economy

All posts tagged economy


When the victory din for Obama was ringing loudest, I must admit that I was caught up in the hope that a regime change was something more, that there was hope that this time. It would be an end to our past decades of policy sins. I should have known better.

Forget that Obama hires a Raytheon lobbyist Bill Lynn into the DOD (among other lobbyists) right after banning such action. Forget that former lobbyist Tim Geitner who now heads out treasury is a tax dodger. Forget the laughable half mil salary cap on fat cats, which only affects the top 25 employess (promote a few janitors) and ISN'T RETROACTIVE! Where's the accountability for the bailout money spent as CEO bonuses?

The hypocrisy of the left wing denouncing conservative tax cuts and ignoring democrat ones makes me want to just tell you to forget it all. But when I saw the mortgage relief plan, well I snapped back to reality. I hope you do too.

So pretend for a moment that throwing $275 billion at a trillion dollar hole was somehow enough. Here's the gist of the plan, with my comments in red:

  1. For 5 years, mortgage interest will be reduced by banks so that monthly payments are 38% or less of monthly income.
    So the tax deductible part is reduced, and even then for only 5 years. Right now it's a blessing to have any tax at all to deduct! Got Job?
  2. Treasury will help get this down further to 31%.
    …with our tax money. Just clarifying.
  3. Both banks and borrowers get paid for modifying their loan.
    We're paying these guys to do something they need to do anyways? Are the banks even trying to survive?
  4. Modified loans get bolstered insurance policies as an incentive.
    So that when fundamental real estate forces cause more foreclosures, the banks will get more protection for their assets. Aren't we supposed to be stemming those forces in the first place?

The best things for banks to do now (by my uneducated guess) is to modify as many loans as possible on the worst terms possible. This is a reckless win-win for the banks. Either get paid for modifying loans you had to anyways, or foreclose on modified loans if the asset price + insurance adds up to more than what the owner can short sale.

Really, the only solution right now is to define exactly how much capital banks need to survive, kill the real estate market to that level, and then give them the bailout money for that use only. Too bad that bailout money is made of caviar and yachts right now.

Long live change.

Yeah, it’s been a while since I’ve had a chance to post. And boy have there been so many things I’ve wanted to talk about, but now at the cusp of what should be a bright new year, I can’t bring myself to carol about all the devastation our economy is experiencing… it’s just too negative. While Xstine and I have consoled ourselves with the idea that our industry is recession proof, is it really? The official unemployment rate is 7.1% in Silicon Valley, above the national average, but if you used metrics from before the Clinton administration retooled CPI to their pleasure, national unemployment is over 16%.

But like I said, let’s stop talking about it. There will be plenty to decry next month, when the market loses faith in the mythical year-end bounce. Let’s talk fun things, like my new favorite site: www.mymomisafob.com It captures the charming, annoying irrational love of the asian mother, steeped in impromptu paranoias and Engrished superstitions.

Ignore the fact that the picture I posted comes from the now defunct Timesplitters developer Free Radical, who sadly along with Factor 5, Midway, EA, et al. are among the many with career casualties this last month. You know what’s fun? RoboKill is darn fun for a simple flash game! Reminds me of shareware classics like Raptor: Call of the Shadows and Zone 66, remember those goodies?

Also, I know this is a bit old, but I finally got to check out Wario Land: Shake It at the store, and it really leverages every bit of the Wii’s potential into a solid, novel platformer… and it has an awesome “trailer” so check this out!

Anyways, it’s tough mustering up much season’s spirit this year, but things are darkest before the light, right? And with so much dark coming, preparing to take advantage of the light is the best way to position ourselves for festive years to come.


People have forgotten how tough things used to be. This is true of both the today’s recession and Mega Man 9. The market is in near panic right now, if you go by the put option prices that have hit all time highs. Check out the ^VIX volatility index for an idea how that looks… you’re looking at a spike in FEAR.

But somehow I’m not fazed yet. People in this recession don’t really know how bad the coming depression will be. People in the coming depression won’t know how bad the Great Depression was. And those who lived during the Great Depression just vaguely remember how rough depressions before that had been. Short memories are so divinely human. We think politics today is more corrupt than before, or wars are more pandemic, or racism more intolerable.

Is that why we crave nostalgia? This idealized summary of the good of the past? Mega Man 9 faceplants me in a slab of nostalgia. What was it about the originals that made them stand the test of time and technology to be fun to this day?

I like to think Mega Man was the first game character in tribute to gastronome Brillat-Savarin, who famously said “you are what you eat”. Mega Man begins as weak as the player, and as he culls the weak theme-bots and usurps their collective powers into his own, he evolves at the player’s will. Mega Man was the ultimate predator.

And he was a man of character. His arsenal was fought for, not given. His name implied great size, but he is as dimmunitive as Alexander Pope, yet this mechanical everyman has every bit as much wrath. He’s a blank slate, a surrogate for all our platforming victories, yet a myth for our ignoble deaths to those goddamn spikes.

Boy, do I crave real men to lead us today. How can anyone who remembers the long shadows of men like Teddy Roosevelt, FDR, or Andrew Jackson, bear to vote in this coming election? How did the Republicans become the antithesis to every fiscal stance they claim? How did Democrats become raging hypocrites, hating the very people they propose to help? If video games have gotten too easy today, then life certainly ain’t churnin’ out winners.

“Satan is wiser now than before, and tempts by making rich instead of poor.”

WAR is truly everwhere. At home Xstine and I are havin’ a blast playing Warhammer Online: Age of Reckoning, and almost every itch we had from leaving WoW has been epicly scratched. And boy were we itchy because the end-game in WoW left some unhappy scabs.

Outside of our world of epic vritual battles, one has already been fought an lost on Wall Street. Some friends have asked for my perspective on the bail-out mess, and I want to use a WAR analogy. In WAR lore, the evolution and advancement of warriors comes from the endless combat between the legions of Order and the minions of Chaos. A great story and its great heroes can only be made with this precarious balance. Too much one way is complacency, too much the other way is anarchy.

You may think it’s far-fetched to compare a fantasy video game to financial crisis in this way, but there’s one thing to consider. In Jared Diamond’s Guns, Germs and Steel he recounts his finding that over the historic rise of civilizations, what built the greatest ones was a combination of geography and natural resources that promoted an optimal state of controlled competition. To have less was complacency, to have more was anarchy. Sound familiar?

Now look at the bail-outs. Chaos has lost, if you believe the anti-free-market crowd. Order has failed if you know better than to believe the Fed. The problem was that Order assisted Chaos, and vice versa. No one knew their roles. The Fed answers to the market now. The market believed the Fed would save them.

What I’m trying to say is that a healthy distrust between the private and the public was lost, Freddie and Fannie being prime examples. What we face now is an extreme reaction as the Fed and Paulson nationalize the market. Chaos has learned that losing the battle means being saved by Order. Where’s the impetus to fight?

Now, I give the Fed credit for not bailing out Lehman brothers, as they knew the books were probably so toxic nothing could be done. And F&F? Ok, sure, they were a GSE, blah blah. But bailing out AIG? An insurer? Forcing BoA to take on Merrill Lynch? And now hints at extending help to foreign banks? Unlimited Sec. of Treasury power? For those who think cash is safe, I’ll point out that the (maybe) $45 billion left in FDIC divided by the $100,000 insured per account is not a happy number. Plus each of these banks going under have tons of employees; Lehman alone has 26,000+. NY is depressing. I can’t even make a conhesive paragraph out of all of it.

And somehow Bernanke is in the back saying a recession is imminent if there is no bail-out. Hello, the recession has arrived, but the punishment for misdeeds has not. Will not? Well that depends on how many tax-payers realize it’s angry mob time.

Sept. 11 (Bloomberg) — U.S. Senate Banking Committee members urged Fannie Mae and Freddie Mac, the mortgage companies placed under federal control this week, to freeze foreclosures on loans in their portfolios for at least 90 days.

"This action would provide immediate relief to many homeowners and let the companies turn these non-performing loans into performing assets to minimize losses," Senators Charles Schumer, Robert Menendez and other panel Democrats said today in a letter to the companies and the Federal Housing Finance Agency, which is overseeing them under the government conservatorship. The companies also should ease their policies on modifying mortgages, the senators wrote.


I'll quote Lil' Jon on this one….. OKAAAAAAAAAAAAAAAAAAAAY!!!!!!!

If you listen to the anti-capitalists, they will tell you that the answer is “none, the market will fix the problem.” And then they’ll tell you that the market hasn’t fixed the problem, and that’s why Freddie Mac and Fannie Mae should be taken back into tight government control.

If you are an intelligent human being, you should understand that that line is a turd of bullshit so large you’d never stop counting the agendas embedded in it like corn in crap. Was that disgusting enough imagery for you? ‘Cuz that’s how you should be feeling right now.

What part of “backed by the government, yo” tattooed on F&F’s back sounds privatized? You see, it’s not just how you run the company, it’s not just what investors are rubbing your balls in cash, it’s what your contingency plan is. And when that plan is “the Treasury will bail us out” then that is NOT free market. Unless you think it has no effect on the decisions/mistakes they make.

F&F are GSEs. This means they were created by the government, for the government, regardless of how “privately” they are run. The Fed gives them cheap loans that they securitize for a profit and then pass on to borrowers, who have special faith in that relationship.

So now look at the Fed’s latest bail-out plan:

  • F&F CEO removed… GOOD, though I’m sure they get some nice parachutes…
  • F&F Conservatorship… RIGHT, because the goverment’s had such a good track record before…
  • Buyer of the Last Resort… WHAT? So the Fed keeps F&F stock afloat with $200 billion of our money? BTW there is only the “last resort” left, ding dong.
  • 10% per annum portfolio reduction… WTF?! Who the hell? Wha…? How are you going to achieve this, how is this relevant, and what are you saying when you tell a company to reduce its business as you buy up its stock with our money?

All that does is keep or lower existing mortgage rates. Solving the credit crisis is not going to address the lack of DEMAND for things to DO with that credit. Like I’m really going to buy a house now that lending rates fell 1% when the nation is facing mass unemployment and inflation. Like I’d really solve the latter by doing the former anyways.

You’d think the Republicans would be against ham-handed intervention. Too bad they’ve confused F&F with Terry Schiavo.

Xstine and I finally went to watch the new Batman movie The Dark Knight, and Christopher Nolan's direction (and writing) continues to amaze me. It's not often that I experience a drama so intense that my chest is left seized in bathyspheric shock, even with a mostly trivial cast.

With one huge exception… Heath Ledger's dying silver screen gift of the most insane Joker yet. His character earns the spot for my third all-time favorite movie villain, the first being Bill the Butcher, and the second being Oldman's corrupt nothing-like-Gordon cop Stansfield. Ledger was chaos incarnate, and reached a place in himself he couldn't return from.

I absolutely loved the rhetorical sarcasm of his finest line "why – so – SERIOUS?" that he delivered with a maniacal slurp of his mutilated jowls. Today, catching up on old news, I found myself repeating and cackling that line over and over as I read this article on the Senate's "landmark" housing bill.

Here's an amateur's opinion, for what it's worth:

  • Establish a stronger regulator for the GSEs.
    And who will that be? Government? Private? Where's the fundamental change?
  • Permanently increase "conforming loan" limits.
    This is good news for me an Xstine, but honestly, I've never understood conforming loans. If the point of the conforming loan is to keep borrowing at a less risky level (less than jumbo), and the amount is determined by median house price across the country, why apply the same loan limit to everyone? Why isn't it by the local median price around the house that the borrower wants to buy?

    You get a conforming loan limit that was too small for us middle-income folks in overpriced California Bay Area, and way too much for low-income people in downtrodden areas. Is it any surprise that those low-income people who couldn't qualify for conforming-loans then went over to non-conforming sub-primes?

    Even worse, those just just failed to get conforming loans went over in droves to Alt-A loans. I'll let Mr. Mortgage explain what those are and why you should continue to fear the housing market.

  • The FHA maximum loan limits for high-cost areas would also increase to $625,500.
    Ok a blanket increase in limits for whatever "high-cost areas" means. I've got to ask how this is paid for, and if this isn't just a way to keep the masses of potential educated middle-class from just defaulting? It's like increasing the credit limit of someone who already can't pay the card off.
  • Create home-buyer credit.
    Up to $7,500 tax rebate for first time home-buyers? Good start, who's going to pay for this? Oh wait a minutes…
  • The refund, however, serves more as an interest-free loan, since it would have to be paid back over 15 years in equal installments.
    …ah we pay for it. Very very sneaky. I see what you did there.
  • Bar down-payment assistance for FHA loans.
    No comment, don't know the full ramifacations of this. I don't see the upside of stopping sellers from helping buyers, is this to stop speculation?
  • The bill would also increase to 3.5% from 3% the down payment requirement for borrowers getting FHA loans.
    Not great, but not that bad either. Not a monumental change.
  • Create an affordable housing trust fund.
    Hahaha… they want Freddie and Fannie's fees to pay for this? Freddie and Fannie who were using $83 billion in cash to juggle $1.15 trillion in debt at 60-to-1 leverage? It's like asking a broke junkie to put something into his IRAs before someone with a tire iron comes to get his due.
  • Give grants to states to buy foreclosed properties. The bill would grant $4 billion to states to buy up and rehabilitate foreclosed properties.
    More money we don't have going to ever more fiscally endangered states to buy properties that you really don't want to encourage people to sell.

So, I'll ask again… WHY – SO – SERIOUS?! :jester:

The last two weeks, Xstine and I made some house-hunting trips. At the moment, I believe that the end of 2008 will be a prime time to buy a house in the Bay Area if you plan on staying at least another 5 years. In many counties, prices have fallen over 25% with supply volume soaring. I'd like to catch a deal before 2009 when non-conforming loan limits drop. This coming winter, a cyclically low season, will be the perfect time to do so.

My God it's a disaster out there. We went out to Brentwood, the edge of flat earth, and found massive tracts of abandoned new construction. It looked like a city that tried to cash in on rising property taxes, but with no facilities to keep anyone there. Nothing but endless residentials. A surburban wasteland.

It's absolutely hilarious to me that angry forum posters on Zillow.com are threatening them with legal action, claiming the site's price estimate algorithm is destroying their property values. Aside from some isolated errors, I'd say their house values are being overestimated, and if they want to sue for "defamation" or whatever, they need to show proof that the site cost them damages. Which means you sell for significantly more than the estimate. Which none of them are going to be able to show because prices continue to plummet.

We decided we like the beautiful Concord/Walnut Creek area, which has had excellent price drops and lies in mostly convenient, comfortable location. A local Fry's Electronics and Rasputin's Music didn't hurt either. With this spring taking such big hits (with the exception of February), I am quite excited that such a great deal has come along in our lifetime. If this sounds predatory, so be it. Americans need to learn to spend only what they can afford.

No doubt you’ve heard the news that Henry Paulson wants to tighten standards on banks now that the country is falling apart. Sit back, ‘cuz I got a heck of a story for you:

While I am completely sympathetic to how much people hate our current President and his disastrously arrogant administration, it infuriates me to hear people claim Bush brought about this recession. We’ve been in a recession since Nixon, we just didn’t know it yet. The worst is how people believe that Clinton balanced the budget, and that Bush subsequently ruined it. How slick is Willy. I think I need to explain exactly why this is an outright urban legend.

The whole charade depends on the semantics of accounting. We actually have two different debts that add up to become the National Debt. They are Public Debt and Intergovermental Debt. The first is what the people owe, the second is what the government owes itself (that the people will repay). The government owes itself? Right, the government, much like our brains, is actually several semi-independent entities that interact to govern, and therefore can take loans from each other as if they were separate.

What Clinton did was borrow from the government (Intergovernmental Debt) to pay off Public Debt. If you check the U.S. Treasury records, National Debt continued to increase throughout the Clinton administration, albeit slower than the previous presidencies. How in the world can increasing National Debt be considered a budget surplus? …

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I haven't time to comment much on the economy recently, thanks to Super Smash Bros. Brawl and… oh who am I kidding… I didn't even do a portfolio postmortem for last year. We are clearly in a recession right now, something I predicted in 2005 after much research, and my wishes go out to everyone in the American workforce… except those in the game industry! We don't need it! We are recession-proof! Hah!

Well, predicted sounds arrogant… I didn't predict a recession, I just tried to point out the mountain of evidence that it would happen. It's no surprise to me that games are recession-proof, though. Entertainment in general follows different fundamentals than other industries. Games often get compared to film, but there are two key differences that have made us an industry that has begun to intimidate Hollywood in size. …

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