[powayseller]

So U-Haul has so few trucks in San Diego, that they give you a 50% discount for driving a truck there. They badly need the trucks in San Diego, for all the people in the exodus out of San Diego. I bet you would find similar stats for leaving anywhere in CA, FL, NY, etc. Has anyone looked over the UHaul site more, to see which cities/states have the highest exodues?

We could use the UHaul data as a leading indicator, where the Census Bureau lags by about 5 years.

BTW, I’m getting really excited about leading indicators. The book, Ahead of the Curve, is about that topic. Written by a Goldman Sachs economist, with 18 years in the retail sector, he writes about the cause-effect relationships of various data, and where economists make the mistakes. For example, they think that employment is a leading indicator of job growth, where in reality it is a 9-12 month lagging indicator. The leading indicator is consumer spending. I’m sure we can improve his model by adding MEW and the U-Haul data.

[powayseller]

When I called Vanguard, they told me that the Prime Money Market holds a variety of debt instruments, including Fannie Mae bonds. The GSE bonds are not listed in the prospectus.

I did not inquire about CA Tax Exempt, since I only have a couple bucks in that one.

So perhaps the CA Tax Exempt is safe. Regardless, if Fannie Mae goes bankrupt, the government will likely bail them out. They bailed out a hedge fund, with much less exposure to global markets than Fannie Mae has. So I wouldn’t really worry too much about the money market deal. It’s just if they do bail out Fannie Mae, they’ll not raise our taxes but print more money, really raising inflation.

I have a funny story. I took my youngster to the bank to make a withdrawal today, and he said, “Mom, where do they keep the money?” I blurted out,”They don’t keep money here, it’s all paper entries. If everyone withdrew their deposits, there isn’t enough here to handle it. See those folks sitting there, signing their loan documents? They have your money. The money is wired to everyone anyway, so we don’t need real money anymore. We pay with debit cards and checks. So son, there is probably a few thousand bucks in this bank, and that’s all they need”. He was amazed at all this information.

But the system works, so that’s good enough for me.

[powayseller]

Realtors are telling their sellers to reduce, but sellers are digging in their heels. To them, paper profits are real profits that they would be losing by lowering the price. Sellers are spoiled by rapid appreciation of recent years. The whole psychology element of investing is fascinating!

[powayseller]

The Mortgage Bankers Association estimates that the burden of higher interest costs would fall on about 7 percent to 8 percent of all homeowners.
The rest have either paid off their mortgages or face no immediate increase because they took out fixed-rate mortgages or refinanced their earlier loans
to mortgages that hold rates steady for 5 to 10 years.

I figured that 7-8% of all homeowners represent a majority of recent purchasers. In any case, this is a very high number of homeowners nationwide who are going to be in trouble by the end of 2007.

[powayseller]

I’ve thought of that also: paying off your house is better than money in the bank.

But, why would we repeat a Depression? I wasn’t alluding to that, although I have no idea why it can’t happen. Is a depression possible? Are all the same risk factors in place?

I was suggesting a recession. A recession is not a bad thing at all, just a normal part of economic cycles. Like a forest needs a good fire now and then, an economy needs recessions. Did you know that the redwood seed needs the heat of fire to crack its hard shell and make it sprout? Fire cleanses dead weeds and underbrush and shifts nutrients from flora to the soil. Recessions also have their place, as they curb excesses from the markets.

[powayseller]

Not mine, since I sold my FNM, and am moving my cash from my prime money market into CDs. By the way, most MBS is owned by foreigners. When the value goes down, how will they react? Maybe they’ll buy Tnotes instead of MBS.

I hope everyone reading this realizes that the mortgage debt is purchased by money markets. Anyone with money markets not federally insured can lose value if MBS lose value, or Fannie Mae files bankruptcy. But I’m sure the government will bail out Fannie Mae. That will require more dollar printing, and higher inflation.

You can get the same yield of a MM by buying CDs. The rates are around 5% for a 4-month CD. So there’s no need to take the risk in a money market in a brokerage account. Vanguard has tons of CDs. Money market in banks are FDIC insured, I think.

[powayseller]

Do you think it would be better for CO homeowners without exotic lending?

While Michigan also is reeling from job losses, it’s interesting that increasing foreclosures are hitting the nation all at once.

It’s going to get really bad next year. This year is just the warmup for the big stuff next year. We have 3x as many ARMs resetting next year, and whenever I read the figures on the ARM resets, I have never read that the problem was confined to CA and FL. It always says, “Nationwide, $1 trillion in ARMs is resetting in 2007”. Emphasis on nationwide.

How are retailers faring in CO? Have you seen any impact on the local economy?

[powayseller]

I haven’t studied the depression. I do believe we are set up to go into a recession, and I want to position my portfolio so that it doesn’t wipe out my assets. Selling my house was the first step.

I wish that some others would add to this topic. Does anyone else agree? Disagree? Why? How are you positioning your investments at this time?

[powayseller]

Include Oklahoma in the list of “foreclosure states”.

Heck, is any state immune from rising foreclosures due to exotic lending programs? It seems we Americans, regardless of state, have bought houses with nothing down, and financed it all. Most of us who purhcased a home in the last few years are on the verge of losing our homes.

[powayseller]

That’s my pet name for Donald Trump.

[powayseller]

I just read the links for today. It turns out that Denver and Austin had high rates of exotic loans as well, and are facing record foreclosures.

This link says (Origination news, bottom)that Georgia and Florida banks are up to 100% – 500% of capital invested in commercial real estate.

Does anyone still think this thing will only hit CA?

[powayseller]

Ok, Jim the realtor removed the article I linked. Oh well…

[powayseller]

I can’t stand to watch him, mainly bec. his yellow skin makes him look so sickly. I also wonder why they don’t replace him with someone better looking, and send him off to the writing division. I don’t mean to be rude, but the guy is worse looking than Donald Dump.

[powayseller]

I rent in Poway, and I sold a house about 2 blocks outside the Poway city limits, rural Poway.

My financial situation is greatly improved since renting. We have more free money now.

Although my husband makes a very good income (and he deserves it!), we were barely getting by on a $475K mortgage. Kids are expensive, esp. in regard to activities and saving for college. And I’m not the most frugal person either…We are both relieved to have the $2100 rent. The house is the same size, although we went from over 5 acres to a concrete patio. However, the move into the city cut our gas bills in half. I used to fill up my car every 3 days, and can now go 6-7 days. Enough about me. I’m fascinated by the life of a day trader. What’s it like? What do you think about payday/pawn shop plays? Which companies do well in a recession?

[powayseller]

What will be the impact on rental prices?

The Q is: Will sellers leave CA, or move into a rental?

[Author]

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