Coaching Businesses and Life, a view from Long Beach

Little Faith In Traditional Banks

I'm closing my Washington Mutual account soon.

I've never had much sympathy for big banks but with the latest turmoils at Wamu, see here, I decided to give my money to a local Credit Union. And why not?

After 4 decades of banks telling the government to not interfere, the latest Wamu problems has pushed them to ask for help after lending money to dubious people. How can I trust a bank that does that? When I worked in real estate I saw how wrong it was pushing loans into most people's hands when clearly they didn't have much to show for. If at my little level I can see that, I would expect my bank to be wiser.

I opened an account with a local credit union with a checking account that earns money with the minimum on it being $50. After all, it is my way of saying enough is enough. It is also my way of investing directly into my community.

Our banking system is out of control and after being part of the mess we are in, they don't need my money. If they are being bailed out because of their mistakes then this will be done without my help. Surely, no one would give me that break if I was in that situation. My, how empowering!

Lawmakers At Their Best

If you had to invent modern politicians or lawmakers, you would have a hard time doing it from scratch.

They are an incredible species. It even makes you wonder if we came from the same gene pool. How out of touch with reality they are is a source of amusement and danger.

Straight from Calculated Risk, Congress comes to the rescue to help out those who bought homes well above their means. Our good folks out there don't want those poor folks walking away from homes. They want them to continue paying no matter. And with the implacable logic of throwing more money into any problems, Sen. Johnny Isakson believes new homeowners should receive a $15,000.00 tax break if you buy a new home now. Never mind the consequences of the hefty budget drain, already taxed to a maximum.

Here is the logic. Sit down and strap yourself, it's a fun and strange ride... "If we can convince buyers to come back to the marketplace and buy these houses, then the houses aren't vacant. It's replaced by an owner-occupant, who is there making payments on a loan and helping all of the other houses around."

I ask you, where would we be without our out of touch friends up there making all kinds of wise decision that effect us? And where would they be had they actually worked in a private company? Does this not show the motivation to create good little soldiers paying their monthly mortgages ever month without asking questions? Shivers...

So once again the answer is to throw more money which will most likely come out taxpayer's pockets. Let's not waste any precious time thinking about the real problem, let's leave that to the next one... and the next one... and the next one... Unfortunately, this is not just happening here, it is happening everywhere. We have more and more politicians who are completely out of touch with reality. And by reality, I mean the ones most people like you and me deal with. It could be funny should it not be so scary that these lawmakers can actually conjure up schemes like that.

Thanks Tanta...

The Bubble No Experts Saw Coming

The New York Times posted an article written by Robert Shiller on why no one "saw" the housing bubble happen.

It is a perfect example on how so called experts are not that good after all, and also why governments are quick to turn situations around to make themselves look better.

Shiller argues that even the all-mighty Alan Greenspan, "a very serious student of the markets, didn’t see it, and, moreover, he didn’t see the stock market bubble of the 1990s, either. In his 2007 autobiography, “The Age of Turbulence: Adventures in a New World,” he talks at some length about his suspicions in the 1990s that there was irrational exuberance in the stock market. But in the end, he says, he just couldn’t figure it out: “I’d come to realize that we’d never be able to identify irrational exuberance with certainty, much less act on it, until after the fact.”"

The question in the blame game is the following, do over a million people lack education or does lawmakers (less than one million) lack proper understanding of human nature? I'll let you that one to answer, but it is pretty clear in my eyes.

It's well worth the read.

Hat tip Calculated Risk.

Beware Of The Old Cut Rates Equal Low Rates

If I had a penny for how many times I heard a lender saying that since the rates have been cuts, we will have better mortgage rates. Well, think again!

While the news loves to talk about cute rates, those rates are good for hedge funds and banks but what trickles down to you isn't necessarily all that great. Take into consideration that since September, the Fed have reduced the short-term rates by 2.25 percentage points to 3%. However, certain mortgage rates have gone up while most others haven't gone down as much as the Fed's rates. Why?

According to Seeking Alpha's Barry Ritholtz: "The average interest rate on a standard 30-year fixed-rate mortgage was 6.38% (a few days ago), little changed from September but up from 5.61% in late January, according to HSH Associates, a mortgage-data publisher in Pompton Plains, N.J. Interest rates on so-called jumbo mortgages -- those larger than $417,000 -- were at 7.35%, also close to their September levels."

So why haven't rates on adjustable mortgages come down as much as the Fed's rates? OK, someone must make some money on it, but surely we could have better mortgage rates if the industry was serious about revamping this stalled market.

Barry believes that: "There are two reasons mortgage rates haven't responded more to the Fed's rate cuts. One is that long-term Treasury yields, which are the benchmark for most mortgage rates, have risen recently, perhaps because of increased concern about inflation as the prices of oil and other commodities soar. The other is that the spread between mortgage rates and Treasury rates has widened as investors and banks become increasingly reluctant to make home loans."

So next time we hear cheers from NAR, your lenders or local Realtor about falling rates, do a little research and see how much rates, if any at all, have actually gone down. I can think of three instances this year where the cut rates have had no positive influences. But if you listen to the news...

And here is another post from Calculated Risk saying pretty much the same.

Less Loan Demands, Good News

Another piece of good news is less loan demands. Why? It means people are actually serious about the consequences and are probably considering alternatives. Lots of probabilities there.

According to this Fed report, one-third of domestic institutions...reported having tightened their lending standards... "...80 percent of domestic banks reported tightening their lending standards on commercial real estate loans over the past three months..." Finally!

And finally: "In the January survey, significant numbers of domestic respondents reported that they had tightened their lending standards on prime, nontraditional, and subprime residential mortgages over the past three months..."

So at least economically, it looks like banks are cleaning up the party mess.

The Mortgage Mess Is Not Contained

I read this post on Calculated Risk about the mortgage mess and I would not have normally written anything about it had I not heard a conversation that troubled me.

The post is called: "More Criminal Inquiries into Mortgage Related Companies" and was taken from the Wall Street Journal. Headlines like that abound lately and you would think everyone knows and all lenders would go into damage control mode. "Federal investigators have opened criminal inquiries into 14 companies as part of a wide-ranging investigation of the subprime mortgage crisis, focusing on accounting fraud, securitization of loans and insider trading ..."

It is already bad enough lenders have to deal with this type of headlines cropping up on a daily base but I wonder how many of them really get it. The other day I heard a lender in a casual conversation with someone he didn't know give financial advice on opening a line of equity so the other person could "cash in at the low new rates". This was the day the Fed lowered the rates to 3%. It's baffling as to why you would want to give this kind of advice to someone you don't know, have no idea what their financial or housing situation is. It's also disturbing to hear a lender saying: "Come and get a line of equity, I can make you cash in on your sleeping home's equity." This was pretty much what I heard. A title agent walked in later after and told he, also couldn't believe what he had heard.

Considering the increasing amount of real estate and lending junk mail trash I am receiving each and every day, we are far, far away from an all across board realization of how serious the situation is. There are still plenty dim light minds out there trying to take advantage of a situation.

Maybe the other person could have gotten that line of equity and place into a high yielding return like a well managed ETF portfolio but I didn't hear that said. I only heard: "If I was you, I would cash in on the low rates and get a equity line loan."

It's dumbfounding that in the midst of this mess, some people still don't get it and add to it.

Relief From Mortgage Early Payments, Long Beach

Very nice catch by Calculated Risk spotting this Bloomberg article on the Fed moving in to make it harder for lenders to charge for early repayments. Good news indeed.

"Dec. 17 (Bloomberg) -- The Federal Reserve will make it harder for lenders to charge fees for early repayment of subprime mortgages, according to consumer advocates and a regulator."

Foreclosures Slowing Down, Long Beach

Could it be true, foreclosures showing signs of slowing down? It looks like it.

BusinessWeek put out this post that shows the foreclosure activity is slowing down a bit, albeit still very high. It could be a combination of many aspects.

Tools For Bloggers

Here are some tools I use for blogging.

My main source of information is Bloglines.com. Bloglines is a feeder of blog you subscribe to. Instead of having an exhaustive list to check daily, bloglines is a sort of portal. You can set up folders and read the news you want. I set up mine with the obvious, Real Estate, Coaching, Cars, technology and a few others things like Fun Stuff.

I also have a gmail account and set up Google Alerts. I have three of them, obviously for Coaching, Real estate and Long Beach. Oh, and Alfa Romeo and Maserati. that's the fun part for me.

With this two essentials, you have a wealth of information to digest from. One thing to remember with bloglines is to trim the info intake. Don't worry about letting go of blogs that don't do it after a while. There are always more out there.

Since I am on a Mac, I use VoodooPad. VoodooPad is a notepad on steroids. It has links. So you can create tiitle and they link to another page. I set up a few links on the main page, Business & Life Coaching, Real Estate, Cars, Local News, etc. each linking to their respective pages.

All of these tools help you rationalize your information and keep them in check. There are more tools out there but I feel these help me just fine.

Of course, I use these tools for Coaching. I can create clients folders with links to pages. It's like having a mini-website or an Intranet as it was called back then.

The Government To "Fix" The Lending Problem, Long Beach

We knew the government was stepping in to help the lending mess. As Mike Goodson points out in his Seeking Alpha post, I also have doubts on the efficiency.

Yes, it's a tough situation and the bleeding has to be stopped, one way or another. But should people who made judgment errors be bailed out while the rest of the country waddles in puzzlement? Hard to say. And what is being done address the real issue? If this was an interim solution and we were seriously starting to make sure these situations don't happen again, I'd be relieved. But that is the real problem in the end, the real problem isn't addressed. We can bail out a few misguided souls but what is being done to make sure we don't get caught in the same maelstrom? If we are not solving the problem at the global level, now is the time to do it at the personal level.

In the end, it reminds why I am calling my company Tap The Source! If you do not get to the source, you never resolve anything. A fire is never put out by throwing water around it. You need to get to the source of it.

And of course, you cal always read Calculated Risk's Tanta's post on it all.