Saturday, May 29, 2010

Daniel Pink's Drive

I read a book a few month's ago titled "Drive" by Daniel Pink.  It is an incredible book showing what motivates people both in business and life.  (Hint: It's the exact opposite of what most people believe)

If you are someone who manages people, either at an office or at home as a parent, the book is well worth a read.

If you are someone who does not like to read, the following video summarizes the key points of the book using pictures and examples:

Click Here To Watch Video

I can relate completely with the conclusions of the author.  I spend hours and hours every week pouring through financial articles, books, and radio.  I then spend hours formulating thoughts on what I take in and presenting it here on this site.

I receive no financial compensation for this work. (I do not think of it as work)

I also spend my Monday through Friday working time managing a 460 unit apartment complex.  I make 4 times less money working there than I did at my previous job.  That is correct, a 75% pay cut for a much tougher job.

Why would I do these ridiculous things?

Purpose.

I do not want to write a financial blog or manage an apartment complex 20 years from now.  I want to be running a hedge fund and own/manage a large real estate portfolio (no where near the actual real estate).

Someone once told me that in order to build a tower you have to have the patience and take the time to pour an enormous foundation.

Daniel Pink has found out that many people other than myself act in similar strange ways.  In fact, it is the norm.  We didn't know why we behave this way, until now.  He has put it in writing for us.

Friday, May 28, 2010

Memorial Day

Thank you to those that watch over us and protect what will some day again be the greatest country on earth.


Thursday, May 27, 2010

Low Rates For All

30 year fixed rate mortgages dropped to a fresh 2010 low this week at 4.78%:



You heard that correct. As the foreclosure tsunami picks up speed, the lender of last resort is now charging record low rates to buy yourself a new home and go into default.

Who is this lender of last resort?  It is the tax payer; Fannie Mae and Freddie Mac who now provide all new loans to Americans.

The losses are socialized, then added on to the back of the Federal debt.

How high is the Federal debt these days?......

Tuesday, May 25, 2010

13,000,000,000,000

Congratulations to the USA which passed the $13 trillion mark on the Federal budget deficit this afternoon with their $42 billion auction of treasury bonds.

At the current rate of issuance (assuming the economy does not get worse and tax receipts fall), our USA will pass $14 trillion in 7 months.

$15 trillion will then be breached 8 months later.

Fortunately we already know what happens when a country has runaway deficits financed with a printing press.  The images of people in Germany burning their money to stay warm is but a recent memory:


Real World Problems

I manage a 460 unit apartment community during the week.  One day every month the sheriff shows up to my property to lock the doors of people that are in eviction and were unable to come up with the money.

This morning we locked five doors, two of which had the families still living there.  Families with children.  Today those kids are going to get off the school bus and not have a home.

When I talk about people getting foreclosed on in their mansions, or having to walk away from their mortgage, it is not a horrible thing.  Why? Because they can rent.

If the government was not force feeding Americans with 100% financed loans with tax credits and low interest rates do you know what they would do?  They would just rent. 

Then the price of homes would fall to a level where Americans could afford real loans with real down payments with real interest rates.

Do you know who would buy a home at that point?  Me.  I would.

If the government would just let the market clear, some people would lose their homes, they would rent, and prices would fall.  That is not sad.  What is sad is when people lose the homes they are renting.  The families that I worked with today.

Anyway, let's take a look at how the government housing program is working out so far.......

Real Estate Bottom?

Quick update on the real estate "bottom."  We received the Case-Shiller home price numbers this morning.  They have now fallen for 6 straight months as seen in the chart below:


Prices fell .5% month over month. 

With prices falling the supply of new homes on the market has to be shrinking, right?

Let's take a look......

Monday, May 24, 2010

April Home Sales And Inventory

The existing home sales for April came in at 5.77 million, a 7.6% improvement from the month of March, as buyers rushed in to get their last chance at the home buyer tax credit.

Even with this one month gasp of adrenaline the total supply of home inventory INCREASED by 11.05% from the previous month.

The April inventory represents an 8.4 month supply of homes.  (This does not include the massive shadow inventory on the bank's books that they are holding off the market.)

As the tax credit has now officially expired we will see sales plunge in the months ahead for new and existing homes.  This will come in the face of the shadow inventory continuing to make its way into the current inventory supply.

Supply surging, sales plunging. 

32 American States Bankrupt

Zero Hedge reports this weekend:

Courtesy of Economic Policy Journal we now know that the majority of American states are currently insolvent, and that the US Treasury has been conducting a shadow bailout of at least 32 US states. Over 60% of Americans receiving state unemployment benefits are getting these directly from the US government, as 32 states have now borrowed $37.8 billion from Uncle Sam to fund unemployment insurance.

The states in most dire condition, are, not unexpectedly, the unholy trifecta of California ($6.9 billion borrowed), Michigan ($3.9 billion), and New York ($3.2 billion). With this form of shadow bailout occurring, one can only wonder how many other shadow programs are currently in operation to fund states under the table with federal money.

Now that all states are slowly moving toward insolvency, it is just another large expense to tack on the back of the Federal Budget deficit.  What will be the straw that finally breaks the camel's back and brings America to bankruptcy?  We wait with breathless anticipation at every debt auction, every week, for the time when no one shows up to bail us out.