Housing crisis and immigration

There is a solution for a current housing debacle: immigration. Legal: speed up Green Card process, temporary increase quotas for countries. It might add about 1 million immigrants, most of which want to buy a house. Of course, this is only some relief on the market, but every little bit of help is important now.

Complete solution needs, well, legalization of illegal immigrants. Total number is about 12 million, if you make usual assumtions (4 people per family, 60% families want and able to own a house), that's going to take about 2 million homes off the market.

Another politically impossible solution for economy...

China's bubble

There are two opinions:

1. China is in a bubble.

2. China is not in a bubble, economy is developing fast valuations are not very high.

My two cents: there is no way that one country, even as big as China, produces almost half of raw steel in the world and it's not a bubble.

Depression: great or not so great?

Interesting article from Paul Krugman here . Good explanation of current mortgage debacle in layman terms. Unfortunately, no quantification. OK, I see that if prices go down 20%, 13.7 million homeowners would have negative equity. How many of those will decide to walk away from mortgages? Mind, walking away might seem like a good financial decision, but you are ruining your credit score at the same time, which is a bad financial effect. And that makes all the difference. If there are 13.7 million foreclosures in couple of years, that's a Great Depression in the making. If there are 3 million, it's bad, but survivable. Current rate is close to 1.2 million for this year, not so awful yet.

Moral hazard, fairness and other bullshit

I'm tired of it. All those talks about bailout, moral hazard, fairness, blah, blah, blah. Economy is not about morality or fairness. It's all about efficiency. Nothing more, nothing less. If Fed allows banks and other lenders to fail, it will punish everybody, not only irresponcible lenders. Just read about Great Depression. If banks stop lending, economy stops. Period. Bad for everybody, even permabears (where are they going to borrow shares to short if brokers are closed?)

We are closer to GD than anybody thinks. If we are in recession right now, Fed needs to pump huge amount of money into economy just to keep it running, never mind stopping recession. Couple of Fed mistakes (and they are probably made already) and we are no better than Japan in 1990. One more administration thinking that markets can fix everything, and we are deep in it. The biggest danger though if China's bubble is burst now (or soon). Then it's global. Buy the apple cart.

Just in: Fed cut .25. "They know nothing!" (Jim Cramer, you are great. And you know it). Where I can buy a good used apple cart?

Help is coming

Thank you, Henry Paulson. You persuaded president at last. Now if uncle Ben reduces rates by .5%, we just might be OK. Might.

On the stockpickr.com, I see the first recommendation for my portfolio which makes at least some sense: DSX. I already have it in my sights.

Santa arrived?

I decided to do all blogging here. I had a blog on stockpickr.com, but I couldn't get into it (until today) after stockpickr software update.

Is it Santa Claus rally? Does it look too good? Wall of worry helps, of course, but it's based on very real concerns. Usually wall of worry consists mostly of old age grumble (I can do it too, and I do!), but now, real estate crisis is real. It's the first time since Great Depression when residential real estate prices fell for the country. With inept Fed, possibility of something like GD is, to put it mildly, higher than 0.

GD recipe consisted of:

1. Structural crisis.
2. Financial crisis, created mostly by government and Fed.
3. Real estate crisis.

We have (3) and possibly (2). Can we have structural crisis? Who knows. There were a lot of changes in economy lately, are they enough? Internet and globalization are significant forces, but it's hard to calculate their combined hit on old economic models. We have deadwood papers (sorry, newspapers) in decline, TV is about to be hit by internet advertising, outsourcing already done whatever it could. Yeah, music business is almost dead, at least big 5 (or is it 4 already?). All of the above is not a very big chunk of economy to create big structural crisis. But have I overlooked something? Can PayPal, Google checkout etc. undermine banking system? Can VOIP kill phone companies? And if both are true, is it enough for structural crisis?

If economists read this, they'd say: rubbish. But GD happened in Japan in 1990s and they still aren't out of the woods.

Uncle Ben (Bernadke), please, save us!

Today's grumble.

I have a portfolio on stockpickr.com: http://stockpickr.com/members/port/Alex-Portfolio/. It more or less represents my real life investments, although it doesn't reflect position sizes. One thing I don't understand about stockpickr.com is how recommendations are made. Recommendations for my portfolio from Pros: among others, two (!) insurance companies. Never mind that my portfolio is loaded with tech and foreign investments. Go figure. Recommendations from non-Pros are more understandable: three mature techs of five. Of course, I don't care for mature techs. They are have beens of tech world, just take a look at IBM.
Funniest thing, recommendations from "Both" don't include any from previous two sets. Looks like some strange math is involved.

But it's just me...