Not Much Good in the News Today

The tragedy in Norway is certainly on my mind. Apparently 90 plus people were killed by one individual. He exploded a bomb in one place and dressed as a policeman fired on young campers on a small island. All self righteous and indignant over what he perceived as a wrong he merrily went out and made things worse. It is indeed sad.

Another news story is that Amy Winehouse, the singer, was found dead at age 27. She had talent, fame and fortune. The cause of death has not been stated; however, it is reported that she had a history of drug problems. I have no idea what the young lady was running from; but, she is not going to find it now.

Rationality seems to escape us anymore and nothing seems to satisfy anyone. As my readers know, a few months back I was finally able to return my house to my lender. I looked up my house on Yahoo Real Estate and it is for sale. I saw pictures of it, they had put in new carpet. It needed it. I am not quite sure how I feel about losing the house, I mean my wages were garnished by my ex-wife so I couldn't make the payments; but, it was my home.

I was reading about some people who were attempting to take homes for $16 through what is known as adverse possession. Basically, if you live there longer enough and the owner doesn't throw you out, you can become the owner. The law is different in each state regarding the steps necessary; but, that is the deal in short. Other people are living in their homes, having not paid their mortgages for three years and not even attempting to work out something with the banks. Many people are trying to renegotiate their loans; but, the system is working slowly.

Now comes word that the government is considering renting out homes that have been foreclosed. Remember that Fannie Mae and Freddie Mac are owned by the government and have the deeds or mortgages to 70% of all the homes in the United States, they used mortgage companies merely as loan processors. This should make you scratch your head, the federal government is about to become the biggest landlord in the United States.

I do hope people understand what I just said, the federal government will be your landlord. I bet they keep rents low. That is going to keep the market low. We are looking at government housing for millions and millions. I wonder if they will rent out to groups of singles. You know mini-apartments. Maybe that would explain why for the past ten years builders were building larger and larger houses while the average family was getting smaller and smaller. I had a Fannie Mae conventional loan and my original loan processor was Citi-Mortgage. Now it is owned by the government, perhaps they will rent it out.

Now if the government begins renting out millions of homes, they will also have to hire people to maintain the homes, collect rent and find renters. Sounds like there will be a lot of work in those areas pretty soon. Once these homes are rented out it becomes a cash flow for the government; but, beyond that, how will these homes ever be sold? I mean you cannot just kick someone out of a rental, there are laws regarding such things.

Lets do a quick recap of what has transpired since 1999. Did you know that the Euro was begun in 1999? That year was also the first year that the Dow Jones Industrial average hit 10,000. Did I say 10,000? Later that year it hit 11,000, actually a little over a month later. That was a 10% increase, that is a lot.

In 2000 the Dow hits 11,722,98 and the tech bubble peaks. NASDAQ hit 5,048, it's all time high. We turn to 2001 and we all know what happened on September 11th.

2002 has the United States going into Afghanistan. That same year the Dow Jones tumbles down to 7,200. People forgot about how bad it got. Now the following month the Federal Reserve dropped the interest rate to below the inflation rate. That had meaning and consequences.

In 2003 we invaded Iraq. In 2004 we can clearly see that the housing bubble which began in 1999 is truly moving upward. The number to watch is the inflation adjusted cost. The housing market was clearly violating it's history. You see if you look at the cost of housing over the past 200 years, you will discover that the annual increase was about the same as inflation (approximately 5%). The jumps we saw in the 1970s were unusual; but, they still matched inflation. The jump in the years between 1999 and 2007 exceeded inflation.

In 2005 we saw the terror attacks in London, their own 9/11. In 2007 we see the housing prices hit the highest point (I sold my rental just as it was occurring). 2008 sees the first of the stock market crash. 2008 also sees the global market crashes as they merrily spread their was across the world. Since 2008 housing prices have continued to drop. Currently housing prices are roughly where they should have been if they had continued to follow inflation.

Housing Bubble Charts.

Now lets try and make some sense of what occurred. The United States basically got out of manufacturing during the 1980s. We saw the great outsourcing as the technologies of other countries began to match ours and their people were willing to work for less while actually increasing the quality.

Warren Buffet began talking about America's probable long term fall. The tech bubble was all air and when it burst there was nothing to prop up the United States economy. The bursting of the tech bubble should have been the beginning of our economic collapse; however, other countries continued buying out debt. Sorry, but we have to talk economics for a minute. In 1996 two economists for the Federal Reserve published a paper explaining how Inverted Yield Curves were predictors of recessions and depressions. I won't bother explaining what the curve is; but, you can look it up online. I have discussed them before.

Now in 2005 and 2006 the yield curve inverted. That should have raised eyebrows. Remember in late 2006 and early 2007 we saw the peak of the housing market. Instead of concern, the Federal Reserve said everything was just fine.

Well as we all everything was not fine and the housing market and stock markets both crashed. How come the best economists that we have didn't see the crashes coming. They either are bad economists or liars. I believe they lied and I believe there was a reason.

One of the biggest reasons that we cannot compete in the industrial race is not infrastructure and it is not technology, it is labor costs and the fact that we had a standard of living that we could not afford. If one had read Mr. Buffet then one would have known that this was coming; but, rather than a long downward spiral, I believe the decision was made to have a bubble and a faster move downward. Here is the reason why, a quick downturn allows us to compete again while we still have resources and trained workers.

In late 2005 I gave a two day seminar in Las Vegas where I told people in real estate that these crashes were coming. They aren't over. In order to work our way out of this mess we are going to have to be producing goods again or selling off our minerals. The problem with selling our mineral wealth is that you cannot get it back and that in the future the world's currencies will have their value set on a structured system that looks at both a nations labor force and mineral wealth.

Lets look at things in their simplest terms. America has about 310 million people. China has a population of 1,340 million. China is the number one leading manufacturer in the world. We owe China trillions and they don't owe us. Now if we don't pay the Chinese, they will simply stop selling us goods unless we pay catch, that immediately drops our standard of living; but, it also causes us to manufacture for ourselves. Do you get it? We will have to work for less or we won't have any toys.

In order for this to work our nation needs to reorganize itself starting with management. Our failure began at the top because they were unwilling to fight the unions or tell the truth and we wouldn't listen to those who did. We need managers who rather than trying to please us and investors will go back to making solid business decisions. Over about the last ten years Detroit was making more money from loans than from cars, GM was making more money buying debt than building cars. That is insanity and led to bad business decisions.

On the labor side I will give a perfect example. We cannot build houses because the labor cost to build a house is more than you can sell a house for. It is simple supply and demand. That means is construction workers want to build houses again, they need to drop their labor rates.

The next thing we need to do, real simple, stop being greedy and stealing so much, it could be lying about overtime worked or pure theft. Same goes for the management. They need to be paid based on how well the company sells products and not the value of the stock. It also means that the value of the stock has to be based on the assets of the company and the expected profit on sales of real products. This is how things used to work; however, debt financing destroyed peoples understanding of the basics, instead they were rewarded for destroying companies and selling off assets.

What we are seeing currently is the last painful attempts to avoid a return to sanity. We are seeing the last sell off of assets by City, County and State governments. We would see the same by business; but, there are no buyers. Same for housing, no buyers.

Let me put it another way, what would it take to make the United States a country that produces and sells products to other countries and make a profit that we can save and/or invest in needed new technologies? Does getting another trillion dollars in debt paying for people to stay in houses that they are not the paying mortgage for and paying their unemployment at the same time make the United States a more competitive nation? If you say yes then I am going to have to hurt you.

We have become a nation of debtors who are unwilling to pay our debts, is that in anyway sustainable? Who will lend to us. My ex-mother in law lent me the couple thousand dollars it took for a down payment on my first house. I set up a spreadsheet that paid her 2% above prime, amortized for so many years by month. I payed her off in advance on the fully burdened amount. I haven't spoken to her in well over a year, still love her, best mother-in-law I ever had. If I needed to borrow money, she would lend it to me. Says a lot about her and something about me.

Sorry, had to pause and lost my train of thought. Be well. Had to go back and read what I wrote. Debt. Yeah, after a certain amount of time, you stop lending to some people. That is good business and I cannot imagine why anyone would lend to the United States as we don't intend to pay off our debt. Be well.

For Robbie

Hey kids, I am a real person and not some bot. I have met people and loved, I love me some Robbie and always seek to please ladies, she helped me find me again, it takes a woman to do that. Help men to find themselves. Thanks dear lady, I will post music for you.

Crosby, Stills and Nash - Suite Judy Blue Eyes

The Baby's - Everytime I think of You

Barry Manilow - Weekend in New England (my mom liked him a lot)

Dearest Robbie, it is so hard to continue to wait; but, wait I do. You know of the one I love, so close and so far. I wait and shall wait forever if that is what it takes. A poem and more music.

ANNABEL LEE

It was many and many a year ago,
In a kingdom by the sea,
That a maiden there lived whom you may know
By the name of Annabel Lee;
And this maiden she lived with no other thought
Than to love and be loved by me.

I was a child and she was a child,
In this kingdom by the sea;
But we loved with a love that was more than love -
I and my Annabel Lee;
With a love that the winged seraphs of heaven
Coveted her and me.
And this was the reason that, long ago,
In this kingdom by the sea,
A wind blew out of a cloud, chilling
My beautiful Annabel Lee;
So that her highborn kinsman came
And bore her away from me,
To shut her up in a sepulcher
In this kingdom by the sea.
The angels, not half so happy in heaven,
Went envying her and me
Yes! that was the reason
(as all men know, In this kingdom by the sea)
That the wind came out of the cloud by night,
Chilling and killing my Annabel Lee.

But our love was stronger by far than the love
Of those who were older than we
Of many far wiser than we
And neither the angels in heaven above,
Nor the demons down under the sea,
Can ever dissever my soul from the soul
Of the beautiful Annabel Lee.
For the moon never beams without bringing me dreams
Of the beautiful Annabel Lee;
And the stars never rise but I feel the bright eyes
Of the beautiful Annabel Lee;
And so, all the night-tide, I lie down by the side
Of my darling, my darling, my life and my bride,
In the sepulcher there by the sea,
In her tomb by the sounding sea.

I love reading Poe's poetry. "Oh my darling, my darling, my life and my bride. He says so much with so little. The longing and loss so cut to the bone, a genius to be sure.

Carly Simon - Anticipation

Heart - This Man is Mine

Dearest Robbie, when will you go to Vegas and let me spend some time with you. I will not post your answer, lol. I await it. Be well, here is more music.

Carly Simon - You Belong to Me

Corey Hart - Never Surrender

Good night and be well. Dearest Robbie, thank you for being there when I needed it.