Monday, January 16, 2012

The Tea Leaves Are Misleading

Unemployment is down or just maybe these people have exhausted their benefits and dropped off of the statistical charts. Consumption has picked up and maybe for the wrong reasons; immediate gratification feels better than the savings rate reward of one percent interest offered by the banks. You want to put something on your credit card, go ahead buy the Wide screen TV and pay 28% interest on the unpaid balance. Want to buy a car, there are fog a mirror loans everywhere, but the interest rates can be a little dicey.

The real question is what do we do with all of the people that were associated with the housing industry? Getting a job after being on unemployment for two years is not an easy task. At that point, reality and frustration become a part of your day to day existence. Unemployed and no job? Go to college or trade school and get that degree with government loans. If you are 62 or over consider early retirement.

Want to buy a home and finance it through a bank? Your name had better be John D Rockefeller or JP Morgan Warren Buffet or Bill Gates. The 20 percent down mortgage is still available. Nobody had 20% to put down in the bubble years and of course everyone that ever wanted a house bought one or two. Now it’s a real effort to sell a home. Of course Fannie and Freddie are still selling homes. Rumor has it; your signature is all the down payment you need.

The number of foreclosures entering the market this year range from one to three million depending on the source. Then there is also the phantom shadow inventory. If you talk to a Realtor, now’s a really good time to buy a house (loosely translated, “I haven’t had a sale in two years, am starving and six payments behind on my Mercedes”). Of course if you planned on selling your home and ease into retirement in style, things have changed a tad.

Our government didn’t save for that rainy day and now Congress can’t even pass a budget. The argument centers around, “Can we spend what we don’t have?” The Democrats say "yes" and the Republicans say "no."

We have an election coming up and the Republicans have the solution, “Try anyone but Obama.” How either party can increase the number of private sector jobs defies all logic. Governments consume taxes; they don’t build anything for consumption.

The stock market continues to go up, our retirement investments are secure, the banking system will not collapse and the housing market is as solid as a rock;>) Our present predicament, kind of reminds me of the one legged man who sold his crutches. As long as he likes where he is standing, there is no problem.


Anonymous said...

Game over. Time to hit the reset button.

If only that tidal wave had hit DC instead of Fukushima? The idea of all those politicians, grifters, villians, clowns and other anti-Americans in DC being flushed away is utterly intoxicating.

Anonymous said...

The chances are very unlikely as the whole corrupt status quo is against him but Ron Paul is this country's only hope. If Obama stays in or any of these other robots such as Romney make the presidency we are doomed. Ron Paul isn't perfect by any means BUT he is the ONLY one that will stop the war mongering (neutralizing the military industrial complex) and stop the further devaluation of our currency (neutralizing the central banking system). These points must be addressed and dealt with terminatedly or we are going over the abyss.

Voting for any one else is a vote to support our wars, future wars and nation building, terrorist retaliation, debt that destroys any chance of growth, destruction of the USD, extinction of free market capitalism and the American spirit of innovation and production. (Obama Care, The Patriot Act, and all of these other police state laws must be repealed if we are going to maintain any sense of liberty and freedom.)

The two headed party and this dog and pony show election is a joke. The power elite are tightening their grip on Europe and the USA with the intention of making us all debt slaves.

The 535 robots that compose the two houses of Congress have sold us out. The Obama administration has done the same. The whole system has been headed this way for the last 50 years and is ready to crash.

Stop the crony-capitalism, the plutocracy, the theft of our country, the destruction of our liberty and freedom by voting for the only man that is willing to confront and deal with our real problems.

dearieme said...

I have a Norwegian pal whom I see every few months. He was telling me today about the way that the income from their gas and oil fields is stashed away, invested to fund the future outgoings of the state - including pensions and so forth. I was struck by the contrast with our debt-ridden societies. There's not much point observing that Norway has a small population and a huge oil industry. Just ask yourself how the modern USA, for instance, would handle such a windfall.

Jim in San Marcos said...

Hi Anon 7:14

I see it as game over also. But where is the reset button??? ;>)

Jim in San Marcos said...

Hi Anon 2:53

I guess we know who you are voting for.

Look at it this way, the Titanic has just hit an iceberg. Holding an election and selecting a new captain will not solve the ships problems. It is sinking.

Whoever wins the next election won't pull us out of this mess, it is getting worse.

If the Supreme Court rules Obamacare unconstitutional, why not give him 4 more years to really piss off even the liberal voters?

If you think the country is in bad shape now, just wait 2 years. That's probably when we hit bottom.

Ron Paul has some real solutions, but it reminds me of why France failed building the Panama Canal. They were ahead of their times, but the technology was not in place yet to make it successful.

Anonymous said...

At the rate we are going, we will be at the same GDP/Debt ratio that Greece is in right now in 4 more years. Health care is going up an average of 9% per year. Medicare and Medicaid will implode in a few more years. Less production and workers in relation to retirees continues to increase. Unemployment will continue to increase. Threat of war with Iran which if it happens will put us further in debt and the cost of oil will skyrocket. We are at 15.2 trillion in national debt (unpayable) and over 60 trillion if you count the unfunded obligations of social security, medicare, etc. Our government and the Fed Reserve will continue to "fight" this depression and deflation with inflation until they've destroyed the currency. Europe will do the same. (Thank you Lord Keynes.)

As Jim says, the Titanic has already hit the iceberg and changing captains won't do much good now.

Nothing will change until we hit a brick wall and have total crisis.

We've only got a few more years to go before it is all over and everyone has to face the reality that the system is broken and we don't have any leaders.

Once all of the governmental legerdemain is over with economic historians will say that the depression began in 2006.

Congratulations Jim you were spot on!

Now... next problem... how in the world am I going to weather the coming storms and live and get through the rest of my life with a decent standard of living? What major changes and preparations do I have to embark on NOW so that I can survive?

Anonymous said...

There is no way out. No fix. The game is over. The pain will be great.

Better hope that America and EU can continue to kick the can down the road for many more years because when this global system crashes it is going to be a nightmare.

Anyone without a home off the grid, garden, animals for food, a water source, silver & gold and guns and ammo will be at risk.

Anonymous said...

I've read the guns ammo and food line a bit much, and I'm not one to follow the herd. So, I thought, our situation can not be new. I can find a country that has gone through what we propose is going to be the downfall of America, and find out what those citizens needed.
the Russian economic collapse is a decent example, and it didn't take me long to find some good articles. Google: Dmitry Orlov

In short, you are correct, I should buy some guns. there is a new AR15 semi automatic shotgun on the market now. That should do it.

Anonymous said...

Obama's state of the union address... saying whatever his spin doctors think is needed for his re-election. He's just another part of the problem.
Sure wish a 3rd party would start their rise.

With the Tea Party and Occupy Wall St. groups as active as they already are. And with the continual decline coming throughout 2012 can you imagine what sort of hell is going to break out at the Dem and Repub conventions this year?

I hope they wheel out the guillotines.

Anonymous said...


I respect your opinion and your logic. Would like to run something by you.

The wife and I have been considering the idea of buying an RV and living a mobile life on a full time basis, based on the idea that it could allow us more flexibility and opportunity, and maximize the growth and income of our businesses. We'd be able to interface on a much more abundant level with clients, prospects, mentors, business owners, etc. This would also facilitate our education (by enabling us to attend many more seminars, workshops, etc. around the country). My wife's business is a product development company consisting of independent contractors all over the USA and she runs it from an internet command center. My business area is private lending, real estate based projects (rehabs) and I also assist wife with her business.

This transition would've been a lot easier to confront and less of a risk if it was, let's say 2004. But now that we are in a depression and there is much uncertainty and lack of prediction for the future, the decision seems more difficult.

Our main concern is the cost of diesel fuel rising to a high level. Yet, our living/operating expenses would be quite low, so having fuel as our largest expense allocation might not be such a big deal. If the benefits of mobility are highly advantageous, than this cost would be well worth it from a multiplier aspect. Plus, we wouldn't be in constant driving mode. Most of the time we'd be staying put for a few weeks to a few months before we traveled on to our next destination. We'd probably drive the same or less cumulative hours per year than a couple that both have to commute to work every day.

We've learned that it isn't that expensive to stay put either. RV Parks are cheap ($100 per week, cheaper the longer you stay) and we can stay put on the property of friends, family and associates for next to nothing. We'd be continually increasing our parking locations all over the country through networking and meeting people.

One can buy a 2-3 year old RV for a very low price and can finance it fo 20 years at 1.99% right now. One could also buy one for a super low price free and clear at an auction.

The combination of earned income from both our businesses and passive income from our portfolio would give us decent financial stability. Our monthly nut would probably be 25% of monthly income or maybe less.

Does this sound unworkable or whacky to you, or do you think that, based on our circumstances, that this could prove to be a prudent and profitable solution to our current and future economic climate?

rob in nova scotia said...

Just my two cents but I would buy the RV fre and clear. I doubt the thing would last 20 years driving on roads in the condition they are in these days. Roads are likely to get alot bumpier in years ahead and suspension holding everything up is likely to fail.

Jim in San Marcos said...

Hi Anon 1:10

Rob raises a good point, why spread the payments out over 20 years? I wouldn't go more than 8 if it has a motor and wheels.

The other thing to consider is your age. If you are approaching retirement, I would forget it. Retirement dreams don't focus on physical impairments, like strokes, heart disease, cancer, failing eyesight and arthritis.

So if you have another 15 years before you retire, I think what you want to do could be a lot of fun. I'd be leery of anyone offering 20 years of payments on an RV. Other than that, good luck, happy camping.

Anonymous said...

Let's take a little more sophisticated look at the financial aspect of this.

Why tie up your money when you can use cheap leverage? This is how I'd play it --- Let's say you have 80k in cash. Buy a 2-3 year old A-Class RV for the 80k. You're past the steep depreciation curve now (better than buying a new one). Put 16k down (20% down is mandatory for RV financing) and finance the 64k. 64k @ 1.99% for 20 years = a monthly payment of $323.46 ($3,881.55 per annum). Take your 64k and invest it safely at 10% (you can buy a first trust deed for 10% interest or buy a rental property with it and get about a 10% return on the money from the rent, etc.) The 10% annual return of $6,400 will cover your payments and leave more money for maintenance and repair. As time goes by, and inflation continues, you'll soon be paying that loan off with much cheaper dollars ($323 per month will seem like chicken feed). After 10 years trade it in for another 2-3 year old one, or sell it.

Also, people are doing this in their 50's, 60's, 70's and even 80's. If you don't have serious health problems go for it. If your health worsens during this time period you can always transition back to a house, condo or apartment.

Anonymous said...

Me again. By the way, I forgot to mention that this is a simple rule followed by people who operate "outside the box" of the normal consumer.

NEVER spend your capital on a depreciating item. Buy an appreciating asset and let the asset pay for the item. Once the item is used up or gotten rid of you will still have the asset and be able to do it all over again.

Anonymous said...

Buy an appreciating asset: a gun
Let the asset pay for the item: rob a bank

Sorry for my strange sense of humor.

As for the RV, have you looked into hybrids? Also, the european brands, some of which are sold in the US, have better gas milage.

Anonymous said...

New blog post please?