patrick.net

I think refinancing is very easy right now...... at least if it's only to get a lower interest rate, and not using the house as an ATM. A few months ago we re-fied a sf home rental with the same mortgage company that held the original loan (streamlined re-fi) and all we had to do was fax back 2 pages of paper signed, no appraisal and then 2 weeks later a notary came to our home to have us sign the big stack of papers. Very easy and simple.

About 3 weeks ago we re-fied a sf home rental with a second permitted house on the back of the lot for a lower rate and that is with CITI and we're signing those papers this week. Again, no hassles, no fuss.

Rob918,

Easy if you have equity in your home.. AKA if you bought over 7-10 years ago and didn't pull out any equity.. AND didn't lose your job or spouse didn't lose their job, and your credit score is immaculate.

Lots of ifs... Basically the wealthy and frugal can refinance easily. I'd say that's a small percentage of the American population :) haha

Los Angeles Renter says

Easy if you have equity in your home.. AKA if you bought over 7-10 years ago and didn’t pull out any equity.. AND didn’t lose your job or spouse didn’t lose their job, and your credit score is immaculate.
Lots of ifs… Basically the wealthy and frugal can refinance easily. I’d say that’s a small percentage of the American population haha

I get your point and agree, but who would even think about trying to re-fi an underwater property in these challenging economic times? I would venture to guess that there is more to the story in the case of the Santa Monica home owners trying to re-fi than they are letting on. Who knows, there could be dozens of reasons like too many rental units in the complex, underwater, but money is not that tight if one has a job and/or a source of income (Rental, retirement, etc.) some assests and at least a little equity in their home. I guess in some ways it's like my dad used to say when I was a kid in the 60s/70s and we were poor and he would attempt to get a loan for this or that....."The bank only loans money to people that don't need it."

The interest rate to price paid, in terms of TCO, is only valid you plan on staying the thirty years.
If prices drop more, because our policy makers are still playing calamity novice, and your house goes below what you paid. Then not only will you have to wait until the economy starts looking promising, so the Middle class starts buying houses again.
For what you paid now, you may have to wait a while, until the other end of the scale, better houses than yours, that sold for less after you bought. Surpasses what you paid for your house, before you can get your money back.
Either that or the waiting for the 30 year mortgage payoff.

How ever if you are committed, and aren't worried about where prices goes from here, then the interest rates are a great help to get as much house as you can, to offset the near future further losses, and gives you the ability buy up as much as possible.

"a guy who makes $1M as an investor each year is still going to pay the 6.2% on the entire $1M in income - not just on the first $90k of the $100k he pays himself in salary as a director in one of his companies."

Social security is taxed on earned income and is a custodial account. If you garnish earned income for SS without limit, then do you raise the SS payout cap as well? Otherwise, it is another form of income tax. And from what I understand, we already have a federal, most states and even some local that tax based on income already.

"We spent it like a tax, in the general budget, mostly on things that benefited the investor class (such as the burst of Defense spending in the 80s and 2000s, Reagan-era Tax Breaks, many Welfare Programs are administered by JP Morgan for a fee, etc), so we should recoup it like a tax, no?"

No, it is a custodial account between the US Treasury and covered citizens, it is not meant to be an income tax. If I pay tax based on 1M in earned income, the program should reflect an equilvalent payout, anything else is income tax disguised as SS tax.

Whatever the treasury does to move money between SS fund and general fund is irrelavant.

SF ace says

No, it is a custodial account between the US Treasury and covered citizens, it is not meant to be an income tax. If I pay tax based on 1M in earned income, the program should reflect an equilvalent payout, anything else is income tax disguised as SS tax.
Whatever the treasury does to move money between SS fund and general fund is irrelavant.

It is already a payroll tax. From Wiki

Confusion, or misrepresentation of the nature of Social Security has often muddied debate over the program. The payroll taxes collected for Social Security are neither simply "taxes" nor do they create "retirement accounts" analogous to investment accounts such as IRAs. Social Security is an insurance program funded through payroll taxes.

Social Security should really be a part of your retirement package, not all of it. Based on that mentality, Social Security is also a large net, that will help people cope with large and massive shifts in the economy, regardless of the economy. When things are going strong, people can easily rely on stocks, savings, bonds, etc. If you were retiring in 2006, you could have had your world turned upside down! Social Security should be there to just help keep the basics flowing for you in the even things go nuts.

That being said, it's obviously going to become more expensive in some decades and less expensive in other decades for the average tax payer. We're entering a time when they're about to explode, but correcting the issue only requires a minor modification, something like 1-2% extra taxed. 1-2% isn't dooms day.

and what's a domestic payroll tax for? Social security, Medicare and unemployment insurance. The employer portion is an indirect taxation to the employee as well. If I get taxed at 1M base and my SS benefit is the same as the person with the 100K base (In context to Thunder's scenerio), in substance, it is an income tax.

"I think the top 1% pay an average of 18% on their income. Compare this with a working stiff making $150,000 a year who will pay over 50%."

"Mr Buffett said that he was taxed at 17.7 per cent on the $46 million he made last year, without trying to avoid paying higher taxes, while his secretary, who earned $60,000, was taxed at 30 per cent."

That's little misleading as Buffet earned book income, not tax income. Most of the 46 million are unrealized and deferred later. As with most ultra-rich people, they play the defferal game. There is no special treatment for state tax. In California alone, if you have a capital gain of 1M, you will be subject to 15% federal and 9.8% state rate at the minimum.

Capital income, dividends, interest are earned with after tax income and/or taxed already at the entity level. Effectively, the same income are being taxed twice, three or even ten times already. Most countries don't even attempt to tax the same income twice.

with regards to social security, wasn't the program a reflection of the promise that what you pay will be reflected to what you get upon retirement? So if input does not match equal output, it sounds like a broken contract and in substance an income tax.

There is no organic recovery. The addition of literally trillions of dollars in credit and stimulus has not proven sufficient.

The situation is dire, the situation has deteriorated markedly from even seven weeks ago (Fed's own words), and they are now openly stating that they will print.

This would NOT happen if the economy were "stable" or "improving." It is a clear sign that things continue to deteriorate.

The Titanic is going down, folks.

If you think inflation or hyperinflation is now "guaranteed" by today's actions you're a rube. No such thing is likely at all. In fact, an open admission of deterioriation, which is what today's actions signify/represent, may help to speed up the deflationary forces already present in the economy.

Insanity is doing the same thing (QE in this case) over and over and expecting a different result. QE #1 did not work.

What do you suppose this second round of banal QE is going to do?

schmitz_kris says

Insanity is doing the same thing (QE in this case) over and over and expecting a different result. QE #1 did not work.

Are you kidding? Of course it did. We've gone from -7.9% GDP to +3% GDP. It just wasn't enough to finish the job and that's why the economy is on the brink of turning back toward possible deflation. More is needed and that's why the FED is acting again.

Government deficit spending allowed the rise in GDP. That is not an organic recovery. It is taking larger and larger and larger doses of debt to bring even trivial rises in gross domestic product.

This is a sign the real economy is dying.

Also, in the USA GDP is 66% spending, not production, so that portion should be removed from the statistics if you want to be honest.

robertoaribas says

taputu, you are delusional if you think all economic problems can be fixed by monetary action. Furthermore, things that can’t work forever, don’t work forever. How much debt the US can handle before it seriously impacts the economy is an open question, but two things are clear: 1. infinite debt isn’t possible, and 2. wherever the cliff is, whether very close, or somewhat further away, we are driving towards it very fast.

Of course they can't. But if the problem is recession then government spending is usually effective.

Yes, infinite debt isn't possible. Yes, government is spending more than it is taking in right now. A decade of incompetence has left us with bad options and worse options. We need to get through this crisis and then work on the debt.

Bernanke has been dead wrong about everything since this all began.

He's ON VIDEO:

http://www.youtube.com/watch?v=HQ79Pt2GNJo

The first comment in the thread below the Youtube video sums things up quite nicely:

Bernanke must be a plant; it's the only way to to explain this buffoon

The "GREAT economist speaks:

2005 - no housing bubble

2007- car industry "OK"

2008 - Few small banks may fail (3 wks before Lehman)

2008 - Unemployment will not hit 10% (currently 17%)

2008 - The Fed will not monetize the debt.

2008 - Freddie/Fannie adequately capitalized

2008 - Sub-prime problem contained

It's uncanny - the guy's forecasts have a near 100% failure rate. Man of the Year? LOL

Yes the interest rates are down but look at the net effect:

Savings yield no interest because banks can borrow at zero and loan to the federal goverment at 3%. Now that really sounds sustainable.

Well the FED all but confirmed interest rates will be staying low an going even lower possibly over the next year... Historically interest
Rates have never dropped or increased more than 1% in a year... So plenty of time to observe this mess from the sidelines.

Dollar is already HIGHER this morning than it was yesterday at this time (BEFORE the QE announcement was made).

Few realize that QE also has the potential to be deflationary (read my post above), as it is a sign of weakness / grasping at straws.

We shall see what the next few months bring.

No jobs. No recovery. Simple economics. Don't have to be too complicated analysis!

schmitz_kris says

“In fact, an open admission of deterioriation, which is what today’s actions signify/represent, may help to speed up the deflationary forces already present in the economy.”

Don't pull a muscle patting yourself on the back there kris. What you're missing is that you're wrong. The deflationary forces were already there. The FED announcement is simply stating the obvious. The important part is that they are trying to combat these forces.

From Reuters:

Stocks Drop, Treasuries Rally on Growth Concern

ON GROWTH CONCERN

From whom? Uh, gee, duh,....uh....

Any glance at flow of funds and the reaction in Asian markets last night show the Fed's announcement yesterday exhibited influence.

Who are you? You are making yourself look foolish on the forum, and then nobody is going to put any stock into what you have to say in the future.

schmitz_kris says

Who are you? You are making yourself look foolish on the forum, and then nobody is going to put any stock into what you have to say in the future.

Thanks for your concern. I'm not too worried.

Again--not sure you are thinking this through. Yes, the FED announcement probably did cause some reaction today. You know why--because people assume the FED has more info than they do and if the FED is worried, probably they should be too. So, in effect, information was made public sooner than it would have without the announcement. But, the information would have made it out there eventually. The announcement didn't cause the economy to slow down. It didn't cause unemployment.

Do you see the difference?

What are you talking about? Who said anything about the announcement per se causing jobs to be lost or the economy to slow down (as if that could be measured over the course of 12 hours?!?!)

I love you, man, but GEEZ!

LOL.

Just another buying opportunity ultimately

schmitz_kris says

What are you talking about? Who said anything about the announcement per se causing jobs to be lost or the economy to slow down (as if that could be measured over the course of 12 hours?!?!)
I love you, man, but GEEZ!

My lord--you have to be the same person as gameisrigged. It's impossible to have a discussion with you because you argue in circles. What exactly are you trying to say then??

I am not gameisrigged, and I am not arguing in any circles.

Go back and read my original post from yesterday.

It was clear as day - "may help to accelerate DEFLATIONARY FORCES..."

Now, look at EVERYTHING today - it's an ocean of red against the USD.

Why do you think I even posted my original thread today in the first place?

" Now, look at EVERYTHING today - it’s an ocean of red against the USD"

So you're a day trader with an opinion? Kind of an oxymoron isn't it?
Market crashed already ...next ones due in 80 years..
Potter's not selling he's buying

If anybody thinks it's a free market now I've got some beach property to sell ya in Louisiana

If it's going down IT"S because they want it to go down. Buy dips sell rallys.

schmitz_kris says

It was clear as day - “may help to accelerate DEFLATIONARY FORCES…”
Now, look at EVERYTHING today - it’s an ocean of red against the USD.
Why do you think I even posted my original thread today in the first place?

Clear as day. OK. How does a falling dollar lead to deflation?

Anyway--extreme short-term notwithstanding--QE will combat deflation.

Tatupu says:

QE will combat deflation.

Tatupu, you've never seen a chart of the Nikkei or Japanese RE have you?

Stock option compensation (or any form of compensation) are earned income, there is no reduced tax rate.

What has preferential treatment is interest, dividends and other working capital to produce these income. Unless they are from an IRA type account, they are working capital from after tax income. Effectively using after tax income to earn interest and be tax again is taxing the same income twice. Congress has a reason why working capital have special treament. Unless it is an IRA type account, you will not have pre-tax money earning income and taxed at reduced tax rates.

A proprietor setting up as a C corporation cannot be sheltered from being taxed twice on the same income. If the entity makes taxable income, they will be taxed, if they make a distribution, the shareholder will be taxed as well. 90% of the IRC bible is devoted to Corporations to try to curumbent abuse, whether it can be 100% or not. Sole properietors like Kendall (more likely his son Jesse) Jackson making millions from the winery is not going to enjoy reduced tax rates because the income are passed through to them. Sure his horse hobby and things like that may be treated as pre-tax business expense when they can be thought of as a hobby,but that is why there is the IRS to look into these matters.

tatupu70 says

But if the problem is recession then government spending is usually effective.

Effective at what?

The nice little bulge the last decade was debt stimulus, a $2T jolt from the tax cuts and a $4T jolt from the housing BS.

The 90s were good -- they gave Windows 3 and 95, making computers usable by everyone, and of course the internet, which greatly facilitates trade, at every level from local to international. Oil prices were low, keeping more of our money in the productive economy instead of being lost to overseas rentiers.

The 2000s were a consolidation of these trends, but increased globalization has a downside as much productive enterprise was offshored, reducing the US economy to a fake service economy and less of an actual old-school capitalist one. The twin deficits with oil producers and China are leaching us dry -- $50B was the trade deficit this month, thats $400 per household. I'm not educated enough to assert with any authority what this trade deficit actually means, but (going on my gut) I'd rather have a massive trade surplus than a massive trade deficit.

For government intervention to actually be effective it needs to increase the productive capacity of this country, the capacity and ability to pay our way in the world via trade.

Funding consumption (unemployment extensions, military, medicare for old people, etc) is NOT doing any of that.

The infrastructure stuff is great but the problem is the meaty improvements take more than a year to plan and implement. Even if California's HSR is a good idea (I'm on the fence on this) it's not going to be a reality this decade.

It is true that any stimulus spent on stuff with eventual payback is good money spent now, but part of the problem is we don't really have $500B/yr of worthwhile projects to replace the $500B/yr good times of the housing bubble.

That economy is gone, and what we're experiencing is pullback from that high-water mark.

Whether another tide will return to carry us back there is an open question. I don't expect it, but something like cutting our national energy bill 20% would push us in the right direction.

schmitz_kris says

Tatupu says:
QE will combat deflation.
Tatupu, you’ve never seen a chart of the Nikkei or Japanese RE have you?

OK--good. Let's use the exception as the rule.

And you make the same mistake as many people do. In order to gauge the effect of something (QE in this case), you can't just look at the end result. You need to compare the end result that would have happened without QE to what happened with QE. So, in Japan, their economy may have been down 10% without QE, but with QE it was only down 1%. So, in that case, it's very effective.

Troy says

For government intervention to actually be effective it needs to increase the productive capacity of this country, the capacity and ability to pay our way in the world via trade.

I'm not sure that is a true statement. The point of QE isn't to make the US more productive--it's to cushion the fall and reverse the negative momentum

schmitz_kris says

A sea of red AGAINST the US dollar.” This means things WENT DOWN in price/value against the USD - the euro went down against it, the pound sterling, stocks, oil, silver, etc. The value/price of the dollar WENT UP. The dollar gained in power - that’s deflation. You can define it several ways, but there’s no reason to quibble over semantics when the immediate reaction was this in-your-face obvious.

You are correct. I just looked at the US/Yen today and didn't look at other currencies. Dollar going up is deflationary. But I think there were other causes for that too--the growth in the rest of the world is slowing as well...

Of course, CNBC brings up my POV AFTER THE FACT!

BACKFIRE!

Gotta love them - are they good for ANYTHING other than the ticker gliding across the top of the TV set?

I don't think so.

http://finance.yahoo.com/news/Could-Feds-Move-Against-cnbc-1695418183.html?x=0&sec=topStories&pos=3&asset=bf22a09a752a52644a31adc2f0a90c1b&ccode=

kris,
Just so you know, your POV was discussed several days prior to it being your POV. Here's one example of someone preemptively discussing the possibility of QE2 backfiring. Note the date.

http://articles.latimes.com/2010/aug/07/business/la-fi-0807-petruno-20100807

Well, duh. I would hope in a nation of some 320 million or so that there'd be at least a few with two brain cells to rub together.

schmitz_kris says

Well, duh. I would hope in a nation of some 320 million or so that there’d be at least a few with two brain cells to rub together.

So your novel idea isn't so novel then since you probably just read and repeated it from someone else. Not sure why you're giving yourself so much credit for doing what 3rd graders can do.

I'm a currency trader. I've been studying economics intently for years - not exclusively textbook theory garbage either (Keynesianism, etc.). My beliefs and opinions are very strong, and they are my own. That said, since there is only a very limited number of opinions available on select economic topics, there are bound to be others, naturally, who share my beliefs.

I never said there was anything novel about my ideas. There didn't appear to be anyone else on the forum with a like idea, and sharing new ideas is what forums are for. Why would it matter if it were novel or not? What matters is how applicable it is to the markets and making money (or avoiding losses).

Great that you bring up 3rd graders. One of my ex-girlfriends is a teacher, and, when discussing how much houses cost one day, one of the elementary-age kids (11? 12?) said, "They cost way too much for what you get - they're gonna be on sale soon I think."

ROTFLOL...for the wisdom of babes is far greater than that of man.