bostonbubble.com

[john p]

http://www.politico.com/news/stories/1108/15674.html

http://www.boston.com/news/local/massachusetts/articles/2009/01/05/citgo_suspends_of_low_income_heating_oil_program/

When you read these two stories and think about the situation in Gaza it makes you wonder if the countries that don't like us i.e. Russia and Venezuela and who make a ton of money off of oil and like our addiction to oil are pissed that oil prices have dropped recently. Oil prices were a contributing factor in the banking meltdown.

The consipiracy theory side of me makes me think that when on the political side you start to get populist leaders or a country puts their bully boys on the ice, it's not a hockey game, it's going to be a fight. You can always feel the electricity before a fight. I hope cooler heads prevail and the sitation in Gaza settles down, but that's quite a big spark. The wealthy have international bonds and some talk about a New World Order, or basically a background organization that protects wealth internationally. It's not such an awful thing as it tempers hot heads and the name of the game is scoring goals and not fighting. I wonder if part of the reason people are afraid to lend is that some of these potential conflicts might amplify.

Keep in mind Hillary Clinton, the new Secretary of State, said that Putin didn't have a soul, and Putin said she didn't have a brain. Chavez said Bush was the Devil, and McCain said that when he looked into the eyes of Putin he saw three letters "K,G,B". It's like we've got the Hanson Brothers out there and their knuckles are covered with tin foil. I mean I wish someone would say, hey guys, lets just find a way where we can make some money here and improve the lives of our people. The challenge is that we're pitted against eachother with this whole oil thing because the people who don't like us make money when oil is expensive.

If Obama can difuse this, I'll take back a very large portion of what I said about him; promise...

[Boston ITer]

[john p]

The planned city would grow through private investment. They would need to get a State Master Plan approved, basically a zoning map showing where uses were allowed and size and scale of buildings in each district. Then, the lots would be privately owned and developed based on the pre approved Master Plan. Because the city would grow from the fringes/low density inward, the infrastructure could be implemented and phased incrementally. Each parcel owner would be required to pay a share of the infrastructure costs and the design would have specifications as to what type of infrastructure was to be implemented. As the city grew inward, the land would be more valuable which would fuel more capital for infrastructure. If it was planned efficiently it would reduce energy consumption etc. We burn a lot of energy in resistance. When we're frustrated we burn, when we sit in traffic we're not productive, etc.

You're right, it most likely would be messed up if politicans got involved. You have to handicap any idea when politicans are involved. The essence of the idea is to relieve the tension of an issue downstream.

Mortgage rates are really a temperature reading on a lot of things, prospects of war, inflation, earning potential, depression, etc.

[john p]

Oh, the infrastructure issue is that we don't have decent procurement laws or filters to keep unlicensed professionals from practicing and making important/ bad decisions. Further, the private sector doesn't profit directly when they repair a road. A developer will build a road for you when he can sell 20 house lots, the same way a gas company might hook you up for free so they can get your business long term. The idea of the Big Dig was fine, having unlicensed theives controlling the project was the problem.

The new city could have its own building and loan and financing.

For whatever reason, I haven't figured out, we have to start building something. I think building something is important. This approach would work kind of like WalMart. It started away from the cities and served the rural areas and got really kick ass and efficient and then they came in and ate up the fat and lazy competition and elevated the level of play. People either like WalMart or hate them, it basically depends on if you see your local companies as Old Man Potter or George Bailey. If you see your local store as Old Man Potter who has been screwing you for years, you love to see WalMart take his control out of your life.

[john p]

The cities could serve as a controlled laboratory to study means and methods. You could have the best minds and draw from the best practices to come up with standards. From there, we could update our Building Codes, or Energy Codes, etc. Part of the problem with the Big Dig was that we didn't study enough how to do things, we just started doing them. I have always questioned why the concrete ceiling tiles weren't anchored with embedments. It makes me think that they were an afterthought. Part of that question makes me wonder if using jet fans to exhaust the tunnel was part of the reason why the tiles needed to be substantial and not pop up with the air pressure in the plenum. I read that there was a moratorium on jet fans as a means to exhaust a tunnel, but I think they did test fires in abandon mines in West Virginia to study the use of them, which I believe changed the practice. We don't know what engineer stamped those drawings because I don't believe that there was a regulatory infrastructure for that project, I don't think they were beholding to Boston's inspection agencies. This is the reason why I fear unregulated infrastructure spending.

[balor123]

[balor123]

[Boston ITer]

In many ways, minus the automobile/oil conspiracies, wouldn't you say that Los Angeles County [ almost the same sq miles as eastern MA ] was a type of planned city with a lot of mini-highly dense regions (Pasadena, Burbank, Long Beach, etc) growing around the nucleus of more sparse downtown LA?

[Boston ITer]

Perhaps the problem is that we shouldn't look at housing and town development as an industry. Because all and all, it's a guns 'n butter solution to an economic slowdown. Even the nicest looking town is just a place to sleep in and perhaps, go for a stroll with the girlfriend in the town center or the local lake. Yes, it's a nice Norman Rockwell but that's really it.

Realize, when the west was being settled, people had lived in Conestogas, before setting up a homestead. And likewise, in a modern world with a lot of sq miles to spread out, we can all live in RVs while looking for work wherever we go. Heck, even RV parks have a greater sense of community then many of those far flung suburbs.

So my idea revolves around the Conestoga notion where we could use a govt/industry plan to revive hi-end R&D, stateside, with a plan to offshore mature industries when they no longer affect our national level of R&D lead. This way, we do share the knowledge (and wealth) with the world but in a way which still encourages others to emigrate to the US for the more interesting hi-end work so that we don't lose out on the future Teslas and Einsteins. We should not, however, allow for MBA-like thinking to permeate our decisions such as offshore everything and float T-bills to keep the party going locally. Allow the hedge funds to be authentic speculators, not a vehicles for national prosperity. And yes, it's ok for the best traders to get rich playing the markets but it doesn't mean that everyone else has to be poor.

In every way, the USA has far more resources than a South Korea and like it, we should be able to make hi-tech utilities and sell them abroad in return for money and then, provide hi-end services for those widgets. And then, townships and residential areas can grow around areas where these R&D centers will proliferate instead of vice versa.

[john p]

That is so weird, I was thinking to ask you guys if you thought that if we really need to be in high gear problem solving mode, if we ought to build a place where that research was possible as opposed to having everone tinkering in their garages?

I mean we've got to be pumped up about this if we're serious about driving out of this ditch. I think if we started yanking the best minds and gave them abundant resources to experiment that we'd get our results. We have to take action. I'd say, sorry, your country needs you, you've got to go to our new research center in X and you're going to be teamed up with x,y,z and you can bring three assistants...

You guys were absolutely right with your earlier posts, our best minds are not geared into solving problems because they need to earn a living. The rocket fuel that we need to power out of this situation is human intelligence and creativity and that is what needs to be harnessed.

If I were in charge of this, I'd get the friggin job done...

[Boston ITer]

[john p]

I just came off a cold and I'm feeling my energy come back... It is hard for me to cave, it is just my nature to be more robust when things look grim. I may be too positive and not realistic many times. If Obama started to bring in some brilliant problem solver minds, I'd be pretty pumped up.



Think about it though, we started NASA as a high level team to focus on Space and getting to the Moon.

Why don't we set up another Federal Research Program to try to develop alternative fuels and cars.

Everybody says "Well if we can put a man on the moon....". Well we did that by creating NASA.

What have we created to launch the next generation of cars? Pretty much everyone sat back and expected the Big 3 Automakers to solve our problems and we even expected the Big Oil companies to find a way for us to get off of oil? That was weird to even write, but it is true, we actually have Senators that expected Big Oil Companies to find a way for us to not use their product.

[Boston ITer]

[john p]

My recent thinking surrounds the overall financial market. Just like realtors typically get a fixed percentage of the price of the house for a sale, financial institutions often get percentages for "assets under management". Just as Realtors like to see inflated house prices because they can get inflated commissions, I wonder if the financial institutions enjoyed the inflated values of equities because it expanded their compensation.

I remember in High School, I took a business class. The professor was a bit odd and said things like "Those funeral home directors, they're making money hand over fist". Anyway, this was going back to the mid 80's and he said General Motors didn't make money selling cars last year, they made money on "financing". What the hell was financing, I thought... Anyway, when you think about it, if they got 8.5 percent in interest on top of the money for the sale, that's pretty good. That percentage certainly outpaced inflation. So then what did we see, we saw some cars selling for a high price with very low interest rates. They realized that they could either get you to pay too much principal or too much interest. People who trade their cars every two years have different strategies than those that like to hold on to them.

Right now you have to see things like stocks are worth like 65 percent of what they were last year. 35 percent represents money that evaporated, sitting on the sidelines, or in other investment forms like treasuries (which is one reason why we have low mortgage rates). House prices in Massachusetts have not dropped that much this year. Could we see a delayed reaction? I saw the refinancing ARM reset bubble coming, I don't underwrite banks balance sheets so I had no idea that that amount could sink banks. I had no order of magnitude and sense of scale for the issue relative to a banks financial structural stability. I assumed that they were run by the best and brightest from Ivy League Schools so they wouldn't be that stupid, but they were. Once I saw the bank meltdown, I could see the layoffs coming. Once the layoffs came consumers stopped spending. Once we elected a populist, I saw the bailout/handout mentality coming. It is so surreal now to see Democrats pushing tax cuts for the wealthy. Obama seems to be backing off his whole WPA infrastructure stuff, which I imagined he would. People are sitting on the sidelines with this whole ultra low mortgage rate scam which may or may not ever happen.

Here's the point, forget the house for a second. On the one hand we always seem to look at banks want to trade today's money for tommorrows money, so we look at inflation premiums. Look at it this way, the banks want our money, as much of it that they can get. Typically we pay for starters up to 36% of our gross income on our mortgage and over time that percentage gets smaller. As people refinance, they often never see that percentage get smaller because they yank out money. The banks want as much of our earning potential as possible because they can control behavior. They can lower rates, create inflation etc. What they didn't bank on was how irresponsible people would be. My wife told me that she saw some lady on Oprah who told her husband that she had 80k in credit card debt. The banks thought that people would fear being bankrupt and be restrained by respect to their obligations to pay back what they borrowed. People just said screw, if you're going to make it so expensive to live here that I have to take some exotic loan to get a house, I'll sign the paper and if I can't pay, come and try to get me off my Homer Simpson chair. I think the banks could have gotten their Pendleton goons or collection agents to put a cattle prod to these types, but when Mom and Pop Smith were forced to refinance to pay for Blake's tuition at Boston University and Pop Smith got laid off because his job went to India, those casualties started piling up and the parasites started to kill the host. I think in the Clinton years we felt invincible. The babyboom was in their peak earning years and they hadn't yet started retiring.

So with all this stimulus they're talking about, and the massive debt and dillution of the US Dollar, why do we have low mortgages? Don't mortgage rates tie to inflation risk? Could it be perhaps because all this money on the sidelines that doesn't want to drop 35% like last year and would rather take the less of a risk in the young professionals with decent jobs who sucessfully lowballed on a house. I mean your credibility right now pays because money wants to find a home with responsible people. The problem is that many responsible people aren't interested right now.

Lastly, think about who's really in pain right now. If you're young and you don't have a nest egg, 2008 was a great year for you. The stocks your going to buy in your 401k's are going to be cheaper, that house you wanted to buy is now cheaper, that mortgage rate is lower, there is more supply of homes for you to look at.

As far as an order of magnitude perspective, we have to look at how many homes actually sold in 2005. what would you guess, one house in every 100? So, it is really only one in one hundred that bought that premium of the peak. To everyone else, that is a benchmark if they happned to sell that year, but make no mistake, not everyone could have all put their houses on the market that year. The ultra low interest rates made one in one hundred actual house sale transactions lever tens of other refinances. So, as yourself, for every actual house sale in 2005, how many refinances did we have? That little advantage the sellers had in the buyers to sellers ratio levered a huge credit wave. People were buying their homes from themselves at premium prices when they refinanced.

I've been having a hard time sleeping so my mind's active but it's turning off now. My last thought is is the specific heat, the amount of economic heat required to melt stocks much lower than say houses, in certain regions of the country? When banks lend out to companies, they underwrite the company to make sure they are qualified for a loan. If the company is in a strong market, it makes the loan less risky. What is interesting to see is that mortgages and banking tend to stay in this monolithic mortgage risk assessment. When you have California versus say some other area of the country that may have stayed level, should these areas have the same mortgage rate? I mean when the price to earnings ratio is significantly higher in one region of the country isn't it more risky? I don't understand why in this stimulus we are wasting resources putting water on areas where there is no fire. I think they need to look at this more regionally as it is clear that certain areas heat up and cool down quicker than others. Its like we put spray on fireproofing over steel. Concrete by itself is its own fireproofing typically. We don't need to put fireproofing over concrete typically. This bailout, we're spraying fireproofing over everthing.

As far as government overspending. They need to offer early retirement to babyboomers. They also need to take a certain position like say a janitor and say that the pension cap for that job can not exceed say $35k. This way, most janitors that got paid $50k will get their fair pension, but the politician's cousin who makes $100k can't get an $80k pension. When we made the deal with the retirement pensions it was based on the assumption that these jobs were going to be based on a certain relationship to the median salary of the State. For instance if the median salary is say $50k, and you have janitors making $80k, they are making more than the median salary and when we made the pension agreements they made substantially less than the median income of the State. We need to address problems locally while not penalizing the janitor or teacher that wasn't politically connected and worked an honest day for an honest wage.

[john p]

My recent thinking surrounds the overall financial market. Just like realtors typically get a fixed percentage of the price of the house for a sale, financial institutions often get percentages for "assets under management". Just as Realtors like to see inflated house prices because they can get inflated commissions, I wonder if the financial institutions enjoyed the inflated values of equities because it expanded their compensation.

I remember in High School, I took a business class. The professor was a bit odd and said things like "Those funeral home directors, they're making money hand over fist". Anyway, this was going back to the mid 80's and he said General Motors didn't make money selling cars last year, they made money on "financing". What the hell was financing, I thought... Anyway, when you think about it, if they got 8.5 percent in interest on top of the money for the sale, that's pretty good. That percentage certainly outpaced inflation. So then what did we see, we saw some cars selling for a high price with very low interest rates. They realized that they could either get you to pay too much principal or too much interest. People who trade their cars every two years have different strategies than those that like to hold on to them.

Right now you have to see things like stocks are worth like 65 percent of what they were last year. 35 percent represents money that evaporated, sitting on the sidelines, or in other investment forms like treasuries (which is one reason why we have low mortgage rates). House prices in Massachusetts have not dropped that much this year. Could we see a delayed reaction? I saw the refinancing ARM reset bubble coming, I don't underwrite banks balance sheets so I had no idea that that amount could sink banks. I had no order of magnitude and sense of scale for the issue relative to a banks financial structural stability. I assumed that they were run by the best and brightest from Ivy League Schools so they wouldn't be that stupid, but they were. Once I saw the bank meltdown, I could see the layoffs coming. Once the layoffs came consumers stopped spending. Once we elected a populist, I saw the bailout/handout mentality coming. It is so surreal now to see Democrats pushing tax cuts for the wealthy. Obama seems to be backing off his whole WPA infrastructure stuff, which I imagined he would. People are sitting on the sidelines with this whole ultra low mortgage rate scam which may or may not ever happen.

Here's the point, forget the house for a second. On the one hand we always seem to look at banks want to trade today's money for tommorrows money, so we look at inflation premiums. Look at it this way, the banks want our money, as much of it that they can get. Typically we pay for starters up to 36% of our gross income on our mortgage and over time that percentage gets smaller. As people refinance, they often never see that percentage get smaller because they yank out money. The banks want as much of our earning potential as possible because they can control behavior. They can lower rates, create inflation etc. What they didn't bank on was how irresponsible people would be. My wife told me that she saw some lady on Oprah who told her husband that she had 80k in credit card debt. The banks thought that people would fear being bankrupt and be restrained by respect to their obligations to pay back what they borrowed. People just said screw, if you're going to make it so expensive to live here that I have to take some exotic loan to get a house, I'll sign the paper and if I can't pay, come and try to get me off my Homer Simpson chair. I think the banks could have gotten their Pendleton goons or collection agents to put a cattle prod to these types, but when Mom and Pop Smith were forced to refinance to pay for Blake's tuition at Boston University and Pop Smith got laid off because his job went to India, those casualties started piling up and the parasites started to kill the host. I think in the Clinton years we felt invincible. The babyboom was in their peak earning years and they hadn't yet started retiring.

So with all this stimulus they're talking about, and the massive debt and dillution of the US Dollar, why do we have low mortgages? Don't mortgage rates tie to inflation risk? Could it be perhaps because all this money on the sidelines that doesn't want to drop 35% like last year and would rather take the less of a risk in the young professionals with decent jobs who sucessfully lowballed on a house. I mean your credibility right now pays because money wants to find a home with responsible people. The problem is that many responsible people aren't interested right now.

Lastly, think about who's really in pain right now. If you're young and you don't have a nest egg, 2008 was a great year for you. The stocks your going to buy in your 401k's are going to be cheaper, that house you wanted to buy is now cheaper, that mortgage rate is lower, there is more supply of homes for you to look at.

As far as an order of magnitude perspective, we have to look at how many homes actually sold in 2005. what would you guess, one house in every 100? So, it is really only one in one hundred that bought that premium of the peak. To everyone else, that is a benchmark if they happned to sell that year, but make no mistake, not everyone could have all put their houses on the market that year. The ultra low interest rates made one in one hundred actual house sale transactions lever tens of other refinances. So, as yourself, for every actual house sale in 2005, how many refinances did we have? That little advantage the sellers had in the buyers to sellers ratio levered a huge credit wave. People were buying their homes from themselves at premium prices when they refinanced.

I've been having a hard time sleeping so my mind's active but it's turning off now. My last thought is is the specific heat, the amount of economic heat required to melt stocks much lower than say houses, in certain regions of the country? When banks lend out to companies, they underwrite the company to make sure they are qualified for a loan. If the company is in a strong market, it makes the loan less risky. What is interesting to see is that mortgages and banking tend to stay in this monolithic mortgage risk assessment. When you have California versus say some other area of the country that may have stayed level, should these areas have the same mortgage rate? I mean when the price to earnings ratio is significantly higher in one region of the country isn't it more risky? I don't understand why in this stimulus we are wasting resources putting water on areas where there is no fire. I think they need to look at this more regionally as it is clear that certain areas heat up and cool down quicker than others. Its like we put spray on fireproofing over steel. Concrete by itself is its own fireproofing typically. We don't need to put fireproofing over concrete typically. This bailout, we're spraying fireproofing over everthing.

As far as government overspending. They need to offer early retirement to babyboomers. They also need to take a certain position like say a janitor and say that the pension cap for that job can not exceed say $35k. This way, most janitors that got paid $50k will get their fair pension, but the politician's cousin who makes $100k can't get an $80k pension. When we made the deal with the retirement pensions it was based on the assumption that these jobs were going to be based on a certain relationship to the median salary of the State. For instance if the median salary is say $50k, and you have janitors making $80k, they are making more than the median salary and when we made the pension agreements they made substantially less than the median income of the State. We need to address problems locally while not penalizing the janitor or teacher that wasn't politically connected and worked an honest day for an honest wage.