Shelter Shakeup

Since the housing market has taken quite a hit over the past couple years, and the Fed and the government has taken drastic measures to try to revive the market, the big question is what lies ahead for buyers and sellers for the next two, three, ten years. Only time will provide an accurate story, but there is no shortage of guesses from prognosticators. While buyers are enjoying low interest rates and sellers are smiling at the first time homebuyers trying to take advantage of the $8,000 credit, buyers and sellers will be frowning at what the future may hold, perhaps within the next year.

So lets look first at the present situation. Low interest rates make refinancing more attractive for current homeowners looking to refinance. Ironically, that was one of the forces that pushed the needle into the housing bubble. First time homebuyers taking advantage of the $8,000 tax credit have until December to sign the papers saying they will take over an asset that will lose its value for a couple more years. Sounds like a great idea to me.

Sellers are not selling their houses for as much as they would like because they bought their houses 5 years ago thinking that they could double their equity three years later. These are probably the same people who invested their life’s savings into Bear Stearns stock. Sellers are happy about the attractive deals that are out there for homebuyers though because that means two more people are willing to at least drive by to see the exterior.

The future seems to look a lot more bleak for both of these groups.

With the lowest interest rates ever, and all the money that has been pumped into the system, rates will go up, a lot more than the average Joe is going to realize. Economists are thinking perhaps 7.5% to as much as 15% within the next year or two. This would be necessary in order to curb inflation. We do not want to become the next Zimbabwe. But with all the money that was pumped into the system, would 15% really be enough? But lets just say interest rates rose to 15%. Would you take out a loan to buy a house? I think I speak for most when I say I wouldn’t unless the sellers dropped their asking prices. So that is exactly what will happen.

Housing prices will drop so that buyers will drive by to see the fresh paint on the exterior. Sellers will lose a ton of money selling the house, and buyers are going to grab their ankles as they volunteer to pay high interest rates on their mortgages.

The positive side for sellers is that if they sell their houses soon, they could just invest their money in a really strong company, perhaps General Motors.

So what does this mean for homebuyers in the future? If you have the money to throw down on a house in a couple years when housing prices may hit bottom, it may not be a bad idea. If you don’t have enough money for a house, good luck. You could just invest your money in another really successful company, Ford.

If you bought a house recently because houses are cheap in order to make a quick dollar in a couple years, you may make your quick dollar, but you’ll probably lose several thousand in the process. That means you won’t have that extra money so that you could invest in the booming company CROX.

My plan is to wait a few years to buy a house. I’m sure I can get one for a low price since the mortgage rates will be high, and I’m sure by then, there will be even more tax credits, government programs to help me get into a house for dirt cheap.

Disclaimer: If you happen to get rich as a result of my brilliant stock tips, it is your responsibility to share to profits with me. My investments in Washington Mutual, Sirius Radio, and Las Vegas Sands two years ago hasn’t panned out for me. You can’t go wrong because it can’t get any lower, right?

Next weeks blog: Abrupt bankruptcy?

Steroids: Baseball's Savior

Football, basketball, baseball, hockey.  These are the four largest major leagues in the United States.  Four sports, four stories, two directions.  Up until the 1990’s, each league was growing and enjoying insane profits.  

That is until the nineties when each of these sports met their own fork in the road.  Much like the cartoons we watched when we were kids, one road led to prosperity, the other to misery and misfortune.

The National Football League created a salary cap opening up new doors for the free agency period.  Parity is at an all-time high.  Teams like Atlanta can recover from a Michael Vick in the matter of a couple seasons.  Today, the NFL is a thriving model for success.  You can thank Paul Tagliabue for that.  The NFL had chosen wisely.

The National Basketball Association benefited by many of the stars being placed on the international stage.  With big names like Michael Jordan showing up in the olympics, the world received a taste of what star power can do on the basketball.  The sport immediately grew in popularity, and today, we get to enjoy many international stars play in our league.  Today, the NBA could be more accurately labeled as the International Basketball Association.  As much as I really dislike David Stern, I have to hand it to him for the actions he has taken to grow the sport.  Good road.

Then there is the National Hockey League, which has struggled against the other sports for revenue, but held its own because of stars like Wayne Gretzky, Mario Lemieux, and Dominic Hasek.  With subsequent retirement and the strike several years ago, the NHL has struggled against to be as profitable as the other major leagues.  Today, the NHL is banking on Sidney Crosby and Alexander Ovechkin to bring the league back into prominence.  Until then, the NHL may have to take the backseat to soccer, whatever the name of the league is here in the USA.  Malfunctioning GPS.

Baseball is the most intriguing of the major sports, and this is where this blog really begins to take form.  Attendance in the Major Leagues were growing at a linear pace from the late 1800’s up until the early 1990’s.  (look at the graph)

The year 1994 was the year that the fork in the road showed up for the MLB.  The strike shortened season caused me to lose my interest in the game.  America’s pastime quickly became something of America’s past.  The season endured the lowest attendance in a decade.  The MLB was quickly on its way to extinction, that is until it injected itself with some performance enhancers.  I’ll be honest, I quit watching the games until the Mark McGuire vs. Sammy Sosa saga was at its hiatus.  I relished the opportunity when I could tell my kids that I saw these guys on a piece of ancient technology called “television”.  

A few years later, Barry Bonds knocked at the doors of the record books with the single season home run record.  I watched daily waiting for him to break the record.  Then I waited for him to break the career home run record.  I’m pretty sure I speak for most of the average baseball fans when I say this - the intrigue brought the sport out of the pitfalls of despair and back into relevance.  Baseball purists would disagree with me but STEROIDS SAVED THE MAJOR LEAGUES.

Referring back to the graph, you will notice that the red area represents attendance during the “steroid era”.  Seems to me that the injected steroids not only made Barry Bond’s biceps burst out of the seams, but owners bank accounts were receiving injections of its own via ticket sales.  

Bud Selig was once at the top of my list of people I really really don’t like, but after much contemplation, I think the guy was given a bunch of lemons and has made lemonade for about 80 million people this year.  Did he know about the juice that Jose Canseco was drinking?  Did he know about the “bole” that A-Rod has admitted to?  Did he know about  Roger Clemens “rocket” fuel?  I’m convinced that he did.  Did the owners know about it?  I’m sure they did.  

So if they knew about it, why wouldn’t they do anything about it?  They were saving their pastime, and making a lot of money in the process.  

So instead of thinking of steroids as the performance enhancers that are responsible for irritating baseball purists, just think of all the other enhancers that they are so willing to overlook.  When a player has reconstructive knee surgery and adds another five years to his career, isn’t that a performance enhancer?  Or what about all the ankle braces, knee braces, tape jobs, pine tar, and band aids designed to give them the competitive advantage?  The black smear on the cheeks.  

Or on that same note, music purists don’t complain about certain singers and bands performing high or drunk, or a combination of the two.  Can you imagine Jerry Lee Lewis performing sober?  I doubt he would be half the performer.  

Can you imagine Dan Patrick as a journalist without the use of a thesaurus?  

Instead of condoning those that have done their best to give themselves a competitive advantage, we should embrace their bold attempts to help 80 million fans live the American Dream, that is to sit at a ballpark with your friend Oscar Meyer.  

Disclaimer:  The only performance enhancers consumed during the composition of this blog was the thesaurus widget, a hot dog, a Mountain Dew, and great music by Adam Lambert.  Don’t judge me.

Next weeks topic:  The Housing Markets' Dilemma

Feel free to suggest future topics.

State of the Economy Address

When I watch CNBC in the mornings, one if the most consistent topics for discussion is that of the state of the economy.  While we are currently suffering what is statistically the worst recession since the Great Depression decades ago, our stock market has rallied to the point that many analysts are declaring that this crisis is over.  While only time could tell, I find it hard to believe that a problem that took us many years to get into would take months to recover.  

What I don’t understand is the steps that were taken in order to dig us out of this recession.  Some of you may remember the stimulus payments that were handed out to taxpayers back in May-July of 2008.  Our country spent several billion dollars that basically did nothing.  So what did we decide to do?  Lets spend even more money.  Another stimulus package was passed and we almost instantaneously added another $1,000,000,000,000 to our national debt.  But I guess it was fine since that $1 trillion represented only about 15% of what the national debt was at the time.  

While the ultraoptimists are excited about the direction they think the economy is headed, the biggest question that comes to my mind is funding for this massive stimulus package.  There are really only two ways to finance this insane amount of money - taxes and the federal reserve.  

The Federal Reserve could simply pump tons of money into the system, but that would only cause high inflation at best.  

So the only other option would be to impose more taxes.  I’m fine with it since America has the simplest taxing system in the world, and corporate taxes are at all-time lows.  

I work at a one of the most prestigious grocery stores in the country.  Since I don’t really do any work, I have the opportunity to talk politics with the other employees that don’t do any work either.  That’s what makes Broulim’s such a prestigious place.  Obama supporter #1, we’ll call him “Seth”, is all about progressive income taxes, meaning the more money you make, the higher percentage of your money goes to Uncle Sam.  Further conversating revealed his ignorance to U.S. History.  He didn’t realize that income taxes were discovered in 1913.  Ironically, that was about the same time America got into debt.  

Socialist #1 and Socialist #2, we’ll call them “Rick” and “Christian”, were another interesting conversation piece.  They are firm believers that instead of taxing everyone, only the rich should be taxed.  That is fairly similar to the initial purpose of income taxes in 1913 as it was intended to tax only the ultra rich.  The difference?  Under their plan, income for the wealthy would be capped at about $2.5 million.  That’s a great idea since I’m sure that will motivate people to become industrious and innovative.  

California has some of the highest taxes in the country.  According to another one of my co-workers, California Boy #1 "Craig", instead of handing out tax returns, California resorted to handing out IOU’s.  His wife is from Modesto, California by the way.

So let’s tax the $#@% out of people so that our government can get out of debt.  

This graph only goes up to 2004, before our massive spending spree over the last year, but I think it is fairly obvious that the strides we have made to tax ourselves in order to get out of debt has paid off.  Our debt since 1970 has really only grown linearly as opposed to exponentially.  That’s good news.  

My good friend Stephen Colbert brought up the idealogy of our brilliant leaders in getting out of the Great Depression.  Just spend.  That didn’t work so they kept spending.  It didn’t work until they joined a little fight called World War II, when we got out of the depression through more spending. (look at the graph)

So if we follow that same historical theory, we’ll just keep spending until we piss off the rest of the world and then we’ll get in a little scuffle with our neighbors, spend more money and we are on our way to another economic boom.  Brilliance at it’s finest.  

So until we go to war, we just have to impose more taxes.  That’s fine because that means our accountants won’t lose their jobs and become just another unemployment statistic. 

Throughout this mess, I have maintained with my co-workers that the way to get out of this crisis is to decrease taxes.  Less taxes means more money for the consumer to spend.  Consumer spending is a lot more effective than government spending.  

Corporations have resorted to outsourcing in order to cut costs.  Over the last couple of weeks I have learned from Obama that these costs are cut through loopholes.  

If we cut corporate taxes, corporations will come back to our shores.  This will provide more jobs, create more consumer spending and so forth.  

So Obama’s solution to convincing corporations to come back is absolutely jeneus, let’s tax them even more.  Let’s show them that their loopholes can be straightened out.  If we can show corporations that they are going to be taxed just as much overseas as they would be here, maybe they’ll spend the extra money to come back to America from India.  That will cause India’s unemployment to skyrocket, and perhaps that will be the catalyst that causes World War III.  A war would mean more spending, and booyah, we are out of this recession.  I don’t know about you but I’m convinced that this could really work.  

Disclaimer:  despite my disagreements with these policies, I understand that these policies are a result of Obama’s economic advisors instead of his own brilliance.  I’m not an expert in the field of economics, simply a bacheloreate in economics.  Therefore, these are opinions based upon my ignorance of the subject.

Next weeks post: How steroids saved baseball

Feel free to suggest future topics.

introduction

Hello to all who decides to read this.  During the life of this blog, I will be writing about random thoughts during the week every Sunday.  These random thoughts will range from sports to the stock market, pop culture to unpop culture.  So just sit back, read, and enjoy the arbitrary thoughts of one of sarcasms' greatest.