I guess not guarding the borders well will now be a whole lot more expensive than it used to be.  For every undocumented alien who gets into the U.S., the health care cost will just keep on going up.  I have to say that if I were thinking about moving back to the U.S. given the proposed coverage I would do it for that alone.

It used to be that being a citizen of the U.S. meant something, but I guess that now it does not.  I can hardly wait to hear what happens when they turn away veterans and people who are paying massive taxes because the services are being soaked up by those who are here illegally.  That should turn out to be an interesting sight.

I don’t know about you, but I think this is a terrible proposal that has been added to the plan.  Health care coverage was never supposed to be about taking care of everyone, it was about taking care of U.S. citizens who could not afford coverage.  If we do not know who is a citizen, that is a failure that must be fixed before we move forward.

As discussed on this site within other posts, there are some who believe that we will not turn around this mess without having housing prices stabilize and turn back up.  There are just too many people who will continue to hit deep negative equity water and dump more real estate onto the market.

I really don’t expect to see prices continue to drop at 32% or more per year, which has been the case here in Las Vegas.  The prices are likely to continue to decrease in price at a decreasing rate.  Las Vegas, unlike many other cities, is adjusting quickly to price drops and my expectation is that we will hit the bottom sooner than many others.  That could occur when home prices find their way below the cost of construction or below their expected or forecasted value based on historic trends.

At some point the psychological aspect of the housing market will change, and assuming credit is available, there will be more people willing to consider a purchase.  The fact that things have fallen so far is of course going to stigmatize the entire market for quite a while. 

When will it happen?  That’s the trillion dollar question that no one can answer.  In Las Vegas we are already seeing many properties sell below what it would cost to construct them.  When you get to about $ 70 per square foot for an average home here, you are near or below the cost of construction (which includes the lot and site improvements).

When you consider the fact that the unemployed are staying that way for a longer and longer period, you can begin to understand why polls are saying that there is an “erosion of confidence” in our economic system. 

The problem is that there are no real signs that things are turning around.  The Press wants to jump on anything.  If a dog barks, or home prices stabilize in Beverly Hills, it must be an economic recovery.  In reality things are likely to get worse in 2009 with continued housing market problems and a new wave of commercial defaults and foreclosures coming our way.

No one really knows if 2010 will end this down market or if it will take much longer.  Real estate cycles can last decades.  In Las Vegas we have been told that there is a 5 year supply of commercial buildings, condos and homes that will have to be absorbed in order for us to return to normal.  Unless we see a mass exodus from California, which is not entirely unrealistic, it will take much longer than most people are willing to admit.

I’m not trying to be negative here, just report some dire information about our economy and the direction in which it is headed.  I am looking forward to the time when things get better, but it appears that we have to prepare for more pain not less.

It will be some trick if a  government sponsored national health care plan manages to survive without creating massive supply and demand distortions.  I’m still trying to figure out how my doctor, who I struggle to see when I need him, is going to take on twice as many patients as he now has and still provide me with a valuable service.  Most of the time I currently see his Physician’s Assistant or his Nurse, so if he doubles his load I will only bee seeing a medical tech of some kind.  I might as well just buy a good medical book.

I am also interested in knowing why my employer would be willing to continue to pay for my somewhat expensive health care coverage when he knows that I could at any time go on a much cheaper federal plan. 

As I have noted on this blog in the past, I’m not totally against changing the system that now exists.  I think the system is not being run in our best interest, how can it be when it is a puppet that belongs to big insurance companies?  Health care is one of those sacred areas where capitalism just shouldn’t be.  Do we need to make a buck on everything?  Years ago society left health care to health care providers.  Now it is run like a consulting business and you will find that, unless you are wealthy, you simply can’t afford those top shelf services that you may absolutely need.

A restructuring of the health care system is relatively easy.  Fix prices for services, and have the prices associated with hard costs . . not associated with lost profits as they are today.  Get the insurance companies out of the health care industry once and for all, but don’t substitute the government, that’s crazy.

it’s an eye opener because the article identifies negative equity as the main cause for mortgage foreclosure, not mortgage rate changes or unemployment, which many thought were the reasons. 

It is important to understand that foreclosure are happening because people are finding themselves in debt holes that are so deep that it would take them decades to get out of them, and rather than spend every dollar that they earn trying to make it right (pay it back), people are just walking away.

I imagined that most of the defaults were being made by individuals who were being forced into foreclosure because they could not make their mortgage payments, but negative equity foreclosures are made by people to proactively elect to default.  They are simply trying to better their financial situation.

I can identify with people who don’t want to be straddled with hundreds of thousands of dollars of mortgage debt.  It was fun buying the Mercedes and touring Europe, but when property values dropped and you find that you have to pay it all back, that is just downright brutal, right? 

Based on this new found knowledge, I will again speculate that the American people will elect to default on their large mult-trillion dollar debt in the next several years rather than pay for it via huge tax increases.  California is effectively defaulting its 24 billion budget shortfall via its I.O.U. program.  They should be starting from scratch with a zero based budget, and kill progarms that they just can’t afford, but in the American tradition they would rather default that accept the fact that they simply could not afford them.

The slow pay trend must be having a nasty impact on larger businesses with many outstanding  invoices.  If many companies are delaying their payments I could see how a slow pay trend could cause a great deal of pain.  This is kind of back to the “house of cards” argument that I talked about in some other posts on this site.  If enough companies start doing delayed payments, its could very well crash others by destroying their cash flow.

I guess that slow pay is better than “I.O.U. pay” that is planned, and may have started, in California.  Myu problem with their plan is that I can’t eat an I.O.U. and I can’t pay my grocery bill or power bill with an I.O.U. either.  I’m interested in seeing how the open market discounts California I.O.U.’s if they hit the street.  California gives you a paycheck for $ 3,000 and you sell the paper for what, fifty cents on the dollar?  Whatever the discount turns out to be, the people who receive them will still have to peddle the paper to buy groceries.

For all of the money that has been dumped into the economy of late by the government I’m not yet seeing a lot of it in circulation.  As discussed on this site, there is a lot of bank hoarding and investor hoarding of dollars.  I still think that it is just a matter of time and all of that money will start to chase hard assets.  We shall see.

I read an article by Martin D. Weiss, PhD entitled “California Collapsing” on the Internet, it is located at http://www.moneyandmarkets.com/california-collapsing-34271 and it is an eye opening report.  I knew there were some serious problems going on in the state but an 11.5% unemployment rate and a $ 24.3 billion dollar budget deficit were surprising numbers to discover.

With a mind numbing budget crisis, crushing debt, high unemployment, commercial real estate defaults increasing and a new wave of mortgage resets with 50% to 80% defaults likely in the home mortgage market, it is going to be a rough ride in the short-term future and in Dr. Weiss’s opinion there is ” a very HIGH probability that California will default.”

It has been my opinion that we would inflate our way out of our massive debt, but a default by a major state like California would solve their problem and possibly others much quicker.  Sure it would devastate a lot of people’s lives, but the government has already decided that a California bail out is not as important as the Wall Street bail outs since it has repeatedly turned California down flat after several requests for additional funds.

I have not been in favor of any bail-outs, so the near trillion dollars that was set aside for them has always seemed more than a bit unfair.  Many have asked, why bail out Wall Street and not states?  The default of a huge state government would bring with it an extremely bad precedent that may be followed by a number of smaller defaults.  I expect that the default of California would bring a number of other defaults, a virtual “house of cards,” that would be even worse for the general public than that which came from the Chrysler failure.

Nevada’s establishment of new Broker Price Opinion (BPO) rules that take effect on July 1, 2009 will allow about 20,000 real estate agents to express “price opinions” upon which decisions will be based by buyers, sellers, lienholders and third parties “making decisions or performing due diligence related to the potential listing, offering, sale, exchange, option, lease or acquisition price of a parcel of real property.”  In other words, for almost any purpose besides an application for a new loan.

One might ask, “are there any special qualifications required of an agent beyond the 1 or 2 weeks of real estate training required of agents for licensing to express such opinions?”  The answer would be no.  One might also ask, “is there any penalty for unqualified agents expressing opinions that are in error, and that may cost buyers, sellers, lienholders and others thousands or millions of dollars in losses?”  Again the answer would be no.

So what the Nevada State government has done with this law is allow the entry of thousands of untrained individuals into the valuation business at a time when valuing real property has become more difficult than it has been in the last 10 years.  Who exactly has this law been written to protect?

I have been a real estate broker for over 30 years and in 1991, after our country’s first financial fiasco with Savings & Loans, appraiser licensing was adopted based on a federal mandate.  The appraisal business has come a long way since then, and appraisers are so much better qualified than agents with regard to the valuation process that the professions have parted ways.  By allowing any real estate agent to act as a value expert is a giant leap backward.  

One wonders if this new law and its timing has anything to do with the fact that appraiser’s have not been willing to provide market value opinions high enough to support higher listings and the upward pressure on prices (see “Realtors Say Low Appraisals Sinking Deals“).

For those party’s buying “broker price opinion” products from real estate agents in Nevada, I guess the government has set up a situation for you where its “let the buyer beware.”  An army of unqualified real estate agents will be giving you a chance to purchase their opinion, but if it’s inaccurate you only have yourself to blame.

The liquidation of well over a million vehicles, in what has been a poor market for vehicle sales, will negatively impact Ford and foreign manufacturers.  Some have predicted that the sell off will cause massive layoffs as production is decreased, and that prices may increase on other vehicles in response to the disruption.

While no one knows just how bad things will get, it is clear that even under some of the most optomistic scenarios Michigan will be suffering over the next several years, and Michigan’s losses affect us all.  The black hole that will be created by primary and secondary job loss in Michigan will ripple through the State and adjoining states.  The job losses from the closure of hundreds of dealerships will hit many more states at a time when job retention is critical. 

There will be more waves in time as iron ore mining, steel, aluminum and parts manufacturing plants are hit.  Regardless of your ideology regarding the necessity for the market to allow such failures, expect the adjustment process will be painful for many.

It’s not like this psychology is new, this is a repeat of every downturn that I can remember.  The banks turn off the spigot when they smell risk.  It’s easier to make a few bucks safely than to put it on the street for a better return and lose the money.

Their are some private lenders of last resort out there, but the new practice is to ask borrowers for money before they can evaluate you for a loan.  That’s rich, you need money so the first thing they want you to do is pay them so that they can figure out if you are worthy enough to receive their loan.

The downward spiral kicks in when consumers who need loans to continue their business operation fail or commercial building owners cannot re-finance.  Banks want no part of buildings with high vacancy rates, so if you lost a real estate agent, a title company tenant and maybe an exercise business and can’t fill the space, you had better have holding power (deep pockets), because the bank is keeping their money.

So all that talk about getting more money on the street via the banks has turned out to be a joke.  If you give someone a million dollars and tell them to be generous with it, to make some loans and stimulate the economy, and all they did was send you bank statements that showed higher balances, you would probably be upset, right?  Well that is exactly what has happened with the banks, they took public money and hoarded it.  Many poorly managed their customer’s money when they had it, now they have become Scrooge with the bail-out funds.