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Marty
32 Comments
'Too Much House' Buyers To Be Rewarded?
This downturn is NOT about Subprime mortgages and housing, that is the symptom of the disease which has been the decimation of the good paying job market for 10 years.
I am a CPA in CT . In 2006 the savings rate in our country went negative for the first time since the Great Depression. Inflation had been running way higher than cost of living increases. Decreases in benefits and pensions offered by companies also hurt.
The average person became unable to pay their bills. Many FIXED mortgages are defaulting and PRIME defaults now outnumber subprime defaults.
The problem is not the house cost as most borrowers can just call up their lender and get a legit modification right now. ITs the cost of everything else.
When I moved into my house the cost of a tank of heating oil was 200 bucks, it rose to 1000 bucks and now its about 800. Gas was 1.50 a gallon and rose to 4.5 (now down to about 2.60) . Property taxes were 3000 now 6000. . Food went out of control this year.
In the 1970s inflation resulted in huge increases in the cost of living adjustments for social security recipients. From 1976-1986 I believe COLA increases were 75% . My father who worked for the Govt at the time had even higher COLAs with his performance based increases.
So you could be ten years later in an inflationary period and be making 75-90% more to pay your fixed debts.
This is how we crawled out of the last inflationary period into growth. People had higher incomes to pay mostly fixed debts.
THis time around due to outsourcing , and limited investment by our country in THIS COUNTRY, people have gone backwards in income and many at best stayed equal or fell behind inflation. Social security only received about 30% over 10 years in increases while their costs soared out of control. At the same time medicare premium increases ate up a chunk of that as well.
This is the root of the problem. At first people borrowed on credit cards some and paid it off with bonuses and sometimes home equity loans. As things got worse, people got stuck with every larger bills. Millions of high paying jobs have been lost. In 1982 80% of jobs had company or Govt paid for pensions that number is like 18% today. Most had medical ins. Today people are lucky to get it and usually have to pay towards it.
Unemployment doesnt measure underemployment.
The bottom line ? Until this country invests in infrastructure, alternative energy, energy development in general, the space program etc etc we are not going to see a recovery.
The standard of living is evening out across the world due to the greed and concentration of wealth once again the masses cant afford life in the USA. This means prices will adjust dramatically and people will just not spend.
We have stood by while more debt was added to the federal deficit in 8 years than in the last 200 of our country and while the uber rich got richer without the need to invest in new companies here in the US due to outsourcing.
We watched our Pet food contain poison, our kids toys contaminated with lead , all because we could get it cheaper from China.
Well the new news is Amercan workers are going to be as cheap as the new China, welcome to the new America.
Like I said its not SUBPRIME mortgages , its a symptom of the jobs , opportunity mix here. As always the same Govt that just a year ago told you the "economy was doing well, the jobs market was strong" is telling you its the "sub-prime mortgages"
The same people that told you we were "running out of oil" and "China was using all our oil" when $147 dollars a barrel oil prices were bankrupting the middle class, and encouraged you to "drill more NOW" while oil now is sitting at $64 bucks a barrel
The same people that give 25 billion to Citibank on the verge of failure only to allow them to pay 25 billion in bonuses ..
The Greed, speculation, concentration of wealth , corruption, selling out of the manufacturing base , war , all without an investment in the future of our country's new industries has been and is the problem.
We have been left with a huge mess, leaded kids toys, poisoned pet food, a bunch of rich people on TV trying to explain why they have hundreds of millions in salary while their companies failed and a very divided public.
Marty
clhct1@aol.com (feel free to write)
Signs of an Economic Bottoming Process
Marty
Buffett and Cramer Agree: It's Time to Buy Stocks
He recently (like 3 weeks ago) called a bottom. Anyone that backed up the truck had the truck fall on them.
Cramer is a smart guy, decent guy, and I dont think many people have his degree of market knowledge. However when things are in this type of mess following any "leader" could be disasterous. People were "playing the market" like the lottery and the "Fast Money" crew was even worse. Heck they were riding that clearly speculative bubble from stock to stock (the coal, the fertilizer the oil etc).
While this might be the time to invest, Cramer thought it was weeks ago as well. This might be the one time that surprises everyone and proved Cramer wrong yet again.
A credit induced liquidation for cash is not a usual market event.
We all hope it gets better, and I hope as this article states , better times are coming as per these two men.
Marty
eBay Is a Losing Bid - Barron's
Another huge issue is that with seller contentment way down, other factors like the worst economy since the Depression have Ebay taking the heat for all problems even though generated by less consumer spending in a bad economy.
While people do unload junk when the economy slows down there seems to be fewer reasons to unload it on ebay. Few if any bids, constantly changing direction etc. The fastest growing areas of the market (local trading and buy online pick up in person/store) were persued by Ebay as "Ebay Local" announced, then burried while Craigslist grew at 90% over the last few years.
The potential is here, I am not really sure what the problem is. You need people that understand why Ebay worked to replace the consultant types, or at least take them somewhere and hit em in the head with some water balloons! LOL
Marty
A Rustbelt Revival: From Doom to Boom
Marty
Housing Crisis Likely to Wipe Out Two Decades of Family-Earned Wealth
The outsourcing of jobs and inflation running well over announced rates combined with a lack of investment in this country has produced a situation where costs of living are way in excess of the ability people have to pay their bills. Sub-prime borrowers were just the weakest link. Look at AMEX and other banks recent news on their prime borrowers increasing their defaults. When gas, heating oil and the cost of food soar to create another monthly mortgage amount something has to give.
Much of the divide between the "high saving types accusing the younger generation" and the "wasteful types in the young generation" is merely because the former rode the bubble up and cashed down.
My dad bought his first home for 20k, sold it for 60k, his second for 107k (a real stretch for him at the time) and sold it for $450k.
Many people like him only had money because they could tap the equity to send kids to school, trade down to cash out to retirement.
Some of this younger group gets out a college which costs 10x as much as when their parents went, into a housing market which was high and if everything else didnt go haywire they would be able to afford the mortgage as well.
Right now the lack of opportunity, outsourcing of not only manufacturing but service jobs as well, combined with a total lack of investment in the infrastructure and technologies of the future here at home has led to a longer term problem that wont be easily fixed..
MA in CT
Amazon Checkout: Stiff Competition for PayPal?
PS Are you seeing any trends with the economy from your end? Less high end buying? More emphasis on free shipping? Any movement to the Walmart/Ace hardware shop online pick up in person? Thanks! clhct1@aol.com
Housing: No Bottom Yet in Sight
Probably the only thing I see in favor of the housing market is the extreme negativity , which usually means things might be close to a bottoming process.
What we need in this country is fairly simple..
1- Get these bozos out of office. Give me Obama or McCain, anyone with a brain, a mind towards tending the record deficits and working across the aisle with the other party. This is America, not red nor blue states but people that can and will work together to solve problems.
2- Start Building the "NEW AMERICA" we need
a- Infrastructure spending
b- Reinvigorated Space Program
c- Alternative energy development on a grand scale
We have spent many of the last years fighting a war with no material benefit, we need to invest in this country once again and also repair our image in the world.
As a CPA in the northeast I can say the economy will be a huge challenge. I see the main problem is the concentration of wealth. Through outsourcing and exporting, large companies maintain wealth but distribute to far fewer here in the US.
The profits of US companies are a subject for study in themselves. In the early 1980s 85% of jobs provided a company paid for pension and most had full benefits for insurance. Now 15% have company pensions and maybe 20-30% have full medical coverage. The more you take out of the pockets of workers the more "companies seem to earn" the multiple of which accrues to shareholders.
401k wealth for most is a myth. 52% of 401k holder took a premature distribution last year. People are tapped out, this country has suffered the biggest period of mismanagement in its history.
What worries me most is the group that stands to benefit from keeping the status quo. Before the last presidential election they pulled the Thurs evening Bin Laden video out, this time from what I read and hear from others it will be worse. An incoming Obama might lead to a pre election war with Iran or an elected Obama a post election pre inauguration war. Those with the money and power dont give it up easily to those seeking the level playing field and America for all.
Id just remember what I said and hope that come next January you can all say, gosh he was wrong (I hope). IF you want a Depression the war scenario is the one way I see that happening. Absent that nightmare scenario I see either new man bringing us out of this mess.
MA in CT
Historic Financial Collapse Underway?
- In 1999 the Nasdaq was 5000 its 2200 or so now. In 1989 as the Japanese real estate bubble burst the Nikeii Average was 40,000 its 18,000 now 20 years later. Their real estate market retraced 20 years of gains as well. I feel it is not totally out of the realm of possibility that a much longer recovery trend like that in Japan can happen here.
-Regardless of the economy there are other factors -HUGE outflow of investment funds to baby boomers retiring. These people were able to save more than the next generations AND had the benefit of company pensions (also invested) that will now be coming out of the market just as new money in gets tougher as people cant save.
-Additional Risk - State and Local revenue -People are not driving on toll roads as much and they need to raise tolls. Property taxes are going to be a nightmare to collect, and sales taxes are down. There are some serious risks in that environment to state and local Govt spending (and related bonds etc)
-Not sure if I agree on the gold thing. The last year has shown you might have been better off buying food that you can store , things like rice , flour etc LOL But there is a valid argument in the currency collapse market.
THOSE THINGS SAID...
As a CPA in the northeast part of the country I have seen this mess coming for over 2 years. Just like the signs were clear to me 2 years ago I am seeing some limited signs of the seeds of recovery taking place. It could very well be far off but let me tell you about the few positive things I have seen..
1- The small business credit crunch seemed to ease when the Fed lowered rates. I dont know why but between Oct 07-March 08, it seemed like noone had money, now people seem to be hanging in there .
2- Some clients are reporting better sales (surprising even themselves). In the last 2 years I have not had a handful of people telling me anything good the same day but I am starting to get those reports.
3- Some new business formation is going on.
4- Looked into details of some financial stocks reports. IT appears to me that places like Citibank and Merrill Lynch are 6 months away from a turnaround. For example, Merrill has reported 40 billion in some odd losses already. They only have 4 billion or so left in CDOS in total.
5- Private people (like Boone Pickens for example with the Energy plan) are starting to step up to the plate with ideas.
There is an all bets off death scenario though. That is if we get involved in another war. Then I think its over.
Id like to state one more thing..
from a year ago to about 6 months ago the Govt essentially lied about inflation, unemployment and the jobs market.
Now the facts are out there. At least people are playing cards with the reality deck now. The risks are out there. Just articles like this one might show a bottoming process.
I have been very negative on things but call it as I see it. I do see some things moving in the right direction. It might be a dead cat bounce as they say but I am hopeful that we are wrong and things will turn, everyone makes out better that way and ill eat crow anyday over not having anything to eat!
Marty
Innovate or Die: eBay at a Crossroads
While I agree with some of what you say about Ebay. I think the innovation is closer than they think and the problems different than you think.
I do not think the new emphasis on fixed price will kill the higher margin auction business. I think in the long run it will help improve auctions to be just for those items that belong on auction , which will benefit everyone. I see some huge positives, some things they are missing and some mistakes.
Positives..
1- STORES BACK IN CORE-Moving back towards stores in core search with the new Italy model making store items 30 days fixed price items for store like insertion fees based on store subscription level.
2- INTERNATIONAL EXPOSURE-(Randy dive into this one on your blog)- This is a total homerun and I almost missed some of the reasons it would be. Stage one our ebay.com items can be promoted on the UK site. Our intl sales have really picked up, but we are also getting better regional indexing in search engines AND there are people that hop around ebay sites that find our stuff on the UK site, like ebay.it buyers and others. If this program expands, this will ping-pong people all over the place in terms of buyers and items. It is really working and Id love to share some stats with you for review.
MISSING...
1- EBay Local - After announcing this program at Ebay Live they died on it. Currently shop online pick up in person is the fastest growing area of the internet leading players like Walmart.com and others with 40% plus growth rates. While not perfect for all Ebayers all of Ebays properties play right into this idea. From Stubhub's tickets to larger local items to vehicles , educational specialists and trading assistants , the time for local hubs has returned. In my opinion they are missing a huge opportunity that an Amazon cant match.
MISTAKES...
1- DSR/FEEDBACK - While it is clear there have been some positives from the DSR/Feedback changes I think the effects on the community have been devastating in many cases. I also think the goal to show more differentiation of sellers is really not being met.
For example, sellers that worked hard and had 99.9 percent feedback ratings, found their nuetrals become negatives in the calculations and a new 98.4 percent rating. That does nothing to discourage buyers but has upset that seller. Second, and this is something Id love your opinion on. Buyers seem to buy more items from larger sellers with lower DSRs and lower feedback despite the search exposure decrease they are supposed to get. In looking over some stats it seemed to me that (as reported by others) larger sellers fell in the bottom 50-60% of Ebay sellers in DSRs and in feedback and not only had high sales but the fastest increasing sales. This shows me that buyers really dont care all that much if someone has a 4.9 or a 4.6 or 99.9 or 98.5 feedback. I worry that the effect on the community is just another thing that is forcing people off the site. Its not one thing its many things over time. I want those people here as they are providing diversity of items and they are also buyers.
Thanks for your thoughts on things.
Marty
Donald Trump on Oil
The facts are in... The Govt stated Gas prices fell last month when they went up 12%!!!!!!!!!!!!!!!!! (IN A MONTH).
When asked about it the Govt mentioned "seasonal adjustments" HUH?
So as Mark Haines pointed out, we can go up to the pump and ask for the "Seasonally adjusted price".
Apparently food inflation is somewhere in the neighborhood of 40% now.
People need to wake the heck up. Cant anyone do simple math?
In any case Im tired of yelling about it, I give up the morons rule
Marty
Don't believe Paulson: S&L 2.0, the Bank Failure Redux
One would think this would happen. The problem is , the things inflating are the things people have to pay for or the things they own. Without the WAGE inflation there is no ability for prices on homes to go up. In the 70s and 80s there was wage inflation.
I will give you a simple example.
During the "terrible inflation of the Carter years" (As we are told to call it), peoples wages ALSO went up. Social security was indexed 75% over 10 years. At the end of the inflation, everyones income was up 75%-100% or more. Now, the higher incomes could easily pay down the mostly fixed debts and that allowed asset prices to increase. When your costs go up, but your income does not (even further distorted by todays lack of benefits) prices on homes will not go up because people cannot afford them.
This is a real mess, and it will take good leadership. The concentration of wealth is so great this time that even the upper middle class is in trouble.
Marty
Don't believe Paulson: S&L 2.0, the Bank Failure Redux
Just in the last few days the Govt announced inflation was 2.4% and gas prices FELL last month!
In a nutshell, inflation has been running rampant. It is the additional costs layered on by inflation that have left people unable to pay their bills, not their mortgage. Between 1978-1986 the Govt indexed social security 75% to keep up with inflation. In the last 8 years that number has been 25%.
So lets find the 2-3% inflation. Here are some real numbers that people are paying in my area.
Heating oil up 350% in 10 years
Gas up 300% in 10 years
Medical insurance, family coverage up 500% in ten years
Taxes in my town up on average 86%
Electricity in much of CT up as much as 74% in the last few years alone!
Food inflation, heck we have things that went up 30% in a month but most food items are at highs except for meats because they are killing the animals as the feed is too expensive, wait til fall.
Thus with technology and outsourcing putting a lid in wages ,there is no pressure to raise wages. Real income is declining much faster than the Govt states. 2 days ago they said it declined 1 % based on 2.4% inflation. If inflation is 10% real income is declining by 9%.
People are making less, not more, have less benefits, and less pensions than in prior years. Good paying jobs have been replaced by jobs with lower pay and less benefits. Please note the recent statistics in BusinessWeek in the differences between men and women in the job crisis and how women have less job losses because they are working in those service jobs which often pay less.
In my client base I do not see any problems with subprime loans. I see a lot of people cutting their spending, trying to keep their businesses running.
The ultimate irony is the same Govt that told you the economy was doing well, the jobs market was strong and inflation tame, is now handing out money telling you to spend it.
This is way worse than people think. Student loans might not fund. Those auction rate securities have 320 billion in peoples funds frozen, some earmarked for college. Inflation/foreclosures... pullback is now entering round two. In NJ they have to raise tolls because people are driving LESS and paying less tolls!!!! Driving is way down yet fuel prices soar.
Only the super rich are making it this time and they will watch their saved dollars depreciate right along with eveyrone else.
Id love to talk to you about what I am seeing and compare notes. My email is clhct1@aol.com
Marty
Amazon Toying with Vertical Integration
One risk I see though is that much of Amazon's recent success came from a few mistakes Ebay made by allowing millions of items to transition off the site when it raised fees and made some comments about its own stores product that left some bewildered.
However, Ebay has lowered fees, attracted many of the larger sellers back and also is working on numerous trials which seem to imply lower fees are coming (from blog posts I have read). It is not so much the people that had moved but the line of people that follow when people have success (as they have on Amazon). When this process reverses ,Amazon will lose that surge to the growth profile.
Marty
Sell on the News: eBay Shares Slide Today
In 2006 , when I felt Ebay was firing on all cylinders when stores were in core user growth was humming etc.
1st Quarter 2006
193 million registered users of which 75.4 million or (40%) were active
Two years later ...1st Quarter 2008
309 million registered users of which 83.9 million were active (27%)
First of all note that 116 million registered users were added but Active registered users only went up about 8 million. Those numbers show an incredibly high churn rate.
In the last few weeks Ebay removed the Ebay Wiki which was built by its members (with no notice) , banned Digital delivery of items like Ebooks, templates, etc), announced they are closing down Live Auctions on the site in 8 months or so and keep moving to a homogenized look which is leaving the community befuddled (at best).
At a time when the US dollar is low in relation to foreign currencies the countries users with stronger currencies cannot see US items unless they change their settings on Ebay.
People came to Ebay to sell things in the new world of the internet. It was exciting, it brought a sense of connection and community. First collectibles but then a market for other items developed. As Ebay expanded worldwide more opportunity seemed to be there.
Right now, Ebays mistakes over the last few years are masked by huge foreign currency exchange differences that are making the 50% of its income derived from foreign countries appear much larger and it is not reflective of strong growth in those markets.
Flat earnings in EUROS for example increased 30% in US dollars over 2 years.
When EBay raised fees in the fall of 2006, it lost millions of items and thousands of sellers. Many went to Amazon and other sites. They saw some success and told other people.
Just as Ebay was formed it can unwind. This is my worry.
It is my opinion that on the current track , Ebay will totally lose its ability to turn this around as user growth continues to be strained.
You cannot have those levels of turnover and succeed. This is exactly what brought down AOL when even MSN couldnt catch it back in the days of online services.
I sell on Ebay, and think that led in the right direction, they could re-invent the glory of what they were. My advice would be ...
1- Stop trying to stamp out the diversity
2- Open up the Intl markets to cross border trading instead of protecting them
3- Buy the remaining 80% of Mercado Libre , the south American Ebay and open up those markets .
4- Let all the people connect, and focus on the connection of the world that is found on Ebay through products, ideas, services etc.
5- Integrate all this with their World of Good and Givingworks programs already active in doing good things world-wide.
6- Use IBMS "MAstor" voice translation program to develop international trading on a new level.
7- Develop the Local Markets as they did in 1999-2000 when they were too early (as broadband growth was minimal then). Ebay Local, announced in 2007 was supposed to be coming but then again it might have been canned. With shipping costs an issue lately , local delivery options and just in time buying could be a whole new market.
I love the company, hate the direction. I dont pretend to have all the answers or always be right but I can say I have a good feel for those around me (fellow sellers) and this is not the correct path to grow the site.
Marty