Saturday, October 11, 2008
There's a piece of the mortgage crisis that everyone seems to be overlooking or discounting.
Real estate prices (I refuse to say values) shot way up over the past few years. The reason was the ease of obtaining credit. It used to be that you could obtain a mortgage commensurate with your ability to pay. If you had a certain income, the banks would tell you that you could afford, say, a $150,000 house, and that was that. When you went shopping, you looked at $150,000 houses. If you were selling a house, you had to be careful not to overprice it, so you wouldn't price yourself out of the market.
And then suddenly, mortgages got easier to qualify for. On the same salary as above, you could get a $200K, or $500K mortgage. So that's the size house you looked for.
Most people really don't have a realistic idea of what they can afford. They don't plan for a crisis. And real estate prices were going up, so they figured that if it turned out that they couldn't afford it, well, they'd just sell it and walk away with a profit. Nobody ever loses money on a house, right?
Well, with looser money, the folks who sell houses realized they may as well get some of that, too. So the prices on houses rose. The same folks who used to buy a $150K house are now shopping for a $250K house, so the house that used to sell for $150K is now priced at $250K. A market-driven inflation. (Not so suddenly, of course, but the movement was inevitable and inexorable, but not inexplicable. It should have been expected.)
In some areas of the country now, it's not unusual to find a four room "fixer-upper" on 1/6 acre in a bad neighborhood listed at $300K. This is patently ridiculous. It's a "deal" only because everything else around it is priced higher.
Home prices were rising faster than salaries. Defaults were rife. Now there are "bank owned" properties on the market, selling for less than average, so it's bringing averages down. It could be a good deal for buyers, except that if they have to sell one house to buy another, they can't.
I see another problem brewing.
Lenders are going to get tougher. You're going to have to really qualify for that mortgage. The banks, having been burned, are now going to tell you that you qualify for only $150K again. But anyplace you'd want to live is priced higher than that, so the real estate market is going to drop. The original $150K house will eventually drop to $150K, because the trough is empty.
This will be good news for buyers.
This will be very bad news for homeowners and sellers.
If you had bought a home with a mortgage in the past five years, you're going to find your house is worth less on the market than you owe on it. Your equity is negative. You won't be able to refinance it, and you'll take a loss on selling it. And if you've been conscientiously making the payments, the government is unlikely to help you.
You are screwed.
This cracked me up, especially 3:13. Not safe for work, unless you turn the volume down, but then you'd miss it all. Her language would get her spanked in my house, nice-looking young lady or not, but the message is funny.
Friday, October 10, 2008
I've been watching the charts for the various stock market indices, and I noticed something odd. Every day, they start out low, drop lower through the morning and early afternoon until they hit an extreme low, then they start climbing again! They climb steadily until about 4:30 pm, then they quickly drop halfway again - and that's where they start the same pattern the next day.
I think I know what's happening. People who are panicking are selling off. That's what causes the early fall. It's a bit annoying to me that when the news outlets report the activity, they report the low point for the day, without mentioning the rise. That only contributes to more panic.
Then the folks who see this as an opportunity wait until prices fall about as low as they're going to fall, and they start buying. That's what bumps it back up.
A lot of people are going to get very very rich from this. They're buying valuable stock at bargain basement prices.
I hope someone has seen fit to order a temporary halt on day-trading and other fast and short-term trades. Otherwise, you could buy a hunk of equities at 1 pm, and sell at 4 pm, and make a tidy profit, and if a lot of people are doing it, the turnover would contribute to the volatility, and increase the panic. Which, of course, benefits the people profiting.
I gave Piper the order today to jump in, and buy me some indexed and total market mutual fund shares, using the cash in my money market accounts. When the market rebounds (and it eventually will, as understanding of what happened and why grows), I could make an immediate 25% profit, at least.
Piper was bemoaning the fact that he couldn't get in. "I wish I had $200,000 or so available!" I expressed surprise. Of all people, I'd expect HIM to have a spare $200,000 lying around, but he says it's "all tied up" in investments he can't sell right now.
So, if you have some money, buy. If you aren't sure of the health of individual companies, buy indexed or total market mutual fund shares. You can find their phone numbers in any investment magazine. All you have to do is call.
I found the following after I wrote the previous post.
"AFL-CIO President John Sweeney denounced the recent campaign stops as dangerous and expressed alarm that the top of the Republican ticket would not protest the crowd's language.
"Sen. John McCain, Gov. Sarah Palin and the leadership of the Republican party have a fundamental moral responsibility to denounce the violent rhetoric that has pervaded recent McCain and Palin political rallies. When rally attendees shout out such attacks as "terrorist" or "kill him" about Sen. Barack Obama, when they are cheered on by crowds incited by McCain-Palin rhetoric -- it is chilling that McCain and Palin do nothing to object."
Veteran reporter Dan Balz has opined that "McCain's tactics are over the line, with no restraint in sight, and threaten to provoke reactions among partisans on both sides that will continue to escalate."
And Frank Schaeffer penned a solemn and critical column (first published in the Baltimore Sun) personally addressed to McCain himself: "If your campaign does not stop equating Sen. Barack Obama with terrorism, questioning his patriotism and portraying Mr. Obama as "not one of us," I accuse you of deliberately feeding the most unhinged elements of our society the red meat of hate, and therefore of potentially instigating violence."
"I just have to rely on the good judgment of the voters not to buy into these negative attack ads. Sooner or later, people are going to figure out if all you run is negative attack ads you don't have much of a vision for the future or you're not ready to articulate it."
- John McCain, the NewsHour with Jim Lehrer, 2/21/2000
McCain & Co.'s campaign has taken an especially nasty turn. They're appealing to the basest emotions of their followers - anger, fear, frustration, racism, by leading them to conclude that Obama is a foreigner, a Muslim, a closet terrorist, a radical who wants to destroy the country, a Communist, on and on. They are whipping up fury.
What they don't seem to realize is that although those attacks appeal to people who would vote for McCain no matter what, and are therefore unnecessary, they are turning off people who actually think about their vote.
They HAVE to be aware of that. So why are they doing it?
What worries me most is that they DO realize that there are rabid nutcases out there who would think that pre-election assassination would be a valid and heroic act to save the country, and guarantee a McCain win.
They HAVE to know that, and it doesn't seem to bother them.
So is that the plan?
The possibility really and truly scares me.
Openness to Experience
|You are a calm person who is considered almost fearless by some, however you are not generally self conscious about yourself. You lead a leisurely and relaxed life. You would prefer to sit back and smell the roses rather than indulge in high energy activities. You tend not to express your emotions openly and are sometimes not even aware of your own feelings [This, the "not aware", is the only part I have to disagree with. I am usually very aware of my feelings. I just don't always know what I want to do about them.]. You dislike confrontations and are perfectly willing to compromise or to deny your own needs in order to get along with others, however you feel superior to those around you and sometimes tend to be seen as arrogant by other people. You take your time when making decisions and will deliberate on all the possible consequences and alternatives.|
Thursday, October 09, 2008
My October 2nd post, 2050 Gotcha, described my annoyance with the local Mensa group's letting the nominations process slide to where there would probably not be an election again this year. If they get five candidates, they just declare them elected and dispense with that troublesome ballot business.
I pulled another Gotcha! They had five candidates. At dinner Tuesday night, I scrounged up another. With six candidates, there has to be an election!
So now everybody is in a panic because the candidates' statements and ballot have to be in the November issue of the newsletter, and the deadline for submissions is next week.
One of the five candidates is Roman, and I know he doesn't want to be on the Board, so I suspect that if he hears we have five others, he'll drop out. So help me God, if he does, I'll have to kill him.
I was reading something the other day that had me thinking that I'm very fortunate in that I have everything I really need. Then I thought that all my life I've always had all the material things I've needed. I've never felt materially deprived. I've been lucky.
Then I thought a little harder, and remembered that there were many times in my life when I had next to nothing.
My entire wardrobe when I was in college took up maybe 14 inches of closet space. I wore bedroom slippers all summer one year (they were straw) because I couldn't afford to buy sandals. One Pennsylvania winter I wore a rubber raincoat over a sweater because I didn't have a coat.
Then after I graduated and began teaching, I bought my first sewing machine (used) with my first savings, and my wardrobe grew. I had to resign 2 months into my second year because pregnant women in 1966 weren't allowed to teach. I had like $200 in savings, and a husband who was away in the army. The army took $125 out of his paycheck every month and sent it to me - but he never sent another cent. Rent was $125 a month [teaching salary was $4800/year]. I ate dinner every evening at the diner around the corner from my apartment because they had a $.80 "blue plate special". That and a glass of diet shake in the morning was all I had to eat every day. I did my laundry in the bathtub because I couldn't afford the laundromat. Then, just a few weeks before the baby was due, there was a fire in the store below my apartment. Everything I owned suffered smoke damage, almost nothing could be saved, my bird died, and the day after the fire I lost the baby.
In 1968 I left Ex#1. I had $500 squirreled away in a secret savings account, in my own name, to use to move away. I got a job in a different state, and when I went to the bank to get the money, I found that my husband had gone to the bank and demanded the money, and they had given it to him. That was normal in those days - a woman's money belonged to her husband. I left with what I had in my pocket and what I could fit in my tiny car (a rear-motor Volkswagon Karmann Ghia (sp?) which meant almost no trunk and a tiny back seat, and the mice, birds, and Smokey cat took up most of that).
The new employer gave me a"per diem" allowance for six weeks while I looked for someplace to live. From that, by moving into a cheaper motel and eating in the company cafeteria, I was able to save enough for the first month's rent on a little 4-room cabin in the woods. The landlady lent me a little lamp, which I carried from room to room at night. I slept on the floor until I could afford a sofa. I slept on the sofa until I could afford a bed. I ate standing at the sink until I could afford a little table and two chairs.
Then I married husband #2, who was a tightwad. In the 70's, a working wife turned her salary over to the husband to manage. The average woman had no idea what was where moneywise. I would have had to beg for things, and I wouldn't beg, so we had no living room or dining room furniture for the first 9 years. When Daughter was born, I made her bassinet out of a laundry basket, and sewed all her baby clothes. In 1979, my monthly budget for food was $70, and I fed two adults and a child quite well on that.
When I finally left him, even though next to no money had been spent on goodies, there was strangely little to be split. I left with $19,000 (half the equity in the house, for downpayment on a small house for Daughter and me), a few shares of computer company stock, my car, and $1,500 cash. (There should have been a LOT more stock, but I didn't want to fight, so I didn't push it.) I'd picked the absolute worst time to leave - I think it was 1981 or 82 - mortgage rates were through the roof. The best I could do was 17.5% and 3 points, for a 30-year mortgage. (Honest! That was a real rate for an adjustable mortgage.)
Nonetheless, living the way same way I had been living before, and now on a low starting salary, after the first ten months I had over $10,000 in savings, over half my $19,000 salary. (The ex was paying support - we had agreed on 40% of the difference in our salaries, but I put all of that money into a separate account for my daughter's college and for emergencies.)
That was when I realized the ex must have cheated me. There should have been more when we split, given his larger salary (well over twice mine) and the way we had been living for so long.
That was the first time in my entire life that I felt that I had been deprived. Up until then, no matter how little I had, I just figured that was the way it was, and I took pride in managing with what I had. I coped. Besides, in college and in my 20's, most of my friends were in the same boat. One of my friends in college had to sell her 15-years-uncut hair to buy textbooks. I didn't even feel deprived when my visiting mother looked around my kitchen in 1979, and said "You don't have a microwave?" I didn't figure I needed one.
About the same time I was starting to look back and feel like I'd been missing something (about 1984ish), that there should have been more. There was a young woman interviewed on TV - her home had been broken into, and the thieves had taken everything. Her list included a large color TV (I had a small black-and-white), a stereo with all the goodies (I had an old one-piece hi-fi), a fox coat (my only coat was cloth), a microwave oven, a VCR (what's a VCR?), etc. The kicker was that she was about 20 years old, childless, and on welfare! I decided then and there that I was going to be deprived no longer. I had worked hard all my life, and by darn I was going to have at least what a 20-year-old on welfare has!
I put a reasonable amount into savings every month, and then the rest I spent. For the past 22 years I have treated myself well. Daughter and I took the first "luxury" vacations I had ever taken in my life - to England and Wales (3 weeks! Two of them on a houseboat on the canals), Disneyworld, Puerto Vallarta (sp?), Barbados, a dude ranch. I bought shoes. I wore store-bought clothes. I bought books!!!
My first 38 years had taught me how to be shrewd about money. I still think beauty parlors are a waste of money, still cut my own hair. I've still never been to a spa or had a professional massage. I happen to like cheap food and inexpensive restaurants. Brand names are all pronounced "ripoff". Not that I buy cheap stuff - I just don't pay for cachet.
When Jay and I got married, he was pretty well strapped. His ex had taken everything, literally everything, they had acquired in their entire relationship, even things she couldn't possibly keep or use. She threw things away rather than let him have them. She left him with a 20-year-old car (it was his first car, and he had an emotional attachment to it), and a lawn tractor, and he had to buy "her" half of the house (she'd "shopped around" for the highest appraisal). She took half the savings and checking accounts, and half the stock. She had been teaching, and all of her salary through the years had been going into a saving account in her name, untouched except for vacations. Naturally, that was all "hers". Jay just lay there and took it. I don't know why he felt guilty - this was a woman who allowed sex maybe three times a year, and had banished him to the guest bedroom because his snoring kept her awake. (It didn't take me long to realize that he had a severe case of sleep apnea, and that was when I really started to hate her. How could she not have realized that he was struggling to breathe - the sleep center clocked him at 70 episodes per hour - especially if it "kept her awake"? I don't think she cared enough.)
Anyhow, Jay was pretty much starting over when we got married, and then he lost his job 4 months later and was out of work for 9 months. We lived on my savings that year. My hard-earned money-squeezing skills came in handy, especially since Daughter had just started college - out-of-state Ivy League (Penn State), no financial aid because her father was too well off, no matter that he was contributing nothing to her costs, them's the rules durn it. When Jay went back to work, his pay was significantly higher, but he had no benefits. No problem, because he could be on my health plan.
That was enough to scare me a little. I went back into save mode. Within the next four years, we had more than tripled our savings and investments. Then he got sick. Then he died.
I still don't understand the numbers during the three years he was ill. The costs, even with health insurance, were enormous. We had my retirement check, his disability check (40% of his salary), and our investment income coming in. We had the bills going out. No matter how I run the numbers, more went out than came in, but we were never hurting to pay the bills. I can't figure it out. The only time I had to dip into capital was when I sold $20,000 of my stock to buy the handicap van. (I also borrowed $20,000 from Jay's father for the van, which I paid back at $500/month, and then in full from the life insurance.) I don't understand it. That must have been some kind of super-saving mode?!? That $500/month loan payment is the kicker. How?!?
So now I'm sitting on all that financial history. And I don't at all feel bad buying oriental rugs and fox coats [and my first fancy car!]. I saved for it. I earned it. I piled it up. I have been deprived so that now I can be indulged.
Wednesday, October 08, 2008
New Version of "Survivor" Series to debut...
A television network is developing a "Texas Version" of "Survivor" and "The Amazing Race". Contestants must travel from Amarillo, Texas, through Fort Worth, Dallas, Houston, San Antonio, and back to Amarillo, through San Marcos and Lubbock ... driving a Volvo ... with a bumper sticker that reads: "I'm for Obama, I'm Gay and I'm Here to Take Your Guns".
The first to complete the round trip is the winner!
Failed World Survey:
"Would you please give your honest opinion about solutions to the food shortage in the rest of the world?" The survey was a huge failure.
In Africa they didn't know what "food" meant.
In Eastern Europe they didn't know what "honest" meant.
In Western Europe they didn't know what "shortage" meant.
In China they didn't know what "opinion" meant.
In the Middle East they didn't know what "solution" meant.
In South America they didn't know what "please" meant.
And, in the USA they didn't know what "the rest of the world" meant!
The "Maury" show seems to be all about paternity tests. Today there's one woman after another who had already been on the show multiple times looking for the father of her baby, and today seems to be concentrating on the extremes. They each have had at least 10 men tested already with negative results.
Ten men? There's a window of a month. So each of these women had unprotected sex with at least ten men in the space of a month - and they're sitting there admitting it? Since they haven't found the father yet, there most have been more than ten. And they're not even pros.
There's a lot wrong there. Those people need a lot more help than just child support.
I tried to watch the debate last night, but I was easily distracted. It seemed like I'd heard it all before. I kept drifting off.
The blogosphere is all excited about McCain referring to Obama as "That one". They seem to think it was racist. I don't get it. At a group dinner earlier in the evening, the waitress asked "which one" had the whatever, and I pointed across the table and said "That one". I assure you there was nothing racist about it. McCain may or may not BE racist, but I don't think that remark is the proof.
I have to pay bills today. I'm behind again. Time is passing too quickly.
Monday, October 06, 2008
Sunday, October 05, 2008
Last night I went through all the old posts I had transferred over from AOL (June 2004 into November 2004) and removed all the AOL-supplied HTML. Doesn't seem to have fixed it. I don't know what's wrong.
AOL had announced early last week that they were killing all the journals as of the end of October, and that they would provide "a method" to transfer all old journal entries to other platforms. No indication what platforms.
I've been using AOL long enough to know not to wait. Whatever they provide will be complicated, inadequate, and full of bugs, and they'll announce it so late that they won't be able to handle the traffic of everybody trying to move their journals at once. I don't know where they get their programmers. The only thing that has ever worked right in AOL is the mail, and I'm waiting for that shoe to drop.
Most of the other AOL journalers agree with me, that we can't trust AOL, and they are copying, stripping, redating, and reposting just like I am.
Well, time to get me out the door.