Archive for March 5th, 2009

The worse your credit record, the lower your rate … (that's not a typo)

March 5, 2009

Well, Team O announced their mortgage foreclosure plan.

Folks who have — or soon will default on their mortgage commitments will get their loans repriced at 2%, lengthened to 40 years, and then have their loan balance reduced, if necessary, to cram the defaulters down to payments (P&I, insurance, taxes) equal to 31% of their income.

If you’re sitting with pristine credit, banks MIGHT give you 5% to 6% for 30 years with a 10% downpayment.

Default, you get 2%; credit worthy, you get 5%.

Who in the world thinks that’s fair ?

Gov’t fact sheet:
http://blogs.wsj.com/economics/2009/03/04/treasury-loan-modification-guidelines/

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Posted in Mortgage Crisis, Obama Administration | 1 Comment »

The worse your credit record, the lower your rate … (that’s not a typo)

March 5, 2009

Well, Team O announced their mortgage foreclosure plan.

Folks who have — or soon will default on their mortgage commitments will get their loans repriced at 2%, lengthened to 40 years, and then have their loan balance reduced, if necessary, to cram the defaulters down to payments (P&I, insurance, taxes) equal to 31% of their income.

If you’re sitting with pristine credit, banks MIGHT give you 5% to 6% for 30 years with a 10% downpayment.

Default, you get 2%; credit worthy, you get 5%.

Who in the world thinks that’s fair ?

Gov’t fact sheet:
http://blogs.wsj.com/economics/2009/03/04/treasury-loan-modification-guidelines/

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Buffett on home ownership … desirable, but not a primary objective

March 5, 2009

Excerpted from the Berkshire Hathaway 2008 Annual Report

Commentary about the current housing crisis often ignores the crucial fact that most foreclosures do not occur because a house is worth less than its mortgage (so-called “upside-down” loans).

Rather, foreclosures take place because borrowers can’t pay the monthly payment that they agreed to pay. Homeowners who have
made a meaningful down-payment – derived from savings and not from other borrowing – seldom walk away from a primary residence simply because its value today is less than the mortgage.

Instead, they walk when they can’t make the monthly payments.

Home ownership is a wonderful thing … Enjoyment and utility should be the primary motives for purchase, not profit or refi possibilities.

And the home purchased ought to fit the income of the purchaser.

The present housing debacle should teach home buyers, lenders, brokers and government some simple lessons that will ensure stability in the future:

Home purchases should involve an honest-to-God down payment
of at least 10% and monthly payments that can be comfortably handled by the borrower’s income. And, that income should be carefully verified.

Putting people into homes, though a desirable goal, shouldn’t be our country’s primary objective. Keeping them in their homes should be the ambition.

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California Dreamin’ … Weed, yes … Oil, no.

March 5, 2009

Recent press reports say Golden Staters are considering the legalization of maijuana as a means of increasing state revenues to offset CA’s huge budget deficit.

But, no reported consideration for off-shore oil drilling.  Hmmmm.

According to  a recent study by the American Energy Alliance, an industry research group, developing our offshore energy resources would create in the coming years:

$8.2 trillion in additional GDP.

$2.2 trillion in total new state and federal tax revenues.

1.2 million new jobs at high wages.

$70 billion in added wages (all taxable) to the economy each year.

The much maligned Gov Palin proved that eco-sensitive drilling can bulge state coffers … and cut citizens tax bills.

Pro-weed, anti-oil … that says it all, doesn’t it …

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Source of AEA info:
http://www.ibdeditorials.com/IBDArticles.aspx?id=320544753372991

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Raising capital gains taxes in 2011 … Obama says: take that, Mr. Dow

March 5, 2009

Barack-O is bound and determined to raise capital gains taxes — from 15% to 20%.

I guess that’s because O thinks returns on invested capital aren’t really “earned” and capital gains only accrue to rich folks.

The problem: this ill-timed move is certain to suppress any market rebound that might materialize.  Why?

2011 sounds like a long way off.  But, to qualify for capital gains, an asset has to be held for at least 12 months.  That means that stocks bought next year (after Jan. 1 2010) will be — by definition — subject to the upped capital gains tax rates.  So, their after tax returns will be reduced.

What to do? Buy stocks later this year (2009) and sell them late next year — before the tax rate goes up — and before the sell-off that will certainly occur in Nov-Dec 2010 (as every Tom, Dick & Harry) tries to bail to beat the tax rate increase).

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Reminder to Pres Obama: a tanked stock market impacts almost 2/3s of Americans — mostly in 401-Ks

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WARNING: This is an econ-political observation, not investment advice.

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Posted in Obama Administration, Taxes | 2 Comments »

Where in the world is UBL ?

March 5, 2009

During the campaign, Candidate O frequently mocked W for being unable to capture or kill Usama Bin Laden.

Well, O has been Prez for over a month and UBL is still a free man … he didn’t even get a shout out in O’s State of the Nation pitch.

Question 1: Which is more likely capturing UBL or curing cancer? Obama has promised both …

Question 2: Do you think Keith Olberman will start a “days since” counter similar to the ones he had for Bush? I’m betting under on that one

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Top 30 innovations in the past 30 years …

March 5, 2009

Excerpted from Knowledge@Wharton, “A World Transformed: What Are the Top 30 Innovations of the Last 30 Years?”,
February 18, 2009

A team of Wharton profs, in conjunction with NPR, picked the top 30.  Here they are.  Agree or disagree?

My view: glad EZ-Pass made the list … where’s the 3-point line ?

1. Internet, broadband, WWW (browser and html)
2. PC/laptop computers
3. Mobile phones
4. E-mail
5. DNA testing and sequencing/Human genome mapping
6. Magnetic Resonance Imaging (MRI)
7. Microprocessors
8. Fiber optics
9. Office software (spreadsheets, word processors)
10, Non-invasive laser/robotic surgery (laparoscopy)
11. Open source software and services (e.g., Linux, Wikipedia)
12. Light emitting diodes
13. Liquid crystal display (LCD)
14. GPS systems
15. Online shopping/ecommerce/auctions (e.g., eBay)
16. Media file compression (jpeg, mpeg, mp3)
17. Microfinance
18. Photovoltaic Solar Energy
19. Large scale wind turbines
20. Social networking via the Internet
21. Graphic user interface (GUI)
22. Digital photography/videography
23. RFID and applications (e.g., EZ Pass)
24. Genetically modified plants
25. Bio fuels
26. Bar codes and scanners
27. ATMs
28. Stents
29. SRAM flash memory
30. Anti retroviral treatment for AIDS

http://knowledge.wharton.upenn.edu/article.cfm?articleid=2163 

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Hyundai: Lose your job? Bring it back …delivers big results

March 5, 2009

Excerpted from New York Times, “Hyundai, Using a Safety Net, Wins Market Share”, by Nick Bunkley, February 5, 2009

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In the midst of an industry-wide slump that has pushed some competitors to the brink of bankruptcy, Hyundai spent $3 million to tell Americans watching the Super Bowl how to say its name correctly.

The company’s market share nearly doubled last month as sales rose 14 percent, the largest year-over-year increase that any big automaker has posted in the United States since last May.

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One reason for the jump in January appears to be Hyundai’s new marketing strategy of promising to let buyers return their vehicles, at no cost in most cases and with no penalty to their credit rating, if they lose their job or income within a year.

“To their credit, they struck at the core of what’s bothering people, and that’s obviously uncertainty . . . It’s just the fear and the uncertainty that’s holding people back.”

“It gives them a whole new audience — people for whom it would have never popped up on their shopping list.”

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Sales of the Hyundai Sonata, a full-size sedan that costs less than $20,000, surged 85 percent in January, making it one of the country’s top-selling vehicles. And Hyundai sold more passenger cars last month than Chrysler, which has four times as many dealers.

Edit by DAF

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Full article:
http://www.nytimes.com/2009/02/05/business/media/05auto.html?_r=2&ref=business&pagewanted=print

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Posted in Autos - Travel, Financial Crisis, Mktg - Advertising | Leave a Comment »