small task, indeed. The principal is responsible for ALL of the rug rats, plus the teachers, janitors, office staff, maintenance staff, lunch room staff, budget, curriculum, books, computers, payroll.... well, you get it.
Now remember, my wife is a teacher, and I am in no way putting down what a teacher does. But their responsibility - thus compensation - should not even be close.
(2) It exchanges excellence for longevity. Stick around long enough, and you get more money. How are your students progressing? Doesn't matter, here's a raise!
How are you supposed to advance your career? Where is the next 'brass ring' to grasp? WHY would you take on the myriad headaches of being an administrator when you won't be compensated for it?
Another thing has always amazed me in teaching: If you go out and get a Master's degree, you automatically get a raise. No requirement to demonstrate excellence, just get the degree. If businesses ran that way, well, they'd be out of business.
That being said, we're looking at my wife getting her Masters. Know the rules, and play by them!
Tuesday, July 15, 2008
You can't legislate intelligence and common sense into people.
With all of the crap going on in the world, our nation and this armpit of a state, can't our state legislators come up with something of substance to worry about?
I noted a few days ago that The People's Republic of California still doesn't have a budget. The current year budget was due on June 1. Check your calendar, we're a bit past that.
So, instead of focusing on the budget, or something important like crime, illegal aliens, off-shore drilling, the endangered Munz's Onion (yes, California actually has an onion on the endangered species list) or space aliens, our steely-eyed leaders have targeted a true scourge of the state.
Kids balloons. Oh, the humanity!
California state Sen. Jack Scott says he didn't intend to "be a party pooper." It's just that helium-filled foil balloons -- like those found at hospital gift shops and office parties -- are dangerous. They float into electric lines and cause power outages, more than 800 in California last year, utilities say.Now, you may be saying to yourself, "Hey. That's not so bad. 800 outages a year, I've probably been inconvenienced at some point. Go ahead and ban them. No big deal."
Oh really? How about a significant loss of tax dollars? Especially in a time of budget deficits.
She also made the case that balloons are big business in California. There are 45 million foil balloons sold in the state a year, selling on average for just over $2 a pop. When combined with floral arrangements or teddy-bear gifts, the gross hits $900 million. The state would be losing $80 million a year in sales tax if the ban goes through, the Balloon Council claims.Holy crap, Batman, that's a lot of balloons!
What this is really about is more of Nanny telling us how to live our lives. We're too stupid to do the right thing, so Nanny has to set us straight.
Let's put this in perspective. Do you know how many people in America die each year, just because they went outside and breathed the air?
According to the American Lung Association, the number is Seventy thousand! Every year. Croaked because they went outside.
Now, if the Nanny Ninnies in Sacramento wanted to do something that actually mattered, they would outlaw the outdoors. Really. Us common folks are so stupid, we actually go outdoors when the facts show that doing so can kill us.
This must be stopped!
Let's do some math: As of 2006, the US had 299.4 million people. California had 36.5 million, or a little over 12% of the population.
That 12% equals over 8,500 of those 70,000 outdoor breathing deaths. It's like the Killing Fields out there! Why is Sacramento doing nothing about this slaughter?!
Or how about this? If someone messes up and one of their balloons arcs a power line, you make them pay to repair it. The chances are very low that you'll be able to track it back to an individual party, so you chalk it up to the cost of doing business in this big-assed state.
Perhaps the state could tell the utility companies that $80 million a year in taxes is tough to give up. We don't intend on giving it up. If the utilities want to track down people to hold them responsible, the state won't get in their way, but we ain't gonna give up the tax revenues. Good luck bringing Bobby or Sally into court right after a balloon got away at their 4th birthday party.
The law will be on the side of the utilities. Common sense and practicality.... maybe not so much.
Common sense and practicality. Sounds like Sacramento could use a bit more of that...
Monday, July 14, 2008
The secret of happiness is freedom. The secret of freedom is courage.
I had mentioned that I was going to attend a toga party this past weekend. Let's just say, a good time was had by all. Some WAY more than others. That's all I'm sayin'...
Anyways, the host is a No Nanny State kind of guy. Libertarian in political belief, a hard-working, gun-loving American. He had mentioned to a number of the guys at the party (I didn't know may folks there), that I was similarly inclined. So people were coming up to me and starting up conversations on politics or banking.
I had mentioned to one of the guys that I'm a VERY strong adherent to the Constitution. I believe what it says, and that it's not a "living" document. He agreed.
I told him that if I sometimes have difficulties with folks that describe themselves as 'conservative' it has to do with the fourth amendment. Particularly illegal search and seizure. Most don't have any problems with the USA Patriot Act. I have huge problems with it.
Quite the buzz-kill for a party conversation!
I just happened to be wearing my Nation of Riflemen T-shirt underneath my toga. I told this guy that the quote on the back pretty much sums up my attitude with regards to when the Constitution should be messed with:
Our Bill of Rights in not negotiable. Not one single part, not ever. Now if you'll excuse me, I'm off to the range.We went back and forth over weighing safety with personal freedom. He'd say we need to ferret out the terrorists, even if that means some innocent people have their rights trampled. I'd come back with 'slippery slope' arguments, and WWJD ("What Would Jefferson Do").
Ya know what? The WWJD gig seems to work the best, even with folks that are dead-set in their beliefs. When you point out that Jefferson and the other founding fathers were willing to lose everything they had, and die in the face of going up against the worlds greatest military power. It seems pretty silly for us to cower in the corner, and trample jAmerican freedoms because some 7th century mountain dwellers are screeching "Death To America".
Even when those mountain dwellers borrow modern technology and occasionally inflict damage upon us - as in 9/11 - you don't decide that the best way preserve rights and freedoms is by first trampling them.
If you don't stand by your ideals when confronted by a punk, what are you going to do when the bully calls you out?
If you've got 10 minutes or so, take a look at this video. I think it's a perfect illustration of what happens over time when scare tactics are used to change public opinion and attitudes.
I've written a number of times about Real ID and RFID chips. Both are horrible things when used in human security applications (RFID is great for keeping track of inventory, though. Is that how we're viewed by Nanny?).
Back in 2005, I wrote:
The biggest concern is that, once again, we dismiss these invasions of our privacy as minor inconveniences. Look how willingly we accept - in the name of safety -surveillance camera deployed by our government. Look how willingly we accept - in the name of terrorist prevention - the warrantless searches allowed by the USA Patriot Act. Look how willingly we accept - again in the name of safety - the government making random automobile stops with no probable cause, looking for drunk drivers.Take a look at this video. It's a bit slick for my taste, but the information is spot-on.
Friday, July 11, 2008
The first step in the risk management process is to acknowledge the reality of risk. Denial is a common tactic that substitutes deliberate ignorance for thoughtful planning.
This is quite fascinating to me. This refusal of so many people to recognize the trouble our economy is in.
Wall Street is hemorrhaging money today (so far, at least). Right now, the Dow is down 200+ points. It dipped below 11,000 for the first time in 2 years. It's down over 20% since October. Today, it's being caused by revelations that Freddy Mac and Fannie Mae might be insolvent.
Why is everyone acting so surprised? Little old ME wrote about this four months ago, to the day.
Some days seem more dangerous to the nation's economy than others.
Today is one of those days with rampant worries that Fannie Mae and Freddie Mac, the two government-sponsored entities (GSEs) that provide essential support to the nation's entire mortgage industry, could be nearing the need for a government bailout.
Hmm. Here's our first real red flag. In the past, for the 20 Primary Dealers to borrow money, the only acceptable collateral was other Treasuries. NOW, they can use "agencies" and MBS. Agencies are securities guaranteed by Freddy Mac and Fannie Mae, the two largest guarantors of loans in the country.Freddie and Fanny combined guarantee nearly 50% of all of the nation's home loans. That's $5 trillion. That's a lot of money, even for Nanny.
Oh, and they're quickly approaching bankruptcy.
Now, it's not like I was doing independent research. I was using information I got from places like The Wall Street Journal, Forbes and Money magazine. Not exactly small, obscure publications.
Yet people are acting like this is some huge revelation.
You have former Senators in full-on denial as well.
Phil Gramm, the former Texas senator and an economic adviser to John McCain, told a Washington newspaper that Americans have become "a nation of whiners" and that the economic recession that has descended upon us in the final months of the Bush presidency is all in our heads.We're whining and it's all in our heads? The economy isn't as bad as we've been hearing? Are you on crack?! How out of touch with normal Americans can you be?
Gramm blamed -- who else? -- the media for the widespread anxiety over the economy.
"Misery sells newspapers," he said. "Thank God the economy is not as bad as you read in the newspaper every day."
Unemployment rising for 6 straight months. Banks melting down because of crappy loans. Real property values plummeting. Food prices doubling and tripling. Gas and oil prices at historic levels. The stock market crashing (where most retirement funds are held). US savings rates are non-existent.
Look at that list again. What is so bad is that we are seeing simultaneous erosions in both short-term and long-term financials.
Short term: No job, higher living expenses, savings depleted. Long term: Retirement balances slashed, home equity (the single largest asset of normal Americans) gone in the blink of an eye.
The real concern is that there is no practical way to get out of this in the near future. We're in deep shit, people, and it's gonna be around for a while.
What is scary is that more and more people are going to end up on government assistance rolls. Fewer and fewer working people paying for more and more unemployed people. The math just doesn't work.
If someone out there can explain how this will be paid for without crushing the life out of people with higher taxes, I'd like to hear it.
Right now, the people that have 'lived' on public assistance aren't complaining too much, because the money is still flowing. Rents are being paid, food stamps are being printed and medical bills are being covered.
What happens when the cash flow stops? My glorious state of California was supposed to have an approved budget on June 1. Like most years in the past, our pin-head legislature still hasn't done their job. When they finally get around to it, I'll be interested to see how they're going to make up the projected $15 BILLION deficit.
Unlike the Feds, California can't just print up new money. How are we going to pay for this shit? Increased taxes and reduced welfare are most likely.
That should certainly help things out....
I think there is a big difference between being a "Chicken Little" and a realist. I'm a nuts-and-bolts kind of guy. When I see something that catches my eye, I look into it.
I, like most folks, don't purposely look for the downside of a situation. I just want to understand what is really happening so that I can plan and prepare to deal with it. I think you're nuts not to understand a situation.
Different people have different reads on what is going on. That's fine. Statistics and data can always be interpreted in different ways. But to denigrate people (those whiners) that are living with increased costs and reduced incomes just smacks of elitism. I don't have a lot of patience with folks like that.
Deny reality all you want. It's your life. I just figure that if your head is in the sand, you won't see the truck barreling down the road in your direction.
Thursday, July 10, 2008
Never rely on the glory of the morning nor the smiles of your mother-in-law.
It's like Christmas, only hotter. Yesterday, it only got to 106. A cold front is coming in, and today, the temperature should barely tickle triple digits (it's 99 right now). Gotta get me a scarf....
Anyhoooo..... Yesterday was a very good day.
First up, my wife returned my father's day gift. She and my boys had purchased a new GPS unit for my car. Looked great, nice big color screen.
One little problem: You couldn't save locations on it. No 'favorites', or 'recent destinations' , no nuthin'. Who in the hell makes a GPS where you can't store locations?
So, she returned it and picked me up a TomTom One. Sweet. I just gave it its first test drive and it was very cool. Gotta pick me some sexy British lady voice for the audio...
FedEx then made two deliveries: My incorporation papers and my fly fishing rod and reel.
It's official - I'm a legal business entity! Today, I went out and filed the fictitious business name statement with the county. Tomorrow it will be to open the bank account, and get the city business license. Come August 1, I'm open for business.
I got an outstanding deal (about half price) on my fly fishing gear, so the weekend after this one, I'll be breaking it all in. Bought a bunch of dry flies and tapered leader online last night in preparation.
Finally, my wife gives me another father's day present. From her mother. I thought she was kidding.
I haven't spoken to that hag in over 10 years. I think you'll agree I'm warranted in my reasoning.
A little background: Jay (my mother-in-law) has been a blight on society for as long as she's been an adult. She has never had a job, spit out 7 kids that you and I all paid to feed and clothe, and has generally played the system like a concert musician. She's a current drug abuser and former alcoholic. We're all now paying for her care and feeding in a nursing home.
She's a real piece of work. But she was my wife's mother, and I was genuinely nice and kind to her for the first 12 years of our marriage. Until 10 years ago.
At that time, her husband (4th marriage?) died (he was probably murdered - not by her - but that's a story for another time). Jay gets a life insurance check for $30K. She burns through it in 6 months, like it's the first of many to come. She's broke again.
My wife does some research, and finds that her ex-hubby worked for the Big Stage Coach Bank for a little while, and had somehow managed to get a $100K life insurance policy (he had a number of physical disabilities as the result of a stroke that occurred when he was much younger).
My wife sets up a joint bank account for this $100K. It's to pay for her new non-government subsidized retirement apartment (woo hoo!), pay her bills and provide a monthly stipend. My wife is managing all of the money. This will easily last her the rest of her life when combined with her Social Security money.
Jay proceeds to come up with ways to get at more of the money. She discovers "electronic checks", and credit card cash advances, and anything to get more money to blow.
My wife clamps down on the account (remember, she has a hubby who knows how to do these things!), and locks out any access to Jay. She'll get her cash stipend, and my wife will send checks for all of the bills.
This goes on for a couple of months. One day, I get home from work, and there is a knock on the door. It's the police. They've just received a report that my wife is abusing her mother and is stealing her money.
I cannot describe the rage I felt at that moment. If Jay had been there at that moment, I would have beaten her to death with a bat, and gladly gone to prison.
Thankfully, this was a cop older than 21. He had interviewed Jay, and realized all the lights weren't lit on her tree. My wife explained the situation, and that was the end of it.
I told my wife that from that moment on, she was no longer welcome in our home. I would never speak with her again. I insisted that my wife remove herself as her mother's acting conservator. She was dead in my eyes.
Jay burned through the remaining $80k or so in under a year. Got thrown out of her apartment and is now suckling full-time on Nanny's teat once again.
Sooooo, imagine my surprise when I get a present from Jay addressed, 'To Michael, Love Mom'.
Love Mom?! You've gotta be shittin' me.
It was a bunch of various sized flashlights (batteries NOT included). I have no idea what this hag wants, but she ain't gonna get it. She can rot in hell for all I care.
If you fuck with my family, you only get one bite from that apple. If you're not shot, beaten or disfigured, you came out on the good side of the deal.
Is that bitter and vindictive? You're gotdam right it is. You made your bed, now lie in it.
It's now 101 degrees. I think my eyebrows just melted.
Wednesday, July 09, 2008
Your occupation is a crackhead.. i will not lend you money because lending $20 to a crackhead is like lending oj simpson your good knife.. you're never gonna see it again.
It never ends, does it?
Yesterday, I wrote about how the Treasury Secretary wants to try and use smoke and mirrors to appear relevant. Not to be outdone, our venerable Fed-Head Ben Bernanke now feels the need to come up with his own inane solutions.
On Monday [of next week], the Federal Reserve is expected to require lenders to document borrowers' incomes and verify that they can afford their mortgage payments -- including the higher payments that come when adjustable-rate loans reset.Ya know what Ben? There's a reason for high-cost mortgages. Any guess what it is? It's because the people can't qualify for a regular-cost mortgage. How about we let the borrower and lender decide if he or she can afford the payments?
"These new rules, which will apply to all lenders and not just banks, will address some of the problems that have surfaced in recent years in mortgage lending, especially high-cost mortgage lending," Federal Reserve Chairman Ben S. Bernanke said at a conference Tuesday.
Here's a news flash: Not everyone has a 9-to-five job, saves 30% of their income, or has spotless credit. For example, some people own their own businesses, and do everything possible to lower their tax burden. That makes their cash flow look very weak. This is the perfect person for a No-Doc (no documentation) loan.
Or, let's say you have missed a couple of car or home payments over the years because of a job loss, medical expenses or whatever. You just couldn't make a few payments on time. Sub-prime lending was designed specifically for you.
POOF! With the stroke of a pen, these program go away. So now these people can't buy homes. And this helps the real estate market improve HOW?
But wait! What's this?! Nanny to the rescue!
In addition to the Fed action, the Federal Housing Administration announced Tuesday that starting next week it would expand the qualifications for borrowers seeking low-cost FHA-insured mortgages, making them more available in cases where a homeowner is behind on payments or owes more than the home's assessed value.Hmmm. One hand of Nanny shuts down lending in the private sector, and the other hand opens it up in the government sector. On top of that, when you earn income, Nanny requires you to put money into a big savings account called Social Security.
I forget - which of the 10 planks of the Communist Manifesto was about nationalized banking?
Nanny herself has largely gotten us into this lending mess. It is virtually impossible - even for someone with many years of lending experience (me, in case you were wondering) - to understand all of the required verbiage in loan documents.
If you've ever bought a home, you know what I'm talking about. Disclosure after disclosure, all mandated by Nanny to, "protect the consumer". In actuality, they just confuse everyone, and it comes back to Nanny operating the bank, not regulating it.
Here's what should be on the loan documents:
*Length of time for repayment
*Interest rate and current monthly payment
*What that rate will be at the next adjustment period and what the new payment will be
*How often the rate can adjust, and by how much
*A place to sign your name
*A document allowing the bank to hold and possibly sell your home/car/whatever if you don't repay the loan as agreed upon on Page 1. It also says that you can't sell this collateral without paying off the bank, and that you must keep the collateral insured while you still have a loan balance.
*A place to sign your name
Congratulations, you now own your new home or car!
Tuesday, July 08, 2008
All things human hang by a slender thread; and that which seemed to stand strong suddenly falls and sinks in ruins.
It's 107 right now at my house, at 4pm in the afternoon. Unreal.
Speaking of feeling the heat (nice segue, huh?), Nanny is busy trying to figure a way out of the housing mess. No one is borrowing for new housing. The problem is, most lenders are having problems coming up with the cash to lend. Things look a bit bleak.
Treasury Secretary Paulson came out with a trial balloon to propose some "new and improved" type of funding source called Covered Bonds. I'd never heard about these things.
Covered bonds, which are widely used in Europe, are a mortgage-backed security that usually provides funding to a commercial banks through a secured debt instrument collateralized by a pool of residential mortgage loans that remain on the issuer's balance sheet. Interest is paid to investors from the issuer's cash flow, as Mr. Paulson noted.What's the old saying? "When you can't blind 'em with brilliance, baffle 'em with bullshit."
Good Lord, this has got to be solely for public consumption, because anyone who's been in banking for more than 10 minutes has got to be shaking their head. This is nothing new.
Most banks will make money by funding their loans and then selling them on the secondary market. They are pooled together into a Mortgage Backed Security (MBS) - bonds - and sold to investors like insurance companies or retirement plans. All of the loan payments are then sent to the buyers of the bonds.
With these Covered Bonds, instead of selling the loans, the bank bundles them together in a big bunch, sets them aside on their own books, so they can't be sold in the future, and gets an up-front payment for the value of the loans. Just like MBS, the interest payments go to the investors.
Six of one, half a dozen of another....
What this is really more like, is when a bank borrows from the Fed. The loans are set aside, and Nanny gives them money at low rates. With all of these approaches, the underlying loans act as collateral to protect the investors.
So what has changed? If investors had confidence in the underwriting practices of the banks making the loans and believed that real property values had stabilized, they'd just invest in good old MBS. Does Paulson think that these Covered Bonds will somehow further protect the investors? I'd sure like to know how, 'cause that's the only way investors are going to open up their pocketbooks.
This is just more of Nanny trying to look busy and appear to be doing something for American homeowners. Until the real estate market hits bottom - first quarter 2009 at the earliest - investors are going to be wary of putting huge sums of money into a mortgages.
Maybe Paulson's theme song can be the same one the band played as the Titanic took on water...
As an American, I think we just need to let this "correction" run it's course. Let everyone get their nose bloodied, pick themselves up, and start over. It will also let a lot of people that would not have been able to afford a home just a few years ago, to do so.
As a homeowner, I want Nanny to do whatever is necessary to get home prices rising again - guarantee loans, make up short-falls, I don't care. Add the cost to the national debt.
I believe that's called a dichotomy....
Monday, July 07, 2008
Nothing is over until we decide it is! Was it over when the Germans bombed Pearl Harbor? Hell, no!
--John "Bluto" Blutarsky, Animal House
I made a miscalculation on the size of the target market I'm going after with my bank consulting business. My intent was to include all banks and credit unions in the 11 western United States with assets of $250 million and below (these are small banks).
I pulled up my information from the FDIC website, and I had just under 600 financial institutions to target. I was pretty damned happy.
To make my "nut", I'd only need to do a full-blown consulting engagement at 6 of them, or 1% of the potential banks. Great odds for success.
This weekend, I was working on my business plan, and was on the FDIC site to see what kind of an increase I'd get if I included banks up to $400 million (this is now edging into the mid-sized bank arena). I was playing with one of the drop down boxes, and I realized that my numbers did not include credit unions.
I had assumed they were included in the FDIC numbers (I believe they had been at some point in the past). So, I pulled up numbers from the National Credit Union Association (NCUA), and there are nearly 1,100 credit unions that met my size criteria!
I just tripled the size of my target market! Now, instead of needing 1% to make my numbers, I only need 0.33%!
I'm in the midst of a significant re-write of the business plan.....
I'm 49 years old. Six months away from the big Five-Oh. I'm a conservative, thoughtful banker.
And this weekend, I'm going to a Toga Party!
A buddy of mine is throwing a birthday party, and it is a Toga-mandatory party. No Toga, No Entrance. They're going to have a 70's band, a couple kegs of beer, and rampant semi-nudity!
If any of you have Toga parties in your future, here's a site to show you essential Toga design and preparation. Proper etiquette is essential...
We're in for a world of hurt, heat-wise here in the SF Bay Area. They're projecting temperatures of up to 109 for the next 5 days.
To make things worse, I had mentioned last week about the skies finally clearing up from all of the fires we've been having. I noticed battleship-gray skies this weekend, and saw on the news that many of the fires had kicked it back into high gear. The Big Sur fire is only something like 11% contained.
Once again, the birds are keeping a low profile. No chirping, no flying, no nothing except for a quick dip in our bird bath.
I was at another birthday party this weekend for one of my sisters-in-law. We were jawing about politics and the like, and someone brought up man made global warming and An Inconvenient Truth.
I swear, I heard the violin shrieks from Psycho going off in my head!
It started off as usual. The typical nonsense about the amount of CO2 man pumps into the air, cows farting methane, polar bears croaking, etc.
Piece by piece, I sliced and diced each and every one of their "suppositions". In fact, I went on the offensive. I'd say something like, "Oh. And now you're going to bring up the scene from the movie where Al Gorleon has this big Power Point presentation going, and it shows how there is a 'complicated relationship between CO2 and Global Warming', right?"
They'd all nod.
I'd go on to explain how the relationship is not as good ole Al presented. I explained how CO2 increases are a result of warming, not a cause. Blank stares.
So I take a bottle of beer and ask, "Think about this beer. If you open it, and place it in the sun, it will be flat in 20 minutes. Why? Science. CO2 comes out of solution as a result of heat. Take that same open beer and put it in the fridge, and it will stay carbonated for a couple of hours."
I see a couple light bulbs going on over some people's heads. I explain it again: CO2 is produced after warming, it doesn't cause the warming.
I explain that even the eco-freaks concur that water vapor and clouds are the primary "green house gas", but they never bring that up. They'd sound pretty damned stupid calling for a ban on clouds.
Still, even though man only contributes one percent of the CO2 in the atmosphere, that is the target. On top of that, the developing world, most significantly China, produces 75% of the man-made CO2. So why do we want to cripple America?
We're back to the blank stares.
I sent a number of them an email this morning with a link to a documentary that shreds An Inconvenient Truth. If you haven't seen this, you need to do so now. It's an hour and 20 minutes, and it will open your eyes.
Full of facts, and when they do use projections and supposition, they tell you so. That is something that is sadly missing from the Global Alarmist propaganda.