Thursday, 2 October 2008

Sold!

Down the river, that is. Even the vegans among us bought a shedload of pork last night, and a bad plan to go along with it. Was it any surprise that there were triple the "yes" votes beat the "no" votes by 3 to 1?

The markets will round out my exacta box by going bonkers today.

Since I never seem to talk about cycling anymore, I will put the cycling content high up today. I got my new DT 240 hubs yesterday. Pure unadulterated triple X rated bike porn. The little cardboard box they came in weighs more than they do. Unfortunately I will not get to lace them up by this weekend's trip to Lost River.

After decrying the trainer/rollers the other day, I had a good roller session on tuesday night. After a month plus of working on living down in the drops, I am all good with it on the road. There is something about being on a trainer or rollers that makes the low low position less comfortable. Maybe as a friend suggested it is a constant pressure thing. I don't know, but I do know that I rode outside on Sunday and was in the drops the whole time and it felt great. Wednesday morning, after being in the drops not nearly as much on Tuesday night, my back felt like it had been worked over with a baseball bat. Not Good.

I've also been doing some upper body work at the gym to go along with all of the core work and leg strength rebuilding. My right leg is still disgustingly weak, but my upper body is almost freakish in its resistance to strength gains. If there was money to be made in not having a strong upper body despite all efforts to the contrary, I would have Monty Burnses money. As it is, I just have his strength. SMITHERS!!

Commentators and politicians keep talking about needing to stop falling house prices as though accomplishing that will stabilize the whole economic morass. I disagree with this sentiment entirely. Falling housing prices are a natural corrective to a speculative bubble and a supply surplus. To artificially support housing prices, and how would you do it anyway, would be an even bigger abrogation of our basic free market philosophy than the pile of pork that the Senate pushed through in a landslide last night.

Housing prices went up because people thought that the rules had changed, and that prices could only go up. The thought that prices could only go up fortified the ill considered surge into pushing heaps of mortgage money at anyone with a pulse. With all the checking that many of the mortgage companies did on their applicants, I wonder if they even tested anyone for a pulse. The surge of mortgage money reinforced the upward drive of prices in a self reinforcing spiral. To try and peg prices at some percentage of a speculative high might do as much good as allowing a bunch of people who are upside down in their mortgages a chance to sell their homes at close to full mortgage value. But if a bunch of inventory goes into the market at a command price, where will the buyers come from? Is the governmet going to find people with healthy personal balance sheets and force them into buying?

When asset bubbles end and the assets in question revert to their historical means, it is usual for them to dip below track and then have a little surge as they get back to their natural path. To try and manipulate any part of this phenomenon is a fool's errand.

A categorically better option is to reduce the rate of foreclosures by manipulating (yes, I will call it what it is) mortgage contracts to help people stay in their homes. Yes, people will still own houses on which they owe more than market value. This has happened before and will happen again, especially if no money down loans reenter the picture. You could enact the kind of program I proposed a few days ago, wherein people have the option of downgrading their payback requirements. This keeps people in their homes, prevents a flood of inventory going on the market, and perhaps most importantly will entice new and qualified buyers into the market to get things going again.

Having adjustable mortgage interest rates adjust upward while the economy is contracting right now is functionally the same thing as increasing taxes at the outset of the Great Depression. It will end in ruin. There was much stupidity on all sides. Let's not battle past stupidity with new stupidity. We need to develop a homeowner based plan to help people succeed in the struggle (and it should be a struggle - they are an equal part to this fiasco) to keep their homes.

Artifically putting any kind of floor under housing prices is the worst of all the bad ideas I've heard through this whole situation, and even gramatically imprecise references to it should not be tolerated.

1 comment:

KML said...

AMEN to the bubble and pork talk. Last time they threw money at the problem it exacerbated the situation. See this article: http://www.independent.org/printer.asp?page=%2Fnewsroom%2Farticle%2Easp?id=2324#