Category: Money

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Housing Prices Decline

After warm weather temporarily boosted home sales in January, reality has returned. According to a CNN Money article, today, home sales dipped in February. More importantly, home prices receded—to an average $230,400, or decline of $6,900 (3 percent)—compared to February 2005.

I am no economist, but I expect an acceleration of the trend. Many U.S. consumers had been using home equity like bank accounts, greatly contributing to overall spending and GDP growth. Trouble signs are everywhere—and well beyond the housing sector. With the exception of some very profitable oil companies, last quarter’s earnings announcements hinted of troubles with consumer spending. When companies like Intel, even Wal-Mart, lower earnings estimate (as they did for first quarter), something’s amiss. And it is. 

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Numbers

On the plane from Washington (DC) to Washington (State) today, I got to thinking about numbers, and the shenanigans businesses–and even journalists—get away with because of them.

Lady seated in front of me had a newspaper open with headline about some company paying $1 billion for something. What struck me was the $1, not the billion. People tend to associate with the familiar, and the numbers zero to nine are pretty familiar. The obvious association is everyday usage, which is $1 as $1, whether there is a million or billion that follows. The impact of the number’s real value is insignificant. 

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Online Buying for Dumb People

I an in a foul mood because of Amazon affiliates. On January 17, my wife ordered textbook Japanese for Young People I: Student Book through one of Amazon’s affiliates. Twelve days later, we still don’t have the book, and another ordered with it.

I take the blame for the mistake. My wife asked my assistance when ordering the book, and being work rushed that day I failed to demonstrate diligence. I should have done what my daughter did: Check Amazon reviews of the seller. Many, many of the reviewers complained about long delivery times, no books received, or damaged items. I would have canceled right then, but I quickly learned that the seller provides no easy cancelation mechanism. So we gambled on the order, for which we received shipment notification on January 18, and lost. 

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The Buck Stops Sales Here

Today may be a holiday, but my daughter has her first Japanese class. We’ve opened our home to other homeschoolers and the wonderful Japanese teacher.

This morning I followed a haircut at the local barber shop with a trip to the local CVS for some last-minute munchies for the Japanese students. One of my pet peeves: People using credit cards to buy stuff at stores like CVS or Rite Aid. Oh, how I just love to stand behind three or four people, each one buying a few dollars in items using a credit card. C`mon, who doesn’t or shouldn’t have five bucks in the wallet or purse—more purse, as most of the credit card purchasers do appear to be women. Is there some cultural or gender factor at work? 

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Steve Makes a Good Case

In today’s Washington Post, AOL founder Steve Case eloquently argues that Time Warner should split into four companies. He writes that in early 2002: “I proposed to the company’s board that it was time to ‘liberate’ and split the conglomerate into four freestanding companies—Time Warner Cable, Time Warner Entertainment, Time Inc. and AOL—each with its own strategy, stock, balance sheet, management team, and board.”

He contends that the four units would “benefit from the separation” and “that other parts of Time Warner would achieve similar results if set free from the conglomerate. Time Warner has proven to be too big, too complex, too conflicted and too slow-moving—in other words, too much like a classic conglomerate—to seize new opportunities”. He sees big potential from separation, and I can’t disagree. 

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Pop!

The Dec. 19, 2005, Business Week piles on more worrisome indications that the housing bubble is deflating. The story focuses on Loudon County, Va., once one of the hottest real estate markets in the country that is now cooling off. As sales slow, sellers are cutting prices. According to Business Week, “From August to October, the median sales price for houses dropped from $506,100 to $480,000”. I expect falling selling prices and rising days on the market to be the norm in most housing markets, if not now within a short time.

I first blogged on the housing bubble in August, a year after I started warning people trouble was coming. Coincidentally, not a week following the post, a good friend asked me about real estate as an investment. She had come into inheritance money and looked to help another friend, who had been successfully speculating on houses in Pennsylvania. I strongly recommended against real estate as an investment. I hope she took the advice. 

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It's Just Too Easy

Yesterday, I received a postal mail offer from one of the local car dealers for a pre-approved auto loan. The paper had a toll-free number to call with a code to get the loan amount. Being in a curious mood, I rang and discovered that (supposedly) I was pre-approved for $22,500. Walk in and walk out with a car, no money down.

We drive a clunker 1989 Volvo 740 that my wife curses almost everyday. So the idea of a new car is appealing, and $22,500 is lots of spending power. It’s a helluva lot of debt, too. As momentarily tempted as I was, no car loan. We’ll drive the clunker and get by. 

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Greed Killed the Trojan Horse

Seems like Apple and music labels are on collision course as iTunes contract renewals approach. Steve Jobs called record labels “greedy“, over alleged plans to move digital downloads to a tiered pricing model. Right now, iTunes buyers pay a 99-cent flat rate for singles, while most albums sell for $9.99. Apple does bundle some singles with music videos for $1.99.

So, I had thought Steve Jobs was being just a wee bit over the top, until a few days later when Warner Music Group CEO Edgar Bronfman Jr. said during an investors conference: “We are selling our songs through iPod, but we don’t have a share of iPod’s revenue. We want to share in those revenue streams” [source Red Herring]. Ah, yeah.