Another week, another smattering of economic insanity to report. Those kids on Wall Street do a good job of keeping my newsletter-writing life easy.
Goldman Sachs, an investment bank that we heard a lot about while the sky was falling in late 2008 has been charged with some severe underhandedness. They have been accused of evidently allowing Paulson & Co. (a big ol’ hedge fund) to “advise” Goldman about structuring an investment portfolio out of the crappiest of the crappy subprime mortgage-backed securities. Paulson promptly bet against that very portfolio. When the portfolio tanked, Paulson & Co. made a gigantic profit.
Basically, that’s like making a football team out of girl scouts, telling the people that fund the team that they’re really 300 lb. gorillas, and betting everything against them. Quite a dickish move.
Though it would be satisfying to see a team of girl scouts try to play in the NFL. Take THAT for charging me six bucks for a box of thin mints. Stupid delicious addictive cookies.
What will inevitably result from this alleged fiasco? Regulatory reform. And lots of it. Whether that is a good thing or a bad thing is up to politicians to decide, but I for one do not like the idea of corporate fat-cats defrauding the investing public. Just my opinion.
Florida is making headlines again for how awful we are. By recent numbers, we are in 5th place nationwide for unemployment (12.3%) and 3rd in foreclosure rates (1 in 57 homes in in foreclosure). We’re slowly moving up in the world, friends. On the bright side, there will be a lot of vacant properties for people to squat in while they’re unemployed.
Speaking of foreclosures, the pace of foreclosures is accelerating. As a country, we’re up 25% from where we were a year ago this month. Despite what you may think, it is not because more people are feeling the financial squeeze and just falling behind. The major driver is that banks can now financially handle the losses of re-acquiring these properties.
Essentially we bailed out the banks with our tax money and now they have enough cash to hire people to take our homes from us and handle the on-book losses that those foreclosures represent. Yay!
Wait… no. Not yay. Not yay at all. The opposite of yay. Booooooo.
To stem the tide of foreclosures, Washington is shaking their stick at banks and bank investors to allow principal writedowns on underwater mortgages. Of course, it’s not happening. So, in a phenomenon called strategic foreclosure, people who owe more than their home is worth are walking away, dropping home prices and putting more people in the “underwater” group. Lather, rinse, repeat.
Not my rosiest report, but it is what it is. I’ll report happy things when the world gives me happy things to report.
Friday, April 16, 2010
Saturday, April 10, 2010
It's time for the lightning round
Lots of stuff happened in the world recently, so strap in. I’m going to do my best to hit the lion’s share of them. I’ll do my best not to belabor any points.
Greece is apparently going to be bailed out of their deep debt crisis with the assistance of Germany. In repayment, all gyros from this day forward will now be made with bratwursts and served with beer.
We’ve managed to add jobs to the economy to the tune of about 162,000 according to the preliminary non-farm payrolls report on Good Friday. The unemployment rate held steady at 9.7%. Admittedly, we’d need to stack about 5-8 years of job growth like this to get back to where we were before the recession began, but you’ve gotta start somewhere. Yay America.
The stock market is flirting with 11,000 points on the Dow and the Fed has recently finished their direct bond purchasing program. This is a one-two punch to bond prices, which ultimately trickles down into higher interest rates at the consumer level. However, bonds have shown an exceptional resiliency (many investors are still choosing to purchase bonds over stocks) indicating that everyone’s kinda still nervous about this global economic recovery (they’re worried that stocks could still take a dive).
Obama went to Prague and signed a landmark treaty with Russia agreeing to reduce each of our respective nuclear inventories by approximately one-third. There’s a lot of politics surrounding this decision, but at the very least I think we can all agree that a world with fewer nukes is a good thing.
Unless aliens attack. Then we’ll be sorry.
China posted their first trade deficit in 6 years. Their economy is growing between 9-10% annually, so I am not thrillingly surprised that they are shifting into the role of another major consumer nation. Maybe now we can start manufacturing cheap knock-offs of their stuff and selling it back to them. Oh, sweet irony.
The rise in gas prices seems to have turned from a walk to a gallop. Some of that can be blamed on the weakness of the dollar as a result of our recent money printing bonanza; some of it can be attributed to investors betting on a recovery and driving up demand in oil futures; some of it is higher demand at the consumer level. Regardless of the reason, let us not forget how crappy $4.00/gal gas is.
The first-time homebuyer’s tax credit in set to expire on April 30th. I’d love to give you the whole “act now!” spiel, but I have noticed that first time homebuyers don’t like to make massive life decisions in a hurried fashion. So, those of you who have contracts in, bravo for taking advantage of Uncle Sam’s offer. Those of you who are still house-hunting, the time is quickly approaching for you to make a decision. And for those of you who haven’t started yet but want to, I’d suggest you get on the phone with me right now because we don’t have a lot of time to spare.
Greece is apparently going to be bailed out of their deep debt crisis with the assistance of Germany. In repayment, all gyros from this day forward will now be made with bratwursts and served with beer.
We’ve managed to add jobs to the economy to the tune of about 162,000 according to the preliminary non-farm payrolls report on Good Friday. The unemployment rate held steady at 9.7%. Admittedly, we’d need to stack about 5-8 years of job growth like this to get back to where we were before the recession began, but you’ve gotta start somewhere. Yay America.
The stock market is flirting with 11,000 points on the Dow and the Fed has recently finished their direct bond purchasing program. This is a one-two punch to bond prices, which ultimately trickles down into higher interest rates at the consumer level. However, bonds have shown an exceptional resiliency (many investors are still choosing to purchase bonds over stocks) indicating that everyone’s kinda still nervous about this global economic recovery (they’re worried that stocks could still take a dive).
Obama went to Prague and signed a landmark treaty with Russia agreeing to reduce each of our respective nuclear inventories by approximately one-third. There’s a lot of politics surrounding this decision, but at the very least I think we can all agree that a world with fewer nukes is a good thing.
Unless aliens attack. Then we’ll be sorry.
China posted their first trade deficit in 6 years. Their economy is growing between 9-10% annually, so I am not thrillingly surprised that they are shifting into the role of another major consumer nation. Maybe now we can start manufacturing cheap knock-offs of their stuff and selling it back to them. Oh, sweet irony.
The rise in gas prices seems to have turned from a walk to a gallop. Some of that can be blamed on the weakness of the dollar as a result of our recent money printing bonanza; some of it can be attributed to investors betting on a recovery and driving up demand in oil futures; some of it is higher demand at the consumer level. Regardless of the reason, let us not forget how crappy $4.00/gal gas is.
The first-time homebuyer’s tax credit in set to expire on April 30th. I’d love to give you the whole “act now!” spiel, but I have noticed that first time homebuyers don’t like to make massive life decisions in a hurried fashion. So, those of you who have contracts in, bravo for taking advantage of Uncle Sam’s offer. Those of you who are still house-hunting, the time is quickly approaching for you to make a decision. And for those of you who haven’t started yet but want to, I’d suggest you get on the phone with me right now because we don’t have a lot of time to spare.
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