The Writers Coin

I watched a couple hours of the Goldman hearing held yesterday in Washington, DC that featured US Senators grilling Goldman Sachs executives. I’ve never really paid attention to hearings like these, but after watching yesterday I have to say that this stuff is fascinating.

There were so many things happening at the same time, it was tough to keep track:

• Presumably, they were there to discuss the SEC charges against Goldman, which they sometimes hit on
• The senators were there to look good in front of the media as they wagged their fingers at Wall Street
• Goldman was there to take the fall for the mortgage crisis, which it did not cause
• The Goldman guys were there to not look stupid and protect the firm

Why is this so interesting? Because both the Senators and the Goldman guys are really smart dudes—but the Senators (as one admitted) don’t have the capacity to really understand all the details of how all this stuff worked. It’s not easy. They did their homework the night before, read all the papers and books (including The Big Short!), and then went out there to wag their fingers in Goldman’s face.

Why? Because they represent the people, and the people are angry. They’re angry about massive job losses, angry about their 401(k) losing so much of its value, angry that CEOs were making money hand over fist even though they messed up big time with the bets they took in the mortgage industry.

And the use of that word—bets—was in full effect during the hearings. The senators made a point to compare what Goldman did to a casino that stacked the odds against everyone else and then sat back to collect the money. Which is oversimplifying A LOT of what happened and is also wrong. The senators acted as if Goldman knew what was going to happen in the future and then acted illegally (or at least immorally) to reap massive profits from that information.

Some of the questions they asked Goldman were astounding. Senator McCain asked the Goldman CEO what he thought about community banks being in so much trouble. He asked him how much he got as a bonus last year ($9 million), and he asked him what he felt about the American people being in such a tough spot right now. Then he threw out something like “But you’re doing pretty well, aren’t you?”

What the hell does that have to do with anything? Absolutely nothing, and that’s why yesterday was so interesting. This was the biggest economic collapse in the history of this country since the Great Depression, and someone has to take the blame. And if you watched yesterday, it’s clear who Congress wants to point the finger at—Goldman Sachs. The people need a villain, and right not it looks like it’s going to be Goldman Sachs.

You Can’t Handle the Truth

Senator Coburn then chimed in with something I thought was pretty brave: he pointed out that 90% of the mess was Congress’ fault—they only hold these hearings retroactively, never before something bad happens. Bravo to you Senator Coburn: amidst the bashing and blaming of Goldman, you came out and spoke honestly instead of just piling it on some more.

It was quite the show.

But is any of it right? Did Goldman Sachs do anything wrong? After all, that’s the point of the SEC charges—that Goldman broke the law by creating a product that one client believed was “built to fail” while selling it to other clients.

I don’t see the conflict of interest. First of all, Goldman had no way of knowing what was going to happen. As we saw in The Big Short, some people were pretty sure that certain tranches of mortgage securities were going to blow up. But no one knew for sure. And even if they believed that these products were going to fail, is it their job to stop others from exposing themselves to the risk they’re looking for? Should Scottrade stop me from buying a stock because it “knows” or “think” it’s a shitty stock?

I don’t think so. I think if an institution or person wants to buy X or Y security from Goldman, Goldman’s job is to sell them the security.

No one knew exactly what was going to happen—including Goldman.

I am Not a Goldman Apologist

Let me get this straight—if it’s illegal to do what Goldman did (I don’t really know, but it doesn’t sound like it should be), they should be punished. Reform needs to happen. But what I don’t like is when people lay blame or make up their mind without knowing all the facts. And that’s what makes this so tricky—I bet 70% of the population can’t really understand (and doesn’t really care to understand) what happened, how it happened, and how to fix the problem.

All they have to do is read The Big Short and you’d get an entertaining, in-depth view of the crisis and how it blew the economy up. Goldman had some to do with it, but that was after lenders were giving out irresponsible mortgages to irresponsible buyers. I get very frustrated and upset when these knee-jerk reactions and decisions are made:

• Goldman made money of the crisis (they lost a ton too) and so therefore they are evil.
• The CEO got a $9 million bonus and so he did something wrong.
• Money is evil.

We’re not idealistic teenagers anymore that have these short-sighted opinions about the world. We should dig a little deeper and try to learn what the root cause of all this was. It was irresponsibility. It was lack of proper oversight. It was leverage. It was greed.

But if you’re going to put everyone that falls under those categories on the stand, it’s going to be one hell of a long hearing.

Anyway, there are hours and hours of video on this out there, but here is a clip of Goldman CEO Lloyd Blankfein on the “stand:”

In case you’ve been frozen for the past 36 years, you probably know about the first-time home buyer credit. The government started it to give home buying (and the economy in general) a boost by offering a credit to certain buyers in exchange for buying a home. Since home buying had stagnated after the mortgage crisis collapsed, it seemed like a good idea to boost the sales of homes by giving people some money in exchange for doing it. While it looks like it might be helping boost the numbers, a lot of people aren’t so sure that it’s a good idea.

I’ve written about the buying a home a lot and one thing I’ve noticed in the comments is a very specific kind of resentment towards this program. Usually, people are mad for one of three reason:

It’s Not Fair

They either just bought a home or don’t qualify for the credit or they qualified for the credit when you had to repay it. Which—to be totally honest—sucks a lot. If I had just bought a home and gotten a $7,500 credit that I had to pay back and then a few months later the “you don’t have to pay it back” version came out, I would be pissed off too.

It’s Not Smart

They think it’s bad strategy to put people into homes (and mortgages) who are so close to not being able to afford it that they need an $8,000 “loan” to make it happen. This makes sense—$8,000 is nothing compared to the commitment you’re making when you sign up for a 30-year loan. What happens when these people run through that money and hit a speed bump?

Politics

Some people just don’t like the government getting in the way. The idea that they are paying their taxes and that some of that money is going to go to someone who can “barely” afford a new home just doesn’t sit well with them. These people aren’t fans of government intervention and this programs gets all up in their nerves.

One More POV

Regardless of your opinion, the credit is having the intended effect: more people are buying thanks to the incentive. Now all that’s left is to hold on and see what kind of long-term impact this has on the economy and the real-estate market in general. What will happen once the credit ends? Will prices stabilize? Will the economy be affected?

For those answers, we’ll all have to wait.

Yesterday I wrote out my first check to make my first payment on the mortgage to our new place. It’s a big check—bigger than any rent check I’ve ever had to write. And I started to think about whether or not it was a little too much higher than my rent used to be.

Doesn’t everyone always say that you should try to pay less than your rent when you buy?

But this place we’re in now is nicer, bigger, and has amenities we didn’t have before—so we moved up in the world by moving here. Which means we should expect to pay more. I did a little digging around and found that I’d probably be paying around the same amount if I rented a place just like this one. So that made me feel better.

Then I read an interesting piece in the NY Times about this very debate: is it better to rent or buy? Usually articles like these try to go against the grain to show people that renting offers more flexibility for less money. This article does the opposite, making the point that in most markets buying is probably the way to go.

And they have a fancy calculator to prove it.

As analytics as I like to think of myself, this is a decision that considers so many other life factors that a cool calculator can’t really do the math on why you’d want to buy.

• By buying we are putting our money towards something for the future
• Renting gives us flexibility to move whenever we want, but I hate moving
• Buying got us a bigger, nicer place
• Renting usually means you’re not living in as nice a place, unless you’re paying a premium
• Buying gives me that unmeasurable feeling of ownership that is hard to describe
• Renting made me feel like I was still in college

These feel things are hard to quantify, especially with so many money ratios out there that we’re “supposed” to follow. And that’s probably whey there’s so much debate about buying vs. renting—you just can’t properly weigh all the pros and cons when you don’t know that feeling of walking in the door, looking around, and going “this is my place.”

I know it’s cheesy and probably very unhelpful, but it’s true.

Image by helloturkeytoe

A few weeks ago I stumbled onto Chris Guillebeau’s site, The Art of Non-Conformity. Chris is an interesting guy—he’s an entrepreneur that has set a goal of visiting every country in the world. And guess what? He’s out there doing it. When I visited his site he was in the midst of promoting a new product called the Empire Building Kit. It’s basically a very detailed, very action-oriented guide to starting and running your own small business (from what I can tell/remember, it’s not open for sale now).

There was a deadline on when you could buy into it and the deadline ran out before I could make up my mind. So instead I visited his store and the found another guide that seemed like a “lite” version of the Empire Building Kit: The Unconventional Guide to Working for Yourself.

Itching as I was for some help and direction with starting Applied Analytics, I decided to buy it and see what Chris and his guides had to offer. I had already been exposed to some of his work from reading his Brief Guide to World Domination, which was a really slick, really entertaining read. And that’s something you’ll notice when you fire up his Unconventional Guide to Working for Yourself—it is very pretty, very readable, and very slick.

What’s It All About?

The goal of the guide is to help readers start a micro business, which is defined as a business that can earn at least $200/month. That’s to start of course and you can always think bigger and go bigger. But the purpose is to get a small business started that makes a relatively low amount of income.

Chris does a great job of tailoring the guide to a wide variety of people. Whether you know what you want to start or not, Chris has got you covered. Personally, I felt like the guide was better tailored for people that have no idea what they’d want to start since he runs through a lot of potential businesses and possibilities. From eBay to blogging to photography, he covers a fair bit of ground that should help you make up your mind about the direction you want to go in.

Chris also does a good job of telling his own story via his experiences as an entrepreneur. You can tell that he’s actually done a lot of these things and it’s reassuring to know that you’re taking the advice of someone who knows what they’re doing.

Is it for You?

If you need a kick in the pants to get started with any type of side business, this guide will give you that bit of added motivation. The audio segments add a nice dimension to the package and Chris is very responsive to any issue that comes up with the guide. If you already know what you want to do and have done a fair amount of work, then you may want to wait until he opens up the Empire Building Kit again. Either way, there are some good marketing tips in here that anyone can benefit from.

And if you’re on the fence about this specific guide, check out his site (The Art of Non-Conformity) and his free Brief Guide to World Domination guide to get an idea of what you’re getting into.

If you’re interested, check out The Unconventional Guide to Working for Yourself. You’ll notice that’s an affiliate link and that’s another cool thing about his guides—once you buy one you can apply to the affiliate program and make some money off every sale you drive to him. Like I’ve been saying—Chris is a smart guy. If you don’t want to go through the affiliate link, you can go straight to the guide here.