Tuesday, September 28, 2010

Dallas home prices

Dallas Home prices are down 5.7% since the peak before the Financial Crisis. Here is a nice map from Dallas Morning News, showing the finer details of the one-year price changes in the metroplex.

And here is a chart from Calculated Risk, showing the Dallas price declines in relation to the price declines in other metro areas. (Look for Dallas on far right)

Friday, September 17, 2010

Walk away from mortgage - by political party

Pew Research Center just put out a very interesting report on American's beliefs regarding walking away from a mortgage. People were asked if it is ok to walk away from a mortgage. Something that stood out to me was the Political party difference associated with the answers.
  • Democrats were more than twice as likely as Republicans (23% vs 11%) to believe it is ok to stop making payments on a mortgage.
Why is that? Any ideas?

Wednesday, September 8, 2010

Small health insurers stop writing new coverage

Dallas Morning News reports that small insurers are having trouble meeting the 'medical loss ratio' requirement in the new National health legislation, which requires that 80% of their premiums be paid out for medical services. Some are discontinuing writing certain policies to their customers, since they do not believe they will be able to pay their employees, cover their administrative costs, etc. with just 20% of the premium money.

There are a couple of things interesting about this story.
  1. Is this pressure on private providers really an unintended consequence of the new health legislation?
  2. Insurers are walking away even before the policies interpreting the new law have been crafted. (What the businesses and individuals have to do in response to laws in the US depends on the policies that administrators write, based on the text of the law that is signed by the President) US DHHS has yet to write many of the policies based on the new law, but insurers are already seeing the writing on the wall.

    Surprisingly, the Secretary of DHHS Kathleen Sebelius is telling the insurers that they are making a mistake by walking away. "It is premature for insurers to make business decisions about participation in particular markets based on rules that have yet to be published...", said Sebelius. That is rather funny! So the businesses are staring in the face of new laws that go into effect on January 1; law that may make their continued actions illegal (with penalties ranging from fines to jail-time) and the person writing the policies is telling them, 'Don't worry about it! Surely whatever we write is going to be just fine!'
    Does she really want businesses to carry on through the rest of this year hoping that in the months between now and January the clear text of the law will be overturned by an administrative policy? Those who do business and provide people with valuable services cannot afford to sit by and run on hope, they have paychecks to meet and services to provide, and when one avenue is shut down for them (private health insurance), they they have to plan ahead to divert their resources into another area that is valuable for their customers.
The article about the particulars is worth reading. Good reporting by DMN!

Tuesday, August 24, 2010

Prices move faster than traffic in China's gridlock

(image from 'politics and world')

What a story from China! A 60 mile traffic jam is going on its 10th day now, with drivers moving forward at half-a-mile per day. In an almost universally typical fashion, the local townsfolk who weave between cars with water or noodles, supplying the drivers with precious food and water, are being accused of price-gouging because they dare to sell the goods at higher than a certain previous price.

Think of this 10-day jam on the way home tonight, when you are in traffic for a few minutes!

Thursday, August 12, 2010

Moral Hazard is coming home to roost

What a sad, sad, predictable, sad state of affairs.

I am disgusted to be living in an era when so many people are forging a new 'morality' of walking away from their contractual obligations; and - what's worse - when they are being encouraged to do so. Respect for contracts, property protection, and common decency seem to have been (unintentionally?) sacrificed in an effort to bail out mistakes big and small. Having seen high risk activity (corporate and private) 'rescued' by those taxpayers who have made prudent decisions, is it any wonder that the marginal homeowner is now more likely than ever to think it is OK to simply not re-pay the debt?

I don't know how it is possible to read these quotes from the New York Times without some sense of despair about the morality that has been encouraged by the moral hazard that well-intentioned actions have put in front of the nation's borrowers:
During the great housing boom, homeowners nationwide borrowed a trillion dollars from banks, using the soaring value of their houses as security. Now the money has been spent and struggling borrowers are unable or unwilling to pay it back.
"... the more money you borrowed, the less likely you will have to pay up.
It rewards immorality, to some extent.”
“Americans seem to believe that anything they can get away with is O.K.
Many also say that the banks were predatory, or at least indiscriminate, in making loans, and nevertheless were bailed out by the federal government. Finally, they point to their trump card: they say will declare bankruptcy if a settlement is not on favorable terms.
Fewer than 5 percent of these clients said they would continue paying their home equity loan no matter what. ... 85 percent said they would default and worry about the debt only if and when they were forced to.
“It’s come to the point where morality is no longer an issue.
“I’m kind of banking on there being too many of us for the lenders to pursue,” [a defaulted homeowner] said. “There is strength in numbers.”
(Read the entire article from the NYT here)
Who here really thinks that this is a way to build a great society?

Tuesday, August 10, 2010

Bonds move stocks and currencies

Today the Fed announced that (among other things) it will buy Treasuries to help bolster the recovery (read: prevent a recession). This announcement, other things equal, should push up prices of Treasury bonds, push down their yields, push up stock prices, and also move currencies. People will expect that the Treasury yields will fall (or stay low), that return-seekers will be less likely to invest in dollar denominated assets and more in other currencies, leading to sales of dollars and purchases of other currencies, leading to a fall in the value of the dollar.

This analysis is nothing new, of course, but I do enjoy living in today's world of technology where such moves can be observed in real-time. Here are the post-announcement screenshots from Yahoo Finance:

(I am still pessimistic about the Dow)

'Who owns GM' and other car company relationships

According to this graphic linked on coolinfographics.com GM is owned by:
  • US government: 61%
  • United Autoworkers: 17.5%
  • Canada: 11.7%
  • Bondholders: 9.8%
Did you know?

Follow the link for more of the car company ownership relationships all around the world.

By the way (and unrelated) - I am now pessimistic about Dow.