6 Milestones before 30

By Emma Johnson, MSN Money
Some dread it. Some embrace it. Some use the big 3-O as an excuse to do that one last, precious keg stand. Others become an eternal 29 overnight.
Whatever your attitude about turning 30, experts say it's a good time to assess your personal financial situation.
For many of us, real life is well under way by the start of our third decade. Usually 30-year-olds have completed most of their education and have a few years of work experience. The Census Bureau tells us about half of us marry before 30 and that most Americans (56%) have children by then. The National Association of Realtors says the median age for first-time homebuyers in the United States is 32.
And while we all enter our 30s with unique backgrounds and varying goals, experts agree there are some fundamental rules that that can help every young adult participating in a market economy (yes, that means you).
1. Scale back the credit cards. "So many people are credit-carding it up," says Sarah Young Fisher, 53, president of financial-planning firm Kuntz Lesher Capital in Lancaster, Pa., and the author of "The Complete Idiot's Guide to Personal Finance in your 20s and 30s." "I'm an old lady. When I started out, you couldn't get a credit card without a job. Now they just mail it to you and people don't understand how long it takes to pay it off at 20% interest."
The average credit card debt among 25- to 34-year-olds was $5,200 in 2004, according to credit card research firm CardWeb.com. That is on top of the average $19,200 in student-loan debt carried by recent undergraduates.
Young Fisher says a 30-year-old needs to be "living on your paycheck" -- getting by without taking on credit card debt -- and saving at least 10% of total salary for the future. "If not," she says, "you're not going be able to retire."
She recommends investing in Microsoft Money or Quicken -- user-friendly software programs that track income, expenses and investments and can be programmed to help with taxes and goal-setting.
2. Own a home -- or have a plan. Young Fisher says that homeownership should be a top priority for those who rent. "Start saving for a down payment," she says. "If you find something you love, or a change of life comes along (like a baby or a relocation) and you don't have any money, you're going to borrow or get an interest-only mortgage -- which is ridiculous."
When you do buy, she says, "buy what you can afford, not what you love." And don't forget the new expenses that come with a house -- like a lawn mower, furnace repairs and snow shovel.
3. Have skills. Even for those who do not consider themselves entrepreneurs, most workers should expect multiple changes in employers and job titles throughout their careers. "By time you're 30, you should develop a set of marketable skills," says Gregg Fisher, 35, founder of Gerstein Fisher, a New York financial-planning firm. "Try to bring something new to the table."
The model of working for the same company for 30 years and retiring with a gold watch is now two generations out of date, says Fisher, who founded his firm -- which serves mostly clients under age 45 -- at age 21. Today's workers must differentiate themselves in order to survive and thrive, Fisher says. "Everyone's really self-employed. If you work for a company, you just have one client," he says. "If they fire you, you're out of business."
4. Give money away. No, not to the credit card companies, in the form of 24.99% interest-rate payments. Instead, establish a regular charitable giving plan, says Scott Hanson, founder of financial-planning firm Hanson McClain and the author of the recently published "Money Matters: Essential Tips & Tools for Building Financial Peace of Mind."
"I think it's financially healthy to give," says Hanson, who also co-hosts a financial call-in show out of Sacramento, Calif. In talking to clients and callers, he's come to believe that we are an emotionally deprived nation that spends to feel good. When we feel down, we head to the mall.
Hanson believes that the good vibes one feels from giving to a cause can also create that feel-good factor -- one with more significance than a new CD or an 80% discounted cashmere sweater. "Giving your money away puts it in perspective," he says.
5. Know thyself. Introspection is not just for middle-aged guys with ponytails living on a cliff in Japan. Having a firm grasp on your priorities and values is one critical component of a healthy financial life.
For example: Is impressing your friends and strangers one of your core values? No? Then why is that expensive leased SUV sitting in your driveway? "Start to know yourself and build parameters so your life and money line up with those parameters," Hanson says.
"People get so caught up that their goal becomes having another zero before they go. Once we have a roof over our head and food on the table, none of that other stuff is really going to bring that much pleasure," Hanson says. "Money is not the most important thing. You'll never have any fun with it if it is."
6. Know smart people. It is important to have strong advisers in your life, Young Fisher says. Knowing a good tax preparer, financial adviser, attorney and insurance agent can save you untold amounts of money and stress. "When you do need someone, get someone good," she says.

Young People watch less tv

Study: Young people watch less TV
The older you get, the more you watch, report says
By Paul Bond
Dec 17, 2008, 08:44 PM ET
Young Americans just aren't watching TV like they used to.Put another way, the older you get, the more you watch, according to a report due out today from Deloitte indicating that "Millennials," the generation of 14- to 25-year-olds, watches just 10.5 hours of TV a week.That compares to 15.1 hours for those belonging to Generation X (ages 26-42), 19.2 hours for Baby Boomers (33-61) and 21.5 hours for Matures (62-75).Lest one assume Millennials are shunning broadcast and cable in favor of watching DVDs on their TV screens -- they're not. They spend less time watching DVDs of movies and TV shows on television sets, 4.8 hours a week, than do Gen Xers.They are, though, spending more time watching DVDs on a computer -- 1.9 hours a week -- than any other age group.But while Millennials are watching the least amount of TV, they are spending the most time with media in general, making that up with video games, music and the Internet.Just don't expect them to spend too much time worrying about such things as news and current events, according to the Deloitte study dubbed "The State of the Media Democracy."TV does remain the most influential advertising medium going, followed by magazines, the Internet, newspapers, radio and billboards.Social networking sites are considered separate from the rest of the Internet, and they are the seventh-most influential place to advertise, followed by in-theater ads, DVDs, blogs (again, distinct from the Internet), video games, mobile phones and virtual worlds.Other nuggets from the study are that Gen Xers are driving DVR usage and to a lesser degree video game usage, as that medium, once frowned on by parents, is more recently being used for "family time."And the older you get, the less time you spend in movie theaters. Millennials spend an average of 1.8 hours a week at the movies, while it's just one hour for Gen Xers, 0.9 hours for Boomers and 0.7 hours for Matures.

Who isn't a Madoff Victim?

Who isn't a Madoff victim? The list is telling.
Although many smart people seem to have been taken in, one expert argues that anyone who really did their homework would have seen the warning signs.
By Nicholas Varchaver
Last Updated: December 17, 2008: 10:14 AM ET
NEW YORK (Fortune) -- As the number of victims of Bernard Madoff, the criminally charged founder of the investment firm that bears his name, seems to multiply with the speed and force of a hurricane, certain types of investors seem to be absent -- so far, anyway -- from the casualty list.
That's no accident, argues James Hedges IV of LJH Global Investments, a boutique firm that invests in hedge funds and private equity for high-net-worth families. In other words, score one for the big institutions that stick to standard rules rather than allowing their managers to invest on personal connections or hunches.
"There's no Duke Endowment [among the list of Madoff investors]," Hedges says. "There's no Harvard management, there's no Yale, there's no Penn, there's no Weyerhauser, no State of Texas or Virginia Retirement system."
The reason is simple, in Hedges' view. Letting Madoff manage your money "wouldn't pass an institutional-quality due diligence process," he says. "Because when you get to page two of your 30-page due diligence questionnaire, you've already tripped eight alarms and said 'I'm out of here.' "
In short, in Hedges' opinion, any sophisticated entity that actually did its homework would have seen the warning signs.
Hedges got the chance to see those signs up close: In 1997, when he was advising the Bessemer Trust, the giant wealth manager, he visited Bernard Madoff to discuss investing with Madoff's firm.
"I found him stylistically like a lot of traders: fast-talking, distractable, not remarkable," Hedges says of Madoff. But during their two-hour meeting, Hedges says, "there was one red flag after another."
For starters, he couldn't grasp Madoff's investing strategy. "I kept saying, 'you've got to explain it to me like I'm in first grade,' " he says. To no avail.
Then there was the fact that Madoff was charging no fees other than trading commissions: "The notion that something is fee-less -- which is what they largely proferred -- is too good to be true."
The fact that Madoff's operation was audited by a microscopic accounting firm also worried him. "He was also so secretive about his asset base -- that was another red flag."
In the end, Hedges was uncomfortable and Bessemer decided not to let Madoff manage any of its money.
In Hedges' view, those that went with Madoff chose faith over evidence. "You've got people who were disintermediated [i.e., didn't have a professional representative], or unsophisticated, or went in through a personal relationship. That's what a con man is -- a confidence man is somebody that engenders a relationship and then subsequently lures somebody into doing something that they shouldn't do." (According to the federal criminal complaint against him, Madoff has confessed that he ran a "giant Ponzi scheme." His lawyer, Ira Sorkin, declined to comment.)
Certainly many of the institutions that turned to Madoff will challenge Hedges' views, as many will face litigation from their own clients. So far, two of the large fund-of-funds with the largest sums under Madoff's control, Tremont and Fairfield Greenwich, have already asserted that they conducted extensive due diligence before investing. Many others will take the same position.
Should Hedges' opinion be borne out and corporate and state pension funds remain absent from the roster of Madoff victims -- of course, there will be many more names added to the list -- it will only heighten the Madoff tragedy. Because, in the end, it would show that this was one investing disaster that could easily have been avoided.

What makes a car American?

By Ashley FantzCNN
(CNN) -- With the top U.S. automakers in economic survival mode, the mantra, "Buy American," is a frequent cry among those trying to save jobs at home.
Georgia trucker Douglas Sullivan says he's concerned more about quality than the origin of a vehicle's parts.
But buying a car to benefit the U.S. economy has become an ambiguous, complicated challenge.
"How you define an American car is one of the great conundrums of this world," said Dutch Mandel, the editor and associate publisher of AutoWeek.
Fewer than half of the parts on some Big Three vehicles are made in the U.S.
Looking at a Ford Fusion? It is assembled in Mexico. The Chrysler 300C is assembled in Canada, but its transmission is from Indiana; the brand's V-8 engine is made in Mexico. Engines in the Chevrolet Equinox sport utility vehicle are from China.
On the other hand, Toyota's Camry is comprised 80 percent of parts made in the United States, and 56 percent of Toyota's vehicles sold in the U.S. also are made here, according to Toyota spokeswoman Sona Iliffe-Moon.
The Toyota Sienna and Tundra also have 80 percent of their parts manufactured in the U.S.
"When you have manufacturers from around the world building cars in the U.S. with 85 percent domestic content -- engine, transmission, assembly -- is that an American car?" Mandel asked. Or, he asks, is it considered foreign because the profits go back to a foreign country?
"It's truly a global industry," said Thomas Klier, a Chicago, Illinois, economist who co-authored "Who Really Made Your Car?" an encyclopedic analysis of the auto industry melting pot. "When you think of buying American, you should focus on three points -- its engine, transmission and where it was assembled," Klier said.
To get that information, read a vehicle's window sticker. U.S. automakers are legally required to detail the origin of a car's parts and its final assembly point.
"Unfortunately, there are few people who know about the sticker or even bother to look at it," said Bernard Swiecki, a senior project manager at the nonprofit Center for Automotive Research in Michigan, which follows trends in the industry.
The sticker's details were news to Douglas Sullivan, 43, a truck driver from Snellville, Georgia. Though he prefers foreign brands, believing them to be of higher quality, he said he used to favor U.S. brands because he wanted to support American workers.
"I wanted to keep the jobs right here," Sullivan said.
Swiecki said many people think about image of a brand, rather than the way that brand has evolved over decades as the market has grown more diverse and competitive.
"They will think, 'I'm buying a GM, I'm getting an American car,' " Swiecki said.
Foreign car manufacturers generate billions of dollars in jobs and community infrastructure in the U.S., but there is a difference between Detroit's economic footprint and that of its foreign rivals.
The Center for Automotive Research says Detroit's Big Three employed almost 240,000 people in the U.S. at the end of 2007. Foreign makers had about 113,00 U.S. employees at the time.
The key difference in how the Big Three and foreign brands support jobs in the U.S. comes outside the factories, according to a 2006 study by the Level Field Institute, a group formed by Big Three retirees in Washington.
"What's driving the difference in jobs ... is investment in research, design, engineering and management," Level Field President Jim Doyle said in a statement on the 2006 study.
The Center for Automotive Research said the Big Three had 24,000 engineers on U.S. payrolls in 2007. The Japan Automobile Manufacturers Association said its member companies had 3,500 U.S. research and development employees in 2007.
Level Field found that every 1,000 vehicles sold by Detroit's Big Three in the U.S. support more than twice as many jobs as 1,000 vehicles sold by foreign nameplates.
Most Americans consumers understand that the industry is global, Swiecki said, and they are more savvy than ever in purchasing vehicles.
"For the most part, gone are the days of people going to a car lot and paying a buck to take a swing of a hammer at a foreign-made car," Swiecki said.
But there are exceptions.
A Savannah, Georgia, Ford dealer sold 15 cars last weekend after he ran a radio ad blaming Japan for Detroit's financial funk.
While 15 was substantially better than weekends before the ad, dealer O.C. Welch said, it was still about half of the business he did a year ago.
"All you people that buy all your Toyotas and send that money to Japan, you know, when you don't have a job to make your Toyota car payment, don't come crying to me," Welch says in the ad. "All those cars are rice ready. They're not road ready."
Sullivan, who was at an Atlanta, Georgia, dealership Thursday to pick up his American brand minivan from the service department, said he has had a different experience.
He said the vehicle has given him trouble, and whenever he replaces it, he'll probably go with a foreign brand, regardless of whether any of the parts were made in the United States.
"What I look for is good gas mileage, and when I pay it off in four or five years, it's still running," said Sullivan, who has owned several American and foreign brands. "It seems I get better quality with a foreign car."

Why home values may take decades to recover

Why home values may take decades to recover
Some see 2006 as 'lifetime' peak in prices
By Dennis CauchonUSA TODAY
More room to fall?
For every $100 spent on a house in 1950 the investment rose slightly through 2002, then soared to about $192 in 2006, adjusting for inflation. Then credit dried up, and the bust began.
Rick Wallick moved into a new, three-bedroom $200,000 home in Maricopa, Ariz., in October 2005. Today, the home is worth $80,000.
The disabled software engineer stopped making mortgage payments this month. His $70,000 down payment is now worthless. His dream house will be foreclosed on next year.
"We're so far underwater it's not funny," says Wallick, 57, who had to return to his original home in Oregon to care for a sick family member and tend to his own medical problems. Wallick, one of the hardest-hit victims in one of the states hit hardest by the housing crisis, lost 60% of his home's value in three years.
His story is an extreme example, but home values have fallen so sharply since hitting a historic peak in the spring of 2006 that many Americans are wondering how much more prices can sink.
As painful as the decline has been, history suggests home values still may have a long way to drop and may take decades to return to the heights of 2½ years ago.
"We will never see these prices again in our lifetime, when you adjust for inflation," says Peter Schiff, president of investment firm Euro Pacific Capital of Darien, Conn. "These were lifetime peaks."
The boom in home prices — fueled by heavily leveraged loans built on low or even no down payments — made it easy to forget that housing values had been remarkably stable for a half-century after World War II, rising at roughly the same pace as income and inflation. Prices soared in most of the country — especially in Arizona, California, Florida and Nevada and metro areas of Washington, D.C., and New York — during a brief period of easy lending, especially from 2002 to 2006. That era's over.
So far, home values nationally have tumbled an average of 19% from their peak. As bad as that is, prices would need to fall as least 17% more to reach their traditional relationship to household income, according to a USA TODAY analysis of home prices since 1950. In that scenario, a $300,000 house in 2006 could be worth about $200,000 when real estate prices hit bottom.
The price plunge has wiped out trillions of dollars in home equity and caused the worst financial crisis since the Great Depression. Susan Wachter, professor of real estate at the University of Pennsylvania, fears that foreclosures and tight credit could send home prices falling to the point that millions of families and thousands of banks are thrust into insolvency.
"Homes are different than other goods and services," she says. "The fragility of our banking system is tied to the value of homes."
Home values have fallen before — during the Great Depression and in Texas after a 1980s oil boom, for example — but those drops were a response to other economic forces. This time, the housing price collapse is the cause of the nation's broad economic troubles, not just an effect.
"If we have another 20% decline in prices, we'll need another bailout of banks similar to what we just did," Wachter says.
Other economists see a brighter picture in the long term. Wachovia economist Adam York expects home values to keep falling until 2010 but is optimistic they will recover.
"The one saving grace is the population is growing by 3 million people a year," he says. "They need to live somewhere. That means more roofs."
Until recently, homes were stable, unspectacular investments, not get-rich-quick schemes.
Nationally, the typical existing home was worth roughly the same in 2000 as it was in 1950, after adjusting for inflation, according to Yale University economist Robert Shiller.
Newly built homes generally were bigger and more expensive than older houses. As time passed, that meant Americans lived in larger, more valuable homes overall. But a house, once constructed, grew slowly in value. California in the 1970s, Texas in the 1980s and Florida on-and-off for a century were conspicuous exceptions to the rule.
Despite only modest increases in value, homes were smart investments. Owners lived in a house, then got their money back when they sold. That's a better deal than renting. Borrowers got tax breaks, too, and built equity that could be leveraged into bigger houses as their incomes grew.
From 2002 to 2006, houses went from being a tortoise to a hare in the investment world. Home sale profits and relaxed lending standards such as lower down payment requirements and adjustable-rate mortgages (ARMs) made it possible for buyers of all income levels to pay more for houses.
When the housing bubble began to deflate in 2006, history had a sobering lesson to teach. Home values had closely tracked three common-sense measures for many years:
•Income — Home values floated at about three times average household income from 1950 to 2000. In 2006, the average household income was $66,500. Under the traditional model, home prices should have been about $200,000. Instead, the typical home sold for $301,000.
•Rent — Homes traditionally have sold for about 20 times what it would cost to rent them for a year. In 2006, houses were selling for 32 times annual rent.
•Appreciation — Existing homes grew in value by less than 0.5% per year, after adjusting for inflation, from 1950 to 2000. From 2000 to 2006, home prices rose at an average annualized rate of 8.2% above inflation and peaked with a 12.3% jump in 2005. Housing prices began to fall in the second quarter of 2006.
Inflation could help homes recapture their old prices, if not their value. But when inflation is factored in, home prices might not return to their 2006 peak for many years. Housing prices are meaningless if you don't adjust for inflation, says Schiff, the investment manager.
He points out that gold peaked in 1980 at $850 an ounce in response to inflation and the Iranian hostage crisis. It never recovered. Today, it sells for about $750 an ounce and would have to top $2,000 an ounce when adjusted for inflation to match its value in 1980.
"That's the nature of bubbles," Schiff says. "The price never comes back."
An extreme relaxation of lending standards inflated the housing bubble.
"Shoddy underwriting on mortgages" is the primary cause of the housing crisis, says York, the Wachovia economist. "People got caught off-guard by how bad it was."
Millions of home buyers — poor, rich and middle class — were approved to buy homes at prices that had been out-of-reach just a few years earlier. Lenders offered low introductory "teaser" rates on adjustable rate mortgages and approved borrowers based on artificially low mortgage payments, not the higher ones that took effect later.
What else changed:
•Optional payments on principal — In 2005, 29% of new mortgages allowed borrowers to pay interest only — not principal — or pay less than the interest due and add the cost to the principal. That was up from 1% in 2001, according to Credit Suisse, an investment bank.
• No verification of income — Half of mortgages generated in 2006 required no or minimal documentation of household income, reports Credit Suisse.
•Tiny down payments — In 1989, the average down payment for first-time home buyers was 10%, reports the National Association of Realtors. In 2007, it was 2%.
Low down payments and ARMs gave homeowners enormous financial leverage to pay high home prices. Leverage boosts buying power through debt, the same way a 100-pound woman uses a lever to jack up a 3,000-pound car.
Consider a couple with $20,000 cash. In 2006, they easily could get a 5% down mortgage to buy a $400,000 house. Today, a 10% down payment would limit the couple to a $200,000 house.
"Leverage matters a lot when you buy a house," says University of Wisconsin economist Morris Davis, an expert on housing prices and rents. "We're not going to go back to the days of only 20% (down payment) mortgages, but the days of putting nothing down are long gone."
Easy access to borrowed money reset all housing prices, even those paid by cautious borrowers. People of all income classes moved up a notch, Census Bureau housing data show.
The sale of new homes costing $750,000 or more quadrupled from 2002 to 2006. The construction of inexpensive homes costing $125,000 or less fell by two-thirds. The biggest boom was in the middle. Homes costing $200,000 to $300,000 became affordable to millions of families.
The failed titans of home lending — Countrywide Financial, IndyMac Bank and Washington Mutual — specialized in high-risk, highly leveraged loans.
"The price correction has been severe, rapid and probably permanent because lending standards have changed," says mortgage credit analyst Suzanne Mistretta, a senior director at Fitch Ratings, a bond rating company. "We are not going to see 2006 peak levels for a very, very long time."
The Great Depression of the 1930s was preceded by a real estate bubble, also fueled by loose lending standards and shrinking down payment requirements. Those real estate problems — and solutions — echo today's.
Florida real estate was the epicenter of speculation in the mid-1920s. Developers ran up prices by selling to borrowers who put as little as 10% down. Those were shockingly risky loans at a time when the standard mortgage lasted five years and required a 50% down payment.
The risky loans went bad first, but it was the spread of credit problems to the supposedly safe loans — five years and 50% down — that caused the housing market to collapse.
The five-year loans required no payments to reduce principal. Homeowners expected to refinance mortgages when the loans expired, usually with the same lender. The stock market crash led to a "liquidity crisis" — no money to borrow — that dried up mortgage refinancing.
Millions of families lost their homes to foreclosure. Falling prices on nearly everything — homes, farm crops, wages — made consumers reluctant to buy and banks afraid to lend.
As part of the New Deal, the government took control of millions of loans and restructured them into something new: the modern mortgage, with 20% down and principal that is repaid over the life of the loan. The government extended the mortgages to 15 years, then 25 and finally 30.
When World War II ended in 1945 and the Baby Boom began the following year, the 30-year, fixed-rate mortgage became a cornerstone of society and led to unprecedented levels of homeownership.
This resilient home finance system should recover in a few years, some analysts say.
National Association of Realtors chief economist Lawrence Yun predicts home prices will keep falling in 2009 but could return to their 2006 peak in three years, not counting inflation.
He says the bubble largely was confined to four states — California, Nevada, Florida and Arizona. "People who bought at the peak in those states will need time for prices to recover, even up to five years," he says. Yun says people who buy now "have much less risk of price declines and a great possibility of price gains."
The danger of rapidly falling home prices is that — similar to the Depression — potential buyers and lenders will stay away, fueling even sharper price declines.
During the housing boom, buyers expected prices to rise, so they were quick to buy, borrow and pay a premium. As prices drop, home buyers wait for better deals. says economist Dean Baker of the liberal Center for Economic Policy Research in Washington, D.C.
Lenders want bigger down payments to protect against the falling value of collateral. Homeowners lose equity, so they can't buy other houses. "Price declines can be a self-reinforcing mechanism," Wachter says.
An out-of-control price collapse would have dire consequences, Baker says. Even the most conservative banks would find themselves carrying portfolios of toxic mortgage loans.
If housing prices don't stabilize at traditional levels, financial troubles could spread everywhere — to credit cards, car loans and commercial mortgages, Baker says. "The waves of bad debt will just keep coming," he says.
Baker and Wachter want the U.S. government to take aggressive steps to help homeowners, not just financial institutions. They support expanding programs that restructure troubled mortgages to prevent a flood of foreclosed homes from coming on the market and driving prices below their traditional level.
Rick Wallick is an example of how even cautious borrowers can be hurt by a price collapse. He made a 35% down payment on his house and got a 15-year, fixed-rate mortgage at 5.75%.
Arizona's real estate mess wiped him out anyway. Now that he's in Oregon, he's renting out his Arizona house at a loss and can't afford to keep two homes.
Wallick's Arizona house is surrounded by countless foreclosed homes and empty lots. He told his mortgage company that his December payment will be his last. "It may ruin my credit rating, but I can still buy food," he says.
Shelley McComb used a no-money-down, interest-only ARM to pay $199,000 in December 2006 for a new three-bedroom home near Birmingham, Ala. The house's assessed value briefly rose to $225,000.
Now, she needs to move to Atlanta where her husband got a promotion. The McCombs put their home up for sale in March. After getting no offers, they dropped their price to $179,000. They'd settle for $160,000.
Shelley McComb, 30, who manages a doggie day care center, says, "I wish we'd rented."

What every NFL team should be thankful for

By:Kurt Schonhardt
As Thanksgiving approaches, it's important to look back and give thanks for everything that you have. For some NFL fans, finding something to be thankful for is easier than others, but we found a reason for all 32 teams. Yes, even the Lions.

AFC East
New England Patriots -thankful that they don't have to keep crying in their Samuel Adams over Tom's injury because it seems that Matt Cassel has finally figured out that Randy Moss is, in fact, really good.
Miami Dolphins - the 'Wildcat' formation, of course. They keep winning with it. If you'll indulge me for a second, I promise it will be worth it.
New York Jets - thankful that even though Brett Favre looks like he has no clue what he's doing or no idea who he's throwing the ball to, the J-E-T-S are winning games again.
Buffalo Bills -thankful that only 6 of their games are interdivision games. 0-3 so far. They are 6-2 against the rest of the league.

NFC West
Arizona Cardinals - that they play in the NFC West and will easily get a playoff spot whether they end up 7-9 or much better.
San Francisco 49ers - thankful that you have Mike Singletary as your head coach. He's fiery, he's intense, he's coaching a team with little to no talent. It's like Jimmie Johnson being forced to drive a Ford Pinto instead of a Taurus.
Seattle Seahawks - Hey, you get a new coach next year. You know, someone that might actually try to make the team a little better?
St Louis Rams - Donnie Avery has been the lone bright spot on a dismal season in the dome. Think if they had a decent QB to get him the ball.

AFC South
Tennessee Titans - really, do you need anything more than 10-1? Don't be greedy. Remember there are starving Lions fans in Detroit that would take any leftover wins you guys don't need.
Jacksonville Jaguars - you can be thankful that your coach is completely pissed about being 4-7 and will try to make things better. Chiefs fans, Lions fans, Bengals fans all get to watch their teams struggle and the coaches seem completely apathetic about it.
Indianapolis Colts - it was a horrific start to the season and now your team appears to be in full-on playoff mode. And doesn't it seem like the better Peyton plays, the more commercials we get the pleasure of watching him in?
Houston Texans - thankful that the other Texas team is getting all the attention for their struggles and for the most part, everyone is ignoring yours. On a more serious note, thankful that the Hurricane wasn't much, much worse than it could have been.

NFC East
Dallas Cowboys - Romo and T.O. look to be back on track, maybe just in time to save the season. At least the Seahawks are visiting for Turkey Day and not the Giants.
New York Giants - Speaking of the Giants, they are thankful that they could have another running back get hurt and still not suffer a drop off at the position. How many teams wish they could say that? All of them, that's how many.
Philadelphia Eagles - thankful that Andy Reid finally had enough balls to bench McNabb. You can't keep turning the ball over and expecting the coach to have your back. McNabb is thankful that Kevin Kolb didn't come in and throw 3 TD's in the second half on Sunday.
Washington Redskins - two words. Jim Zorn.

NFC South
Tampa Bay Buccaneers - you have a gritty, short, tough QB that is getting you win after win. And he's got a smokin hot wife to boot.
Carolina Panthers - hey, look at that! Steve Smith hasn't broken anyone's eye socket in like 3 months now. Way to go!
Atlanta Falcons - thankful that the Chargers couldn't find any need for Michael Turner. You know, just in case LT were to struggle? But that couldn't happen, right?
New Orleans Saints - thankful that they got to watch Deuce McAllister break the all-time Saints TD record at home.

AFC West
Denver Broncos - if I were a fan, I'd be grateful that Jay Cutler is getting a bit of a lesson in humility. Seriously Jay, don't every mention yourself with John Elway in the same breath while talking to anyone from Colorado. All the while your team is running away with the division because everyone else has given up.
San Diego Chargers - thankful that they can at least blame Ed Hochuli for their poor showing this year and completely ignore the fact that LT and Antonio Gates appear to be past their peak.
Kansas City Chiefs - they are thankful that they likely won't end up as the worst team in the state, thanks to the Rams.
Oakland Raiders - thankful that their team has won any games with an owner that's nuttier than a pet racoon

AFC North
Pittsburgh Steelers - thankful that Big Ben is apparently, like his namesake, made of steel. He's been crushed so many times this year, it seems crazy that he's still playing.
Cleveland Browns - thankful that after the season, Romeo Crennel will be able to join his buddy Charlie Weis as coordinators on some other team.
Baltimore Ravens - thankful that Joe Flacco has made for a servicable quarterback so far.
Cincinnati Bengals - thankful knowing that you're simply 1 healthy QB, a decent running back or two, a couple of receivers that won't destroy the chemistry of the whole team and a halfway decent defense from having a good team.

NFC North
Chicago Bears - thankful that just maybe they have a quarterback. Let's see, there was Kyle Orton, Rex Grossman, Brian Griese and now Kyle Orton 2.0, who looks to really have figured it out.
Minnesota Vikings - they give thanks that their defense can score at will and their offense doesn't allow the other team's defense to score enough to beat them.
Green Bay Packers - that Aaron Rodgers hasn't played so bad that they are wishing for you know who to come back, even after he completely screwed over the entire state of Wisconsin.
Detroit Lions - thankful that Matt Millen is gone. Thankful that they'll be able to grab another stud receiver with their first overall pick and thankful that they'll get tons of media attention in Week 17 as they try to stay defeated for an entire season.

Football personalities compared to Thanksgiving food

Turkey-John Madden has become the industry standard. Some people by now are sick of this meat but in the end you had to admit it's not thanksgiving with out it.

Turducken-Joe Buck. Because when he talks it feels like someone is trying to jam things inside me that don't belong there.

Gravy-Gus Johnson makes everything better and can jazz up even the biggest pile of shit on your plate.

Stuffing-Emmitt Smith. Just throw a heap of gizzards and bread together and hope - pray - something good comes of it. Luckily, like Emmitt, you really can't go wrong. Even when he's bad (always), he's oh so rewarding.

Hard Cider-Frank Caliendo. It's not something you'd choose to drink normally, but at least one day out of the year you hope it gets the job done as you try to drown out your bantering family.

Sweet Potatoes (with marshmallows)-Cris Collinsworth. Tasty, hits the spot, and is too often surrounded, covered up, or drowned out by ex-players who offer nothing but fluff.

Fancy Table OrnamentJimmy Johnson. Most brilliant thing at the table, but in the end gets put to the side.

The Last Piece of Pumpkin PieBrent Musberger. Some people cannot stand him (or the pie), and some people say College FB doesn't exist without him. As the women head to the stores for black Friday and super savings Saturday, we are stuck at home, molded into our couch listening to Musberger, much as we reluctantly reach for a second piece of pie as the table clearing and clean-up begins on Thurdsay afternoon.And who's preparing this feast?
Posted by Hugging Harold Reynolds at 11/26/2008 09:00:00 AM

Winston Churchill quote
"Anybody who is under 25 and not a liberal has no heart, because he can't feel pain and suffering of the people. Anybody who is over 25 and is not a conservative has no brains, because in 25 years he has not learned what people are really like."

According to James A Funk's Human Action Theory written in 1932

Depression produces Thrift
Thrift produces Confidence
Confidence produces Investment
Investment produces Activity
Activity produces Prosperity
Prosperity produces Easy Credit
Easy Credit produces Overproduction
Overproduction produces Fictitious Sales
Fictitious Sales produces Fictitious Collateral
and these produce Panic
Panic produces Depression, and
The more things change, the more they are the same.

Quotes about the economy

Quotes about the economy:

Inflation is when the creaking of the pillars of the economic system can’t be heard above the rustling of the banknotes.

Don’t go around saying the world owes you a living. The world owes you nothing; it was here first.

A government that robs Peter to pay Paul can always depend on the support of Paul.

Pity the man who believes in communism-he believes in something that doesn’t believe in him.

Don’t know what your tax bracket is? Look up “bracket” in the dictionary. It’s something that nails objects to the wall.

In Communism, all share equally in getting the short end of the stick. Capitalism makes longer sticks.

If your faith in the free enterprise system is running down, a trip to Russia is a wonderful booster shot.

It is extraordinary to what an expense people will go to in order to get something for nothing.

Toughest thing about making a living? Getting up and doing it all over again tomorrow-buying things we don’t need with money we don’t have to impress people we don’t like

Bureaucrates are often very good at cutting red tape- the only problem is that they tend to cut it lengthwise.

The secret of economy is to live as cheaply the day after payday as you did the day before.

In caveman days, every woman had a fur coat, every man a private club, and backyard barbecues were mammoth.

I remember when a liberal was generous with his own money- Will Rogers

The more government in the economy, the less economy in the government.

Interesting Facts about ACC mascots

University of North Carolina Tar Heels
According to legend, the term "Tar Heels" originated to describe North Carolinians after a battle during the Civil War when North Carolinian soldiers stuck their ground while soldiers from other states retreated. After the battle, other soldiers asked the North Carolinians what they planned to do with the tar they had back in North Carolina and the North Carolinians answered that Confederate President Jefferson Davis was going to "put it on you'ns heels to make you stick better in the next fight." UNC-CH adopted the nickname for North Carolinians as the school's nickname.

Wake Forest Demon Deacons
In 1922, Hank Garrity, Sr. took over the Wake Forest athletic program and made plans to rebuild it after it had basically disintegrated. After a decisive win over rival Duke, sports editor Mayon Parker of Ahoskie thought the best way to describe Wake Forest's "devilish" play was to dub them the "Demon Deacons." The personification of the Demon Deacon came in 1941 when a frat brother dared Jack Baldwin to dress up as the school's mascot.

Duke Blue Devils
"Blue Devils" was orignially the nickname of a group of well-known French soldiers recognized for their bravery in World War I. In 1921, then Trinity College, lifted a ban on football at the school. Students felt that their team needed a nickname and The Trinity Chronicle student newspaper attempted to take a vote on what the nickname should be. Unfortunately, the results of the vote were indecisive and it was not until 1923 that the editors of the school paper decided to go with "Blue Devils" to describe the university's athletic teams. Eventually, the name caught on and became the official mascot.

Virginia Tech Hokies
The term "Hokie" came from a cheer written by O. M. Stull, class of 1896. The cheer won first place in a contest and is now known as "Old Hokie." It goes like this:
Hoki, Hoki, Hoki, Hy. Techs, Techs, V.P.I. Sola-Rex, Sola-Rah. Polytechs - Vir-gin-ia. Rae, Ri, V.P.I.
The word Hokie, which was then a word that mean "hooray," stuck as the school's nickname.

University of Virginia Wahoos
In the 1890s, UVa fans would sing a chant that included the phrase "wah-hoo-wah" during baseball games against then rival Washington and Lee. The Washington and Lee fans, attempting to poke fun at UVa, called their players "a bunch of rowdy Wahoos." UVa fans liked the name and by the 1940s it was being used as frequently as the school's official nickname, the Cavaliers.

David Knighton Kicked out of School

Harding has a reputation of kicking people out of school and a very strict rules policy. I personally believe that as christains this is not they way we should act. As Christians we all make mistakes. Our job is to try to bring everyone we know to christ no matter what mistakes they have made in the past. We are not the judge only God is. We should not kcik students out of school for minor infractions only major ones (I am not making a judgement on if the bleow article is a major or minor infraction). I just think as Christains we should show the grace that we are given and remember that these young adults might make mistakes and to kick them out of school and have them lose the money they paid, the lose of a semester of work, and the bad feelings that will be created to God might not be the best decision. I don't know how you try to make Harding students reflect christ while letting them expierence life and make mistakes. I don't know if make them doing couseling sessions, loss of scholorships, or give them so many warnings (like 3 strikes and your out). I feel sory for this indivual listed below, even though certain things have been left out. I won't go into to much detail but the article makes it seem like it was a random girl not his girlfriend who they went on date that night. Any one who went to Harding knows you can get into the dorms after curfew for a few hours so she was very late. Also they both lied to the administration as to were she was. Which did not help their case. This also was not a first time they have had problems with this indivual.


LITTLE ROCK, Ark. (AP) -- One of the top quarterbacks in Division II might not play again at the college level.
David Knighton of Harding University has been suspended from school for a code of conduct violation. His father, Reggie Knighton, said the senior is being punished for allowing a female student to spend the night at his off-campus residence.
"My son is being done a great injustice," Reggie Knighton said Wednesday.
Harding (2-8) plays its final game of the season Saturday at Arkansas Tech.
David Knighton, a member of The Associated Press Little All-America team last year, has appealed his suspension.
Harding, a private school in Searcy affiliated with the Churches of Christ, says in its student handbook that "staying overnight in a motel, hotel or any such arrangement with a member of the opposite gender will result in suspension, although explicit sexual immorality may not have been observed."
David Knighton was not available for comment. His father said he believed the incident in question happened last weekend.
"My understanding is that this young lady, she missed a curfew and needed a place to stay. She knew she was in trouble, was probably going to be suspended or something like that," Reggie Knighton said. "She called David and asked if she could come over there. David said, 'Well, I'm not telling you to come over here. The door is open."'
Reggie Knighton said the young woman came over.
"She slept on the couch, left that morning," he said.
He said his son found out about his punishment soon after.
"They were judge, jury and God all in one," Reggie Knighton said.
The school would not go into detail about Knighton's situation.
"Harding has a long-standing policy of not discussing student personnel matters," a school public relations director said in a statement. "The Family Educational Rights and Privacy Act (FERPA) regulations prohibit us from releasing information from students' records. Included in that information is any disclosure involving student disciplinary records, academic records or health records."
Reggie Knighton defended his son, saying the woman's safety could have been at risk if Knighton had turned her away.
"This decision that he made, he thought was a Christian decision -- not to leave someone out in the cold," he said.
David Knighton has thrown for 3,834 yards and 24 touchdowns this season.

Daniels always in the right place

Daniels always in right place
Sunday, November 09, 2008
BY JOHN NALBONE
PHILADELPHIA -- Free safety Brian Dawkins has put in 13 years of hard labor with the Eagles and is still searching.
Right tackle Jon Runyan will run his streak of consecutive regular season starts to 185 tonight against the NFC East-leading Giants at Lincoln Financial Field, while quarterback Donovan McNabb has attempted 4,020 passes since being drafted second overall in 1999.
Left tackle Tra Thomas has protected McNabb's blindside for nearly all of those throws, yet he has not reached the pinnacle in a sport often judged by just one thing when all is said and done.
Winning a Super Bowl.
Torrance "Tank" Daniels must be living pretty darn good.
Let go by the Eagles following the 2006 season after appearing in just six games, the backup linebacker and special teams performer was picked up by the Giants, whose newly-hired defensive coordinator, Steve Spagnuolo, was familiar with Daniels' work when both men were employed by Andy Reid.
Comparable to his brief stint with the Eagles, who originally signed Daniels as an undrafted free agent before affording him the opportunity to become the first player from Division II Harding University to play in the NFL, Daniels spent most of the 2007 season on the Giants' practice squad.
Lighting struck for the 26-year-old Daniels in Week 13 of the regular season, when he was moved to the active roster.
Although he appears nowhere in any statistical category over the final four regular-season games with New York, Daniels showed enough intangibles to stick around for the playoffs.
To make a long story short, Daniels forced a fumble in the NFC wild-card game against Tampa Bay and, a few weeks later, found him self on the field celebrating with the Giants after they stunned the unbeaten New England Patriots in Super Bowl XLII.
"I just feel so fortunate to be in the league only three years and have a Super Bowl ring," Daniels said. "Not only that, I have been to the playoffs every year. To be a Super Bowl champ, it took a long, long, long time even after winning to have it kind of sink in. Then I came back here to Philadelphia (in September), seeing great, I mean great players that are 10 times bet ter than I am, who still don't have what I have. It's pretty humbling."
To recap, an undrafted free agent from a Division II college that has spent the majority of his career on the practice squads of two teams -- whose most notable contribution in the NFL was a forcing a kick return out of the hands of the Buccaneers' Michael Spur lock early in last season's playoff run -- has made the playoffs each year he has been in the league and returned to the Eagles (5-3) a champion after being let go by the Giants (7-1).
Bad stuff happens to good people all the time.
But so do good things.
So when men such as Daniels can find time to visit wounded soldiers at Walter Reed Army Medical Center before he and his Big Blue teammates were feted at the White House, there is hope for Dawkins, McNabb, Runyan, Thomas and every other member of the Eagles still in search of the NFL's Holy Grail.
That seemingly endless journey continues tonight against the defending champs in a game the Eagles, who are winless in the divi sion, must have.
"The guys in here work so hard," said Daniels, one of only three Eagles with Super Bowl rings.
Cornerback Asante Samuel (2/ Patriots) and Dan Klecko (3/ Patriots and Colts) are the others.
"They deserve to experience what I was lucky enough to experience last year," he said. "It's not easy, obviously. Every year, every week it's something different in the NFL. It's a beast, but once you taste it a little bit, you want more and I believe this team can be a champion."
Contact John Nalbone at jnalbo ne@njtimes.com

Tough times ahead for Republicans

A new generation transforms US politics
By James Carville
American voters have emphatically slammed the door on eight long years of George W. Bush and Dick Cheney’s divisive politics and disastrous policies. Following a predictable and ho-hum closing stretch of the campaign, Barack Obama was overwhelmingly elected president. The most important and most textured race for the presidency in my lifetime, in most Americans’ lifetimes, deserved a more dramatic finish.
The historical significance of electing our first African-American president cannot be lost on me, as I remember what it was like growing up in the segregated South. To say that I never thought I would see an African-American president in my lifetime is to understate what Mr Obama’s achievement says about America.
Additionally, although there seem to have been no fireworks or fuss marking its demise, with this election the Republican party has lost not only the White House and more than a few seats in Congress but an entire generation of voters. I have written in these pages, as early as August 2007 (see: “How Karl Rove lost a generation of Republicans”), that the Bush-Cheney-Rove triumvirate alienated a vast majority of young voters with its culture wars, ill-planned Iraq war and thorough, relentless bungling of domestic and foreign affairs. What was once a split demographic has become a solid voting bloc for the Democratic party for many years to come. Mr Obama and congressional Democrats made history on Tuesday night in no small measure due to the unprecedented enthusiasm of America’s youth. Mr Obama addressed them in his victory speech: “It [our campaign] drew strength from the young people who rejected the myth of their generation’s apathy; who left their homes and their families for jobs that offered little pay and less sleep.” Quite simply, young voters (18-29 years old) delivered and delivered big.
Exit polling indicates that Mr Obama won two-thirds of those voting under 30 years old against 32 per cent for John McCain. Compare that with a 54-45 margin for John Kerry in 2004 and a 48-46 margin for Al Gore in 2000. Consider this: if young people had voted for Democrats at about the same proportion of the overall electorate (52-46) as they had voted as recently as 2000 for Mr Gore and for many cycles prior, Mr Obama would not have won North Carolina or Indiana. Young voters also provided the margin of victory in key battleground states such as Florida, Virginia and Ohio. The youth vote expanded the map for Mr Obama; it put him over the top in states not won by Democrats in decades.
Additionally, exit polling indicates young voters increased their share of the electorate to 18 per cent, which is no small feat. These numbers will be studied for years to come. But already it is clear that the importance of the margin by which Mr Obama and Democrats up and down the ballot won 18-29 year olds must not be understated.
By large margins, young people believe that Mr Obama can and will change the direction of the country. Their view that government should take an active role in society separates them from older voters. Young people want to see government try to solve problems, like environment and healthcare, and are willing to pay a little more in taxes to make it happen. Their view is indicative of a larger problem for the Republican party.
In presidential politics, party dominance is cyclical. Look at 1896-1932, then 1932-1968, then 1968-2008. Republican dominance over the past 40 years (the exceptions being one term for Jimmy Carter and two for Bill Clinton) grew out of a reaction to the 1960s. It was rooted in the power of the white male vote. But that voting bloc is shrinking while emerging Democratic constituencies are projected to grow in size and voting strength. To put it simply, every shrinking demographic is Republican and every growing one is Democratic.
One party has to lose a presidential election every four years. Congressional seats change hands every election cycle. Elections come and go and usually they are without deep or abiding consequence for either party. That is politics. But occasionally there is the election, like this one, that makes a resounding, lasting impact on the US political landscape. The Republican party, now an at all-time low in popularity, has lost a generation of voters. In 2008, a new Democratic majority has emerged with young voters at the helm. It is a majority that will continue for 40 more years.
The author is an international political consultant and CNN political contributor. He was chief strategist for Bill Clinton’s 1992 campaign, and is working on a book, ‘40 More Years: Electing a Democratic Majority for the Next Generation’

Top Ten Hockey Quotes

Top Ten Hockey Quotes:
10. "Guys, I don't want to tell you half-truths, unless they're completely accurate." - coach Alain Vigneault.
9. "Luc Robitaille is a great kid and good player, but ask anybody on the street and they'd probably think Luc Robitaille is a type of salad dressing." - L.A. Kings owner Bruce McNall on why he brought Wayne Gretzky to Hollywood in 1988.
8. "We only speak two languages here: English and profanity." - Penguins coach Kevin Constantine on the many languages spoken by his team.
7. "He's the kind of guy who will stab you in the back right to your face." - St. Louis Blues superstar Brett Hull on coach Mike Keenan.
6. "We have only one person to blame, and that's each other." - New York Rangers defenseman Barry Beck.
5. "I've never had major knee surgery on any other part of my body." - Saku Koivu.
4. "Getting cut in the face is a pain in the butt." - Calgary Flames' Theo Fleury.
3. "Wayne came over to the bench one day after seeing (Zdeno) Chara, and said 'That's why I'm quitting.'" - Rangers coach John Muckler, laughing about Wayne Gretzky's comment on Ottawa's 6'9" defenseman Zdeno Chara.
2. "Tell him he's Wayne Gretzky." - Oilers coach Ted Green, after Shaun Van Allen suffered a concussion and couldn't remember who he was.
1. "How would you like it if, at your job, every time you made the slightest mistake a little red light went on over your head and 18,000 people stood up and screamed at you?" - Hall of Fame Montreal Canadiens goalie Jacques Plante.

Quote of the Day

The Quote of the Day Is:
“The budget should be balanced. Public debt should be reduced. The arrogance of officialdom should be tempered, and assistance to foreign lands should be curtailed, lest Rome become bankrupt.”
- Marcus Tullius Cicero
(106 B.C.- 43 B.C.)
Roman statesman

Sarah Palin and National Defense

I was forwarded this email by a Republican friend. I don't know if this justifies you being a vice president but it was interesting.

Question: What is America 's first line of missile interceptor defense that protects the entire United States ?
Answer: 49th Missile Defense Battalion of Alaska National Guard. Question: What is the ONLY National Guard unit on permanent active duty?
Answer: 49th Missile Defense Battalion of Alaska National Guard
Question: Who is the Commander in Chief of the 49th Missile Defense Battalion of Alaska National Guard?
Answer: Governor Sarah Palin, Alaska
Question: What U.S. governor is routinely briefed on highly classified military issues, homeland security, and counter terrorism?
Answer: Governor Sarah Palin, Alaska
Question: What U.S. governor has a higher classified security rating than either candidate of the Democrat Party?
Answer: Governor Sarah Palin, Alaska According to the Washington Post, she first met with McCain in February, but nobody ever found out. This is a woman used to keeping secrets. She can be entrusted with our national security, because she already is.

Is Barack Obama realy a socialist?

Is Barack Obama really a socialist?
By Donald J. Boudreaux Donald J. Boudreaux – Thu Oct 30, 4:00 am ET

Fairfax, Va. – Since telling Joe the Plumber of his wish to "spread the wealth around," Barack Obama is being called a socialist. Is he one?
No. At least not in the classic sense of the term. "Socialism" originally meant government ownership of the major means of production and finance, such as land, coal mines, steel mills, automobile factories, and banks.
A principal promise of socialism was to replace the alleged uncertainty of markets with the comforting certainty of a central economic plan. No more guessing what consumers will buy next year and how suppliers and rival firms will behave: everyone will be led by government's visible hand to play his and her role in an all-encompassing central plan. The "wastes" of competition, cycles of booms and busts, and the "unfairness" of unequal incomes would be tossed into history's dustbin.
Of course, socialism utterly failed. But it wasn't just a failure of organization or efficiency. By making the state the arbiter of economic value and social justice, as well as the source of rights, it deprived individuals of their liberty – and tragically, often their lives.
The late Robert Heilbroner – a socialist for most of his life – admitted after the collapse of the Iron Curtain that socialism "was the tragic failure of the twentieth century. Born of a commitment to remedy the economic and moral defects of capitalism, it has far surpassed capitalism in both economic malfunction and moral cruelty."
This failure was unavoidable. It was predicted from the start by wise economists, such as F.A. Hayek, who understood that no government agency can gather and process all the knowledge necessary to plan the productive allocation of millions of different resources.
Likewise, socialism's requirement that each person behave in ways prescribed by government planners is a recipe for tyranny. A central plan, by its nature, denies to individuals the right to choose and to innovate. It replaces a multitude of individual plans – each of which can be relatively easily adjusted in light of competitive market feedback – with one gigantic, monopolistic, and politically favored plan.
A happy difference separating today from the 1930s is that, unlike back then, no serious thinkers or groups in America now push for this kind of full-throttle socialism.
But what about a milder form of socialism? If reckoned as an attitude rather than a set of guidelines for running an economy, socialism might well describe Senator Obama's economics. Anyone who speaks glibly of "spreading the wealth around" sees wealth not as resulting chiefly from individual effort, initiative, and risk-taking, but from great social forces beyond any private producer's control. If, say, the low cost of Dell computers comes mostly from government policies (such as government schooling for an educated workforce) and from culture (such as Americans' work ethic) then Michael Dell's wealth is due less to his own efforts and more to the features of the society that he luckily inhabits.
Wealth, in this view, is produced principally by society. So society's claim on it is at least as strong as that of any of the individuals in whose bank accounts it appears. More important, because wealth is produced mostly by society (rather than by individuals), taxing high-income earners more heavily will do little to reduce total wealth production.
This notion of wealth certainly warrants the name "socialism," for it gives the abstraction "society" pride of place over flesh-and-blood individuals. If taxes are reduced on Joe the Plumber's income, the rationale must be that Joe deserves a larger share of society's collectively baked pie and not that Joe earned his income or that lower taxes will inspire Joe to work harder.
This "socialism-lite," however, is as specious as is classic socialism. And its insidious nature makes it even more dangerous. Across Europe, this "mild" form of socialism acts as a parasitic ideology that has slowly drained entrepreneurial energy – and freedoms – from its free-market host.
Could it happen in America? Consider the words of longtime Socialist Party of America presidential candidate Norman Thomas: "The American people will never knowingly adopt socialism, but under the name of liberalism, they will adopt every fragment of the socialist program until one day America will be a socialist nation without ever knowing how it happened." In addition to Medicare, Social Security, and other entitlement programs, the gathering political momentum toward single-payer healthcare – which Obama has proclaimed is his ultimate goal – shows the prescience of Thomas's words.
The fact that each of us depends upon the efforts of millions of others does not mean that some "society" transcending individuals produces our prosperity. Rather, it means that the vast system of voluntary market exchange coordinates remarkably well the efforts of millions of individuals into a productive whole. For Obama to suggest that government interfere in this process more than it already does – to "spread" wealth from Joe to Bill, or vice versa – overlooks not only the voluntary and individual origins of wealth, but the dampening of the incentives for people to contribute energetically to wealth's continued production.
• Donald J. Boudreaux is professor of economics at George Mason University. He is the author of "Globalization."

Fair Value Here to Stay

NEW YORK (Fortune) -- Fair value accounting is still fair game for attack, but there may be more common ground than imagined between critics and proponents of the rules governing how financial firms value the securities they hold.
The Securities and Exchange Commission at a Wednesday roundtable heard comments on fair value, or mark-to-market bookkeeping, which requires firms to value securities in their portfolio at, well, market prices.
Such accounting arcana has turned into a political football in recent months as firms were forced to write down the value of debt for which few buyers existed - like mortgage-backed securities in a deflating real estate bubble. SEC chief Christopher Cox said Wednesday that the fair-value standards need "further work."
He wasn't alone. Though fans maintain the fair-value approach results in greater transparency for investors, critics such as former Federal Deposit Insurance Corp. chief William Isaac argue that it does no such thing.
Worse, they say, it's intensifying the financial-sector meltdown by forcing banks to write down the value of debt securities even if the loan payment streams behind them are flowing satisfactorily.
"[M]ark-to-market accounting has been extremely and needlessly destructive of bank capital in the past year, and is a major cause of the current credit crisis and economic downturn," Isaac said in prepared remarks.
"The rules have destroyed hundreds of billions of dollars of capital in our financial system, causing lending capacity to be diminished by ten times that amount." (Banks typically lend out around ten times their capital.)
Caught in the middle is the Financial Accounting Standards Board, the private-sector group that sets U.S. accounting rules along with the SEC.
Not so opposite
Despite the lively debate, one expert says there is more common ground than might be initially apparent - which, in his view, means the mark-to-market rules are likely here to stay.
"Those who looked like polar opposites were actually much closer than they appeared," says David Larsen, a managing director at investment advisor Duff & Phelps and a member of the FASB committee that advises the board on fair-value accounting issues. "The task now is to harmonize the conflicting views."
Isaac's broadsides aside, Larsen says he believes many comments made at Wednesday's meeting show that critics of the mark-to-market regime often misunderstand the current rules and how they should be applied. Proponents and critics of the rules, he says, often agree on some principles but don't know it because they're "speaking different languages."
That observation, he says, gives the FASB and the SEC latitude to possibly issue further guidance and make minor changes to the rules, without throwing them out - a move that he said would reduce whatever insight investors have into often opaque financial firms.
One aspect of the fair-value approach that may need adjusting, Larsen says, revolves around how to hold accountants, auditors and financial executives accountable for the judgments they make in assessing the value of an infrequently traded security.
He says that one common misperception centers on what happens when a recent trade has been at a fire-sale price. He takes the example of Merrill Lynch's (MER, Fortune 500) agreement in July to sell a $30.6 billion portfolio of troubled debt to Lone Star funds for 22 cents on the dollar.
Fair value rules don't force holders of similar securities to use 22 cents as their mark, Larsen says. But he says some comments made by opponents of the fair value rules suggest they believe otherwise - and he fears that accountants and auditors who recall Arthur Andersen's prosecution for its mishandling of Enron's books may see things the same way.
"We have people who are doing the right thing who are just afraid of making a mistake," said Larsen. He says one thing regulators might consider is some sort of safe harbor that would permit accountants to make difficult securities-valuation judgments without the risk of jail time.
Those aren't the only changes that may come to the fair-value regime. The FASB is working on adding disclosure requirements, Financial Week reported, that would help investors and analysts more fully understand the types of assumptions firms made in valuing infrequently-traded securities.
Wednesday's roundtable came about as a result of the passage earlier this month of the Emergency Economic Stabilization Act, which directed the SEC to study the economic impact of fair-value accounting. The agency is due to hold another roundtable next month and to report back to Congress by Jan. 2.
Larsen, for one, believes the fair value rules are here to stay, even if their form is apt to change at the margins. "My sense is that investors want and need transparency," he said. "That's out of Aladdin's lamp, and you can't push it back in."
By Colin Barr, senior writer

A Return to Thrift

Fortune Magazine) -- Sometimes it takes a near-death experience to change bad behavior. Think of your friend who quit Lucky Strikes after a coronary incident. Or look at how banks are reducing their dependency on debt after watching rivals go belly-up.
On Wall Street this process of reducing debt relative to equity is called deleveraging. Main Street should be deleveraging too.
Deleveraging is different for people than it is for companies, however. Big institutions are selling equity to pay down debt, but most individuals can do little if any of that. Their largest asset is probably their home, which they don't want to sell because they need a place to live, and in today's environment it may be worth less than the mortgage balance. So for most people the only way to pay down debt is to cut back on spending, or to use a quaintly antique term for it, be thrifty.
To realize how far we have gotten away from thrift, consider how those in the Greatest Generation financed the big purchases of their lives and how little cash the Facebook generation puts down for homes and cars or how comfortable they are with credit card debt. The present crisis could actually be the ideal moment to make thrift cool again, because debt has rarely been in worse repute.
Debt got us into this mess. Blaming the subprime lenders has become popular, and in some cases they were deceptive, but most borrowers knew perfectly well what they could afford. Millions joined in the debt mania, and now we're paying the price. Maybe American culture is ready to turn a corner.
It's an idea that's gaining momentum. The Thrift Project, a research effort by several think tanks, has produced a recent report ("For a New Thrift: Confronting the Debt Culture"), a book, and a traveling exhibit. Ronald T. Wilcox, a professor at the University of Virginia's Darden Business School, has written a book called Whatever Happened to Thrift?: Why Americans Don't Save and What to Do About It. The common message: America's debt addiction is seriously bad news for the country, and solving the problem requires action on many fronts.
The researchers of the Thrift Project believe we need to change our institutions. Most big banks are no longer very friendly toward small savers or even present in less than affluent neighborhoods. Meanwhile, state lotteries are depressingly effective at getting poor people to put their scarce dollars into essentially negative-interest "investments."
Wilcox believes we can use the findings of behavioral finance to entice people to save more - for example, by changing the default choice in 401(k) plans so that employees have to opt out rather than opt in. From that perspective, Barack Obama's proposal to let citizens break into their 401(k)s is a step in the wrong direction.
But it will take more than white papers and wonkery to change social norms. So what forces in today's society could be harnessed to make economizing admirable? A couple seem promising.
One is environmentalism: The mantra of "reduce, reuse, recycle" is a formula for saving money, while wasting resources not only is personally profligate but also harms everyone by hurting the planet. In Hollywood a Prius is far hipper than a Hummer.
Another force might be retirement anxiety: If you don't save enough to pay all your own bills, then you're forcing your kids and mine to pay them, and that's not right.
It's far from certain that focusing on any of this would work. The famous Harvard sociologist (and former Fortune staffer) Daniel Bell contended in The Cultural Contradictions of Capitalism that something like the current mess was predictable; capitalism depends on diligent hard work but also on the promotion of hedonism and self-gratification to keep people spending, which eventually must corrode the ethic of self-sacrifice. The story, he felt, cannot end happily.
I'm not ready to give up on thrift just yet, because I suspect Americans are finally ready to embrace thrift today for a better tomorrow. If we do, and even if that causes a temporary hit to economic growth, I'm certain that we will be happier, saner, calmer, and ultimately much better off
By Geoff Colvin, senior editor at large

Don't Blame Accountants

Fortune Magazine) -- Mark to market is a business rarity - an accounting term that draws reactions from people who don't know spreadsheets from bedsheets. Mark to market, which we'll call MTM, evokes images of Enron's made-up profits and the other corporate scandals that marred the first years of this decade. Not pretty.
Now MTM - which means valuing marketable securities at market prices - is a hot item again, but for the opposite reason. This time financial companies and their allies are claiming it's too strict. They argue that marking the value of complex, illiquid securities to artificially low market prices has unnecessarily crippled the U.S. and world financial systems by creating billions of illusory losses on perfectly fine (albeit illiquid) securities, such as collateralized debt obligations linked to mortgages. Markets for these things, the argument goes, are depressed way below true economic value.
Accountants argue that MTM - known formally as Financial Accounting Standard 157 - is fine, although the Financial Accounting Standards Board has agreed to tweak it some. (Don't ask me for details - the written arguments on this are so sleep-inducing they could be marketed as an Ambien alternative.)
This week, the Securities and Exchange Commission is scheduled to hold a high-profile public meeting about MTM. The SEC, which has the power to overrule FASB, is holding the meeting because Section 133 of the $700 billion bailout bill requires that it study MTM and report to Congress by late December.
The guy who got 133 into the bill, Representative Spencer Bachus (R-Alabama), the ranking minority member of the House Banking Committee, told me he wasn't trying to politicize accounting. "It just says, 'Study it,'" he told me. "It doesn't say [to do] a study to repeal it. It doesn't say [to do] a study to suspend it."
But given that it's finger-pointing time both in Washington and on Wall Street, it's not going to be easy for the SEC to leave mark to market strictly alone. In this environment what regulator dares run the risk of being held responsible for not doing something that would supposedly mitigate the world's credit crunch? Would you want to find yourself accused of failing to act if the financial world totally melted down, as it has occasionally seemed about to do?
Normal accounting is being overridden to help banks in various ways. In early October, for instance, federal financial regulators jointly ruled that the $125 billion of preferred stock the Treasury is buying from nine big banks will be treated as tier-one capital (the best kind), even though it normally wouldn't qualify.
Second, in a little-noted move, regulators allowed banks with losses on some Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500) securities to treat the resulting tax savings as tier one in their regulatory statements for the third quarter. That's strange, given that the third quarter ended Sept. 30, as usual, but legislation making this tax break usable didn't become law until Oct. 3. How often has my source for this nugget - accounting guru Robert Willens of Robert Willens LLC - seen such grandfathering in his 40-year career? "Never," he says.
Of course, this is more about optics than economics. As is mark to market, in my humble opinion. Credit markets have been frozen much of the past 15 months largely because banks haven't trusted the balance sheets of other banks and have thus been afraid to lend to them. I can't imagine that confidence problem being resolved by changing MTM.
There are problems with MTM: It's relatively new, and parts of it seem arbitrary. But its problems have been exaggerated. It's easier to blame accountants for your problems than to admit you made your institution vulnerable by overleveraging its balance sheet and buying securities you didn't understand. Ironically, many of today's whiners adopted MTM a year before they had to, partly because of an arcane provision that let them count as profit the decline in the market value of their publicly traded debt.
The bottom line: Despite MTM's flaws, blaming it for the world's financial problems isn't the answer. Neither is shooting the messenger - or, in this case, the accountant.

Middle Class in Big Trouble

Middle Class in big trouble?
Friday, October 24, 2008 6:25 PM CDT
The strength of our great nation is our middle class and they are in trouble. By middle class I mean that great mass of more than 150 million workers that are the backbone of all our country's industries and businesses. By middle class I mean male, female, every human hue possible, every religion conceived, and every ethnic or national background possible.This great economic force created by the middle class, the greatest the world has ever known, is in deep trouble. What kind of trouble? The rest of the world, which for years has envied us, is downright mad at us!
Why is the rest of the world mad at us? We all of a sudden don't have money to spend to buy their products. And what really angers them is it is our own fault.How is it the great middle class of these great United States of America are to blame? We allowed apathy to overcome us. At the same time we gave into greed and impatience. We took our eye off the target and somebody stole it from us.After surviving the Great Depression and WWII, the US middle class experienced about 50 years of unparalleled economic boon. We went from being huddled around a radio for entertainment to a TV in every room and movies galore. We went from an old “keep it running” family car to a vehicle for every member of the family. We went from two party lines to a multi-faceted instrument that not only brings calls to you wherever you may be, but will find you a restaurant, balance your checkbook, make photos of your grandchildren, and so forth and so on.Get the picture? We have gone from small bungalows to sprawling homes in the ‘burbs. We have also gone from begging banks for money to answering daily letters of how we have been pre-approved regardless of our credit history or income.

All of this expansion was made possible by cheap, overseas labor and easy credit at home. But during those 50 years we were king of the hill. Yes, they envied us and at times despised us, but they never asked us to quit buying. So we didn't.That is when we took our eye off the ball. Since the Revolutionary War the middle class has always kept businesses and politicians in check. If they were openly corrupt like Tammany Hall, it was with the silent blessing of the middle class. But somehow during all our giddy success after WWII we quit keeping them in check. Maybe it was due to the dynamic change from rural to urban, or the scattering of the families. I don't know for sure.
What I do know is we allowed evil, greedy people into our political process and business world. They came disguised as Political Action Committees with wheelbarrow loads of cash for any politician who would listen. And listened they did. In fact they listened so much to PAC's they forgot to hear us.They also came disguised as easy credit so we could find instant gratification for anything our hearts desired. Without blinking we said thanks and took every credit card they gave us, whether we needed it or not. Our motto became, “It is mine and I want it now!” No longer did the long-term dreams and goals of our parents apply. We didn't have to wit till mid-life to drive a BMW and cruise the Caribbean. Nope, we could have it all.For 50 years we ate, drank, spent, and made merry without regard to consequences. Now the consequences have hit us and our lack of buying power is shutting down industries all over the world. And they are mad as all get out at us, because we let it happen.
Dennis Bennett is a columnist for The Daily Citizen.

Americans are saving more

By Colin Barr, senior writer
NEW YORK (Fortune) -- The economic storm pelting the U.S. economy is going to do plenty more damage to already flattened job and housing markets.
But as dark as the next three or four quarters could be, the U.S. economy appears to be undergoing a more lasting, and ultimately uplifting, shift.
Americans who for decades have spent an increasing share of their incomes and taken on more and more debt are now, for the first time in years, saving instead.
The personal savings rate, which measures the amount of disposable personal income that isn't spent, ticked up to almost 3% in the second quarter of 2008, after almost four years below 1%.
While Americans still aren't going to win any awards for thrift - consumers save more than 10% of their paychecks in creditor nations such as Germany and Japan, for instance - the return to saving carries big implications for U.S. economic health.
More saving is good over the long haul, because domestic savings create a pool of money from which companies can borrow to invest in new plants and equipment, creating the jobs that push living standards higher over time.
A growing domestic savings pool could also reduce America's need to borrow money overseas - which would make the U.S. less beholden to foreign creditors who now supply us with hundreds of billions of dollars in financing every year.
The trouble with virtue
Unfortunately, thrift will cost in the short run. Saving more means spending less - which translates into more hard times in retail and other consumer-driven businesses like the auto industry. The latest evidence of the shift came in Wednesday's steeper-than-expected pullback in retail sales. They dropped 1.2% in September, in their first year-on-year decline in six years and only their third drop in the past 16 years. Economists had been looking for a 0.7% drop.
Given that two-thirds of economic activity is consumer spending, today's thrift will exacerbate a general downturn and will weaken the impact of the massive interventions the government has made in the financial markets.
"The breadth of the decline shows a broad-based pullback in consumer spending that will not quickly turn around," writes PNC economist Stuart Hoffman, "even with the arsenal of federal firepower now aimed at the Great Financial Crisis of 2008."
Federal actions such as a $250 billion plan to buy preferred shares in banks, along with a public guarantee of bank deposits and bank debt, are aimed at unlocking credit markets and boosting economic activity. Policymakers have promised to get banks lending again, to restore economic growth that has clearly been ebbing even as government data chalked up modest gains in gross domestic product for the first half of the year.
"This plan is a means to an end," Hoffman says of the Treasury's agreement to make capital injections in banks such as Citi (C, Fortune 500), JPMorgan Chase (JPM, Fortune 500) and Bank of America (BAC, Fortune 500). "The key concept is that reasonably prudent lending should be supported."
But as the economy shows further signs of deceleration - factory production and industrial capacity utilization fell sharply in September, the Federal Reserve said Thursday - the question is who the banks will be lending to. Indeed, merely plying the banks with capital isn't certain to get them lending in a world in which businesses and consumers are trying to reduce their leverage after a long run of credit expansion.
William Cline, a senior fellow at the Peterson Institute for International Economics, notes that the decline of saving in the United States over the past two decades was accompanied by a sharp increase in the rate of bank lending, as consumers cashed in on the appreciating value of their houses.
Bank credit growth, after averaging around 6.5% in the 1990s, spiked to 12% in the four years ended in 2007, Cline says. Meanwhile the U.S. personal saving rate turned negative at the height of the housing bubble in 2005, down from around 7% in the early 1990s.
"We were already on course to have some return to saving," says Cline, who is the author of the 2005 book, "The United States as a Debtor Nation." With the credit crunch making consumer credit scarcer, he adds, and reduced house prices making Americans feel poorer, "We're going to see some more pressure on household spending."
For now, that will mean more pressure on companies that sell their goods to consumers. GM (GM, Fortune 500) and Ford (F, Fortune 500) have traded at multi-decade lows this month as U.S. auto sales slowed to a pace last seen in the early 1990s. Macy's (M, Fortune 500) dropped 12% Wednesday after the department store chain cut its profit forecast, prompting ratings agency Moody's to warn that further problems could prompt a costly credit downgrade.
The government interventions mean deleveraging can continue without the risk of an economic collapse, which is obviously "extremely positive" in the long run, says Ken Kamen, a financial adviser who is president of Mercadien Asset Management in Trenton, N.J. But that doesn't mean the short run is going to be particularly enjoyable, as Wednesday's 9% stock market decline suggests.
Kamen warns his clients that before they make any hasty decisions, they should decide how much stress they can tolerate in their portfolios.
"You don't want to be resetting your financial future while the compass needle is spinning," he says. "You may need to sell assets - but only to the point where you can sleep at night."
First Published: October 16, 2008: 11:44 AM ET

Housing prices fall but not property taxes

By Les Christie, CNNMoney.com staff writer
NEW YORK (CNNMoney.com) -- Housing prices have plummeted, but property tax bills probably won't budge.
This January, local tax authorities will begin to send out property assessments for 2009, telling homeowners what their property is valued at, and how much their tax bill is.
But many assessments won't reflect any of the steep home price declines that have been making headlines for the last year or so.
And even if property assessments do drop, property tax bills won't necessarily be any lower.
"I think you're going to see a lot more taxpayer protest this year," said Bruce Hahn, president of the American Homeowners foundation, a non-partisan consumer advocacy group.
A huge runup slows
Property taxes climbed relentlessly earlier this decade as home prices rose, according to Pete Sepp, spokesman for the National Taxpayers Union. This year Americans will pay more than $400 billion in property taxes, up about 25% from levels in 2004 and double what they paid ten years ago.
At best, says Sepp, those steep increases may start to level off.
Nevertheless, homeowners are already pressing assessors for lower tax assessments.
"For my first 25 years [as an assessor], nobody ever asked me to lower the assessment based on a home selling for less down the street. There are many such inquiries this year," said Ken Wilkinson, the tax assessor for Lee County Fla., which includes Cape Coral and Ft. Myers.
He estimates that 80% of county residents have seen the value of their homes decline. The median price of existing homes fell more than 25% in the 12 months ending June 30, according to the Housing Opportunity Index compiled by Wells Fargo (WFC, Fortune 500) for the National Association of Home Builders.
Home prices in Moreno Valley, Calif. a city of 187,000, have fallen by more than a third over the past two years, according to the same index. And that has many more homeowners clamoring for reassessments, according to Barry Foster, the city's economic development director.
But even if local prices are way down, taxpayers may not win a lower assessment, because there can be a big lag time between when the home sales used to calculate them take place and when the assessment is actually issued.
To calculate 2009 assessments, for example, assessors will use home sale prices from 2008 or even earlier, according to Sepp. Usually this works to taxpayers's advantage, since price increases take a while before they are fully reflected in assessments.
That's why it's typical for most homes to be under-valued, according to Bruce Hahn of the American Homeowners foundation. But that's also why many homeowners aren't likely to see their assessments shrink immediately.
Lower values, same bill
There's another reason why homeowners are unlikely to see any decrease in property tax bills. In some states, such as California, Washington State, Massachusetts and Idaho, taxes are based on the last resale price of the house. Even a home worth $500,000 in California may be taxed based on the sale price when it was bought 10 years earlier for $200,000.
"Because the assessment is based on acquisition value, it's difficult to get that re-evaluated," said Sepp.
That's why the market value of most homes in these states exceeds the assessed tax values. The owners with best case for a reassessment are the ones who bought at the top of the market and have seen their values drop by a third or more, like many of Moreno Valley's residents.
Even if citizens do receive a lower assessment - and this year Wilkinson expects to lower assessments for most taxpayers in Lee county, Fla. by 20% or more - their property tax bill may not shrink at all.
Tax collectors often raise tax rates to offset lower assessments to meet their budgets, which will be very strained this year. Assessments go down but rates go up so that the tax collections stay roughly the same.
"State and local governments depend very heavily on real estate taxes and they are reeling from a loss of revenues from sales taxes and other sources," said Bruce Hahn.
Once homeowners get their bills, they'll have several weeks to contest their assessments, according to Hahn.
He suggested they go online to real estate evaluation sites such as Trulia or Zillow to determine how far property values have fallen in their communities. They can also cite comparable home sales for similar properties to make their cases.
"Some tax assessors have been very reasonable," said Hahn, "but others are under great pressure to keep revenues up."

Mortgage rates headed to 7%

By Les Christie, CNNMoney.com staff writer
NEW YORK (CNNMoney.com) -- Low mortgage rates, the one bright spot in a devastated housing market, are on the rise.
And while rates remain low by historical comparison, experts say they could continue to creep up.
The average interest rate on a 30-year, fixed rate mortgage jumped to 6.6% late Tuesday from 6.06% the Tuesday before, according to Keith Gumbinger of HSH Associates, a publisher of mortgage information.
A borrower with a $200,000 mortgage would pay about $1,207 a month at 6.06%, and $70 more at 6.6%.
Mike Larson, an analyst with Weiss Research who participates in Bankrate.com's weekly mortgage rate surveys, expects to see rates top 7% in the next six months, and then turn back down.
That's quite a bit higher than rates have been, but it's no disaster.
Gumbinger blames the rate increase on the massive federal bailout. To fund the rescue and the new government guarantees, Treasury must sell a raft of new Treasury bills to raise money.
"Who even has the cash to buy them all?" said Gumbinger. "The Treasury has to offer higher interest rates to sell."
Mortgage rates tend to move in conjunction with Treasurys.
But mortgage rates are higher than Treasury yields, because when mortgages are securitized and sold to investors, they're a riskier proposition than government bonds.
"There's any number of risks with mortgage securities," said Gumbinger, "including the risk that borrowers may not pay the mortgages at all."
So, with Treasury yields on the rise, mortgage rates should continue to be a more expensive for the next few months, he said.
Unintended consequences
There may be another factor at work sending rates skyward, according to FTN Financial Group analyst, Jim Vogel.
The cost of financing mortgages will grow for the biggest buyers of mortgage debt, Freddie Mac (FRE, Fortune 500) and Fannie Mae (FNM, Fortune 500), thanks to the plan for the Federal Deposit Insurance Corp. to back the newly issued, unsecured debt of some banks.
By guaranteeing bank debt, the government is making that debt more attractive for investors, and consequently creating more competition for Fannie and Freddie when they look to sell their own securities. To compete for buyers, the mortgage giants will have to raise their own yields - and to pay for that they'll have to charge borrowers higher interest.
"In theory, I think that could be correct," said Mark Zandi, chief economist for Moody's Economy.com, who is also an adviser to John McCain's presidential campaign. "But in practice, whether it means that rates will rise is an open question. There's a strong demand for really safe assets these days and Fannie and Freddie bonds are just a step removed from Treasurys."
If there's enough demand for ultra-safe investments like Fannie and Freddie bonds, Zandi says, they may not have to boost their yields all that much to attract investors.
Zandi pointed out that the difference between Treasury yields and 30-year mortgage rates is very high right now, more than 2% compared with 1.5% normally. That's because investors fled to risk-free Treasurys when the markets panicked.
But eventually, he says, the government rescue may send mortgage rates down and narrow that spread. "If that helps bring down the general angst, than mortgage rates should fall," he said.
Gumbinger expects rates to stay higher for several more months, as financial markets and lending take some time to return to normal. But he doesn't see the current spike as the beginning of the end of affordable mortgages.
"Rates should probably settle back down," he said. "We should see an easing of credit availability and that should put downward pressure on rates."