patrick.net

If politicians absolutely *must* provide some "relief" to greedy, stupid asshats (to stay in power), I'd much rather it come in the form of removing the new Chap. 7 BK restrictions or some type of debt forgiveness/short sale arrangements with the lenders. This isn't great in that it lets them off too easy for making collossally stupid decisions --and therefore may not provide the kind of "never again" pain required to prevent this mess from recurring-- but it sure beats stepped-up cap loss write-offs.

SHTF re:Death Valley

Heheh...I went to Death Valley in my Nissan Sentra. OK, there were a few places that it could't go, but most of it is accessble in a 4 door compact. Most of the inaccessable places it more a question of clearance than road quality. I'm with you - its more to do with the skill of the driver and less to do with the vehicle you're driving.

On the H2: the H2 just seems to be a Weekend Warriors version of the real thing. The original Humvees are awesone vehicles - in the right gear you can litrally crawl up the side of a building. However they get about 5 miles to the gallon, and only go about 50mpg flat out. And there's that irritating central axle... and no cup holders. What's a suburban communter to do?

H2 are All About The Bling. They have none, literally none of the things that make Humvees so amazing. They're just Status Symbols On Wheels.

My jaw dropped when I saw those adverts. They are ads for Keeping Up With The Joneses With Some Road Rage for added value.

Veeerrry Interesting to note that they've come out since the price of oil has skyrocketed. Advertising at its best (or worst, depending on how you look at it).

The husband has a link showing an aerial view of a parking lot somewhere out here in the West, and all you can see for miles are row upon row of new H2s... Now that people are starting to realise that they're just too expensive to run, no ones buying them and there's a huge glut of them, already made, waiting for the remaining suckers to put their money down.
Hence the ads. They're playing on human's most basic instincts in their desperaton to unload all those unbought H2s. Once the husband is awake I'll try and get the link.

HARM,

I don't see it happening. The FBs would only be able to exercise the option after they sell, and I don't see many people who can take that kind of one time loss and still stay solvent to collect any tax benefits(which will only be in 15% of the loss anyways). It's not like the stockmarket where you're using your own money and the stocks are easily liquidated.

Astrid,
There were a lot of roads that went to ghost towns all over the park. We were not very sure how bad some of them would be. A few were over 20 miles long and extremely rough, as in boulders in the road and the occasional 100 foot drop on one side with no guardrails. It was an awful lot of fun, but I probably wouldn't have done it in a car. You do need some clearance or you could crack a tranny case or oil pan.

“Foreclosure Prevention Program” which allows 0% interest loans to those that qualify.

Nice. Yes, let's reward all the idiots, while responsible borrowers pay full market rate. No moral hazards here! And who's paying to subsidize this wonderful social experiment, I wonder?

SHTF,

Hmm, that doesn't sound too bad. It seems like 4WD is mainly important in deep sand situations where 2WD might get trapped. Renting a 2WD SUV is a lot cheaper than renting a 4WD one, so it's nice to know where high clearance alone is enough.

Let's look at this from a practical national viewpoint. Ok, so let's say that uncle sam says oh well to all those folks that played the game. The game was their plan anyhow. But... people got a little carried away and the "plam" totally backfired and Uncle Sam is now in worse shape than ever.
What this little experiment proved was that if you have a sagging economy, the best way to prop it up is find something people will buy even if they are willing to almost kill themselves trying to find ways- any way- to buy it. it sure isn't cars, boom boxes, or laptops. it's housess. Yes- a house for everyone in the "american dream".
So Uncle sam is up shit creek without a paddle. What to do? Should all those folks with debt out their ears be saved? The answer the govmint' will give you is yes. Why? Because this event proved that there is an enormous supply of people with a lack of fiscal responsibility. if they can be counted on to make idiotic decisions, then they can be bailed out and reused in the next little scheme. Just you watch- those people will get off scott clean and we'll have to sit and watch.

astrid,

I fear most FB's will wind up in a "short sale" situation. As will "Joe Dude" our Claremont flopper. Status Quo dictates that the pain stays where the pain belongs. The lender (FL) gets stiffed b/c of their overzealous lending and total lack of underwriting discipline and the FB gets a 1099 at the end of the year declaring the amount not paid as "income".

If they ARE through some divine intervention able to sell the house below what's owed and "bring cash" to the closing then they will be able to write off the loss. All I'm saying is to retain staus quo so they'll only be able to write off 3K per year. That's your "never again" lesson b/c they'll be carrying it forward for, for....... forever!

I would be VERY surprised if the US Govt does not try to rescue the distressed homedebtors. We are just at the beginning of the crash. And already, people are screaming for help in various forms.

Did anyone pay attention to the BB testimony yesterday ? At least one senator was complaining that Fed is fighting an inflation monster that just does not exist. So many stock analysts and journalists are already criticising Fed. And BB is already being dovish - just a few weeks after the hawkish posturing.

I believe "Greenspan put" is a real Fed strategy, not a made up expression. The stock market crash was not a good enough reason to reduce interest to practically zero. If they could do it then, expect Fed / Govt to do something even in the coming crash.

Maybe ZIRP ? Maybe tax breaks ? I don't know what that will be. But 2008 is an election year, and also an ARMS reset year. Expect Govt to do something. Definitely. I am so sure that it is not even an interesting discussion to me.

More interesting discussion is, whether it will really help ? Even after prolonged low interests, stock market - a good proxy for economic future - is not indicating anything good. A low interest policy will devalue US$, as it did yesterday. Prolonging the pain only makes it worse.

SFWoman,

LOL! Yes! I find both the VW and the Hummer ads really hilarious, as they bridge the widening gap between practical usage and perceived usage. 90% of the ownership comes down to buying something that appeals to their vanity. Most German car owners could get a better built car for less if they go with a Japanese built vehicle. Most SUV owners would actually get a better driving experience and better offroad capabilties from a Suburu or a minivan. But darn if they'd ever settle for something that practical.

I still don't get the FU attitude that SUV drivers have around other cars. Just because they're likely to do better in a head-on collision with another car doesn't mean they can stop watching the road or stop using signal lights. If they get in a crash, they can still get hurt and see their insurance rate shoot up.

I have a bit of a mixed feeling on this one. I know too many people, both on a business and personal level, that are being legitimately pinched, and most never participated in the bubble run-up. They’re just struggling to hold onto their homes that they bought years ago, and don’t want to indebt themselves to the hilt to do it.

Yes, sometimes the JBRs here --myself included-- forget there are OTHER bubble victims out there: legitimate owner-occupiers who bought in pre-bubble with traditional financing and are now seeing their property tax go through the roof. Of course, it's not a problem in CA thanks to Prop. 13 --a rare example of Prop. 13 actually serving a socially useful purpose.

Just because they’re likely to do better in a head-on collision with another car doesn’t mean they can stop watching the road or stop using signal lights. If they get in a crash, they can still get hurt and see their insurance rate shoot up.

They do not even do better in all crash scenarios.

Remember the Mustang vs. Explorer crash with Tongan royalties recently? The person in the Mustang was not hurt but Explorer flipped multiple times, killing everyone onboard.

Moreoever, if an SUV causes a fatal accident, they driver can be charged with vehicular manslaughter, which is punishable by months of imprisonment even without gross negligence.

The only problem I have with the VW ads is that as someone interested in mechanical things, I can't help but think that the people wanting one of those doesn't realize what utter engineering disasters they are. Almost everyone I've known that's owned a VW made in the last 10 years has had major problems with them. We're talking cracked intake manifolds, transmissions that give out at 65k, excessive carbon buildup, and radiators that are so close to the ground that running over a curb causes them to rupture. yet they're sort of sold as yuppie metrosexual vehicles. The people that buy them are supposevly people that appreciate good quality. yet they buy these things and to me that'ss too ironic.

I do not get the "prop 13 protects poor old people" argument. Why do they need special protection? If the property tax is too high the owner can always sell the house and move over. Why is it so diffcult to say "tough" or "too bad"?

Of course, I prefer removing property tax altogether. It can be replaced by a rental-equvilent consumption tax.

I think there’s a feeling of invulnerability that comes with driving an SUV. I drive my husband’s car quite a bit and it’s a sub-compact. I get tail-gated something awful in his car. But in the SUV, I never get tail-gated. Odd.

SQT, sub-compact is a no-no. Get him something safe.

Get a rear bike rack and you will not be tailgated. :)

I have to admit that most of the auto ads are actually painful to watch. Firstly they JACK UP the volume on the commercials and then insult your intelligence with base messages. It's funny b/c I have an associate that recommended I read, "Why is it always about you?" (a guide for dealing with narcisstic types). I'm still pecking away at "Snakes in Suits" and I say pecking not b/c it isn't interesting or valid but more b/c that stage of my life is behind me.

Now these "narcisstic types" that's another story!

Peter P,

Seriously? I'd never thought of that! I don't really bike so would you rec. just putting some "junker" up there just for effect?

Seriously? I’d never thought of that! I don’t really bike so would you rec. just putting some “junker” up there just for effect?

I was just joking. :)

The proposition 13 protecting the poor is about as stupid as it gets because it's self defeating. The only thing it did was essentially delay paying for any of the neccesary costs needed for most of this state's infrastructure. As mentioned endless times here, the school system is ranked 44th, the roads are amoungst the worst in the country, and there is little chance for anyone not making signifigant money- as in anyone not posessing a degree in law or medicine- to ever afford their home, or at least do so and not live like working class citizens if they do so.

Since living here, I've noticed that if someone has bought a home, and this goes for people that bought as long as 20 years ago, it seems like quite a few of them own derlict older beater cars, rarely take vacations, or have kids until they are almost at retirement age.This is very diffrent from most other places, where there's a new car every 5-10 years, people have kids earlier, and there is generally more money that is free to spend. This is how a healthy economy is supposed to work.

If you take away the housing bubble, this state is still damned expenssive, and the reasons are from all the ill-concieved legislation created in the 70's. If there was a time to address these issues and bring them to light, now is the time. if not, the bubble will likely burst, people will once again barely be able to buy something on a conventional loan, and the same low quality of life will continue.

I don't know either way if bankruptcy would be a solution for FB's or not. I have a friend that handles "loan work-outs" and as painful as they might be he says it's preferable to filing BK. The claim is that most people that file BK wind up losing the home within a year anyway! Even before the "new" law was passed (which btw needed support from both sides of the aisle) my buddy tells me that BK judges were getting tougher anyway. I just can't see it as an "easy out" for FB's at all. It's really just a temp. solution at best.

I think the "pointy metal bits" on the bike rack are sufficient; the more visible, the better. (Just got back from Ukraine, where people drive somewhat interestingly. They view road markings as mostly suggestions, but at the same time use blinkers and headlights to communicate with each other. Not like here at all, where they're only used as a "get outta my way" and occasionally to mark a lane change.)

Slightly more on-topic; I finally got around to reading Stratfor's latest quarterly forecast. They mention capital flight to the US from China's banking problems as a possible counterbalance to Japan's moving away from ZIRP policies and its effect on the global economy. Thoughts?

One thing I'm even less sure about is necessarily equating "being at home" and "low quality of life"? Sure it's nice to be able to go out where you want, when you want (and spend as much as you want) but ALL families go through lean times. Especially when they've just bought a house.

I guess the difference that I'm hearing here is that many Californians in order to live the "American Dream" can't afford to go anywhere but work and back? Well if that is true then that does suck! My buddy "used" to live in Perris, CA and had all kinds of neighbors that "hung out" in their garage (facing the street) pretty much everyday! Great........

Give me 3 resources on the web where I can read about its ramifications, so I know what you people are talking about.

Mike, it is a political issue. So most resources will be biased.

Okay, so houses go down the pan, banks foreclose and people declare BK. That will have a knock on effect on Bank shares surely - and then of couse on our mutual funds in 401K's etc, as we have no control over the funds holdings and most funds offered all have a banking/finance element - anyone got any suggestions?

Mike, here is a link anyway:

http://en.wikipedia.org/wiki/California_Proposition_13_(1978)

I too would stay away from a subcompact. I drove one for about a month recently, while my wife's car was in the shop after someone backed into us in the grocery store parking lot. It was a Chevrolet Aveo, sort of halfway between a Corolla and a Scion XA/C in size.

The gas milage was great, no doubt about it, but when a Suburban went by on the 10, the whole car would shake when it was hit by the gust of air displaced by the Suburban. It felt like you were driving a skateboard, at 80mph, on the Interstate. Not a good feeling.

The 4cyl engine was so tiny that it seemed like the rear bumper of the truck in front of you was only about an inch away.

It had no power at all; while driving up a hill, I literally had to plant the gas pedal to the floor just to maintian a speed of 80 mph. And this was with no passengers or cargo in the car, only me.

The build quality was OK, but you just knew that the car would fall apart in 2 or 3 years. It was so lightweight that you knew every pothole was bending the frame, dash, etc., shaking some internal bolt loose which would eventually start to rattle.

Back in the 80's, my mom had a subcompact. A 3cyl (yes) Chevrolet Sprint. One day I got caught by a gust of wind and was literally blown into the next lane. If a semi had been driving in the lane, and speeding up, I might well have died. Fortunately there was no one in the next lane, but that was just a matter of luck.

Subcompacts are cheap, and they can be useful, but I don't know that I would buy one.

Claire,
You make a good point and one that I think most of us don't want to admit, which is that either way, we're going to have to pay some way or another for a lot of irresposible people. Some states like california and new york will be a hit a lot harder and might actually have severe recessions as a result. But nationally, we will all probably have to do some bailing. Sad.

Lefantome,

Good points, and some angles I hadn't considered. I know I've referenced this before but several months ago Bankrate.com ran an article pretty clearly stating that over half of the mortgages in this country are under TWO years old. So........ if any portion of them did their "equity extraction" thing it may not matter as much "when" you bought your home. As Surfer X is fond of reminding us when you "re-fi" your home you're basically "re-purchasing" it all over again. Even though mort. fees became more competitive during the boom most working class people probably opted to go ahead and take the equity out while they were paying the fees anyway. Wasn't there also an article that said that homeowner's equity is at historic lows?

When people complain on this blog about Prop13, are they complaining about the RE part or the 2/3 vote for rate increases part?

I complain about the philosophy behind it. In particular, it does not incentivize economic efficiency.

People who cannot afford to stay should be kicked out so that the free market can put the land into better use.

I do not care too much about the fairness issue, as life is inherently unfair.

OK. How about just tell me why it’s political.

If an issue involves a conflict of interests among groups of people, it is political.

We own a SUV because, just before we moved here, a student of my husband's test drove a sub-compact - hit wet diesel on the road, lost control and hit a Land Rover Discovery coming the other way side on - the two friends in the back and the car salesman in teh passenger seat were killed, he was paralysed all down one side. Police said it was not his fault, as he was not speeding or driving dangerously.

Therefore we changed our minds about owning anything low down and small, especially when you see that your childrens heads are lower than most bumpers on other cars.

I don't know the full ins and outs of Prop 13, but most people complain that one neighbor will be paying less than $1000 property tax and the next $13,000, because of when the houses were bought and how much they had to pay for the house.

Claire,

Fear not! The trend for 401K's (particularly the larger plans) is toward ETF's (Exchange Traded Funds). I've never advocated someone "own the market" and it doesn't sound like you do either. They're cheap to run, focused and have better liquidity. The prospectus is easier to read also so you can better understand what you're getting into. You'll be able to target the asset classes and markets you want to be in and avoid the rest. If your employer doesn't currently offer them bring it up at the "info share" and get co-workers excited about. Making the switch is no big deal.

*General Investment Information (not specific inv. advice)

My current fantasy car is a used Audi A8L. It is boxy, pretty, and big. However, I doubt its reliability.

Peter- The issue with prop 13 is that it helped create the unaffordable environment we've been in for 30 years. Prior to these laws, SF, and CA were on the same level of affordability as the rest of the country.
and SQT, Volvo is a Ford product. The large Volvo SUV they produce has the same engine as the Ford Explorer, so you're essentially paying for the name alone. Buy an Explorer. Same vehicle.

I really wished car manufacturers will design more non-luxury sedans with 5000+ lb curb weight. :(

Claire,

get your co-workers excited about (ETF's!)

is what I meant to say.

The issue with prop 13 is that it helped create the unaffordable environment we’ve been in for 30 years. Prior to these laws, SF, and CA were on the same level of affordability as the rest of the country.

The issue is that it interfered with the market mechanism, so everything is out of whack.

A BMW saved my Dad’s life. I’d drive one if I could afford it, but it’s a little too pricey right now.

How about a previous generation 7 series? But is it less reliable than an older volvo?