Single family homes and Profiteering

I know one of the things that makes capitalism work, market economies, in the Grand old land of opportunity is the profit motive.

I am ok with people speculating, flipping, and causing chaos in downtown markets, in areas like Hawaii, San Diego, NYC etc. I draw the line with profiteering single family homes in the suburbs, where the thankless workers who fuel the whole system of wealth for others, are forced to reside in the few hours they have away from the ball and chain they call their job.

In the most recent article in Barrons, an article gets into detail about the workings of Fannie Mae and Freddie Mac, well, how they used to work anyway, before the US government took them over in conservatorship.

Well, apparently in an effort to realize huge gains for shareholders, and increase their market share, they took on a lot of crappy paper that they shouldn't have. This means loans that wouldn't be paid back.

Fannie and Freddie buy mortgages to take them off the banks books so they can make new loans, and sold some of them away as securities - apparently guaranteeing them against default at least part of the time.

The article makes an interesting comparison. Utility companies are regulated, and I happen to know, from reading Security Analysis by the father of value investing, Benjamin Graham, that the oversight (ie Corporation Commission) sets limits on rate increases, and generally limits the companies/investor return to what is deemed reasonable - typically around 6% return on investment.

Why should scalpers be let loose in residential real estate, in the suburbs, to inflate home values to 2-3-4 times what median incomes can support? Why should our State, City governments depend upon nothing but the continual increase of housing values and employment from housing related acitivities for income?

This country needs Economic leadership - we need a national vision - we need to have a common goal. I think it could be something like a united effort to lead the way in curing diseases and alleviating human suffering. Something, for God's sake, more meaningfull than ever-expanding suburbs, with ever increasing values (not really), needing cheap, exploitable immigrant labor (funny how the immigrant labor managed to swarm in when it was needed, even in this post 9/11 world - can you say border security?)

Stop playing roulette with housing, you political jerks. Get a vision.

The Housing Bubble

Reviewing some real estate listings recently, I was surprised at just how many were short sale or lender owned properties. Then again, I usually had a hunch that they were when looking through the pictures you see pictures of a fully-furnished home, often with little chairs, toys and obvious miscellania showing that young children live(d) there.

We are a country of hard workers, there can be no doubt about that. The American work ethic is legendary. Most of us don't want handouts, we work for what we get.

When the stock market went crazy back in 2000 and then finally collapsed, some investors lost money. When Greenspan and the US government brought interest rates down near zero and spurred the housing bubble to inflate, they planted the seed for much chaos and suffering down the road.

Without so much as even giving an eye to the consequences, for who among us did not realize that prices were way out of hand? Does anyone actually smoke enough dope to think that prices can be maintained at a level 2-3 times more than average monthly incomes? Guess what, when the rate resets from the teaser rate, people get screwed every time.

The list goes on and on. Stated income loans.

What has been allowed to happen - the huge rise and fall in housing prices, has dealt a serious blow to many American households. As far as I know, there has been no scrambling efforts by the government to take care of the citizens who have been disenfranchised by this debacle. The scrambling efforts to save companies, Bear Sterns, Fannie Mae and Freddie Mac, continues.

The sheer stupidity, I mean, to even think that the US government and regulators did not see this coming...well that sheer stupidity has caused some people to think the government has let this happen on purpose for some secret reason.

My point is, they have fouled the American Dream, have dealt an unwelcome blow, a slap in the face to the middle class. People who do nothing but go to work every day and try to scratch out a living and a better life for themselves and their children. Now they're taking away their homes. Disrupting lives. Causing divorces, suicides, murders, abuse, mental breakdowns.

Blame my silence on Windows XP

Had a major screw up with my computer - spent probably 16 hours this weekend between re-installing everything, running Virus scan and spyware searches (found nothing).

I've done a complete overhaul and even upgraded my memory and installed backups. I have the feeling there are some nasty malware circulating, probably exploiting Windows vulnerabilities. I wouldn't be surprised if I'm not the only one having a computer meltdown.

One way to look at it: It certainly forces one to spend some money at the old computer store doesn't it?

Makes you think...maybe Norton and McAfee create viruses, maybe new startup spyware programs create terrible spyware. Maybe someone crashes Windows so you'll buy Apple.

Tightening the Screws on us

Here's a bonus post of some rants I've come up with through the years.

Lie #1: We must globalize or get left behind. Eventually, globalization will be complete and we will have the benefit of lower priced goods etc. Any arguments to this concept (and the offshoring of jobs) and we will label you as a dirty protectionist. You are interfering with the free market, and basically socialist.

Truth: We have surrendered our quality of life - that was earned on the backs of hardworking American labor and the service men and women since the birth of the nation. We have simply handed our quality of life over to other countries, to allow them to industrialize and gain rates of consumption which have already been shown to be unsustainable globally. (Think about the price of oil lately).

If the government wanted to globalize and take away all of our jobs, I say fine. Jobs suck anyway. Take a page from Kyosaki and turn us all into business owners. Charge a tariff for all the goods and services that are no longer produced here, and then send every United States citizen a monthly check. No this would not be entitlement, buddy. This would be smart business, earned income. Let someone else do all the dirty manufacturing, I'll sit around and write my blog all day and go cash the check that I earned by moving the production to a place where the unit labor costs are dirt cheap.

Lie #2: Technology will lead to massive productivity gains. The future is limitless. Every man, woman, and child, will eventually have so much free time on their hands that this may well cause its own crisis - therefore we must be prepared to create recreation plans for this coming wave of ennui.

Truth: Like regular productivity, gains from which are supposed to allow business to increase wages without causing inflation, productivity gains from technology have been skimmed like fat off the surface of a crock pot. The American worker sees no significant wage gain - definitely not enough to keep their hard-earned pennies in the bank or in their wallet from shrinking in purchasing power due to inflation of the money supply by the US Treasury.

If anything, this globalization and increase in technology has actually made our lives far less worth living. We are forced to buy ever cheaper (and more dangerous) products, and household goods from third world countries. Look at the country of origin on the next "USA" t-shirt you buy. Mine was made in El Salvador. The toothpaste will kill you, if the tomatoes and the jalapenos don't do the trick first.

Electronics are made on assembly lines, and it is pretty well known that a good portion of them will be lemons - that is - will be defective shortly after you bring them home. Most of the products we buy are significantly lower quality than they used to be when they were made in the USA and providing jobs to Americans. This is yet another way that we are screwed by inflation (as if this transfer tax had not taken enough of a bite out of our savings and earnings).

And to really smear our faces in our own...the US government has the gaul to use our tax dollars to bail out the banks and finance industry, who they were supposed to be overseeing, after they did absolutely nothing to stop the gigantic real estate bubble now busted, which is ruining the lives of countless people. Goldman Sachs runs this country. Paulson just got permission to basically use a blank check to bailout Fannie and Freddie, even to buy their common stock. Then they decide to start enforcing laws against naked short selling on certain financial companies.

*I wish the government would compensate me for my stock losses in the Tech bust.
*I wish the government would step in when a stock I own was going down the tubes.

Well, ladies and gentlemen, if this isn't protectionism, then I guess I don't know what the hell is. Haven' t had much of a chance to look into this new housing relief bill, but the concept that was floated around before of trying to make the lenders refinance underwater mortgages would invalidate contract law and be very bad for business.

But, I guess it doesn't matter. There will be plenty of jobs for us and our children serving coffee to our land barons in the future.

Profluence, Synchronicity

Two words I'm hard pressed to find exact definitions for. Profluence, I've lifted from the novelist and teacher John Gardner, used to describe the unfolding-in-time, causal chain of events that needs to be demonstrated in good fiction.

Synchronicity, I've lifted from Carl Jung. It ties in with Wayne Dyer's philosophy as well.
And, I assume it is fairly self-evident what it means, so I won't even attempt to define it.

I had just completed reading the first novel I've read by John Gardner, Nickel Mountain, after having completed Gardner's Becoming a Novelist, and being halfway-through his The Art of Fiction. All of these comments by Gardner regarding fiction, and what makes for interesting fiction (maintaining the "vivid and continuous dream" in the reader's mind), had got me thinking about fiction and life.

So many things, big and small, in my life have made their appearance at the exact right time. As if we are prepared for things to come. Probably everyone has had the experience of learning something new, and then days, or seconds later, coming across an example of what they just learned about. Part of this, no doubt, can be explained by the fact that we do not notice what we do not know.

But then again, there is a deeper sense of strangeness, that often attends these events. Perhaps a Heideggerian spirit of the times moves over a period, or a place and things congregate. At any rate, here is one of the small Synchronous stories that happened to me this afternoon.


Having taken pictures of an old Mission in San Diego, I had decided to send them via US mail to my Aunt. After digging around
for a proper envelope to send the CD and some papers in, I resigned myself to not having what I needed. Then, going into my room, on the top of my trash can, was an shipping envelope, of just the right size. It was padded like I needed, and then I noticed that it had two uncancelled stamps on it. Lo and behold, the postage scale in my house confirmed it had the exact postage. Synchronicity.

...but back to the idea of profluence in fiction. Is this a case of life imitating fiction, or fiction imitating life? Often the events in my life are lived out like a novel. We are prepared beforehand for events later to come, as if the author was preparing the reader for events in a later chapter.

And a vague, dreamlike idea on this note as well - if life is novel-like, I had the distinct sense that life is like free-falling from a great height - in the sense that you probably do not know the answers, cannot fully plumb the depths of meaning - until the last few moments before impacting the ground. Like reviewing one's life upon a deathbed, looking back, weighing it in the scales. You cannot judge a book by its cover, but you have to read clear through the last chapter before closing the cover and contemplating the meaning.

Even though witnessing strange events like I describe can make one see that things are meaningful - that is - not by chance, they cannot reveal what their meaning is at this point in time.

(For anyone interested in for more explanation of profluence in fiction, read more here. A webpage from some unknown (to me), fellow blogger.