Friday, December 20, 2013

Sticky Rate Valve

The following chart shows the spread between the 1-year adjustable rate mortgage rate and the 1-year treasury rate.

Click to enlarge.

There's a problem with the "Fed Sir" valve. We 'll need some 3-in-1 oil and some gauze pads. That's in addition to the ball bearings and ten quarts of Quaker State antifreeze of course.

December 20, 2013
‘After Christmas’ Sales Arrive Extra Early This Year — Like Now, Basically

What’s especially interesting is that in some cases, consumers won’t have to wait until after Christmas for the arrival of “after Christmas” sales. In the same way that retailers have messed with the timing of Black Friday sales — which certainly began on Thanksgiving Thursday, and were launched a week earlier by some stores — shoppers can expect to be presented with “after Christmas” deals before Christmas.

The internal consumption engine clearly lacks fuel. How else can one explain a pre-Christmas post-Christmas sale? This could lead to shopping exhaust. Hope it doesn't backfire.

Just know that if the paper is flapping in and out and sucking against the tailpipe any at all, then you have issues with your valves and that they need to be checked out by your local mechanic.

There's plenty of paper flapping and it can definitely suck for some. No doubt about it.

November 26, 2013
6 Ways You Can Beat Someone's Cash Offer When Buying A Home

5. Pay extra. Spending more money to beat a cash offer sounds crazy. But cash buyers nearly always expect a discount from the seller simply because they’re offering cash. As a result, the cash buyer will often make a lower offer. To increase your chances, top the cash offer. If you plan to live in the house for years, and it’s the home of your dreams, paying a bit extra may well be worth it.

Just pay extra! Genius! Since this one is guaranteed to work, forget the other 5 ways! Rates are nominally low but relatively high (see first chart). Prices have already fully recovered to normal pre-bubble levels (real median prices, November 2013 dollars). What could possibly go wrong again?

Speaking of what could possibly go wrong, I was watching the financial news on TV today and they ran a story about a couple who had lost their home. They couldn't afford the payments. Now that very same house is being rented back to them with payments $200 higher. It looks like a really nice house. That said, I might have been tempted to downsize on the off chance that this new and improved economy experiences yet another kick to the gonads at some point, but hey, perhaps that's just me.

Forehead. Desk. Whack. Whack. Whack.

Source Data:
St. Louis Fed: Custom Chart


MisFit Kid said...

Sounds like the couple could not afford (lets say)
$800 a month to be in a home, but they can afford $1000.....
Modern finance?, or/but it is different this time.....

mab said...

"Fed sir" valve!

Brilliant! One of my favorite movies.

How many "b's" are in Babar?

Who Struck John said...

I'm sorry, Mark. I barely have snark enough for my occasional snark on MOM's blog. I can't keep up with the sheer volume of snarkworthy targets that you post.

The situation is like trying to put out a fire with a drip irrigation system; it won't end well.

Stagflationary Mark said...

MisFit Kid,

More than double those rental prices. It was a very nice home. They have kids. Gotta keep up those appearances that everything will be okay somehow.

From my point of view, had impending doom written all over it. But hey, at least they don't actually own all those major appliances now more than likely. When they fail, it's the landlord's expense. Unless one believes those expenses can miraculously be passed to them in the form of even higher rents that is. Good luck on that!

Stagflationary Mark said...


I'm a sucker for those old Chevy Chase movies. We've got Modern Problems!

According to these chicken guts, there's going to be an awfully big ruckus here this weekend. - Dorita, Modern Problems

Yeah, pre-Christmas post-Christmas sales!

Stagflationary Mark said...

Who Struck John,

The situation is like trying to put out a fire with a drip irrigation system; it won't end well.

Hahaha! It sounds a lot like generating real long-term consumer spending in a 0.49% CD Rate World. Drip! Drip! Drip! Sigh.