Friday, May 23, 2008

Profits are Obscene, but not for the Government

So, according to Obama, the Federal gas taxes imposed by our government don't amount to much. Over a three month period the taxes charged by the government amount to about $30.00. The Federal tax gas is $0.18 per gallon. Looking at that as a "net profit" the government is making about 4.8% profit margin on each gallon sold.

Now lets look at what the oil companies make per gallon. The average over the last 10 years is what it is now, about $0.08 per gallon. That equates to a profit margin of 2.1%. So the government makes over twice as much as the oil companies do on each gallon of gas sold in the US.

Now, what does the government do to earn that kind of return? Squat! that's what. In fact, they not only collect the gas tax, but they also collect income tax on corporate profits, in the tune of around $48 billion last year. That's an even higher rate of tax than the per gallon tax they collect. And again, what did they do to earn that money......Squat!

Now, what did the oil companies do to earn their smaller share of net profit, how about everything. They found the oil, they drilled and pumped it out of the earth. They transported it to refineries, the few we have left, and produced gasoline. Then they trucked it around the US for us to use in our cars and trucks. This is on top of the capital out lays they loose when say, a dictator just takes their assets and provides them little or no compensation, ie: Hugo Chavez. Dealing with countries that don't have our best interests at heart produces other costs we can't see.

Now Obama says that the small amount of taxes we'd save is so small that it only amounts to only a half a tank of gas over 3 months. But then he thinks that the smaller amount the oil companies make is obscene and should be taxed extra. And then he'd take that money and use it to find ways to not use the product that produced these extra taxes in the first place. The man has no clue. And the knuckle heads in the Congress have none either. Even my own congressman, Rick Keller, had to chime in. He has the right idea for the production of more crude, but he still had to get his digs in on the executive pay. See his questioning here. I want to hear what he says about refineries, asking the Exxon exec. why they haven't built any more. It's the government Rick, and all the environmentalists that they don't want to piss off.

Again, as I've said in the past, more drilling, in our own country, is the only way to get a handle on gas prices. Looking at the facts above, the government and the oil companies will still get theirs, and if it comes from the US, such as ANWR, the Florida and Calf. coasts, shale deposits in the upper west US, we would keep the majority of the money spent on crude oil here at home. If the government wants to stimulate the economy all they would have to do is let the drilling began. Jobs would be created, more money would be in consumer's pockets to spend, and fewer dollars would flow out of the country. It's amazing, if the government did less, the country would grow more.

"Government is not the solution to our problem. Government is the problem."

Ronald Wilson Reagan, First Inaugural address (1981)

Monday, May 19, 2008

This is Scary, Infuriating, Maddening, If it's True!

I found this on Neal's News, Neal Boortz' web site. I thought I'd watch a little of it just to see what he was talking about, after the first few minutes I was hooked, I watched the whole hour and 15 minutes. He's a little hard to take, but, if what he says has any merit at all, and I'm seeing some of it come to pass as of today, we may be in a world of hurt. Try to make it though the whole thing, and think about the price of gas today, this was recorded before Oct. 24th, 2007. What he says is plausible, and where he gets his info from is credible. He will make you think, and what I'm thinking is making me uncomfortable.

If you're wandering why we won't pump oil from ANWR, it's not because environmentalists, and Global Warming, think about that as you watch, and all the conspiracies that come to mind. Who's making more money off the sale of oil than the "Big Oil Companies", see what he says and then think about it. Why is the U.S. Dollar falling like a rock? Why is oil so important? It's not why you think.

The embedded video is the first part of 8, if you want to see the whole thing, click on the link to the Google Video. He might be a loon, he might be way out there, but if he's not.....

Friday, May 16, 2008

This Could Mean the Bottom is Near!


Today Fannie Mae announced they are will be changing their previous position; regarding additional down payment requirements for financing a home located in a declining market. (see article below)

We have been in contact with the market as well as with the MI companies, to determine when we can begin originating loans under these new terms. As soon as additional information, becomes available, we will pass on to the group.

News Release
May 16, 2008
Fannie Mae Announces Single National Down Payment Policy; Replaces Policy Regarding Markets Where Home Prices are Declining

-- Fannie Mae (FNM/NYSE) today announced a new, national policy on down payment requirements for conventional, conforming mortgages the company will purchase or guarantee. Starting June 1, 2008, Fannie Mae will accept up to 97 percent loan-to-value ratios for conventional, conforming mortgages processed through its Desktop Underwriter® (DU®) automated underwriting system, and 95 percent loan-to-value ratios for loans underwritten outside of DU, in all geographic locations in the United States. The new national down payment policy will supersede the policy the company adopted in December 2007 that required higher down payments in markets where home prices are declining.
"As another part of our 'Keys to RecoveryTM' initiative, we are today announcing that we will be equalizing the down payment requirements for borrowers in all parts of the country, regardless of local market conditions," Marianne Sullivan, Senior Vice President, Single-Family Credit Policy and Risk Management, said. "This new down payment policy reinforces our goal to support successful home-owning, not just home-buying, as we seek to bring liquidity to all communities and help the housing market recover."
The new national down payment requirements of 3 or 5 percent will apply to loans for purchase of single-family, primary residences. Down payment requirements will vary for other occupancy, property and transaction types. The company will implement systems and operational changes over the summer to accommodate the new national policy.
"We are able to adopt this new, national down payment requirement, even in markets where home prices are declining, because our new automated underwriting risk assessment model DU Version 7.0 will limit risk layering and assess each loan more precisely," Sullivan added. "At the same time, we believe that equity matters, especially in this market. Down payments are a critical success factor in homeownership -- and responsible lending is good business."
Since the housing correction began, Fannie Mae has expanded its mortgage guaranty business to serve the market's urgent need for stability, liquidity and affordability. The company also undertook steps to help protect borrowers, manage the increased credit risk in the market, and fortify the company's capital position. Among these steps, the company has continued to assess and establish new pricing, eligibility and underwriting criteria for its business that more accurately reflect the current risks in the housing market and guard against the potential for foreclosure. These changes have been incorporated into DU and have included adjustments to credit risk assessment, loan-to-value ratios and down payment requirements, among other factors.
Among the changes in response to market conditions, in December 2007 Fannie Mae adopted a "Maximum Financing in Declining Markets Policy" that restricted the loan-to-value ratios on properties in markets where home prices are declining, essentially requiring higher down payments in these markets. The new single national down payment policy announced today will supersede that policy.
Fannie Mae Senior Vice President Jeff Hayward stressed the company's commitment to special affordable lending programs to support homeownership for families of modest means. "We are stepping up to provide more liquidity and affordability to some of the most distressed communities while also seeking at least a 3 percent down payment investment through our Desktop Underwriter system from borrowers to help ensure their success."
Fannie Mae will continue to provide support for homebuyers that need down payment assistance, and will continue to allow loans with Community Seconds® up to a maximum 105 percent combined loan-to-value ratio. Community Seconds allow a borrower to obtain a second-lien mortgage to help cover down payment and closing costs, with funding typically provided by a state or local housing agency; an employer; or a nonprofit organization. Fannie Mae also offers MyCommunityMortgage® and Flex mortgage products, which permit down payment assistance programs in the form of gifts and grants.
"We recognize that down payment assistance programs remain a viable tool for borrowers who can afford a mortgage long term, but might need a little help getting started," Sullivan said.
As part of its "Keys to Recovery" initiative, Fannie Mae is expanding its partnership with the National Council of State Housing Agencies. The company will provide up to $10 billion in financing to help Housing Finance Authorities (HFA) serve first-time homebuyers of modest means. In some cases, Fannie Mae will purchase HFA mortgages that have greater than 97 percent loan-to-value ratios.
The first "Keys to Recovery" initiative that Fannie Mae announced on May 6, 2008 also includes: streamlined refinancing for Fannie Mae borrowers whose mortgage balances exceed the value of their homes; improved pricing for jumbo-conforming mortgages to help borrowers in high-cost areas; and a neighborhood stabilization initiative with the Center for Community Self-Help for targeted areas with high home foreclosures.

Thursday, May 15, 2008

5000 Then, 25,000 Now, Sounds Threatended to Me!

Now I think I've seen everything! First we have the spotted owl, and it needed protection, there were very few of them. So we stopped the cutting of old growth forests, I can live with that. We had whales being killed by the thousands and we stopped whaling, why because they were very few of them as well. Here in FLA we protected the gator, why, because there were very few of them, and now we're over run with them. Now we need to protect the Polar Bear? Well first I thought we had done that, we stopped the hunting of these beautiful, yet deadly creatures back in the early 70's, and what happened? The population went from 5000 to 25,000 in 35 years! That sounds like a great result. So we stopped doing something that directly affected the bear, hunting, and they came back with a vengeance.

But now the government has further protected them from the "possibility" of loss of habitat because of a theory that has new holes being punched in it every day. Global warming is the biggest hoax ever to be perpetrated on the US and the world in history. Even the governments real scientists don't agree with this ruling about putting the polar bear on the "threatened" list of animals out there. NASA, not a bastion of conservative thinking, does not believe that the shrinking of the the Arctic Ice sheet is do to GW. (that's Global Warming, not George "Dubya") Please read this article from AEI //

All the other creatures that we have protected have all been declining in number or had their habitat being gobbled up by urban encroachment. But neither of this things are happening to the bears. Their numbers are strong, most populations staying pat or growing in number over the last 35 year, and this winter the ice was more plentiful than in the past, showing a trend of improving conditions, not worsening. With all that is wrong with this ruling about the polar bear the most sad and pitiful thing about it is that conservative republicans showed no back bone, no guts and mad no stink about it. I heard a little from radio but nothing from Washington about absurd this is and the negative impact this will have with regards to digging our way out of our energy crisis we've put our selves into. All the other countries that share polar bear habitat also drill for oil, responsibly and again, the bears have been thriving. Chalk another win on the board for the environmentalist, the ones that promote this idea that man is the scourge of the earth and that the world would be so much better if we were just not here. I'm going to want to see the looks on their faces when, in 50 years, were trying to make room for all the native peoples of the Arctic down in Washington state and Montana because the ice sheet and glaciers have covered what was once their homes. There's just as much chance of that happening than there is of the arctic ice melting away. In the mean time, they should go find a polar bear and ask for its thanks for saving its life, reach out and pet it and give it a little tofu burger. Hopefully the bear will do what bears do, and that's not sh_t in the woods.

Tuesday, May 6, 2008

WSJ The Housing Crisis is Over!

Here's the article we've been waiting for. God, I hope it's true. I have an Eco Degree from FSU so I get it and understand it. I think Cyril Moulle-Berteaux does a great job explaining why we may be at the bottom of the slide, namely "affordability"! He also explains why by 2009 we should be in be in a tighter housing market. Read on;

The Housing Crisis is Over -- Wall Street Journal
By Cyril Moulle-Berteaux May 6, 2008
The dire headlines coming fast and furious in the financial and popular press suggest that the housing crisis is intensifying. Yet it is very likely that April 2008 will mark the bottom of the U.S. housing market. Yes, the housing market is bottoming right now.
How can this be? For starters, a bottom does not mean that prices are about to return to the heady days of 2005. That probably won't happen for another 15 years. It just means that the trend is no longer getting worse, which is the critical factor.
Most people forget that the current housing bust is nearly three years old. Home sales peaked in July 2005.
New home sales are down a staggering 63% from peak levels of 1.4 million. Housing starts have fallen more than 50%, and, adjusted for population growth, are back to the trough levels of 1982.
Furthermore, residential construction is close to 15-year lows at 3.8% of GDP; by the fourth quarter of this year, it will probably hit the lowest level ever. So what's going to stop the housing decline? Very simply, the same thing that caused the bust: affordability.
The boom made housing unaffordable for many American families, especially first-time home buyers. During the 1990s and early 2000s, it took 19% of average monthly income to service a conforming mortgage on the average home purchased. By 2005 and 2006, it was absorbing 25% of monthly income. For first time buyers, it went from 29% of income to 37%. That just proved to be too much.
Prices got so high that people who intended to actually live in the houses they purchased (as opposed to speculators) stopped buying. This caused the bubble to burst.
Since then, house prices have fallen 10%-15%, while incomes have kept growing (albeit more slowly recently) and mortgage rates have come down 70 basis points from their highs. As a result, it now takes 19% of monthly income for the average home buyer, and 31% of monthly income for the first-time home buyer, to purchase a house. In other words, homes on average are back to being as affordable as during the best of times in the 1990s. Numerous households that had been priced out of the market can now afford to get in.
The next question is: Even if home sales pick up, how can home prices stop falling with so many houses vacant and unsold? The flip but true answer: because they always do.
In the past five major housing market corrections (and there were some big ones, such as in the early 1980s when home sales also fell by 50%-60% and prices fell 12%-15% in real terms), every time home sales bottomed, the pace of house-price declines halved within one or two months.
The explanation is that by the time home sales stop declining, inventories of unsold homes have usually already started falling in absolute terms and begin to peak out in "months of supply" terms. That's the case right now: New home inventories peaked at 598,000 homes in July 2006, and stand at 482,000 homes as of the end of March. This inventory is equivalent to 11 months of supply, a 25-year high -- but it is similar to 1974, 1982 and 1991 levels, which saw a subsequent slowing in home-price declines within the next six months.
Inventories are declining because construction activity has been falling for such a long time that home completions are now just about undershooting new home sales. In a few months, completions of new homes for sale could be undershooting new home sales by 50,000-100,000 annually.
Inventories will drop even faster to 400,000 -- or seven months of supply -- by the end of 2008.
This shift in inventories will have a significant impact on prices, although house prices won't stop falling entirely until inventories reach five months of supply sometime in 2009. A five-month supply has historically signaled tightness in the housing market.
Many pundits claim that house prices need to fall another 30% to bring them back in line with where they've been historically. This is usually based on an analysis of house prices adjusted for inflation: Real house prices are 30% above their 40-year, inflation-adjusted average, so they must fall 30%. This simplistic analysis is appealing on the surface, but is flawed for a variety of reasons.
Most importantly, it neglects the fact that a great majority of Americans buy their houses with mortgages.
And if one buys a house with a mortgage, the most important factor in deciding what to pay for the house is how much of one's income is required to be able to make the mortgage payments on the house. Today the rate on a 30-year, fixed-rate mortgage is 5.7%. Back in 1981, the rate hit 18.5%. Comparing today's house prices to the 1970s or 1980s, when mortgage rates were stratospheric, is misguided and misleading.
This is all good news for the broader economy. The housing bust has been subtracting a full percentage point from GDP for almost two years now, which is very large for a sector that represents less than 5% of economic activity.
When the rate of house-price declines halves, there will be a wholesale shift in markets' perceptions. All of a sudden, the expected value of the collateral (i.e. houses) for much of the lending that went on for the past decade will change. Right now, when valuing the collateral, market participants including banks are extrapolating the current pace of house price declines for another two to three years; this has a significant impact on the amount of delinquencies, foreclosures and credit losses that lenders are expected to face.
More home sales and smaller price declines means fewer homeowners will be underwater on their mortgages. They will thus have less incentive to walk away and opt for foreclosure.
A milder house-price decline scenario could lead to increases in the market value of a lot of the securitized mortgages that have been responsible for $300 billion of write-downs in the past year.
Even if write-backs do not occur, stabilizing collateral values will have a huge impact on the markets' perception of risk related to housing, the financial system, and the economy.
We are of course experiencing a serious housing bust, with serious economic consequences that are still unfolding. The odds are that the reverberations will lead to sub-trend growth for a couple of years.
Nonetheless, housing led us into this credit crisis and this recession. It is likely to lead us out. And that process is underway, right now.

Mr. Moulle-Berteaux is managing partner of Traxis Partners LP, a hedge fund firm based in New York.

Monday, May 5, 2008

Oil and Politics just don't Mix!

The year was 1980 and Congress passed and Carter signed a "windfall" profits tax on the oil companies and what happened? Well the Congressional Research Service found in a 1990 analysis that the tax reduced domestic oil production by 3% to 6% and increased our imports from OPEC by 8% to 16%. Now Barack Obama wants to do it all over again. Just like at church, he must have missed that day in Eco-101, that said when you tax something you get less of it.

In a very well written editorial from the WSJ on May 3rd, 2008, Review & Outlook section, the case for how utterly ignorant and political the fight over which candidate for president can stick it to the big oil companies, this "Windfall Profits for Dummies" piece is sharp and lays it out so anyone can see that taxing only begets less. (Oil that is)

McCain and Clinton want to have a tax holiday for gas at the pump. This would save approximately 18.4 cents per gallon. A nice start but not a solution. And when you mix politics into the holiday plans, it sounds like a vacation that Chevy Chase would have thought of. You have McCain saying that the general revenue will pick up the slack for the lost taxes. I'll go along with that, but it still doesn't give anyone incentive to pump more oil. Clinton wants to have the oil companies pay for the taxes we wouldn't collect. But the government already takes 35% right off the top to begin with, then she wants them to pay more? Obama doesn't like the holiday idea, but just wants the oil companies to pay for one anyway.

When we hear these incredible profit numbers, $10, $20 Billion in profits for a quarter, the average citizen sees that and thinks it's some how unfair. But when you take in to account the amount of sales that the oil companies take in every day, every quarter, every year, the profit margin, or the amount of money earned per dollar invested in the company, is about 8.3%, while the average for all companies is 7.8%. And this is a BOOM year for oil. If you look at the profits as a margin, oil is doing much worse than "Big Corn" right now. And god, don't get me started down that road.

Here's the economic problem with all of this. What is the goal for these actions, to lower the price at the pump, to increase oil supply, to increase exploration, energy "independence", ... WHAT? The editorial states the dilemma perfectly. "This tiff over gas and oil taxes only highlights the intellectual policy confusion – or perhaps we should say cynicism – of our politicians. They want lower prices but don't want more production to increase supply. They want oil "independence" but they've declared off limits most of the big sources of domestic oil that could replace foreign imports. They want Americans to use less oil to reduce greenhouse gases but they protest higher oil prices that reduce demand. They want more oil company investment but they want to confiscate the profits from that investment. And these folks want to be President?"

At close to $120 a barrel isn't now the time to start drilling. We know where so much oil is, the Gulf of Mexico, off California's coast, ANWR! We need refineries in every state, so storms can't interrupt supply, we need nuclear power and even more, cleaner coal plants. (we are the Saudia Arabia of coal in the world) As Captain Kirk would say, " Scotty, we need more Power", and boy do we ever. We can't "Reduce, Reuse and Recycle" our way out of our energy crisis, we have to produce our way out of it. I know the Democrats will not want to drill, but even John McCain says that he'd no more drill in the Grand Cannon than drill in ANWR! So I guess the continental shelves are off limits too Senator? God, where's Scotty when we need him?