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The Financial Lives Of the Poets is truly a book of the times, and one of the best books I’ve read over the last year.  The book revolves around the life of one man, and his interaction with his family (cheating wife, father and 2 sons), his bank (sub-prime mortgage holder about to foreclose on him), his new drug dealing mall friends, his former newspaper boss that laid him off, and the special police drug unit that gains control of his life.  It sounds like a lot, but the character and story development is well done, and it is very entertaining.  And for those that just haven’t had enough of the mortgage meltdown theme, here is a notable quote from the book:

the only thing that seemed rock steady was the house, so we took another chunk out of it, just to catch up, we said, to temporarily cover living expenses, and we refinanced at the peak value; like a snake eating its tail we borrowed against our house to pay the house payment of a house leveraged at forty percent more than the house was worth.

Later when everything seems hopeless, he confirms it with his financial adviser, the same financial adviser who destroyed nearly all of his non-house related assets’

You have fiscal Ebola, Matt.  You are bleeding out through your nose and your mouth and your eye sockets, from your financial asshole.

The desperate situation eventually leads to a subtle crime wave, and then more trouble and doses of reality.  But despite the busy plot, there is also quite a bit of development on the more simple theme of family affairs, and changing relationships – with Matt’s father, his wife, and his kids.  It truly is one of the best books of 2009.  Click the book below to purchase your copy.

One more note, for those wondering about the title.  I don’t want to spoil any more than I already have, but there are a few financial poems and financial haiku’s within the pages.

The Financial Lives of the Poets by Jess Walter

For only $3,700 a day, you too can help sponsor an executive. No longer can we sit and watch these poor executives despair over where the money will come from to pay the bonuses they already approved. Please open your hearts and your wallets provide the much needed executive support.

The weekend is here and there is nothing I like more then enjoying my breakfast with a good laugh while reading the Saturday morning comics. And by comics, I’m referring to the Seattle Times Real Estate section – “New Homes Saturday”. Seattle may have been late to the real estate depreciation game, but they are certainly not out. From May 2007 to May 2008, home values in the Seattle metro have depreciated approximately 6.3 percent according to the Case Shiller Indices. Foreclosures in Seattle were also up 52 percent from June 2007 to June 2008, according to the Seattlepi. And those are just the reported foreclosures; the percentage of delinquent mortgages are thought to be 2-3 times higher then the actual filed foreclosures. Lenders are walking a tight rope as they try to balance the need to start foreclosure proceedings with the need to hold back even more negative housing news.

But all those statistics don’t matter to the Seattle real estate agents, appraisers, builders and lenders, who are still ignoring reality. You can hear them raving about the Seattle appreciation at your local Starbucks, and you can see their idle attempts to keep the market rolling by reading the comical ads in the Seattle Times “New homes Saturday” section. Here are a few highlights:

• The WestWater condo complex is providing a 5 percent per year appreciation guarantee to condo buyers for two years. Their “independent” appraisers will assess the value after two years, and if it has not appreciated five percent per year, they will pay you the difference of the appraised value and the declared appreciation guarantee value. I’d love to see the fine print on this one!
• The WestWater is also waiving mortgage payments for the first 6 months. If your new dream home is so “affordable” then why would you need 6 months without a mortgage?!?!
• The Element Redmond town house property is trying to lure buyers with an offer of a free Honda Element with the purchase of a new Element townhome. And today’s ad says there are “only 3 days left” on that deal, but somehow I expect them to extend the deal, or come up with an even stupider deal for next week.
• The Boulders of Redmond are promising a $10,000 buyer bonus and 105% financing. 105% financing?!?! 105% financing?!?!? 105% financing?!?!?!?!?! Are they out of their minds???  Isn’t that what caused the housing mess to begin with?!?!?!?!
  
• Lea Hill Condominiums in Auburn is still advertising FHA ZERO DOWN loans! Not as ridiculous as 105% financing from the Boulders, but a very close 2nd place award for stupidity.
• Verdeaux condominiums near Kirkland and Woodinville, which have already seen $60,000+ price reductions, are also offering ZERO DOWN FHA financing?!?!?!

All of those crazy deals are just to much entertainment for me on a Saturday morning.

The smartest guys in the room (CEO’s of major financial institutions) were not so smart after all. Their own economic forecasts asserted that home prices would continue to climb at 20-50 percent per year indefinitely. And they made HUGE housing loans – lots of them – to anyone with a heart beat. Jobs and down payments were optional. That house of cards is still crumbling, proving just how insanely stupid those CEO’s were. Thank you for your wise economic insight, but I’ll stick with the more accurate Big Mac indicator for my future economic insight.

The Big Mac indicator was introduced by the Economist in 1986 as a humorous illustration, but has been published every year since. It is based on the rule of purchasing power parity, which states that exchange rates should move to make the price of goods the same in each country. The price of a McDonalds Big Mac in the United States ($3.57) is used as the base for comparison. From the chart below, the Big Mac indicator is telling us:

• The Chinese Juan is undervalued by 50 percent
• The Thai Baht is udervalued by 50 percent
• The Euro is overvalued by 50 percent
• The Norwegian Kroner is overvalued by 121 percent

Currency exchange rates don’t make such dramatic changes to parity overnight, so there is still plenty of time to make your currency bets on what the Big Mac is telling you.

Back in January of this year, Herb Greenberg made headlines by discovering a new leading economic indicator at his favorite Chinese restaurant. He called it the Hot-and-Sour soup indicator, apparently named after his favorite menu item. Herb is a regular at the Chinese restaurants near his San Diego home and the local staff was not shy about reporting the dramatic economic slowdown in Hong Kong and China, well before the Asian slowdown was reported by the official media. The hot and sour soup is a leading economic indicator direct from the U.S. based relatives of the Hong Kong and Chinese citizens feeling the pain of their regions slowdown. Herb went on to compare the hot and sour soup indicator to the official rear view mirror indicators released by the government, calling the former at least as credible.

In honor of Herb’s findings, I will now release my findings of the coffee shop housing bubble indicator. Back in 2006 at the height of the housing bubble, it was impossible to walk into a coffee shop in the high flying bubble areas – California or Seattle – and NOT hear people raving about how much money they were making on their houses. Those conversations occurred in 2005 and 2007 of course, but the peak of the coffee shop real estate wealth conversations occurred in 2006 by my very scientific calculations. And that peak corresponded precisely to the peak of the national housing bubble.

Today if I walk into any coffee shop in Seattle and listen (eavesdrop) attentively, I hear mixed signals from the coffee shop indicator. While some conversations point to worry over the value of houses, others are convinced their house is still appreciating. In terms of economic forecasting, I would say we are still well above the bottom of the housing bubble, despite the National Association of Realtors claims to the contrary. The coffee shop housing indicator does not lie, and we will not truly be at the bottom until the peak of the coffee shop conversations relate to housing wealth deterioration across the country. I’ll be sure to let everyone know the precise moment in time when that happens, and it’s safe to buy your new dream home. Don’t hold your breath waiting as the housing pain has just started in some parts of the country (Seattle) and will likely last several years to come.

Can somebody please tell Yahoo that cost cutting for the sake of a merger value facade will not work. Don’t you think Microsoft knows you can’t even keep your servers running! If I am getting these Yahoo mail messages several times during the day, then I presume that everyone, including Microsoft executives brainstorming on their next offer are as well. Hint: The Microsoft execs have been instructed to lower their offer by $1 per share for every failed mail attempt they receive at Yahoo. (You think they actually use hotmail?!?!?!)

Come on Jerry, apologize to the system admins and tell them they can have their jobs back. And do it quick. I’d really like to finish reading my email today!

From the onion, and eerily true:

WASHINGTON—A panel of top business leaders testified before Congress about the worsening recession Monday, demanding the government provide Americans with a new irresponsible and largely illusory economic bubble in which to invest.