I Bought A New Car Below Dealers Invoice

I have been thinking of getting a new minivan because my old camry is getting really old, and things are starting to break down. With my friend’s help, we both each bought a new 2007 Honda Odyssey. Before tax and fees, we paid roughly $23,900 for the car, which has a price of $24,584 from carsdirect.com, an invoice price of $25,846 from Yahoo, and a MSRP of $29,330.

Why did I choose this car? I have been extremely busy at work, so I simply relied on my friends’ advice for the choice of car. In fact, I only spent part of the last 3 days shopping for the car. Because my friend told me that both Toyota and Honda have a promotion going on, with manufacturer rebating the dealer about $2000 if a sale is made before the end of September, dealers have more rooms to go down in price. And with Honda, you can easily request price quotes via internet at the honda.com website. So it made the price comparison much easier. At the end, my friend was able to solicit 3 different quotes all within $100 of each other. With the housing market slowdown, the inventory at dealers is definitely significant. Price concession is certainly easier, especially for 2007 models.

Certainly car prices have been going down after adjusting by inflation. I’ve paid almost the same amount for my old camry, some 10 to 15 years ago. And now I’m paying about the same price for a minivan. The power of technology brings deflation, and improves life quality. Relative to housing price, cars are getting quite insignificant these days.

P.S. I will adjust my net worth by the amount that I’ve spent on the new car through a period of a month or two. I will be putting a value of $0 for my cars, since I consider that is money spent already.

Markets Will Probably Challenge The Old High

Looks like the parties are not over yet. And that’s just great, because I haven’t started shorting yet. I did sell some 10% of my portfolio.

I didn’t think that Bernanke will abandon $US this fast, but I guess subprime problems are very serious, and 50 basis cut was necessary. And it’s an unanimous decision! So much for all those “tough” Fed talks. Today’s decision clearly shows that Bernanke is THE Helicopter Ben. I guess things are really playing out according to script. Higher inflation is to come for sure. $US is going to go down. And looks like a 1987-style correction may be in the process of turning into a 1998/99 prelude to another stock market bubble.

This incredible bubble blowing series may really crunch all bears to pieces, but ending up in hyper-inflation, then depression. So with the biggest high-tech bust, Greenspan created the biggest housing bubble. Now with the biggest housing bust, Bernanke appears to be in the process of blowing up the stock bubble to replace it. Money may be “funny” money again. Sometimes, I’m amazed at how these people lived in their lies, especially the Numero Uno Greenspan, a maestro of words, but crumbled in front of real truth. His recent lies and shunning of the housing blames truly make me repugnant. I don’t even want to talk about his greatest irresponsibility of this decade in human history. Not realizing that subprime is getting out of hand?? I thought it is YOUR JOB as the chairman of central bank, Greenspan?

So what should one do now? I believe one should get back to stock market at the opportune time. If there is not a good opportunity, one should temporarily park ones cash in gold or foreign currency. $USD is going down. According to Frank Barbera’s podcast this week, Chinese currency Yuan looks like it may have a revaluation soon. And Walmart’s prices are soon to go up.

Eventually one day 99 cents store will cease to selling $1 stuffs, but maybe $2 or $5 goods. I always wonder that whether they have ever thought about inflation. One day, $1 will be worthless as five cents, and what are you going to buy with that??

See the chart of $US below. There goes your 3.4% of purchasing power in 1 month (from 82 to 79.2). And you just thought that you are earning a decent 5% on a bank CD after a year?? The sad truth is that US government is going to rob you blind through inflation, and then tax you mightily too after you generate some good amount of “capital appreciation” through inflation. The middle class will continue to shrink at the expense of upper class and foreigners. The politics and social unrest will be increasing. And I only wish that Bernanke would have written his script differently. Unfortunately, one day far away in the future, we will be paying for someone (Greenspan’s + Bernanke’s) else’s sins. And we collectively speaking won’t even know how we get there, and recognize the real culprits of our economy.

Do me a favor, don’t let the government take away your hard-earned wealth. Invest in something tangible, and forget about paper money. That literally is just a number in some computer of your bank.

Yield Curve Steepening Means No Recession

Incidentally Mark Hulbert is posting another bullish post “Ahead of the (yield) curve – Commentary: Post-Fed curve much steeper, a good sign for the economy”. I must say that everything of what he said about a smaller chance of recession based on the steepening of yield curve is correct on paper. However, I cannot agree that one can simply use only the yield curve to determine the odds of recession.

For one thing, because the long term bond markets are not collapsing or dropping dramatically after Fed raising interest rate, while the short term interest rates are falling, it appears to be a good sign that Fed still having everything under control for now, except on US dollar index cutting through multi-years support at 80. But based on Bob Hoye’s historical analysis (pg.2 at this link), such post-bubble yield curve steepening is more ominous rather than a bullish sign. Bob’s recent forecast has been quite accurate, and I would trust his words as a market historian rather than Mark Hulbert’s who has been putting out 8 to 9 bullish articles out of 10 this year. Such yield curve steepning according to Bob Hoye is simply part of the post-bubble credit contraction process. Certainly, if long term bond yields start to go up much more, they will simply deepen the housing recession. Now, I don’t care about how accurate the predicative power of yield curve. It is simply a black-and-white matter that housing markets will get worse if the bond yields go up. With the housing bubble unfolding, my only attention would be the absolute level of the long term bond yields, rather than whether the curve is inverted or not.

By the way, if I didn’t make it clear in my yesterday’s post on “is it 1998 or 1970?”, I will now. I believe that more of the emerging markets will be in the 1998-style progression, while more of the senior markets will be in the 1970-style. I think US stock market will be going thru an extended period of sideway with possibly a bullish slant, with $US falling gradually. The best thing for US dollar holders should be trading in this sideway market to make up the $US fall in purchasing power. But you do need to wait for a round of cleansing before jumping into it.

Best luck, and have patience.

Greenspan, Here Is What You Said Before

Greenspan supported tax cuts back in 2001 (01/25/2001 from CNN Money). Greenspan again defended his position on tax cut in 2005 (‘01 Tax Cuts Were Justified, Greenspan Maintains, 3/16/2005 from Washington Post). Now Greenspan is criticizing Bush’s tax cut that he supported (9/14/2007 from Bloomberg). And he says he is mis-interpreted?? Hey, Greenspan, if you are mis-interpreted, you have let it go for 6 years. And I thought you really like to speak up and express your opinions?

Greenspan says ARMS might be better deal (2/23/2004 from USA Today). This is just right before the first interest rate increase in June 2004. What does that mean that ARMs might be a better deal? Is that an encouragement for would-be homeowners to take up the extremely low initial teaser rate at 1%, with the potential of resetting to 5% later? And you said that you don’t get how subprime mortgages were rampant until late 2005/2006. I wonder who specifically taught the homeowners about all the benefits of ARM.

On the housing bubble, Greenspan defends himself in an interview:

“Sometimes I get criticized, and I deserve to be criticized, and that’s part of the game,” Greenspan says. “But this one, I’m innocent.”

Greenspan argues that the Fed mainly has influence over short-term interest rates, which affect adjustable-rate mortgages, a small portion of the overall mortgage market. Long-term interest rates, which influence fixed mortgage pricing, are somewhat beyond the Fed’s control and became more so earlier this decade.

“We tried to push them up in 2004, and we failed,” he says. “What we found was that the global forces of disinflation were far too powerful for even the Federal Reserve. We tried again in 2005, and we failed.”

Greenspan notes that if the housing bubble was the Federal Reserve’s fault, why were similar such bubbles — many of them worse than what was seen in the USA — created around the globe?

Sorry, Greenspan, I don’t buy that at all. If you want to say that globally there were also other housing bubbles, and so, it was not your fault, then you should refrain from taking all the credits for the low inflation due to the low manufacturing wages from globalization. It’s simply your job of watching over US economy, whether there are globalization factors or not. With increasing globalization, inflation in the USA is spilling over to many countries, especially in countries where there is a currency peg or link to US dollar. Greenspan/Clinton simply got lucky to take the ride in the best part of globalization.

Mis h has an excellent review on Greenspan’s words (click to read more). Greenspan’s lies are obvious to those who remember.