Thanks God!! A mortgage failure silver lining??

September 25, 2008
Thanks God!
What else are we supposed to do when the mortgage finance industry goes down. What else are we supposed to do when the New Orleans levies break. What else are we supposed to do when hurricanes smash our cities. What else are we supposed to do when Indonesia, etc gets smashed by a tsunami. What else.
Are we supposed to sit back and assume this is part of God’s taxing system.
When the IRS wants to get taxpayer’s attention they take bank accounts, garnish wages and generally cause mischief. Has God really been trying to get our attention. Or is there some other plan which is being dealt to us.
When the IRS does get our attention a plan of repayment is devised. The full payment over a series of months or years. The IRS does not want to take our possessions but merely to get our attention so the non-payment issue can be addressed and eventually satisfied.

The mortgage sub-prime situation is this different or about the same. I heard today that in some areas of California where a large population of illegal immigrants live that over 25% of the subprime paper involves illegal immigrant underpayment or foreclosure proceedings. One may consider this to be the problem but the other 75% is still there so the problem would still exist if the 25% illegal immigrant portion did not exist. So I will be discounting the 25% as not being the cause.  The illegal immigrants would have been encouraged and not discouraged in getting a mortgage.  The legislation is not the fault of the illegal immigrant but the shame, shame of the legislature and the mortgage industry.   Yes, part of the problem but not the cause.

There has to be some other portion of the macro economy which is the cause. Credit card interest rates, adjustable rate mortgages, no income verification, unethical mortgage lending practices, fraud, high interest rates in comparison to levels of income, credit scores, etc. Yes, all of the above.

One thing I see as a cause is the change in legislation two years ago. The bankruptcy laws were levied at individuals for payment of credit card debt for a 5 year period of time. In the meantime prior to bankruptcy credit card interest rates were increased substantially from a maybe normal 8 – 15% interest rate to a 29.9% interest rate if another credit card was missed. The missed payment could have been from a credit card in dispute or a mortgage which was a little bit late or from a credit card companies policy of processing incoming mail at a snails pace so late fees could be charged. Disputes from another credit card thus would not be allowed in this situation whereas prior to this legislation they could be disputed and non-payment would be allowed. Double jeopardy thus was allowed to the punishment of the consumer.

No, I would not say that God was responsible for creating the mortgage industry or credit card issuer meltdown. It is either as a result of unethical power brokers in business and the mortgage and credit card industry tied with the legislative greed of the Congressional Leaders and Senators of the elected official of the United States.

Should anyone have warned of this poor legislation. Keep your ears tuned to the news media for a completely biased report on what is and has happened during this Presidential Campaign Season. Corruption and politics was the payoff and now the results have come home to roost.

Although I am sure that God has noticed this meltdown the meltdown was not His objective. Getting rid of the corruption and the bickering in the Legislative branch and having the Godly solutions put back into place was the objective. Now the question is who will pay for the solution and what should the solution be.

My solution. The legislative branch of Congress has been talking about a $700 Billion dollar bailout. I hear the legislature saying they will buy out paper which is or has been defaulted on at a deep discount. But really this is not punitive to the unethical and unscruptulous finance industries. In fact I believe some of the financial portions of the finance industry may have bought fraudulent paper without their knowledge and thus would be innocent and financially burdened as well. I would take the credit card interest payments which are in reality part of the problem in the mortgage industry due to the bankruptcy law change legislation and force all of the credit card companies to replace the interest rate charge for up to six years back with a across the board six percent interest rate. Eliminate all of the penalties of any kind. The difference then would be used to reduce or eliminate the credit card bill which the credit card holders would have. Any excess would not go back to the consumer but would be used to eliminate other credit card payment amount from other issued credit cards. The reduction would be even if the consumer was unable to pay the credit card interest rate. But the credit card bill would only be allowed up the the zeroeing out of the credit card or mortgage interest owed.

There. My solution. Punishment of greed must be paid for. Caution in lending must be back in vogue. Unethical and fraudulent practices even if legal need to be punished and unscruptulous lenders eliminated from the financial industry.

So the silver lining might be that our differences are eliminated and the Congress can finally start to work together and not bash each other.  My legislation is better than your attitude has got to stop.  What is good for the citizens is why we have elected officials in the first place.  In 1776 everything suddenly came together when they prayed.  Maybe a stronger practice of prayer would be a good solution for this problem.  A little bit of a higher pay grade sometimes (always) is needed. 

My Financial Planning Viewpoint

Keith Ljunghammar

 
 
 
 

 

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Financial Disaster

September 17, 2008

The current path to Financial Disaster seems to be imminent.  Today the Fed did not raise the interest rate.  This seems to be a repeat of what happened in the President Dwight D. Eisenhower era.  But the economy was stable during that time and President Eisenhower wanted stable interest rates so the Federal Interstate road system could be built at a reasonable cost. 

Normally interest rates are raised to either 1)  Stave off inflation or 2)  Create an incentive for foreign investors to bring foreign currencies into our markets in order to stimulate the economy.

If we have inflation – well our prices at the pump are going down because our economy or the strength of the dollar is a little bit better but we still need a lot of strength in our currency.  When I am talking with taxpayers they still have not seen a turn-around for them personally in the economy.  New jobs have not been created lately but jobs are on the decrease.  This is only from a recent vantage point however.  I am not seeing any signs of inflation as of the last two months. 

If I was a foreign investor would I put money into U.S. currency or into another foreign currency.  The dollar rate between foreign currencies and U.S. currency has been getting closer as of lately.  Some currencies have been remaining relatively stable between the U.S. and the foreign currency.   Canada has been having a wider spread.  If the dollar increases in value the Canadian currencies decreases in value.  Canada’s economy is extremely dependent upon wood, natural gas, and oil.  As the price of gas goes down the price of the Canadian dollar goes down against the U.S. $.

I believe in the economy everyone should be looking at solid industrialized currencies even if only an investment in a bank CD is the ultimate individual investors objectives.  As our world shrinks our needs to know what is happening must expand.  No longer can an investment or should I say a stashing place for cash have no due diligence basis.  Every aspect of the investment field is suspect to needing a knowledge base and a complete understanding of the integral variables in other types of mobile investment strategies.  This strategies of speculative, junk status, emerging markets, gold, other metal, commodities, derivatives, options, futures, real estate, land, tax liens, and etc. all are part of what the banks look at when determining what the CD rate will be.  Then again add the same mix put from every major country in the world and how their economies are moving.

With the recent disasters in the Mortgage, Investment Banking, Banking, and soon to be Life Insurance fields caution is all around us. 

If another bank fails I believe it will be purely from a bank run and not a balance sheet bailout problem. 

WAMU has a CD for 8 months @ 4.25%.  Is this a warning sign or is it a way to get fixed cash amounts into the bank.  Are they expecting their balance sheet to have problems for the next six months and then everything could be great after that.  Or do the banks need to publicize their income and profit reports monthly and the balance sheets monthly for assurances to the banking investor of the solid nature of a particular bank.  Then again I do see other banks offering something similiar to this also.  FDIC insured to $100,000 and FDIC insured to $250,000 is just fine but if insolvent I believe no interest is paid for about 6 to 9 months.  And if it is then it does or would take about six to nine months for the FDIC sytem to straighten the system out. 

I really do see this entire system being created by Senator Biden and his change to the credit card system.  After the bankruptcy change old credit cards which were not submitted to the bankruptcy system would have had a large default rate.  If you cannot pay your credit cards you will pay your mortgage first.  But the credit cards now are allowed to boost your interest rate up to a high of 29% and this is even if you have not missed a payment on your credit card.  The your ARM is coming due and you try to refinance and with all of the credit card debt and missed payments many homeowners are now going to pay an extra premium because of their credit cards.  A decrease in value of the credit cards and the new mortgage cannot absorb the credit card debt and then a larger interest rate is charge.  Can’t refinance and can’t sale a home.  This really does sound like stalemate from a chess players standpoint.  But this is not just a game. 

My solution would be to undo the credit card debt laws and eliminate the credit cards.  If a law creates chaos and the law was lobbied by an institution then the instituation must pay the price.  If a taxpayer cannot repay credit card debts and redo a mortgage then the credit card debt should be completely forgiven up to the point of the new re-assessed value of the house. 

The IRS has values and formulas for basic standards of living.  These formulas could be used as a backup in determining if a taxpayer is insolvent.  The bankruptcy courts also use a system to determine if someone is insolvent.  This could be used as well. 

The assumption when the house of purchased was that the homeowner would be able to pay the mortgage with everything being equal.  Whether the homeowner was under a 30% or a 35% or a 50% or higher income equation on the original mortgage then this could also be the criteria for determining the value of the amount which should be required to be paid.

Watch out for the falling economy even if you are only investing in CDs.

I thing before this is all done foreign governments will have to send money to U.S. credit card holders.  They probably would have to send this to credit card companies as gifts to pay off maybe $2000 in credit card debt to the creditors.  Above that the debtor would have to pay.  For instance, it may be in China’s best interest to get the U.S. economy going again by sending money to the U.S. so they can keep their people employed.  Just a thought and I doubt this will happen.

Maybe a mattress is the only sound investment these days.


Solar and IRA/Roth IRA

August 18, 2008

 
An infrastructure built by individuals

Environmentalism. Environmentalism. Environmentalism. Drill. Drill. Drill.
 
Environmentalists say drilling is detrimental to the environment. The driller claims off-shore and tundra drilling help the animal environment. Friendly drilling needs to continue for the benefit of our society and the animal kingdom.

In the meantime alternative sources of energy “exploration” need to be developed. The solar cell energy industry has advanced considerably. One company claims they can produce a solar cell for $1 and the actual roof-top construction cost is $5 each.

But I have no money. I am working paycheck to paycheck.
You might be saving up some money in a pension plan or in an IRA.
True power lies in the ability of the individual to make decisions. Individual decisions when accumulated collectively can help or hinder a society as a whole. Collectively as the price of “at the pump” gasoline increased the individuals reduced driving habits thus the collectiveness of individual actions reduced the price of gasoline.

In the same sense government actions can help or hinder progress or should I say action or in-action of the individual as well. IRA’s and Roth IRAs have stimulated the non-pension individual to save for retirement. Some individuals have accumulated substantial massive individual account balances tax deferred or tax free. This is good.

But now the government needs to let the individual free up some of their money so the collective strength of the individual can benefit society once again.

An IRA or Roth IRA should be accessible for the individual house construction of a solar panel roof. Costs of solar cells are down and construction workers are looking for work. If the government would allow up to a $15,000 to $20,000 withdrawal from an IRA without a 10% penalty this would be the first step. Step two would be allowing the individual to: 1) withdraw the funds as a loan with payback at the selling of the house; 2) or instead of an ordinary gain charge a capital gain tax on the withdrawal.

If a loan then no monthly amounts would have to be returned to the IRS except monthly amounts received from utilities for excess electricity bought by utilities. In some utility districts the sell back amount might be higher due to the higher cost during daylight hours. The eventual selling of the house would then pay off the difference and the IRS would continue to accumulate wealth at that time with those funds.

If under a capital gain then 2008, 2009, and 2010 with an individual 15% tax bracket no capital gains tax would be paid for the cost of the solar cell roof. This would allow those in lower marginal tax brackets to truly withdraw funds and thus lower their personal costs of living. The lowering of costs may also help in freeing up other funds for IRA or retirement contributions. The higher than 25% tax bracket would enjoy a lower tax on the amount of the withdrawal by not having to pay a tax on the withdrawal of the funds for personal use at the ordinary tax rate but at the lower capital gains rate.

The third way would be the loan and capital gain rate combined. An amount above the 15% tax bracket would be considered a loan and the amount of the loan paid back as previously mentioned. For the amount in the lower tax bracket since capital gains have been calculated this amount would then not have to be paid back. Obviously the calculation would be done at the individual income tax preparation and filing time.

On the Form 1099-R, in Box 7 a code “C” for cell would be used. As with all withdrawals a payment from the trustee directly to the contractor would take place.

The advantage of this would be construction and electricians would get back to work. This collectively would be done in the southern states at first but the construction process might benefit the northern states from reduced solar cell costs. Later on with the lower costs thus this also would make solar cell roofs affordable in the northern states.

When money moves our economy moves. If money does not move our economy is stagnant.

In the meantime let’s drill, drill, drill. Let’s create an oasis for the animal kingdom and stimulate the “freely” using of electricity as previously worded on the mosaic outside of the Seattle City Light Building.
Thanks
 
 
Keith Ljunghammar, EA
Candidate for 46th Legislative District, position 1
2400 NW 80th Street, #324
Seattle, WA 98117-4449
206.388.9982
vbhoundabout@homtail.com
keithlj.wordpress.com 


Solar

August 17, 2008

 

 
 
 
 
 
 

 

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Window energy.
This is another wild invention form our northern neighbor’s in Vancouver, B.C. High tech windows on your house can generate electricty. I wish I had more details but of all things “green” generating windows. A double meaning for the term, a “green house”.
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Wood
A year and one-half ago on September 20, 2006 I read that termites stomach enzymes were being scientifically looked at. Termites use 5% of the energy they eat for personal use. If this could be multiplied and used to breakdown wood for alternative energy usage the Pacific Northwest would undoubtedly benefit. Otherwise unusable wood would have a use besides for firewood.

 

 

 

 

 

 

 

These household pests can convert 95% of what they consume into energy within 24 hours.

http://www.renewableenergyworld.com/rea/news/story?id=46014
 

Through a DOE-sponsored program, we continue to investigate the termite gut to identify enzymes to convert wood into sugars. http://www.verenium.com/Pages/Biofuels/BiofuelsCellulosicEtoh.html
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Solar
The magic of solar and solar cells. One company claims they can produce a solar cell for $1. Effectively after transportation and installation costs making it $5 per solar cell after construction and installation costs. Maybe at $5 Pacific Northwest homes might finally be able to produce their own roof top energy. Presently marginally positive. See other energy saving ideas with your IRA/Roth also.
Photon Energy Systems is committed to a renewable energy world.
Our flagship products are based on ultra thin single crystal silicon photovoltaic devices, using a novel process that radically reduces the amount of silicon needed. As a result, both the processing and raw materials costs of our products enable manufacturing costs below $1/watt in high volume.

Systems based on PES modules enable power delivery at costs below fossil fuel generation rates. http://www.photonenergysys.com/index.htmBottom line? It would cost every person in the US $10.6k, potentially spread out over 20 years, to build enough solar power to completely replace the entire US oil consumption.
And once such a system is in place, from that point on, for at least 25 years and longer, the system continues to generate power at very little cost – there is almost no maintenance. Flat panel solar energy systems in general will last much longer than 25 years if designed properly, degradation is primarily due to interconnect corrosion, NOT the cells themselves.
New studies show that silicon crystalline and polycrystalline PV has the lowest long term degradation of any flat plate PV technology:
See
 
 
osterwald_wcpec.pdf
The above described scenario is worst case – other renewable energy sources will take a large portion of this burden. Aircraft will have a bigger issue with fuel. Battery powered aircraft are not likely, although experimental solar/electric aircraft have now demonstrated the ability to fly continuously – see the
Solong project. http://www.photonenergysys.com/why.html
 
 

 

 

 

 


Invention

August 5, 2008

     Was traveling around the 46th Legislative District and from one house I looked at something.  Well, from this I had an idea and after the election I will be trying to modify what I saw and possibly make an invention out of it.  I believe it would be of a greater function after I get done with the changes which would be needed.

     When I was 13 I found out that my great uncle invented one type of washing machine.  It was the one which had the squeeze rollers at the top.  This was used to ring out some of the excess water.  He never worked another day in his life.  I almost got the tools for making a ball inside of a ball inside of a wooden ball inside of a ball which he designed himself.  These balls are seen predominantly in European museaums which is where he also received the idea.

     What type of candidate for office do you want.  One who thinks continually or one who takes the garbage from the party power brokers.  Which will help your bottom line, your communities and your county and your state? 

     Both of my opponents I have not seen a single original idea from their “gossip” websites.  No original ideas.  They are just repeated what someone else has said.  Your vote counts more than ever in the general election and now even more in the primary.


Improving the Economy

July 11, 2008

Keith Ljunghammar, EA, CFP

How to Cut the Recession and Improve the Economy.

When I was selling securities at a brokerage house the primary client had money that was about to move. An inheritance, under performing investments, or an increase in personal income through a promotion or graduating from college.

When I was exploring the mortgage industry my schooling said to look at a mortgage purchase approaching or recently passing a two year timeframe. Also a credit rating improving and lower interest rates can be a double plus for the homeowner. Both counted together or separately can be potential clients.
When helping to preparer tax returns I noticed my income can improve when I prepare more tax forms. This would be either by paying attention to the taxpayer or advising for tax changes which the taxpayer would benefit from and have a smaller tax bite and more than likely more forms for tax reporting.

When insurance agents interview clients the degree of support and the reduction of risk or spreading of risk is what is being offered.

When Congress wishes to influence the flow of funds either for helping the economy or moving social concerns tax manipulation is the tool Congress uses with great enthusiasm. Home mortgage interest, education credits, mortgage interest credit, tax-free interest, low-income housing credit, lower capital gains rates and more are the tools which Congress has used in the past to help in establishing National goals.

In order for Congress to truly recognize what is ailing the economy they must see where the weakness is in the macro economy and see what type of tools have or could be used or create to help the macro and the micro weaknesses strengthen. What can stimulate. What can help.

First what can be strengthened with a little bit of effort and have the greatest amount of pull. Can the solution for the macro be concentrating in a few segments of the micro. But the conclusion from finding what can strengthen the problems in the economy must be seen. What or where are the weaknesses.

The frustration in the economy as I see it was created in the mortgage industry. Now the mortgage industry is hurting and another industry related to the mortgage industry is the construction industry. The creation of a mortgage document does not create wealth but the actual construction process so let’s look at the construction industry.

Weakness in the construction industry can be seen by the months of inventory waiting to be sold. At the present time six months is the length of time between a house being on the market and sold. When this happens the construction industry may go to home improvements if the home owners have the money to do this. The homeowner who has extra money but is not moving may want a little bit more room. Then they are happy. More on this later.

One other industry which when it moves from weakness to strength move with little effort. This is in both directions. Good to Bad and from Bad to Good. Historically when the overall economy moves by five percent the durable goods industry can move by fifty percent.

One of the booming industries at the present time is the energy industry. From oil and now to farming. Farming is a new contender. Segments of the energy industry are; oil, gas, dams, nuclear, corn or similar, coal, shale oil, ethanol, methanol, heating oil, solar, wind, water wave power, geo-thermal. All of these and more have attached infrastructures and are steady and in great demand as the economy improves. They slip as the economy goes down.

Dynamic changes in the macro economy are not stagnant and will never be stagnant ever again. China and India are increasing demands of oil. So even if our economy traditionally decreases instead of the price of oil decreasing it will increase and our economy will slip further and this dynamic change will decrease our economy even more.

If our economy needs pushing can there be some type of a tool where by using the tool the economy will not be hurt and ideally helped. Is there some method where the risk of consuming “oil” will not hurt our economy. What will stregthen without causing risk. Can something be moved from one area of the economy without causing things like wage-push, inflation, deflation, exhaustion of a segment of the economy. Is the risk low. Can the move create taxes by stimulating one are without taxing in another area. Any solution which hurts the helping segment cannot be a solution. Can the solution reduce imports or reliance of goods and services of finances from foreign governments or foreign investors. Can this be done safely and as close to risk-free as possible.

One major caveot is to make sure the U.S. dollar does not weaken further. Traditionally one way the federal reserve increases the value of the dollar is to increase the federal reserve rate so loan interest reates are higher. But then durable goods manufactured in the U.S. cost more in foreign countries. As our $ improves the foreign governments currency decreases.

Reviewing all of this and comping up with an economic solution – oh my. Is there a palace in the economy which can do all of this.

Yes, there is.

The alternative energy industry has had dynamic discoveries in the recent past. A group of MIT reserchers are in the process of developing an ion battery which can give a 450 mile electric car battery performance and a recharge time of fifteen minutes. Solar celll discoveries have recently increased the effectiveness by ten times. From the start of the wind industry efficiencies have increased effectiveness by five times. These discoveries are like finding a major oil deposit and they renewable and not depleting.

This can help some of the energy segment and some of the construction industry and some of the durable goods industry. But can this be thrown into the dynamic arena without taking away that much from another area. What area is moving slowly and if it moved faster would not be hurt.

Let’s consider funds which are setting in a low return area. Traditional IRAs, pensions and Roth IRAs. Not moving and not expected to move. But not just moving from one security to another will not move an industry in a dynamic fashion. Increasing the supply without moving the demand only decreases the cost of the supply. Moving demand and supply at the same time can be the only solution. It must by dynamic.

The alternative energy segment demand should be stimulated but by the homeowner. Construction and the construction industry needs a stimulus. Taking money out of a pension, IRA or Roth IRA for installing alternative sources can be the only solution. Homeowners can manufacture their own sources of heat and electricity and sell the extra back to the energy industry. Thus the taxpayer/homeowner can make money, reduce taxes, have no tax consequences, stimulate the durable goods industry, hire excess cosntruction workers capacity, not harm or decrease the value of the dollar, increase alternative fuel energy durable goods industrial base capacity, lower the price of alternative fuel because of the increased capacity and supply and helps in increased capacity to be sold overseas and helping our economy and strengthens the economy. And finally it gets stagnant money to move this stimulating more than the economy. Every dollar made equals $12 in the economy.

But to do this no tax consequences would have to be showing on the individuals return. No withdrawal income tax or ten percent penalty. If no taxes then a repayment schedule would have to be legalized. If it costs $15,000 to $20,000 for the house construction then a $1000 per year repayment should not be a harmful affect to the economy. Allow income from the creation of excess energy rebates to pay the “loan” back to themselves needs to be written into the law. Or repayment of the “loan” at the time of the selling of the homeowners house. No harm, no foul.

Let’s do it. Move the money. Stimulate an efficient source of energy. Reduce the cost of living. Get the construction and alternative fuel source industries active and increase the strong dynamic aspects of exports.

Thanks


Life, Liberty and the Pursuit of Happiness

July 11, 2008
Life, Liberty and the Pursuit of Happiness

Endorse: I-409, Respect Washington Initiative; Retrofit Viaduct;  Garbage to Energy Plant; all of State Auditor Brian Sonntag 432 performance audit recommendation – Saves $3 Billion; SR-520 eight lanes.

Promote: Medical alternatives; lower credit card maximum interest rate; reduce cost of mortgage refinancing; stimulate home energy self-reliance.

Observe: Macah Tribe Ocean Wave Power buoy project. 1MW for 150 homes.

Whether lowering costs of government or stimulating growth in industry by making it freer or creating efficiencies in government through technology usage the end result is:

Economic growth creates stable jobs.