Only the principle builds equity. The rest is all cost.
Wednesday, March 21, 2012
Cost of homeownership - 1
Principle + Interest + HOA + Property Taxes + Insurance + Maintenance + Extras cost of Utilities + Extra cost of Commuting to work + Lost Opportunities for Mobility + Extra purchases just to fill it up with junk
Homeowners
Why do they address them as "Homeowners", when, for all practical purposes, they are mortgagors?
Marketing.
Wednesday, February 15, 2012
Foreclosure rate ticks up again
After the $26 billion robosigning settlement, the foreclosure rate is ticking up, as expected. Why should it not result in home prices sliding down again? A realtor I know said "There is some chance it may result in softening of home prices". Really? I thought markets were more efficient to price that in.
So here it is. The changes in the rate of foreclosure is a somewhat leading indicator of the changes in home price index.
And here's the data and the correlation is -0.75, implying a highly negative correlation.
The further price correction starts in 3...2...1...
So here it is. The changes in the rate of foreclosure is a somewhat leading indicator of the changes in home price index.
And here's the data and the correlation is -0.75, implying a highly negative correlation.
The further price correction starts in 3...2...1...
Thursday, August 06, 2009
Journalists freed from North Korea
Free at last! But at what cost?
Did the two reporters did not know what they were doing when they went illegally into North Korea to report for Current TV? Whatever happened to personal responsibility?
Did not Al Gore take a calculated risk in sending his reporters to North Korea? If they had succeeded in taking footage of reclusive North Korea, Gore's channel would have made a ton of money. Instead, they got caught and got imprisoned. Isn't that a "business loss"? If banks take risks and lose, we unload heaps of scorn on them. But when another business (Current TV/Al Gore) takes risk and loses, we sympathize!
Al Gore benefited because he can now boast that he can get his reporters to undertake risky ventures because he has the ability to get them freed if they run into hot waters.
President Obama was benefited because he now has one less international issue to face.
Even North Korean leadership benefited - Kim Jong Il was able to get much needed international attention and recognition for which he so desperately craves, and was able to demonstrate the "magnanimity" of North Korea's "Dear Leader" by the Presidential Pardon.
But what about the US? It lost face in the international community; it had to climb down from its strict rhetoric of "there will be consequences". Far from punishing a small, rogue state, the mighty US sent its former President to secure a "pardon" for its journalists. While it has exposed the US to ridicule, it also has reduced the effectiveness of the Office of the Secretary of State. Predictably, the Secretary of State Hillary Clinton had to go to Africa and not being around when the series of events unfolded.
If President Clinton went to North Korea in his private capacity, then it was imperative on the White House to declare that the Administration is not involved in negotiation, other than ensuring the safely of the former President. Since that did not happen, it gives a more official flavor to the entire episode.
And what about the people of North Korea? If Kim Jong Il is a dictator who has caused countless sufferings and millions of deaths in North Korea, by giving legitimacy, recognition and international attention to his regime, propping it up (and thereby helping him to stick to power longer), President Clinton has done a huge disservice to the people of North Korea and history will judge him in that context.
Oh well, nearly everyone benefited except the US. But then who was representing the US interests anyway?
Did the two reporters did not know what they were doing when they went illegally into North Korea to report for Current TV? Whatever happened to personal responsibility?
Did not Al Gore take a calculated risk in sending his reporters to North Korea? If they had succeeded in taking footage of reclusive North Korea, Gore's channel would have made a ton of money. Instead, they got caught and got imprisoned. Isn't that a "business loss"? If banks take risks and lose, we unload heaps of scorn on them. But when another business (Current TV/Al Gore) takes risk and loses, we sympathize!
Al Gore benefited because he can now boast that he can get his reporters to undertake risky ventures because he has the ability to get them freed if they run into hot waters.
President Obama was benefited because he now has one less international issue to face.
Even North Korean leadership benefited - Kim Jong Il was able to get much needed international attention and recognition for which he so desperately craves, and was able to demonstrate the "magnanimity" of North Korea's "Dear Leader" by the Presidential Pardon.
But what about the US? It lost face in the international community; it had to climb down from its strict rhetoric of "there will be consequences". Far from punishing a small, rogue state, the mighty US sent its former President to secure a "pardon" for its journalists. While it has exposed the US to ridicule, it also has reduced the effectiveness of the Office of the Secretary of State. Predictably, the Secretary of State Hillary Clinton had to go to Africa and not being around when the series of events unfolded.
If President Clinton went to North Korea in his private capacity, then it was imperative on the White House to declare that the Administration is not involved in negotiation, other than ensuring the safely of the former President. Since that did not happen, it gives a more official flavor to the entire episode.
And what about the people of North Korea? If Kim Jong Il is a dictator who has caused countless sufferings and millions of deaths in North Korea, by giving legitimacy, recognition and international attention to his regime, propping it up (and thereby helping him to stick to power longer), President Clinton has done a huge disservice to the people of North Korea and history will judge him in that context.
Oh well, nearly everyone benefited except the US. But then who was representing the US interests anyway?
Tuesday, August 04, 2009
Cash 4 Clunkers
The debate over additional funding for Cash for Clunkers (C4C as it is sometimes called) would be amusing if it were not so tragic. Amusing because Republicans oppose it but can't articulate why. Tragic because Democrats think it is the greatest thing since sliced bread and it is not.
It is easy to understand that no one will trade his vehicle for a $4500 credit if the value of the car is more than $4500. Therefore, this will impact cars with a market value of less than $4500.
"Unintended consequences" of the C4C program that the Administration did not see (or refuses to see)
1. It will take many low priced used cars off the market and put them into the dumpsters. This will reduce the supply of old, running, for-sale cars in the market. By the law of supply and demand, this reduction in supply will increase the price of old cars, making them out of reach of poor people.
Indirectly therefore, the very poor, who're in the market for cheap cars (those costing less than $4500) will be paying for those who can pay additional thousands to buy a new car.
2. It is being touted that the model sold the most is the Ford Focus, selling for nearly $15000. That means people are still putting in nearly $10500 from their own pocket to buy the new cars. Since this is significant amount of money, most people who will spend this kind of money are the ones who anyway intended to buy the cars in the next few months. So there's a likelihood of sales dropping sharply once the program is over, because all this program will do is to move the purchase dates forward, not genuinely increase demand.
3. People buying the new cars may be buying them for business (as I'll explain) or out of irrational exuberance. In either case, a lot of these newly bought cars will be out in the market for private sale. Consider this:
I can trade-in a $1000 clunker and put in $10500 to buy a $15000 Ford Focus. My total cost is $11500. I can now immediately put this Ford Focus for sale in the market at nearly $14000 - making a cool $2500 profit.
This will increase the supply of (nearly) brand new cars in the market from private sellers, and since a brand new car from the company and from a private seller are nearly perfect substitutes, it will reduce the sales of the cars from the company.
4. It will create a black market for people who will buy a clunker for x (where x < 4500) and buy a new car using the $4500 rebate, and make ($4500 - x) in the process. There is a provision in the CARS law to prevent this: "The trade in vehicle must be continuously insured and registered to the same owner for the full year preceding the trade-in". But nothing still prevents the dealers (or anyone else) from colluding with people who're just trying to sell their old car to ask them to take the 4500 credit, sell the brand new car to the dealer back immediately and split the profits.
Economics and politics don't mix!!
It is easy to understand that no one will trade his vehicle for a $4500 credit if the value of the car is more than $4500. Therefore, this will impact cars with a market value of less than $4500.
"Unintended consequences" of the C4C program that the Administration did not see (or refuses to see)
1. It will take many low priced used cars off the market and put them into the dumpsters. This will reduce the supply of old, running, for-sale cars in the market. By the law of supply and demand, this reduction in supply will increase the price of old cars, making them out of reach of poor people.
Indirectly therefore, the very poor, who're in the market for cheap cars (those costing less than $4500) will be paying for those who can pay additional thousands to buy a new car.
2. It is being touted that the model sold the most is the Ford Focus, selling for nearly $15000. That means people are still putting in nearly $10500 from their own pocket to buy the new cars. Since this is significant amount of money, most people who will spend this kind of money are the ones who anyway intended to buy the cars in the next few months. So there's a likelihood of sales dropping sharply once the program is over, because all this program will do is to move the purchase dates forward, not genuinely increase demand.
3. People buying the new cars may be buying them for business (as I'll explain) or out of irrational exuberance. In either case, a lot of these newly bought cars will be out in the market for private sale. Consider this:
I can trade-in a $1000 clunker and put in $10500 to buy a $15000 Ford Focus. My total cost is $11500. I can now immediately put this Ford Focus for sale in the market at nearly $14000 - making a cool $2500 profit.
This will increase the supply of (nearly) brand new cars in the market from private sellers, and since a brand new car from the company and from a private seller are nearly perfect substitutes, it will reduce the sales of the cars from the company.
4. It will create a black market for people who will buy a clunker for x (where x < 4500) and buy a new car using the $4500 rebate, and make ($4500 - x) in the process. There is a provision in the CARS law to prevent this: "The trade in vehicle must be continuously insured and registered to the same owner for the full year preceding the trade-in". But nothing still prevents the dealers (or anyone else) from colluding with people who're just trying to sell their old car to ask them to take the 4500 credit, sell the brand new car to the dealer back immediately and split the profits.
Economics and politics don't mix!!
Saturday, July 12, 2008
What explains the Obama phenomenon?
The polls still show Obama with a significant lead over McCain.
That, despite his long and close associations with Rezkos, Wrights, and Ayres. That, despite the flip flops on NAFTA, public financing, Iraq and surveillance. That despite his comments on guns and faith.
Come to think of it, Obama has no resume other than a speech he made in 2002 (he never voted according to his convictions on Iraq war). And he really has nothing to offer other than hope.
What hope?
That he will get jobs back to the US. That he will improve the schools and the hospitals and infrastructure. That the US will usher into a green energy revolution.
And how will he do that?
Here's where you hear the deafening silence. There are no plans. Just hopes. Of course there's this plan to tax the oil companies because of their record profits. And to tax the wealthy.
While I truly believe that just like you can't drill your way out of the energy crisis, you can't tax your way out of this economic crisis, I will focus on the other important question - what makes Obama so appealing to the voters?
Firstly, people are very outward-looking. They get easily swayed by looks and appearance. Obama is a fairly decent looking guy. He dresses well. And yeah, he speaks well (you could contrast him with Hillary who used to stretch her sentences like "And we will go all the wayyyyyyyy", and McCain who, my friends, speaks like a sad man).
Secondly Obama knows that blaming the current administration always works because people are generally fed up or just bored with the current administration. It just helps more when you have an economic, housing and energy crisis at hand. And if you blame them long enough, people actually start believing that.
Thirdly, Obama knows that if you promise people the good life (with great schools, hospitals and infrastructure, and jobs and high tech jobs in green energy, and cheap energy etc) they will like you without questioning. (They don't trust the Nigerian emails where they are promised a share of millions of dollars if they could claim the money in a Nigerian bank, but they will gladly trust a politician without question).
It just helps that Obama is 46 and McCain is turning 72. The ageism is on his side.
Obama has very carefully cultivated a rock-star image, playing basketball and pool for photo ops and playing rock music in his meetings. He knows that the American youth can be easily impressed with these symbols of Americana, and since the young tend to earn less, the promise of taxing "them" just impresses them more.
He speaks nice to each community. He talks about going easy and diplomatic with Iran, yet talks about protecting Jerusalem to Jews. He talks about nuclear energy to everyone but no Yucca Mountain in Nevadans.
Overall, Obama comes across as a very shrewd politician who plays his cards extremely well. Whatever might be Obama's negatives, you can't deny that he is one of the most clever and calculative politicians of recent times.
And at least that is a good thing.
That, despite his long and close associations with Rezkos, Wrights, and Ayres. That, despite the flip flops on NAFTA, public financing, Iraq and surveillance. That despite his comments on guns and faith.
Come to think of it, Obama has no resume other than a speech he made in 2002 (he never voted according to his convictions on Iraq war). And he really has nothing to offer other than hope.
What hope?
That he will get jobs back to the US. That he will improve the schools and the hospitals and infrastructure. That the US will usher into a green energy revolution.
And how will he do that?
Here's where you hear the deafening silence. There are no plans. Just hopes. Of course there's this plan to tax the oil companies because of their record profits. And to tax the wealthy.
While I truly believe that just like you can't drill your way out of the energy crisis, you can't tax your way out of this economic crisis, I will focus on the other important question - what makes Obama so appealing to the voters?
Firstly, people are very outward-looking. They get easily swayed by looks and appearance. Obama is a fairly decent looking guy. He dresses well. And yeah, he speaks well (you could contrast him with Hillary who used to stretch her sentences like "And we will go all the wayyyyyyyy", and McCain who, my friends, speaks like a sad man).
Secondly Obama knows that blaming the current administration always works because people are generally fed up or just bored with the current administration. It just helps more when you have an economic, housing and energy crisis at hand. And if you blame them long enough, people actually start believing that.
Thirdly, Obama knows that if you promise people the good life (with great schools, hospitals and infrastructure, and jobs and high tech jobs in green energy, and cheap energy etc) they will like you without questioning. (They don't trust the Nigerian emails where they are promised a share of millions of dollars if they could claim the money in a Nigerian bank, but they will gladly trust a politician without question).
It just helps that Obama is 46 and McCain is turning 72. The ageism is on his side.
Obama has very carefully cultivated a rock-star image, playing basketball and pool for photo ops and playing rock music in his meetings. He knows that the American youth can be easily impressed with these symbols of Americana, and since the young tend to earn less, the promise of taxing "them" just impresses them more.
He speaks nice to each community. He talks about going easy and diplomatic with Iran, yet talks about protecting Jerusalem to Jews. He talks about nuclear energy to everyone but no Yucca Mountain in Nevadans.
Overall, Obama comes across as a very shrewd politician who plays his cards extremely well. Whatever might be Obama's negatives, you can't deny that he is one of the most clever and calculative politicians of recent times.
And at least that is a good thing.
Friday, July 11, 2008
The collapse of Indymac Bank : Bad Omen?
Today evening the FDIC took over the beleaguered Los Angeles, California based Indymac Bank.
The rumors had been circulating for over 6 months - it was a disaster waiting to happen. But the final straw came when Chuck Schumer, D-NY went public with his comments on the bank's liquidity crisis and its ability to survive the housing crisis. Over $1.3b was withdrawn from the bank in the last few days. Indymac tried to offset this by increasing its interest rate on deposits to 4.55%, but apparently it just wasn't enough.
Schumer should be answerable for his irresponsible act of taking his comments public.
FDIC says over this weekend, people can use ATM to withdraw their money but can't use telephone banking or online banking. Ridiculous!! It is discriminatory against people not local to Los Angeles area (or where ever Indymac bank branches don't exist).
As I write this, the indymacbank.com website is down.
Most of the customers with deposits in the bank are safe because it is FDIC insured for deposits up to $100,000. Overall, 96% of the deposits in the bank are FDIC insured. The bigger problem is going to be more of the impact on the psyche this event is going to happen.
What does it mean for the overall economy? Monday would be another bloodbath in the stock market. Secondly, the world's faith in the US economy will take a beating, and as the world's investors move to withdraw their investments in the US dollar, the value of the US Dollar would fall. This in turn will increase the price of oil. Gas will become more expensive, and inflation will increase. Overall, it will hurt the American people.
Let us now keep the crystal ball away and keep our fingers crossed. Lights, camera, action ...
The rumors had been circulating for over 6 months - it was a disaster waiting to happen. But the final straw came when Chuck Schumer, D-NY went public with his comments on the bank's liquidity crisis and its ability to survive the housing crisis. Over $1.3b was withdrawn from the bank in the last few days. Indymac tried to offset this by increasing its interest rate on deposits to 4.55%, but apparently it just wasn't enough.
Schumer should be answerable for his irresponsible act of taking his comments public.
FDIC says over this weekend, people can use ATM to withdraw their money but can't use telephone banking or online banking. Ridiculous!! It is discriminatory against people not local to Los Angeles area (or where ever Indymac bank branches don't exist).
As I write this, the indymacbank.com website is down.
Most of the customers with deposits in the bank are safe because it is FDIC insured for deposits up to $100,000. Overall, 96% of the deposits in the bank are FDIC insured. The bigger problem is going to be more of the impact on the psyche this event is going to happen.
What does it mean for the overall economy? Monday would be another bloodbath in the stock market. Secondly, the world's faith in the US economy will take a beating, and as the world's investors move to withdraw their investments in the US dollar, the value of the US Dollar would fall. This in turn will increase the price of oil. Gas will become more expensive, and inflation will increase. Overall, it will hurt the American people.
Let us now keep the crystal ball away and keep our fingers crossed. Lights, camera, action ...
Thursday, July 10, 2008
A small (and free) hosting solution !!
Recently I heard in a forum about how some people want to be able to have their own small private website without paying for it.
OK, my take on this is - don't do it. Its generally not worth it.
If you really want to go ahead and do it, you can try what I did as a proof of concept.
1. I registered with dyndns.org. I created (say) abcd.dyndns.org.
2. I went to my router's configuration page. My router is Netgear MR814v2, and I have a link for Dynamic DNS configuration. If you have a different router, see if you have Dynamic DNS confguration. I provided DynDNS user name and password (from #1) in my router's configuration, and specified the port (say) 1234 to be used.
3. Set up Port Forwarding on my router for port 1234 for the computer (say) 192.168.0.7 in my network that will host my HTTP application(s).
4. I ran the Apache HTTP Server on my computer (192.168.0.7), on port 1234.
5. Opened the Windows firewall for Apache application.
6. Went to my browser and typed in http://abcd.dyndns.org:1234/. It works !!
The good thing is that you're running your HTTP traffic over port 1234 instead of 80. So no one will notice it immediately, though someone can simply run a port scan on abcd.dyndns.org to see that you have port 1234 open.
Do share your experiences if you try this.
OK, my take on this is - don't do it. Its generally not worth it.
- Firstly, hosting is ultra cheap now. I have a domain (www.stockeconomics.com) and it costs me ~$9/yr. The hosting used to cost me like $4 a month (when I was hosting it - I am too lazy to do anything, so not hosting now). Overall cost was like $4.75/month. Ultra cheap by all standards. Now I am not advertising for the provider I used so I'd not take names.
- Secondly, and the bigger problem is security. If you have your home PC running your website, I would never be sure if you've secured it enough that no one can break into your system and steal your information. In running an HTTP or a FTP server on your PC, you're inviting anyone on the internet to be able to connect to your PC (albeit on port 80 or 21 respectively), but depending on your application and security it provides, someone will some day manage to break in.
- Most service providers' terms of service specifically disallows you from doing this. They will ask you to buy static IPs or business class service from them. They monitor port 80 or 8080 for activity. If you're running only a few MBs a day, you'd probably get away with it without noticing, but if you become greedy, they will notice and shut you down. Of course you can find ways around that too - run your HTTP service on a different port, or tunnel it through a VPN. I will discuss the second part sometime later.
If you really want to go ahead and do it, you can try what I did as a proof of concept.
1. I registered with dyndns.org. I created (say) abcd.dyndns.org.
2. I went to my router's configuration page. My router is Netgear MR814v2, and I have a link for Dynamic DNS configuration. If you have a different router, see if you have Dynamic DNS confguration. I provided DynDNS user name and password (from #1) in my router's configuration, and specified the port (say) 1234 to be used.
3. Set up Port Forwarding on my router for port 1234 for the computer (say) 192.168.0.7 in my network that will host my HTTP application(s).
4. I ran the Apache HTTP Server on my computer (192.168.0.7), on port 1234.
5. Opened the Windows firewall for Apache application.
6. Went to my browser and typed in http://abcd.dyndns.org:1234/. It works !!
The good thing is that you're running your HTTP traffic over port 1234 instead of 80. So no one will notice it immediately, though someone can simply run a port scan on abcd.dyndns.org to see that you have port 1234 open.
Do share your experiences if you try this.
Subscribe to:
Posts (Atom)