RickRussellTX

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    • Sat Sep 20th 11:42 AM | Rating: 0 0
      Commented on:
      Bailouts: The Moral Imbalance
      I'm going to tease some truth out of a response that I otherwise don't agree with:

      "These mortgages are worth 95 cents on the dollar if held"

      The question is: is this actually true? That actual mortgage default rate may turn out to be about 5%. I've seen competing figures of 3.75% to 4.5%, but the worst may not yet be behind us, so let's assume 5%.

      In principle, then, 95% of the mortgage assets can be valued at their stated value, while perhaps 5% will have a value below their stated value. In some case, far below their stated value, but in most cases, perhaps 30-70% their stated value, since the properties will be sold and the proceeds divided among the mortgage-backed security holders.

      However, that assumes that home prices stabilize. If they do not, won't defaults go up? Few people will be willing to pay for a $500000 mortgage on an asset that is worth $300000 or less, and for them it may make sense to walk away, deal with the credit problems, and get back on an even footing in 5 or 7 years. I have a relative who defaulted on a mortgage -- BADLY, by just walking out and refusing to check her mail -- and she repaired her credit and was offered a new mortgage in 4 years.

      The fact that young wage earners are essentially priced out of the home market in many regions is a suggestion that liberal mortgage policies (and let's face it, fraud) created an artificial elevation in home prices. Home prices are directly related to mortgage rates and liquidity. If rates go up or liquidity is permanently reduced (or both) then home prices will truly adjust downward.

      That's why these assets are so toxic. Sure, 5% looks like a realistic number now. Realtors I've talked to say that about 30% of home recent buyers are in bad mortgages *right now*, at current home prices. What if the final number is really 50%?

      Of course, we may not have a choice. The person who made off with the money -- and the person who was least culpable in this disaster -- was the home seller, who didn't commit fraud or put anybody in a position of taking on a bad mortgage.
      View article »
    • Wed Sep 3rd 16:09 PM | Rating: 0 0
      Commented on:
      Google's Chrome Sounds Like 1970s Pressure Cooker
      The business model for Google is "a vibrant, healthy Internet full of well-designed applications". They realize that, in order to sell advertising, they need to attract the maximum number of user eyes away from newspapers, television, etc. and put them in front of a computer screen. Maybe people sit in front of Google applications and services. Maybe not. Google will try to be the advertising broker in any case.

      Also keep in mind that, as the tools to support interactive Web sites get better, Google will actually be able to sell services directly for green cash money. Public and private sector organizations are increasingly converting to hosted Web applications for e-mail, calendaring, CRM, ERP, etc. Google already has fingers in that space and they have made some key sales, and a fast, very stable Web browser can only make those applications more appealing.

      I don't know if they will try to implement unique features in Chrome and use those as a selling point for the platform (Microsoft tried it with IE, and it was pretty roundly criticized). But even if they stick to "industry standards", if they do a better job than the competition -- better performance, fewer browser crashes, etc -- that may be enough to get folks to convert.

      Look at it this way, you could have made *precisely* the same argument against Firefox, which was released in Nov. 2004. Only four short years later, it's at 20% market share (almost all at the expense of IE: www.computerworld.com/... ), a feat that was widely viewed impossible. Children and grandmothers are using it, because their computer-savvy friends are telling them that it's less vulnerable to malicious software.

      Unlike some others, I don't see the Web browser bringing a natural end to standalone applications. Honestly, that's silly. Look at Google Docs, for example, and compare it to any 1990s version of MS Office, or even OpenOffice. The online offerings are short on features by a huge factor, and it will be years or even decades before browser-based offerings compete directly in that space. Ultimately, there will (and should be) healthy competition in at least two major classes of applications: standalone apps coded for each platform, and Web-based apps coded for the browser.
      View article »
    • Wed Sep 3rd 12:58 PM | Rating: 0 0
      Commented on:
      Google's Chrome Sounds Like 1970s Pressure Cooker
      Let me break it down for you very simply.

      On a Web site, there are two ways to generate content that is dynamic and interacts with the user:

      (1) Every time the user does anything, submit a request back t the Web server and send new information back to the Web browser, or

      (2) Run executable program code inside the Web browser itself that interacts with the user, sending updates back to the Web server only when necessary.

      Google realizes that we are at a crossroads. The first crossroads was at the end of the dot-com bubble, when people started coding software designed to run on the Web browser's Javascript interpreter. That gave us rich applications like Gmail and Google Docs and Flickr.

      Now we are at another crossroads. Web developers realize that if they want to code really fast, highly interactive applications (say, video editing), they must rely on a nonstandard technology, such as ActiveX (which is nothing more than executing a Windows program in the browser), Java or a plug-in like Flash. The degree to which each of these technologies can integrate with the Web browser is different -- ActiveX is tightly integrated with IE, but it's platform-locked to Windows. Java and Flash are great programming environments for various tasks, but they are essentially separate programs that run outside the browser, and do not really interact with the Web page at all. Java and Flash are also dependent on the whims of Sun and Adobe, respectively. And all three have serious implications for computer security, since they all allow the program code to run within the user's operating system. Java is pretty well locked down (and uses the same sandboxing model that Google is proposing), but Flash and ActiveX are security nightmares.

      So, Google decided to develop their own solution designed to address the performance concerns of Javascript, the Web interactivity concerns of Flash and Java and the security concerns of ActiveX and Flash (and to a lesser extent, Java).

      Will they pull it off? For many users, the fact that Google applications work better in Chrome may be enough to justify the switch. I spend a significant portion of my life in Gmail, Picasa and iGoogle.
      View article »
    • Sun Aug 31st 04:23 AM | Rating: 0 0
      Commented on:
      Questioning Obamanomics
      Putting aside some of the more extreme estimates out for the cost of the wars, it's a fair bet that extricating ourselves from foreign conflict would save on the order of $200-$500 billion per year.
      View article »
    • Mon Aug 18th 19:09 PM | Rating: 0 0
      Commented on:
      Inflation: CPI vs The Market
      I'm not sure I understand the complaint -- wouldn't we normally expect consumer price inflation to lag changes in commodities? In general, vendors are going to hold off increasing prices until it is absolutely necessary, for fear that they will not be in lock-step with their competitors and end up taking the brunt of lost sales and lost customers. Higher consumer prices come when manufacturers pass costs on to distributors and price gets increased down the line until it hits consumers. That's not expected to be an instantaneous process.
      View article »
    • Wed Aug 13th 11:28 AM | Rating: 0 0
      Commented on:
      A Million Bucks Ain't What It Used to Be
      "f the US was to have today the rate of exchange for a dollar that you historically suggest, we would need 726 billion ounces of gold per year; 15 trillion dollars at 4.84 oz/100 dollars."

      Whatever you may think about the gold standard, I think you missed the point of the article. He's trying to make the point that the gold standard was a way to set the value of a dollar -- we wouldn't need to produce 15 trillion dollars today, since the dollar would be more valuable in real terms if it was calibrated to something.

      The problem (and I'm no economist, just me thinking on these matters) is that any commodity you choose to use as a dollar index is going to introduce strange unintended consequences. If you set the dollar rate at $1.00 = 10 kilowatt hours, what happens when companies can't buy supplies at a cost that will meet that pricing goal? They close up shop and stop producing electricity until Congress sets a new threshold?
      View article »
    • Tue Jul 29th 13:12 PM | Rating: 0 0
      Commented on:
      Successful Investing Is Not About Predicting the Market
      "I don’t know when it will go closer to its true value."

      That's a fallacy. The true value of a market-traded commodity is the price that someone is willing to pay for it. That's the only measure of value.
      View article »
    • Thu Jul 3rd 12:22 PM | Rating: 0 0
      Commented on:
      Dow in Secular Bear Market When Priced in Ounces of Gold
      I'm not sure I understand indexing against the price of gold. Sure, it's a kind of "panic" indicator. But wouldn't some basket of inflation measures make more sense? I'm not saying the full CPI, since we know how that's constantly getting tweaked. But some basket of well-understood raw materials & manufactured products would provide a more stable comparison baseline.
      View article »
    • Sun Mar 23rd 11:58 AM | Rating: 0 0
      Commented on:
      Bear Stearns Should Go for More Than $6 - Barron's
      I hate to blame the Feds for "bailing out speculators", but it's time to call a spade a spade. If the JP Morgan wants to buy Bear Stearns and make a lowball offer because of bad assets in the Bear Stearns' portfolio, that's fine. They should hunker down over the table and hammer out a price.

      But why is the government involved? From this outsider's perspective, it looks like nothing more than banking bigwigs trying to help out their golf buddies. The Fed should assist all banks, not just their buddies at Bear Stearns and JPM. Bernanke needs to preserve the impartiality of the Fed by walking away from this deal ASAP.

      RR
      View article »
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