Home Builders, the New OPEC

I remember getting reprimanded for using the word "glut" in one of my reports one time.

A middled aged, banker who made money lending money to his nearly bankrupt cronies condemned my report when I said there was a "glut" of housing on the market. "Glut is an insulting word, it suggests gluttony." Which I thought to myself, "Well, that's exactly what's been going on, hasn't it????"

Regardless, I changed the word to "oversupply" but that still doesn't change the fact that the best word in the entire English language to describe the situation was indeed "glut." There was a 12 month supply of housing for the particular area we were looking at and it was the four letter word known as "glut."

And though I have no direct experience in home building, with such over supply and low housing prices it seemed to me that home builders would quit producing homes altogether. That new housing starts would drop to zero, allowing the market to catch up and eat through this excess inventory. Alas, this has not seemed to happen;

For while housing starts have plummeted, they're still producing them at a near historic average. And what I don't get is how home builders can't look at this and realize that are now facing a commodity market. And that if they continue to produce more homes for an already gluttonous market, it will depress their prices further. Therefore home builders as a whole are not much different than OPEC in the late 90's where the price of a gallon of gas was 85 cents. The price of their good is at a historic low and if they were smart, they'd cut off the supply.

Seriously, the best thing for home builders would be to take a year long vacation. You can work 60 hours a week, but the market price for your end product will be so low, that if you just wait a year or two, you could work 40 hours and make the same amount of money in just two years. Why work? Do America and all of the home owners a big huge favor and go on vacation.

Of course, I'm assuming home builders have a basic grasp of economics. And given the ruinous oversupply (read "glut") of homes they produced with not one of them, NOT ONE, conducting an absorption study, I am foolish to think they'd drive housing starts to my recommended red line.

No Reason to Panic Despite the Down Jones Dropping 310 Points

So the Dow Jones dropped by 310. So what?

Unlike the idiots who I graduated with from college during Dotcom Mania, that drove stock prices to insane levels the average US stock is accurately valued, based on historic measures, namely the P/E ratio.

The S&P 500's P/E ratio is at about 16 right now, just one point higher than its historic average of 15 since 1928. This is in contrast with a P/E ratio of 61 at the height of Dotcom Mania.


I know that the recent bull market may have some cautious minds scared, but unlike our last bubble the earnings are actually there, legitimazing the Dow's current level.

Additionally, corporate profits are at an all time high relative to the economy.


Corporations, unlike their government and citizen counterparts, are actually very efficient with their money, squeezing ever more profit out of their sales and assets. You may be a beer drinking slob, watching American Idol and the local sports franchise but the corporation you work for is actually a bit more hard working than that.

So do yourself a favor and relax. The only way stocks are overvalued is if there's a recession on the way...oops.

Shouldn't the Baby Boomers Be Paying Down Their Debts?

I was under the presumption that as you approach retirement, you not only store up enough cashiola to float you through to your death, but that you also pay down your debts. Alas, this does not seem to be happening;


And it concerns me a little bit because I see people older than me not only cashing out all the equity in their homes, but more and more people using the reverse amortization mortgage as a means to bleed out all the equity in their homes as they retire. Effectively leaving their children with a fully leveraged house. My question is what will happen to the value of these inherited properties when Gen X sells them, because we already have our own homes and don't need them? The flood of properties will lower the price below the amount owed on it and we'll have ourselves a nice little debt problem.

Alas it seems a generation is unknowingly committing the perfect crime, racking up debt, only to die before they pay for it...then again, I don't know how this materially differs from social security.

The Most Toys

This chart is a bit dated, but I found it interesting none the less.

Making It Difficult to Be Against a Progressive Tax System

I am as ardent a supporter of capitalism as there will ever be.

I largely view the majority of people's circumstances in the developed and free world as a product of their work ethic and drive. I largely view the developed world as meritocracies where you get what you deserve. I was dirt poor and I couldn't care less about your problems because I've been there and chances are you haven't.

But then this happens.

And it becomes insanely difficult to defend my position to be against the redistribution of wealth.

At what point does your moral compass kick in and say,

"You know, for $210,000 I could do a LOT of good in the world. I could put some poor kids through college. I could get some tutors for some kids that have trouble at school. I could pay for single parents to get some training or college or have their children get day care while they get some schooling." Or something of noble worth you could do with $210,000.

But $210,000 FOR DRINKS?????

Come on!!!!! WTF???? Wouldn't you feel a bit better about yourself if you donated it to a charity? Or heck, just threw it out into a street and made a bunch of normal schleps happy? Hell, I'd pay somebody's mortgage off just for kicks. But no, you're going to spend it on booze. And on booze, that frankly, probably tastes no better than a cold Sam Adams.

Forgive me while I feel a little socialist for a while.

If You're Happy and You Know It Clap Your Hands

The Economist came out with another interesting chart, showing once again money does correlate with happiness.

Of the many observations I could make, I will only make two;

1. The UAE, the most capitalist (and least radical) Arab country is pretty darn happy.

2. What the hell are the Finlanders so happy about?

(though I can see a joke "Why is Finland so happy? "Because they're not Norway")

Of The Economist, Fred Thompson and Hair

HAR!!!

Economics Made Very Simple

Economics, when it really boils down to it, comes down to one simple, cardinal rule;

If you don't work, you don't eat.

If there was just one person on the planet and that person didn't work to find food and find shelter he/she would die.

And even though there is more than one person on the planet, if everybody took the attitude, "I don't have to work" then as a whole since we don't work, we don't eat, we'd all die.

Therefore self-supportation or self-reliance is the single most honorable moral a human can have out of respect for his fellow man and society.

I will work, therefore I shall eat and therefore not rely upon you to take care of me.

However, the left finds refuge in the fact that if there's enough people on the planet and if they work hard enough, then there is a surplus of food and shelter and that some people don't have to work in order to eat. And the left (and I mean this in the sincerest sense) only has the power it does because it convinces people that "no, you really don't have to work in order to eat" and promises those weak-minded fools such a scenario.

Playing off of victimhood, conspiracy theories and any other half-baked reason they can find, the left convinces people they were deprived of food, deprived the opportunity to work, and therefore are entitled to eat at others' expense. And human nature is all too accommodating to this type of thinking because provides them with a benefit with no cost.

But that still doesn't change the cardinal rule that if you don't work, you don't eat.

So, even though common sense, just basic kindergartener common sense would prove this simple rule to be true, because such a large percentage of the population's livelihood is based on the opposite of this rule I find no greater joy in providing empirical evidence to prove them wrong.



For it seems that the freer a society is, the more one is allowed to pursue not just wealth, but allowed to keep the majority of their wealth, the more successful that society is, and not just for the individual, but for society as a whole.

And it is this that gets to the heart of the matter. If you are genuinely concerned about the poor, if you are genuinely concerned about advancing society and increasing the standards of living for ALL people, you would be the most ardent supporter of capitalism, low taxes, freedom and individualism. Alas, because of the left's vehement opposition to economic freedom, I am only left to conclude that the left uses "the advancement of the poor" as a farcical and cowardly cover argument to rationalize the transfer of wealth to themselves.

Craft and construe the argument however you want, it still doesn't change the fact that if you don't work, you don't eat.

Hugo the Hypocrite

If I recall correctly we let some piece of sh!t slime ball into our country where he promptly began to call our president the devil in front of the UN.


I may not agree with GW all the time, but he is without a doubt the bigger man.

The Idiocy of Argentinian Economics

Christina Kirchner, the wife of Argentina's current president Nestor Kirchner, is running for president.

And to make a long story short, Argentina is much akin to Ecuador, Bolivia and Venezuela in that (very long economic story made short) the people blamed the IMF, America and the West for their problems, elected idiots or outright dictators into office who are now about to destroy not just their economies, but their democracies.

But this takes the cake. To show you how utterly stupid and naive Kirchner (wife or husband) really is. She asks, rhetorically, the audience how Argentina lowered its debts. Claiming the lowering of the debt was due to some economic genius on the part of her husband. Look closely at the red highlights in the article.


"HOW DID WE CUT OUR DEBT?????!!!!"

Are you joking?

Yeah, what Argentinian economic genius. Lower your debts, by just refusing to pay for them.

Wow, seriously, she must have gone to the U of Chicago.

I think I'm just going to do the same with my mortgage and then brag about it. I can see it now, chatting up some girl at the bar;

"Hey baby, I just got rid of my mortgage."

"Really, how? Through hard work? Creative investments? You won the lottery?"

"No baby, I pulled an Argentinian. I just refused to pay it. I'm an economic deadbeat. And I blame America and the IMF."

"Wow, you're so dreamy!"

What gets me is she's the most popular candidate and likely to become the president of Argentina. Are the Argentinian people really that stupid to elect somebody like her when within 2 minutes of a speech she clearly displays her ignorance of basic economics???

Yeah, right, enjoy those 4 years of economic growth in Argentina. It will be coming to an end.

Snidley Whiplash Doesn't Adjust for GDP

Ryan had a better title so I went with it.

Originally it was titled "Military Spending" because I get a kick out of how the left complains we always, ALWAYS spend too much on the military (which a quick perusal of the federal budget would tell you otherwise). Regardless, to convey context as to just how much we spend on the military and for all the troubles we have with terrorism in the middle east, you all should just shut the hell up and enjoy your plasma screen TV's because it really isn't that bad. We spend nothing, I mean nothing on the war on terror. The Japanese killed 3,000 of our men and women and we responded with a budget that allocated 40% of our GDP to the military.

Muslim nutjobs killed 3,000 Americans and we ever so slightly bump up our military spending from 3% to 4% GDP, to the howls and protests of anti-war leftists. Sheesh!

So new lesson people. It's always got to be as a percent of GDP.

Don't care what you're measuring, you have to account for not only the increase in the country's population as well as the increase in its economy. Otherwise inflation and population growth distort your figures.

Just the other day I was on a date and she asked me "what do you do for fun?" And I said, "I like playing video games but only after converting them to a percentage of GDP."

When I get to the pearly gates, St. Peter will ask, "What did you do with your time on Earth? Donate to charity? Work with children?" and I'll say, "I converted things into a percentage of GDP."

My Mom will call me up and still to this day ask if I brushed my teeth. But she'd be wiser in asking if I brushed my teeth adjusting for GDP.

So remember, Americans, Patriots and all around cool guys and redheaded libertarian gals adjust for GDP. Commies, liberals and Snidley Whiplash don't.

Delinquency and Default

Interesting chart from the WSJ showing where defaults and delinquencies have increased the most.


What's up with Stockton or Modesto, CA?

Almost Makes You Want to Be a Virgin

http://arbyte.us/blog_archive/2007/07/Bad_Assumption_Justice.html

China's Economy Forecasted to be Larger than US' by 2025

I was predicting 2016 the way their growing, but The Economist differs.

The Housing Market Index

Well seems it dropped to a historic low.

This would be expected seeing it was at a historic and unsustainable high.


But what I find interesting about this is that it is the "builders" perception of the housing market. Builders thought that the future of housing was going to be GREAT in late 2005 while the rest of us educated schleps knew otherwise. Which means we should really view this as a good thing.

I don't mean to become the cheerleader for the housing market. I truthfully enjoy watching it tank, destroying those that laughed and mocked me and my economic brethren who warned of a housing crash. But in my experiences in banking and the housing market I realized one key thing;

Builders aren't economists.

I never once, NOT ONCE saw a builder bother to sit down and do economic research. I've never seen a builder do an absorption study. All I ever saw builders do is say, "Hey, I sold 4 houses last year. I'm going to build 20 this year!!!!" And that was the extent of their economic and market research.

And given their track record of miserably failing to predict the market, if they view things as being so bad, then I have a hard time thinking there isn't something good ahead.

But don't get excited. I'm not forecasting a quick recovery here. I'm just pointing to the beginning signs of a recovery, the most recent of which are the home builders' claiming doom and gloom.

Best License Plate EVER

Please, Buy Our Crap

Funniest thing I've read in a long time.

This Horrible Country Known as America

Another wretched night at the officers club.

Life is just horrible in this country. Is there any country on this planet that could possibly be worse than this God-forsaken country known as the United States of America? I suppose I'll get on with this horrible life I lead in this horrible country.

I Have Chart Envy

A microcosm of the unionized American labor force in general, Dr. Mark Perry makes an EXCELLENT point with and EXCELLENT CHART!!!

Read the whole post here (which you will, you will conform!)

Many thanks to Dr. Bob!

Those Sub Prime Blues

I admit I take a sadistic joy in watching all the banks and mortgage brokers who threw any means of quality control or credit out the window to line their fat pockets with commission and closing costs, get theirs in the end.





Enjoy the unemployment line boys and girls!