Only One Paycheck Away from Disaster… No kidding, really? Go figure.

Okay, so I’m sitting here having my morning coffee and I come across Naked Capitalism’s post about a story that I saw in DS News last week, under the headline, “Job Loss Could Put One in Three Out of Their Home.”  I didn’t write about it last week because it seemed to me to be anything but “news”.

The story starts out like this…

“One in three Americans would be unable to make their mortgage or rent payment beyond one month if they lost their job, according to the results of a national survey taken in mid-September.”

I’m serious, when I read that last week in DS News the first thought that came to my mind was: Wow… and that’s news to someone?

And the second thing I said to myself was: Yeah, and another one in three would be right there with the first one in three, but they lied when the survey taker called.

The DS News survey went on to say that even people making more than average would be in trouble without their jobs…

“Despite being more affluent, the poll found that even those with higher annual household incomes indicate they are not guaranteed to make their next housing payment if they lost their source of income.”

Golly, well color me surprised.  Apparently, ten percent of the survey respondents that earned over $100k a year said they would immediately miss a payment were they to lose their job.  And 61 percent said they couldn’t make more than five months of mortgage payments if they found themselves out of work.

It seems that DS News and even Yves over at Naked Cap are surprised… even shocked by these numbers.  Me?  I find the 61 percent could make it five months shockingly high.  I think at least half of the 61 percent were lying in order to feel better about themselves.

See, this is how the real world calculates their net worth, absent a paying job and ever since the banks defrauded and hence destroyed the credit markets and then stood around blathering about irresponsible borrowers and moral hazard long enough to eviscerate all of the home equity on the planet…

Start with available credit on cards.  Then, I figure my change jar is good for $500 easy, in a pinch.  And then there’s the $1,000 I could get out of a couple weeks of garage sales on Saturdays… that would cover food and gas.  After that there’s the gold or silver coins purchased along the way and thrown in my sock drawer.  I don’t know what I paid for them, but I know they’re easy to turn into groceries.  Then there’s stuff that can be pawned… expensive watches purchased in between stock market bubbles are always good for that sort of thing.

After that it gets harder… like I suppose I could sell my bike or a camera on eBay or Craig’s List, but it could take time, so I shift my thinking to things like guitars or original art bought with a bonus check years ago.  You know the kind of things that you shelled out $6500 for, but you could always sell for $350 if you needed to eat.

But, what about my mutual funds?  Silly boy… those were gone bubbles ago.  My IRA or 401(k)?  Well, how the heck do you think I’ve made it from the last meltdown to today?

So, lets see… how many mortgage payments is that?  Umm, let’s see… seven minus four, carry the three… hmm… oh, NONE.

And I’ve got another thing to say on this subject, just in case Yves and DS News aren’t aware of this little fact either…

You know how Ben Bernanke says inflation is under control if you take out food and gas.  Well, am I the only person out there that hears that and thinks… hang on, all I buy is food and gas, why would we take those things out of the calculation?  Does anyone know anyone who is just headed to the mall to idly shop for stuff at Nordies or Saks these days?

And have you noticed the cars on the road have changed?  There’s hardly any new ones out there anymore.  I live in Southern California, and a few years back, you couldn’t get through a single morning without seeing at least 3 new Mercedes Benz models, a few BMWs, 2 Jags, 6 Lexi (I think that’s plural for Lexuses, right?).  Now, if you even see a new car, it’s a Kia or a Hyundai.

Of course, the morons over at DS News are saying:

Job loss has become the primary driver of mortgage defaults.

No they haven’t, you fools… job loss doesn’t cause mortgage defaults… we’ve had job loss on and off for years, but it didn’t come with record, out-of-control foreclosures.  After the dot-com bubble burst unemployment was quite high in and around Silicon Valley and Massachusetts.  But foreclosures didn’t spike… how come?

Because it used to be if you lost your job you either borrowed on your house to get through it, or worst case you sold your house.  Gee… I wonder why neither of those options exist anymore?

Oh, wait a minute… no I don’t… it’s the bankers that broke the world once again.

Of course, DS News is about as banker-friendly a publication as exists anywhere, so it doesn’t surprise me that they’re going to make unemployment the cause of something…

“With the national unemployment rate holding above 9 percent for five straight months and not expected to drop by any significant measure in the foreseeable future, the state of the labor market is one of the biggest obstacles for struggling homeowners and their lenders.”

Don’t you love the way this stuff gets phrased?  The national unemployment rate is “holding above 9 percent.”  First of all, you bank-friendly clowns at DS News… that’s all crap because you and I both know that the U3 unemployment rate only accounts for those in the labor force that are not working and actively trying to find a job.

U3 leaves out a whole lot of folks, like the ones out of work for so long that they’ve stopped looking for a job and haven’t answered their phone for months, and the ones working part-time and basically starving to death.  The U6 unemployment rate is up around 16 percent, and even that is somewhat suspect.

The whole thing is based on a Household Survey of 60,000, and some moderately educated guessing using something that defines opacity called the birth/death model that is used to estimate how many businesses have been born and how many died at a certain point in a modeled recession, based on data about U.S. recessions going back to 1950.  The assumption is, for example, that if we’re at a certain point on the modeled recession, then we can estimate how many small businesses are hiring and somehow extrapolate some contribution to the unemployment rate.

I know, that’s not all that clear, but I’m not trying to teach you how to do it, so relax.  The important thing to know is that we only started keeping data on this country’s recessions in 1950… and we haven’t had anything but ‘V’ shaped recoveries since 1950.  If we had data from 1930, well then it might be an accurate map upon which to plot our economic location, but as it stands… well, not so much.  It’s like were looking at a map of Mexico and trying to figure out how to get to New Jersey.

Here’s how all that U1-U6 stuff breaks down:

U1 – This is the percentage of the labor force unemployed for 15 weeks plus, the “chronically unemployed,” as they’re referred to at the Bureau of Labor Statistics (“BLS”)

U2 – This is the percentage of the labor force that lost jobs, or completed temp jobs but are now out of work once again.

U3 – This is the one you can think of as “headline unemployment,” because it’s the number the government always reports.  It’s made up of those who are not working but actively seeking employment.

U4 – U4 is U3 plus a dash of “discouraged workers,” which are those folks that have stopped looking for work because there isn’t any and they’re tired of hoping against hope.  You know… they’re discouraged.

U5 – Take U4 and sprinkle in “marginally attached workers” and you get U5.  What are marginally attached workers?  I don’t care…

U6 – This is the real, fully loaded unemployment rate.  It uses U5 and adds in the part-time workers who want to work full-time but can’t for economic reasons.  The under-employed, as it were.

Okay, so now that we’ve got that out of the way, the DS News article went on to discuss the variety of programs that have come down the pike supposedly to help homeowners who are unemployed.  I’ve written a fair amount about these spectacular failures over the last year or so.  None of them make any sense whatsoever.  I mean, does the idea of loans for people that don’t have jobs sound like it’s going to go swimmingly?

Emergency Homeowners’ Loan Program (EHLP) was supposed to subsidize 30,000 mortgage payments for unemployed homeowners.  Official statements coming from HUD say that they don’t expect to meet the original goal of $1 billion, and the New York Times says it won’t be half that amount, but to-date the numbers, as close as I can remember, were coming in at like 250 applications and a handful of approvals.  Laughable.

And here’s a quote a really loved:

“An analysis of government records by USA Today shows that a separate federal program which provides money to individual states to assist homeowners who’ve lost their jobs has been slow in ramping up.”

Slow going?  I do not suppose you could speed things up?  I hate waiting.  My Name is Emilio Montoya!  You killed my father!  Prepare to die!  (Come on… didn’t you see “The Princess Bride?”)

Now get this… but for the record I want you to know that I don’t need this sort of charity.  I could be funny even without this stuff.

“Through the Treasury’s Hardest Hit Fund, 18 states were awarded a total of $7.6 billion to develop their own localized programs to counter unemployment and falling home prices in the fight against foreclosure.

USA Today says only about 1 percent of this money has actually been distributed to distressed homeowners, 16 months after the program was launched.

The news agency found that as of June 30th, 17 states had used the federal funds to help about 7,500 homeowners.”

Well, bang-up job so far, fellas… LMAO… I’m dying over here.  These people need to work with a laugh track.  Do you hear that… isn’t that the circus music from Ringling Bros?

So, Yves… the news that people are broke really should not be so “stunning,” as you mentioned it was to you.  America’s middle class have been raped and robbed, but slowly over the last 30 years, and then at a faster pace since 2007.

It all started in the mid-1980s when securitization started to make credit flow freely, and collectively we went into a debt nap.  When we awoke, we were driving BMWs over to buy a new $400 sweater at Saks, ordering the paté de Fois Gras, and couldn’t seem to remember our neighbor’s last name.

Thirty years later, we had bought so much stuff that the main reason that many people don’t want to walk away from their underwater homes is that they break into a cold sweat just thinking about having to clean out their garages.

Since then, we’ve been bubbled into financial ruin.  We bought high and sold low, until our 401(k)s turned into 201(k)s, and then we doubled down on shares of Pets.com, never bothering to question how the company planned to deliver 50 pounds of kibble across the country overnight… for free.  When the bubble popped, we promised God that if Cisco Systems would just come half way back, we’d buy nothing but bonds for the rest of our lives.

So, we swore off risky growth stocks and poured our discretionary dough into something safe, something solid… something responsible… real estate, what’s more responsible than real estate.  Houses could never go down to zero, don’t you know.  We were going to be just fine after all.  We’d be property owners, land barons, our counter tops made of marble flown in from Lake Baikal.

Nothing down, stated income, and we’ll refi in a couple years to a fixed rate.  What could possibly go wrong?  You know… besides EVERYTHING.

And now we’re broke… and someone broke the credit markets… so fine.  We’ll just stop buying stuff and learn to save again, like our parents and grandparents always said we should.

Yves is concerned that with all of us sitting out here on the edge of financial ruin, when the next financial shock wave hits, we’re going to need a lot more of those plastic food stamp cards.  And she’s probably right… it’s going to be a mess… but you want to know a secret?

We’re going to be okay… I mean us, the homeowners… the broke people… the ones on the edge… we’re going to be absolutely fine no matter what.  Even if we lose a house… so what we’ll rent one just as nice… maybe find one with a pool… for less than we were paying, and we won’t be underwater anymore… won’t have the insufferable bankers to fear anymore… no more calls at 8:00 AM on the dot from Chase asking when we plan to make our next payment, no more listening to insensitive idiots calling us “irresponsible borrowers,” because we certainly won’t be anything like that anymore.

Nope, we won’t borrow anymore… debit cards are so cool… oh, and how much is that sweater?  Are you kidding me… not a chance!

Did you see my new Kia… paid cash… now I’m going to drive it for at least a decade.  Great mileage too.  And so small, I can wash it myself over the weekend… it’ll be fun.  Then maybe a picnic in the park… play with the dog… get to know our neighbors again, maybe play some Bridge… watch something on cable TV before bed.

Yes indeed… WE HOMEOWNERS ARE GOING TO BE JUST FINE… everyone else, like our politicians… the bankers… those corporate execs… those are the people you should be worrying about Yves, not us.  It’s not our futures I’m worried about, it’s theirs.  We’ve already fallen and the rest of the way down actually sounds kind of freeing, if you ask me.  They, on the other hand should be careful because their first step down is likely to be a doozy.

We’re going to get responsible, stop spending, start saving… no more credit.  We’re swearing it off like a bad cold.  Back to basics… in fact, it’ll be great.  We’ll teach our children to do the same things.  Think I’ll open an account at a community credit union.  Let the bankers find some other suckers to securitize and scam… ’cause the American middle class has had enough.

I wonder who will miss whom more.  I don’t think I’m going to miss the bankers, or the politicians, or the corporate fat cats, but I’m thinking that in the end, they may miss us quite a bit.

And besides, I really did need to clean out my garage anyway.

Mandelman out.

Come on… help me get this documentary done this year… it’s really important because we need to change the way our politicians and others think about the foreclosure crisis, and there’s no time to wait for them to read all 525 of my articles.  Take a chance… I wouldn’t ask if it wasn’t important.