Underwater Residential Real Estate

One of the confounding narratives many folks cling to today is that real estate somehow transcends the universal laws of economics (or maybe even physics for that matter). Despite glimmers of light in certain markets, overall somewhere between 1 in 5 and 1 in 4 houses with mortgages are worth less than those mortgages. I was surprised to learn that around 50 million homes in the U.S. are subject to a mortgage. If home prices continue downward (as appears likely in many/most locales), these ratios change exponentially to the downside. We could well be looking at 1 in 3 or 1 in 2 underwater. Not good.

Financial Self Defense

We have linked a resource to the right of this posting aimed at educating financial services consumers on what NOT to do. The headlines almost every day have a story about someone who has made the mistake of using a salesperson rather than an advisor. In essence, if they spend most of the time with you pitching specific products or investments (the how instead of the what), then you have a salesperson , not an advisor.

How Jobs are Actually Created

An excellent article on the messy manner in which jobs are created and the difference between large and small businesses. The author has a great line midway in the piece "net new jobs are created only by entrepreneurs who start businesses that earn profits". That is correct indeed. No profits equals no jobs.

Savers and Spenders

An interesting article on the debt ceiling , As we see with clients , savers are always savers (regardless of income levels) and spenders always find a way to spend all they have and some more. Our attitude seems to mimic the pre-conversion St. Augustine roughly paraphrased "Lord make me Holy but just not yet". We have to start now.

Dodd Frank Law

A good piece, if a bit long, on the consequenses, some intended and many not of the Dodd Frank law. Already we have seen credit disappear among lower income consumers pushing them to loan sharks. Banks have raised monthly fees, etc. and the real time bomb that resides in Fannie and Freddie continues merrily along.

Market is "Efficient Enough"

Saw this 6 minute clip with Professor Burton Malkiel which is excellent. He has just released the 10th edition of his book Random Walk which largely refutes the notion that investors can out select with consistency. About 5 minutes into the clip he says the markets are "efficient enough" to make them unbeatable. That is spot on and swipes at those who say the markets are not perfectly efficient. They don't have to be.

Debt Picture

a great graphic showing federal debt and the steeply sloped trend line . The article provides good perspective from the other side of the pond. It won't be solved by even large cuts to "discretionary" spending but rather the big three : SS/Medicare/Medicaid will have to be structurally changed in order to reverse the trend.