July 10, 2010
Financial Briefing: Weekly Wrap-Up
— Monty The upswing continues in equities, leading the major indices the the best week in nearly a year. The S&P 500 ended the session up more than 7 points to close at 1,077.94, and the Dow closed up nearly 59 points at 10,197.65. At least my 401(k) isn't sucking wind quite as badly as it's done since, oh, April.... How the recession has changed American spending habits. I do know that I tend to hunt hobos locally now rather than going on safaris to Detroit or Cleveland, and I've started being rather more picky about which fences I will use for my stolen goods. I also tend to haggle more when hiring hit-men for jobs I cannot do myself. As the Baltic Dry Index (BDI) continues to plunge, everyone wonders what it means. I'm one of those Eeyores who thinks that it presages a major slowdown in industrial output, and thus in international trade. Do not fear the death-cross! Chart of the day. Check out the change in NYSE volume between 2003 and now. Great googly-moogly! This must be how the mouse feels when the shadow of the hawk darknens the sky...and then departs, passing the trembling little creature by. Where is the average Joe and Jane putting their money now that the stock market has gone bonkers? Back to the basics: bonds, gold, and cash. This would seem to argue against a sustained equities rally as no new money is entering the markets. Even South Korea has accepted the obvious and bumped the rates on their bonds. The worldwide QE binge is losing steam, with Uncle Sugar one of the last holdouts. Buyers of American debt might as well get used to zero coupon for a long while to come. I'm cuckoo for Cocoa Puffs! Screw gold, man -- I'm going to the store tonight and am buying every box of Cocoa Puffs and Cocoa Pebbles I can get my grubby mitts on. The newest players in the "stretegic default" confidence game? Rap moguls, hedge-fund managers, and dippy socialites. Perhaps you remember the sad tale of Mr. Chamillionaire, who found paying the mortgage on his $2 million property an onerous burden and decided to sink his savings into a llama-ranch in Peru instead. Amity Schlaes (who's been opinionating at a high rate the last few days) thinks that Bammer is really doing his best to emulate FDR, including all of FDR's worst mistakes. Obama is much like FDR in that he subscribes fully to the "class war" idea, in which the "soak the rich" approach is punitive as much as palliative. Like many Democrats, Obama sees the success of one person or firms not in terms of an absolute good, but as a burden on someone else. Ronald Reagan once said that a liberal couldn't see a fat man standing next to a thin man without thinking that the fat man had somehow taken advantage of the thin man, and that holds true with Obama as well. I am not a fan of James K. Galbraith, and articles like this are the reason why. Galbraith is a Statist and Keynesian, bone and blood, and sees "rule of law" mainly as a way of keeping the plebs in line. Note that while he inveighs against Wall Street's excesses and shouts for frog-marching CEOs of corrupt firms to the clink, he completely forgets to mention the K Street axis and connivance of folks like Barney Frank and Chris Dodd. He notes the greed of the financial whiz-kids in New York, but fails to note the stupidity and corruption in Washington, D.C. Like Krugman, Galbraith is a leftist political ideologue hiding behind an economics-professor facade. His faux populist sentiments about the poor man on the street (another trope right out of the Democrat playbook) make me want to puke. He is, in a word, a stooge -- a perfect apologist for this Administration. The de-valuing of men is one of the great cultural stories of our age, but probably will not be chronicled in full for many decades, if ever. The Great Recession hit men far harder than women for the simple reason that the various governments -- municipal, state, and federal -- made sure that women had support and quota structures that men did not have. Further, the recession hit those industries that men predominate in -- construction, manufacturing, finance -- while hitting service industries where women predominate much less. Women now outnumber men in the job market, 51%-49%, and the ratio is increasing. Yet there is no cry in Washington to provide an EEO for men; no shirt-rending at how men can't get an even break in a female-dominated world; no thumb-sucking editorials on how men can't break the "glass ceiling" with their gender-biased female bosses. I kid, but only a little: a civilization that marginalizes the input of males into the economy is not long for the world. We are only beginning to see the wages of this madness. (Men suffered disproportionately in the Great Depression as well. Another data point: women serve less time for comparable crimes than men do.) Via Insty, a very revealing chart. Jonah Goldberg posts a bracing piece on NRO about how institutional liberalism becomes paralyzed by mission-creep.
— Monty The upswing continues in equities, leading the major indices the the best week in nearly a year. The S&P 500 ended the session up more than 7 points to close at 1,077.94, and the Dow closed up nearly 59 points at 10,197.65. At least my 401(k) isn't sucking wind quite as badly as it's done since, oh, April.... How the recession has changed American spending habits. I do know that I tend to hunt hobos locally now rather than going on safaris to Detroit or Cleveland, and I've started being rather more picky about which fences I will use for my stolen goods. I also tend to haggle more when hiring hit-men for jobs I cannot do myself. As the Baltic Dry Index (BDI) continues to plunge, everyone wonders what it means. I'm one of those Eeyores who thinks that it presages a major slowdown in industrial output, and thus in international trade. Do not fear the death-cross! Chart of the day. Check out the change in NYSE volume between 2003 and now. Great googly-moogly! This must be how the mouse feels when the shadow of the hawk darknens the sky...and then departs, passing the trembling little creature by. Where is the average Joe and Jane putting their money now that the stock market has gone bonkers? Back to the basics: bonds, gold, and cash. This would seem to argue against a sustained equities rally as no new money is entering the markets. Even South Korea has accepted the obvious and bumped the rates on their bonds. The worldwide QE binge is losing steam, with Uncle Sugar one of the last holdouts. Buyers of American debt might as well get used to zero coupon for a long while to come. I'm cuckoo for Cocoa Puffs! Screw gold, man -- I'm going to the store tonight and am buying every box of Cocoa Puffs and Cocoa Pebbles I can get my grubby mitts on. The newest players in the "stretegic default" confidence game? Rap moguls, hedge-fund managers, and dippy socialites. Perhaps you remember the sad tale of Mr. Chamillionaire, who found paying the mortgage on his $2 million property an onerous burden and decided to sink his savings into a llama-ranch in Peru instead. Amity Schlaes (who's been opinionating at a high rate the last few days) thinks that Bammer is really doing his best to emulate FDR, including all of FDR's worst mistakes. Obama is much like FDR in that he subscribes fully to the "class war" idea, in which the "soak the rich" approach is punitive as much as palliative. Like many Democrats, Obama sees the success of one person or firms not in terms of an absolute good, but as a burden on someone else. Ronald Reagan once said that a liberal couldn't see a fat man standing next to a thin man without thinking that the fat man had somehow taken advantage of the thin man, and that holds true with Obama as well. I am not a fan of James K. Galbraith, and articles like this are the reason why. Galbraith is a Statist and Keynesian, bone and blood, and sees "rule of law" mainly as a way of keeping the plebs in line. Note that while he inveighs against Wall Street's excesses and shouts for frog-marching CEOs of corrupt firms to the clink, he completely forgets to mention the K Street axis and connivance of folks like Barney Frank and Chris Dodd. He notes the greed of the financial whiz-kids in New York, but fails to note the stupidity and corruption in Washington, D.C. Like Krugman, Galbraith is a leftist political ideologue hiding behind an economics-professor facade. His faux populist sentiments about the poor man on the street (another trope right out of the Democrat playbook) make me want to puke. He is, in a word, a stooge -- a perfect apologist for this Administration. The de-valuing of men is one of the great cultural stories of our age, but probably will not be chronicled in full for many decades, if ever. The Great Recession hit men far harder than women for the simple reason that the various governments -- municipal, state, and federal -- made sure that women had support and quota structures that men did not have. Further, the recession hit those industries that men predominate in -- construction, manufacturing, finance -- while hitting service industries where women predominate much less. Women now outnumber men in the job market, 51%-49%, and the ratio is increasing. Yet there is no cry in Washington to provide an EEO for men; no shirt-rending at how men can't get an even break in a female-dominated world; no thumb-sucking editorials on how men can't break the "glass ceiling" with their gender-biased female bosses. I kid, but only a little: a civilization that marginalizes the input of males into the economy is not long for the world. We are only beginning to see the wages of this madness. (Men suffered disproportionately in the Great Depression as well. Another data point: women serve less time for comparable crimes than men do.) Via Insty, a very revealing chart. Jonah Goldberg posts a bracing piece on NRO about how institutional liberalism becomes paralyzed by mission-creep.
Liberalism has become a cargo cult to the New Deal, but many of the achievements of the New Deal would be impossible now. Just try to get a Hoover Dam built today.Liberals also suffer from a profound historical ignorance, and what many of them think they know about FDR and the Great Depression is at best hagiographic, and at worst completely and utterly wrong. (Goldberg also gets off a nice shot at a favorite whipping boy of mine, Tom Friedman.) See, baby? Back then, nobody liked you. You were gawky, old-fashioned, a wallflower. You were't hip or "with it". Now? Everybody loves you, baby. They may smack-talk, but they're still admiring your curves. Those other girls were all flash and no substance; you're the one they want. I haven't given the Euro a shot to the nuts in a while, so let me rectify that right now. Pow! This is what comes of marrying your money rather than making it. NRO's Uncommon Knowledge is running an inteview with Michael Boskin and Edward Lazear, both former chairmen of the Council of Economic Advisers. It's worth a look, even though it will probably be familiar material to most of you already. I'm in the wrong business. Who knew that doing the Lord's work could be so remunerative? As Kratos reminds us oft and anon: Chaos always wins in the end. You cannot control markets, or even guide them, really -- all you can do is ride the river and hope the boat doesn't overturn. Yet more on the Microsoft KIN fiasco. This interests me on a deeper level than that of a simple product-failure, mostly because of what it says about the kind of company Microsoft is these days, versus how it sees itself and how it wishes to be seen by everyone else. Remember back in the 1995-1996 era when Apple couldn't even get arrested in the tech sector, and Microsoft was the company driving the technology ship forward? But then Microsoft's fortune has always been tied to the desktop PC; when that market goes down (as it's doing right now), then Microsoft goes right along with it. They've never broken out of the desktop-software paradigm, even with the XBox video-gaming console (which has been a money-loser for most of its life and is notorious for hardware problems). I expect that Microsoft will end up doing what IBM did and give up on packaging hardware and software for the masses, and try to become a pure services company. The US Department for Investigating the Completely Fucking Obvious (DICFO, or "dickfo", as we financial types call it) concludes that the US economy might "cool" just a bit. I'm going to pause here for a moment so you can catch your breath, or maybe get a drink of water. For the shock, you know. If you're a man (or a gay woman, I suppose), you know how it is when your wife or girlfriend comes out in a new dress and says, "How do I look in this?". You feel a sinking dread: do you tell the truth and say that the dress makes her ass look as big as a drive-in movie screen, or do you lie and say that she looks great in that dress? Any man with an ounce of the sense God gave him always takes the latter course. White lies of this kind are the foundation of successful relationships. Just ask Tim Geithner. Another "Whatever shall the Fed do?" thumbsucker from the drama-queens at CNBC. Basically, the Fed has two tools: lowering interest rates on the debt; and printing money. That's pretty much it. The first tool is used up: you can't reduce rates below zero. The second -- printing money, or inflation -- has already been used once (QE-1). The question now is whether to heat up the presses for QE-2. Inflation is low right now, but many of us naysayers aren't convinced that it's going to stay low over the long term, which is why we view another monetization move as pure madness. If money is disappearing into hoards rather than flowing freely, the Government has only itself to blame: get rid of the uncertainty, and build a more pro-business climate, and the money will come back. And you thought that I was guilty of labored economics metaphors? How about this one: The Lady Gaga Economy. Today's briefing brought to you by old-fashioned love.
Posted by: Monty at
04:09 AM
| Comments (73)
Post contains 1620 words, total size 13 kb.
2
Good Morning Monty
From the "Habits" link:
the bursting of the pre-recession housing and stock market bubbles has shrunk the wealth of the average American household by an estimated 20%, the deepest such decline in the post-World War II era, according to government data."
The newspapers like to print stuff like this but it is really meaningless for most people. So what if your house has declined in value as long as you are still living in it and are able to make the payments.
A decline in value only hurts people who churn houses for a living or people who are in occupations that require them to move a lot.
From the "Habits" link:
the bursting of the pre-recession housing and stock market bubbles has shrunk the wealth of the average American household by an estimated 20%, the deepest such decline in the post-World War II era, according to government data."
The newspapers like to print stuff like this but it is really meaningless for most people. So what if your house has declined in value as long as you are still living in it and are able to make the payments.
A decline in value only hurts people who churn houses for a living or people who are in occupations that require them to move a lot.
Posted by: Vic at July 10, 2010 04:16 AM (/jbAw)
3
Amity Schlaes (who's been opinionating at a high rate the last few days)
thinks that Bammer is really doing his best to emulate FDR...
She is not the only one. I recall the cover of Time magazine way back where they photo-shopped an old FDR photo with Obama and it was intended for praise.
http://tinyurl.com/2ud5yer
One wonders why they are not doing that now? Could it be because he IS doing the FDR "create a depression" thing?
She is not the only one. I recall the cover of Time magazine way back where they photo-shopped an old FDR photo with Obama and it was intended for praise.
http://tinyurl.com/2ud5yer
One wonders why they are not doing that now? Could it be because he IS doing the FDR "create a depression" thing?
Posted by: Vic at July 10, 2010 04:23 AM (/jbAw)
4
Put your money into incandescent bulbs. They won't be making them anymore.
Posted by: MarkD at July 10, 2010 04:23 AM (YhZfg)
5
Liberals also suffer from a profound historical ignorance, and what many
of them think they know about FDR and the Great Depression is at
best hagiographic, and at worst completely and utterly wrong.
Of course, everything written about the depression by the MFM is utterly wrong.
Of course, everything written about the depression by the MFM is utterly wrong.
Posted by: Vic at July 10, 2010 04:26 AM (/jbAw)
6
is a leftist political ideologue hiding behind an economics-professor facade
that's some pretty poor camouflage
that's some pretty poor camouflage
Posted by: Jean at July 10, 2010 04:27 AM (CPefM)
7
So what if your house has declined in value as long as you are still living in it and are able to make the payments.
Peter Schiff, in one of his lectures, said this about renting rather than owning (I'm paraphrasing): "I don't understand it when people say that I'm wasting my money on rent. I need somewhere to live! How can I "waste" money on that? That's like saying that I'm wasting air by breathing it." Your primary residence, your home, shouldn't be considered an asset, to my way of thinking -- it's a cost-center, not a profit-center. It's part of the cost of living in the world, whether you rent or buy.
In fact, I think if I had to do it over again, I'd rent rather than buy. When you rent, you can just call the owner or super if something breaks. If you own, you either have to do it yourself or pay to have it done. Upkeep never stops when you own a house. The mortgage is only part of the cost -- figure in taxes, utilities, and general upkeep, and you can add 50% or more to your mortgage payment as "housing expenses". And now that the tax break on mortgage debt is about to go away, that's yet another reason to rent rather than buy.
Posted by: Monty at July 10, 2010 04:27 AM (jM/Et)
8
The first tool is used up: you can't reduce rates below zero.
Why not? If there is enough uncertainty in the rest of the world - a modest negative interest rate for a liquid safe harbor could have a certain appeal. At the current low rates, the effective value of money invested in the US is negative (with transaction fee, taxes, etc.) until a significant volume is realized, and yet they still come.
At the interbank level it would look like another fee for dealing with the Treasury, can't be any worse then paying Goldman.
Why not? If there is enough uncertainty in the rest of the world - a modest negative interest rate for a liquid safe harbor could have a certain appeal. At the current low rates, the effective value of money invested in the US is negative (with transaction fee, taxes, etc.) until a significant volume is realized, and yet they still come.
At the interbank level it would look like another fee for dealing with the Treasury, can't be any worse then paying Goldman.
Posted by: Jean at July 10, 2010 04:32 AM (CPefM)
9
'pull quote'. You're like as good as Connections. Thx.
Posted by: vqosf at July 10, 2010 04:33 AM (lqec/)
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'pull quote';unbeatable. ur like as good as Connections, just shorter. Thx
Posted by: July 10 at July 10, 2010 04:36 AM (p1dtv)
12
I rented myself for a number of years Monty. My take is that renting is like many things as far as the bottom line goes; it depends on the circumstances.
If the renter keeps his/her charges low compared to the average market value for a mortgage it is a good deal on a temporary basis. However, if the renter is smart they will adjust their rent to match or nearly match the market. IOW, if you have a house you are renting and and if it were sold under the standard 25 year mortgage at $750/month then that is what you rent it out for. Where they make their money is that if they have owned the house for a while it would have been nowhere near that amount originally.
There are only a few areas of the country where housing values have dropped greatly. They have hardly changed at all here. So yes, if you buy your house you are stuck with repair costs taxes etc. But smart renters factor that into the price of the rent as well.
The bottom line is that if you rent you are building equity in someone else's name. My opinion is that you should only rent until you build enough cash for a downpayment or if you are in a job that requires frequent moves from city to city.
If the renter keeps his/her charges low compared to the average market value for a mortgage it is a good deal on a temporary basis. However, if the renter is smart they will adjust their rent to match or nearly match the market. IOW, if you have a house you are renting and and if it were sold under the standard 25 year mortgage at $750/month then that is what you rent it out for. Where they make their money is that if they have owned the house for a while it would have been nowhere near that amount originally.
There are only a few areas of the country where housing values have dropped greatly. They have hardly changed at all here. So yes, if you buy your house you are stuck with repair costs taxes etc. But smart renters factor that into the price of the rent as well.
The bottom line is that if you rent you are building equity in someone else's name. My opinion is that you should only rent until you build enough cash for a downpayment or if you are in a job that requires frequent moves from city to city.
Posted by: Vic at July 10, 2010 04:37 AM (/jbAw)
13
The IBD asks, "Why so gloomy, chum?" Answer: because things suck, and will continue to suck until sanity returns to Washington.
Posted by: Monty at July 10, 2010 04:39 AM (jM/Et)
14
Via Forbes, "A Masterpiece of an Economic Mess". From the article:
"Another worry, the U.K. banks' largest counterparties on the collateralization of derivatives are hedge funds who may also be highly leveraged. "UK banks," says the Bank of England, "need to maintain resilience in a difficult environment while refinancing substantial sums of funding." As banks go, so goes the economy. Add in an increased value-added tax on consumer purchases, and you have a slowdown with bite."
Posted by: Monty at July 10, 2010 04:44 AM (jM/Et)
15
And last of all, Darla and Alfalfa. Tragically both died young.
Posted by: Vic at July 10, 2010 04:45 AM (/jbAw)
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Monty- since your knowledge on all things financial is light-years ahead of mine, can you explain just what is keeping CA afloat? For months we've been hearing that they're "on the brink" but it doesn't look like they've actually taken the plunge.
Thanks!
Thanks!
Posted by: Gran at July 10, 2010 04:46 AM (kmmbv)
17
vic - your only building equity if the value of the house increases faster then the cumulative costs of maintenance, inflation, and taxes, or the property produces income.
Duplexes, rural property in which you can lease out the land to farmers, etc. seem like a better "investment". I'm not sure how current tax law treats this - but renting in a high wage (and thus high cost area) while buying in a low cost area with the purchased property being a primary residence and the rental being a work "expense" - seems like the best of both worlds.
Duplexes, rural property in which you can lease out the land to farmers, etc. seem like a better "investment". I'm not sure how current tax law treats this - but renting in a high wage (and thus high cost area) while buying in a low cost area with the purchased property being a primary residence and the rental being a work "expense" - seems like the best of both worlds.
Posted by: Jean at July 10, 2010 04:50 AM (CPefM)
18
What's all the doom and gloom talk ? We're doing quite well in this economy, I must say. Bling,bitches !
Posted by: BHOoming at July 10, 2010 04:52 AM (kMLW9)
19
Monty- since your knowledge on all things financial is light-years ahead of mine, can you explain just what is keeping CA afloat?
Basically? Nothing. They are broke. Busted. Tapped out.
A US state cannot print money, so the only way they can pay bills is to raise tax revenue. California has a huge economy -- if it were a country, it would be the seventh-largest economy in the world -- so it has massive tax-revenues. But it also spends more than it takes in. Not by a lot, actually -- less than most states. What kills California is public-sector spending (on public employees and their pensions), and indebtedness. California is groaning under a huge raft of bond-based debt that has to be rolled at low rates of interest as it matures; otherwise, taxes must skyrocket to service the debt.
It's spending and debt, not liquidity so much. It's like I've always said at the Federal level: it's better to have a $500 billion government with $500 billion in debt than a $1 trillion government with no debt.
Posted by: Monty at July 10, 2010 04:53 AM (jM/Et)
20
Obama is such an ignoramus. As Waldo said to Darla in the Little Rascals, he has "the sophistication of a woman of twelve."
Posted by: Empire of Jeff at July 10, 2010 04:53 AM (5I/OY)
21
I refer to this economy as the Tesla Earthquake Machine Economy in which everything is resonantly shaken to pieces.
Posted by: Circa (Insert Year Here) at July 10, 2010 04:56 AM (6GoV8)
22
The mancession is indeed troubling. I'm sure whiskey will have a big essay to post if he sees this, so I'll leave that to him. The short version is that an often overlooked aspect of our redistributive government programs is the massive transfer of income from men to single women, functioning as a "surrogate husband." Feminism's "strong, independent women" are being propped up by the nanny state. Another aspect of this is the harsh, dismissive treatment of male-dominated industries like oil drilling, coal mining, and construction versus the endless coddling of female-dominated (and largely government-managed) industries like education, health care, and (increasingly) legal services. The core democrat constituency isn't minorities or gays, it's single women and the white knights who protect them.
Posted by: the peanut gallery at July 10, 2010 04:57 AM (mg/vv)
23
vic - your only building equity if the value of the house increases
faster then the cumulative costs of maintenance, inflation, and taxes,
or the property produces income.
Not true. You always build equity unless the price of the house drops faster than the equity you put in. As I said earlier, all of those other costs are being paid if you rent as well. You just don't see them as they are hidden costs. And the housing price drop has been concentrated in CA, NY, and FL. Those places that had the huge bubble.
Rental being a work expense can only be done if the rental property is for the business and you are filing as a subchaper S. Personal residence expenses are not tax deductable or a legitimate business expense.
And I would say that it is rare that you would be able to have a low housing cost area in a high wage area. Keep in mind the first law of real estate; location, location, location. Prices go up as demand occurs. High wages brings in workers and workers bring in the demand,
Not true. You always build equity unless the price of the house drops faster than the equity you put in. As I said earlier, all of those other costs are being paid if you rent as well. You just don't see them as they are hidden costs. And the housing price drop has been concentrated in CA, NY, and FL. Those places that had the huge bubble.
Rental being a work expense can only be done if the rental property is for the business and you are filing as a subchaper S. Personal residence expenses are not tax deductable or a legitimate business expense.
And I would say that it is rare that you would be able to have a low housing cost area in a high wage area. Keep in mind the first law of real estate; location, location, location. Prices go up as demand occurs. High wages brings in workers and workers bring in the demand,
Posted by: Vic at July 10, 2010 04:58 AM (/jbAw)
24
or people who are in occupations that require them to move a lot.
Even if the occupation doesn't require mobility, you have a better chance of finding a new job after lay-off if you're able/willing to move. 50% of all new private-sector jobs created last year were in Texas... I completely understand why the folks sitting around Janesville complaining that the GM plants closed don't want to move six states away from Grandma (where the weather's shitty 11 months out of the year and there are no fried cheese curds), but I don't think they understand they're choosing to limit their own incomes/opportunities. And I resent being expected to give up my own income/opportunities to support their lifestyle choice through taxes on myself and businesses that won't hire me because they no longer have the means to expand.
Even if the occupation doesn't require mobility, you have a better chance of finding a new job after lay-off if you're able/willing to move. 50% of all new private-sector jobs created last year were in Texas... I completely understand why the folks sitting around Janesville complaining that the GM plants closed don't want to move six states away from Grandma (where the weather's shitty 11 months out of the year and there are no fried cheese curds), but I don't think they understand they're choosing to limit their own incomes/opportunities. And I resent being expected to give up my own income/opportunities to support their lifestyle choice through taxes on myself and businesses that won't hire me because they no longer have the means to expand.
Posted by: HeatherRadish at July 10, 2010 05:00 AM (M9BNu)
25
I do know that I tend to hunt hobos locally now rather than going on
safaris to Detroit or Cleveland, and I've started being rather more
picky about which fences I will use for my stolen goods. I also tend to
haggle more when hiring hit-men for jobs I cannot do myself.
Monty, you are starting to sound like one of those Jooo peoples.
Monty, you are starting to sound like one of those Jooo peoples.
Posted by: Kemp at July 10, 2010 05:00 AM (2+9Yx)
26
Gran,
There are basically two finds of financial crises: liquidity crunches (not enough cash for short-term obligations), and solvency problems (you're not generating any income).
Let's say that you have a gas bill that is due on Tuesday in the amount of $80.00, but you don't have any money and you don't get paid until Friday. This is a liquidity problem -- you cannot pay the bill when it is due, but you will have money later. Credit exists to solve liquidity problems like this -- you borrow money to pay the gas bill, and pay the lender a premium (interest) for the risk they take. The gas bill "costs" you more (because you have to pay a premium on the loan), but then again you don't go into default or have your gas turned off.
A solvency crisis is much more severe. That's when you can't pay your gas bill (or your electric bill, or your mortgage) because you lost your job. You have no income. Your business model is broken. A lender in this case probably wouldn't help you because with no job, how would you pay the loan back? Your only option in some cases is to default (declare bankruptcy), discharge your debts, and start over again at zero.
States don't operate in exactly this way, of course -- for one, they can't legally go bankrupt (although municipalities can, and do). But California right now is facing a solvency problem: they aren't generating enough income to cover their obligations. Their only recourse is either to raise capital by selling assets or to raise taxes. But given the size of the hole they're on, and the scope of future obligations like public pensions, it's unlikely they'll be able to cover their debt. I see a default, inevitably, which would probably mean a Federal bailout.
Illinois is another basket-case with the same kinds of problems.
Posted by: Monty at July 10, 2010 05:01 AM (jM/Et)
27
Thanks Monty!
I'm even more grateful for Chris Christie now, as he's managed to balance the NJ budget and he's also trying to get spending on the public employee unions under control.
I'm even more grateful for Chris Christie now, as he's managed to balance the NJ budget and he's also trying to get spending on the public employee unions under control.
Posted by: Gran at July 10, 2010 05:01 AM (kmmbv)
28
Basically? Nothing. They are broke. Busted. Tapped out.
Yep, my theory is that the holders of CA's paper are scared to call for redemption and they are quietly rolling it along at the current rate as it comes due.
They are praying for a federal bailout and hiding the fact that a default is likely because when the first one goes the flood gates will open and the impact on the large institutional investors will be catastrophic.
Yep, my theory is that the holders of CA's paper are scared to call for redemption and they are quietly rolling it along at the current rate as it comes due.
They are praying for a federal bailout and hiding the fact that a default is likely because when the first one goes the flood gates will open and the impact on the large institutional investors will be catastrophic.
Posted by: Vic at July 10, 2010 05:01 AM (/jbAw)
29
Ronald Reagan once said that a liberal couldn't see a fat man standing
next to a thin man without thinking that the fat man had somehow taken
advantage of the thin man . . .
You bastard, Oliver.
You bastard, Oliver.
Posted by: Stan Laurel at July 10, 2010 05:04 AM (7+pP9)
30
vic - so buy in a low wage/low cost area (rural redoubt, and ease the back 40 out to a farmer) and live in an expensed hotel room in the high wage area, right.
Isn't it the price of your equity and the rate of inflation. I'm not sure the same investment model that worked with a demographic bubble works when that glut of houses is sitting on the market and the boomers all want managed care with free applesauce and a nurse to wipe their ass.
Isn't it the price of your equity and the rate of inflation. I'm not sure the same investment model that worked with a demographic bubble works when that glut of houses is sitting on the market and the boomers all want managed care with free applesauce and a nurse to wipe their ass.
Posted by: Jean at July 10, 2010 05:05 AM (CPefM)
31
Sigh. I knew as soon as I saw "mancession" the thread would devolve. peanut gallery, don't conflate "single women" with "uneducated mothers of illegitimate children." It's dishonest. None of the single women who read/post here are taking "wealth transfers" from you or anyone else.
Posted by: HeatherRadish at July 10, 2010 05:06 AM (M9BNu)
32
And I resent being expected to give up my own income/opportunities to
support their lifestyle choice through taxes on myself and businesses
that won't hire me because they no longer have the means to expand.
I assume you are talking about an increase in federal taxes to pay for someone's choice to "not move". I agree.
I assume you are talking about an increase in federal taxes to pay for someone's choice to "not move". I agree.
Posted by: Vic at July 10, 2010 05:06 AM (/jbAw)
33
I'm not sure the same investment model that worked with a demographic
bubble works when that glut of houses is sitting on the market and the
boomers all want managed care with free applesauce and a nurse to wipe
their ass.
You are missing the point. It is really not an "investment model" as much as a living expense that allows you to build equity as you live.
This thing on the decline in value is rare and is a result of an artificial bubble created by federal interference in the markets. And it still is only a significant problem in 3 States, CA, NY, and FL. (maybe IL as well but I am not sure on that one).
And the old folks are going to want some kind of retirement regardless of whether they rent or buy.
You are missing the point. It is really not an "investment model" as much as a living expense that allows you to build equity as you live.
This thing on the decline in value is rare and is a result of an artificial bubble created by federal interference in the markets. And it still is only a significant problem in 3 States, CA, NY, and FL. (maybe IL as well but I am not sure on that one).
And the old folks are going to want some kind of retirement regardless of whether they rent or buy.
Posted by: Vic at July 10, 2010 05:11 AM (/jbAw)
34
None of the single women who read/post here are taking "wealth transfers" from you or anyone else.
I hope you don't think that I'm making that point, Heather. My point is simply that men have had a rougher time not just because they tend to be employed in the hardest-hit sectors of the economy, but also because they get zero support from the government. Women, contrarily, have many avenues of support before, during, and after landing a job. Uncle Sam is their Dutch Uncle, you might say.
A good example of this is how government officials always are complaining that women are "underrepresented" in IT, and spend billions each year to "rectify" that "problem". Yet women vastly outnumber men in fields like nursing, education, and other fields; yet the government couldn't care less. Family law is still outrageously tilted towards women; marriage places a far more onerous burden on men than women, in financial terms.
I'm just saying that the perception that women are still a trodden-down minority is a myth.
Posted by: Monty at July 10, 2010 05:11 AM (jM/Et)
35
"peanut gallery, don't conflate "single women" with "uneducated mothers
of illegitimate children.""
It's not just the "welfare queens" who are beneficiaries of government largesse, though. Government employees are disproportionately female, and heavily government-financed sectors like health care and education are also disproportionately female. These are the sectors where stimulus money was concentrated. I'm not trying to scapegoat single women, just pointing out that they are often overlooked as a key voting bloc with identifiable interests. The "marriage gap" is well documented.
It's not just the "welfare queens" who are beneficiaries of government largesse, though. Government employees are disproportionately female, and heavily government-financed sectors like health care and education are also disproportionately female. These are the sectors where stimulus money was concentrated. I'm not trying to scapegoat single women, just pointing out that they are often overlooked as a key voting bloc with identifiable interests. The "marriage gap" is well documented.
Posted by: the peanut gallery at July 10, 2010 05:11 AM (mg/vv)
36
Posted by: HeatherRadish at July 10, 2010 09:06 AM (M9BNu)
Heather, I think "peanut gallery" is one of our resident long time trolls.
Heather, I think "peanut gallery" is one of our resident long time trolls.
Posted by: Vic at July 10, 2010 05:12 AM (/jbAw)
37
vic - I bring this up because I know several people who live in SC and commute weekly to DC. They rent small places in DC and write them off. As Government employees, how are they doing this?
Posted by: Jean at July 10, 2010 05:14 AM (CPefM)
38
They rent small places in DC and write them off. As Government
employees, how are they doing this?
Politicians have written some special stuff in the codes for legislators and their staff. Those don't apply to 99.9% of the rest of the population.
Politicians have written some special stuff in the codes for legislators and their staff. Those don't apply to 99.9% of the rest of the population.
Posted by: Vic at July 10, 2010 05:18 AM (/jbAw)
39
#36
Not a very impressive one.
I pay good money to read this blog; why can't we get a better class of trolls? Or at least ones that don't just regurgitate nonsensical talking points and cut and paste from their high school sociology papers?
Not a very impressive one.
I pay good money to read this blog; why can't we get a better class of trolls? Or at least ones that don't just regurgitate nonsensical talking points and cut and paste from their high school sociology papers?
Posted by: NJConservative at July 10, 2010 05:19 AM (LH6ir)
40
"Heather, I think "peanut gallery" is one of our resident long time
trolls."
Jesus, I'm not a troll just because I occasionally make points that are outside of the mainstream milquetoast conservative consensus. It's not like I'm some lib who comes around to taunt you when things go awry.
Jesus, I'm not a troll just because I occasionally make points that are outside of the mainstream milquetoast conservative consensus. It's not like I'm some lib who comes around to taunt you when things go awry.
Posted by: the peanut gallery at July 10, 2010 05:20 AM (mg/vv)
41
vic - the retiring boomers are not going to want 5 bedroom houses in Sandusky. They want smaller, easier to care for places, in areas that are tax friendly for retirement income. With a smaller working population there has to be a regoinal contraction in the housing market.
I was in Central PA recently - houses are going for 30K. That is less in unadjusted dollars then they cost in the 1970s. People are buying houses that cost less then their car - and the little real estate paper is full of them and the city is trying to tear down whole stretches of them.
I was in Central PA recently - houses are going for 30K. That is less in unadjusted dollars then they cost in the 1970s. People are buying houses that cost less then their car - and the little real estate paper is full of them and the city is trying to tear down whole stretches of them.
Posted by: Jean at July 10, 2010 05:22 AM (CPefM)
42
I'll show you some financing! I told those peoples I saved the moneys.
Now, with my Al Greene Action Figures, I going to be RICH!!
I hates that those peoples opposing mes had to read dis.
http://tinyurl.com/29epat3
Now, with my Al Greene Action Figures, I going to be RICH!!
I hates that those peoples opposing mes had to read dis.
http://tinyurl.com/29epat3
Posted by: Alvin, the candidate, not the Chimpmunk at July 10, 2010 05:23 AM (2+9Yx)
43
vic @ 38, they are regular run of the mill SES'ers and GS schedule types - not legislative staff.
Posted by: Jean at July 10, 2010 05:24 AM (CPefM)
45
I was in Central PA recently - houses are going for 30K.
Was that inside the city limits? Particularly a large city?
Again, its is location location location. You can get a house in Detroit for a 100 bucks right now. There are locations inside the city limits here where you can get a 1500 sq ft house for 50K where the same house outside the city limits would be $150K.
It wasn't that way in the early 70s (at least here from what I'm told) because the cities had not yet shit in their beds and made them unlivable.
And I wouldn't mind having a 5 bedroom house in Sandusky myself although I wouldn't like the taxes probably.
You have to look at the overall averages for a given area and what the prices are doing.
Was that inside the city limits? Particularly a large city?
Again, its is location location location. You can get a house in Detroit for a 100 bucks right now. There are locations inside the city limits here where you can get a 1500 sq ft house for 50K where the same house outside the city limits would be $150K.
It wasn't that way in the early 70s (at least here from what I'm told) because the cities had not yet shit in their beds and made them unlivable.
And I wouldn't mind having a 5 bedroom house in Sandusky myself although I wouldn't like the taxes probably.
You have to look at the overall averages for a given area and what the prices are doing.
Posted by: Vic at July 10, 2010 05:32 AM (/jbAw)
46
vic @ 38, they are regular run of the mill SES'ers and GS schedule types
- not legislative staff.
They have either found a loophole somewhere or they are cheating.
They have either found a loophole somewhere or they are cheating.
Posted by: Vic at July 10, 2010 05:33 AM (/jbAw)
47
I agree it's location - but people can move, houses can't. How can you build equity in an area that is losing population or has an aging population that doesn't want a house with a swing set and three flights of stairs. Equity has to collapse, at least regionally.
Posted by: Jean at July 10, 2010 05:36 AM (CPefM)
48
Darla and Alfalfa. Tragically both died young.
Right after that picture was taken as a matter of fact. They were eaten by snakehead fish.
Right after that picture was taken as a matter of fact. They were eaten by snakehead fish.
Posted by: Ostral B Heretic at July 10, 2010 05:40 AM (QeWQ8)
49
I sent this in to the tips the other day hoping Monty or someone would pick it up but I guess it was overlooked. Interesting reading. Don't tell me they might be hiding something. No, not this White House. http://tinyurl.com/22te89s
Posted by: Pocono Joe at July 10, 2010 05:40 AM (DstWq)
50
O/T: Possible eco-terrorism in Houston? http://tinyurl.com/25k5rje
Posted by: Countrysquire at July 10, 2010 05:40 AM (7ulWa)
51
Gotta go, big 4 O doctors appt. - my wife now understands why I wasn't so upset when our old doctor semi-retired and hired a young Asian girl doctor with tiny little fingers into the practice. Not sure I'll respect her in the future, but they insist.
Posted by: Jean at July 10, 2010 05:41 AM (CPefM)
52
How can you build equity in an area that is losing population or has an
aging population that doesn't want a house with a swing set and three
flights of stairs.
If the State or local area has a net migration out, yes housing prices will fall. That is bad news again for States like NY and CA. But again, that is location location location.
My neighbor in the house behind me moved into their house a few years ago (before the collapse). They are an elderly black couple from NY who had retired (like you said) and left NY and came South. They may have actually lost money on the sale of their house in NY but the difference in house prices for NY and SC enabled them to buy a large house here with something NY doesn't have, a large lot.
If the State or local area has a net migration out, yes housing prices will fall. That is bad news again for States like NY and CA. But again, that is location location location.
My neighbor in the house behind me moved into their house a few years ago (before the collapse). They are an elderly black couple from NY who had retired (like you said) and left NY and came South. They may have actually lost money on the sale of their house in NY but the difference in house prices for NY and SC enabled them to buy a large house here with something NY doesn't have, a large lot.
Posted by: Vic at July 10, 2010 05:41 AM (/jbAw)
53
my wife now understands why I wasn't so upset when our old doctor
semi-retired and hired a young Asian girl doctor with tiny little
fingers into the practice
LOL, tiny fingers. Much better for the old prostate check.
LOL, tiny fingers. Much better for the old prostate check.
Posted by: Vic at July 10, 2010 05:42 AM (/jbAw)
55
One more item on the rent vs buy equity issue. Even if you lose some of your money in equity, it is better that ls better than losing ALL your money in equity renting.
Posted by: Vic at July 10, 2010 05:46 AM (/jbAw)
56
O/T:
I've noticed Ace lecturing, scolding, and bringing out the banhammer again. This time for advocating violence, but in the past for excessive cursing, and further back for making unfunny jokes....I know there's more, but alcohol's long term effects on my long term memory....
This is disheartening, because Ace's place is the last reasonable blog left where you can rant and vent, and sometimes those emotionally driven purges are politically incorrect, rude, or even vile. But they do express a feeling at the moment, and I for one don't like when they are silenced.
In almost every other social circumstance, we conservative/libertarian types have to bite our tongues while the other side goads us, mocks us, provokes us, and threatens us. And by the other side, I mean the Administration, the MFM, and the 40% of the 52% that put this Adm in power. That's quite a group to have allayed against you, and at the end of the day, it's nice to have a place where you can purge the built up venom.
Now, I realize that this blog is not my property, and Ace is free to do as he wishes. I also realize that advocating racial violence isn't just foolish, but morally wrong. So I may be picking nits here, but Ace's anger seemed to be directed at any who would advocate violence for most any reason. I'm not going back to grab quotes, but something along the order of "you fucknuts that wanna grab a gun every time something doesn't go your way have no place here" is about what I took from it.
Sure, Ace has the right to "class up" the place as he see fit, and to purge dissent at his discretion, but if we have to self-censor, constantly going back and striking potentially offensive material from our posts, then Ace of Spades takes one more step in the direction of LGF and HA, two other places I'll not go unless linked to.
BTW Monty, between the financial updates and the reading lists, you strike me as a George Will kind of guy. Only cooler. Your posts have been a nice addition.
Posted by: OneEyedJack at July 10, 2010 05:49 AM (Poe30)
57
That picture sure ain't from the original "Our Gang" or "Little Rascals". Probably from a stupid, shitty remake. Another Hollywood "original" idea.
Posted by: Pocono Joe at July 10, 2010 05:50 AM (DstWq)
58
This is disheartening, because Ace's place is the last reasonable blog
left where you can rant and vent, and sometimes those emotionally driven
purges are politically incorrect, rude, or even vile.
The banhammer yesterday was for racially motivated violence talk. He has long made it abundantly clear that he will not tolerate racism or calls for revolution or violence. I have no sympathy for those banned under those conditions at all. Perhaps he should post a link in part of the side bar to the "rules" so newbies can read up on them and oldies can refresh their memory.
Sure, Ace has the right to "class up" the place as he see fit, and to purge dissent at his discretion....
I have never seen Ace ban anyone for dissent or disagreeing. I quite often disagree with him on some political points and we have an active discussion but never once has he even mentioned the banhammer for that.
The banhammer yesterday was for racially motivated violence talk. He has long made it abundantly clear that he will not tolerate racism or calls for revolution or violence. I have no sympathy for those banned under those conditions at all. Perhaps he should post a link in part of the side bar to the "rules" so newbies can read up on them and oldies can refresh their memory.
Sure, Ace has the right to "class up" the place as he see fit, and to purge dissent at his discretion....
I have never seen Ace ban anyone for dissent or disagreeing. I quite often disagree with him on some political points and we have an active discussion but never once has he even mentioned the banhammer for that.
Posted by: Vic at July 10, 2010 05:55 AM (/jbAw)
60
Monty, your Rent v. Own arguement maybe should be Rent v. Mortgage. I paid my house off just after the 2008 election. Since I lost my job in Jan. I am sitting here with no rent or mortgage, just a nice paid off house. Being over 59 1/2 I converted my 401k to an income fund which more than covers property tax and other big bills, so my wife and I can live on her wages and my funemployment check. Won't last forever like that, but it sure puts oil on rough seas, maybe an unfortunate metaphor considering the Gulf lately, but it makes survival a lot easier. This recession seems to have hit older guys like me harder than previous ones I remember, but then again using a little intelligence and forethought has enabled us to ride it out better than if we were in our 30's or 40's. Kinda sucks to be young right now, though.
Posted by: bigred at July 10, 2010 05:59 AM (uh7Ap)
61
Hell, a blind man could see that the banhammer was coming for "that person".
Posted by: awkward davies at July 10, 2010 06:05 AM (B4e7Q)
62
My point was that in the not too recent past, a beat-down from the morons would have ran that guy out, or at least made it clear that his opinion wasn't gaining any traction here. Troll beatings made life here more fun. And preserved truly free expression.
I know Ace feels some pressure to make clear His opinion, as operatives from lefty sites have come to right leaning blogs, leave incendiary posts, and then use those posts to disparrage the site. This puts right leaning blogs in a tight spot, to be sure, but I still liked it better when the moron "street" took care of business.
Posted by: OneEyedJack at July 10, 2010 06:12 AM (Poe30)
63
Done..... I'm not looking to thread jack, and I've yard work calling me.
Posted by: OneEyedJack at July 10, 2010 06:14 AM (Poe30)
64
Heather, a number of those guys in Janesville have taken work in Kansas City, carpooling and rent pooling to keep working. Kinda sucks for them, but they are working and not having to pull up stakes to do so. Anything you can do to ride it out is worth it.
Posted by: bigred at July 10, 2010 06:16 AM (uh7Ap)
65
???? Sure it is.
Posted by: Vic at July 10, 2010 09:57 AM (/jbAw)
Come on Vic, I'm an old bastard so I know my old shit. You made me do it. I found the same picture on a site for a 1994 remake. That doesn't really look like Darla, that's the giveaway.
Posted by: Pocono Joe at July 10, 2010 06:16 AM (DstWq)
66
OK I found the source of that picture. It is the new one. Sorry.
Posted by: Vic at July 10, 2010 06:21 AM (/jbAw)
67
You wingers are so obsessed with everything ant-Obama you're turning off the rest of America.
This is how the majority of Americans view our president (from the LA Times):
Obama has led what historians have called the most productive Congress since President Lyndon Johnson . . .
So go ahead and keep on whining. It'll only add to the Democrat majorities this November.
This is how the majority of Americans view our president (from the LA Times):
Obama has led what historians have called the most productive Congress since President Lyndon Johnson . . .
So go ahead and keep on whining. It'll only add to the Democrat majorities this November.
Posted by: I Luvs Obama at July 10, 2010 06:26 AM (7+pP9)
68
and I'm a troll for pointing out who benefits from big gov't...
Posted by: the peanut gallery at July 10, 2010 06:29 AM (mg/vv)
69
Posted by: I Luvs Obama at July 10, 2010 10:26 AM (7+pP9)
Productive 1 : having the quality or power of producing especially in abundance
In terms of shit, cows have the same ability.
Posted by: Pocono Joe at July 10, 2010 06:39 AM (DstWq)
70
How will LeBron's decision play out? Perfect. Multiple titles in Miami Flop. Lakers will beat him in 2011 Finals Huge flop. Heat won't get to 2011 Finals He'll win ring but be Cleveland's biggest villain
Here's a poll from USA today. I notice "Who Gives a shit is not an option.
How will LeBron's decision play out? Perfect. Multiple titles in Miami Flop. Lakers will beat him in 2011 Finals Huge flop. Heat won't get to 2011 Finals He'll win ring but be Cleveland's biggest villain
Here's a poll from USA today. I notice "Who Gives a shit is not an option.
Posted by: kansas at July 10, 2010 07:00 AM (mka2b)
71
Obama has led what historians have
called the most productive Congress
since President Lyndon Johnson . . .
Indeed. It's the product that sux.
Indeed. It's the product that sux.
Posted by: toby928 at July 10, 2010 08:07 AM (4WbTI)
72
In fact, I think if I had to do it over again, I'd rent rather than buy.
Sounds good, but we have to leave our current home after only one year, because the owner is selling and we can't afford to buy it. It's so frustrating to have to go through all the hassle and expense of moving again, when we thought we were settled here for a while.
Sounds good, but we have to leave our current home after only one year, because the owner is selling and we can't afford to buy it. It's so frustrating to have to go through all the hassle and expense of moving again, when we thought we were settled here for a while.
Posted by: Barb the Evil Genius at July 10, 2010 08:13 AM (5aVkt)
73
This is how the majority of Americans view our president
"All in all, are you satisfied or dissatisfied with the way things are going in this country today?"
6/24-27/10 Satisfied: 27% Dissatisfied: 64%
It's science.
"All in all, are you satisfied or dissatisfied with the way things are going in this country today?"
6/24-27/10 Satisfied: 27% Dissatisfied: 64%
It's science.
Posted by: toby928 at July 10, 2010 08:15 AM (4WbTI)
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Posted by: dfbaskwill at July 10, 2010 04:13 AM (ndlFj)