DarkStar Spouts Off

Stating The Obvious, aka N.S.S.

This is stating the obvious, but at least a Fed member said it.

A senior Federal Reserve policymaker on Thursday warned that US central bank moves this year to extend credit to Wall Street investment banks carried a significant danger of “moral hazard” and could encourage risky behaviour in the future.

Jeffrey Lacker, president of the Federal Reserve Bank of Richmond, said in a speech at the European Economics and Financial Centre in London: “The danger is that the effect of recent credit extension on the incentives of financial markets participants might induce greater risk-taking, which in turn could give rise to more frequent crises, in which case it might be difficult to resist further expanding the scope of central bank lending.”

You don't say!

This Is The Problem

Thoughts like this is at the core of the problem.

Jason Gerbsman and his wife, Lauren, began thinking about buying a home just as the housing market began to slump two years ago. The couple, who were renting an apartment in the District, had saved a "substantial" amount for a down payment. But they wondered whether real estate was the best way to invest the money they had saved since college.

The average person should not consider a house an investment. The house should be thought of as a home. No matter how much you think the house is worth, your house is only worth the price at which someone is willing to buy it.

You also have a run up in home prices for areas with "good schools." This is definitely true, but it is not as pronounced as this opinion article states.

Hints of how things began to go awry appeared in "The Two-Income Trap," a 2003 book in which Elizabeth Warren and Amelia Warren Tyagi posed this intriguing question: Why could families easily meet their financial obligations in the 1950s and 1960s, when only one parent worked outside the home, yet have great difficulty today, when two-income families are the norm? The answer, they suggest, is that the second incomes fueled a bidding war for housing in better neighborhoods.

It's easy to see why. Even in the 1950s, one of the highest priorities of most parents was to send their children to the best possible schools. Because the labor market has grown more competitive, this goal now looms even larger. It is no surprise that two-income families would choose to spend much of their extra income on better education. And because the best schools are in the most expensive neighborhoods, the imperative was clear: To gain access to the best possible public school, you had to purchase the most expensive house you could afford.

...

The result was a painful dilemma for any family determined not to borrow beyond its means. No one would fault a middle-income family for aspiring to send its children to schools of at least average quality. (How could a family aspire to less?) But if a family stood by while others exploited more liberal credit terms, it would consign its children to below-average schools. Even financially conservative families might have reluctantly concluded that their best option was to borrow up.

At least, that's my opinion.

Correlation Or Causation?

OK, is this an example of correlation or causation?

Okla. unemployment rate bucks national trend

Oklahoma's unemployment rate has bucked national trends and declined over the last year, but economists say the positive jobs figures have more to do with the booming energy industry than a new anti-illegal-immigration law that has led some Hispanic workers to leave the state.

Oklahoma's unemployment rate dropped more than 1 percent since March 2007, to 3.1 percent in March 2008, giving Oklahoma the fourth lowest rate in the nation, according to the U.S. Department of Labor.

While some speculate the trend may be tied to a bill passed last year targeting illegal immigrants, economists say it's more a result of Oklahoma's bustling oil and gas industry, high commodity prices and the state's insulation from the national housing crisis.

"Oklahoma is enjoying a fairly prosperous time given the state of the national economy, with everything going on in the mortgage market and sub-prime area," said Steven Agee, an economics professor at Oklahoma City University. "We haven't experienced that big real estate bubble like other states ... so our housing market has not suffered by comparison."

Oklahoma's most robust job growth from March 2007 to March 2008 came in the sectors of educational and health services (6,800 jobs) and natural resources and mining (5,700), according to statistics from the Oklahoma Employment Security Commission.

Here is a different view:

Unemployment rates are rising across the United States, except Oklahoma. That state is experiencing the most dramatic reduction in unemployment since 2007, an improvement many in Oklahoma attribute to the passage last year by the state legislature of a strong employment-focused immigration reform law.

The U.S. Bureau of Labor Statistics on Friday reported unemployment in Oklahoma had fallen to 3.1 percent in March, down from 4 percent in March last year, while unemployment nationwide was 5.1 percent, up from 4.4 percent in March last year.

"Oklahoma is no longer 'OK' for illegal aliens," said State Rep. Randy Terrill, who sponsored House Bill 1804 which passed by overwhelming majorities last year in both the House (84-14) and Senate (41-6) of the Oklahoma Legislature.

"The bottom line is illegal aliens will not come here if there are no jobs waiting for them," Terrill said. "They will not stay here if there is no government subsidy, and they certainly won't stay here if they know that if they ever encounter our state and local law enforcement officers, they will be physically detained until they are deported."

I don't know the answer, but I suspect causation. Remember what what happened after the ICE raids on the Swift meat processing plant. The company raised wages and put out employment ads. People lined up to put in an application to "do the work that Americans won't do."

Yeah, Thi$ Make$ $en$e

$ure, thi$ make$ $en$e.
NOT!

The federal government yesterday gave Fannie Mae and Freddie Mac permission to operate with a reduced safety net in order to increase their aid to the troubled mortgage market.

The step could allow the two federally chartered finance companies to immediately increase their investment in mortgages by a combined $200 billion, potentially compensating for weak demand from other investors. That could improve the availability and affordability of home loans, leaders of the two companies said.

Together, the two companies already hold more than $1.4 trillion of mortgages and securities backed by mortgages.

This is going to make matters worse.

JPMorgan And The Fed

JPMorgan and *THE FED* are bailing out Bear Stearns.

Bear Stearns, facing a grave liquidity crisis, reached out to JPMorgan on Friday for a short-term financial lifeline and now faces the prospect of the end of its 85-year run as an independent investment bank.

With the support of the Federal Reserve Bank of New York, JPMorgan said in a statement that it had "agreed to provide secured funding to Bear Stearns, as necessary, for an initial period of up to 28 days."

For the next month, JPMorgan will work with Bear Stearns to reach a solution for its financing crisis. Options could include organizing permanent financing or, according to people briefed on the discussions, buying the bank for a discounted price.

"JPMorgan Chase is working closely with Bear Stearns on securing permanent financing or other alternatives for the company," JPMorgan said in its statement.

There was some discussion last week that The Fed was quietly hiring people to handle bank failures. Ladies and gentlemen, prepare for a life change.

[ UPDATE 3/15/2008 ]

JPMorgan buys Bear Stearns for TWO DOLLARS A SHARE!

Bear Stearns Cos. reached an agreement to sell itself to J.P. Morgan Chase & Co., as worries grew that failing to find a buyer for the beleaguered investment bank could cause the crisis of confidence
gripping Wall Street to worsen.

The deal calls for J.P. Morgan to pay $2 a share in a stock-swap transaction, with J.P. Morgan Chase exchanging 0.05473 share of its common stock for each Bear Stearns share. Both companies' boards have approved the transaction, which values Bear Stearns at just $236 million based on the number of shares outstanding as of Feb. 16. At Friday's close, Bear Stearns's stock-market value was about $3.54
billion. It finished at $30 a share in 4 p.m. New York Stock Exchange composite trading Friday.

Effective immediately, J.P. Morgan Chase is guaranteeing the trading obligations of Bear Stearns and its subsidiaries and is providing management oversight for its operations. The deal isn't subject to any
conditions, except shareholder approval. It is expected to close before the end of the second quarter.

DAMN!!!! It closed at $30/share and is brought at $2/share!

Mail List Comments R Me: Eonomics and Political Party

So there is a mini-firestorm happening on an email list that I'm on. It happens to be about voting Democratic vs. voting Republican.

In one of the responses, I wrote:

I don't care if politicians feel my pain. I just want them out of my damn pocket and out of my way.

Later, I wrote the following (with edits) response to the question of how voting for the GOP would fulfill that desire:

Right now, if the tax cuts stay in place, my taxes will be lower because of DS 2.0 and the Mrs. Other than that, they are a waste. But the Democrats are talking about re-vamping income taxes, which means I'm screwed.

I'm going though that now in Maryland, which is controlled by Dems. They have increased the sales tax. The Dem governor, Martin O'Malley, is talking about taking measures to force a decrease in green house emissions by 90%, without even knowing what is possible. He has even said as much. As a result, a lot of people, including some Democrats, are saying the measures  he is talking about WILL drastically increase the cost of living for all people left in Maryland. O'Malley is in a pissing contest with an energy provider in Maryland and there are now lawsuits flying left and right. O'Malley's moves and comments are blamed for about a 15% drop of the company's stock value.

Kick In The Groin

This is a size 13 double E steel toed boot kick in the groin.

Kansas politicians are fuming over the US Air Force's decision to award a 40-billion dollar tanker refueler modification contract to a foregn company.

Boeing and French rival Airbus had been vying for the contract. Boeing said the deal would have meant hundreds of jobs in Wichita if it were awarded to them.

Boeing's Wichita facility would have served as a finishing location for the 767, in essence, outfitting it to become a KC-767, as well as test flying the planes before delivery to the military.

Kansas Congressman Todd Tiahrt told KAKE News previously that the contract would have meant nearly 4,000 jobs in the Wichita area for Boeing and its contractors. He also said the contract would have injected 14-million dollars into the local economy annually.

*UFFFFFFHHHHH*

Home Equity Line of Credits Are Now Being Frozen

Home equity lines of credit are being frozen

In one brief phone call, Nancy Corazzi's lender yanked away what was left of the $95,000 home equity line of credit that she and her husband took out five months ago.

The lender informed her that her Howard County home had plummeted in value and the company did not want the risk that she would owe more than the house was worth.

"I got off the phone and I was shaking," said Corazzi, who was using the money to pay preschool tuition for her twins ."I was near tears. We needed this credit line to get us through some tough times."

Check out the ending quote they decided to use.

Corazzi said she was blindsided by what's happened. "I didn't know they could do that. I thought I was too smart to have something like this happen to me."

The bad thing is, this is how I was going to fund upgrades before selling the house. Well, I have other means.

I wonder how this affects people who are using Money Merge Accounts?

The U.S. Government Is Lying About The Economy

Have you ever heard of the economic indicators government website?

No?

Don't worry about it then. It won't be around much longer.

Due to budgetary constraints, the Economic Indicators service       (http://www.economicindicators.gov) will be discontinued effective       March 1, 2008.    

Economic Indicators.gov is brought to you by the Economics and Statistics Administration at the U.S. Department of Commerce. Our mission is to provide timely access to the daily releases of key economic indicators from the Bureau of Economic Analysis and the U.S. Census Bureau.

Uh huh...
Just like you can't find out the real value of the money supply anymore because the government stopped publishing the data, they do this to hide the true story.

House Hunting

I have real estate searches set up to find homes for sale in desirable areas, within a certain price range, meeting a certain style. Here are some things I've noticed:

• While PG county is off of my list because of taxes and poor school system, the number of "short sale" comments is absolutely amazing. I should say that it has been reported many times that PG county has the highest foreclosure rate in the state of Maryland.
• A lot of homes stating short sale have comments stating pre-approval is required by Countrywide.
• I've tried to get to see homes listed as short sale but the listing agents don't want to show it unless pre-approval is available.
• The short-sales are not necessarily good deals from what I can see.
• We are looking into buying property for rental investments but the market is glutted. The going rate for monthly rentals would make it hard to buy a decent home and make money on the rental. Right now, you couldn't even break even. That's very disappointing.

You Won't Like This Idea

I read this and came up with an idea.

Stock markets around the world plummeted today, as a financial crisis that began in the market for U.S. home mortgages spread to almost all corners of the global economy.

U.S. markets were closed for the Martin Luther King Jr. holiday, but all of the world's other major economies experienced a sell-off. Stock prices fell 7 percent in France and Germany, 5 percent in China and Great Britain, and 4 percent in Japan. Stocks lost value in 42 of the 43 nations with widely followed markets; the only exception was Sri Lanka.

"It was all about blood on the wall," said Georges Ugeux, chairman of Galileo Global Advisors, who was visiting the Indian stock exchange, which fell 7.4 percent (the equivalent of a 900-point drop in the Dow Jones industrial average). "For them, this is a black Monday."

You won't like this idea at all, but I think it's the best thing for the U.S. economy. Instead of coming up with a "stimulus package" that, in reality, is nothing more than a wet band-aid, why don't we just let the markets do what the markets are going to do and suffer the ride?

Cutting rates, coming up with a stimulus package that gives people money to spend, pumping money into the economy, saving people from losing their homes, now, only to lose them later, etc, is just delaying the inevitable and making the real correction much harsher in the long term. Just, let it happen.

I Know It's Friday And I Should Post Something Happy

I know I should be posting something mindless and not post something that if you think about it, it could mess up your weekend, but it is not a good idea that Saudi Arabia and China are bailing out our major financial companies.

I wish I could remember the person and the exact quote, but a famous communist once stated they didn't have to do anything to make capitalism fall, because capitalism will sell and buy the rope to hang itself with.

Short Sale

I have a few real estate search profiles set up and I'm noting more and more "short sale" comments in the description. Some interesting things I've notice:

• There are a few short sales that indicate Country Wide must be used to pre-approve financing. How the hell can a seller force the pre-approval issue? I'm sure they can't.
• All of the short sales that I have taken time to look at in depth, are not good deals. Each one so far is above the original purchase price according to the tax records.

I have a search set up for certain areas in Prince Georges County. Although that county is not on my list because of high taxes and poor schools, I've noticed a lot of short sale comments in homes for sale in PG County.

You Can't Go Home Again

I understand that people want to live in the area in which they were raised. In fact, most people never live more than 20 miles from where they were raised, if I remember the statistic correctly. However, a few people rioting because they, or people they "represent", can't move back into projects, seems to me to be over the top.

NEW ORLEANS (AP) - After violent clashes with police at City Hall, protesters vowed that the fight over a plan to demolish 218 public housing buildings for the poor was far from over, both in the courts and on the streets.

On Thursday, police used chemical spray and stun guns on protesters who tried to force their way into a City Council meeting where the members voted unanimously to allow the U.S. Department of Housing and Urban Development to demolish 4,500 public housing units.

The vote allows demolition crews to begin tearing down the buildings within weeks unless they are blocked in the courts. Lawyers fighting the demolition say they have not exhausted their legal options.

Endesha Juakali, a protest leader arrested on a charge of disturbing the peace, said the confrontation with the council was not the last breath from protesters.

It would really be nice to read about people who were forced to leave and now live a better life.

Scared Yet?

OK, ladies and gentlemen, are you scared yet?

The Federal Reserve launched a concerted effort with central banks around the world to try to get financial institutions to lend money more readily, its latest attempt to help thaw a frozen financial system.

The surprise move, announced yesterday, less than a day after the Fed cut a key short-term interest rate, is an attempt by the central bank to prevent worsening problems in global credit markets from causing a U.S. recession. In this case, the tools are special auctions that would make at least $40 billion available to U.S. banks by the end of the year, and an agreement with the European Central Bank and the Swiss National Bank that would make $24 billion available to banks in Europe.

"The Fed has not only opened its vault doors to the banking industry, they are now trucking it to their place of business," Scott Anderson, a Wells Fargo senior economist, said in a report. "If that doesn't get the banks excited about lending again, nothing will, and the battle to forestall recession is already lost."

Well, I am.

Adjustable Rate Bailout

Another quickie, this adjustable rate bailout isn't about saving the homes of people who were irresponsible when taking out these mortgages, this bailout is about saving the banking industry, and most importantly, saving the FOREIGN INVESTORS who invest in the U.S. banking industry.

I Haven't Noticed Name Calling Against These People, Have You?

Mention New Orleans and the state of the city after Katrina, and it won't take long for people to start mentioning things like "dependent on the government" or "stupid for living in a flood plain," etc. But what about the people in Mississippi who suffered because of Katrina? Up until now, if anything was mentioned about Mississippi, it was about how well they have done, in comparison to New Orleans, after Katrina. So, it is interesting to read this:

While Gov. Haley Barbour (R) has hailed the casino openings as a harbinger of Mississippi's resurgence and developers have proposed more than $1 billion in beachfront condos and hotels for tourists, fewer than one in 10 of the thousands of single-family houses destroyed in Biloxi are being rebuilt, according to city permit records. More than 10,000 displaced families still live in trailers provided by the Federal Emergency Management Agency.

Now, long-standing resentment over the way the state has treated displaced residents has deepened over a proposal by the Barbour administration to divert $600 million in federal housing aid to fund an expansion plan at the Port of Gulfport. The port's recently approved master plan calls for increasing maritime capacity and creating an "upscale tourist village" with hotel rooms, condos, restaurants and gambling.

"We fear that this recent decision . . . is part of a disturbing trend by the Governor's office to overlook the needs of lower and moderate income people in favor of economic development," 24 ministers on the Mississippi coast wrote in September in a letter to state leaders. "Sadly we must now bear witness to the reality that our Recovery Effort has failed to include a place at the table . . . for our poor and vulnerable."

State leaders rejected the complaints. Gray Swoope, executive director of the Mississippi Development Authority, which is leading the state's recovery efforts, called the port expansion a "key piece" of the state's economic recovery and said that already-funded programs will be enough to address the state's housing needs.

"The people at this table are very compassionate about the people on the coast," he said. "We feel housing has been addressed, and it's in our plans."

Swoope said that because storm-displaced Mississippians are being accommodated by the state's housing programs, the state is comfortable asking the Department of Housing and Urban Development for permission to redirect the housing aid to the port project.

Exactly how much help residents should receive for rebuilding has been a flashpoint from the beginning of the recovery, when Louisiana and Mississippi adopted starkly divergent approaches to dispensing federal housing aid.

I find it interesting. Your mileage may vary.

NPR Poll on Blacks: Single Race?

A new Pew Research Center survey found that nearly 40 percent of Blacks think "blacks can no longer be thought of as a single race."

The phrasing of that bothers me. It's as if a "poor" Black person is considered to be a different "race" than a "not poor" Black person. It should be stated that 40% of Blacks are acknowledging class differences. Or better yet, that people are now recognizing class differences and are finally being ASKED about it.

Or maybe not. I'm still thinking... Marinading....

[ Update ]

This is from a letter to The Washington Post Op-Ed section:

Black America is not a monolith, and neither is white America. Because a white Anglo-Saxon Protestant cab driver sees the world differently than a Hungarian immigrant computer company executive doesn't mean that they're not both white. White Americans are more diverse than African Americans are. Whites span the spectrum from dairy farmer to homeless Vietnam veteran and from minimum wage waitress to college professor. They descended from English Episcopalians; Russian Jews; Irish, Polish and Italian Catholics; German and Norwegian Lutherans and members of the Armenian Orthodox Church. They invented the Ku Klux Klan and taught kids how to be hippies. There are huge divides among whites in values, education and class.

Clearly, whites are at least as "divisible" as blacks. But nobody is looking to divide whites into different races.

Subprime Mess Explained

The sub-prime mess, explained.

Charters Putting Catholic Schools Out Of Business

Again, not much time. A lot of code to write and test and integrate. More traveling.

Seven D.C. Catholic Schools to Become Public Charter Schools

Seven D.C. Catholic schools will undergo conversions to charter schools, Washington Archbishop Donald W. Wuerl announced today. His decision means that the schools will no longer operate as religious schools but will receive public funds and be run by a charter operator.

Wuerl announced in September that he was considering conversion for eight of 12 Catholic schools operating as the Center City Consortium because he said the archdiocese could no longer afford to subsidize the financially struggling schools. The proposal touched a nerve among black Catholics who protested by holding prayer rallies and writing letters to Wuerl. They were concerned that the move by the archdiocese would limit high-quality education options for African American children.

I bet the established edu-crats will stop complaining about charter schools until they put Catholic schools "out of business"!

My Financial Future

I don't worry too much about the future of social security. My assumption is that I won't get it and neither will my children, but we will have to put money into it because they will continue to confiscate funds to fund it.

I worry more about people who start to withdraw funds from their 401(K), 403(B), and IRAs for their living expenses. Seeing that is where I expect to have my funds for living, I wonder what happens to the stock market when stocks have to be sold and the buyers are not there. That's devaluation, right?

What got me thinking about this was this article about the first Baby Boomer who is going to file for Social Security benefits and this article about the government retirement savings program.

iPhone Cry Babies

When I buy a computer, no matter how much I load it up or get "the most powerful" system components out there, I KNOW that in a few weeks or months time, the price of the system will fall and there will be a more powerful system out there for the same price that I paid for my system. This is just a fact of electronics gear. It happened with my plasma television. It was a better model and I paid around $3200 for it. Today, the replacement model for what I have costs around $2000. That's just the way it is.

So while I can understand people who brought iPhones in the last week being a little mad, those who rushed to get it the first day would be out of luck if it were up to me.

I have to give Steve Jobs some respect for offering $100 credit to those folks, but then again, it's not a REFUND it is a CREDIT.

Free Market?

Ummm....
In a "free market" or a "capitalistic market," does the government pump money into the system to support it?

Financial Market Education

Today's article in The Washington Post by Steven Pearlstein is an excellent lesson about today's financial market motives and moves. Finding one piece to excerpt is very hard, so while I provide one, please read the entire article (registration required).

Although its operations were to be primarily in the United States, Carlyle Capital was incorporated offshore, on the island of Guernsey in the English Channel, which offers the advantages of low corporate taxes, lax regulation and legal protection from unhappy investors.

It was not until February that Carlyle finished raising the initial money for Carlyle Capital from large institutions and wealthy individuals. But the ink was barely dry on that $600 million private placement when the fund announced that it would also tap the public markets for what turned out to be an additional $345 million by listing its shares on Amsterdam's Euronext exchange. The foreign listing allowed Carlyle Capital to avoid some of the tighter rules on disclosure, corporate governance and investor protection that govern stocks on U.S. exchanges. But it could not shield Carlyle Capital from the turmoil of U.S. markets when the credit bubble burst.

...

And then there are the fees -- oh, the fees.

First, there's the annual management fee of 1.75 percent of equity paid by the investors of Carlyle Capital to the Carlyle Group. That's a guarantee of $15 million. Add to that the "incentive fee" if the fund earns more than an 8 percent return on equity, which is not much of a stretch when you're working with 96 percent leverage. The incentive fee for the first half of 2007 came to $4.7 million. And let's not forget the 6 percent of Carlyle Capital stock that was awarded to Carlyle Group and its employees upon successful completion of the IPO. By my calculation, that works out to another $55 million.

It comes to about $80 million in the first year alone, or nearly 9 percent of all the money provided by investors, net of investment banking fees.

And for what? Borrowing $21.2 billion from Wall Street broker-dealers at 5.3 percent and using it to buy asset-backed securities that yield 6.5 percent. How hard can that be?

This is VERY GOOD READING!

Comments R Us: Miami "Cubans"

This thought was generated from a post by Baldilocks highlighting the hope that Castro is dead.

Miami "Cubans" need to get a life and stop waiting for the end of Castro's life. When Castro dies, there is no way they can "go back" and "get back" their land and property. The Cuban "Cubans" aren't going to roll over and let them take what is now theirs. Plus, just because Castro dies, it doesn't mean the leadership currently in place is going to let "the revolution" die.

The Miami "Cubans" need to:

1. Push for the end of the embargo.
2. Push for an all out capitalist push into Cuba.
3. Just sit back and wait until the Cubans get used to buying NEW cars, traveling directly from the U.S. to Cuba and back, and directly taking U.S. money in other endeavors besides the sex trade.
4. Waltz on his and buy back their land once capitalism causes the communism to crumble.

But that makes too much sense and Republicans don't want to lose the sure money the Miami "Cubans" generate.