Tootin' New Hampshire's Horn

A site called Daily Beast has released a survey ranking the states in terms of most corrupt to least. Most corrupt was a surprise to me - Tennessee. I have not had a lot of contact with that state but certainly have not read a lot about corruption there. Frankly, I thought Louisiana would lead the list. I apologize to some friends of mine from that state but I have read, and had experience with, regular stories out of Louisiana on corruption, both public and private, including a story this week on some official hiring his live-in girlfriend for a big job over many more qualified folks. In any event, Louisiana still ranks up there.

I am happy to note I am from New Hampshire and it ranked as the least corrupt state. And so, let me take a few paragraphs to sing the praises of my home state for the past 8 years.

NH is often noted as one of the states with the lowest tax burdens, which is probably due to no income tax and no sales tax (other than on prepared food). I am not sure why there is a tax on prepared food. You can buy a car and pay no tax but if you buy a burrito, watch out. There is a real estate tax, but after living in NY it does not seem too bad to me. Indeed, I moved here after 17 years in NYC and cannot believe how well NH does with so little after seeing how poorly NY does with so much.

Now part of this may be due to NH being a state among the highest median incomes in the country, and at least one year since I have been here the highest, but since income is not taxed, median income should not really impact how well the state does that much.

Somehow, NH has mastered the art of doing more with less. The state motto is live free or die, which probably initially meant personal freedom but these days stands as a very prominent anti-tax motto. Any politician not running on an anti-tax motto will not get elected. Despite having one of the lowest tax burdens in the country, us here in NH want even a lower burden.

Now I am not one to complain about paying taxes. I do appreciate that we need government and the services it supplies. I also appreciate that taxes are in some respects a redistribution of wealth, and that does not really bother me. But while I do not mind paying taxes, or even more taxes if it makes sense, I get a bit outraged if I think my tax money is being put to bad use. I will not go on further on this point other than to note Obama has given most of my tax dollars to support undeserving financial institutions who are in large part to blame for our problems and that outrages me. Moral hazard be damned. Again, taxes do not bother me nearly as much as tax money being wasted. Thus, I am happy to live in a state with low taxes with low corruption where I can see my dollars doing what they should do. If only every state could be this efficient. If only the federal government could be this efficient.

This Economy is Coming Home to Roost

Well, today was an interesting day. The trickle of bad economic news seems to have become more of a steady flow and the markets did not like it, not one bit. If you are reading this you already undoubtedly know about the bad unemployment numbers out today, worse than any of Bloomberg's surveyed economists predicted. Ask me if I am surprised? The "economists" being surveyed have been too optimistic on 18 of 21 of the most recent unemployment reports. Are these people paid to be wrong? Well, quite possibly.

The Philly manufacturing index down as well, from positive territory to negative in one fell swoop. Economists really did not see that one coming either.

Now you cannot say I have not been telling you about this. My timing has not necessarily been the best but I have been saying consistently for a year and a half that the fundamentals are simply not there. Stimulus certainly glossed over this fact but the fact is still there and now that stimulus is fading fast the reality is setting in equally fast.

Now I know I sound like a broken record as I keep spouting off the same stuff (which is a major reason I have been posting less of late) but the fundamentals are again worth noting, with a few more linked stats to support the situation:

Tonight I will limit myself to real estate. There is way too much property under water, unemployment continues to lead to more foreclosures, more foreclosures lead to more REOs sold at depressed prices, which in turns further lowers the price of RE, which puts more folks underwater on their mortgages, which leads to more foreclosures, and so forth and so on. Interesting cycle. As you can see in this link, the number of foreclosures continues to increase. Fannie, Freddie and FHA had an increase of 22% in Q1 versus the prior quarter, which is an increase of 59% versus Q1 2009, when RE was already sucking wind:

http://www.calculatedriskblog.com/2010/05/fannie-freddie-fha-reo-inventory-surges.html

Now some of this may be due to ARMs resetting, some due to unemployment, some due to continuing declines in RE prices in some areas, but some are due to banks, Fannie, Freddie and others holding off on foreclosures in the past and spreading them out. This was not just something they decided to do on their own, as now we learn the official government objective was to spread out foreclosures to give financial institutions time to deal with them. Call it extend and pretend or kicking the can, either way something right now is coming home to roost. I get this inside line from John Lounsbury who had the opportunity to hear it first hand from Geithner earlier this week.


http://seekingalpha.com/article/221249-further-thoughts-on-my-treasury-meeting?source=dashboard_macro-view

There is, however, a prospect for foreclosure rates to slow if the courts continue to hold that the mortgage industry screwed itself through MERS, an electronic recording system developed during the frantic housing bubble to make it easier for financial institutions to securitize mortgages and not bother with pesky time consuming and costly recording requirements. As it turns out, some courts are saying using MERS not only saved on fees but it ventured outside of certain legal requirements for documenting things properly. In short, there could be 62 million properties in this country where the current financial institution holding the mortgage cannot legally prove it - as in the homeowner could be free and clear on their mortgage whether they know it or not. This is by no means a legal certainty in any jurisdiction, but it is getting the attention of a few courts. For a lot more detail on the situation, I recommend the following link:

http://seekingalpha.com/article/221344-homeowners-rebellion-could-62-million-homes-be-foreclosure-proof?source=dashboard_macro-view

If the trend in courts continues, many financial institutions could once again find themselves on the rope.

Disclosures: None.