patrick.net

Claire - what's happening is, people are unable to make their credit card payments, then if the cards aren't already up there, the interest is raised to 30% and sometimes even more - which eats up any "room" they had, and people get threatening letters. Actually the letters are amazingly polite so far, it's a very interesting process to watch lol.

As you may guess, this is my situation so I am happy to share my experiences with anyone here curious about, or looking forward to, the life of an insolvent bum.

So.... since I can't charge, the only card useage I enjoy right now is using my food stamp card, I have to admit that's fun.

It's all cash for me, I don't have a bank account and in fact, this is funny but right now I don't have the $100 cash to start one at the local bank. I'll open one when I make some money doing something I guess. It's all cash for me right now.

Hmm, now if the banks fail ...... I'd say that yeah, let's say you have a Citi card that you have little or no balance on, you're a good user, and you use it for say your Starbucks purchases and pay it off each month. It's a good way to have all your purchases for the month on one bill actually. And, let's say Citi fails, they're bankrupt, will your faithful Citi card still work at Starbucks? I'm going to guess it will, because Citi will get bought out by some other bank, or they will try to keep doing business as long as they can - which apparently companies can when in chapter 11. If for some reason the bank just plain stops operations, I'm sure you'd get a polite letter saying your card will stop working and that's that.

Depending on how fast things fall, and how much of the financial system is automated, maybe we will see CCs just stop working. I think ultimately we will see people going back to cash - a lot of us are going to become cash-only curmudgeons!

I finally talked to my buddy down in El Mirage, AZ. I sent him the link from the last thread.
He says, "Sounds about right. There are 50 to 60,000 homes for sale in the Phoenix Metro area and a full one third are unoccupied."
Can you imagine that? Geeeez.
I'll agree that it is a big area, but still.

PeterP - I've got you beat, couch-surfer in a paid-for place. Who eats old fashioned Quaker Oats for b'fast.

El Mirage is a hellhole. At least it was when I last drove by it, about 3 mos. ago.

Coworker just returned from Toronto - He paid $5 CAD for a gallon of milk. The inflation will ravage both strong and week currencies!

It's the newer area over by Suprise, east of Luke. Nice neighborhood, but then again, I like it when war hardware flies overhead. Watching those F-16's stand on their tails and hit the gas--- YEA BABY--- that's horsepower. The one thing I will not do is visit in the summer. TOOOO DAMN HOT!

It's time to get mad as hell!

http://www.youtube.com/watch?v=90ELleCQvew

French subtitles for our friends up north.

Yes it was around the beginning of August when I blew through there..... great place if you likes planes though.

I had all kinds of military hardware overhead in Sunnyvale, one day I looked up and saw an AWACS you know, the plane with a frisbee on it, it was cool. I often could just about count the rivits on the undersides of the cargo planes flying in and out of Moffett from my ghetto-partment micro-porch.

I often could just about count the rivits on the undersides of the cargo planes flying in and out of Moffett from my ghetto-partment micro-porch.

Can you see the Google Jet from there?

Another prescient movie-

http://www.youtube.com/watch?v=iicB80Mwz8w

PeterP - I'm not in the bay area any more.

Brilliant video clip - of course things are MUCH worse now than in 76, and I doubt anyone would stick their head out of the window and yell now - people are much better controlled and brainwashed now.

Wow - "Rollover" is such a dangerous film I've never heard of it and I'm willing to bet maybe 10 or 15 americans ever have.

What we're undergoing is a Tainterian collapse, and but we'll experience it as is a financial collapse.

I’m not in the bay area any more.

Bay Area is a scam anyway. Hope you will do well.

Thanks PeterP.

Follow my posts on here, I'm not keeping my situation any secret lol.

Same pay in Podunk towns and in the Bay Area, yeah I'd say it's a scam.

http://tinyurl.com/2wosv4

(my tinys never work?)

that one did

Cool link Goober. Boats'n'booze.

Good points on boats - that they are the most discretionary purchase, not being needed unless you're a fisherman "and we don't have many of those".

Around here a lot of "discretionary" vehicles are used for practical purposes - ATVs used to putt around town, and Harleys are very popular and scooters, and in town bicycles are used a lot.

it's not uncommon to see a bicyclist loaded up with stuff and I don't mean a yuppie either, intrepidly pedaling along Route 89, gettin' somewhere.

I myself have developed a huge "Jones" for a Honda Rebel 250 mo'cycle, which is normally considered a discretionary purchase but I figure it's SO much cheaper to operate than even the junkiest car, and would be great for getting around except on snow days but it's best to stay home on those days.

I just realised that if you scale the Oz govt surplus to the American population, you would have an AUD$1.5 trillion surplus now... and we may as well call dollar parity for all intents and purposes...

@Rob Dawg,

Thanks --hey, it's funny how we both posted near-identical threads on the same article.

The rereport.com folks come out with their numbers earlier than DQ and have much better data.

http://rereport.com/scc/

Please go the the next page (link at bottom right) and look at individual cities. Anything that is not Fortress is hurting big time, and this of course is not clear from the headline. Forget Gilroy, even San Jose has more than a year's worth of inventory.

Typically inventory goes down this time of the year. It has gone down, but not so much. Evergreen is still at 530+ (max was 550). It did not go over 400 in entire 2006.

Now even the smart techie guys understand that future is bearish for RE in Bay Area. But given what Fortress buyers are doing many might be thinking it's a temporary blip and good buying opportunity for the "long term".

It is 5:22 a.m. and just checked Bloomberg. Yen at 111.24 Maybe I'm still dreaming but this looks like major stuff. Carry Trade Unwind ? Hold on to your hats in the stock market!

We may get to revisit the 12,000's before the day's end......

Ah yes, we have moved on to credit cards. A trillion here a trillion there and pretty soon we are talking about real money.

Look, everyone can calm down about putting gold in the toilet or stuffing their mattresses with Swiss francs. The financial sector will not dissolve. And it will not be the governement riding to the rescue.

Banks will lose money, stocks will devalue, and at some point people with cash will say, "Hey, that's a bargain!" and buy these companies. The trick is figuring how far they will have to drop until that happens.

Long before Citi and Wachovia and every other credit card company dissolve, countries with trade surpluses (and thus cash reserves in stronger currencies) will move in to buy these companies. Heck, with any luck a German owned Citi bank will not pay its CEO 100+ million dollars.

Life as you know it will not change.

What I do foresee is that the world GDP will contract. During the upcoming global recession people will examine what went wrong and excesses will be wrung from the system.
In the US, this will mean banking regulation, tax law changes, credit regulation(the credit card system is sooo bad - regulating who gets credit and how much is painfully needed) and hopefully a new social contract.
I say a new social contract becasue of the massive moral failings in the US.

Using sports as a metaphor for current culture we can see in the Patriots football team, the entire sport of cycling, baseball, etc the following unstated assumption, "Everyone else is cheating. If I do not cheat, I cannot compete." Becasue of the perception that everyone else is doing it we have the self fulfulling prophecy of an entire sport's worth of cheating.
Now, lets look at the social contract. The perception is that everyone esle is gaming the system by walking away from their investment homes since the payments were too high, or walking away from credit card debt because the companies charged too much, or taking very risky investments because the only downside is governement bailout. Thus, everyone takes that course.

A new social contract would say to borrowers, "It is not okay to get too far into debt. It is not okay to walk away from debt." We need to restore the social stigma of doing so. On the other side we need to enforce that corporate entities do not offer credit to deadbeats just becasue they can charge higher rates to everyone to cover the losses, plus makes fees on processing the bad debt. Systematically we need to insist, as a society, that everyone do their part to keep financial prudence and solvency as a core value. Just because you can legally walk away from that investment property, declare bankruptcy, or move every two years to reap massive capital gains windfalls, DOES NOT MEAN THAT YOU SHOULD! Corporations that say, "I had to take on MBS' and CDOs because my competitors were making tons of money and it forced me to do so or lose my customers." Or Countrywide, "We had to give mortgages to deadbeats because our competitors were."
Look, I hate to harp on this, but I think it is impossible for a society to function on legal imparitives alone. Enforcement would be too expensive. Society needs moral persuassion; moral rights and wrongs. I am hoping this recession provides the impetus for a return to core US values: honesty, hard work, financial prudence, innovation (man I hate business plans whose sole purpose is to buy patents, then sue for their infringment), and compassion to name a few.

Duke,

Well said, very well in fact. Sure they'll be some bumpiness along the way and your insights may be awhile off, but they are both true and necessary.

What I wish we "could" see is folks moving on to 'the next big thing'? Can we please stop jumping through hoops to shore up housing and move on? It's gotten embarrassing... already. I'm not an innovator (some of you could probably tell that) but they are still about. Let's tally up and settle up before the endless obsessing over "saving the housing sector" consumes us!

Duke said:
Look, I hate to harp on this, but I think it is impossible for a society to function on legal imparitives alone. Enforcement would be too expensive. Society needs moral persuassion; moral rights and wrongs. I am hoping this recession provides the impetus for a return to core US values: honesty, hard work, financial prudence, innovation (man I hate business plans whose sole purpose is to buy patents, then sue for their infringment), and compassion to name a few.

Agree with you, but my hope is somewhat tempered by the experience of the last few years.

After watching firsthand the evaporation of ethical behavior among executives during the dot-com days, I hoped that the dot-com bust would be the end of this - but sadly it only seems to have gotten worse. The phony revenue-recognition and insider stock placement games that pre-IPO dot-coms did seem like child's play compared to the stuff that happened since then.

correction to the last sentence:
The phony revenue-recognition and insider stock placement games that pre-IPO dot-coms _played_ seem like child’s play compared to the stuff that happened since then.

Society needs moral persuassion; moral rights and wrongs.

Morality sounds good on paper. But what is it in reality?

I have an answer: your morality is the competitive advantage of others.

AUD-USD = 1.09
USD-JPY = 110.9
AUD-JPY = 101.3

Watch this space. Carry trade gets interesting.

SP, may I ask which forex broker do you use?

Peter P Says:
your morality is the competitive advantage of others.

It seems so, but it has been generally observed in animal societies that a habitual cheater fares less well than those who balance self-interest with pack-interest. All you need is to make the retribution loop a little more efficient... watching a habitual cheater get his head bitten off has a salutary effect on the opportunistic cheaters.

"Do you know what nemesismeans? A righteous infliction of retribution manifested by an 'orrible cunt..." :-)

Humans are not animals.

Most of us even understand morality, though a few know how others understand morality.

Speaking of "competitive advantage" I just got off the phone with a wholesaler that moved to WA from the east coast last summer. After several weeks of living in hotel rooms he settled on a nice townhouse. He offered to put 35% down and since he didn't want any hassles he just went no doc. (He didn't have any banking relationships and his CU didn't have a branch anywhere close) so the agent offered for him to use the MB in their office.

So he goes to closing and as he goes through the doc's he notices one that says he has a deposit with a bank for 500K! WTF? He's doing well, (he's not doing THAT well). So he goes to grab his car keys and walk away when they offer all kinds of mealy mouthed explanations like, "Well it was just easier this way". Yeah, no sh!t, it's always "easier" to lie your a$$ off! He explains that he's sec. registered and wants no part of FALSIFYING any thing... in any way! So they frantically expunge (sp?) the 'doc.' and procede w/ the closing.

The utter lack of anything resembling integrity in that industry is absolutely astonishing. The guy said, well if there's going to be any lies told (and hell to be paid) AT LEAST let ME be the one to tell it! The guy said, hey I don't "need" this place THAT bad! I mean it's not like his company was pressuring him or anything? Incredible.

Peter P,
Ah yes, a pure competitor.
What you say is completely true. People face morality versus competitve advantage decisions every day. And as more and more people feel they have to head towards to the side of competitve advantage we get the mess we are in. A system must collapse, by definition, once more and more people migrate towards the gaming brinksmanship that undermines the rules of the game.

Don't make the mistake of hubris I think you are making here. That only you and a very few others 'know' how others 'understand' morality. This kind of cempetitve advantage survives on the sufference of the very people who appreciate the abuses of the system but know the truth that there must be some structure esle there would be no marketplace. Wasn't it Winston Churchill who stated, "It has been said that democracy is the worst form of government except all the others that have been tried?"

I think Warren Buffett shows quite clearly that pure business is a better long term strategy then gaming systems to their destruction over and over again.

Can't believe the MBs are still doing that. Have they no sense of decency?

I think Warren Buffett shows quite clearly that pure business is a better long term strategy then gaming systems to their destruction over and over again.

What some people see as "gaming" is what others will see as "arbitrage".

I like WB a lot. I am sure he is a very successful arbitrageur.

Seems like the time to add my two cents.

We found a house and we're buying.

Yikes!

Here's the deal though. It was bank owned and the banks are starting to dump properties here and I think we're getting it with a good price drop factored in. The average price per square foot in the Sacramento area is $203 sqft right now (per Sacramento Landing) and we're buying this place at $135sqft.

It was inspected two weeks ago and the inspectors told us they never see places as clean as ours. Everyone, from the mortgage broker, Realtors, neighbors, family and friends are saying they think we got a sweet deal, so I hope they're right. Don't want to catch a falling knife and all that. The appraisal came in $90k over what we're paying (I fully expect this to go up in a puff of smoke in the next two years) so I think we have some buffer.

Anyhoo, we can buy it without a voodoo loan, and can live in it the next ten years with ease-- and plan on it.

But Surfer-X bought, so I guess I'm in good company.

Don’t make the mistake of hubris I think you are making here. That only you and a very few others ‘know’ how others ‘understand’ morality.

But I really don't. Otherwise I will be doing something else.

However, I believe a morally-agnostic society will produce more good. This is a paradoxical but true.

But Surfer-X bought, so I guess I’m in good company.

Congrats SQT!