6 pc

This post is the last of my "6-6-6" series. 6% was the percentage of employees at my employer who own their homes with no mortgage.

I read yesterday that the entire city of Orlando, Florida -- the entire city -- is underwater. That is, the total outstanding balance of mortgages is greater than the total housal unit value for the entire city. I believe that the city of Las Vegas falls into this category, too.

That's impressive! And, it's exactly what keeps Wall Streeters earning twenty two million dollar bonuses, too. Without all those Orlandans fuckering away their next nine years of collective gross annual product on mortgages that will take that long just to break even, bankers would have to find other ways to garner such profits.

But no. Individually, we love to carry staggering amounts of debt so that we have a nice 3,200 sq ft starter mansion each with his-n-hers BMWs in the driveway and new iPads charging in the docking stations. Locally, our cities and counties are borrowing twenty cents for every dollar they spend, while our states are borrowing nine cents for every dollar they spend and the federal government is borrowing thirty cents on every buck. Government is simply mirroring what we do ourselves.

The housal unit, the pair of BMWs and the iPads all do nothing to add to the value of the Orlando family in this hypothetical example (hypothetical, but real; there must be over 450,000 of them!) -- or more correctly, they are all unproductive assets. They are not employed in any productive fashion, to earn the family income. They do not yield current income, nor will they yield future income -- they are trapped, dead assets. Yet the two wage earners owe $228,356 on the mortgage, $25,790 on the two Beemers and $2,430 on the credit card used to pay for the iPads. That is -- they are working today to service their debts...not their assets. They can most perfectly be described as debt-slaves.

None of the things, not a single fucking one of them, that people in Orlando buy are productive assets. None of them. A BMW is not productive, not in the least...not even when you consider it carries you to work. That $235 iPad with another $97 in accessories is only ever used as a toy, to socialize, to view YouTube videos, to play Angry Birds. And least of all is that housal unit, it is not productive in the least. Indeed, you will lose 6% to a realtor of it if you wanted to liquidate it.

I regard the purchase of tools, even if bought on credit, as an example of a fine way to increase one's productive capital. A hoe can be used to provide vegetables, or a hand plane can build furniture for your own or others' use, or a 15-mm socket can be used to save you $35 on an oil-change. But most Orlandan housal units owners wouldn't even know how to spell hoe, let alone know how to use one. Check that -- hoes as bitches, well, they probably know all about them hoes.

Socking away monies in the 401(k) like we're all taught to do is also a form of sunk, stranded, trapped capital -- we have no access to it to produce anything today, and certainly not to pay off any of those soul-crushing debts Orlando housal unit owners owe.

Orlando citizens consumers will be spending the next decade paying on underwater mortgages to bankers in Manhattan, just to break even on their "assets" and their debts. If this isn't the definition of debt-serfdom, I don't know what would be.

6 Months

I'd bet that if I were to apply for a credit card today I might well be denied. I am slowly losing my valuable "credit history."

Losing it, because I no longer make regular payments to anything. I've been mortgage free for six months, have no car payments, and don't carry a balance on credit cards. Six months is perhaps the time frame one might need, as a young college student for example, to establish one's credit. It's also, perhaps, the time frame one might need to lose it altogether, too.

Can you imagine? I spend fifteen years squirrelling away every spare nickel to get out of debt only to find that it will cost me more to acquire new debt because I no longer have a "payment history." A new car that might carry a 4.85% APR might cost me 7.35% because I have such "shitty" credit.

I don't believe for a second that this scenario couldn't happen; no, not in today's credit-score driven society. Thirty years ago this wouldn't have been an issue -- I'd offer to a local banker that I own a housal unit and he'd identify me as an acceptable risk and I'd get a loan. Today, the decision to deny me would be made within six milliseconds (6 mS) inside some Cisco server inside a football field sized server farm in Youngstown, Ohio owned by a too-big-to-fail East Coast based bank who, when they fuck up the lending standards as they will again do, would simply lobby upon Washington to force taxpayers to subsidize the losses.

The cost of assessing risk to a lender has dropped, what with a simple "credit score!" nowadays, a score that you have no goddamn way of calculating for yourself. It's a score...like it's some fucking game, and indeed it is! to those in the financial services industry. No longer does a local banker worry about your risk when he can just shuffle off the mortgage to Fannie Mae. Nothing about the securitization food chain that imploded our economy three years ago has changed -- lending standards are supposedly tightened, yes, but the bank still doesn't care about your willingness and ability to pay that back over the next 30 years -- they'll hold it for no more than 30 mS before it's tranched and sold into another mortgage backed security. These things have not gone away -- no, not even.

I should not want to participate in such a system where I'll be penalized for carrying no debt while trying to gain access to some. Yet such hypocrisy is what built the existing financial services sector into the "industry" it is today.

6 mS

Been fascinated by conservative pundits who assert that the OWS movement can't possibly not be motivated by some behind-the-scenes interest group. Something like a George Soros, or maybe ACORN, or any name-your-left-wing-propaganda group and insert here.

It's easy to assert, because it's hard to understand how a group of disparate, unorganized, non-violent citizens can act like citizens instead of consumers...where true citizens participate in protests, in voicing grievances, in participating in democratic action.

I don't really like to believe that the OWSers aren't really targeting correctly. It's convenient to protest against the top 1%, yes, but I don't know that it will be particularly eventful, even though it is meaningful. Unless and until this group can express themselves through political action, I don't see how or why the software engineers on the thirteenth floor of the building next to the New York Stock Exchange would willingly halt production on that new high frequency trading algorithm that's designed to fuck the upper forty floors out of a few mils each day, and a few hundred mils from other local entities each day, and a few hundred thousand mils each day from every productive citizen who "plays" the stock market.

You see, the closer high frequency traders are to the NYSE, I mean, the physically closer they are, the faster they can access those few mils before someone else. The thirteenth floor is advantageous to servers on the sixteenth floor. Consider a new $300,000,000 trans-Atlantic cable currently being laid to connect NY with London which will shorten digital transmissions by 6 miliseconds. 0.006 seconds...but hey, this means all the difference to the new breed of high frequency trader. Every 1 mS delay represents a $100,000,000 lost opportunity to a large international hedge fund.

It's a difficult thing to pull out of the stock market altogether, as an individual schmuck investor who thinks that if you just stay in for the long haul (as every investment advisor recommends) that you'll come out ahead, even in the face of such fantastically stacked and rigged odds against you. The financial services industry long ago traded in their function as a service to production and instead opted for short-term parasitic gains against that productive base for fantastic, immediate profits. I witnessed this first hand, while watching California electric ratepayers get fucked over every hour for three straight years by the Enronization of electric markets, companies filled with people who could care less about the long term (or medium term) stake in their organizations and instead self-imploded under their own hubris and greed.

The OWSers -- they can collectively do one thing, and perhaps most have already -- they all should strive to owe Wall Street nothing. It's fantastically easy for me to now say this as I hold virtually no debt, but really, Wall Street would cease to exist if people followed my example and paid off their mortgages instead of fuckering away all their discretionary income on new Acuras ever three years, or new 4S phones everytime Apple says it's time for an upgrade.

We may all well be forced to have health care at some future point...but as far as I can see, there is no law on the books that forces each of us to carry a credit card, and to carry a perpetual $5,975 balance either. There is no law requiring us to maintain a mortgage, or to go into $68,000 in debt to get an education. Without debt, Wall Street would cease to be revelant. Instead, we choose to, I dare say we choose to, and as a consequence the interest rate we pay on a mortgage is 0.03% higher than it would have been otherwise if Goldman Sachs hadn't intervened in some way to broker CDOs that digitally moved your mortage to a suite of foreign investors, and 0.02% higher than it would have been otherwise if AIG hadn't insured it against default, and 0.001% there, and 0.001% there, and...

Being debt free, and thus a free citizen, means that I don't have to occupy Wall Street.

Occupy!

I'm glad to see that there are scads of peeps marching on Wall Street in these three-week old occupy rallies. Glad to see it.

Take note that the tea party, which immediately chooses to distance itself from the occupy movement, was founded because of profound public resistance to the passing of the Troubled Asset Relief Program (TARP) in 2008 (among other things). Tea partiers recognized that taxpayers were going to foot the immense losses incurred by the financial industry.

But the right wing has the objectives of the occupy movement all wrong, in my opinion. They ask the ridiculous question to the protesters: "what do you want to replace capitalism with?" to which occupiers "respond with a deer in the headlights silence." They have no answer, conservative pundits suggest.

Wrong. It's an expression of the deep disconnect between government and the people, how influence by moneyed interests have enriched those at the very top. From Bruce Maiman this week:

In 1999, then-Texas Sen. Phil Gramm was chairing committee meetings on a bill to further deregulate investment and hedge fund banking. The bill contained language he didn't like and he couldn't get committee members to agree with him. Furious, he left the meeting, walked over to lobbyists waiting in the hall (a common practice in Congress), demanding they get Citigroup CEO Sanford Weill to tell Bill Clinton to call these committee members to get on board or "I'll kill the bill. You have one hour."

Sure enough, the calls were made, all was glossed over to the satisfaction of Gramm, the bill went forward and ultimately, Gramm-Leach-Bliley, the legislation that repealed Glass-Steagall and opened a door that allowed rigging of home loans through derivatives and CDOs by investment banking institutions, was passed.

Tell me that any of us can wall into the halls of congress to so much as voice our opinions with such influence others have.

It's not about destroying capitalism, it's about making it accessible to the majority.

In my opinion they are only protesting the symptom -- bankers -- while the real change must come from Washington eventually, such as forcing mark-to-market accounting standards. I'd bet that a large swath of European bonds are now only worth 40% of their face value but the face value stands and we continue to prop up banks that argue their assets are still at 100%. I'd protest that we don't give one more nickel to banks and let them fall on their own, which is something they might be doing soon, provided something like a Greek default occurs.

Banks have destroyed the living arrangements for Icelanders, Grecians, 2.3 million Chinese laborers and about 16% of the US working population. I'd argue that most of the "growth" of the last decade was hallucinated, yes, but if we never had a bubble we would never have had such a meltdown.

There are protests daily in Lisbon, in Madrid, in Athens, in New York -- all with the theme that the bailing out of financial institutions by politicians represents an utterly destructive system perpetuated. It harms many and benefits few.

They don't have a clear, organized message? This sign says it all:

$70,000 college debt
$12, 000 medical debt
I'm 22. Where's my bailout?

Just a loafer? Someone who doesn't want to work and wants to be supported by the system ad infinitium? Hardly. I'd march if I were there and I'm quite a producer. Most want to, too -- and I argue that the financial services industry essential produces nothing -- its role is to service those who do. As we will have fewer and fewer non-college jobs going forward as we fucker away our manufacturing base while the cost of college is rising at double digit rates, the only way to earn enough will be to service, to effectively take a larger and larger percentage from those who might still continue to produce.

Starter Vineyards

My company used to host an internal chat room. The topics were moderated but any employee could post on them. As is typical of the web at large, my SMUD utility also has its share of ingrate idiots, those few individuals who cannot or will not keep their homophobic, racist, sexist, slurish comments to themselves, and consequently the forum was permanently shut down a few years back.

It was fantastic! We used to host topics regarding energy efficiency, the coming smart grid, SMUD retirement issues, etc., and man, they were a source of excellent discussion. But alas, this couldn't last, as a few fuck-offs decided that calling Obama a nigger was more important than lively discussion, particularly when the discussion revolved around energy subsidies, or other such "leftist" policies that my company embraces.

I find it fascinating how talk radio uses the term "N-word head" when talking about a rock painted "niggerhead" on some Texan ranch somewhere that some people allegedly saw back in 1996. As if there's some moratorium on using the word nigger on the radio when every black rap artist uses it as every other word in a sentence. But there are apparently limits...and the moderator having to pull posts by public service employees using nigger on an internal forum is obviously over that limit -- because of the context in which it was used.

I, however, am not over any line here on this blog. My use of the word is apt, descriptive, and relevant to my argument -- it doesn't take long for any web forum, of any sort, to fall into a "nigga-this" and a "fuck-you-that" back and forth that destroys the value of what could be such wonderful forums for good information.

It's no different to fucker away such a resource than it is to have set it afire and destroyed it by arson, or to have smashed in the windows of a web-kiosk with a brick. It's equivalent...and it's too bad we can't find good discussion on non-moderated forums...anywhere...on anything. I can't go to a Ford truck restoration forum without some poster arguing that Fords suck and Dodges are superior. I can't go to a thrash-metal forum without scads of posts between two dolts bickering and leading to personal insults.

I should not be surprised. Indeed, it only validates my own long-held position that Americans are, by-and-large, culturally bankrupt. The web only reinforces such idiotic behavior that would occur in some other capacity elsewhere if it didn't exist there.

These days, my company's webmaster posts a weekly "poll," where employee's can vote on some random poll topic such as "what does the end of the NFL football lockout mean to you," or "how many employees will SMUD have in 10 years' time: much more, slightly more, the same, less, or substantially less than today." It's been reduced to a worthless, useless, meaningless statistic that cannot generate any discussion because there's no forum in which to discuss it. This is nothing different than our culture at large, whole segments of our "consumers" enraptured by "voting off" contestants on some reality TV-show that has no hint of "reality" about it and no form of discussion as to why actions played out the way they did.

Yet! Last week's poll question was unexpected (at least by your Monologueonian): "Is your mortgage underwater?" with the following limited, canned options for response along with the final percentages"

Yes. (34%)
No, I owe less than what it's worth. (33%)
No, I own my house outright. (6%)
No, I rent. (15%)
Other. (12%)

The percentages didn't appreciably change over the course of the weekly poll, which is indicative that the poll is accurate, indicative that there weren't outliers that drastically changed the results, while over a quarter of my utility's employees responded. The same percentages on this poll are in rough agreement with my own little work group. That is -- a third of my fellow workers owe more on their mortgage than what their housal unit is worth...if you extrapolate these 25% responses to the company at large. This is an amazing statistic.

SMUD employees likely average $85,000 per year (the best data Ihttp://www.blogger.com/img/blank.gif could find), which is almost 70% more than the median salary in SMUDs service territory ($47,107) -- yet, a third of us are underwater. I will yet again argue that the more money one makes, the more one is likely to be up to their eyeballs in debt.

All that money made, yet all that money flowing directly to Wall Street bankers, those who hold the paper on some collateralized debt obligation of which some single, insignificant mortgage holder in Sacramento county keeps on paying to help keep it rated "AAA," the same rating as government issued Treasury's. One third (about 700 employees) who are staring down another one or two decades of payments just to break even.

A third. That's the same percentage of people as males who have erectile dysfunction. However, I wasn't surprised by this statistic. I look in our parking lot and see dozens and dozens of $40,000 rigs -- I know that many live in the beautiful gated communities of Serrano, or the majestic highlands of Folsom, or on 25-acre "starter vineyards" out towards Rancho Murieta. On an $85,000 salary? Come on, such lifestyles have been fueled by growing debt burdens over the last thirty years -- upper middle class wage earners are no different than those in the upper poverty class. The more people make, the more debt they carry, and I'd bet that the percentages are roughly the same between classes.

I do not consider myself "lucky" to fall in that 6% "loan is paid off" tranche. Luck had nothing to do with it. I neither inherited a housal unit nor an inheritance. I paid my down payment with US savings bonds I accumulated earlier, and I made massive personal sacrifices for 15 years to put every dime I had left over into principal. You cannot do this if you're buying new his and her Acuras every five years.

The past twenty weekends were spent on ladders replacing fascia and painting the trim. Today I'll be outside in about an hour finalizing the paint on the garage doors. I replaced my car's brake pads last Saturday. I smash my own aluminum cans. I mow my own lawn. These things in the aggregate are what allowed me to have the discretionary income to blow on my mortgage, not to blow on hookers and blow.

I hold no magic key here. Frugality and thriftiness are the sounds of my perseverance. I also know that I could lose it all in an instant, too; there are many unknowns that are coming, as there was and always will be.