This is not the 90s

August 12, 2009

The constant comparisons between the current healthcare push and the Clintons’ are superficial and misguided.  It is actually much more like last year’s presidential campaign.

First off, the Clintons wrote the bill behind closed doors and then sent it to congress to rubberstamp.  When it came time to sell it congress was MIA, so it was left to Hilary alone.  A lady driving around in a bus.  This time around there are 200+ salesmen with skin in the game, that know their respective constituents and what moves them.  That means every day we are going to have dozens of advocates on local radio, network TV, morning shows, op-eds, etc.

On top of that you’ve got the best explainer in chief the White House has ever seen, a great communications machine, and an organizing arm.

Now think back to the presidential campaign: Early on McCain made outrageous accusations and fabrications about Obama.  That gave him an initial bump, but strategically it was a huge mistake because it gave Obama months to disprove each and every one.  Independents started seeing through the lies and distortions, and by election day nothing McCain could throw stuck.

Same thing is happening now.  Lies, misrepresentations and innuendos are scaring the beejesus out of grandma, but after a couple weeks of further silliness, and disproving from proponents, this tactic will lose teeth.

In the end public support will be split very much as in the election: 100% of Fox viewers (i.e. Republicans) will hate it.  Independents will lean in favor and Democrats will all support it (even though many will have to swallow hard).  Only difference is that since the election Republicans have bled members.

Of course this isn’t a popular vote, so it remains to be seen what a 57/43 opinion split will do to move Blue Dogs and the Maine Twins.

Advertisements

After their long alliance against Microsoft, Apple and Google parted ways today, and the stage is set for the great fight of the second decade.

I happen to think prices are bottoming out this Summer, and have said so since February (I would only exclude the worst offenders in subprime which additionally have high unemployment, places like the Inland Empire and Las Vegas).

However most people think even with sales picking up prices have more to fall.  So let’s say I’m wrong and prices do fall another 10% into next year.

Even then this is the best time to buy.  Why?  Because mortgage rates are going up and will be way higher this time next year.  About 3 points higher.

Mortgage rates will be up sharply because U.S. treasuries are shooting up (there is, of course, a strong direct correlation between treasury yields and 30-year fixed mortgage rates).  This is not due to inflation fears, or ‘China dumping our treasuries’ or some other ominous headline, but simply because:

a) The economy will continue to improve, and there will be a massive flight away from safety into higher yield asset classes.  People, funds and companies selling their treasuries and putting their dollars into stocks, commodities, hedge funds or Silicon Valley venture funds means treasury prices will go down, and yields up.

b) The Fed will start ratcheting the funds rate up by late 2010 to mop up the massive excess liquidity and keep inflation in check.

So let’s run the numbers using this calculator.

For a $500,000 house, with $100,000 down, at the current 5.5% rate on a 30-year fixed (1.25% tax and 0.5 PMI):

Monthly payment: $2854.49

Total interest paid: $440116.16

Now let’s look at the same house, one year later, now priced at $450,000 with a $90,000 down payment, and an interest rate of 8.48% (corresponding to a 7% treasury yield per this):

Monthly payment: $3,287.99

Total interest paid: $654,925.49

Even though the down payment was $10,000 less and therefore easier to ‘get in the house’, the increase in monthly payment is $433, for 30 years! which comes out to $214,809.33 in additional total interest.  So, again, house price was $50,000 less, and yet payments will be $433 more.

Of course, if prices do stabilize, monthly payments will be even higher ($799).

Some caveats:

  • If prices do go down 10% you will lose half of your equity in the near term (50K of the 100K down payment), so this only makes sense if buying for the long term.  But really, is anyone still planning on flipping a house?
  • A higher mortgage rate and corresponding monthly payment is not so bad if you’re able to refinance after some years.  But rates are near all-time lows, so they probably won’t come back down anywhere near this for another couple decades, if ever.

So, am I missing something?

Interesting visa program I didn’t know existed:

A bipartisan group of senators is pushing to save the EB-5 visa program, scheduled to expire at the end of September. The program grants temporary visas to foreigners who invest at least $500,000 in distressed areas. If an investment creates at least 10 jobs for American workers, the temporary visa can become a permanent green card. Last year, 945 EB-5 immigrants invested more than $400 million in U.S. ventures.

Some examples

Very interesting acts of civil disobedience people are coming up with in Iran:

The second phase plays out in a boycott of goods advertised on state-controlled television. Just try buying a certain brand of dairy product, an Iranian human-rights activist told me, and the person behind you in line is likely to whisper, “Don’t buy that. It’s from an advertiser.” It includes calls to switch on every electric appliance in the house just before the evening TV news to trip up Tehran’s grid. It features quickie “blitz” street demonstrations, lasting just long enough to chant “Death to the dictator!” several times but short enough to evade security forces. It involves identifying paramilitary Basij vigilantes linked to the crackdown and putting marks in green — the opposition color — or pictures of protest victims in front of their homes. It is scribbled antiregime slogans on money. And it is defiant drivers honking horns, flashing headlights and waving V signs at security forces.

With the recent reports that Netanyahu called Emanuel and Axelrod self-hating jews, I found this at the Economist DIA blog interesting:

Efforts to win support for right-wing Israeli policies are inevitably going to spin off accusations, like Mr Kirchik’s, that Jews like Max Blumenthal who criticise Israel are self-hating or in some sense not real Jews. This is a familiar dynamic in ethnic nationalist politics; it’s similar to what Slobodan Milosevic did to Serbian liberal opponents, what Putinists do to liberal Russian politicians, or what Mahmoud Ahmadinejad has done to his opponents in Iran. It’s actually rather similar, for that matter, to what ethnic nationalists, actual anti-Semites, have always done to the Jews in their countries—claiming they are not “real Russians”, “real Englishmen”, “real Frenchmen”, “real Americans”. If those who are slurring liberal Jews critical of right-wing Israeli policies were thoughtful people, this might give them pause. But, for the most part, they’re not, and it won’t.

via Andrew, who adds:

If you don’t agree with Jamie Kirchick, you’re a self-hater if you’re Jewish and an anti-Semite if you’re not.

Good rundown of why it’s needed, the logistics, and what needs to be accomplished.