I fear that the future demise of small business and the widening gap of the have and have nots is increasing at an alarming pace. This is being perpetuated by the lack of funding to small businesses (Though SBA is showing very large increases is lending recently) and cheap money. The fed is continuing it's drive to push lower rates to spark demand in the market - However, those that are borrowing are the ones that can afford to. Moreover, those that can qualify. With that being said, the M&A activity that I spoke of in the past is making for larger businesses that will soon evolve into oligopolies in certain industries, and it will crowd out the smaller businesses because of pure pricing. There will always be a market for certain small businesses, but the larger businesses will continue to get larger and the cost of labor will be cheaper per capita. With that being said, you will see people working for lower pay, and thus increasing profit margins, or increasing the payouts to shareh0lders - i.e. the people who can afford to invest - i.e. the rich. So, essentially what is happening is the movement of money from the have's by increasing their stake in these huge companies to get bigger and the have nots by reducing their pay because of what we are seeing (layoffs, it's better to be employed for less than you're worth than unemployed, etc, etc). This will be ever perpetuated by the need for higher education to sustain a viable job, thus increasing individual debt loads. As those that incur the most debt for educational reasons, they will be the most burdened to be enslaved to these large corporations to pay for their education. We will continue to see a reduction in benefits and overall well being for employees and this will lead to a slave state, not too unlike China - Only if things aren't fixed legislatively.
This will come to a turning point when the have nots, which will be an overwhelming majority, will begin to rebel. As we are seeing in England with student fee hikes, France's retirement age increasing, etc. America will only take so much. We will see.
Wednesday, November 10, 2010
Thursday, September 23, 2010
The Newest Blog
Okay, so I have officially realised that I need to write more religiously, as I have a great pulse on the economy as a whole (I talk to middle market businesses all day everyday), and I have alot of experience in the capital markets that I can translate to happenings on the street to happenings on paper. So, here it is:
http://sneakynomics.blogspot.com/
Check it out - Post questions, I will answer them - Read it - Spread the word... I will try to update this at least once a month, but if there are any issues that come up, they'll surely be written about.
http://sneakynomics.blogspot.com/
Check it out - Post questions, I will answer them - Read it - Spread the word... I will try to update this at least once a month, but if there are any issues that come up, they'll surely be written about.
Thursday, July 16, 2009
It is a GREAT time to buy a home...
Some factors contributing to this amazing time to buy...
1. The government is moving to push more legislation that helps homeowners stay in their home, even if they can't afford it.
2. Interest rates are lower than they've been almost ever!
3. Banks are forgiving some mortgage debt by reducing principle amounts.
4. There are FHA programs, requiring only 3.5% down, and some states even offer to loan this amount to you - making 100% financing available.
5. Even if you can't make your payment because you lost your job, or you just got into a loan that you can't afford - banks will go ahead and take whatever you owe and tack it onto the back of your loan so that you are delinquent anymore.
Oh, yeah, I guess there are some consequences to this... So, here are some extrapolation of what is happening.
1. By the government pushing legislation, the free market ability to find the real price of real estate is now lost - therefore, prices are substantially higher than they should be, because there is government involvement in what should be a free market.
2. Interest rates being lower should have the effect of causing prices due to higher demand since affordability is higher due to lower prices. The opposite is happening.
3. By the banks forgiving mortgage debt, this in turn is hurting the banks, which the banks are getting massive bailouts and being pushed to do this - see #1. By this happening, the real effect is that the taxpayers are picking up this tab. Moreover, the people who are getting this debt forgivin are going to have a large income tax burden that they must now pay - causing problem down the line.
4. As we have seen in the past, when you're upside down, there is no incentive to keep paying your mortgage. There is no incentive to keep the place nice. So, why is it that we still have a program that requires no money down? With prices continuing to fall, this will hurt anyone that does this 100% financing. Homeownership is not a right, it's a luxury, and if you can't afford it, you should own a home. Therefore, there are a lot of homeowners that shouldn't be in those homes and will eventually lose them to foreclosure.
5. Banks are forgiving debt, taking the delinquet amounts and putting them to the end of the loan, and doing whatever it takes to keep people in their home. Why? It's because they want to show more of a profit to get the government off their back, make it look as if foreclosures are coming to an end to spur buying, and to make their books look better... This will all come to light over the next 5-10 years.
It is a GREAT time to buy a home... If you want to lose tens - maybe hundreds - of thousands of dollars. What is happening now is putting off the depression for years, and we will be in a slow, if not no growth economy for some time. We will not be out of this until there is a real price found in real estate, banks begin lending again, and there is confidence in the system. With the manipulation and lying that is going on in the financial markets, this will cause a total loss of confidence, and I wouldn't be suprised if we saw an introduction to a whole new financial system. This will take years...
1. The government is moving to push more legislation that helps homeowners stay in their home, even if they can't afford it.
2. Interest rates are lower than they've been almost ever!
3. Banks are forgiving some mortgage debt by reducing principle amounts.
4. There are FHA programs, requiring only 3.5% down, and some states even offer to loan this amount to you - making 100% financing available.
5. Even if you can't make your payment because you lost your job, or you just got into a loan that you can't afford - banks will go ahead and take whatever you owe and tack it onto the back of your loan so that you are delinquent anymore.
Oh, yeah, I guess there are some consequences to this... So, here are some extrapolation of what is happening.
1. By the government pushing legislation, the free market ability to find the real price of real estate is now lost - therefore, prices are substantially higher than they should be, because there is government involvement in what should be a free market.
2. Interest rates being lower should have the effect of causing prices due to higher demand since affordability is higher due to lower prices. The opposite is happening.
3. By the banks forgiving mortgage debt, this in turn is hurting the banks, which the banks are getting massive bailouts and being pushed to do this - see #1. By this happening, the real effect is that the taxpayers are picking up this tab. Moreover, the people who are getting this debt forgivin are going to have a large income tax burden that they must now pay - causing problem down the line.
4. As we have seen in the past, when you're upside down, there is no incentive to keep paying your mortgage. There is no incentive to keep the place nice. So, why is it that we still have a program that requires no money down? With prices continuing to fall, this will hurt anyone that does this 100% financing. Homeownership is not a right, it's a luxury, and if you can't afford it, you should own a home. Therefore, there are a lot of homeowners that shouldn't be in those homes and will eventually lose them to foreclosure.
5. Banks are forgiving debt, taking the delinquet amounts and putting them to the end of the loan, and doing whatever it takes to keep people in their home. Why? It's because they want to show more of a profit to get the government off their back, make it look as if foreclosures are coming to an end to spur buying, and to make their books look better... This will all come to light over the next 5-10 years.
It is a GREAT time to buy a home... If you want to lose tens - maybe hundreds - of thousands of dollars. What is happening now is putting off the depression for years, and we will be in a slow, if not no growth economy for some time. We will not be out of this until there is a real price found in real estate, banks begin lending again, and there is confidence in the system. With the manipulation and lying that is going on in the financial markets, this will cause a total loss of confidence, and I wouldn't be suprised if we saw an introduction to a whole new financial system. This will take years...
Wednesday, June 3, 2009
The economic collapse to come
wow... I can't believe I am writing this, but I am. Read the economic depression to come, and tell me if I was nuts back then - I even think I am nuts, but I can put everything together now... and it makes sense...
Currently, there are huge deficits, people losing jobs, states robbing municipalities of their money, the federal government robbing citizens of their tax dollars, and so on. This collapse is coming from the inside - and it stems from the inability to raise taxes to pay for deficits that are ever increasing. Why are they increasing? For multiple reasons - The first and probably most important reason is from the collapse of the automakers - and there'll be more to come over the years - The inability to sell the 10 million needed units will have the Government Managed car companies reducing the amount of dealerships, which is already happening. This will drive tax revenue for cities downward, and effectively bring the tax revenue for states down. As the states begin to increase taxes on businesses, they will slowly make their way from heavily taxed states to lower - as seen by the film industry. Consumers will follow. As taxes go up, people will spend less and less for obvious reasons, which will have an effect of less tax revenue for the federal government - as people spend less, more businesses will pay less taxes because of less taxable income or they just go out of business.
Moreover, when the states, like California, begin to become so insolvent, they are forced into bankruptcy, the federal government will step in and bailout those states - causing massive debt loads for the government. Soon, it will get to a point where the dollar isn't worth nearly what it was and the interest rates are going to soar because of the default risk associated with it. We will see a collapse similar to that seen in and around 1994 with Mexico, but the problem being is who will bail us out like we did to Mexico? China?
Well, with that, the major businesses will slowly be bought by countries that have more money than us - China - and we will slowly lose our economic power to generate internal profits.
I want to elaborate about what I see for national security, but for fear of big brother, I choose not to - This is only a prediction and is not reality, but at the rate we're going, it will be reality.
What can fix this? Well, for starters, we need to tax more. We need to renegotiate government union contracts. We need to get rid of the pensions (sorry seniors), especially those that pay 90% of your highest grossing year, we need to quit paying our CEO's 100x more than the lowest paid worker. We need the government out of business. We need to let things fail.
Unfortunately what my resolutions are sound a bit two faced - How can we let big business be free of regulation, but also have CEO's earn only 10x the amount of it's lowest paid worker? Well, we also need to understand we're not a consumer based economy anymore, and the days of buying the Hummer with the McMansion for $500K is over.
We have officially started the new economy, but everyone believes it's going to be just like last time (look at the stock market and home sales numbers), but it won't be. The next wave of the economic collapse will be disheartening to everyone who is jumping in to buy homes now. This will be a long and painful depression that will effect everyone, but we need to prepare for the future and quit living for today.
Currently, there are huge deficits, people losing jobs, states robbing municipalities of their money, the federal government robbing citizens of their tax dollars, and so on. This collapse is coming from the inside - and it stems from the inability to raise taxes to pay for deficits that are ever increasing. Why are they increasing? For multiple reasons - The first and probably most important reason is from the collapse of the automakers - and there'll be more to come over the years - The inability to sell the 10 million needed units will have the Government Managed car companies reducing the amount of dealerships, which is already happening. This will drive tax revenue for cities downward, and effectively bring the tax revenue for states down. As the states begin to increase taxes on businesses, they will slowly make their way from heavily taxed states to lower - as seen by the film industry. Consumers will follow. As taxes go up, people will spend less and less for obvious reasons, which will have an effect of less tax revenue for the federal government - as people spend less, more businesses will pay less taxes because of less taxable income or they just go out of business.
Moreover, when the states, like California, begin to become so insolvent, they are forced into bankruptcy, the federal government will step in and bailout those states - causing massive debt loads for the government. Soon, it will get to a point where the dollar isn't worth nearly what it was and the interest rates are going to soar because of the default risk associated with it. We will see a collapse similar to that seen in and around 1994 with Mexico, but the problem being is who will bail us out like we did to Mexico? China?
Well, with that, the major businesses will slowly be bought by countries that have more money than us - China - and we will slowly lose our economic power to generate internal profits.
I want to elaborate about what I see for national security, but for fear of big brother, I choose not to - This is only a prediction and is not reality, but at the rate we're going, it will be reality.
What can fix this? Well, for starters, we need to tax more. We need to renegotiate government union contracts. We need to get rid of the pensions (sorry seniors), especially those that pay 90% of your highest grossing year, we need to quit paying our CEO's 100x more than the lowest paid worker. We need the government out of business. We need to let things fail.
Unfortunately what my resolutions are sound a bit two faced - How can we let big business be free of regulation, but also have CEO's earn only 10x the amount of it's lowest paid worker? Well, we also need to understand we're not a consumer based economy anymore, and the days of buying the Hummer with the McMansion for $500K is over.
We have officially started the new economy, but everyone believes it's going to be just like last time (look at the stock market and home sales numbers), but it won't be. The next wave of the economic collapse will be disheartening to everyone who is jumping in to buy homes now. This will be a long and painful depression that will effect everyone, but we need to prepare for the future and quit living for today.
Sunday, May 3, 2009
Current State of Real Estate
Recently I have begun to dip my toes into the waters of real estate. I have tried to tame my urge to buy a beautiful home for my family to live in - But, I am slowly getting tempted. Why? Well a few reasons. Our place is horribly small, 920 sq. ft. We are outgrowing this place with more and more crap. And ideally, I want to work on a house, giving me projects to do over the weekend.
So, I began talking to a real estate agent, and I started hearing the same lame excuses as why it is a good time to buy - Real estate is lower than it's been in a long time, renting is just throwing money away, interest rates are lower than they've ever been, etc, etc... So, I started realizing what is going on in the real estate industry - and it is now time NOT TO BUY.
Here is what I see as problems and forecast for this.
#1: Interest rates are lower than they've ever been: Okay, this may be true. But, here is the truth of this. Affordability has increased due to the decrease in interest rates. What does that mean? Well, a home that is normally 200,000 at 10% has a payment of 1755.14 for 30 years. Now, when interest rates decrease to 5%, the payment then goes to 1073.64 making for an apparent 39% increase in affordability. These numbers are obviously not accurate, but for the simplicity of it, take it as a roundabout truth. With this, "fact", then more people can afford a home causing an increase in the demand side of home prices. The supply side must then reduce, causing a price increase. Therefore, with a reduction in interest rates, prices will rise... THIS HAS NOT HAPPENED: Prices have been reduced because of alot of varying factors. #1, personal credit has been shot. #2, the economy has shrunk causing real incomes to reduce, causing deflationary pressure on all prices #3, over building has caused increase inventory which has increased the supply side #4, the lowering of asset values has left people to walk away, thus increasing the supply side #5, foreclosures, etc increase supply side.
So, I began talking to a real estate agent, and I started hearing the same lame excuses as why it is a good time to buy - Real estate is lower than it's been in a long time, renting is just throwing money away, interest rates are lower than they've ever been, etc, etc... So, I started realizing what is going on in the real estate industry - and it is now time NOT TO BUY.
Here is what I see as problems and forecast for this.
#1: Interest rates are lower than they've ever been: Okay, this may be true. But, here is the truth of this. Affordability has increased due to the decrease in interest rates. What does that mean? Well, a home that is normally 200,000 at 10% has a payment of 1755.14 for 30 years. Now, when interest rates decrease to 5%, the payment then goes to 1073.64 making for an apparent 39% increase in affordability. These numbers are obviously not accurate, but for the simplicity of it, take it as a roundabout truth. With this, "fact", then more people can afford a home causing an increase in the demand side of home prices. The supply side must then reduce, causing a price increase. Therefore, with a reduction in interest rates, prices will rise... THIS HAS NOT HAPPENED: Prices have been reduced because of alot of varying factors. #1, personal credit has been shot. #2, the economy has shrunk causing real incomes to reduce, causing deflationary pressure on all prices #3, over building has caused increase inventory which has increased the supply side #4, the lowering of asset values has left people to walk away, thus increasing the supply side #5, foreclosures, etc increase supply side.
Sure, demand is rising, but not enough to keep up with the supply side. Moreover, with interest rates lowering, the prices should be rising, so effectively, there is a "real" reduction in home values more than what would be seen if interest rates have risen or stayed the same.
So, what is going to happen? The problem also lies in the fact that inventory
has been bought up, and speculators are coming out buying thinking it's a great time to buy - causing artificial demand. On top of that, we've had a moratorium on foreclosures, giving the false sense of inventory levels decreasing and an end to the real estate mess. So, where are we now? Now that the moratorium is over, we will see a rise in inventory levels. That will further depress prices, causing some to walk away from their homes if they lose value. The economy has yet to see it's bottom, and that may take another hit on people who have just bought a house believing their jobs were stable, and they aren't.
With interest rates being at historical lows, there is only one way up. With the government increasing it's debt size, the interest rates are going to rise due to default risk. Inflation is a thing of the past as there is not enough money chasing the number of goods produced, depsite the governments best efforts. (Think about this: how many trillions of dollars have been lost in the stock market from March of 2007 to the present? Now, think about the paper losses of real estate that have happened from 2005 to present - Next, think about how much the government is spending to help "revive" the economy? Yeah, it doesn't come close to what was lost). So, with the fact that interest rates are going to go up, that will cause prices to further be depressed. Many other factors are inclusive of this, but I am trying to keep it as simple as possible.
Now, let's think about down payment. On that $200,000 house at 5%, you'll need 3% for FHA or 20% for conventional. So, $6,000 or $40,000. Let's go back to our 5% rate 10% rate example. If interest rates double, let's assume real estate drops 39%, as evident by the decrease in payment. That then brings that 200,000 home down to 122,000. If you wait, your downpayment is now 5% or 33%. Your payment at 122,000 at 10% is the same as it would be at 200,000 at 5%, difference being that you now owe less...
So, anyone thinking it's a great time to buy a home - Wait it out... The recover won't be a V, nor a U - It'll more than likely be an L - And that is my prediction on real estate... We are a long way from the bottom.
:::Disclaimer:::
Greetings out there to all who are reading this. I am starting this new blog on blogspot because I like the format and the layout of it. Not just that, but because of search engine crawlers, it will be able to pick this site up, and hopefully get it publicized better than that of myspace - Plus, I hardly use that at all. Not just that, but it is much easier and user friendly. As a disclosure, I have not read those postings for years - I merely copy and pasted them into this blog. Therefore, I apologize if I offend anyone with my transparent language. I tend to speak my mind and the truth and sometimes fail to realize that it may offend people. So, if you have a problem, I will be more than happy to change it. I know I once posted on myspace a specific name of a financial advisor that I thought of as a douche because he lied to his customers merely to make his commission - I subsequently removed his name.
I have in the past 15-20 minutes transcribed all of my pertenant postings from myspace to help you understand that I am not new to this. I have been following the economy quite closely since 2002ish, and following the equity markets since 1998. The previous postings are written from an unbiased approach to the markets, as I have no financial interest in anything I speak of, and if I do, I explain what my interest is. I am not a cheerleader, and the underlying fundamental for myself is that there are certain times to buy assets and certain times to sell. I have been a stock broker for the past 4 years, been in the stock market since 1996 with my first mutual fund - actively traded stocks, mutual funds, options, and commodity ETF's since 2005. I have my undergrad in business finance and minor in economics. But, the basis among my rants is that I speak the honest truth as to how I see it.
I don't care about making money - If I want money, I will go get another job to get more. I am not motivated by money. I have cheap taste, my dream car being a Jeep Wrangler - which I have. I've always wanted a cruiser motorcycle - which I now have. I've always wanted an amazing wife - I have this now. I've always wanted a great daughter - I have that too. What does all this mean? I am not looking to grow my possessions, as that doesn't make a person. So, my rants, posts, blogs, whatever you want to call it - They all stem from an unbiased approach and look on the markets.
With that, I move to my first real post of this blog - the others are all from myspace that have been written over the past few years.
I have in the past 15-20 minutes transcribed all of my pertenant postings from myspace to help you understand that I am not new to this. I have been following the economy quite closely since 2002ish, and following the equity markets since 1998. The previous postings are written from an unbiased approach to the markets, as I have no financial interest in anything I speak of, and if I do, I explain what my interest is. I am not a cheerleader, and the underlying fundamental for myself is that there are certain times to buy assets and certain times to sell. I have been a stock broker for the past 4 years, been in the stock market since 1996 with my first mutual fund - actively traded stocks, mutual funds, options, and commodity ETF's since 2005. I have my undergrad in business finance and minor in economics. But, the basis among my rants is that I speak the honest truth as to how I see it.
I don't care about making money - If I want money, I will go get another job to get more. I am not motivated by money. I have cheap taste, my dream car being a Jeep Wrangler - which I have. I've always wanted a cruiser motorcycle - which I now have. I've always wanted an amazing wife - I have this now. I've always wanted a great daughter - I have that too. What does all this mean? I am not looking to grow my possessions, as that doesn't make a person. So, my rants, posts, blogs, whatever you want to call it - They all stem from an unbiased approach and look on the markets.
With that, I move to my first real post of this blog - the others are all from myspace that have been written over the past few years.
Thursday, November 13, 2008
State of everything today
::: Transcribed from personal myspace blog account:::
Ladies and Gentleman, out there reading this blog right now - This will probably be my last financial blog, because I am working on economyandmore.blogspot.com - Check it out and comment...
I just went back through my past postings and realized, wow... I was right about just about everything going on in the economy. I made some dire predictions, and they were right. From the stock market falling, to real estate, to interest rates, and even unemployment. Well, why is that? It is simply because I speak the truth. I am not afraid of NOT making money based on my statements. In the financial markets, it's all based on fear and greed - the person to speak the truth is silenced in one way or another. But, the truth is that peoples actions and impulses are predictable and foreseeable. But, because people want to make money, they won't tell the truth. This factored in with the truth, it will always come through - the truth.
So, what is the truth today? People are losing alot of money. People have lost savings that they made over the past 5-7 years. People are scared for their financial security. Their spending patterns are changing because of this. Banks are being greedy - and aren't lending money. What is happening? The future will pan out like this. We are in a changing time. We are in a revolutionary period where people are going from spenders to savers. The reason being is because they have no more money to spend. Children are going to grow up in the next 10 years being more frugal than the generation just before that. Over the next 10-20 years, people won't spend like they used to and the economy won't grow like it once did. We are going to see massive deflation, prices will come down, but jobs will be hard to come by also.
You can tell the future by seeing the truth. Everything is a lie, but there is truth to every lie. And if you find that truth, you will see the future.
Ladies and Gentleman, out there reading this blog right now - This will probably be my last financial blog, because I am working on economyandmore.blogspot.com - Check it out and comment...
I just went back through my past postings and realized, wow... I was right about just about everything going on in the economy. I made some dire predictions, and they were right. From the stock market falling, to real estate, to interest rates, and even unemployment. Well, why is that? It is simply because I speak the truth. I am not afraid of NOT making money based on my statements. In the financial markets, it's all based on fear and greed - the person to speak the truth is silenced in one way or another. But, the truth is that peoples actions and impulses are predictable and foreseeable. But, because people want to make money, they won't tell the truth. This factored in with the truth, it will always come through - the truth.
So, what is the truth today? People are losing alot of money. People have lost savings that they made over the past 5-7 years. People are scared for their financial security. Their spending patterns are changing because of this. Banks are being greedy - and aren't lending money. What is happening? The future will pan out like this. We are in a changing time. We are in a revolutionary period where people are going from spenders to savers. The reason being is because they have no more money to spend. Children are going to grow up in the next 10 years being more frugal than the generation just before that. Over the next 10-20 years, people won't spend like they used to and the economy won't grow like it once did. We are going to see massive deflation, prices will come down, but jobs will be hard to come by also.
You can tell the future by seeing the truth. Everything is a lie, but there is truth to every lie. And if you find that truth, you will see the future.
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