Nationalization  

We can all agree that the United States Treasury has chosen to inject money through the banks through the purchase of preferred shares.  When TARP (Troubled Asset Relief Program) was first conceived, the initial intention was the buy the mortgage backed assets from the banks, which would remove the "toxic assets" from their balance sheets and recapitalize the banks.  This method would have injected more liquidity and given the banks a clean slate but would transfer the liability of the declining value mortgage backed asset to the government and therefore the tax payer. However, the Treasury Department has now chosen the inject liquidity through the purchase of preferred shares.  

I have heard the opinion that this is nationalizing the bank system.  Wikipedia defines “nationalization” is the act of taking an industry or assets into the public ownership of a national government.    Even though the government does theoretically own a piece of the bank, it does not have any voting rights. TARP purchase of the preferred shares of banks is quite different then the nationalization of Venezuela's and Bolivia's oil and gas which the government took full control of the industry where the governments decides who to trade with and the prices to sell their commodities. The United States Treasury has chosen to inject liquidity to the system though the purchase of preferred stock which usually carry no voting rights but may carry superior priority over common stock in the payment of dividends and upon liquidation.  The decisions to run the companies still is the responsibility with the their respective boards and executives not the government of the United States.  The government decision the capitalize the companies through preferred shares gives a return on their investment and higher priority if a company were to go bankrupt. Please keep in mind the company that issues the preferred shares always has the option of retiring those shares. 

"The unwillingness of people to spend are a function of their chronic pessimism has been a major drag on the German economy."

http://www.nytimes.com/2006/07/11/business/worldbusiness/11cup.html

This quote accurate depicts why some countries remain poor since the people in that countries do not spend or invest in the money they spend. Anytime a person works and receives money for their services it means they are contributing to society and receiving a resource in the of form money which can be easily exchange for anything they may need or want. This is explicit reason why banks exist to make sure the resources that are sitting idle (money not being spent) are lent to the people or organization that needs money in loans and investments. Banks are the are agents which brings the borrowers with the savers. The capital markets exist to further the role in the economy.

For a economy to really thrive money needs to flow in the economy.

24

The most exciting show on television today is 24. Kiefer Sutherland plays Jack Bauer a rogue CTU agent that fights terrorism at all costs. Watch it on Mondays at 9:00 pm.

Alias

Jack Bristow plays the father character of Sydney Bristow. The wise and experienced intellgience agent that will do anything to protect his daughter.

Perspective

The popularity of these two shows what the television audience wants to see. People who are determined in the pursuits and willing to do anything. I think the studios that produce these two shows have increased the public's appetite by delaying their premiere. It has been over six months since the end to season four of "24" and Alias is on a three month hiatus for Jennifer Garner pregrancy.

Job Search

I wanted to share my person struggles with finding a job in today environment. I have B.S. degree in Computer Science and M.B.A. I have to realize that there is not a good fit for me anywhere. It has been my experience in the dozens of phone conversations and in person interviews that I lack is experience. In today's economy employers are looking for people that can do the job from the day they walk in to the site. So what does a person do?

"What's going to happen to the real estate market in the next year, how about next 5, or 10 years?"

Focusing on Silicon Valley and the Bay Area...

My prediction is home prices will go downward for the next two to three years due to the housing boom the last few years where demand and supply not increasing at the the same rate has caused prices to rise rapidly. Prices are so high no one can afford a descent home. This will lead to lower demand and a drop in prices. Moreover, we need to look at the whole state of the economy where inflation is on the rise and the federal reserve has taken a stance of tightening monetary policy making it harder for people to finance their purchases which in turn will decrease demand.

In the long term such five to ten years you going to see an upward trend in home prices going steadily higher not a huge jump in the last ten years. Home get smaller and be built vertically meaning more floors such as town homes. Condos and town homes will be more prevalent because there is lack of available land.

The Housing Market Misconception

Most people, believe buying a house is a can't miss investment, however people forget to realize that your home is like any assest and is dictated by market forces such as supply and demand.

The Obvious

People who buy homes and use mortgages to finance their purchase do have huge advantages. First the deduction in taxes which lowers a person's adjusted gross income which allows people to pay less taxes. Also they principal they pay toward their mortgages is equity and the rise in value of the home is also equity gain. These are advantages of owning a home instead of renting.

The Not so Obvious

Most people do not understand why the term of standard mortgage is thirty years. Like any loan, a mortgages are the length of the assest lifetime. Mortgages were created to last as long the assest would exist. For example a standard car loan is four to five years or the likely life time of the car. Most people only keep their cars for four to five years and get a new one. Mortgages were designed to last as long as the house is standing. It is pretty obvious these days that houses last longer than thirty years. People also need to realize the value of the land rises not the improvements or house which actually depreciate.

The rise of home prices in the Silicon Valley area is because of the high demand while small increase in supply. The reason for that is because housing has been expanding horizontally because county laws prohibit builders from building structures higher than two floors except in special circumstance. However, if demand gets so high that law might change where construction companies build vertically like major metropolitan cities such San Francisco and New York where demand was high with no more supply of land to expand horizontally so builder build vertically.

Like any assest there is some point the person will sell it if not him or her or the her of the owners of the home. Most people do not realize that a major component of the value of the house is the ability to liquidate the assest. Your house might be worth a ton of money according the appraised value but it worth nothing until you sell. There is possibility that you might not sell the house. What happen if your house so expensive no one can afford your house? What happens if the house is a junk home?

The government encourages people to own a house because they want you to a home owner to be in debt the rest of his or her life. Having debt means that every month a person has to make a payment and most mortgages last thirty years therefore forcing people to work for the lifetime of the loan. If a person stops paying its mortgages the lost the home and the equity of they have built so when you buy a house you have something to lose when you make the plunge to take out a mortgage.

This journal was not created to persuade people not to buy a house because there are advantages of owning a house but people need to realize the disadvantages of buying a home at all costs.

The end of the Housing Boom

The following story describes a bigger issue that people should realize. The increase in the cost of mortgage lending as to do with the increase in interest rates by the federal reserve. The Federal Reserve has decided to raise the target rate in order to stop the increase inflation caused by rising prices. One of these reasons for the increase inflation expectation is the high cost of gasoline. I write about this issue because a lot people believe that the home prices will continue to rise regardless of the situation. They believe in this because of their ignorance in the market forces that control our financial system. However, people refuse to see that there are signs of at least a leveling effect on prices for home. The increase in vacancy rates therefore more housing supply. Secondly, there are high oil prices and increase inflation expectation therefore the high interest rates and therefore higher borrowing costs. Next will come greater supply and lowering of home prices.

This trend should concern people who have leverage their home for their investments such as second mortgages equity lines of credit, considering if the housing boom ends and their home values decrease they will be paying a payment on declines assist.

If I was a person with a high of leverage in the home I would continue to reduce my debt level in order to put at a higher equity level and lower my risk when home prices dramatically drop.

An opporunity to buy

However, if history following the same patterns when interest rates rise prices usually decline which could give an opportunity for people who thought homes were expensive now purchase homes at a more affordable price. When interests then decrease because of market forces home owners can then refinance to make their borrowing costs lower.

http://news.yahoo.com/s/ap/20051025/ap_on_bi_ge/mortgage_lending;_ylt=AgR1GwHutgBN1WKpePwD0QMO57EF;_ylu=X3oDMTBjMHVqMTQ4BHNlYwN5bnN1YmNhdA--