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Faith
in house price appreciation is religion in California - (www.ochousingnews.com) Kool aid is
flowing again. Last week, I read the following comment that encapsulates the
religious faith of most Californians, Besides, OC real estate has been and will
continue to be desirable. It’s also very cyclical and I knew there would be
another cycle coming much sooner than the bears predicted. This place has never
had “flat” home prices… ever. Apparently this commenter had faith in the
successful efforts of market manipulators and the herd behavior of California
buyers. The last year has done much to reaffirm the faith that was sternly
tested by a 40% decline. The problem with blind faith is that it doesn’t ask
“why.” Faith just accepts things as is and doesn’t demand an explanation.
Unfortunately, with financial markets, the “why” matters. California had a
housing bubble in the 1970s because lenders adjusted to a high-inflation
environment by abandoning long held debt-to-income ratio standards. They
allowed borrowers to take on debts much larger than they could afford based on
the belief the borrower would get 10% raises every year which would make the
house payment affordable after a year or two of extreme austerity.
Pew: 93% of households lost net worth 2009-11 - (www.usatoday.com) The richest Americans got richer during the first two years of the
economic recovery while average net worth declined for 93% of the nation's
households, the Pew Research Center said Tuesday.
The Pew report says wealth held by the richest 7% of households rose 28% 2009
through 2011, while the net worth of the other 93% of households dropped 4%. Pew
says the main reason for the widening gap is that affluent households have
stocks and other financial holdings that increased in value, while the less
wealthy have more of their assets in their homes, which haven't fully regained
their value since the housing downturn.
Senate moves ahead on online sales tax — but would it help or
handicap small businesses? - (www.washingtonpost.com)
The Senate on Monday moved forward on legislation giving states more
authority to collect sales tax on
transactions made over the Internet, which would level the playing field for
online and offline businesses — but it could also pose major challenges for
small merchants who sell across the state lines. The Marketplace
Fairness Act would allow states to tax retailers from outside
their borders that sell goods to their residents. Right now, that is only
permitted if the retailers themselves have an actual presence in the state. The
Senate approved the measure in a preliminary
vote 74-20 on Monday, but the proposal may be a tough sell to
House Republicans. The change would deliver an an additional $11 billion in tax
revenue to state and local governments across the country, but many proponents
say they are more interested in the potential to finally level the tax burden
for brick-and-mortar and Internet-based merchants.
Corporate pension funding down in 2012 on falling interest
rates - (www.reuters.com) The funding shortfall bedeviling the 100 largest U.S. corporate pension
funds rose for a second straight year in 2012, as a strong stock market and
hefty plan contributions failed to offset damage done by persistently low
interest rates, according to an analysis by Towers Watson released on Monday.The
gap between what these corporations, all publicly traded, will owe retired
workers and how much they have put aside jumped 17 percent, from $252.7 billion
at year-end 2011 to $295.2 billion at year-end 2012. By comparison, these
companies had a pension surplus of $86 billion in 2007.
Europe Parliament likely to approve forced losses on wealthy
failed bank depositors - (www.reuters.com)
The European Parliament is likely to back plans to impose losses on
wealthier depositors in failed banks while shielding
smaller savers, its lead negotiator on the rules said on Tuesday. Talks are
under way to finalize EU rules on crisis-hit banks following the
bailout of Cyprus, in which both large and small depositors were originally
going to be hit before the plan was changed to charge only the former. The
European Parliament's backing is needed for any proposals to become law. Gunnar
Hokmark, a Swedish conservative in the European Parliament, said most
categories of deposits would not be protected under proposals likely to be
agreed. "There is a very clear exception for all deposits below 100,000
euros," Hokmark, who will lead negotiations with European Union member
states, told a news conference.
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