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Key points:

  • Community Reinvestment Act of 1977 created during Carter Administration.
  • Under the Clinton Administration, the Democrat Congress poured fire on it by enacting the Financial Services Modernization Act of 1999.
  • This created the environment for predatory lending by Wall Street and was guaranteed by Fannie and Freddie.
  • Banks were sued if they did not make loans to low-income, minority consumers.
  • John McCain warned Congress about these problems (So did Ron Paul).
  • Congress did not listen.
  • Media did not report.
  • Why would they? Home prices were skyrocketing because of the flood of buyers (re: demand) into market compared to the limited supply of homes.
  • Low-income consumers begain to default on their loans they could not afford.
  • Banks began to foreclose.
  • Housing prices began to tank. The Market began to get nervous.
  • Congress did NOTHING.
  • A veritable snowball of foreclosures continued. Housing prices bottomed out.
  • Fannie/Freddie and Wall Street fat cats jumped ship with “golden parachutes” (one as much as $25 million) because of “accounting inaccuracies.”
  • Henry Paulson firmly plucks a number out of the air (or some other orafice) and tells Congress it will cost $700 Billion to fix this mess.
  • The House does not pass the “Bailout Bill.”
  • The Market dives 777 points.
  • The Senate, ignoring the Constitution, takes a tabled bill about mental health and adds approximately $700 Billion to it with some provisions to bailout the economy. It passes.
  • The House, which narrowly defeated the bill just four days earlier, decides it is a better idea to pass the aformentioned un-Constitutional Bill sent from the Senate, with an additional $110 Billion of bacon attached. (Apparently in the current economic climate of thousands of foreclosures, repossessions, lay-offs and unenployment, not to mention and expensive two-pronged war in the Middle East, it is way more palatable to foist over $810 Billion on the taxpayers of the US and not just $700 Billion). Good idea.
  • With the Bush Administration, Treasury Secretary, Chairman of the Federal Reserve, Democratic Leadership, Republican Leadership and the Mainstream Media (MSM) telling us we “need” this bailout bill, or we will be living in a recession/depression until the next ice age, the Dow drops another 157 points on the great news!
  • The President signs the bill into Law.
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I have recently (twice in the last month) played “Settlers of Catan” (and wiki). It is an amazingly-fun game!

Quickly, it is a role-playing game that is a mix of “Risk” “Monopoly” and “The Game of Life.”

Strategy, negotiation, resource allocation, intrigue…it has it all!

It can take as long as Risk and Monopoly (I guess), but it hasn’t in my experience. One cool aspect of the game is that the board is unique each time it is played!

I have never played one of the “Sim” games, but I imagine it is a board-game version of that genre.

Check it out!

(BTW: for alternate or shorter versions of Monopoly, check out Seth’s page here.)

Another lo-fi game we like to play with our children is called “Pass the Pigs.” It is like playing craps with swine! It forces them to do addition quickly in their heads, and it is buckets ‘o fun.

Game on!

Freakonomics blog reports on the increasing cost of metals in construction and their impact on society at large.

This has really been a problem for the last two years or so

Think of it this way, steel is a major component in the following materials/products:

  • Concrete reinforcement.
  • Structural steel (hot-rolled shapes).
  • Metal stud framing (cold-rolled shapes); metal studs are used primarily in commercial construction whereas wood studs are used primarily on residential construction.
  • HVAC ductwork and piping.
  • Plumbing piping (schedule 40 anyone?)
  • Electrical conduit.
  • Fasteners (an architect’s fancy name for nails, screws, bolts, etc.)
  • Not to mention all of the finished products that include steel.

Copper is a major component in the following materials/products:

  • Plumbing piping (hot/cold water).
  • Electrical conductors (an architect’s fancy name for wire).
  • Some flashing and roofing.

Aluminum is a major component in the following materials/products:

  • Architectural decorative metalwork.
  • Most flashing and some roofing.
  • Commercial-quality (Architectural) windows, doors and storefronts.

I haven’t mentioned petroleum products:

  • Asphalt.
  • Transportation of all building materials.
  • Plastics (including electrical wire insulation).
  • Extraction, refinement and fabrication of most products.

So, in the last couple of years, you mix an increased demand from China and India for these materials as these nations develop their infrastructure, as well as an OPEC-created false short supply of oil and petroleum products and you have the environment for a mess in construction costs in America (as well as other locations).

I and my clients have felt the sting of this for at least two years.

What would have been the original ‘butterfly effect‘ that caused all of this?

Inspired by JLP of AllFinancialMatters (and the recent purchase of a large appreciable asset) I am interested in consistent (albeit theoretical) home appreciation valuation.

No, I do not mean how much I like, enjoy, or praise my home–although I do, very much like our new home. We have been in it for seven several months now (2/2006) and in an effort to conservatively track home appreciation (because of the New Worth issue) I have gone about it this way:

I will appreciate the home 1/12 of 1% (of the value = recent purchase price) per month.

I feel this is conservative because it assumes that the home will appreciate at only 1% per year, and I have heard that the national average is more like 3% (just throwing this out). Being that this is theoretical appreciation, meaning I won’t know or realize the gain until it is sold (really, isn’t even a appraisal theoretical?).

My general accounting philosophy is to estimate conservatively on cash in-flow and [a restrained] liberally (wadda you expect, I am conservative in every other way) on cash out-flows.

This way, if I make a mistake, I usually make the mistake in my favor, not “the other guy’s.”

Does this sound plausible? A good idea?

a.k.a.: What your real estate agent won’t (or can’t) tell you

In a previous post, I observed an interesting business practice: a liquor store open at 7:15 am.
After meditating on this madness, as well as other observations, I figured I would codify them for your here. The following are my observations about real estate. I am not a licensed broker or agent. I am not even “good” at it; I have owned two properties (not at the same time) and lived in one my whole life. Take it for what it is worth: the musings of a fool. These are mostly indicators of a not-so-good neighborhood, and therefore a not-so-good property valuation; I won’t be discussing quality of school systems or neighborhood watch programs: these are obvious and what you will learn from your agent.

Here how this works: take the value of the property in question the perform the following calculations (it is kinda like a game, you know):

Foolarch’s Law of Real Estate [de]Valuation: Home values decrease as marginal businesses increase . Read the rest of this entry »

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