Clunkers and Credits
The Cash for Clunkers program temporarily stimulated the
auto industry but has now come to an end leaving the dealers very nervous about
what lies ahead. Similarly, the
federal tax credit for first-time homebuyers has stimulated the housing market
as evidenced by the record setting increase in sales of previously owned
single-family homes 7.2% compared with June and 5% from July 2008, The National Association of Realtors
(NAR) reported Friday. The monthly gain was the largest on record for
existing-home sales, which NAR has tracked since 1999. But this tax credit will end December
1, 2009 and will raise two questions for the housing market.
1. How much of the uptick in home sales is
attributable to the tax credit as opposed to record low interest rates and
significantly lower home prices?
2. What's the game plan for 2010?
The answer to the second question is of particular
importance because on July 26 states reported an increase in their unemployment
numbers, with California leading the way at 35, 800 lost jobs according to the
Labor Department. This explains
why unemployment is expected to account for 60 percent of the mortgage defaults
this year, up from 29 percent last year according to Economy.com. The health of the housing market is
inextricably tied to the health of the overall economy, which means that in
order for there to be a real and sustainable recovery of the housing market the
economy must be shored up.
One of the continuing drags on the economy at large is the
persistent illiquidity of the capital markets. Banks are continuing to use the spread between their costs
of funds (federal funds rate/discount rate of about .05%) and market interest
rates of about 5.5% to replenish their cash reserves. That is why the share prices of the banks that survived the
mortgage meltdown have risen so dramatically. The problem is that for better or worse we live in a credit
driven society. Until small
business and consumers can begin to get credit again, economic recovery will be
difficult.
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LOL - Laughs OnLine
"Fluffy surprises Mittens with a left jab"
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What's the big idea?
License and Registration
You can always tell when a highway patrol officer is on the
freeway because invariably everyone slows down to a very respectable 65
mph. This universal fear of the
highway patrol results from the fact that their wrath takes the form of not
only a monetary fine but the two-headed monster represented by either traffic
school or increased insurance premiums.
I imagine that this deference on the freeway fills highway patrol
officers with a sense of power as they pull over intimidated drivers and walk
menacingly up to the window with those ominous words, "license and
registration" or even worse "do you know why I stopped you?". Of course you know why. What you really would like to know is
where were they hiding. But, if
the patrol officer feels flushed with power, how does the parking enforcement
officer feel who rarely gets the pleasure of seeing the victim? I will explore this branch of law
enforcement in the next issue.
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Share If You Care
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Sincerely,
Kwame J. Granderson
Equinaire
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