February Newsletter 2010

A Few Observations:

•Those of you who travel a lot know about the Sky Mall magazine. It’s the best thing to happen in aviation since the Wright Brothers. One flip of the page and you’re submersed in wonderful products such as crossword wall paper, a cat house disguised as a clay pot, and our personal favorite – a water purifier for parrots. If you ever wondered why so many Americans are in debt, Sky Mall is your answer!

•In contrast, something that does not fly is business lingo. The other day I was on a conference call where someone uttered the question, “What is the attention-bandwidth of the project.” What?? If business speak has come to this, it has got out of hand. It took me 10 minutes to figure out this person wanted to know the deadline of the project. We promise to never utter phrases like that at Yale Street!

Two books on our reading list:
•The Quants: How a New Breed of Math Whizzes Conquered Wall Street and Destroyed It, Scott Patterson

•Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System and Themselves, Andrew Ross Sorkin

Maybe we’ll start with one of these and let you all know how it went. If any of you have read any of these, please send us a review!

FYI: The New York Times recently cited First American CoreLogic’s (a subsidiary of the title insurance giant) estimate that over 20% of U.S. homeowners are underwater on their mortgages, meaning, their mortgage balances were higher than the current value of their homes. (An incredible 65% of all residential properties with mortgages in Nevada are underwater!). The article wondered if homeowners will start to act like newspaper companies (i.e. Chicago Tribune Company, also owner of the bankrupt LA Times) and commercial property owners (Tishman Speyer Properties) and hedge funds (BlackRock) (in the default and imminent foreclosure of the huge Peter Cooper Village and Stuyvesant Town apartment complex in New York) and just walk away! However, a University of Arizona study found that far fewer people default on their underwater mortgage than one might expect because they fear the shame of foreclosure and the long term effect on their credit rating. Maybe the new loan modification program needs to more aggressively push lenders to reduce principal balances so homeowners can stay in their homes. And, banks need to stop delaying foreclosure on homes where the homeowners have already given up so we can be sure we’ve hit a true bottom in prices. Once we know we’re at a real bottom, people will start to have confidence in values and start buying homes again.

Random Question of the Day: What is the appropriate response when using a one-person bathroom and someone knocks to get in? Do you say, “Someone is in here?” or do you say, “Yeah?” or do you do the fake cough and clearing of the throat? We’re not sure.