Archive for October, 2008

I’ve been tracking my FICO for the past year and I just noticed that my score dropped 40 points.  I find it amazing because over the last couple of months I’ve actually paid DOWN debt.   I paid down 50k worth of my mortgage, I unwound 25k of arbitrage and I paid off a new car I just purchased a few months ago.    I’ve been on a mission to covert from paper assets to tangible assets and the result has been a lower FICO score.   I just don’t get it.

I’m still waiting on some brave souls to file a class action lawsuit against FICO for these weird anomalies that damage people’s reputation and credit worthiness.   At the very least, there should be a way to opt out of this madness.   I don’t want these people “scoring” me if they’re doing it all wrong.

Fortunately, it looks like some of these “rating” agencies are starting to get sued.   Bloomberg is reporting that Moody’s is getting sued and I hope they’re taken to the cleaners:

By Joel Rosenblatt

Oct. 30 (Bloomberg) — Moody’s Corp. directors and officers were sued by shareholders and accused of deliberately overrating asset-backed securities at the world’s second-largest credit- rating company.

The Louisiana Municipal Police Employees Retirement System filed the so-called derivative suit today in New York on behalf of the company, naming Moody’s as a nominal defendant. The pension system claimed that, as a result of misconduct, “trillions of dollars of highly risky securities were sold to investors that should never have seen the light of day.”

U.S. House investigators last week released e-mails from Moody’s employees telling executives that issuing dubious ratings to mortgage-backed securities made it appear they were incompetent or “sold our soul to the devil for revenue.”

I wonder if there’s an insider at FICO saying that their models are broken but no one has the courage to speak up.   There’s no way to find out why my FICO fluctuates from 760 to 720 in a matter of months because everything this company does is proprietary and “secret.”  And no, I haven’t been late on any payments because I’ve pretty much paid off a great deal of debt so there’s nothing to be late on.

I’m counting the days till FICO gets taken to the cleaners, we just need someone to crack the case open….

Breast Cancer Awareness month, Walk for Diabetes, Hurricane Relief, United Way, American Red Cross, National Marrow, Blood Bank, Food Bank, Obama Taxation, McCain Housing Socialism, Girl Scout Cookies, Boy Scout Popcorn, M&M Candy School Fund Raiser, St. <insert saint name> Fund Raiser, Church Fund Raiser, International Church Fund Raiser are just a few of the organizations that have tried to bleed me this month!

Fortunately, I can’t give blood because I’ve traveled to just about every dangerous region of the world this year including Europe, Africa and Asia that I can’t donate blood.  I say “fortunately” because that’s the only one that I can give a “legitimate” excuse for not donating too.

I just can’t do it anymore, I’m sick of people asking for help and it’s only going to get worse as the economy worsens.  What the hell has happened over the last 30 years to make people so damn dependent on other people?

The only organizations I recall my parents being asked  to donate to was their local church and the United Way but now everybody has their hand out.   I’m not even counting the bums on every street corner asking for cash; I’m not even counting the door to door kids selling magazines to earn “scholarship” points;  I’m not counting the political hacks calling to ask for more money despite the fact that the election is next week.

What does the future hold?   Well I guess people won’t be asking, they’ll simply be taking…..

Remember 9/11, things were going to be so different after that day.  People promised they wouldn’t grind their lives away at dead end jobs or jobs they hated; People would reconcile differences with loved ones forever; Materialism was dead.    That lasted about 18 months then everyone went on a Hummer & McMansion binge that lead us to the financial crisis we have today.

I hear the same people saying that this financial crisis will lead us onto a new world:  A world of frugality and a simple way of life; a life based on cash transactions; a credit-less and debt free life filled with joy and happiness….

I wasn’t around for the Great Depression or World War II or Korea or Vietnam and barely a kid during the boom & bust of 80’s oil but I would imagine that the same things were said, “This time, things will be different.”

I suspect that in 18 months around spring 2010 or perhaps spring 2011, we’ll be up to our eyeballs in new & improved hydrogen fuel cell cars and solar paneled houses surfing the net on iPhone WiMax 5.0.   The financial collapse will be a distant memory as we bask in infrastructure and alternative energy bubbles cashing in on the boom.

It is the way of things my friends, history repeats itself over and over.  It is the cycle of creation, growth and death that we have been accustomed to and it will repeat itself again.    All you have to do is position yourself to cash in on the next wave and that’s all there is to getting rich slick……

I had a parent teacher conference with my kids teacher this week and the teacher asked me if I was interested in recycling the schools trash.  I didn’t quite understand what exactly I was supposed to do until I realized that the school my kids go to has stopped their recycling program and they were now trying to push that job onto the parents.

I gave the teacher a sympathetic look but I informed the teacher that the city had just sent out notices that they were suspending their recycling pick up program due to higher fuel costs, low participation and tight city budgets.

I’m not sure if the two things are related but I suspect that the city wasn’t picking up the schools recycling material any more and they didn’t want to deal with the hassle of dealing with trash anymore.

I suspect that as city & state budgets grow tighter because of the credit crisis and housing mess that more and more cities will begin to cut back their recycling programs amongst other services.  It’s too bad that the environment needs to be a casualty of the housing mess.   The unintended consequences are unfolding in dramatic ways each week!

Bloomberg is reporting that Korea Development Bank has been authorized to dump up to $830 million debt on the US Taxpayer.

Oct. 28 (Bloomberg) — Korea Development Bank was approved by the Federal Reserve to sell as much as $830 million of commercial paper to the U.S. central bank.

State-run KDB can raise $400 million in the U.S. by selling short-term notes, Sung Joo Yung, a spokesman for the Seoul-based bank, said today by telephone. The bank will roll over an existing $430 million of debt, he said.

A few days ago we found out that pigs were feeding at the trough and now the doors have been opened up for any pig from around the world to feed here.

You’re doing a heck of a job Benny.

The Los Angeles Business Journal is reporting that auto registrations are down 20% in the third quarter in California.  “Read this now and think about it later Arnold.”

If you didn’t watch Arnold Schwarzenegger during the 2004 Presidential election, you can watch him here.   All I can say is that Arnold’s California is looking pretty flabby these days.   Look at those weak girly man auto sales and sagging housing prices; Arnold what have you done to yourself?

Arnold, you need to go visit Hans and Franz to get pumped up!    Read this now and think about it later Arnold:

California vehicle registrations declined nearly 20 percent in the third quarter, according to the California New Car Dealers Association.

Registrations of new cars and light trucks declined 19.1 percent in the third quarter ended Sept. 30, 2008, with a year-to-date decline of 18.5 percent from the same period a year earlier, according to the California Auto Outlook third quarter 2008 market report.

Declining home values, tight credit markets, bank failures, increased unemployment and gas prices are among the reasons cited for the decline.

Periodically, I’ll go to the grocery store during my lunch hour to pick up some snacks that I store in my office for those late nights and 3 p.m. power bar snack times and I’ve noticed lately that more and more people are shopping during the lunch hour at the grocery store.

I first noticed this about two weeks ago after I couldn’t find a parking space in the parking lot near the grocery store. I thought that it must be some sort of holiday or some strange specials the store was running that enticed people to come in but I’ve now confirmed that there are simply more people walking about during their lunch hour at the grocery store.

The type of people at the grocery store during the lunch hour has changed. Instead of just seeing a mom with her kid in the cart, I’m seeing business people dressed in suits or office attire roaming the isles.

Many of the items people are buying are packaged meals, soups, chips and other snacks which presumably means that more people plan on eating these items at their office or place of work as it doesn’t make sense to buy a frozen Lean Cuisine at noon to store it for dinner.

This confirms my observations at restaurants that the density keeps decreasing as tables are much more easily available during lunch than during other periods this year. This doesn’t bode well for the holiday shopping season either. People are generally more jolly and outgoing during the holiday but lately, people seem to be much more stressed than usual.

There is one single lesson from the Great Depression Market Crash that each investor should remember. During the crash, there was a flood of people who thought they were going to “score big” with stocks being discounted so “cheap” that they would buy low and sell high.

I keep reading the same quote over and over again everywhere that reads, “Be fearful when others are greedy. Be greedy when others are fearful” which is attributed to Warren Buffet.    I don’t think this quote was meant for the context of today’s economic turmoil.

During the Great Depression market crash, millions of people were wiped out not during the initial collapse but right after the average Joe got in trying to turn a quick buck.   The Dow was supposedly at bottom at 13,000 then 12,000 then 11,000 then 10,000 and on and on.   TV pundits are now calling the bottom at 8,000 using index P/E’s showing that they’re at 5 or 8 multiples of the index as conclusive proof that we’ve hit a bottom.

No, the bottom occurs when people decide they actually want to buy and own stocks and there is mounting selling pressure that is GROWING.   Mutual funds are trying to sell to give investors their cash back; hedge funds want to sell because investors want their money out;  The holidays are just around the corner and that will beget more selling if it looks like this shopping season is going to be anemic not to mention the annual tax selling season late in the year.

If you don’t know what you’re doing, stay out of the way.   You’ll need a powerful ship and strategy to steer through this hurricane and it might be best to wait till after the storm to get back in the water.

Like clockwork, the US Treasury is feeding the pigs at the trough and there’s quite a frenzy. The AP is reporting:

WASHINGTON (AP) — First, the $700 billion rescue for the economy was about buying devalued mortgage-backed securities from tottering banks to unclog frozen credit markets.

Then it was about using $250 billion of it to buy stakes in banks. The idea was that banks would use the money to start making loans again.

But reports surfaced that bankers might instead use the money to buy other banks, pay dividends, give employees a raise and executives a bonus, or just sit on it. Insurance companies now want a piece; maybe automakers, too, even though Congress has approved $25 billion in low-interest loans for them.

Bonuses?  Dividends? Raises?   What does this have to do with the financial bailout?  Oh, it’s just another fleecing of the the taxpayer as usual and it’s only going to get worse as the pigs turn to hogs.    I knew this bailout wasn’t going to work and you and expect the markets to tank hard over the next couple of weeks….

I love this quote, “Bank executives hinted they might instead use it for acquisitions. Sen. Christopher Dodd, chairman of the Senate banking committee, said this development was “beyond troubling.”

And the band plays on……

Had lunch with an old college buddy that I hadn’t seen in a few years and he told me he recently got laid off.   He had avoided being laid off during the last five up/down cycles his company had gone through but he didn’t make the cut this time.

Unfortunately, his home of 10 years (bought new) is barely above where he bought it so that means that if he finds a job in another town, he’ll barely break even or take a loss on his home after Realtor commissions and other expenses.

Fortunately, he built up a large savings account and cashed out some of the stock options he got from the company but still, he’s worried that if he doesn’t find a job soon, he might not find one at all given the current deteriorating condition of the economy.

I feel bad for him because I frequently advised him to leave Giant Corp. and seek a leadership/executive position at a mid-size company to be in a better position to survive layoffs.    Once you work at Giant Corp, you’re nothing but a number to the machine.

Now I’m reconsidering my vacations to Europe and South America this year in case things really start getting bad but then again, I really need to get away from all the pessimism too.