Freezing in NH

I personally like the Hitchhikers Guide to the Galaxy, and right now it’s good advice.  The NYTimes actually titles the article Time to Assess Finances, but they really mean “don’t panic”.  The basic advice is sit tight, don’t make any emotional decisions, don’t sell stocks you meant to hold long term while they’re down.

“Small investors always make the worst timing decisions because emotion is involved,” Mr. Tysk said. “This is precisely the wrong time to move to safer options. The stock market has dropped dramatically and now is the time to invest — don’t close the stable door after the horse has left.”

They do talk about TIPS, which is something I hadn’t seen much of in the press until very recently.   They’re a good choice for folks who need stable money, such as folks past retirement who have a significant chunk of their portfolio in bonds but need to worry about inflation as well.

Treasury Inflation Protected Securities, known as TIPS, are securities whose principal is tied to the Consumer Price Index.

With inflation, the principal increases, while with deflation, it decreases. When the security matures, the United States Treasury pays the original or adjusted principal, whichever is greater.  

The one thing they just gloss over is job security.  It would probably be a stronger article if they left it out entirely, here is everything about your job:

The first thing to do is take stock of your life. Determine how secure your job is, which, in these uncertain times, may not be easy.

If your job is relatively safe, step back and look at your financial situation.

And if your job isn’t safe?  That advice must be in a different article, because it’s not in this one. 

There’s an interesting article on Slate: The Case for Foreclosures: One Family’s Sorrow is Another’s Joy.

If you’re facing foreclosure, Treasury Secretary Henry Paulson wants to help. “If someone is willing to make a call to reach out,” says Paulson, “there’s a chance we can save their homes.” But Paulson can’t save these homes because the homes are not endangered in the first place. They stand to change hands, not to vanish.

None of these foreclosed houses is going to disappear. After a foreclosure, one family moves out, and another moves in. We see the sad faces of the people moving out, but we don’t as often see the happy faces of the new homeowners moving in. Nevertheless, those happy faces are out there, and we should not discount them.

I kind of want to quote the whole article, it’s worth reading.  And there’s a point that’s not really made in the article that I’ve been thinking about.  My thesis is thus: The bottom of the housing market is a relatively fixed place, where all the people who can’t afford a house have been tossed out, and the rest of the people feel that things are stabilized enough to get back into the market and buy a house.  Since I think this point is a fixed value, I think it’s better to get it over quickly like ripping off a band-aid.  Let the banks foreclose on everyone who can’t make payments, sell those houses at auction, let the auction determine the new price, and move on.   The longer we sit in this place of uncertainty, the longer it will take to get people moving and buying houses again.

One of the few things that’s been proposed that I actually agree with is the plan to freeze payments for people who can afford their house at the current payment level and cannot if it increases.  I think it makes sense for the banks, since at this point foreclosing is probably not going to bring in any extra cash.  Folks have gotten HELs and such and have little if any equity, so the bank should prefer a person in the house making payments to an empty house they can’t get rid of.  But these are the folks that banks have always been fairly willing to work with, if only they contact the bank before they stop paying.   I must admit feeling a little jealous since my loan will eventually adjust (7/1 ARM here) but I will be able to make the increased payments, and the fewer houses in foreclosure around me, the better.  

From an op-ed in the NYTimes: George Speaks, Badly.  (I really want to cut and paste the whole thing…)

Watching George W. Bush address the New York financial community Friday brought back many memories. Unfortunately, they were about his speech right after Hurricane Katrina, the one when he said: “America will be a stronger place for it.”

All I can say is “George, you’re doing a heckuva job.”

The president squinched his face and bit his lip and seemed too antsy to stand still. As he searched for the name of King Abdullah of Saudi Arabia (“the king, uh, the king of Saudi”) and made guy-fun of one of the questioners (“Who picked Gigot?”), you had to wonder what the international financial community makes of a country whose president could show up to talk economics in the middle of a liquidity crisis and kind of flop around the stage as if he was emcee at the Iowa Republican Pig Roast.

I just wonder what goes through his head?  Does he think this isn’t serious?  Does he think it is serious but just doesn’t know how to show any empathy? 

The country that elected George Bush — sort of — because he seemed like he’d be more fun to have a beer with than Al Gore or John Kerry is really getting its comeuppance. Our credit markets are foundering, and all we’ve got is a guy who looks like he’s ready to kick back and start the weekend.

This is not the first time Bush’s attempts to calm our fears redoubled our nightmares. His first speech after 9/11 — that two-minute job on the Air Force base — was so stilted that the entire country felt like heading for the nearest fallout shelter. After Katrina, of course, it took forever to pry him out of Crawford, and then he more or less read a laundry list of Goods Being Shipped to the Flood Zone and delivered some brief assurances that things would work out.

Yeah, maybe things would go better if we had a VP that was camera ready.  Our current one can’t do anything except snarl. 

But wait — more positive news! The secretary of Housing and Urban Development is proposing that lenders supply an easy-to-read summary with mortgage agreements. “You know, these mortgages can be pretty frightening to people. I mean, there’s a lot of tiny print,” the president said.

Er, there’s already a one-page HUD summary before the closing.  Not sure what else could be here except “hey dummy, if you pretended your salary was twice as high as it really is, you can’t afford this.”

Really, if he can’t fix the economy, the least he could do is rehearse the speech.

Poor Bernanke, he means well. 

I’ve been reading through a series of articles, and nothing is removing my opinion from a month or so ago: Bernanke messed up.  At the beginning of all this mess, he was still focused on the rising inflation numbers, so he was increasing rates to slow down inflation, not cutting them.  This is sound fiscal policy, if we operated in a vacuum.  But we don’t, we live in a time when the media is screaming for attention.  And Bernanke seems to have missed the fact that we act like lemmings. 

NYTimes Buiness Article:
“The Fed rate cuts aren’t doing anything for my clients except confuse them,” Steve Walsh, a mortgage broker in the Phoenix area, wrote in an e-mail message at the end of January.

He seems to live in a world of numbers where people act rationally.  And from personal experience and watching the news, there is very little rationality out there.  Despite rising inflation, he needed to see the housing panic coming, and he didn’t.  Now he’s got some more ideas that are perfectly rational but not going to happen. 

NYTimes again:
The chairman of the Federal Reserve, Ben S. Bernanke, urged mortgage lenders and investors on Tuesday to reduce the principal on loans for many people whose homes are no longer worth as much as the amount they still have to repay.

This is brilliant, give homeowners enough equity that they feel responsible for their houses.  But it is missing the point at the moment.  People are not sending their keys back to the lender because they’ve lost equity, they’re sending keys back because they can’t afford to keep up with their payments.  Okay, some are dealing with lost equity because they have to sell for a move, but most are giving up their house because they can’t afford it month to month. 

Additional equity is great if it means folks can re-finance, but with tightened standards many folks are not going to qualify.  Especially if they got in with a no-doc loan, and now are dealing with increasing prices for gas and food.  They’ve got less money left over at the end of the month, and since they can’t round their income up any longer with a no-doc (and that’s assuming that one or both of them hasn’t lost a job in the meantime) they’re stuck.  But if they had equity they could sell and move into a rental I suppose.  If they’re going to be that logical.  Most people aren’t, when it comes to uprooting their family.

Who’s to Blame for the Subprime Mess:
In reality, there’s not one element here that is solely to blame; what we’ve got is a cornucopia of reasons and factors and a clustering of events that have come together to conjure this disaster.

And one thing we shouldn’t leave out: the personal responsibility that homeowners have to take as participants in this predicament. It doesn’t help that victims themselves have made it easy for the bad guys to prey upon them, as evidenced by the following survey results.
[…]
almost 7% of mortgage holders have negative equity
34% of homeowners don’t know what type of mortgage they’re carrying
34% of adjustable rate mortgage (ARM) holders don’t know what they’d do once interest rates adjust

There are a lot of factors in this mess, but I have difficulty understanding how someone would let themselves be pressured/talked/etc into making the biggest purchase of their lives without understanding the terms.  Were they afraid to look stupid by asking questions?  There’s a contract at the closing, both parties are held to what they sign, why wouldn’t you read it? 

Anyway, I’m getting very far afield from my original topic (poor Bernanke, he’s trying so hard).  People don’t look at the total cost of anything, just the monthly payment.  So increasing equity only affects those who plan to sell.  And I’m sure Bernanke will have some more good ideas in the coming months, but he really needs to get a couple of psychologists or something on staff.  The logical solution is not always going to work with illogical people.

Okay, lets see a show of hands, who out there doesn’t know about the tax rebate/stimulus thing?  Anyone?  So that’s good.  Okay, who doesn’t know that you need to file a return to get it?  Oh, just a couple folks who didn’t file a return last year either, like people living on social security, or veterans benefits.  Okay, so the IRS is going to spend $42 million sending those people letters.  Wait, what’s that you say?  The $42 million is for the IRS to send letter to people who are already filing taxes every year?  What about the vets and SS folks?  Oh, maybe you’ll send them a letter later, but that amount isn’t included in the total.  Hmmm…why doesn’t this make any sense?  Oh, right, it’s the government.

Senator hits IRS for letters touting tax-rebate checks

I’ve been thinking about an article in the NYTimes: Foreclosure Aid Rising Locally, as Is Dissent.  This is sort of where I was a couple months ago.  I have a house, with an adjustable rate mortgage, purchased a few years ago.  But because I bought a house that I could afford, I’m not going get any help with the mortgage.  And my feeling was that bailouts were a huge misuse of people’s money, time and effort.

“Just can’t agree with using taxpayer dollars to bail out private homeowners, no matter how the mayor tries to justify it,” read a complaint posted on the “Soundoff” section of The Seattle Post-Intelligencer’s Web site.

But after a few months of thinking about it (not solid thinking of course, just occasionally having it pop into my mind) I realized that if the slightly crazy neighbor next to me went into foreclosure and his house were auctioned off, that would be the most recent comp (comparable sale) when I went to sell my house.  And the auction price for a house that hasn’t been spruced up is not that great, especially here in the winter.  So if he goes into foreclosure, the value of my house (and thus my bottom line) sinks.   

The goal of these programs is not just to keep people from losing their homes, but also to limit broader economic fallout, including plummeting property tax revenues and widespread declines in home values. Still, they pit what some government officials say are practical economic solutions for the common good against individual ideals of fairness and personal responsibility.

 So while I hate the idea of bailing out idiots and liars, it still might be in my best interest. 

Here are some more details after my previous post on Prosper and their tax stuff.  Prosper Taxes at Rate Ladder.

I got the same email as Single Ma, but while I just grumbled to myself, she went and wrote a fab Dear John letter.  Go read it!

Maybe CNN is trying to tell me something: Five reasons to find a new job.

I’ve been thinking about it for a while.  I enjoy some part of my job, but the folks I enjoy working with are all burning out and either leaving or becoming hard and jaded.  And the company I work for is having some financial issues and cutting back on things like 401(k) match and raises.  The writing’s on the wall, I just need to get up off my butt and do something about it.

So now I’m trolling sites for various tips.  I’ve just run across the frugal law student’s posts:
Make Your Resume Pop With These Resume Writing Tips
Make Yourself Stick With These First Impression Tips

From the New York Times: The New Year’s Cocktail: Regret With a Dash of Bitters.  An appropriate article to start the year, with many folks waking up with hangovers or a few extra holiday pounds and holiday bills.

Over the past decade and a half, psychologists have studied how regrets — large and small, recent and distant — affect people’s mental well-being. They have shown, convincingly though not surprisingly, that ruminating on paths not taken is an emotionally corrosive exercise. The common wisdom about regret — that what hurts the most is not what you did but what you didn’t do — also appears to be true, at least in the long run.

We all have regrets, but the article mentions that some people have better ways of dealing with them than others. 

And since it’s New Years, I’ll have a post about goals and such, but this has been a busy couple of weeks so I’m taking a few extra days to think about them.