The Ballad of Hammerin’ Joe

By John Galt

April 29, 2008

This is the story
About Hammerin’ Joe,
Hittin’ everything
With his hammer you know,

Then one day,
He made a mighty hit,
And broke his hammer,
Into itty bitty bits.

Along came a bankster,
Who said “Hey Joe!”
Need some money or a
Hammerin’ Loan?

Joe said sure,
But I’m quite dead broke,
After all I’m just a
Hammerin’ bloke,

The bankster said fine,
Don’t even start to whine,
No money down is how
To start a gold mine

Joe said great,
Where do I sign?
And the bankster said
On the bottom line

Joe made payments
The first two years,
Then the loan reset,
Which was what Joe fears

He said “Hey bankster”
My business is down,
Can I refinance
As I train to become a clown?

The bankster said no,
Give my hammer back Joe
And foreclosed is
The way the hammer goes.

Joe learned a lesson,
It was real hard,
A hammer is a tool,
And an economic wild card.

This officially ends my songwriting career(maybe). But if you hum it at a bankster board meeting, it might just work.

The moral to the story?

A house is a tool. It is not an “investment” in the traditional sense of the word and it is not something “liquid” which can be rapidly converted into hard currency, also known as “cash.” Just now Americans are discovering, it is a place to live, not to flip, take equity out for stock speculation or to leverage out for purchases of “investment properties.” It is a place where a profit is possible provided insanity does not take hold. It is an opportunity to get a decent return on investment IF inflation is maintained at reasonable levels. Am I calling a house a “hammer” in that sense of the word? Yes. It is a tool. It is shelter. It is a place to sleep and eat in, bath and raise a family, but it is an “it” which means the ability of the object to rapidly increase and decrease in value is a specter hanging over the head of the ownership. If people wanted to “invest” they would have been better off buying good stocks and bonds than piling a fortune into a home and calling it their nest egg. As many are finding out, their nest egg is now worth 40% less than what they refinanced it for.

What triggered this horrid song in my head? While listening to the local news yesterday morning, I heard a talking head from Raymond James discussing the real estate markets and declaring that it could have another 10 to 15% to drop before the prices were stabilized. No big deal, right? Immediately after that part of the news a commercial comes on for “make money flipping real estate now!” I about wrecked my car. I’ve heard some really stupid and ironic comments over the last two years, but to have that ad on in this market is tantamount to advertising Easy-Off Oven Cleaner at Auschwitz on the prisoner’s uniforms. The insanity of some people just blows my mind. And the people who think that even in current market conditions with an unstable interest rate environment are viable for real estate flipping are not just irresponsible, but fools. The 30 year mortgage is now up again to 5.97% on average as of the market’s close yesterday. Regardless of the lip service we hear from the Fed tomorrow, we will see a major problem with the 30 year mortgage as the bond vigilantes are getting ready to punish the markets for the stupidity of our central bankster over the last year. This means that the bailout in the housing markets, long hoped for to ease the pain, is not coming. It means that the 5.1 years of supply of condos we have in the south Florida markets will become a six, seven or longer year supply as no one can obtain financing. And what it really means this is far from over, as I’ve been screaming about, and that we have about two more years of serious pain in front of us.

So old Joe’s hammer couldn’t refi and it got foreclosed on. Well, that’s the story of the homes. Many people fell for the “take the equity and play flipper” during this last speculative boom. The inability for people to pay attention to the history of not just the Florida market, but real estate speculative booms as a whole is about to punish the remainder of the nation. I know this might seem like blasphemy but the crazy people who purchased new homes in 2005 through 2007 are not the only problems we will have to deal with. People who purchased homes in the 1990’s are the next surprise awaiting our system and those that took out second mortgages will pay a brutal price. The banksters have to clean up their balance sheets and the day of reckoning is coming at them like that asteroid which zapped the dinosaurs. And people who do not understand the difference between long term investments and speculation are sitting where the crater is about to be formed. Be warned my friends. The foreclosure process will accelerate in the months to come no matter the pleadings of the politically putrid pundits of D.C. Jim Cramer might actually get one prediction right this time; we may actually see over seven million foreclosures before this is all said and done.

And it will change our political and economic landscape for decades as a result.

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