Housing Affordability Index - REPOST!

So my realtor forwarded this to me. The "Housing Affordability Index."

Here's the long version of what it means. But in short, it basically measures how affordable housing is. The higher, the more affordable housing is. The lower, the worse, as housing becomes less and less affordable.

Well, the index has been plummeting as short term interest rates (and long term ones as well) increase, not to mention all the ARM/Reverse Amort. yahoos flooding the market with money they shouldn't have been loaned in the first place has tended to drive prices sky high.

This here's the chart for the nation, unfortunately the NAR is stingy with their data and they don't have monthly data for 2003-2005 (they do, they just don't release it)

Fortunately I found a decent proxy here for the local market, giving you a better idea of the rate at which houses are becoming less and less affordable.


It's a sad day when a realtor admits there might be a bubble.

Take the Federal Reserve's Poll on Saving!!!

OK, so the Fed in St. Louis has this poll going on.

And so I click on it, voting that I am an American and save 10% or more each year.

The results come in and I'm actually surprised how many people claimed to be saving as much as they are (I'm also surprise that such a cool hip web site only got 26 respondents).



Then I realized I'm on the St. Louis Federal Reserve's web site and there might be a weeee little bit of sample bias as the majority of the people going to this web site ain't exactly the same people who threw parties when Lil' Kim was released from jail or the morons that actually vote on American Idol.

Why do we economists have to be so responsible?

I Found This Appropriate to Repost

Originally posted when Israel started attacking BUT before they went ballistic and started blowing up stuff everywhere.

What I cannot help but notice is how the Lebonese Prime Minister is all of the sudden NOW willing to go after Hezbollah.

See what the threat of death can do?

Regardless, the world doesn't need any more carrots. It needs lots o' sticks.




Hilarious. And cynical. I like their cynicism. As cynicism is usually not cynicism, but reality, it just takes a cynic to realize that. Like their post on April 18th.

Anyway, this cartoon is surely going to be proven wrong as I'm sure we'll be proven right in how we're playing nice with Iran. I mean, cause we're nice, right? I mean, they'll realize we're being nice and understanding, which is why Hitler never invaded Poland or France, because the Allies were so nice and understanding of him before. Maybe if we just gave Iran their equivalent of the Sudetenland they'll comply.

Anyway, visit them if you haven't already. Half thinking about buying some of their auctions.

All the Sociology Majors in the World...

...will never work up the wealth to pay for what they demand.

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2006/07/14/cnusa14.xml&menuId=242&sSheet=/money/2006/07/14/ixcity.html

Too Hot? Cool Down with the Captain!

Hi All!

Don't know about you, but we have a heat waves here in Minneapolis. Fortunately we live in a nanny state that tells us what to do;

The State of Minnesota Recommends;

1. Drink lot's of alcohol. Alcohol is a better hydrater than water.

2. Run outside a lot. We're talking at least 10 miles. Your body will replace the water you sweat out with the alcohol you just drank.

3. Do NOT run the air conditioner. Air conditioners use energy, and energy pollutes the air with greenhouse gases. So if you all don't use air conditioning, global warming will reverse itself.

4. Listen to The Economics Supper Club, this Saturday from 1-3PM Central Standard Time. Listen on the radio or over the internet via the following link

http://www.am1500.com/subpages/streamsupport.htm

5. Call into The Economics Supper Club 651-646-8255 or 1-877-615-1500.

Remember, if you do what the state tells you, you'll be cool!

The Housing Market Index

Well, technically the "Wells Fargo" Housing Market Index, as if Wells Fargo paid to have its namesake up on a stadium. Kind of like the "Excel Energy Center" or "Staples Stadium" they have the "Wells Fargo" Housing Market Index.

Anyway, here is what is measures. And if that it too elongated, the HMI basically measures how healthy the housing market is.

And it isn't too healthy. You know those bevy of cookie cutter townhomes/single family homes that form a big massive circle around every major metropolitan area and sprawl out for miles until all you can see is a vast sea of identical and un-unique housing that all of the sudden makes you feel like you're in a public housing project designed by communist architects?

Yeah, those architectural master pieces are foisting a glut of supply on the housing market, driving down prices.

It's also driving down the HMI to it's lowest point in 11 YEARS!



A buyers market for sure, but a market so overvalued you'll definitely want to low ball those selling by a significant margin.

One More Time; THERE WAS NO RECESSION

So whilst broadcasting (AM 1500, Saturdays 1-3 Central Standard, listen here) last week I got a caller that contested me when I said there was no recession.

Not that he was accusing me of lying or being uninformed, truthfully he sounded like an economist and was just informing me that the government had revised the figures and perhaps there was a genuine recession.

Remember, a recession is when GDP contracts for 2 SUCCESSIVE quarters in a row.

Though not booming economic growth, we did NOT have a recession.


I am vindicated once again...but it's hard to be wrong when you only argue the truth.

If I Could Change One Thing About the US...

This would be it;

Norway Part 2 - Repost

As to be expected, when I got into an arugment with a leftist recently, the immediate knee-jerk reaction was that "Norway" rules.

You see, this is why this is an important post, because the left doesn't think. They don't research, they don't study, they just want free money and anything that maybe, sort of seems to support their cause, they will immediately herald as an example of "socialism" working.

So once again, I shall post this to remind all leftists that your darling children in Scandinavia, while impressive, are no rivals for the US. The only country that beats or rivals the US is Luxembourg and soon to be Ireland.

OK, closest we got was Doink looking up oil as a percent of Norway’s GDP for the latest year. Which was what I was trying to get at, but wanted a nice longitudinal chart which you’ll see below.

Going from practically nothing in 1971, oil now accounts for a full 24% of Norway’s GDP (although I speculate this high percentage has a lot to do with an increase in the price of oil recently and it’s traditionally more around 20%).

Regardless, what I did then was calculate Norway’s GDP per Capita going back to 1971 WITHOUT that evil capitalist abomination we all have learned to hate and which any good socialist would never associate themselves with or be proud of; oil.


And the results are what we’d largely expect. Norwegians only work about 75% as much as Americans, and thus when you take away their cash cow, they enjoy standards of living of roughly 75%.

This further confirmed something I’ve always suspected of Norway, and that’s if you took away the oil, they wouldn’t be materially different than any other Scandinavian country.



So aspiring and junior deputy economists, what’s the lesson to learn from all this?

That the next time you hear some leftist idiot start blathering on about how Norway has higher standards of living than the US and is proof positive that socialism works, you can once again, hit them upside the head with the truth and point out to them that, no in fact, Norway really doesn’t have higher standards of living and just happens to be lucky geologically…that and they should be ashamed for taking such joy in (GASP!) oil!

GDP Growth Rates

Just a pretty standard chart. Again, note China, India and Ireland are at the top. These three have liberalized their economies more than most, pursuing pro-capitalist policies, and shucks howdy, look at that, they're growing.

Will the insane complexity of economics ever cease?

How Much You Wanna Bet...

It isn't Jewish women between the ages of 45-80 that go to synagogue where a firebrand Rabbi preaches the merits of blowing up those darn Hindu's that pulled this off.

Al Gore All Over Again

Cripes, big girls do cry.

Help the Captain

As you know I am a big fan of The Economist. And truth be told, when they had their article about a year or so ago about how they broke the 1 million subscriber mark, rather than celebrate, I sent a letter to The Economist berating them about how was it that such an excellent publication could have so few readers.

I then suggested that they target the Twin Cities market for we here in Minnesota suffer from a duopoly of two main papers, both of which are communist rags, and that The Economist could swoop in and take the market by storm.

The Economist was actually kind enough to have their main representative in New York call me and discuss it. I learned that The Economist's target market wasn't the everyday person, but that they were ACTUALLY ADVERTISING ON NPR!!!! That was their target market!!!!! 50 something burnt out hippies that listen to Prairie Home Companion, drive Volvo's and eat only organic food.

This shocked me for it almost seemed that The Economist didn't realize what a boon it is/could be to people of more righter leaning ideologies.

Well fast forward 2 years and many things have changed. One, Captain Capitalism has become a somewhat mentionable blog, but more importantly I got a radio show. And as you know there is no money in radio...unless you get sponsors.

Thus, I see a mutually beneficial opportunity.

I disagree with the marketing department at The Economist, I think there is a voracious demand for no-nonsense, unbiased, economic and political news and this demand is pent up in people who are sick of their schmaltzy, leftist dailies like the Star Tribune, The LA Times, The Pioneer Press, The Miami Herald and other MSM entities that hold metropolitan areas oligopolistic hostage. I see additional voracious demand in the collegiate-aged youth as many of you here have exhibited here.

The Economist does not see that.

The Economist is like that beautiful girl next door that has braces, her hair put up and thick rimmed glasses. AND YOU JUST KNOW IF SHE'D LET IT DOWN WE'D BE ALL OVER HER!!!!

THUS, I am doing what I can contacting their offices here in the States to see if they'd be interested in sponsoring The Economics Supper Club (ahem, which you can listen to on AM 1500 on Saturdays from 1-3PM Central Standard time!).

What I need is all Junior Deputy Economists, Aspiring Economists, and Captain Capitalism Groupies that have subscribed to The Economist to make a post here so I can show the people at The Economist that there is demand for their services, it's not the Baby Boomer Public Sector Granola Eaters, and that (ahem) if you happened to have subscribed to The Economist because of this blog, that you also make that known ;)

Besides, it's just a crying shame and pity that PEOPLE MAGAZINE has almost 4 times as many readers.

There is something seriously wrong with the world when people care more about Brittney Spear's latest excursion into sluttery than whether the the shrinking budget deficit is the cause of the Laffer Effect.

Oh Canada!

http://thelatecomer.blogspot.com/2006/06/id-like-extra-four-or-five-grand-year.html

Laffer Laughs at the Left

Oh, what a sad day for the socialists.

First, it seems the tax cuts are cutting away at the left's only real legitimate criticism of the Bush administration (deficit spending) as those dem der evil tax cuts prompted such economic growth that the deficit is expected to shrink because of unexpected tax revenues.

SECOND, it was the NEW YORK TIMES that wrote the article.

Of course, it's only the New York Times. Main stream media. You know, that ailing dinosaur that is about to become extinct.

And the reason it's about to become extinct is because of natural predators like myself can outdo them in accuracy and above all CHARTS!!!!

So here it is, the government deficit as a percent of GDP.


My favorite is how the deficit during WWII provides some excellent context as to just how expensive the "War in Iraq" is.

Of course the severity of the deficit during WWII warps and dwarfs other deficits, so I focused in on the last 30 years here;


2.3% of GDP?

Yeah, right, Laffer didn't know squat.

Bottom Feeders

So mortgage lingo is not my forte. I had a mortgage banker friend of mine explain these charts and acronyms to me once, but I forgot most of what he said (I also forgot if they applied to the entire housing market or not, so please correct me if somebody knows, otherwise I'm operating on the premise they do).

That being said, all you need to know is two things;

ARM's and Negative Amortization Loans.

We're all familiar with ARM's. Originally intended for people who KNEW they were only going to live in a place for 3-5 years, these loans were a great way for them to build up equity in a house and take advantage of lower, short term interest rates.

Of course, ARM's started getting abused when people who shouldn't have been loaned money bought houses they couldn't afford using ARM's.

They are paying for it now with WSJP and short term interest rates at 8%+.

But my favorite was something that I thought shouldn't have existed.

You know, there are things that just SHOULD NOT EXIST.

Like genetically engineered mosquitos that carry AIDS. That's a bad idea.

Or dance shoes with glass soles. That's a bad idea.

Or surgical gloves laced with Ebola. That's a bad idea.

Or music that is repetitive with no lyrical component, talent or creativity, ie-rap. That's a bad idea.

Now common sense would dictate to most industries that you would not develop a product that would harm the potential customer. But what if your a mortgage banker with few moral scrupples. Everybody with good credit already has a loan. People with marginal credit already have an ARM, leaving only folk with the crappiest of credit. How do you get them a loan and your precious 1% commish?

Enter in the negative amortization loan or the "reverse amortization loan."

Here's a loan where you are charged interest, but you are so unable to afford the house, you can't even pay the INTEREST on the loan. But that's OK, BECUASE THAT'S THE IDEA OF A NEGATIVE AMORTIZATION LOAN! You pay only PART of the interest and the remaining balance of interest is ADDED to your principal balance on the mortgage. Thus you never actually pay down your mortgage balance, it only GOES UP.

Sudden rap doesn't sound half bad.

What I'm failing to grasp is why would any bank or financial institution push such a product? The only way I can see it, is if they are predatory and fully intend on collateralizing the house when (inevitably) the poor schmoe that was stupid enough to get a reverse mortgage can no longer afford the PARTIAL interest payments.

Of course, that's just how it affects the few unfortunate souls that engage in this sort of financing.

Unfortunately there are not so "few" unfortunate souls as ARM's and, worse still, negative amortization loans are becoming more and more common. Common enough to the point they no doubt are having an affect on their entire housing market (namely a housing bubble). Thus when 25% of the loans hitting the market in 2005 are negative amortization loans and an additional 23% are interest only loans, this money that should not have been given to people floods the housing market, artificially driving up prices. Artifically I say, because once interest rates go up (which they are), these people will quickly leave the market as they cannot finance the loan, flooding the market with housing that frankly, nobody really needs, and prices will drop to normal levels.

The question is whether this decrease or even temporary halt in housing prices will destroy the "wealth effect" that has prompted American consumers to spend more than they make via the Home Equity Loan, and has been one of the engines of the economy's growth in the past 5 years.

I smell a minor recession coming on.

Congratulations to Presidente Calderon

Congrats Felipe!

And might I congratulate the Mexican people for making a wise choice...just barely!

Intelligence of the Masses

One of the more cutting edge frontiers of studies in finance (or at least highlighted) is the use of markets to predict the outcomes of different phenomena.

The classical example is the University of Iowa where they allow people to take bets on which politicians they think are going to win, thus resulting in "stock prices" for different candidates.

Some of the evidence points to the masses (read-the people) are better predictors and forecasters than the alleged "experts" as it is probably better to have a million minds working on a project than just a handful of doctorates.

Of course, this is nothing new as we've been using markets to predict the outcome of stocks for centuries. But what I get a kick out of is how nobody seems to point this out when leftists are elected into office or perhaps NOT elected into office.

Most recently Mexico looks to have elected Calderon over Obrador, the free-marketeer against the socialist. This resulted in Mexican stock markets rallying about 3% on the news, and continuing their rally today;

Of course this is common sense that the markets, which are based on profits, economic growth, sales, etc., would respond positively to a capitalist winning the presidential election. But what I get a kick out of is how nobody points out just what a slap in the face this is to leftists across the globe. That when people are allowed to invest their money and they have to put it down somewhere in a free market, such as the stock markets, they prefer the capitalist crowd. It's the masses telling the left, "socialism sucks, your policies would result in lower profits, confiscated business assets, lower sales, lower economic growth and all other things that would naturally bring down the markets and make our lives sucky."

What would ultimately prove my point would be to have a chart of the Bolivian stock markets when Morales was elected in Bolivia. And I fully had intended to find a chart and post it here.

Alas, it seems that I am asking too much of a small, socialist country for their stock exchange seems to have absolutely NO INFORMATION ON THEIR WEB SITE! Heck, not even a chart! Not to mention they don't even bother translating it into different languages.

So I am forced to speculate;

HAD Bolivia had a fully functioning stock market

WHICH represented actual stock prices

I WOULD BET A MILLION BOLIVIAN PESOS (read- 3 cents) THAT IT WOULD HAVE TANKED!

Anybody got a line of a good Bolivian chart?

The Abe Simpson Generation

Led to believe by the politicians they elected that the meager pittance people were throwing into social security was;

1. Enough to provide for the entirety of their retirement
2. Wasn't being pissed away anyway on the "Great Society"

the Baby Boomers, soon to be Abe Simpsons of the world, would ignorantly live life through the 60's, 70's, 80's, 90's and today thinking somehow they were "entitled" to limitless social security benefits.

This was not just being conducted in the US, but replicated in our oh-so-much-more-intouch European counterparts where they too promised the world to voters.

Of course for those of us who ever bothered to look at government budgets and social pension forecasts, we knew this was nothing more than a ponzi scheme, concocted and perpetuated by politicians to ensure they had the old-fart vote, not to mention the vote of ignorant dumb youths who thought it unfair that retirees be forced to pay for their own retirement, even though they would be the ones bending over to pay for it.

And with a ninja-like cunninginess, the politicians were still able to fend off paying the piper by employing the ingenius use of debt, allowing them to cut taxes, yet increase spending, allowing everybody to have their cake and eat it too, while postponing the inevitable financial hangover far into the future. Far enough that the politcians would be dead and thus pulling off the perfect crime.

Thus leaving us with the current situation we have today, ie-retirees don't pay for their own retirement, but rather rely on current generations to pay for their retirement.



I'm absolutely amazed how the bottom 20%, essentially have a free retirement. I'm equally appalled that the top income earning retirees STILL GET A GOVERNMENT SUBSIDY!!!!

Alas, Abe Simpson summarized old people the best when he said this.

What Better Way to Spend the 3rd of July Than...

With your beloved Captain when he substitute hosts for Dave Thompson TONIGHT!!!

What better way to ring in the birthday of the factually world's greatest nation than to pour yourself a brewski...or perhaps a martini, kick back on this hot 3rd evening and take in all that is the economic wisdom known as The Economics Supper Club.

Will have on tap tonight, which is more important, economic or social rights.

Talk about my experiences talking to Punjab in scenic Bangalore to get my piece o' crap Dell computer to work, and how this is a rare example of free market failure.

Get around to how Bike Messengers are feeling the pinch from technological advances and how technology will obsolete certain labor and industries.

And if we have time find out where the hell all the Mexican woman are on the Latin dance scene.

You can tune in at AM 1500 or listen to streaming audio here.

Call in by calling 651-646-8255 or TOLL FREE for you Canucks and other North Americans at 1-877-615-1500!