havent posted for a while

Well I havent posted in a while and partly that is laziness but partly it is because I’m frankly speechless. The news speaks for itself. The US economy is headed off a cliff and this is now far far bigger than simply housing problems in Eastvale or anywhere else for that matter. Of course it all started with the collapse of the housing market though. A good little video i saw this morning about the 15 freeway corridor referring to it as “Foreclosure Alley”. Nice. Check it out:

http://calculatedrisk.blogspot.com/2008/10/foreclosure-alley.html

On a side note I know some people who are totally qualified, have good credit and the ability to pay and are getting consistently outbidded on homes. Homes in the high 200s and low 300s are seeing a very high level of demand similar to how things were during the boom years when there would be multiple bidders on each house. I guess this proves that when the price is right people WILL buy. The problem is that even though prices are getting low it still may not be greatest time to buy because it could fall much further since current values are still above what is normally considered “affordable” based on median incomes. Also, with unemployment going up we’ll now see the regular process of increasing foreclosures which typically occurs in a recession. Just throwing more gas on the bonfire… But, of course, not everyone makes the median income and not everyone is being laid off, and many people are able to pay for these houses at current prices which is why we’re seeing a lot of them jump in. This is great as a whole because at least it shows our homes are not entirely worthless… We sure have come a long way since 2005………..

Hang in there people. If you’re staying put for several years (let’s say 10 for safety sake) and you can afford your monthly payments then it may be a good idea to just ignore what is going on. Paper losses don’t impact you until you sell…. Always remember that. Same goes for the recent crash in your 401(k) plans. Yes it sucks to watch it lose value but hopefully you’re not retiring in the next 5-10 years…..

As for that nutty bailout that the government is trying to do. I can think of many reasons why it is a good idea and many reasons why it is a very very bad idea. I dont like that they are going to rush it which means it will suck like everything else that is rushed. I dont like that it will add to the deficit but thats a lost cause anyways so F it, add another trillion, its not going to change the fact that the US is headed into a very bad economic downturn. It will probably make it worse yes. But if they dont do it it will get bad really quick which people in this country just aren’t ready to handle (not that they ever would be…). I still see people driving new luxury cars, builders still building and people still buying starbucks every morning. Do you really think the average person is ready to really truly sacrifice what they “believe” is their standard of living (even though its a farce that is debt-financed)???? I dont. I think it will be forced upon them though at some point. Its just a matter of time now. The clock is ticking…

I dont know what else to say really. Like i said, these days I’m relatively speechless.

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~ by razor on October 1, 2008.

4 Responses to “havent posted for a while”

  1. It will only add $700 billion to the deficit if the gov’t cannot sell any of the assets, which will not happen. They will be buying the bad assets now and will be selling them in the future when the markets calm down. There will be value in those assets in the future. However, never $700 billion worth. Even the worst mortgage backed securities are having a 35% failure rate right now. So that means that 65% are continuing to pay back their mortgage with interest. Plus the gov’t will be more open to reworking those mortgages than the private sector which will help the failure rate and add some value to the asset.

  2. you are correct. The real cost will likely not be 700 billion. I am hopeful there will be underlying value in them. The problem is that with the treasury stepping in and buying these assets they will likely overpay. Recently Merril Lynch sold off a bunch of their junk paper at 22 cents on the dollar. If the treasury pays a similar amount then i’ll get excited but the reality is that they will pay much much more. This bailout plan is not going to solve our problems. We need to dig ourselves out of this massive debt hole before it is not possible to and i dont see any policies that are going to lead us down that path to fiscal responsibility. The government needs to do zero based budgeting and pass a constitutional amendment REQUIRING a balanced budget otherwise lobbyists and lawmakers will always spend more than we take in. There simply are no incentives for them NOT to.

  3. I personally would have liked them to spend $700 billion on infrastructure projects. For every dollar the gov’t spends on infrastructure projects, it generates multiples of that in terms of economic activity.

  4. there are actually a bunch of those earmarks that were added that are tax credit that will encourage alternative energy construction in solar, wind, plugin hybrid cars, etc, etc… So thats good at least… But I agree they should be investing a bunch in repairing the crumbling infrastructure in this country like all the bridges, roads, etc, etc…

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