Your Exceptional Life

I received an email from Senator Boxer today. While I don’t discuss politics on this blog, her email contained some great history of Port Chicago. I’ve excerpted it:

Port Chicago was the site of a major disaster on the night of July 17, 1944 when an explosion rocked the Port Chicago Naval Magazine, an ammunition storage facility where ships were loaded with bombs, shells, mines, and other explosive devices to be used in World War II. That night, nearly 5 thousand tons of ammunition exploded, killing 320 service members (most of whom were African-American), wounding hundreds more, and destroying the surrounding town of Port Chicago.

Shortly after the explosion, those stationed at Port Chicago were ordered to resume work at a new site a few miles away. The enlisted personnel refused, citing unsafe conditions. The Navy arrested hundreds of sailors on various charges, and 50 men were charged with mutiny. All were African American, and all were convicted.

Thurgood Marshall took up the case of the Port Chicago 50, suing the Navy on behalf of the 50 sailors. Although he could not get the conviction overturned, he did win clemency for the Port Chicago 50. In investigations, no cause was ever determined for the explosion and fires, in part because so much damage was done to the area. One survivor sought, and ultimately received, a pardon from President Bill Clinton in 1999.

I thought that was pretty interesting history for our area and I plan to do some more research on the subject.

The new housing bill has passed and the President is expected to sign it.  It has some interesting components.   If you asked me a year ago about a $7500 credit for first time buyers, I would have just laughed at you.  $7500 didn’t begin to cover closing costs in Contra Costa County.  It’s a different world today and there are many places out here in the Shadow of Mt. Diablo that might benefit from this tax credit.  It works out to be essentially an interest free loan for 15 years.  This assumes that you stay in the house for 15 years.  We will benefit from the new conforming limits of 115% of the local median.

It doesn’t address the things that really caused the problem in the first place.  I’m not big on fixes.  I’m big on prevention.  The loosy goosy underwriting that went into the loans that became mortgage backed securities was a huge contributor to this problem, as was the designer loan products with teaser rates and huge interest rate adjustments.  These loans which allowed for artificially low payments allowed people to bid up homes to numbers that the property should never have seen.  It was the market then.  Now the market has changed.  I knew a guy who bought in 1991 at the height of the last run up.  He held that house for 8 years while the market worked it’s way back up.  In 2001 he could have sold that property for twice what he paid for it.

The market here will recover.  We have the infrastructure to keep people working.  If we were in an area supported solely by one factory, we could have issues but we aren’t.  We’re in a robust area with diversified business.  We’re feeling this, but we won’t become an dying steel town.

Some people catch fire for no particular reason. And some strike lighting.

Rest in Peace.

“The brick walls are not there to keep us out; the brick walls are there to give us a chance to show how badly we want something. The brick walls are there to stop the people who don’t want it badly enough. They are there to stop the other people!”

Randy Pausch

Unfortunately, sometimes in the middle of the night, I need these guys. I’ve needed them on Saturdays and Sundays. And they’ve always been there. I have taken a stray hit by a car to them and they did right by him. I took my dear Xica to them once she had expired. Toby Doby went to the bridge with them. On the night of June 17th I needed them again. Contra Costa Veterinary Emergency Pet Hospital was there on a Saturday afternoon when my beloved Doberman Pinscher Beauregard was having a hard time breathing. I knew in a 9 1/2 years old dog it may very well be bad news. It was. Dr. Matt Harsch delivered the bad news with compassion and understanding. Three days later when Beauregard couldn’t get his breath at all and was gurgling at 3 o’clock in the morning, Contra Costa Veterinary Emergency Pet Hospital was there. The only words I could say was “my dog’s in distress.” Dr. Dannucci was kind but firm with where we were and what would unfortunately do right by my dear boy’s soul. In the worst of conditions, the entire staff was beyond kind and understanding. I would say they couldn’t understand the connection between me and that dog, but he’d been there so many times before that they absolutely knew that we had captured lightening for 9 1/2 years. For that kindness I will always be indebted to their Doctors and their staff. So today, we give a shout out to the Contra Costa Veterinary Emergency Pet Hospital. I’m glad you’re in my neck of the woods.

There’s been a lot of ink spent on the run on Indymac. This is pretty interesting to me. Today I’m going to talk a little about FDIC insurance, SPIC insurance and how to keep your accounts safe and insured by the federal government. Once you accomplish this level of safety, there’s no reason to stand in line for four hours to get your money. Once the Fed reopens the bank, which is generally a day or so at the most, your insured money is safe and available.

FDIC is the Federal Deposit Insurance Corporation. It was founded in 1933 in the midst of the many bank failures of the Depression. Back then they paid out a lot of disbursements on failed banks. These days a lot fewer banks fail due to stricter regulations. If you walk into your bank and there is an FDIC sign on the door, there’s a good chance your deposits are insured to $100,000.  Before you make that large deposit, ask if they are FDIC insured.  The problems arise for consumers when they keep over $100,000 in a single account. Some instances where this might occur would be if someone sold a house and put the equity of $180,000 into an account for a month or two until they were ready to purchase their next home. The $100,000 would be insured, but $80,000 of this account and any interest earned would not be insured. The potential for loss in this account is in excess of $80,000.  It is always advisable to keep the account balance in any one bank account below $100,000 so that the interest in protected as well. So if there is $270,000 that needs to be held in a bank, it would be best to spread that out over three accounts, thereby protecting the principle and the interest.

The SIPC is the Securities Investors Protection Corporation. While the FDIC insures cash deposits, the SIPC insures securities on deposit with brokers. A broker in the securities business is defined as a broker-dealer. Morgan Stanley, Oppenheimer, Merrill Lynch, Schwab are all broker dealers. Essentially, the SIPC helps you get back your securities. Securities are stocks, bonds and similar investment vehicles. The cash limit on SIPC claims is $100,000 but the securities limit is $500,000. Just like bank accounts, it is important to keep your brokerage account cash balance under $100,000 to maintain that protection. Additionally, it is important to keep the account balance for securities under $500,000. in each account. So if a customer has $2,000,000 in securities and $250,000 in cash, that should be spread out over six accounts to maintain SIPC insurance.

Those simple steps will keep your investment insured and keep you out of those long lines in the event the bank or broker should fail.

Mea culpa

You know, when you’re wrong you need to fess up. I was quoted for an article by Janis Mara in February 2007 and I was wrong. I missed the mark. Majorly. In my defense I didn’t expect banks to fail. Several have failed since then including the most recent implode, which happens to be the second largest bank failure in US history, Indymac. I didn’t expect people to be dumping houses, walking away and sometimes even purchasing again before the existing home was lost. I didn’t expect Contra Costa real estate to drop by 44%. I missed the mark. I was wrong.

Here’s what’s happening out there. People got into mortgages they had no business getting into. Zero down, teaser rates, liar loans, stuff that they shouldn’t be involved in. Lenders are failing because they spent too much time looking at the bottom line rather if they were making sound investments. A loan must be made on the borrower’s ability to repay coupled with the value of the collateral. You can not make a safe loan based only on the market value of the collateral, because market value is subjective. The market dips, no value. The market has dipped. Some people believe that they are being savvy by walking away from a mortgage they are upside down on. They will be unable to purchase another home for many years to come. How savvy is it to give up the mortgage interest deduction on your taxes? That deduction has kept my taxes down for the last 10 years. I wouldn’t trade it for anything. The rent payment may be less than the mortgage note, but it’s not tax deductible. Property taxes are no longer a deduction once the house is gone. What’s gained by walking away could very well be lost in taxes paid. My advice for the last several years has been, if you can afford it, do it. That is sound advice. If you can afford to stay, then stay. With a 44% dip in value in Contra Costa County, what’s lost in equity may be saved from the government in taxes.