No Day at the Beach

Yesterday was no day at the beach.  Okay, technically I suppose you could twist the facts around and put a major league, curve ball spin on it and call it a day at the beach.  You know, if you want to get hung up on little details like how I spent the entire day at the beach.  I packed up my two boys, an ice chest full of Cheetos and one large cantaloupe.  (I didn’t bring a knife and apparently you don’t eat those things like an apple, so I returned with one empty ice chest and one large cantaloupe.)  I met up with my good friend and occasional confessor Brian Brady and his lovely daughter.  We were later joined by his wife, whom I’ll just call Mrs. Lance Armstrong Brady for this story, and we spent an entire, glorious day at the beach.  But other than that, yesterday was no day at the beach.  Yeah, okay, I see your point.  Put it this way, it wasn’t a typical day at the beach.

 For me, a typical day at the beach would mainly involve long discussions with Brian on solving the world’s problems (ask us sometime… we’ve got the whole thing whittled down to a small pamphlet) and occasionally testing the sandy hardness of the ocean floor by falling off my boogie board.  (This is all done purposefully and as part of my larger interest in oceanography.  I could ride a wave on a boogie board if I wanted to…)  Sometimes, just to spice things up, I see how long I can hold in my gut without passing out in front of an attractive, bikini-clad woman.  They usually do a surprisingly good job of pretending to not even notice me, but we’re so close to Hollywood I assume most of them are just acting…  Anyway, that’s a typical day at the beach for me.  But not yesterday.  Yesterday I was distracted by a gigantic hole.  Yes, a hole… in the sand.  Like I said: not your typical day at the beach.

 My two boys and Brian’s daughter spent a good chunk of their morning – when they weren’t out on boogie boards catching waves and staying upright, as if that’s the only way to ride one of those things – digging a hole.  I know, that probably doesn’t sound like much fun, but you have to trust me: catching waves on a boogie board can be fun.  In any case, they dug themselves a pretty good hole.  It was big and deep and had a nice groove cut toward the ocean.  Once the tide came in, they’d have themselves a nice little hot tub just made for three.  (I actually overheard one of them… okay, it was one of my boys, say something about turning it into a jacuzzi.  I’m not sure how they planned on creating bubbles, but I figure what I don’t know won’t hurt me.)

 Sure enough, as the tide came in all their hard work started to pay off.  At first there was only a little water, but it was obvious that before long they’d have a first rate hot tub.  It was about this time I began to notice other boys and girls approach; as time passed more and more came until we had a regular Hole in the Beach Gang.  They thought this was the neatest thing they’d ever seen and soon began to splash in the hole too.  It didn’t occur to any of them to ask if they could play in the slowly filling “hot tub.”  I guess they figured holes were just something that appeared at the beach without any work; kind of a no-cost benefit they were all entitled to play in and enjoy.  Pretty soon, my boys and Brian’s daughter came over to us and pointed out that they weren’t getting to play in the hot tub they’d created because there were “all these kids in there who didn’t even help build it!”  I have to say I was shocked, shocked to learn my kids possessed a sense of ownership over this hole.  Why?  Because they got there early?  Because they worked long and hard on it?  Is that any kind of a justification for not sharing it with kids who were busy playing video games all morning and only stumbled into the hole on their way to the ice cream stand?  Being a philosopher, I sat down to formulate a deeply moving response to our children’s dilemma.  Brian on the other hand, ever the pragmatist, just looked at them  and said: “Life’s tough. Wear a helment,” and sent them off to clear jelly fish so he could enter the water for a bit.

I stayed and watched “the hole” though.  I’d become intrigued and I’m glad I did because the most interesting thing happened.  The original three creators of the hole, once they realized they weren’t going to be able to enjoy what they’d built, wandered off to find new adventures.  (At least, I think that’s what they did.  Look, it’s a big crowded beach surrounded by pounding surf and occasional rip tides.  It’s not like I can keep an eye on them every minute…)  The others though, the ones who jumped with both feet into the hole they didn’t create, they stayed and they played and they made that hole their own.  But a very strange thing began to happen.  With each surge of ocean water came a large deposit of sand and the hole became less and less of a hole (and less fun) as it filled with water. 

 Now here’s the really odd part: the kids all just looked at each other as it was happening.  They knew their hole was de-holing (don’t bother looking it up, I promise you it’s a word), but they didn’t know what to do about it.  The various shovels and buckets originally used to create the hole were all still there, lying on the outer edge, but no one thought to grab a shovel and contribute.  They just kept playing in less and less water, till one by one they began drifting away.  Maybe some found another magically appearing hole they could take as their own.  I imagined others discovering a blanket spread with hot dogs and chips… and helping themselves to the magic of a free lunch.  It wouldn’t surprise me if one or two went off in search of our three kids – the original builders of the hole – to complain about how it wasn’t built big enough and didn’t last long enough.  (I don’t know for sure where any of them went because that would have required me getting up out of my beach chair and I was, at that particular moment, testing another one of my scientific theories about compression of sand under extremely heavy loads.)

Toward the end of the day, my sons and Brian’s daughter came back around and looked at the hole, or rather: what was once a hole.  It was pretty filled in and the sides had crumbled under the weight of so many kids.  Their shovels and buckets were strewn about.  I asked if they were going to build another hole and they shook their heads no.  ”What’s the point?” my older son asked.  “Yeah,” my younger son chimed in, “if we do, we won’t get to play in it anyway.”  Brian’s daughter summed it up, saying: “I think our hole digging days are over.  We did all the work, but someone else got all the fun.”  Kids say the funniest things, don’t they?

 As we broke down the tents and packed the tools and tried to carry as much sand back to my recently detailed car as possible, I remember thinking to myself: I sure hope these little guys enjoyed themselves today, despite what happened with their hole.  And I certainly hope they’re not assimilating this one-time episode into any sort of large-scale, world view.  Deep down I hope that by the time they become adults they can look back on this day and say: ”Life is no day at the beach.”  Just in case though… wear a helmet.

 

Filed under: LIFE THAT POPs, POLITICAL & ECONOMIC FOLLY

There are Only Four Things Certain Since Social Progress Began

(alternatively entitled – with all due apologies)
Though I’ve Belted You and Flayed You, By the Livin’ Gawd That Made You;
You’ve Made a Worser Man of Me, Socialism

“And a woman is only a woman, but a good cigar is a smoke”  (from The Betrothed).  I have loved Rudyard Kipling from the very first time I read Gunga Din.  His pace and pattern appeal to me, as does his archaic sense of manhood.  I have argued before, and dare say would do so again quite successfully, that his poem If  is among the finest pieces ever written in the English language.  Of all the inspirational articles I have written and the many orations I have given, much time could have been saved had I simply gone in, recited If and walked out.  If you have never read it, stop what you are doing now and do so.  The answer to just about every event you may encounter in your life is contained in that poem.

This post, however, is not about Kipling’s great work If.  (If it were, I would certainly link to my own, real estate based homage to wisdom, and I’ve done no such thing.)  No, this post is about another poem Kipling wrote, one I am chagrined to admit I only recently discovered.  More mortifying still, I discovered it only because Glenn Beck is using a couple of lines from this poem to plug a new book of his.  (I’m not denigrating Mr. Beck, only lamenting the discovery of fine art through it’s crass commercialization.)

The poem refers to Copybook Headings and I was unsure what those were.  For the one or two of you out there as simple as I am, copybooks were primers used by school children to perfect their penmanship.  Across the top of each page was written a Biblical passage or similar lesson of moral imperative.  The children would copy the line over and over on the page below, thus improving their cursive and at the same internalizing certain truths.  Truths that, according to Mr. Kipling, are forgotten at our own peril.

Printed below in its entirety, this poem was written almost 100 years ago.  But you’d be amazed how little has changed in the theater of the absurd we call politics.  Mr. Obama and the Neo-Pros who share his religion are fairly called out in these words, but then so are we…

The Gods of the Copybook Headings

As I pass through my incarnations in every age and race,
I make my proper prostrations to the Gods of the Market Place.
Peering through reverent fingers I watch them flourish and fall,
And the Gods of the Copybook Headings, I notice, outlast them all.

We were living in trees when they met us. They showed us each in turn
That Water would certainly wet us, as Fire would certainly burn:
But we found them lacking in Uplift, Vision and Breadth of Mind,
So we left them to teach the Gorillas while we followed the March of Mankind.

We moved as the Spirit listed. They never altered their pace,
Being neither cloud nor wind-borne like the Gods of the Market Place,
But they always caught up with our progress, and presently word would come
That a tribe had been wiped off its icefield, or the lights had gone out in Rome.

With the Hopes that our World is built on they were utterly out of touch,
They denied that the Moon was Stilton; they denied she was even Dutch;
They denied that Wishes were Horses; they denied that a Pig had Wings;
So we worshipped the Gods of the Market Who promised these beautiful things.

When the Cambrian measures were forming, They promised perpetual peace.
They swore, if we gave them our weapons, that the wars of the tribes would cease.
But when we disarmed They sold us and delivered us bound to our foe,
And the Gods of the Copybook Headings said: “Stick to the Devil you know.”

On the first Feminian Sandstones we were promised the Fuller Life
(Which started by loving our neighbour and ended by loving his wife)
Till our women had no more children and the men lost reason and faith,
And the Gods of the Copybook Headings said: “The Wages of Sin is Death.”

In the Carboniferous Epoch we were promised abundance for all,
By robbing selected Peter to pay for collective Paul;
But, though we had plenty of money, there was nothing our money could buy,
And the Gods of the Copybook Headings said: “If you don’t work you die.”

Then the Gods of the Market tumbled, and their smooth-tongued wizards withdrew
And the hearts of the meanest were humbled and began to believe it was true
That All is not Gold that Glitters, and Two and Two make Four
And the Gods of the Copybook Headings limped up to explain it once more.

As it will be in the future, it was at the birth of Man
There are only four things certain since Social Progress began.
That the Dog returns to his Vomit and the Sow returns to her Mire,
And the burnt Fool’s bandaged finger goes wabbling back to the Fire;

And that after this is accomplished, and the brave new world begins
When all men are paid for existing and no man must pay for his sins,
As surely as Water will wet us, as surely as Fire will burn,
The Gods of the Copybook Headings with terror and slaughter return!

Filed under: LIFE THAT POPs, POLITICAL & ECONOMIC FOLLY

The NAR Backs the FHA… Who’s Backing You?

Late last week the House of Representatives passed H.R. 5072, the so-called FHA Reform Bill.  One of the major components of that bill (you can read the text of the bill here), raises the monthly insurance premium for all FHA buyers.  What does that mean to your bottom line?

 

Currently, the FHA monthly premium is .55% and the new legislation Congress is looking at will raise the premium a wopping 272% to 1.5%.  What does this mean to your buyer?  If they are at the limit of their eligibility on a $300,000 purchase price now, they would have to lower their interest rate by over 1.25% to still qualify for that house.  In other words, if the current market rate is 5.00%, it would have to drop to 3.75%!  If you think you might have trouble locating a lender who will do 30 year fixed loans at 3.75%, don’t worry; you can also lower their purchase price to bring them back into eligibility.  Their new price would only have to drop 10%!  A buyer looking at $300,000 today will be looking at $265,000 to $270.000 as soon as this bill passes. Does that change your market opportunities for the better… or the worse?

 

I understand why the NAR supports this, it keeps FHA alive and well, doing sub-prime loans for people who can’t afford to buy a home, which in turn keeps dues paying agents busy and coughing up their fair share.  But why do agents support it?  It’s going to have a devestating affect on your clients, and therefore on you.  Do you support it?  Have you let anybody know?

Filed under: INVESTORS, LENDERS, POLITICAL & ECONOMIC FOLLY, REALTORS

Define the Tipping Point

The following began as a comment to a great post put up by Greg Swann recently, in which he excerpted a terrific article from Mark Steyn on income taxes and suckers:

…by 2004, 20% of U.S. households were getting about 75% of their income from the federal government… how receptive would they be to a pitch for lower taxes, which they don’t pay, or lower government spending, of which they are such fortunate beneficiaries? How receptive would another fifth of households, who get about 40% of their income from federal programs, be to such a pitch?

I believe My Styne is talking about the “tipping point” here, something I’ve also been talking about since before the election in 2008. Once enough people are dependent on the government, we reach a tipping point from which there is no purposeful return; only failure and rebirth. This is not news.

What’s interesting (at least to me) is the actual equation marking this tipping point. Obviously if more than 50% of the populace received 100% of their income (or benefits) from the government, we’d be over the tipping point. Not much of a stretch there, but not much of a definition either. I suggest the tipping point is well below the “50% get 100%” threshold.

So what is the level? This strikes me as a very important number – and concept – to know. Where is the line if it’s not “50% getting 100%:”? For argument’s sake, let’s say we have a voting block that will endorse politicians and policies which benefit themselves. Is receiving 75% of their income from entitlements enough to effect that vote? 60%? 45%? I suggest that the block crumbles at 20%, but is monolithic at 75%, so the answer lies somewhere in between. A 30% loss of income would be pretty bad for most people, but may not be bad enough that they would forsake their principles and beliefs. At 40% though… I think we’re dialing in the range.

On top of this, we should take into account the actual voting numbers of the population. How is the tipping point affected if only 60% of the population regularly votes? More importantly, what % of people – on the dole for at least 40% of their income – regularly votes?

I don’t have the economic access or statistical model to perform a proper study, but I’m surprised I haven’t seen something like this from one of the pro-capitalist think tanks. For instance, we may discover that once 40% of the total population receives, on average, more than 40% of their income from government sources, we’ve reached a tipping point. Translation: we could, at that point, reliably expect more than half of likely voters to vote in favor of maintaining their entitlements. Knowing this would provide a clear line in the sand of capitalism and democracy.

Perhaps we are already there. If I were to guess, I would say my 40/40 estimate is not far off. How close are we to 40 and 40? Politicians on both sides of the aisle have clearly understood this concept for some time. Today’s political campaigns run on only two real messages: “Here’s how much I’ll give you,” or “Here’s why the other candidate won’t be able to give you as much as me.” But what if we knew where the line was? Would it make a difference? Would we act on it? Is it too late?

Filed under: POLITICAL & ECONOMIC FOLLY

A Future By Halves vs. A Future of Have-Nots

Voluntaryism vs Social Democracy

Two quick polls: First, all those who enjoy belonging to a society that provides some minimal safety net for the least among us, please raise your hands… Ahh, I see some hands going up. Very good. Second, all those who occasionally enjoy being forced to do something against their will by threat of a gun, please raise your hands… Right, masochists aside I see no hands raised. Very good. The problem is, you cannot have one without the other. Thus spoke the Voluntaryists.

On Monday night I was invited by fellow Bloodhound Brian Brady to attend a debate entitled Voluntaryism/Market Anarchy vs. Democratic-Socialism held in a little hot bed of thought and cafe called Cafe Libertalia. It was an engaging evening spent listening to the point / counter-point discussion on the very legitimacy of government itself. You can gain a more detailed understanding of Voluntaryism here and of Social Democracy here. (Although if you’re a regular reader of BHB you’ve no doubt gained quite a bit of free-market, Voluntaryism philosophy from our Greek emeritus: Greg Swann.)

I must be honest in admitting that I know quite a bit less about Social Democracy philosophy than I do Voluntaryism, and the debate was of little help. The team on the Social Democracy side presented a less than cogent argument for a society wherein free markets and democracy exist in ever changing ratios, as dictated by the people themselves. When asked, the speakers could not name a single  society where this system currently exists.  When pressed, they admitted that the countries currently attempting it are abysmal failures.  But this did not dissuade them from the idea that it could exist. Their logic – such as it was – stemmed from the idea of pure democracy (one man, one vote) and concluded that the majority would decide which means of production should be left to the free markets and which to the nurturing womb of centralized government. “How can you be against that?” they asked.  “We’re not advocating government take-over; we’re saying it should be up to the whole of the people to decide government’s role in the economy.”  When asked what coercion should be applied to those in the minority who might disagree with the majority decision, they answered by questioning the meaning of coercion. I’m not sure if that’s a straw man argument or circular logic, but it leads nowhere either way.

Their crowning point was that coercion exists in a free market too, just as it does in a system of government. Example? If you don’t pay your property taxes (system of government problem), you are eventually led from your home at the point of a gun. Similarly, if you don’t pay your mortgage (free market problem) you are also eventually led from your home at the point of a gun. When the spuriousness of comparing an involuntary agreement such as taxes with a voluntary agreement such as mortgages was pointed out, this was their response: “If I were to video the outcome of both events and show them to you, you would not know which was which; therefore, they are the same in the end.” (Leave it to a theoretical physicist to conceptualize an experiment wherein the proximate cause of events can be excluded from an analysis of the outcome.) Truly embarrassing.

The Voluntaryists drove home their main argument: each of us is solely and 100% the owner of our selves. By logical extension, we are then also the owners of the fruits of our efforts. Thus: property rights – which are the core of true free market philosophy. With this I have no quarrel. If, at any point, you believe you have the right to take from me against my will then you must necessarily believe that we are not the sole and 100% owners of our selves. This leads to an obvious question: “How much of me do you believe you rightfully control?” This is not a difficult argument to win and by my estimation the Voluntaryists did so, despite some rather clunky analogies.

If you’re still with me, you might ask why I am posting on such an esoteric subject. Two reasons: first and foremost, if you are in the real estate industry you are a business owner (at least to some degree) and so this should not be esoteric to you at all. This is a subject matter that cuts to the very heart of entrepreneurial effort and reward. Again, Greg does a much better job than I at making this link clear, but clear it should be. There is a growing and manifestly important debate growing in our country, and whether the terms are used or not, that debate is over Voluntaryism vs. Social Democracy. My second reason, however, is more direct. Based on my title it should be obvious what result I foresee if we are to follow the philosophy of Social Democracy: an eventual citizenry comprised of have-nots (with the possible – probable? – exception of those elite by whom the means of production are directed). But what about the end game of the Voluntaryist philosophy?

To be more precise: even if we were to all agree that an absolute free market system is the desired outcome, is it attainable? I cannot bring to mind any society that has existed over time – on any acceptable large scale (nuns in a convent live in a very direct form of communism, but that does not prove the viability of communism on any scale) – which has not formed a government in deed if not word. In other words, if Voluntaryism is the ideal to which we aspire, is it actually attainable or is it more accurately a yard stick by which to measure progress. A progress necessarily gained by halves, but never in total?

Filed under: LIFE THAT POPs, POLITICAL & ECONOMIC FOLLY

The End of the Neo-Pros, the Beginning of Real Nastiness… or Both?

The worm is turning. Now for the real question: is it too late? Are we left with ugly but self-interested politicians, who run for the middle – or elitist Neo-Pros, who take Chicago politics to a new level? 2010′s going to be a bumpy ride…

More here.

Filed under: POLITICAL & ECONOMIC FOLLY

What’s in a name? That Which We Call a “Job” Summit, by Any Other Name…

“When I use a word,” Humpty Dumpty said, in rather a scornful tone, “it means just what I choose it to mean — neither more nor less.”

“The question is,” said Alice, “whether you can make words mean so many different things.”

“The question is,” said Humpty Dumpty, “which is to be master — that’s all.”

Through The Looking Glass – Chapter VI

Lewis Carroll

Small business accounts for over 65% of all new jobs. If you wanted to create new jobs (I mean, if that was your actual goal and not just a cover story) you might decide to sit down with people who represent small business interests. The guest list for an actual, according to Hoyle, “Job Summit” then, might look like this:

• The Chamber of Commerce
• The National Federation of Independent Business
• The National Association of Manufactures
• and so on…

If, on the other hand, your actual goal was to consolidate power and become the de facto benefactor of jobs, you might want to sit down with the people who kill small business on a regular basis. To keep things simple, you should probably limit yourself to those with whom you are already sleeping. The guest list might look like this:

• The Service Employees International Union (S.E.I.U.)
• The American Federation of Teachers
• The United Steel Workers Union
• Policy wonks with absolutely no real world business experience
• And of course, Paul Krugman (an economist/columnist so far to the left he can’t ever be right)

Which list do you think showed up for the White House “Job” Summit?

To paraphrase Lewis Carroll (and, quite possibly, President Obama?):
“It is a job summit damn it! It is because I say it is. The question is, which is to be master: you… or me. That is all.”

Filed under: POLITICAL & ECONOMIC FOLLY

Join the DOER Revolution

The $8000 first time home buyer tax credit is a mistake.  Congress should have enacted the original idea: a $15,000 tax credit.  This goes for the repeat home buyer tax credit as well.  As a matter of fact, I would like to have seen both tax credits even higher.  If you’ll maintain an open mind for the next few minutes, I hope to show you how embracing these tax credits actually creates a “win-win” situation that benefits you and this great nation.

The inherent spirit of humankind is individualistic, creative and inclined toward action.  The heart of man is inexorably drawn toward freedom: freedom to live, freedom to express and freedom to choose.  No matter what short-term damage is effected by an oppressor or institutionalized by a government, men and women will devise ways to rebuild and overcome.  Even in countries where the idea of freedom has been systematically driven out by force, we witness people taking action toward freedom.  It is a natural state that can be delayed, but not denied.  We are DOERs.  This country, the United States of America, is the poster child for taking action toward freedom.  We are a nation made up of DOERs.

So what does this have to do with the tax credit?  It empowers us with a “win-win” opportunity.  The immoral bribes to home buyers, the unconstitutional mandate for health insurance, the socialistic bail-outs, even the very destruction wrought by stimulus packages:  embrace them all!  These are all opportunities to make that “win-win” choice.  Embrace the home buyer’s credit and ACT on it!  Be a DOER.  It’s the DOERs who create the success of our society.  A nation of DOERs – of independent, entrepreneurial, action-based DOERs – will always bring about the necessary changes to save this republic.  If you desire your own success, then you desire to become a DOER.

More specifically: every action you take to help another person receive the tax credit strengthens you as a DOER while at the same time weakening the architects – the very architecture – that imposes itself upon a free people with that tax credit.  Eventually, the system cannot bear its own weight; the center cannot hold.  In taking action to embrace the tax credit you not only strengthen your potential for long-term success  by being a DOER, but you effect the implosion of the progressive state.  In other words, you hasten the collapse of an economic enemy by using its own tools of destruction and in the action of using those tools, in being a DOER, you reinforce and strengthen the very reason such a system cannot stand in the first place.  It’s a “Win-Win” proposition.

One last thought: there are those who fear taking action because they don’t know what will happen after the crash.  That’s actually a  surprisingly insignificant concern.  We don’t control outcomes and so we cannot know them.  Rather, we take action based on our knowledge of who we are, what we believe and what we desire.  We are a nation of DOERs.  If you believe that, than you have no reason to fear your desires or the brave new world after the collapse.  A more legitimate fear might instead be: “what happens to me after the collapse if I am not a DOER in a society being restored by DOERs?”

Embrace the government hand-outs and credits and stimulus spending.  Encourage an immediacy so apocalyptic that no one has time to read the laws they enact.  Take action and be a DOER… Join the revolution.

Filed under: LENDERS, LIFE THAT POPs, POLITICAL & ECONOMIC FOLLY, REALTORS , Doer, Home Buyer Tax Credit

Is Goldman Sachs Over-Paid for Doing “God’s Work?”

I guess I haven’t reached that point in my life yet when I’m so jaded (or is it cynical) that nothing will surprise me.  I say this after reading an interesting little article in the London TimesOnline.  They had the chance to interview Lloyd Blankfein, the Chairman and CEO of Goldman Sachs.  It seems he’s convinced – or at least he’s convinced he can convince us – that Goldman serves “a social purpose.”  As a matter of fact, Mr. Blankfein is so enamored with the self-importance of Goldman that he proudly proclaims he’s “Doing God’s Work.” Wow…

Just to refresh our memory:

• Goldman received $10 Billion in Tarp Money
• Goldman received $12.9 Billion of government money through AIG
• Goldman received $20.9 Billion in FDIC debt guarantees
• Goldman, restructured as a “bank holding company” borrows at the Fed Window (at basically no cost)

Oh, and one more thing: Goldman will be paying $21.9 Billion in bonuses for 2009.  I don’t begrudge them bonuses, after all: they’ve had a helluva year.  Although some of that might be due to their oligarchical position within the federal government.  It would be nice – every once in a while – if Goldman would send a little thank you nod our way; maybe a quick wave or even a wink.  I guess I’m saying that when you’re screwing me this bad, a little dinner wouldn’t hurt.

John Lennon stirred up quite a spot of bother when he said: “We’re more popular than Jesus now.”  Have to admit though, that seems like such a trifle compared to the CEO of Goldman Sachs.  I mean, who cares if you’re more popular than Jesus?  Mr. Blankfein is angling to BE Jesus.

Filed under: POLITICAL & ECONOMIC FOLLY , Goldman Sachs, Wall Street

Deeds for Lease Program: More Bad Ideas from the Bad Idea Factory

Fannie Mae announced today it’s implementation of the Deeds for Lease Program (which name, interestingly, they have trademarked). I cannot begin to count the problems with this latest attempt by the government to sober up an alcoholic nation by supplying enough booze to drown a water hippo.

You can read the press release and imagine the nightmare yourself so I’m not going to recount it here, but I will point out one of the less reported aspects of this program that has the potential to cause a whole lot of those pesky unintended consequences our political leaders are so loathe to anticipate:

… (the borrowers or tenants) lease back the house at a market rate… Borrowers or tenants interested in a lease must be able to document that the new market rental rate is no more than 31% of their gross income.

Interesting wording there at the end.  It’s not clear at first glance, but what this means is that if the borrower – who has generally endured a financial hardship to begin with – doesn’t make enough money, they’re still eligible… the rent will just have to drop to below market.  Well what could go wrong with a government/landlord artificially lowering rents throughout the nation… That shouldn’t bother real estate investors… or anyone who works with real estate investors… or anyone who owns real estate near a real estate investment, should it?  I’m sure the people who paid $70,000 for $30,000 trailers that are STILL housing people post Katrina know exactly what they’re doing.

Filed under: POLITICAL & ECONOMIC FOLLY , Deeds for Lease