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Saturday, April 10, 2010
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73 comments:
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The Story of the CDO Market Meltdown: An Empirical Analysis
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By: Anna Katherine Barnett-Hart
Presented to the Department of Economics in partial fulfillment of the requirements for a Bachelor of Arts degree with Honors
Harvard College, Cambridge, Massachusetts, March 19, 2009.
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Michael Lewis’s ‘The Big Short’? Read the Harvard Thesis Instead!
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WSJ Blogs
Deal Journal
An up-to-the-minute take on deals and deal makers.
March 15, 2010, 4:59 PM ET
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By: Peter Lattman
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COMMENT--
o 2:28 pm, March 16, 2010
o TV wrote:
I don’t want to disparage this girl. She showed a ton of initiative which in most instances is all it takes. Look no further than the 30 yr old chick that runs her own hedge fund that sent Buffet a letter and got invited to dinner. I read her recommendations. They are well thought out, but it’s nothing particularly profound.
Ms Barnett-Hart’s conclusions are similar. Her findings were not ground-breaking. I work in the industry and could have told you the exact same thing. And I didn’t even go to Harvard. In fact, just about everyone at my firm felt the same about these CDOs. We manage over $25 Bln in fixed income products and made a conscious decision to stay out of them and largely avoided the mess. (but we didn’t the get the same press b/c we are not an attractive 22 yr old co-ed from Harvard.) The problem is not about CDOs. It’s not about underwriting standards. These contributed yes, but they were the tools used by the real problem. And that is the culture. In an environment where all anyone cares about is how much money someone makes, nothing else matters. They screw everyone else in order to get theirs. And that’s exactly what happened. These banks used
their highly intelligent, highly-paid Ivy League talent to concoct “financial products” that they could sell to the dumb (m)asses for a very nice profit. And as long as they sold them and the bonuses were paid, it didn’t matter about the rest.
The (recent) history books are rife with examples of Wall Street pawning off overly complex products on uneducated clients that don’t need them but come with a fat spread for the bank. This wont change and will probably lead to the next crisis in 5-7 years.
What’s sad about Ms Barnett-Hart is that even though she gives some BS line about wanting to change the culture, the reality is that she succumbed to the same thing every other ivy grad that goes to Wall Street does - money, power and privilege. If she truly believes in wanting to change it, she’d leave. But instead, I suspect that she’ll do the same thing her new supporter Michael Lewis did. Go to Wall Street, be a hypocrite for a couple years, collect a fat paycheck and then spend the rest of her life sensationalizing and profiting from it. She already has a good start.
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Interesting article about the "dream" of home ownership and the limitations home ownership pose to gainful employment and a strong economy. Read Washington Post story,
http://www.washingtonpost.com/wp-dyn/content/article/2010/04/08/AR2010040806444.html
It is a good article to read particularly if you are a twenty something trying to buy a home.
From the article: "In a study that Bucchianeri conducted in 2005, at the height of the housing boom, she found that among people with equivalent incomes, renters were significantly happier than homeowners, spent more time with friends -- and weighed 12 pounds less, on average."
"...the work of British economist Andrew Oswald, who argues that high rates of homeownership in the United States and Europe lead to higher rates of unemployment. "Part of the difficulty is not that unemployed people are themselves the home owners; it is that unemployed men and women cannot move into the right places," Oswald wrote 1999. "High home ownership levels block young people's ability to enter an area to find a job."
What strikes me as being at odds with the idea of homeownership is the very nature of our current economy: not only do people have to fear being laid off, but, often, people only stay at a job for a few years before moving to another company or organization. In the 1950s, homeownership made sense. Most of the population had a factory job, and had the same job for 20 or 30 years until retirement. That's not the case in the non-industrial, service economy. If you're living in your own house, you want a lot of employment opportunities located within the range of a reasonable commute.
Thanks for the link Alex.
I don't work in the industry but do follow the financial news somewhat. This mess was telegraphed long in advance and it's not done yet.
Back in 2007 when the first inklings about the subprime crisis were first making their way into public awareness, there was a wonderful summation by a noted British comedy act.
If you haven't seen it yet, try
Subprime Crisis
or google "Bird and Fortune subprime".
interesting article, dc2. I have one question...what the h. is the "Atlas district"? I have lived here my whole life and have never heard of this alleged neighborhood. Same with my husband. ????
Meshell...
The Atlas District"
Jeremy-
Haha I have never seen that page before, but it is really funny.
Everyone-
Is it just me or was there a ridiculous number of open houses this weekend. I still am going to wait another couple of months before I worry too much about checking them out, but I opened redfin and it looked like there was an open house on every street in northern Va...
Housebuyer,
It was a well-prepared weekend of open houses. Realtors basically threw one big collaborated shin-dig in anticipation that the markets are about to take a big dump. Do a google news search on "realtor" and you'll find articles for pretty much every county/state in the country doing this.
it does appear a lot of sellers who have "Choice" are seeing if the market will let them out now.
hb,
It was a national open house weekend event sponsored by NAR.
We went to one up the street from us. The agent held a 12-1 neighbors open house before the 1-4 regular open house. (although the listing says 12-4 so mayber there were some buyers mixed amongst us). The nieghbors time frame was packed. Everyone wanted the free food and ideas for things to do in their own houses. Passing by later the regular open house seemed less so by lack of cars, but who knows.
It was a gorgeous house and totally deserves to sell for list, it might even go a tad higher.
The addition completely solved my issue with the capes in the neighborhood (lack of main level living space) and was well done. And the kitchen was extremely tasteful with what I felt were pretty timeless as well as eminently practical choices. The new gutters and buried gutter extensions were a nice touch. The replacement windows were of the less expensive variety though, they didn't get the custom fit ones, so all of them had a gap. It really confused me why these gaps hadn't simply been caulked... But assuming the buyer doesn't notice or doesn't care about that one detail, I think it will go quickly and for list.
http://franklymls.com/FX7303153
Sorry it has zero pictures...
Kevin & Pat-
That makes a lot of sense. I assume this weekend will be big too then. It makes a lot of sense having the open houses a couple of weeks before the credit expires so there is enough time to find a buyer negotiate and get them under contract. Either way it was crazy looking at the map. I am used to seeing 10-20 properties have open houses that are somewhat near where I am looking. This weekend it was probably more like 150
Cara-
Thanks for the explanation.
NY Times Robert Shiller
outlook for housing...
It's a very interesting article, I think he gives his research too much credit in creating the breaking of the bubble... I would credit the limit of lender stupidity and timeframe of the most foolish of the loans more. Inventory accumulation... Not the small segment of the population reading housing blogs who might have known about Shiller's chart.
I'm with you, cara. Media reports' of Shiller's research may influence consumer "thinking", and these in turn may mediate or be one of many factors, rather than a primary cause of the housing bubble's bursting. When people could no longer get financing to gamble, when many people were priced out, or only the sanely risk averse were left as prospective buyers, as a result of the factors you mentioned, prices are going to fall.
Ace,
What's funny is that he also thinks to think that the formation of a bottom will be based on perceptions rather than what I'd call fundamentals. While the bubble hasn't fully unwound back to the pre-bubble inflation adjusted trend line, in many (most?) places entry-level housing is on par price-wise with renting. While yes, this is dependent on interest rates, I do think it's enough to create demand at current price points. In fact I think that's what has already happened. Things didn't turn around last spring because people were hopeful about the economy, they turned around because prices had fallen enough to reach the well of untapped demand that exists once buying becomes an affordable option.
This doesn't tell us what will happen or play out in the move-up market, but the stats sure look like higher price ranges are thawing to me. At least around here.
Hmmm, this month's monthly reports inconveniently don't (yet?) have a county by county breakdown with the condo, SF attached and SF detached numbers. Grr.
There have been some interesting studies on the psychology of economics. Some things are somewhat self-fulfilling.
Va_investor,
Sure, some things are self-fulfilling, but wouldn't that be more likely to be the explanation for momentum not turning points?
The new direction of the turning point sustained by self-fulfilling beliefs I'd believe... And I guess that's all Shiller is saying, that he'd like to see the turning point translate into a self-fulfilling belief. But if the fundamental conditions that created the turning point continue to exist, then I don't see the problem. Eventually people's beliefs will get grounded by the observed reality of a sustained bottom. This second half of the process just may or may not have happened yet.
And Shiller is rightly concerned that many places haven't reached fundamentals yet. Seattle for one (as it was late to the part). Higher end California also seems to be floating on a sea of 4 or more times income is still okay.
Cara-
I think it also had something to do with the economy. While the economy was collapsing and housing prices were falling 1-2%/month people were willing to wait. When everything started to flatten out (not necessarily improve, but at least stopped falling) people were more willing to jump in.
Cara,
I would also point out that memories are short. People are becoming more and more familiar with, and possibly resigned to, the prices they've seen. The number of people on this blog that are still holding out for lower prices continues to dwindle.
That has a real impact. How many years is someone willing to wait to get on with their lives? People like anonymous and myself who were willing to wait 7 years are most likely way fewer in number than those that just want to get on with things.
I finally hit my comfort point where I'd rather have a house and be wrong by 10% on the price than wait another 2 years and only be wrong by, well, 10%... :)
My $0.02
I agree that memories are short. I also think that the absolute shock of the banking meltdown has disipated and people have come to accept current economic conditions as more "normal". People are peeking out their windows and seeing that life continues.
That said, my anxiety levels wax and wave on a day to day basis. But I am a worrier.
mytwocents,
My mental picture has the time frame even shorter than that. New entry-level potential buyers reach "that time in their life" where by virtue of age, job-status, marital status, roomates moving out, or whatever they feel it's time for them to buy.
When prices aren't competitive with renting, then those new buyers see what's available to them in their price range and recoil (unless everyone is telling them to buy now or be priced out forever, or get an IO loan and thereby gigantically increase their purchasing power). They then say, hmm, guess I've got to save up for a few years. But when new buyers figure out their price point and like what they see, then they go ahead and buy.
There's no waiting or memory whatsoever. Only if prices are exorbinant do buyers take the time while waiting to educate themselves more to the market forces. Most people advising young buyers bought at least 5-6 years ago so their conception of prices and interest rates is always out of date.
But what you're talking about is what consitutes pent-up demand. All the buyers who would have entered the market during the run-up or peak but didn't. That's real too, and may indeed have constituted the first of the buyers that helped decrease the overhang of inventory from 2006.
meant "wax ane wane".
I better find my glasses....
Cara,
That's an excellent point on new buyers not even having "a memory" and I agree. A corollary, I have a ton of friends who already owned homes who didn't even realize, 1. How big the run up in prices had gotten. 2. Didn't realize how crazy rents were.
When you have a choice between paying $3k for a rental, or $3k for a $450-500k mortgage, you're probably not too worried about what prices were like 5 years ago.
My $0.02
A friend of mine says that she went to see a new development in Hay Market over the weekend and really liked it. Her realtor said to her that since was it's "new" development (under construction), he could not represent her for negotiations and that she had to negotiate on her own. Is this right? He added, if a house is old, and for foreclosure, he can negotiate on her behalf. Does all of this ring true?
mytwocents,
Yup, partially because the tax appraisals lag and may reflect only 90-95% of the value anyway, I think most homeowners were unaware of exactly how high the comps were at peak. And most of their reaction consistented of, dang, I'm glad I didn't have to pay that to buy this place.
Tom,
The builder probably has it's own sales office and probably won't pay realtor commissions. That would be my guess. During the boom times a lot of builders did this.
Of course, when things started going south most of them started offering commissions to get realtors to bring prospective customers their way. I'm surprised this isn't still the case.
My $0.02
Tom,
No that is not normal. Frank at Frankly Realty had a blog post on it once, but you always should be able to have representation of your own if you want it.
It's possible that there's something specific about this development? Maybe the hidden realtor only comments state that no buyer's agent commission will be paid?
Tom, there's no reason your friend needs a realtor to represent them for any purchase, let alone that of a new house. That is of course with the exception that the realtor wants a piece of the action, as is almost always the case. If the builder is offering commission, have your friend negotiate with the realtor for a rebate. That is, say "you're getting X thousand dollars to do almost nothing, so give me half."
I obviously don't hold their cartel in very high regard and think it's highway robbery, so that's just my opinion=)
Meshell,
Do not feel bad you did not recognize the name Atlas district. That is because it is made up. Realtors and developers have made up a few names for neighborhoods in DC in an attempt to spur gentrification. It's all a bit silly.
mytwocents,
I think the number of people in 2002 and 2003 who though there was a bubble was tiny. I think it was more around 2005 and 2006 that people started to think there was a bubble. I agree that at some point those people will get tired of waiting but I think most of the bubble sitters still have a year or two more to go before they are too tired to wait.
I would also agree with cara's description of the average buyer. I know many people buying just because they are marrying. Or having a kid. Or finally can afford a home they like. Many people refrained from buying in 2006 because everything they liked (even after compromising) was too expensive for them. Few people sit down and think about whether the prices inherently make sense.
If anyone doesn't mind living on the north side of route 50 in Arlington, this REO's price has just dropped again.
http://franklymls.com/AR7226037
advice,
So, the previous owners had the entire interior of the house painted before selling it. Evidently they either went with the lowest bidder or allowed it to be painted when it was too cold or wet out because on almost every wall, the paint will come off if you put masking tape on it. (hanging paint samples). This weekend when painting the kitchen we discovered this is also true of the ceiling. (we masked the ceiling rather than just edging carefully and with a wet rag in tow). So, this week we'll be sanding and fixing the huge tears in the cieling the masking tape made, and next weekend our project is to prime and repaint the kitchen ceiling.
So, anyway, here's my dilemna. The ceiling looks fine, it just falls off with tape. (a) From now on for the rest of the entire house we could just prime and repaint the ceiling. Or (b) I could do my usual careful edging job and leave the ceiling alone.
(b) is obviously cheaper, way less time consuming, and involves less covering everything in tarps and/or risking drips. (I hate ceilings) And if there are problems with the ceiling paint in the future we can always paint it then.
(a) has the advantage of being able to use masking tape thereafter, which means I can trust my husband to edge as well as me or close enough. And it means once a room is done, it's done.
Whoever did these paint jobs should be shot. I swear whoever chose the color picked it so that when they painted over the outlets (which had been black) they would be "off-white" in that electrical color. (which is a fire hazard and we've been replacing all of those too). And I seriously think they put up one topcoat only, wherever they could get away with it. Probably latex on top of oil at that. What's funny is that neat-ness-wise the job was impeccable. Just actual quality/durability-wise does it suck. So, someone who knew exactly what they were doing and was just fleecing either the owner or us depending on how much they charged.
That's the thing about fresh paint jobs. They can be just as cheap as fresh carpet or as poorly done as new hardwood/pergo (warping over time). You may think, oh fresh canvas. Nope, prime prime prime. I love what primer does, I hate painting with it, it's basically glue...
But hey, the seller got what they wanted, they sold the house, and we were planning on repainting with colors everywhere anyway. Just was sincerely hoping to skip the ceilings.
Ace,
I remember that house. The one near the pedestrian bridge.
I don't understand why Tom and a few others deny the bubble burst in North Arlington when you see price history like this:
PREVIOUS LISTING PRICE HISTORY
Date Price % Change Days at Price
8/5/2008 $1,275,000 50
9/24/2008 $1,190,000 -6.7% 57
11/21/2008 $1,190,000 +0%
CURRENT LISTING PRICE HISTORY
Date Price % Change Days at Price
12/25/2009 $939,900 19
1/14/2010 $919,900 -2.1% 21
2/4/2010 $901,900 -2.0% 24
3/1/2010 $883,900 -2.0% 21
3/23/2010 $849,900 -3.8% 20
4/12/2010 $828,900 -2.5%
cara
what you describe is cheap latex painted on oil.
My parents would do that.
Pennywise pound foolish, that was them.
i remember them painting harvest gold onto lime green walls. the stuff was peeling when you touched it.
Interesting article in yesterday's Washington Post Magazine about Wakefield HS's former principal.
pat,
yeah, but these were someone else's pennies, and my pounds.
TBW said: "I don't understand why Tom and a few others deny the bubble burst in North Arlington when you see price history like this."
Because it's a house that simply doesn't represent North Arlington. Why? Because it's on Route 50!!!
Geez....
Here is Time magazine interview with David Rosenberg, formerly of Merrill Lynch.
He was a bit later than Roubini to identify the housing collapse and bank failures but he still got it right well before the actual crash.
According to him, a second recession is very much likely in the next few (maybe 2--3) years and it seems to me he makes a compelling case, though it is hard to predict exactly when.
Of particular interest to the real estate boosters here:
"Housing is a sector that is receiving tremendous support from the government — at all levels, whether it's through FHA financing or home-buyer tax credits, or the fact that the Federal Reserve for the first time ever took a trillion dollars of housing loans onto its balance sheet. And yet with all of that, whatever recovery we're seeing in the housing market is extremely feeble."
TBW said: "I don't understand why Tom and a few others deny the bubble burst in North Arlington"
The people who were denying it were the bears who just last spring, were telling us Arlington "had yet to come to terms with the market" or " could not simply continue to levitate" or "was due for a nosedive", etc, etc, etc.
Of course, thats when the median prices started going up...
tedk-
His recession comment is very weak. Effectively he doesn't know when it will happen, but says we will have another recession at some point in the future. This is always the case I would have thought 3-5 years from now, but 2-3 is also possible. A lot of his points are backward looking and saying that times were better in 2006 than now. This is true, but not relevant, I think people care about will things continue to improve not how great were things in the past.
He also makes it sound like it is a bad thing that housing starts and auto sales are low. Personally I think both of these are good things, too many cars & houses were built over the past decade and in order to get balanced markets for these goods we need to under produce cars and houses for several more years.
So although I agree with many/most of his points I don't think the tone should be as bearish as it is.
my favorite from the article:
"Remember back when the FASB rule 157 [which requires that investments be "marked to market"] was suspended. To me, that change in the accounting legislation was a very big deal in providing this lift to the financials. Of course, it doesn't mean we get to anything remotely close to [market] price discovery, but that was the tide that lifted the rest of the boats — and it absolutely killed anybody who was shorting the market.
Read more: http://www.time.com/time/business/article/0,8599,1980989-1,00.html#ixzz0kvOZ2Ih0
"
Suspending Mark to market has left the banks with huge piles of garbage on their balance sheets, and instead of repairing them, they've paid more in bonuses then they have earnings.
cara said - "It's a very interesting article, I think he gives his research too much credit in creating the breaking of the bubble... I would credit the limit of lender stupidity and timeframe of the most foolish of the loans more. Inventory accumulation... Not the small segment of the population reading housing blogs who might have known about Shiller's chart."
Absolutely..it seems inaccurate to say blogs/charts burst the bubble. We built and speculated on too many RE than actually were needed. Affordability became ridiculous and income/price, price/rent ratios do really come into play after a while.
The trouble is none of those fundamentals still line up by a long shot. Most analysts are celebrating poor tax-payer sponsored bridge that can only go so far....
Spider-
I am pretty sure that rent vs. buy calculation are not bad across the country. Sure they do not work where we want to live, but policy isn't based on Vienna...
CNBC Blog:
"The nation's foreclosure inventories reached record highs. February's foreclosure rate of 3.31 percent represented a 51.1 percent year-over-year increase. The percentage of new problem loans also remains at a five-year high. The total number of non-current first-lien mortgages and REO properties is now more than 7.9 million loans. Furthermore, the percentage of new problem loans is also at its highest level in five years. More than 1.1 million loans that were current at the beginning of January 2010 were already at least 30 days delinquent or in foreclosure by February 2010 month-end." http://www.cnbc.com/id/36422316
Rather than abating, foreclosures & delinquent loans are intensifying.
HB,
I am not talking just about Vienna.
Are Home Prices Cheap?
"Using a Price-to-rent ratio, akin to a price-earning ratio, Deutsche Bank analysts argue that home prices could decline another 11%. During the early 1990s, the average price-to-rent ratio was 16.2. During the mid 2000s the ratio reached a peak of 24.7 in Q2 2007 and has since fallen to 18.2 in Q4 2009. However this 18.2 reading is still elevated compared to that of the 1990s.
During the 1990s a booming economy did little to push price-rent ratios out of equilibrium as both home prices and rents moved in the same general direction. In our view, rents are likely to decline, thus prices may need to fall even further than the 11% that the price-to-rent ratio implies."
(source: Deutsche Bank "Rent or Buy?")
hb,
Oh..and you said you are pretty sure....really?
"TBW said...
This is not the only house in North Arlington that we've seen major price drops on this blog. But you can continue to believe it's still 2006 in North Arlington."
Agreed, but that house isnt really representative of whats goin on in N. Arlington. For each dog like this, there is another that is pretty much unscathed. Remember your "show your cards" house?
Frankly, I find it insulting to the meaning of the word "bursted" if this is all I can expect. I never imagined I would be losing out in a handful of bidding wars in a "bursted" bubble market.
Spider-
I still stand by my comment that rent vs. buy is not bad. Sure it is not the best it has ever been, but it is better than average.
It is a little ridiculous to only use a P/E ratio without discussing interest rates. In general P/E ratios are higher when interest rates are low and are low when interest rates are high. There is always a trade off between investments so their relative P/Es tend to move together. Thus with interest rates very low housing and stocks should and do have higher than average P/E ratios.
If you look at the chart, which corresponds to the 11% drop you talked about you will see that an 11% drop would make it the lowest price to rent ratio in the past 25 years. price to rent
Although the ATMP says renting is slightly cheaper than owning it also says buying now takes the lowest percentage of after tax income that it has taken in the past 20 years. housing costs
So with the charts in your article I think it is hard to say now is a bad time to buy. Yes it may not be the best ever, but it definitely isn't bad.
hb,
One can't make any sound valuation calls based on short-term variables...
I am sure you don't think prices will halve if interest rates were to double or triple.
Cara
You aren't going to like this, but, i'm going to suggest, you fix what they did wrong.
that means probably sand all that cruddy paint down, not neccessarily 100% but nough that you can get a decent primer coat on.
then prime,
wait 24 hours,
then paint 2 coats.
"many times over the last few years, I have said to expect the income tax rates to shoot through the roof."
...and then deleted your post and disappeared for another few days.
Spider-
Of course I don't think housing prices would be halved if interest rates doubled (I am talking about 10 year rates), but housing prices would likely fall some. You can always get an FHA loan, which is transferable and this loan absolutely will become more valuable if interest rates rise. You still missed my point, which was that it isn't really fair to say its a bad time to buy, because the price to rent ratio is not the lowest it has ever been. A big part of this is that rents are very cheap right now do to the overbuilding. Since very few new rentals are being made rents will eventually start rising again putting upward pressure on housing. So locking in your housing cost at the lowest percentage of income in the past 25 years sounds like at least a decent time to buy.
Cara, my sympathies but I agree with Pat about why you're having the problem and how to fix it, with one twist: pay a painter to do this and cut back somewhere else if you have to.
Wall prep and painting most of us can do, but pros can more quickly handle ceiling problems with less physical strain and risk. So give yourself a break and work on something else--let a pro do the job you hate.
So, when you guys say sand, you mean the whole cieling, not just where it's pulled off from the tape?
It was my understanding that the concept of primer is that not only will it make a finish that the topcoat adheres to, but that it will seep into the underlying layers and create a new bond with the wall/ceiling. (If you could see it, it's such a paper thin coat of paint, it shouldn't be hard to seep right through it...)
We've definitely decided to get it all done right and fixed now. Prime the whole thing walls and cieling, paint the cielings, mask and paint the walls. It'll be slower simply because there's more to paint, and more drying time, but it will also be easier because you don't need to worry about hitting the cieling or hitting the walls with the primer or the cieling paint.
So, it will slow us down on our timeline to repaint the whole house, but it will be easier in the long run. And the one good thing about their crappy cheap paint job is while it is the color of yellow masking tape, it is a livable color and clean looking so if it takes us a year to actually work our way through the whole house, so be it.
But we've got gutters and tree triming and a new electrical panel, new HVAC and water heater, new washer and dryer, new dishwasher all coming down the pipe in the next 1-5 years, (already put in $11k to replace all the windows with really nice high quality replacements) so anything we are capable of doing ourselves, we'll be doing ourselves.
OTOH, if I thought the whole thing needed to get sanded, dude, painters. I'm definitely not taking a sander to the ceiling. Extension pole rollering I can do.
Contrarian Did you delete your posts because you are a sockpuppet?
contrarian,
If the reason you deleted your posts is so obvious but isn't one that's been given here, enlighten us. Because the possible motivations that are obvious to us, like you were wrong and you're paranoid and delusional, have been said.
contrarian,
And I think you missed the part where I pointed out that we bought our house at a 16% DTI. If we can't afford our mortgage due to higher taxes??? This country's going to be in a lot more trouble then just us having a hard time paying off our house.
Inflation and growth are the way out of this, not higher taxes. We probably won't grow anywhere near as quickly as we did in the 40's 50's and 60's. But we're also not in as deep of a hole. If the world economy has changed such that we can't grow, then you're right, we're as screwed as Greece. But I don't see any reason to believe that's the case. You do. That's nice.
Really our differences can all be summarized by you read nut cases, and I read Krugman. Refer to his columns and blog if you want to know what I believe about how we'll get out of the current debt to GDP hole. Everything that I "think" on economics is derivative from Krugman or Calculated Risk.
Cara-
I think Contrarian is missing the point on his tax charts. He is looking at the marginal tax rates on the highest earners. Sure there were times where people making millions a year were taxed 70%, but the average person still had reasonable tax rates. It is possible tax rates rise dramatically for the super wealthy (I doubt it and hope not), but if they do that will only have a minor impact on most of us, because we do not fall in these categories. I fully agree that Bush's tax cuts will be removed, but changing the tax rates a couple of percent will not be the end of the world for most of us here.
The reason I think/hope rates will not sky rocket is it destroys incentives for entrepreneurs. If you remove a lot of the upside from creating a successful business there is little reason to work your ass off and risk your starting capital.
Cara, I'll defer to pat, but I believe you need to sand off the entire cheap latex layer in order to get to the oil based layer. Then you MAY need to use oil based paint after the primer. It's possible that with something like Kilz you can change to latex going forward. Alternatively, if you want to use latex, you may need to sand off the oil layer as well to get a really good bond.
Mama always taught me not to mix latex and oil, but technology may have improved, and with more concerns today about oil-based paints, the new latexes may work over primer. Maybe there is something trustworthy on the web about this?
This is why I leave ceiling jobs to the pros.
Ace,
An enamel primer layer between oil and latex allows you to use latex going forward. That I know for sure. Today's primer's are actually pretty amazing. There's Kilz and moisture barrier ones, and mildew killing ones, which as far as I can tell I don't need.
There's such a thing as oil-based primer, which won't help me, and latex-based primer which likewise isn't sufficient to stick to the oil underneath, but the enamel one, this is one of it's many purposes.
If I had to use oils, I couldn't do it at all until after the baby was born, and then not a good idea for a while.
But I'm pretty confident that my understanding of primer, and the amount of sanding needed in the case is accurate. Step-father in law was a contractor who mostly did painting for a living, although a lot of roofing too. And my mother-in-law's opinion was, oh, yeah, all you need to do is sand down the patch you pulled off and prime it well. If it were peeling off on it's own, that might be a different story, I'd have to ask.
In this instance I'll trust my mother-in-law. Everything I've found on the web agrees with her.
If it were peeling on it's own, then yes, they'd tell you to sand the whole thing off.
It was really just a question of, the ceiling isn't peeling now, do I want to preventatively take care of it now, or just go ahead and paint and fix it later when it becomes a problem.
And really? My trust level for contractors is nil. Why should I believe them if they tell me all it needs is primer? Why would I believe them if they tell me it needs to be sanded? It's just like car repairmen, if you don't know enough about cars yourself, you can't trust their reccomendations either. One guy could be trying to be the lowest bidder, one guy could be fleecing you for more money. If you don't already know the answer, you can't tell.
Control issues or just jaded? eh, I'll let you all decide for yourselves.
Now the other possibility is that there are moisture issues throughout the entire house, and the walls are just wicking moisture up through them, such that no paint job will ever stick. I prefer to think that this paper thin layer of paint and a cheap paint job are the problem. But time will tell.
"reecon said...
Contrarian Did you delete your posts because you are a sockpuppet?"
Perhaps he is involved with his "trustworthy" source Hal Turner in assisting the government on covert secret ops. If so, I can see why he wouldnt want a paper trail leading back to him -- its all very cloak and dagger you know...
Cara, sounds as though you have it nailed.
In the future--good contractors can save your marriage--ok, well, some free time, quality of life, and a lot of aggravation. I generally have not been steered wrong by checkbook.org ratings. And once you develop a good relationship with one or more (and they become aware of your circle of friends and family, to whom you may give their names as a reference), they have much more incentive to do fine work for you and continue the good relationship over many jobs, than to try to take advantage to make a quick buck on one job.
"Yes Leroy, I deleted many posts, but my position has been consistent for the last 18 months. "
If by that you mean your views remain nutty, then yes... that is consistent.
As for why you deleted your posts, that clearly has a lot to do with you attempting damage control and somehow thinking that making it harder to dredge up your old predictions would increase your credibility today.
If your old predictions had had any value you would have wanted to preserve them. That way when liars like "The Anonymous" tried to make things up about you you could easily refute him.
contrarian,
So obvious, and yet so complex as to require time? I won't hold my breath.
"I am really surprised you don't know why I deleted the comments, but I will explain when I can find the time."
Don't make it a big priority or anything.
Contrarian-
I am pretty sure it was saying it would raise the marginal rate on these people not their total bill. So if the family is making 250K there tax bill would not increase at all just the amount of money over 250K would see the tax increase. It is also a shame that it doesn't lay out its numbers well at all, because without these numbers there is no reason to suspect that are correctly calculating what taxes need to be to reduce the deficit.
I do agree with you that taxes are going up I will just be amazed though if they go anywhere near what you are thinking for families making a few hundred grand a year.
The article Contrarian linked is quite misleading. According to articles in the Post and elsewhere about this - sorry, don't have a link handy, but anyone sufficiently interested shouldn't have trouble finding these articles if you look for them-- the Obama administration asked what it would take to meet certain deficit reduction targets. Some pretty extreme figures resulted.
Reactions were generally that, politically, it would be impossible to even consider. The discussion then turned to what combination of lowering of expectations on goals and politically feasible tax policy changes might work.
Cleaning up expensive messes isn't easy, cheap or fast. And there is no free lunch.
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