ERICOPOLY

Read it for yourself: http://www.huffingtonpost.com/2012/01/01/rick-santorum-would-invalidate-gay-marriages_n_1178450.html http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2012/03/02/BA3Q1N9EV9.DTL

It explains Newt better too: Because gorillas live in groups with one male and many females

He has an 8 yr, $400m contract (with Clear Channel, signed in 2008). I think he just realizes that there are haters in this country and he gives them what they like to listen to. He isn't the only one, just listen to the presidential candidates wanting to limit freedoms for homosexuals. I guess it sells -- hate.

http://www.greaterfool.ca/wp-content/uploads/2012/01/Prices-incomes.jpg I think this graph shows it nicely. Housing tends to follow inflation -- people earn more, they spend more on housing, prices rise.. but now people aren't earning much more but prices are way higher, so the difference has to be made up by debt. Also, note that the graph ends in Q1 2011, so the difference is probably even wider now. Prices might be higher because of increasing mortgage debt (not the other way around): Here is a nice presentation on the topic: http://www.debtdeflation.com/blogs/2011/03/20/mortgage-finance-association-of-australia-talk/ It's for Australia, but perhaps also would apply to Canada.

article: Daily property index latest thing to bet the house on http://www.smh.com.au/business/property/daily-property-index-latest-thing-to-bet-the-house-on-20120301-1u5zf.html Melbourne's gross rental yield only 3.63% today: http://asx.com.au/asx/markets/propertyIndices.do

Is it just me or does every character in the movies these days use an IPhone and a MacBook? I think there's a lot more to this game than just the technology.

I haven't seen data on this, but I think you'll probably find a correlation between rising total Canadian mortgage debt as a % of Canadian GDP and rising housing prices. When mortgage debt is on the rise as a % of GDP, home prices rise faster than trend, and they rise slower than trend (or fall) when the ratio of mortgage debt to GDP retreats. This is what Steve Keen does in Australia and it seems fairly convincing. He's not just looking at population trends as a measure of demand, but rather looking more closely at the financial demand.

Just a warning on Shilling though -- he is skewed with a negative bias so take his article with a dose of skepticism mixed in. For example, he writes: -- Annual Absorption: Household formation in the fourth quarter of 2011 was 659,000 at annual rates. Over the last decade, it has averaged about 900,000, a number that seems reasonable in years ahead. Note, however, that this number may be on the high side if significant doubling up reduces household formation. I comment: Gary, it actually might be on the LOW side if there was significant doubling up the past few years given the unemployment rate. The average formation rate for the ten years immediately pre-ceeding the crisis was much higher. And using that higher number debunks your thesis. He also writes: If historical trends hold, the total homeownership rate will return to its earlier base level of 64 percent by the fourth quarter of 2016. I comment: Gary, you only get away with this argument because the boomer generation skews the data. If you look at any age category under 55, home ownership rates are lower at the end of 2011 than at any point in history going back 50 years (as far as the data goes). So, if historical trends per age category hold, then home ownership rates will CLIMB from here. Honestly, what a rookie mistake to compare today's demographic makeup of the United States where it's so top-heavy with the 80% ownership rates of the over-65 age category. And ditto for the over 55 category, which (combined with the over 65 category) encapsulates all the boomers.

Shilling's number includes principle payments (and insurance) as well I think, but his number is actually $65 billion (I guess by making it only $50b I'm adjusting for the principle portion): -- Rent-Free Renters: Since 2006, 3.1 million people are essentially living rent-free by not paying their monthly mortgage payments. Assuming a monthly mortgage bill equivalent to the national average of $1,721 per person, these nonpayers have increased their purchasing power for other items by $65 billion at annual rates, or the equivalent of 5.6 percent of after-tax income. Here is the article: http://www.bloomberg.com/news/2012-02-22/why-renters-rule-u-s-housing-market-part-1-a-gary-shilling.html

Not me. I just learned about options by thinking about them mainly. For example, the $2 strike BAC 2014 call option has an "ask" of $6.3. I can buy it in my Roth IRA where margin loans aren't permissible. I can get about 1.33x leverage by purchasing that option. $6.30+$2=$8.30, which is a 17 cent premium above the market price of BAC. 17 cents is 8.5% of $2, so 4.25% (plus foregone dividend yield) is roughly the interest rate on the loan, except you have the disadvantage of having to put up the interest costs upfront. You also have the huge advantage that there are no margin calls and there is an embedded put -- if the stock price declines considerably, the rising value of the put will soften the blow of your losses. Second example is that if you fear high consumer price inflaiton is you can put 100% of your margin account in TIPS, and then write deep-in-the-money puts on something like BRK class B shares, or perhaps your other favorite company. As the CPI rises, so does the value of your TIPS, and hopefully the underlying stock value of whatever you wrote puts on (maybe just an index ETF). Etc... etc... I find thinking about options in these practical terms to be more productive than studying academic theory on volatility pricing, etc...

I was reading something by Gary Shilling where he stated that people who collectively are not making mortgage payments are getting an imputed income of about $50b from not having to pay anything at all to continue living in their homes. I'm wondering if anyone can take a stab at how much interest income BofA is missing due to their share of that $50b pie?

Personally I think he was just saving face. Why mention any kind of leverage against deposits? The "typo" argument just doesn't make sense. Why would one ever say "loan it out at 1x", instead of just saying "loan out the deposits". The 1x would be implied. No, I think he is confused about how deposits get loaned out. My guess is he intentionally wrote 10x because he mentally got it mixed up with the money multiplier effect about how deposits get loaned out, then deposited again, then loaned out, etc... Again, wouldn't it be odd to write "loan it out at 1x" when you are just trying to say "loan it out". That's a very awkward way of saying something. Then he didn't object the first time I questioned him with the $10trillion figure, instead muttering something about a "black box", presumably to avoid the question (saving face).

There's no use. He already deleted his account.

You said with confidence that a deposit can be loaned 10x. That would imply $10T of loans. Let's say you had confidence that their books were clean. You are willing to stand behind the claim that their capital ratios will be acceptable with $10trillion in loans? To the best of MY knowledge, a deposit that BAC (or any other bank) takes in can be lent out 1x. To loan out more money beyond that they have to take on debt, retain earnings or raise more equity, or take in more deposits which in turn can be lent out once.

BofA has $1 trillion in deposits. You are saying they can make $10 trillion in loans with a net interest margin?

They are merely putting the free bathroom key behind the counter. You want to use the bathroom for free, then buy some product. They are not charging profitable customers for the bathroom.

Wells Fargo is already charging for checking if you have no meaningful relationship with them. Just like they did before when I was watching movies on VHS. I'm 39 in a bit over a month.

Alright, now is there a Wells Fargo in your area with customers walking in and out the door? If there is, then we are settled that there is in fact pricing power in banking. You have a zero-fee bank in your area, yet Wells Fargo's customers would rather keep paying fees than move their relationship.

— Since November, Wells Fargo has charged $15 a month for some checking accounts unless customers have three accounts with the bank, maintain a minimum balance of $7,500 or have a Wells Fargo mortgage. http://finance.yahoo.com/news/even-backlash-banks-quietly-pursuing-225535347.html

I might be more inclined to bank with BofA if their lines are empty at the tellers. Getting rid of unprofitable customers might add to my convenience and increase the experience of the paying customers. But I'm happy with Wells right now. Anyhow cutting staff of 30,000 (New-BAC initiative) might mean that the mix of customers needs to shift as well. There might also exist a class of customers that keeps an account open at a few different banks just to avoid ATM fees -- he can have a Wells, BofA, and Chase account with $500 in each. This way he can always find an ATM without getting charged. I also wonder if they had to issue those 400m shares in December as a result of the $5 debit fee falling through -- the fee might have been a way of filling in a hole before submitting to the new stress test.

Actually the customers who make money for the bank for the reason you describe are not going to be charged anything. The deposit has to be of a large enough size before it becomes a profitable "loan" to the bank -- they have overhead costs. I could loan you $50 for free interest rate and it would be a "favor" to you, but then what if I asked you to mail me a monthly statement and used up so much of your time on the phone and knocking on your door every day that you just figured it wasn't really a "free" loan anymore.

The strange thing about this is we're talking about accounts that actually cost the bank money. It's like they (Durbin and others) are trying to argue that banking is an essential utility, yet if you don't pay your water bill the municipality shuts it off. If you don't pay your electric bill you are shut off. So is it a utility or isn't it, and why can't BofA behave like one and ask people to pay for their service? Bank of America customers are doing BoA a favor. They are technically creditors; they have loaned the bank money. Are you suggesting we should actually PAY for the "privilege" of loaning a bank money? The first bank to charge people fees just to have an account will lose big time. It's so dumb. Just like the $5 fee was dumb. If a bank can't make money borrowing for free then they don't belong in business. And the idea that small accounts should be charged because they are just too small to be profitable is short-term thinking. I have a Wells Fargo account because my parents banked there and I opened my first account with my birthday money. I probably had sub $750 in my account for a decade. If they had charged me money, I would have gone elsewhere. And they wouldn't have my much larger account today including credit cards and CDs. They wouldn't have my fiance's account. I double dare the first bank to make that move. Might I ask if you are in your 20s? The term "free checking" is used because there was a time when it wasn't free. You really think they are going to make money on an account balance of $100 when you use their ATM for free, take up time at the teller window, and get all those statements mailed to you? First there were upfront fees, then "hidden fees" replaced them (the dawn of free checking), and now hidden fees are being reigned in by government. So a new era of upfront fees is born. My account with Wells Fargo initially had a fee for my checking account -- then it was eliminated when I added more services, like direct deposit, or perhaps it was a larger account balance. I don't remember when. But yes there was a time in the 1980s/1990s when my monthly fee was eliminated for my checking account.

The strange thing about this is we're talking about accounts that actually cost the bank money. It's like they (Durbin and others) are trying to argue that banking is an essential utility, yet if you don't pay your water bill the municipality shuts it off. If you don't pay your electric bill you are shut off. So is it a utility or isn't it, and why can't BofA behave like one and ask people to pay for their service?

I have only ever had one account -- opened in 1984 with Wells Fargo. I've since lived in six different cities in three different states. I've never had trouble finding a branch near where I live. And they don't charge me any fees to have my account. Why would I ever leave for a local bank that won't exist in my next city?

How many of them pay more on deposits than BofA? If you tell me "most of them", then it undermines your argument that there is no pricing power in banking.