[bsrsharma]

davelj,

Thank you for shining light on the dark underbelly of insurance. I had this notion that insurers are all very conservative and eschew risk outside of their chosen field. It is a frightening thought that just when we have an economic down turn, say a bubble bursting event, the insurers may also go belly up if a catastrophe occurs. I guess CA people have to redouble their prayers that there won’t be a 7+ earthquake or wildfires during next few years! (and FL folks should pray for fewer Cat5 hurricanes)

[bsrsharma]

davelj,

Thank you for shining light on the dark underbelly of insurance. I had this notion that insurers are all very conservative and eschew risk outside of their chosen field. It is a frightening thought that just when we have an economic down turn, say a bubble bursting event, the insurers may also go belly up if a catastrophe occurs. I guess CA people have to redouble their prayers that there won’t be a 7+ earthquake or wildfires during next few years! (and FL folks should pray for fewer Cat5 hurricanes)

[bsrsharma]

One thing I don’t understand is why HUD secretary for panhandling? Isn’t it the job of treasury secretary or someone from FED to handle the nations monetary/fiscal crises? This Alphonso’s bio reads like a mid-level bureaucrat; hard to imagine him convincing skeptical hard nosed China central bankers.

Another question is, why China? Japan is equally awash in $ and if there is anyone in Asia that may take a financial bullet for US, it is probably BoJ. We surely enjoy more goodwill with Japan than China.

Anyway, if the story is true i.e HUD secretary is gone “fund raising”, we are approaching the iceberg and there aren’t enough lifeboats!

[bsrsharma]

One thing I don’t understand is why HUD secretary for panhandling? Isn’t it the job of treasury secretary or someone from FED to handle the nations monetary/fiscal crises? This Alphonso’s bio reads like a mid-level bureaucrat; hard to imagine him convincing skeptical hard nosed China central bankers.

Another question is, why China? Japan is equally awash in $ and if there is anyone in Asia that may take a financial bullet for US, it is probably BoJ. We surely enjoy more goodwill with Japan than China.

Anyway, if the story is true i.e HUD secretary is gone “fund raising”, we are approaching the iceberg and there aren’t enough lifeboats!

[bsrsharma]

“My bet is that the insurance company isn’t making any net profit once the two are netted out. But the Nips are famous for tolerating break-even/unprofitable enterprises”

I think there is some confusion here. The insurance company wants to make profit in insurance business i.e. estimating cost of risk payout and charging premiums to cover that and profit. Buying treasuries is not any more interesting to them than you and me keeping a few hundred $ in checking/savings account. They have enough risk to manage in insurance business and would probably do a bad job if they try to manage money risk – that may blow up their insurance business if something goes wrong. Imagine getting hit with hurricane Andrew or Katrina in a down market – fast ticket to bankruptcy (and may be even to jail – for underwriting much more than loss reserve)

[bsrsharma]

“My bet is that the insurance company isn’t making any net profit once the two are netted out. But the Nips are famous for tolerating break-even/unprofitable enterprises”

I think there is some confusion here. The insurance company wants to make profit in insurance business i.e. estimating cost of risk payout and charging premiums to cover that and profit. Buying treasuries is not any more interesting to them than you and me keeping a few hundred $ in checking/savings account. They have enough risk to manage in insurance business and would probably do a bad job if they try to manage money risk – that may blow up their insurance business if something goes wrong. Imagine getting hit with hurricane Andrew or Katrina in a down market – fast ticket to bankruptcy (and may be even to jail – for underwriting much more than loss reserve)

[bsrsharma]

It is already there at patrick.net

see for example, http://patrick.net/index/search.php?zip=&target=&downpay=&br=&ba=&start=350

For non-real estate transactions, the one I know is priceline.com

see http://www.priceline.com/promo/toughlove.asp?irefid=HPFEATURE&irefclickid=ToughLove_NYOPHotels_070907

P.S. I haven’t used either and I am not recommending!

[bsrsharma]

It is already there at patrick.net

see for example, http://patrick.net/index/search.php?zip=&target=&downpay=&br=&ba=&start=350

For non-real estate transactions, the one I know is priceline.com

see http://www.priceline.com/promo/toughlove.asp?irefid=HPFEATURE&irefclickid=ToughLove_NYOPHotels_070907

P.S. I haven’t used either and I am not recommending!

[bsrsharma]

“Perhaps you’d like to proffer a good reason for buying a 5-year piece of paper yielding 1.5% in any currency when the 6-month equivalent in that same currency is yielding 0.76%”

One reason is there are institutions like insurance companies etc., that want to structure their maturities for constant cash flow. They are less keen on yield than on principal preservation. Think of a Japanese insurance company that simply wants a guaranteed one billion yen exactly five years from now, wants to take ZERO risk of any kind – investment or exchange rate – and DOESN’T care for return. What could it do? Put the cash in 5 year Japan treasuries and think of 1.5% return as gravy.

[bsrsharma]

“Perhaps you’d like to proffer a good reason for buying a 5-year piece of paper yielding 1.5% in any currency when the 6-month equivalent in that same currency is yielding 0.76%”

One reason is there are institutions like insurance companies etc., that want to structure their maturities for constant cash flow. They are less keen on yield than on principal preservation. Think of a Japanese insurance company that simply wants a guaranteed one billion yen exactly five years from now, wants to take ZERO risk of any kind – investment or exchange rate – and DOESN’T care for return. What could it do? Put the cash in 5 year Japan treasuries and think of 1.5% return as gravy.

[bsrsharma]

I would hesitate even offering 500K for the homes built during the last 5 years. The builders were so keen on producing that they did quite a shoddy job in many cases and hired anyone with a pulse. Whatever may be your offer, get a really good building inspector first. You may not want a money pit even at fire sale prices.

See this sad story

http://www.geocities.com/myllamas/CCFL/pulte.htm?ref=patrick.net

[bsrsharma]

I would hesitate even offering 500K for the homes built during the last 5 years. The builders were so keen on producing that they did quite a shoddy job in many cases and hired anyone with a pulse. Whatever may be your offer, get a really good building inspector first. You may not want a money pit even at fire sale prices.

See this sad story

http://www.geocities.com/myllamas/CCFL/pulte.htm?ref=patrick.net

[bsrsharma]

I can remember the scenario described is quite accurate. We struggled a great deal if we were catching a falling sword when we bought a small house in SD county in 1993 for $135K in the middle of the slump and watched in horror as the prices dropped till 1996.

[bsrsharma]

I can remember the scenario described is quite accurate. We struggled a great deal if we were catching a falling sword when we bought a small house in SD county in 1993 for $135K in the middle of the slump and watched in horror as the prices dropped till 1996.

[bsrsharma]

I think it is absolutely reasonable, considering the current market dynamics, to offer a price equal to mean value before the onset of bubble. So, take 1999 or 2000 base price and add a 5% yearly inflation and make an offer if you like the house. If the seller rejects it, you can walk away completely guilt free. Alternately, look up the most recent pre-bubble sale price on zillow and add a 5% p.a. rise.

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