Tag Archives: USA

Mad at Pakistan?

Americans are mad at Pakistan.  Last night, Jon Stewart showed a clip of Fareed Zakaria asking if Pakistan is complicit in hiding Osama Bin Laden – or just incompetent.

Do you blame Pakistan for bin Laden living there?  Do you think our relationship with their government should be strained by this?   Should we reduce support?  Sanction trade?

No.  That’s wrong.  Here’s why:

Pakistan is not one thing and their government is not monolithic.  There are many power structures in Pakistan.  You shouldn’t blame “the government” for sectarian separatists, terrorists, or others who secretly hide within their borders.  Thinking that way is like blaming a person when their body grows a cancer.

Did we blame the American Government when Timmothy Mcveigh was a terrorist in Oklahoma City?  No.  America was a victim.  And Pakistan is the victim now.  Pakistan has been in a complex civil war with multiple armies of radical extremists for many years.  Some of them are politicians trying to consolidate power with secret affiliations, others attack India trying to incite a broader war, others hide like rats.  Pakistan is suffering from these cancers.

We should be offering tax incentives to increase trade with Pakistan, increase aid, and increase support for democratic stability, secular and academic institutions, and human rights.   Economic sanctions and saber-rattling are counterproductive because they attack the commercial economy.  It would be better to empower the population through the commercial economy – enable them to overtake and stamp out radical separatists and would-be religious fascists.  Help them get on a path to become a productive and educated economy that has the power and will to suppress it’s own cancers.  Use economic levers to achieve better outcomes.

US Housing Market is Still Collapsing

The Economic Collapse has put together a stupendous list of 20 startling facts about the US housing market:

1. According to Zillow, 28.4% of all single-family homes with a mortgage in the United States are now underwater.

2. Zillow has announced that the average price of a home in the U.S. is about 8% lower than it was a year ago;

3. U.S. home prices have now fallen a whopping 33% from where they were at during the peak of the housing bubble.

4. During the first quarter of 2011, home values declined at the fastest rate since late 2008.

5. According to Zillow, more than 55% of all single-family homes with a mortgage in Atlanta have negative equity and more than 68% of all single-family homes with a mortgage in Phoenix have negative equity.

6. U.S. home values have fallen an astounding 6.3 trillion dollars since the housing crisis first began.

7. In February, U.S. housing starts experienced their largest decline in 27 years.

8. New home sales in the United States are now down 80% from the peak in July 2005.

9. Historically, the percentage of residential mortgages in foreclosure in the United States has tended to hover between 1 and 1.5 percent. Today, it is up around 4.5 percent.

10. According to RealtyTrac, foreclosure filings in the United States are projected to increase by another 20 percent in 2011.

11. It is estimated that 25% of all mortgages in Miami-Dade County are “in serious distress and headed for either foreclosure or short sale“.

12. Two years ago, the average U.S. homeowner that was being foreclosed upon had not made a mortgage payment in 11 months. Today, the average U.S. homeowner that is being foreclosed upon has not made a mortgage payment in 17 months.

13. Sales of foreclosed homes now represent an all-time record 23.7% of the market.

14. 4.5 million home loans are now either in some stage of foreclosure or are at least 90 days delinquent.

15. According to the Mortgage Bankers Association, at least 8 million Americans are currently at least one month behind on their mortgage payments.

16. In September 2008, 33% of Americans knew someone who had been foreclosed upon or who was facing the threat of foreclosure. Today that number has risen to 48 percent.

17. During the first quarter of 2011, less new homes were sold in the U.S. than in any three month period ever recorded.

18According to a recent census report, 13% of all homes in the United States are currently sitting empty.

19. In 1996, 89% of Americans believed that it was better to own a home than to rent one. Today that number has fallen to 63 percent.

20. According to Zillow, the United States has been in a “housing recession” for 57 straight months without an end in sight.

Source: The Economic Collapse: :”Don’t Buy A House In 2011 Before You Read These 20 Wacky Statistics About The U.S. Real Estate Crisis

Long term investment strategy blather

“The FED has been daring us, effectively, to go out and buy risky assets for the last 2 years”

“It will be the creditor that tightens global liquidity.  Not the debtor.”

I don’t agree with Russell Napier’s ultimate conclusion about S&P hitting 400, but this interview is full of gems:

http://video.ft.com/v/946244201001/Long-View-Historian-sees-S-P-fall-to-400

(it’s part of a series: http://video.ft.com/v/940727417001/Long-View-A-gathering-storm)

The reason that I don’t agree with his conclusion is that I think emerging market credit expansion will be harder to control.  I think credit expansion will be highly private, opaque, poorly regulated, and broadly accepted by the population.  Expansion of credit is an expansion of the money supply.  During which, emerging market consumption and inflation will be higher than expected.  Corporate profit growth would likely rise faster in that scenario, so downside risk should be protected to some extent by strong corporate balance sheets.

Or of course it could go the other way.  🙂

Net Neutrality: No Compromise

To begin talking about Net Neutrality, it helps to clarify what the internet is. It’s simply data sent via TCP/IP (the protocol for sending data through routers). Some people host web sites, others connect to their company e-mail, others do other things – it’s all the internet.

Understanding that the internet is just a connection using TCP/IP, then Net Neutrality is simple, too. Net Neutrality simply means that your ISP may not interfere with the internet. They may not censor your packets (the data that is sent via TCP/IP). This means they can’t censor your news, keep you off of Skype, restrict your sending and receiving, or otherwise interfere with your communications.

Any compromise on this is wrong for two reasons: 1) Your ISP should not have the right to interfere with your free speech, and 2) ISPs should not be able to tax the value creation of the media industry.

ISPs should not be able to interfere with consumer access to media companies, nor tax those companies for access to consumers. ISPs should not be able to interfere with our speech or block our access to the speech of others.

ISPs are in the business of providing internet access, but they don’t own the internet; any attempts to eliminate net neutrality would violate our consumer rights and hurt the economy.

Reconsider the Stimulus

I am fed up with the structure of the stimulus plan.  Bailing out failed banks is foolish when tax credits for mortgage payments would cut the foreclosure rate and fix the toxic debt.  Why ignore this easy and super-efficient tactic?

If I could recommend a specific plan, it would be to provide tax credits for up to $30k/year in mortgage payments for primary residences for the next 2 years. This relatively cheap solution maintains free market capitalism with all the good incentives, and would dramatically reduce the foreclosure rate — particularly for those paying less than $30k/year for their mortgages. The plan could be extended or expanded if necessary, of course.

The result would be a reduction in mortgage defaults, an increase in the value of mortgage backed securities (MBSs), and a recovery of the financial strength of the lending institutions and pensions that hold MBSs. Essentially, this would repair the cause of the credit crisis rather than throwing money away at the symptoms and rewarding failure.

As soon as it is announced, assumptions about foreclosure rates would fall, raising the value of MBSs the same day.