Property Grunt

Sunday, October 21, 2007

Well, what the hell we supposed to do, ya moron?

So what do you propose ? Aside from buying foreclosures, which I am not advocating for the newbies, what would you do ? Investing in financials waiting for the upturn ? Buying consumer staples companies ? Gold ?


That is the question I have pondering for quite sometime. However there is no easy formula to present with real estate and personal finance in general because it is all quite subjective. For instance someone who has $20,000 in credit card debt and is barely scraping by is unlikely to jump into day trading, while a person who has little or no debt and has plenty of liquidity is probably more likely to make more riskier investments in the stock market.

The best I can do is give you my take of what is going down. Please bear in mind, I am not a financial planner nor am I an expert in finance. These are just my opinions. So I strongly recommend that you all talk to professionals in the field before making any decisions.

Our government is being run by temps.

With only 15 months left in office, President Bush has left whole agencies of the executive branch to be run largely by acting or interim appointees — jobs that would normally be filled by people whose nominations would have been reviewed and confirmed by the Senate. In many cases, there is no obvious sign of movement at the White House to find permanent nominees, suggesting that many important jobs will not be filled by Senate-confirmed officials for the remainder of the Bush administration. That would effectively circumvent the Senate’s right to review and approve the appointments. It also means that the jobs are filled by people who do not have the clout to make decisions that comes with a permanent appointment endorsed by the Senate, scholars say.
While exact comparisons are difficult to come by, researchers say the vacancy rate for senior jobs in the executive branch is far higher at the end of the Bush administration than it was at the same point in the terms of Mr. Bush’s recent predecessors in the White House.

Basically the federal government is being held together by spit and bailing wire.

“You’ve got more vacancies now than a hotel in hurricane season,” said Paul C. Light, a professor of public service at New York University and one of the nation’s best-known specialists on the federal bureaucracy. “In my 25 years of studying these issues, I’ve never seen a vacancy rate like this.”

And it is going to get worse.

“You’ve got more vacancies now than a hotel in hurricane season,” said Paul C. Light, a professor of public service at New York University and one of the nation’s best-known specialists on the federal bureaucracy. “In my 25 years of studying these issues, I’ve never seen a vacancy rate like this.”

Michael J. Gerhardt, a law professor at the University of North Carolina who studies the federal appointment process, said that he believed the large number of vacancies reflected a widespread fear by Republicans that the next president, whoever it is, will be a Democrat, and that there is no job security at the top ranks of the executive branch.

“Republicans don’t have as much incentive to give up lucrative jobs in the private sector right now,” Professor Gerhardt said.

Professor Light said it was not surprising for the number of vacancies in senior government posts to grow near the end of a president’s term, when political appointees seek work outside government and it becomes more difficult to recruit candidates for what may be short-term jobs.

But he said the situation in the final months of the Bush administration was dire. Since Mr. Bush may well be replaced by a Democrat who would almost certainly want a wholesale turnover of political appointments, the vacancies could continue well into 2009 at many cabinet departments and other agencies, Professor Light said.

He said the problems of having so many acting senior government officials were obvious: “One of the things we know is that they just aren’t as effective as Senate-confirmed appointees. They just don’t have the standing in their agencies. Acting people are very shy about making decisions.”

Anyone in the Republican party who has any talent or capital is not going to commit to any type of high level position in the White House at this point in time because it is not worth it. They would rather make more money in the private sector or wait it out till the next Republican administration, which at this rate will probably occur in the next ice age.

Also no Republican in their right mind wants to be associated in anyway with George W. Bush’s administration if they have aspirations to continue their political career.
Remember Michael “The Fashion God D. Brown” formerly of FEMA? This is probably the type of cannon fodder that is running the majority of our governmental departments right now. They are non threatening personalities who know how to follow the party line and are only interested in putting out fires and making sure the administration holds together till GW takes his final flight on Air Force One. Which is the wrong type of person you want in these positions because they are not going to be assertive in making decisions. They are simply going to fade in the background and hope that no one notices what they are doing. If they screw up, who cares, they can be replaced.

Exhibit A

Henry M. Paulson Jr

“The housing decline is still unfolding, and I view it as the most significant current risk to the economy,” Mr. Paulson said on Tuesday in a combative speech at Georgetown University in which he called for changes by mortgage lenders, credit rating agencies and Wall Street investment banks that had resold mortgages to investors around the world.
“The longer housing prices remain stagnant or fall, the greater the penalty to our future economic growth,” he warned.

He just figured this out now? The real estate and general public have known about the meltdown for more than 2 years. I know Mr. Paulson is not a stupid man since he was a CEO of Goldman Sachs.

It appears his strategy is to maintain the status quo. I am not saying he is a bad guy but his primary objective is to make sure the economy doesn’t hit any more icebergs so he is not going to do anything to cause any further upsets. Besides, I am not sure if Mr. Paulson could take any aggressive measures since he is a relative newcomer to the D.C games and does not have the network that someone like Bernanke has to make changes.

Do not count on the government to bail us out of this situation. They are only going to do as much as they need to and no more. Whatever actions the government takes and whatever information they release, I would strongly advise to examine it closely to see if it is simply lip service at what type of effect it will have on our finances. In other words, we are on our own.

Run away, Run away!

Financial Times

Foreign investors slashed their holdings of US securities by a record amount as the credit squeeze intensified, according to the latest Treasury figures.
The Treasury International Capital report – known as the Tic – for August will be closely watched because it appears amid growing concerns about the weakness of the US dollar, which hit a record low recently against a basket of major currencies.

Financial Times

Currency traders were given a green light to continue selling the US dollar on Wednesday, as the International Monetary Fund said the greenback “remains overvalued” and rejected claims the euro had risen too far.
Contradicting Rodrigo Rato, the outgoing IMF managing director, who last week said “right now the dollar is undervalued”, the fund’s staff conclude the dollar is still too high. The multilateral lender also forecast slower growth in 2008 at 4.75 per cent, compared with 5.2 per cent expected this year.

Yahoo Finance

The dollar fell to a new low against the euro on Thursday after the 13-nation European currency broke through the $1.43 mark on reports from Washington that growing economic weakness was boosting jobless claims.

The Telegraph

Japan and China led a record withdrawl of foreign funds from the United States in August, heightening fears of a fresh slide in the dollar and a spike in US bond yields.

AP News

The Dow Jones industrial average dropped more than 360 points Friday - the 20th anniversary of the Black Monday crash - as lackluster corporate earnings, renewed credit concerns and rising oil prices spooked investors.
The major stock market indexes turned in their worst week since July after Caterpillar Inc. (CAT), one of the world's largest construction equipment makers, soured investors mood Friday with a discouraging assessment of the U.S. economy. In a week dominated by mostly negative results from banks facing difficult credit markets and rising mortgage delinquencies, investors appeared surprised that an industrial name was feeling an economic pinch, too.

Foreigners are running away from the dollar as fast as a bunch of blonde cheerleaders running away from OJ Simpson during a production of Julius Ceasar which has led the Dollar in becoming the new Killer Rabbit. Yeah, I know. Tell us something we don’t know.

Follow the money.

Now what I really want to know is what all are those countries going to do with all that liquidity? They are not going to simply toss a couple of billion in a money market account. They are going to want to get the biggest bang for their buck or at least place their funds in a secure investment.

The Bad old days.

One of the places where the money is leading us to a return to tech stocks.

A year ago, Yahoo invested in Right Media, a New York-based company developing an online advertising network. Yahoo’s investment valued the firm at $200 million. Six months later, when Yahoo acquired Right Media outright, the purchase price had swelled to $850 million.

What changed? According to Right Media’s chief technology officer, Brian O’Kelley, very little, except that Yahoo’s rivals, Microsoft and Google, were writing billion-dollar checks to buy online advertising networks, and Yahoo thought it needed to pay any price to keep up.

Of course that did not go unnoticed.

“I have to say I giggled,” Mr. O’Kelley, 30, said of the deal that earned him millions. He has since left Right Media and is starting another company. “There is no way we quadrupled the value of the company in six months.”
Does this sound familiar?

The trend is described as a return to madness (by skeptics) or as a rational approach to unlimited opportunities presented by the Internet (by true believers). Greed, fear and a desperate rush to pick the next big winner are all adding fuel to the fire that is Silicon Valley’s resurgence.

“There’s definitely a lot of betting going on, and it’s not rational,” said Tim O’Reilly, a technology conference promoter and book publisher.
Mr. O’Reilly is credited with coining the phrase “Web 2.0,” which refers to a new generation of Web sites that encourage users to contribute material. His Web 2.0 conference, which begins Wednesday in San Francisco, has become a nexus for the optimism around the latest set of society-changing online tools. But that has not stopped Mr. O’Reilly from worrying that the industry is minting too many copycat companies, half-baked business plans and overpriced buyouts.

When the bubble inevitably pops, he said, “there are going to be a lot of people out of work again.”

“We are almost going back to year 2000 types of errors,” said Aaron Kessler, an Internet analyst at Piper Jaffray. Internet companies “are buying users instead of revenue and profitability,” he said

If it is not tech then it will be gold, oil or whatever is deemed the next big thing. People with liquidity are going to go to where they are going to get the highest return which can lead to more volatility. Whatever path you chose in investing your money, know the product, know when to get in and know when to get out. Just remember to follow the money, see where it leads you. It might be someplace where you can make a profit.

I realize that the points that I have stated in this entry are probably broad and general but I hope you all understand that I have to present this information in this manner because everyone’s financial situation is different so any action is quite subjective.

"And where does the newborn go from here? The net is vast and infinite."

Major. Motoko Kusanagi

As I have stated before, do not rely on my blog as your only source of information. Look at other resources, talk to experts in the field, look at your own finances and see what your options are and take the proper course of action. Just be aware of the variables I have presented and that there are definitely other factors out there that can affect your finances.

Think of yourself as a newborn just entering this new world and remember there are limitless opportunities for you.

Remember that this is cyclical. So there is no need for any type of self induced emotional hijacking because if you keep a cool head you should be able to get through this.

Those of you who have any suggestions or advice please feel free to comment on it.