That DB fare is not at all connected to the cost of running the train. DB is far more subsidized than Amtrak is. [PDF warning] DB reports profits of about $1.94 per train mile while the railroad is receiving $36.78 in public funding. When public funding is taken into consideration, DB Train Operations actually cost the German government $34.88 per train mile. Similarly, passenger rail operations in the other five European countries cost their governments between $13.77 to $27.78 per train mile.

I make no claim that DB less subsidized than Amtrak. However, the report he linked is comparing apples to bratwursts. The level of service isn’t even comparable between Amtrak and DB. On Amtrak the speeds are slower, on older equipment that is close to worn out in stations that are mostly falling apart.

The one flaw in that study that immediately jumps out at me however is that they compared all of DB to just the Amtrak NEC and corridor services. However, DB operates all of the local trains as well as freight. So to have a proper comparison, the study should have also included NJTransit Rail, SEPTA’s Rail (not the subway, trolly, and bus services), MARC, Long Island RR, Metro North, Chicago’s Metra, Chicago’s South Shore, etc etc.

If rail in the US were operated like in Germany, than all of those other companies I mentioned would be part of Amtrak rather than their own entities. Take THOSE subsides into account and the operational subsidy will be much closer and the resulting disparty in service levels and quality will appear that much more drastic.

Whirlpool is only going to make between $363 million – $401.1 million in profit for 2011, so naturally, American workers will have to suffer.

I appear to have misplaced the press release where Whirlpool’s executive team taking any pay cuts. Whirlpool’s five top paid executives make a cumulative $28.6 million a year.  But I’m sure it will turn up somewhere…..

The first part, and this is a biggie, is that those new mortgages with their shiny new interest rates also magically convert into recourse mortgages instead of non-recourse.  That is, with a traditional mortgage today, if you default on the mortgage and the bank forecloses on your property, any deficiency between the auction price of the home and the remaining balance of the loan is eaten by the bank.

By converting these mortgages (which are already vastly underwater mind you) into recourse loans, that balance will now follow you around for all eternity or until bankruptcy court. Anyone who agrees to one of Obama’s new mortgages instead of going into foreclosure and living in the house rent free for 18 months needs to have their head examined.  Anyone who does this needs to realize that they have just signed their entire life away to the bank.

The next part is no less serious, but is more of a direct gift to the banks and only affects you as a taxpayer rather than a homeowner.

FHFA moved to protect lenders from having to buy back loans if underwriting problems are later found. “Of all the barriers, this may be the most significant,” said Gene Sperling, director of the White House National Economic Council.

Basically, the banks can keep right on going with their sloppy and fraudulent mortgage writing procedures and not suffer any consequences from their actions. When the mortgage fails, the bank doesn’t suffer, we the taxpayers do.

Thankfully, so few people will qualify for these new regulations and hopefully those who do will be told by you, dear reader, that doing this is such a terrible idea that the overall impact of Obama’s new mortgage plan on the taxpayers will be minimal.

 

WASHINGTON — Seeking to circumvent congressional opposition, President Barack Obama is promoting a series of executive branch steps aimed at jumpstarting the economy this week, beginning with new rules to make it easier for homeowners to refinance their mortgages.

The White House said changes to the two-year-old Home Affordable Refinance Program will help homeowners with little or no equity in their houses refinance by cutting the cost of doing so and removing caps to give deeply underwater borrowers access to the program. The new rules apply to homeowners with federally guaranteed mortgages who are current on their payments.

This is a terrible terrible idea. It’s being promoted as a stimulus when it is really another bank bailout at the expense of tax payers (on the front end) and homeowners (on the back end being conned into paying more for a property that is worth less) Refinancing an overpriced house at a lower rate is still paying too much. Many of these houses are so underwater that they will never recover the current value of their mortgages while the mortgage is still being paid on.

Many people think that our economy revolves around oil. I disagree. I think oil is only a convenient enabler. If the oil dries up, we’ll find a replacement. It sounds overly simplistic, but compared to rebuilding our nation’s entire infrastructure around an urban mass transit plan, finding a replacement for oil is the cheap, easy way out.

For the past 90 years our growth has centered around our love of the automobile. We built the interstates, the suburbs and the food/product distribution network, for and by the automobile. For the better part of the last century, the largest companies in the United States were the auto manufacturers. This is not a judgment for or against, simply an observation of what is.

Oil has caused our economy to become unstable not because we rely on oil per say, but because we rely on our automobiles and those automobiles currently rely on oil. As I mention above, take away the oil and we’ll find an alternative. Take away our cars and the economy collapses because there is no alternative that can be quickly implemented.

The character of Jed Bartlett on the series the West Wing once remarked, “The greatest chaos happens when the one thing we rely on, but pay no attention to, stops working.”

This is my attempt to document this whole mess.

This one jumped out at me:  The Wall Street Journal reports U.S. Consumers Reduce Debt for Fifth Month in a Row

That headline taken in a vacuum should be good news right? Well… sorta. It was consumer debt that both drove the economy for the last 30 years and yet at the same time contributed to it’s implosion.

People drastically reducing spending and (hopefully) living within their means don’t help an economy that depends on consumer spending for 70% of it’s activity.  These people (including myself) are putting as much of their resources into reducing their debt and freeing themselves from the usurious practices of the banks.  But this is a case where we have too much of a good thing. If debt reduction happens too fast, the corresponding consumer spending reduction could extend this recession far longer than normal.

About the only good thing I can see coming from this either way is that if enough people relieve themselves of credit card debt, it will hurt the banks since they will no longer be able to make money from their usury. They might actually have to compete a little and put their interest rates at a reasonable level.

Anything that hurts the banks makes me smile a little inside. It’s not like they don’t deserve it.

If the current recession has hit Germany, it doesn’t show. Walking around Cologne there is construction everywhere. New shops going up everywhere. The stores are busy and bustling. Germany has been careful to not outsource it’s labor force to foreign markets as much as we have in the US. If German companies need cheap labor, they set up shop in the former East German territories. This way, at least the GDP stays local to Germany’s economy.

Why can’t we do the same thing here? Sure, we couldn’t pay the minimal wages we pay Chinese prison laborers to sew soccer balls with their teeth, but I’m sure there are willing laborers in states like West Virginia, Alabama, Arkansas, etc. The cost to ship thing from Alabama factories to stores in the US would have to be a LOT cheaper than shipping it from Shanghai. At the same time, we would have an easier time making sure those workers are treated ethically and there are better safety standards in the products they produce. Just ask any Mattel executive about lead in toys and see what kind of reaction you get.

Yes some prices will go up. Do you really think $30 for a DVD player is reasonable? It’s time that we start demanding some real quality in the products we purchase.

I’ve been rather pessimistic on the economy for a while now. As recently as April I was predicting a long drawn out recovery. I also predicted that a second wave of foreclosures coming from a type of mortgage called Option ARMs would start carpet bombing the economy all over again. Well, unlike a certain ex-President of ours, I’m willing to chart a new course when provided with new information.

Here is why I am cautiously optimistic for a near term recovery. I’ll go out on a limb and say that the bottom was sometime in June 2009.

Option ARMs

First, my biggest reason for originally predicting a long, drawn out, recovery was the Option ARMs. In a previous blog post, I explained how Option ARMs are one of the most dangerous mortgage types out there. The cliff notes version of this is: You can pay less than the amortised amount each month and whatever you don’t pay gets tacked onto the principle, up to 125% of loan value, and thus charged interest. After about 5 years or once the principle reaches 125% of loan value, the monthly payment “recasts” and now the owner has to pay the entire amortized payment on 125% of the loan value and now they only have 25 years amortization… just as sugar on top. A large batch of these mortgages were due to start recasting at the end of 2009.

My reason for course change? Many of these mortgages aren’t even making it that far. 42% of Option ARMs originated in 2006 and 35% of Option ARMs originated in 2007 are more than 60 days late today. These mortgages are never going to make it to the 5 year mark for recasting. Now, I’m not saying that these people aren’t going to be foreclosed on, they are. It’s unlikely that ANY of these mortgages will qualify for loan modification since one of the requirements is a principle balance lower than the value of the home.

Here is the good part, by going into foreclosure sooner, it softens the overall impact on the economy. So while it’s still bad, it hurts less. Would you rather be hit by 18 inches of snow over a period of 3 days or get hit by an 18 inch diameter snowball?

Ford posts profit

Ford Motor Company had two pieces of good news. First, Ford posted an overall profit for 2^nd quarter 2009. Their operating cash still took a $1 billion hit, but clearly progress is being made. The proof of that is in the next item.

Ford posts positive sales numbers

Ford posted their first sales gain in 19 months. Now I’m sure that a good portion of this can be attributed to the government’s Cash for Clunkers program, however Ford’s current model lineup easily stands on it’s own without help from the government. If their new Taurus had been in showrooms already, I’m sure they would have done even better.

This comes on the heals of Toyota’s statement that they are no longer profitable in North America.

Anecdotal

I do I.T. consulting work on the side. One of my clients is a real estate appraiser. Just three months ago he was talking about closing up shop. Now he’s having me refurbish older computers that haven’t been used in a while so he can bring in more help for all the work he has.

A guy who does painting and drywall work for me was talking about how he is closing on a house on Thursday but he doesn’t have time to work on it because of all the work he has coming in suddenly.

GDP only at -1%

This is where the caution part of “cautiously optimistic” comes in. That number, in a vacuum, doesn’t look too good. Taken with the numbers of the previous quarters it signals a huge turnaround. However, much of that regrowth has come from the government’s stimulus projects. Sure the bill was passed in the late winter, but it took till April and May before any sizeable amount of money was dispersed. In my area alone there are no less than four major bridge building/refurb projects that have started or resumed.

Unemployment

The unemployment numbers still don’t look too great but they tend to be a lagging indicator simply because they aren’t reported till after someone gets or loses a job. Watch the unemployment stats over the next few months.

Green Shoots?

Not really. But the seeds have been planted and watered.

Watch this space.

Update: Ok apparently WordPress didn’t import my post from blogger very cleanly so I’m going to have to go back and update all the formatting on them. They didn’t look like that originally…. promise.

Hometown: Trenton, NJ

Currently: Pittsburgh, PA (since 1999 and for the foreseeable future)

Interests: Cars (Oldsmobile and Cadillac specifically), blogging, rollerblading, water/snow skiing, finance, home improvement, travel

Occupation: Currently employed in the I.T. department of a large energy company.  Owns Pittsburgh Living LLC which is a holding company for a family of websites, an I.T.  consulting group, and a property management company.

Personality: General misanthrope. Think Dr. House without the cane….. though sometimes I wish I had one so I could smack people with it.

I can be reached at Drew :at: Pittsburgh-living.com