Financial topics

[mannfm11]

Freddy I had something interesting happen this past week. I manage my mothers real estate and we have a tenant that has been lagging on his rent. He has 5 boys and their mother died a few years ago. The kids were homeschooled, which I have to believe was a religious thing. In any case, he married a strange gal that doesn't work and stays home with the kids. I have been letting this guy slide on his rent by calling him and reminding him, letting him have an out and not collecting late fees. He never returns my calls, but eventually pays the rent, later each month. I noticed last month that even though he paid the rent about the 16th, he had dated the check within the time due. Monday, this week I took a late notice over to the house, as I had called him 3 times and he hadn't returned my call. In recent months, his wife had painted the interior doors of the house a muted light green, which is a paint disaster so I wasn't exactly happy to see her at the door when I arrived. Instead of addressing the issue, she asks me when we are going to put in new carpet and screens on the windows. I asked her when she was going to pay the "damn" rent, at which time she got indignant about my language, had the kids call her husband and try to put him on the phone with me. He had plenty of time to talk to me after the calls I had made, which I had left civil messages and none returned.

In any case, I get the rent that night with a note written on it that this time I should put it in the bank before I lost it and another note that he paid it on the 6th(I had another tenant I will mention later and I was watching hard for his check and this guys and neither had appeared, plus he hadn't returned calls that I hadn't received his rent), that the only receipt he has is the check we cash (note the comment about the date, as the man is lying by what he puts on the check) and that I am too stupid to get it to the bank. My records show that he had been on time twice since December 2007 and the cell phone records I had verified in every case that I had made a call the day of the deposit or the day prior to the deposit that I hadn't received the rent. To say the least, I was steaming, but my mother has control over the properties. He would be moving with a bad reference after that antic.

My point isn't that this guy is a SOB, for he is really a pretty decent fellow who is under the gun. The real point is if he had to pay a late fee, his entire financial plan would collapse. He has progressively gotten later. I have another tenant who I am about to have to evict. He is a cable guy and he had 2 months where he made about 10% to 15% of normal. His wife left him twice, the first time taking the kids and this time she left them. He has been behind and I have let him stay because he could at least keep even with the month. Now he half a month behind plus this months rent, another one sliding down the slippery slope. His father has been helping him, but I haven't even seen the amount he says his father is giving him. Out at the plate.

Last year I rented a house to a couple and their high school age son. They were losing a home they had since the late 1980's. I don't know what got them in the trouble that they would lose a house that had to have equity in it, but their other son told me they had been hanging for a good part of his life. I would guess the house had no upkeep on it, being they were barely hanging on all those years. I am renting to another guy that is walking out of a house. This is DFW where there wasn't a bubble.

The other point is that I get a credit score, not the score we hear about, but a rating from a tenant check place when I rent a house. I haven't seen a qualifying score in over a year and I have rented to a couple of people that scored a zero. These are smaller homes, but not slum properties. This is what all the speculators think are going to take their speculations off their hands at a good profit or rent from them. We don't owe any money on these homes and this is DFW's prime upper income suburb, Plano. My mother thinks we should be buying more houses. I keep telling her, lets see how bad it gets first because every tenant is now a real crap shoot.

[John]

The news today is that the euro zone's economy fell an enormous
amount, much more than expected. Germany's economy shrank a massive
3.8%.

So what does Reuters say?

> Europe recession deepened in Q1, may be low point

> ...

> "Although we are nowhere near the peak in unemployment, we can
> safely assume that the first quarter was the worst in terms of
> the pace of decline," said Martin van Vliet, an economist at ING
> bank.

> "The latest ugly GDP figures should, however, mark the trough of
> the current 'Great Recession', said Alexander Koch, an economist
> at UniCredit bank. ...
> http://www.reuters.com/article/ousiv/id ... CZ20090515

This stuff never ceases to amaze.

Sincerely,

John

[freddyv]

I love this guy...

http://finance.yahoo.com/tech-ticker/ar ... -Attention

Howard Davidowitz, telling it like it is.

--Fred

[John]

From a web site reader:

> I am interested in your discussion regarding long term Historical
> PE ratios. I saw your analysis on S&P. Have you happened to do
> anything similar specific to utility companies (50+ years back)?

> I really appreciate any guidance you might have.

I have no information like this. If anyone else does, please post
it. Thanks.

Sincerely,

John

[StilesBC]

I wrote about consumers completely giving up this week:
http://futronomics.blogspot.com/2009/05 ... towel.html

The fundamentals of a balance sheet recession were eventually going to overwhelm the optimism that everything is over "because it was bad and therefore must get better." Some abysmal numbers out of Europe this week that I wanted to get to, but am in the process of moving back to Vancouver from Germany. There are catalysts abound for another shoe to drop:

- California
- Chrysler & GM bankrupcies
- The treatment bondholders are getting in the above
- Commercial Real Estate
- Equity dilutions
- Pensions
- Protectionism
- Pakistan
- Mexico

It's just a matter if people are in the mood to recognize these issues now or climb a wall of worry through the summer. But these issues are not just going to go away.

[freddyv]

I found this comment from Richard Russell very much to the point of what our government is doing wrong:

Russell Comment -- While the US is spending $trillions in an effort to thwart the primary bear trend, China is systematically buying up the world's resources from oil to farm land to rare-earth metals to gold

We are about to be passed by the commies!

My guess is that in about 10-20 years we will wake up, take a look around, pull our heads out of our asses and go back to work building real wealth once again. We're not done for but man are we in for a tough decade or two ahead.

More from RR's newlsetter today:

The comment below is from Bill Gary's great "Price Perceptions" advisory report (800 231 0477).

"The People's Central Bank of China warned this week that quantitative easing by the US and other nations risks global inflation and surging interest rates. Most economists viewed the warning as a sign China will continue to diversify its foreign reserves away from US treasuries. As indicated in our April 18 issue, China is buying industrial metals and investing in foreign raw material rights because they realize they can't continue buying US bonds.

Premier Wen Jiabao indicated last month at a Communist Party summit that the US was engaging in "stealth default" of its debts by driving down the dollar."

The next step in this crisis, I believe, is that it becomes "real" for most Americans; we begin to come up against our credit limits and fear sets in as we come to realize just how leveraged we are and just how long it's going to take to save our way out of it.

The last step, IMO, is just starting to show signs of being really recognized: National bankruptcy.

At some point we will realize that we can't pay off the $25 trillion that we owe (give them time, it WILL be $25 trillion or perhaps more) and that will probably be about the same time China steps away from the USD as their reserve currency and the rest of the world follows.

--Fred

[Samir]

Those ideas seem interesting in the long-term, but there are some more immediate problems that I think will cause the market to react very negatively. Chrysler and GM are both looking at bankruptcy. I don't think the markets have yet calculated these two events in. If i recall correctly the Lehman Brothers failure was accompanied with some radical downward movement for the markets. It will be hard for analysts to lie about this (unlike P/E, and the bogus Green Shoots). Interestingly enough I herd a man on CNBC (didn't catch the name) tell them that a forward looking P/E of 15 is too high.

[freddyv]

Those ideas seem interesting in the long-term, but there are some more immediate problems that I think will cause the market to react very negatively. Chrysler and GM are both looking at bankruptcy. I don't think the markets have yet calculated these two events in. If i recall correctly the Lehman Brothers failure was accompanied with some radical downward movement for the markets. It will be hard for analysts to lie about this (unlike P/E, and the bogus Green Shoots). Interestingly enough I herd a man on CNBC (didn't catch the name) tell them that a forward looking P/E of 15 is too high.

Perhaps, but I would say that "the market" is going through a much longer term correction than what most are used to, as Generational Dynamics suggests, and so even if we have priced in this, that or the other the new era of deleveraging and then a more modest lifestyle will take years and perhaps a decade or two to be priced in. That I am sure of; whether or not the GM or Chrysler bankruptcies are fully priced in are a more difficult bet, at least to me.

My concern now, however, is that the government has created a zombie economy that may keep the market from bottoming and then recovering in a reasonable amount of time. To me what the government is doing is very simple: they are moving the problems of today to tomorrow and to a certain extent that makes sense but they are going way overboard with the bailouts and stimulus. I am 50 and am beginning to wonder if I will be around for the recovery. Folks in Japan are still waiting.

--Fred

[aedens]

Just because many cannot, or are policy stricken plain evil or worse - stupid - they will not even admit it is the Summer of discontent mentioned by many here also and it is just blooming to the full reality for many marketers who will be swallowed whole very soon. We really noticed it in October 2007 and started preparing. The people in so called power "most" are so far behind it does not matter what they think anymore. In there status quo, and regal vanity they are watching prudent deflationist building a civilization and why do they care, since the election money is Corporate anyway and undisturbed to Washington. It is an illness now with them as I watch the lesser Stone head corporatist worry now in this hour. It is amazing as John and many who can think are subject to the Oh, your a doomer some time ago. These people are typical, and as truth is accepted later than sooner they will ask who will help me? They are buried alive in there selfish fantasy's. Whe are talking total group think wishful thinking now. There being catapulted out the doors and glassy eyed why me, or despondent now when coached. This society is the classic 80-20 rule and the 20 are watching the 80 get adulterated since they see true pragmatic people making decision to corporate survival predated by the state. Are we building plants in the states? Would you? or can you in this climate? I say no and maybe in 2 or 3 years of brutal reality thing will turn. Hope I am wrong.....

Homo Americanus (from New Latin) is a sarcastic and critical reference to a category of people with a specific mindset that were allegedly created by the governments’ moral hazard disease. Indifference to the law of contract (as expressed in the saying "They pretend it’s investing, and we pretend we are capitalist ), and lack of transparency to taxpayers and fulfillment of all contract law initiatives.
Indifference to truth and theft from the taxpayer, both for personal use and for profit.
A line from a popular song, "Everything belongs to Obama now, everything belongs to me" treasury and all common property as their own ponzi management for the new state organ. It was sometimes used ironically to refer to instances of grand left theft. The Law of Obamanites which make taking from the taxpayer legal.
Isolation from, created by the DHS restrictions on travel abroad and strict censorship of information in the media (as well as the abundance of propaganda).
The intent was to insulate the American people from sane influence of thinking for themselves to the historical context of the left certain bent of mind; instead, "toxic sausage will pave prosperity" Soviet officials called this fascination "Western idolatry" (идолопоклоничество перед Западом).
Passive acceptance or obedience of everything the government imposed on them.
Following the collapse of the Soviet Union, many social and economic problems in Russia were blamed on Homo Americanus’ inability to adapt to a market-economy based capitalist society and the Dead Letter denial syndrome.

[aedens]

Thank's for telling it straight up. If you can help any its worth the fight.
As a Consumer as stated we started sometime back. Given the reflexive nature
in Government in six month's they will notice what the hell happened?
Its not like the tools where not available. I enjoy your commentary very much
and thank you again for being candid.

I wrote about consumers completely giving up this week:
http://futronomics.blogspot.com/2009/05 ... towel.html

The fundamentals of a balance sheet recession were eventually going to overwhelm the optimism that everything is over "because it was bad and therefore must get better." Some abysmal numbers out of Europe this week that I wanted to get to, but am in the process of moving back to Vancouver from Germany. There are catalysts abound for another shoe to drop:

- California
- Chrysler & GM bankrupcies
- The treatment bondholders are getting in the above
- Commercial Real Estate
- Equity dilutions
- Pensions
- Protectionism
- Pakistan
- Mexico

It's just a matter if people are in the mood to recognize these issues now or climb a wall of worry through the summer. But these issues are not just going to go away.