patrick.net

oo

I find that rice post of yours immensely disconcerting.

Food shortages equal political instability, mass migration, and more war.

Many argue we have already entered the century of resource wars, of which our Iraqi adventure marks the opening salvo.

Poor Africa.

I'm not sure if you simply manage your own funds or also those of others, but I'm continually impressed with the depth of your knowledge in such things. Apologies if its inappropriate to ask and feel free not to answer, but what do your avg annual returns look like? I'm prepared to be a very jealous bitter investor on your report.

Where does Fairfax county come up with such a massive amount of money to buy up foreclosure properties?

Peter

Would you argue that modern medicine is in fact often counterproductive, that disease should be allowed to spread maintaining population control?

In your view, has our medical and biological science corrupted the natural order of things? Would we be better off with black plagues and rampant aids, malarial population culling of the weak, old, and unlucky sobs?

NVR,

I just manage my own funds, I grew up and worked in different parts of the world, which gave me a perspective a bit different from home-grown Americans.

Thanks for your compliment but I am really a peon individual investor. My return is consistently in the double digits because I am very conservative. During the down years I am able to stay above water but during the good years I make less than sector average. I invest my hard-earned money, and I don't have any expensive hobbies, so I don't need lots of investment return to feel happy.

Whether you like it or not, we are entering a phase of instability around the world. But as the history of human beings has proven, resets and turmoils still happen, yet with an increasingly milder impact on our lives. In the 16th century, such an economic reset meant massive-scale famine and war and cannibalism, while in the last century, such reset meant a world war that wiped out a much smaller portion of the human population than before. I think the reset this time will definitely be even milder. Of course there will be hardship, but in the grand scheme of things, we are already doing so much better than our ancestors.

BTW, I think it is a worthwhile bet to start accumulating Yen now.

Japan's rice (main staple) is heavily reliant on imports. Oil and rice combined will make it extremely difficult for the Japanese to keep cutting interest rate to peg their Yen to us.

Once the Yen breaks the peg, it can easily blow through the 80s as all the carry-trade funds come home to roost.

Where does Fairfax county come up with such a massive amount of money to buy up foreclosure properties?

I'm certain the first thought of county Finance Director was to create some securities with the housing as collateral, I suspect the banksters cabaling in his circle quickly straightened him out. :-)

The chair of county sups is primary proponent, he usually gets his way. Council is debating proposal even as I write this. Lots of quotes from local FB's, complaining about the upkeep of the empty properties affecting their "values".

Real estate personal property tax increase? That would be perfect.

In his annual State of the County address, the Democratic chairman and 11th District congressional candidate will announce he wants to explore the use of some of the $23 million affordable housing fund to reverse the damage foreclosures have dealt to neighborhoods, and at the same time allow more families to afford to live in the county.
But since Fairfax was struck by a rash of foreclosures amid a nationwide crash in the subprime mortgage market, the chairman is banking on the county being able to scoop up the empty houses at a far lower cost.

Fairfax County saw 4,527 foreclosures in 2007 compared with 347 a year before, and is on track to see more this year, according to forecasts.

“Clearly, taking a home out of foreclosure would help restore stability to a neighborhood and restore confidence in the local real estate market.

It also would allow the county to open these homes to working families for purchase at an affordable rate,” Connolly is slated to say in his speech.

“Work force housing is in great demand but short in supply.”

The Fairfax County USD amounts are not meaningful at this point, but it merits a REDFLAG. This is another taxpayer loss conduit, potentially coming to a theatre near you.

OO,

Thanks as always for the excellent insight. What DennisN said one day has remained etched in my thoughts. "We are the Saudi Arabia of food".

I am looking at RJN, MOO thanks to you and DinOR. But it's much harder to make money on this theme.

Japan’s rice (main staple) is heavily reliant on imports. Oil and rice combined will make it extremely difficult for the Japanese to keep cutting interest rate to peg their Yen to us.

Good point.

Now we just need to find a good instrument for investing in rice.

Would you argue that modern medicine is in fact often counterproductive, that disease should be allowed to spread maintaining population control?

Not if medicine is market-driven. Companies should be free to provide medical solutions for profits. Naturally, this will happen.

I am not against universal health care if a society can afford such a luxury.

I am a strong supporter of farm subsidy no matter how much it costs. Food security is just as important as maintaining a military superiority, without both we are just another Argentina.

I am beginning to agree with you. However, the needs to be incentives for farmers to improve efficiency and lower costs.

Oh my, here it is.....the mother of all bailouts. Prepare to be annoyed.

The Bush Whitehouse mortgage bailout plan, fresh off the presses, courtesy of the Washington Post

http://tinyurl.com/ypo6rc

Soylent Green is people.

But wouldn't the farmers be better served by paving over their black farming soil and filling the land with McStucco brand shitboxes? I mean what's growing food when you can grow wealth? With money can't you just buy the food?

ahahahahhahahahahahahahahahahahahahahhahahaha

amazing how quickly the fecal matter has hit the cooling device.

The Bush Whitehouse mortgage bailout plan, fresh off the presses, courtesy of the Washington Post

Oh fuck me, where the fuck do I sign up?

amazing how quickly the fecal matter has hit the cooling device.

Call it a fertilizer application system. :)

Wheat Killer Detected In Iran: Dangerous Fungus On The Move From East Africa To The Middle East
http://www.sciencedaily.com/releases/2008/03/080317091046.htm

So the Federal Reserve seems to be nominating itself to enjoy broad new powers become an uberoverseer of the US economy. Quasi public entity the Fed is.....really just opaque instrument of power for those in control of the banking institutions.

Not so long ago, Goldman Sachs created a private stock exchange for unregistered securities, open to clients with $100 Million Minimum. Unregulated.

Oh, and NASDAQ opens unregulated private stock exchange for those with a minimum of $100 Million in Assets.

I'm feeling very much like a card carrying member of the sheeple of late.

Some changes could actually reduce the power of the Securities and Exchange Commission, which is charged with maintaining orderly stock and bond markets and protecting investors.

That would be a significant expansion of the central bank’s regulatory mission, which has been limited primarily to supervising commercial banks. When Fed officials agreed earlier this month to rescue Bear Stearns, once the nation’s fifth-largest investment bank, they pointedly noted that the Fed never had the authority to monitor its financial condition or order it to beef up its protections.

This is worth a real hard look. Las Vegas construction half built and quite likely to stay that way. Reminds one a bit of Bangkok.

To date, I can think of no image of this current crisis that really drives home the new reality of our situation with more impact than this one. This very well could become iconic.

Las Vegas crash in all its glory

We've got one site like that in Boise. But it's only one site. There's a block downtown where a skyscraper was intended to be built. Only a foundation exists today.

wow that vegas site is impressive.

i hope it stays half done like that 4eva so my yearly trip to vegas can include a ghost town tour right on the strip.

Growing up in the 80's I always expected to live in a post apocalypse one day.
It was supposed to be nuclear bombs, but it turns out BANKS are more dangerous than bombs.

Los Angeles is also crashing swimmingly. Heres a home sold for 1.25m in Feb 07, now listed for 750k a year later. Thats a 500k/40% haircut. Lots of hair left though... these deals are everywhere now pissing off the dream price listings.

http://tinyurl.com/2c6duw

Quick update from across the pond.....

Germany is now in a defacto state of financial martial law, its institutions in full blown preparation mode for the complete collapse of the global financial system.

Spain.....

Spain’s once-booming property market is in freefall, official statistics have revealed for the first time.

“Many people thought that buying property, especially a second or third home, was an investment to make a profit. Now we’ll see cascades of these homes up for sale.” Mr Blesa was speaking in Vienna, where his savings bank yesterday inaugurated a new headquarters to handle credit lines for big construction companies operating in central and eastern Europe.

And if anyone cares or is watching, Iraq looks to be on the edge of complete chaos and breakdown of social order. US prop'ed central gov't might easily fail and not recover. What a mess.

So we need McCain. :)

Spain is not the only place. England is seeing cracks. Portugal.

From what I can tell the financial problems associated wih a credit crunch are very wide spread. It would b ironic is fiath in the US were restored by shear virtue of the fact that the size of our problem relative toour GDP is so much smaller. Can you imagine attrackting capital based on the premise that our corrupt, opaque, horrible financial sysem is better than everyone else corrupt, opaque, horrible financial systems?
Time will tell how the securitization bond market goes. . .

Offtopic: who are the idiots still buying in Palo Alto? I live in mid-town area, and homes seem to come and go ... totally perplexed. I thought the GOOG party is over.

Patrick I just had this conversation with my new CPA a couple of weeks ago. DinOR is right, and your thread is right as well. If I use my LOC to increase my loan portfolios the interest will end up going on the investment interest expense since it will not be a MID above 100K. I joked and asked him how they would even know the balance on it, maybe someone could just pay it down on the last day of the year to $100K.

To be clear this applies to equity lines. A purchase money loan has no such restrictions that I know about. That is the difference you were asking about.

"Anyone know if this is true? And what’s the difference between the mortgage interest deduction and interest expense?" - Patrick

Mortgage interest deduction is a left over deduction from when individuals could deduct interest. The code was changed in the late 80s early 90s and only allowed the deduction of interest on primary residence and second home loans.
An interest expense is a line item on a business's profit and loss statement. It is deductible only as a business or investment expense.

Peter P Says:
March 28th, 2008 at 7:41 pm
"I am beginning to agree with you. However, the needs to be incentives for farmers to improve efficiency and lower costs."

I had to do a double take. Anyway, nice to see some open mindedness. I think farms are overly efficient and the corporate farming model is inhumane, UnAmerican, and present public health hazards.

Does anyone here think that commodity ETFs are going to go flat for months as the Fed marches toward zero interest rates? They have been fantastic for months, but each rate cut seems to cause at least a temporary dip.

Suppose we go through a few 75 basis point cuts and live with ZIRP for an extended period. What will be the consequences of the Fed enacting a ZIRP? What will the investment environment look like? Any fearless soul here want to look into the crystal ball and describe the future...

"Flat tax is the answer but nobody wants to listen."

The best argument I've heard against the "flat tax" was "you still have to calculate a number." So tax complexity really doesn't go away because there still has to be rules about what's taxed and what's not taxed.

I hear that you can even deduct interest on a second home, for which an RV could even qulify, which explains why there are so many of the gas guzzlers around.

NEWSFLASH.

Ummm.....I think this is particularly serious. Recall discussions here relative to money markets and safety?

This will tighten one’s sphincter up nicely.

Auction for UBS cash equivalent securities are not FAILING at a rate of 71%. Account holders are completely illiquid and cannot withdraw funds. UBS marking down accounts! Holy moses.

Stormclouds brewing folks.

From Bloomberg:

UBS AG has cut the value of the auction-rate securities its customers have in their accounts by about 5 percent following more than a month of market upheaval.

“We received calls from a young saver whose house down payment is now frozen; two siblings whose family trust is now frozen; and small business owners who find their business interrupted because money they thought was liquid is tied up in these frozen securities,” said William Galvin, the Massachusetts secretary of the commonwealth, in a statement.

How the H do these people end up with 'auction rate securities'? I never heard of them until they blew up. It sounds like something sold in boiler room tony soprano 'stock of the week' style.

I was pitched auction rate securities by my brokerages before for a little higher yield than US Treasury and GSE bonds. In an environment where interest rate was approaching 0, the pitch was that ARS offered higher after-tax yield than GSEs and Treasury. That was a period that every single basis pt in yield counts, because the yield was so f*cking low on fixed income instruments and there was too much risk in stock market. Even high yield bonds (junk bonds) were only offering 5-6% for 2-3 years, and the risk premium was compressed to almost nothing. Horrible. I didn't go for ARS because I thought the yield difference was too small to compensate for the complexity in the pricing mechanism.

In 2002 and 2003 I was carrying a full load of GSE (FNMA and Freddie Mac) bonds because the yield on fixed income was so low and the housing bubble hasn't fully developed to benefit the stock market yet.

Actually I have to be thankful to Bush, if he was not elected the second term which was a wake-up alarm, I would not have ditched all my USD bonds at a slight loss to get full speed into PM, oil and commodities. I would have been one of those stuck with soon-to-be-worthless GSE bonds. Bush 2nd term lighted a fire under my butt and forced me the divest aggressively outside of the US.

yes bush term 2 was a scary scary moment. like realizing your government has been taken over by a foreign power. thats what WE do to THEM dammit!

Actually to a certain extent, this crisis is a mechanism to give small conservative guys a nudge ahead of the risk-taking higher net worth investors.

Lots of HNWIs will wake up broke, especially those who have been earning very high salary ($500K and above) so that they have no time to manage their own portfolio. Private banking clients will be hit real hard, because lots of "innovative" financial products that came out in the last few years were targeting these people.

These HNWIs were essentially forced into high-risk hedge funds or yield chasing junk bonds in the last few years due to the extremely low interest rate. This is going to get very ugly.

Now that the subprime peons are screwed, the next group of people to be screwed are these single-digit to double-digit millionaires.

OO, no doubt you are correct and this is why the Fed's new powers/bush bailout is now surfacing.

The Bloomberg article is here.
www.bloomberg.com/apps/news?pid=newsarchive&sid=adMWraq8li6c

"listing as named plaintiffs a San Diego retiree couple who it says owned $1 million of the securities. "

Why would anyone park that kind of money in an account like that?

I currently have an empty shell of a UBS account, dating from when I worked for INTC. They hired UBS to manage the employee stock option and stock purchase plans. But I've long since excercised my options and last December sold off all my shares (at $27+ :) ) . Early this year I finally drained off the small amount of cash left in the "uninsured money market account" tied to the stock plan.

DennisN,

it is called yield chasing. I can particularly understand why the retiree couple would do that.

Wealthy retirees typically live on the assumption that they can live off the interest of their principal. It was impossible to do so for the last 5 years. Normally you would only need $1-2M to generate a reasonable after-tax return to support a comfortable lifestyle. With Treasury running at 2-3% you would need a much larger nest egg.

These ARS were all AAA rated. Not that AAA rating means anything these days, but back then individual investors were a lot more naive and trusting.

I'm a somewhat wealthy retiree living off the interest on my savings too, but I'm not that dumb. Right now I'm really feeling the pinch from these darned interest rates. But I live cheaply.

I really kick myself for not tying my cash up in CDs last fall when rates were more reasonable. I did pick up a 13 month CD at 5.55% apy when Banner Bank had a special on them.

DennisN,

the key is, you live cheaply.

Lots of single digit millionaire retirees live very lavishly.Their retirement lifestyle cost easily $150K a year, after tax.

Their expectation of lifestyle is shaped by the media, financial magazines and their peers. Vacation home, 4 luxurious international trips a year, eating out often, new cars, exclusive golf club membership, etc.