3161 Oddities

Monday, November 15, 2010

"A man only learns in two ways, one by reading, and the other by
association with smarter people."
-- Will Rogers --

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I don't agree with Will up there in the green if he meant that those are the only ways to learn. Another way to learn is by doing. But maybe it's a tongue-in-cheek play on one of my biggest peeves - the misplacement of the modifier "only". The "only" here modifies the "learns", not the "two ways" as most people would interpret it. In that case, he's correct. In reading and in associating with smarter people, a man "only learns".

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A weirdness about the house - just before the heat goes on, before the actual burner fires, not just the fan, there's a section of outside wall between the window and the bathtub in the master bath that ticks. It sounds like water dripping. The wall will start ticking, and within three minutes I'll hear the whoosh of the furnace firing. Weird.

A weirdness about me - I normally go to bed around 11 pm or later. But lately, I'm looking at my watch thinking of bed at 7 or 8 pm. Last night I went to bed at 9. Weird.

A weirdness about outside - I hear more birds, of greater variety, here than I did in the mid-Hudson valley, weird enough in itself, and there are more squirrels close to the houses. So this morning I threw some bits of (whole wheat, slightly mold-spotted) bread out on the back patio, hoping to attract some birds or squirrels for Jasper's viewing pleasure. The bread is still there, untouched, at 10 pm. Weird.

A weirdness about the neighborhood - there are some very small houses, like 15 feet wide, and the smaller the house, the larger the TV set visible through the living room windows. The set across the street has to be at least 6 feet by 8 feet. I've noticed that before in other areas. I think it's weird. (Maybe I'm just more attuned to investment considerations....)
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2067 An opinion on real estate prices

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.
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2065 Tracking the Market

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.

Odd pattern?

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.
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2028 More Short Stuff

Monday, September 22, 2008

Talked w. Piper today. Learned more about "selling short". The description I gave is indeed a kindergarten version of the theory behind it, but the way it actually works is much more complicated. There's no "you", and no real stock "in hand". It's a gambling game in virtual space, but with real money. And if I described how it really worked, you'd laugh me out of the room.

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Ok, here goes, attempt #2:

- Stock ABC is selling at $30 a share.
- I go to you and offer to sell you 1000 shares at $30 per.
- I don't actually have any shares of ABC.
- You say ok, and you set up an account for me with $30,000 credit, what they're paying for the stock, in it.
- In exchange for this, I have to deposit a real $15,000 into the account.
- The account now has $45,000 in it. This is my money, and I owe you 1000 shares.
- You are betting the stock goes up.
- I am betting the stock goes down.
- The money sits there in the account.
- I get all the money in the account when I hand you the 1000 shares of ABC.
- If the stock goes down, say to $10 a share, I buy 1000 shares for $10,000, send them to you, and you release the $45,000 to me. I made $20,000 on the deal.
- If the stock goes up, I'm covered by what's in the account until it goes to $45 a share (or something - the amount of coverage is a bit fuzzy to me). If it goes over $45 a share, I have to put more money in the account to cover the increased value of the stock I owe you! At some point, say $50 a share, I panic at all the money I'm putting in that account, so I buy 1000 shares at the current price, $50, and send them to you, and you send me all the money in the account. (Seems like it would make more sense for you to just use the money in the account to buy 1000 shares, and send me any money left over, if any.) I made no money. Remember, I sold you the stock for $30 a share, but I had to buy it at $50 to fill my debt. I'm out $20,000. You made $20,000.

Stop laughing.
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2026 What Does "Sell Short" mean?

Sunday, September 21, 2008

This is a very simple explanation.
- You have 10 shares of ABC, and it's selling for $100 a share right now.
- ABC looks to me like it might be overvalued, and the stock might be on the verge of a slide.
- I go to you and ask you to "lend" me your 10 shares, and I'll pay you Z dollars "rent" for them.
- I sell those shares, and pocket $1,000 dollars, minus the Z dollars "rent" I pay you.
- The stock drops. Now it's $20 a share.
- I buy 10 shares at $20 each, $200 worth, and I give them to you.
- I just made $800 minus Z dollars profit.

Of course there are a lot more details, but that's the basic theory. I am a short seller, and you are a fool. That's pretty much it, except that it's done on the level of hundreds of thousands of shares at a time, not 10.

I can get hurt doing it if the stock goes up instead of down and you demand your stock back, or the term of our contract ends, while it's high, and I have to buy stock to replace yours at a higher price. Piper has told me horror stories about people who were "caught short".

If the stock doesn't go down, you will get Z dollars profit and you still own the stock. It's like renting out your second home or something.

However, I still have trouble understanding why ANYONE would "rent out" the stock to a short seller. That would be like renting real estate to college students. It ISN'T likely to come back in the same condition.

The market is stacked in favor of short sellers, because if several of them sell huge blocks of stock all at once, that almost guarantees the price will fall. They can make their prediction come true simply by predicting it. There's gotta be something wrong with that. And that's why it's banned right now - to prevent an avalanche.

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UPDATE: 9/22/08 I talked with Piper today. The above description is the general theory of what happens, but it's not exactly how it happens. There's no "you", and no real "in the hand" stock. And if I told how it really worked, nobody'd believe me.
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1877 Gloom and Doom

Wednesday, June 25, 2008

[Rant on]

I'm reading a lot about how people can't afford the necessities and how it's going to get worse. About how families have to decide between filling the gas tank or filling the grocery cart. Mostly, it ticks me off.

Ok, yeah, there are families that are living hand-to-mouth, day-to-day, and they're not the ones that bug me. It's the ones that make bad financial decisions to start with that really get me going.

The ones with the huge cars, and iPods, and Sirius, and fancy cell phones with expensive phone plans and who don't pay attention to how much they use them, and "name" athletic shoes, and rotating wardrobes. Like the recently seen couple who "cannot afford health insurance", with the kids on Wii on a 5-foot-wide TV in the background of the interview.

People might say, "Well, you're financially comfortable. You don't understand."

These are usually people whose grocery carts are full of snacks and expensive ready-prepared foods, at $7 per person per meal, instead of the fresh vegetables and meats that will run $2-3 per meal. The same folks who will pay $6 for a cup of fancy coffee, and pay for it out of a designer purse. Please! You can afford groceries. You just can't afford YOUR groceries, and you certainly can't afford that purse.

Some people seem to think that they need everything new that comes along. If something is advertised as "better", faster, bigger, they think they need it. Who really needs an SUV?! A Hummer?! Come on! Sheep led by corporate advertising, that's who.

All bull poopy. How do you GET comfortable, and BE comfortable with what you have? You understand the difference between "want" and "need". That's how.

I don't need cable. I don't need an iPod, or a phone that takes pictures, or texting on my cell phone. In fact, I don't need the cell phone. The only time I turn it on is when I travel, and it's more for the convenience of others than my own.

My car is five years old. I bought it used two years ago for $9,000. My thinking included not only the cost of the car, but the ongoing cost to insure it. It works just fine - more than meets my needs.

I have a lot of clothes and shoes, I'll admit. But what most people don't notice is that a large portion of my closet is ten, twenty, or even thirty years old, because I don't buy "fashion", I buy classic. And I see no need to pay retail.

My house is furnished in antiques, purchased at local estate auctions for less than I'd pay for new furniture of equivalent quality and craftsmanship. It's sturdy, strong, and never goes out of fashion.

When Jay was job-hunting around the country, we looked at houses hither and yon. He'd point to McMansions, and say, "We can afford that." My response was always, "That's more space than we need, and I'd have to clean it all! No way!" I cannot understand why people buy more house than they need. And don't tell me it's an investment. It's an investment only if you pay cash. If you've got a mortgage, you'll spend more than you'll ever make on it - unless you pay the mortgage off early, which I have always done, and Daughter and Hercules are doing now (I've taught her well).

Yes, I have four television sets, but I didn't pay more than $200 for any of them.

Yes, I do treat myself well. I do buy some things I merely want, like my Pleo Clyde, and the recent Waterford lamp. (Note that in neither case did it cost more than half retail.) And one of these days I will present myself with a swoopy sportscar, just 'cause I want it.

That's the one argument I have over and over with Piper. He chides me for never spending principal, only income. He says I could afford almost anything I want. I respond that I have everything I need, precisely because I don't buy everything I want.

[Rant off]
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1716 In Love with the Vision

Thursday, March 6, 2008

Free advice: Never take out a loan to buy something depreciable.

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As you get older, you get wiser in some areas, and stupider in others. Or maybe not more stupid, just better at fooling yourself.

I have long believed that when men fall in love, it's not so much the woman herself that they fall in love with as the way they feel when they're with her, most likely strong and capable. Of course that's a trap, because at some point some condition is going to arise where he feels inadequate. Maybe that's why marriages often don't survive breast cancer.

I think women often fall in love not so much with the man, but with the vision of what they imagine life would be like with him. And that's a trap, because eventually real life intrudes on the vision.

I guess it's hard to tell, when you fall in love, whether it's the other person you love, or the trap. You probably don't know until it's over, because you convince yourself that it's the person.

Jay had abandonment issues. Some things had happened in his childhood that made him afraid that no one would care for him. He had bad dreams of his mother walking off and turning a corner and disappearing, or driving off in the car and leaving him stranded in the middle of nowhere. He was unhappy in his previous marriage because his wife pretty much lived her own life, she didn't much "do" for him. She had pretty much emotionally abandoned him. So I know that much of his love for me came from his knowing that I would care for him and not abandon him. I mothered him, and that's exactly what he needed.

Did I love him, or the vision? Well, any rosy vision was pretty much destroyed by the brain cancer diagnosis, but I still loved him just as much, so yeah, I think it was just him.

And Roman, the Roman of all the 2005 and 2006 fuss and furor? It was the vision. I was tired of being alone, and here was someone who liked a lot of the same things I did, wanted to travel, challenged my mind, and would be a good companion for the remainder of my years. Of course I liked him a lot, too, but it really was mainly the vision I was tied up in. It wasn't until I gave up on having that vision that I realized that although I do like him a lot, still, as a person, we really aren't suited as a couple.

Now I'm in love with another. (I tease him that women see him as a "fast car", after the Tracy Chapman song (see below), thinking that he'll take them out of a life they don't like and make it all better, and when he doesn't, they get mad.) I'm pretty sure it's him, not the vision that has me hooked, because, frankly, I have no vision of a future with him. I just can't see it. He's a workaholic, and nowhere near retirement, has no desire for world travel (unless the Vikings happen to play in France), vastly prefers city living, and on and on. I just don't see it. What we want from life is so different. So I'm pretty sure it's HIM that keeps me coming back for more, not the vision of a future together.

I don't know why he loves me. Of course he says it's the brains, the thoughtfulness, my itty-bittiness, and my independence, and so on, but I know I also make him feel very strong and masculine, and I'm smart enough to fully appreciate his brainpower. I don't know if it's me he loves, or the way I make him feel.

Why does it matter? Because if it's me, I can say or do or be any way consistent with me, and he'll still love me. If it's only the way I make him feel that he loves, that's REAL easy to lose. A wrong word could kill it.
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And now, for your listening pleasure, Tracy Chapman's "Fast Car".

[http://www.youtube.com/watch?v=Orv_F2HV4gk&feature=related]

And just 'cause I love her, here's another favorite:

[http://www.youtube.com/watch?v=kjRo_CHSdt0&feature=related]
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866 Financial Fussing

Tuesday, September 5, 2006

Piper called this morning while I was out, left a message that he was going to be out of town off and on over most of the next two weeks, so if I need anything, I'd have to catch him today or tomorrow. Since I'm going to have to ask for more money to pay the estimated taxes on the 15th, and it takes a week for the check to arrive, I guess I'm going to have to figure out today how much I need. This is embarrassing. The check I got last month when I bought the car was supposed to be enough to cover the taxes, too.

I've been trying this year to live on just the Company retirement check and the SS widow's pension, to see if I could do it, to see how much I really need. I guess I need more than those two. Piper says I'm doing fine, that I haven't withdrawn any principal, it's all interest, and that I should consider the roof replacement as an unusual expense, but really, when you own a house, stuff like that has to be figured into the budget. Next year it'll be replacing the air conditioning and the deck, and landscaping of the woods, and eventually I won't be able to ignore the driveway any longer. It's frustrating.

Ok, now I feel guilty for fussing over money. There are people who live paycheck to paycheck, and if they lose their job they're in big trouble. Daughter might point out that if I'm really so concerned, I didn't REALLY have to fly first class to Florida. I didn't even really have to go to Florida. "It's false fussing. It's unbecoming. Shut up."

Yeah, I've got enough that I don't have to worry about anything. And now enough of it is in safe investments that I don't have to worry about it disappearing. But fussing like this is precisely why I have it in the first place!

Some of the clothes in my closet are over 30 years old, and I still wear them. I've never paid more than $30 for a pair of shoes. I've never paid more than $15 for a watch. I buy a lot of my clothes at Wal-Mart or on eBay. I don't understand nail salons - they have created a market where no need exists. I'm smart enough to not pay a small fortune for fads and show and competition, stuff that loses value. I'll pay for real value. I'll pay for comfort and convenience. I won't pay to impress someone else, or for flash. And I'll especially pay for investment (that explains wearing an estate-auction diamond ring with Salvation Army resale clothes). I've never understood why a middle class woman would spend more than $20 for a purse. That makes no absolutely no sense to me. I hear about someone paying $350 for a purse (a purse!), and my immediate thought is that she should have paid $20 and invested the other $330 in a decent blue chip stock.

So, I fuss.

Piper has seen the house (outside). He's all excited about the location, layout, and grounds. He says he can tell me where I can invest $30,000, and it will increase the value of the house by $100,000 or more. (For some strange reason, he wants me to replace the siding.) I asked him why would I want to increase the value? All that will do is increase the taxes, and that makes absolutely no sense. I can't see any reason to increase the value if I'm not planning to sell, and I don't plan to sell. So all that would do is cost me $30,000, plus an additional $7,000 a year in taxes every year thereafter, all to impress the neighbors? No thanks. (This from my money manager? Sheesh! I'm glad he's good at picking bonds and mutual funds.)

Maybe it's my blood heritage.