Tuesday, September 30, 2008

Prop Up a Bubble?

So banks gave billions in credit to people who could not afford it. Home prices ballooned out of control. We had a bubble that was created by sub-prime lending.

Now that bubble has popped and the value of all those mortgages has tanked. Many home owners ended up upside down, in homes that no longer were worth as much as they where when they purchased them. So they cannot sell and get out. Foreclosure was/is the only option. This is still occurring for many people.

So how is this bail-out going to fix that situation? The market was over inflated. Throwing $700 billion at it will not change that. It might prop up a little bit of the fragments that are still standing but the reality is that the market needs to drop back down to reasonable levels.

Sure the market will dip, but it'll come back up to where it's really supposed to be, which isn't where it was. The market would be smart to be more conservative with it's growth after this blows over.

Monday, September 29, 2008

Has the hammer fallen?

Lots of panic following the news that the House did not pass the 'bailout' bill. I think we'll see calmer minds prevail by tomorrow but it'll be a crazy afternoon/evening.

Now that my house is on the market the the credit market has to freeze up. Ugh! Well that just means the buyers will be the cream of the crop and I can just hope that my house floats to the top of the heap of houses on the market. I think it is nice and creamy personally.

Thursday, September 25, 2008

Yes I can be selfish and short sighted

I was just rereading my last post and I was looking at how the economic 'crisis' would affect me. I neglected to think or comment on how it would affect others. Here are my thoughts on some general groups:

1) Those at or under the poverty line: They have few dollars invested so the loss of money in the investment markets will not affect them...directly. Indirectly the reduction in value of the US dollar in response to the drop in the market will affect this group (as it will all). Food and shelter costs will increase. However, this group is often under some kind of social welfare. Those programs will likely still continue, though potentially pinched by an influx of people from the lower-middle class.

2) Lower-Middle Class: As noted above, some of these individuals could be vulnerable to job layoffs. When most companies start looking for employees to trim in hard times, it can affect the lower wage employees, especially in manufacturing (which is already a hurting industry). These people are then stuck with few job opportunities and have to fall to assistance to make it by. You can certainly understand why this group is looking at the candidates for the next President and asking, what are you going to do to help keep us working?

3) Retirees and those nearing retirement: This is the group that should be most worried. Of course it's also a very large group. The "baby-boom" group is getting close to that age where they want to retire or are already retiring. Their pensions and retirement funds are in dire straights. I suspect that is why the government is passing the bailout package. That's a LOT of people who suddenly might not be able to retire at 65 or would put even greater strain on the already feeble Social Security system.

4) New Yuppies: (I include myself in this group) It'll be a pain in the ass but at the end of the day it's not going to be Armageddon. It'll just suck getting credit for a car or house. We might have to rent more or be more frugal in our major purchases. Oh no, we might not be able to get that 65 inch TV! I had to drop HD and DVR functions to help offset increased costs. It's a pain but really did I NEED those things? Nope.

We yuppies will recover fine but I think we'll have to pay for this mess long term regardless if the big finance firms are bailed out or not. We'd be paying for the social programs to help the retired or the poor or we're paying to keep the market stable. Either way we pay in the end. I'd sure like to think that the post-'baby-boom' generations can do better but I'm not too confident of that either. We like our toys too much.

Wednesday, September 24, 2008

Current Economic Situation

Well it's on everyone's minds so here are my thoughts. First, the US shouldn't buy the bad debt from investment banks who made poor choices. They should have to suffer for those choices. Any other company would have to, even if it meant going out of business. Could it hurt the market? Sure it might be ugly for awhile but the markets would self correct, as they should. Maybe banks will think twice about giving credit to those who shouldn't have it or giving more than the person could afford.

When I was financing to buy my house I prequalified. The bank was willing to give me about $220K for a house, even though after doing the math I knew I could only afford about $150K. Now if I knew this why would the bank have been willing to give me more than I could possibly afford? I wouldn't have had enough for food or anything else! I was then pushed to get an ARM and borrow against the equity of the house to put more down on the house. What? That never sounded good to me and I also was lucky to get sound advice telling me to get a fixed rate, even if it was a bit higher.

So today I'm not being killed by my mortgage payment and I'm not worried about foreclosure. In case there was any question, the reason I'm trying to sell our house has nothing to do with the economy or my finances but the fact that I'm tired of spending all my spare time doing house work and maintenance. Being a home owner is a pain in the ass. Sorry, that's a rant for another day.

So what if the markets crash or at least dip badly? Well jobs could be an issue because so many public companies rely on that money and most companies sell something to another business. If those businesses are closing or tightening the belts then money is tight for everyone. That is my biggest worry. That wages will dip and jobs will be lost, at the middle-class level.

I realized recently that I'm not upper-middle like I was dreaming I was. I'm square in the middle. I do reasonably well but it wouldn't take much to push me down. It wouldn't take much to push me up also. But I'd still be in the middle-class. The jump from middle to upper is huge! I could probably make $100K per year if I worked hard but that would be about it. After that you have to make huge leaps in education and social standing and investment. Frankly I don't have the stomach for that. Plain old hard-work isn't enough for most people to make it big.

I don't want to say that all rich people are lazy jerks. Many worked very hard to get their riches. But many of them also took advantage of those under them, making their money off the sweat of others. So back to the investment banks wanting this government bail-out. How much do you think their CEOs make/made? I don't need to see the data to know it's more than some people will make in their entire lives. How is that right? Because of their mistakes those in the middle-class will be screwed over one way or another. Why are they not stripped of their wealth and that money put into the market to help stabilize things? Sure it's a drop in the bucket but it would be a symbolic win for the middle-class and give other greedy SOBs something to think about before they gambled with other peoples money so loosely. Bring them back down to our level. If they are so well educated and hard working, they'll be able to rebuild. If not then perhaps they never deserved to be part of the financial upper-class to begin with.

If the markets tank I know my 401K is going to tank. I'm not very happy about that but I also know that the markets will rebound eventually. Even if I loose it all, it's not a massive amount of money and I'm yet young enough to rebuild my retirement fund.

I also know that if the job market goes south that I have a number of marketable skills aside from my computer skills. After the remodeling on the house I've realized that I could do that very easily if I needed to. It's hard back-aching work but it's work that will always be in demand regardless of the market.

I honestly don't believe the market will get that bad. There are still lots of options for the banks yet. They might not like some of them but things will work out one way or another.

Oh and a note to those making runs at their banks, You are only making things worse. Panic is not helpful in any way shape or form. Storing your money under your mattress will still loose value if the FED has to inflate the value of the dollar, so you might as well leave it where it is, where it can help keep the market functioning.

Sunday, September 21, 2008

Gables Part Deux

Worked on the small gable today. Well actually finished it.

The first picture was pretty early this morning, maybe 9am. Just got done tearing off the old wood, scraped some old peeling paint and got the tar paper up.

This next picture is after all the siding is up and ready for paint. I had to give the caulking time to dry so I did some other touch-up painting around the exterior of the house.

Done finally. The results are nice. It's not as 'perfect' as I would like but it's good. Certainly good enough for prepping for sale. The new owners shouldn't find much to complain about.

I don't have pictures but I also painted the shed. It was an old barn red before. Now it's the same cream color as the house. It'll at least look like they go together now. I still have to paint it's trim white, but that'll be for tomorrow afternoon.

Things are getting close! Nearly done with all the work before putting her on the market.

Saturday, September 20, 2008

Gables are a pain to replace

Well in preparation for selling the house the gables on the front needed replacement. So I began that project today. I also did some power-washing of the drive way.

As you can see from the picture below, the drive way was pretty dirty. I'll need to finish it up in the next few days.

However, the priority was working on the gables because they take much longer than I have time in the evenings after work.

This pile is all the old wood that was replaced. If you look carefully you might see some of the wood rot. It was primarily due to water damage rather than insects. Though, I did find, to my delight, a wasp (Polistinae)nest while removing the wood. They were not happy that I found their home but surprisingly they were not aggressive. I got the bug spray and went to town. A few flew off to return later, but they were quickly disappointed to find that they could no longer get to their home and I'd spray them dead! Muahahaha!

These last two pictures are when I was putting up the tar paper and finally being done with the main gable. I still need to do the small one over the porch. Hopefully that'll go much faster.