Below The Crowd

A Screen Without a Mouse Attached is Broken

Clay Shirkyon's piece entitled "Gin, Television and Social Surplus" on his Here Comes Everybody blog intrigued me when quoted by Barry last week, and even more so when I finally got a chance to read it in its entirety yesterday.

The most revealing point he makes is a simple one about his four year old daughter, who interrupted her DVD-watching to look for the television's missing mouse:

Here's something four-year-olds know: A screen that ships without a mouse ships broken. Here's something four-year-olds know: Media that's targeted at you but doesn't include you may not be worth sitting still for. Those are things that make me believe that this is a one-way change. Because four year olds, the people who are soaking most deeply in the current environment, who won't have to go through the trauma that I have to go through of trying to unlearn a childhood spent watching Gilligan's Island, they just assume that media includes consuming, producing and sharing.

I came back to this article later in the day, after reading another article about Hollywood whining. This time it's Jeffrey Katzenberg whining about the fact that theater's haven't rushed to adopt new 3D movie technology, and for that matter, even plain old digital projection technology.

Catching Up

Well, it's been a really good ski season. While Snowbird is still going strong through May (and likely for at least a couple of weekends in June, leading to a likely July 4th blowout) the time has come to leave the winter relationships and the snow behind and get back to reality, including this blog. I get one final weekend up ahead of me, but thoughts have already moved on.

• During Howard Stern's winter hiatus, I switched my Sirius clock radio to CNBC and kind of stopped listening to him for a while, going straight from bed to CNBC or one of the other financial channels on TV. I recently swtiched back and have noticed that my trading has improved markedly. I'm making less trades but also making much better ones. I think losing the financial TV noise has been good for me. I'm now back to Stern through the morning, only occasionally dropping the muting on TV for something that looks particularly interesting.
• It's yet another example of the fact that the central theme of Blink really works. Our minds tend to respond better when confronted with the key pieces of information and less extraneous noise that merely clutters our thoughts.
• I got a pretty crazy email the other day, apparently taken from a messageboard somewhere. The essence of this email is that a guy with equity in his house and good credit was thinking that it made sense to take out a home equity loan for the full amount of available credit, and put it into a CD that he had available to him at a similar interest rate. His rationale was that if the bottom really fell out, he could then walk away from the house and retain most of the equity that had been "taken out."

  This struck me as completely nuts.

  First, he failed to note that in California (where I believe he was), a home equity loan taken out after purchase is considered a "recourse" loan, meaning you can't necessarily walk away and mail in the keys. The lender can come after you. Historically they haven't, but I suspect that as conditions get worse, they will start doing this to people who walk away from their homes out of convenience rather than financial hardship.

  Second, he fails to note that Fannie and Freddie have noticed this. Fannie has published new guidelines saying -- in effect -- no new mortgages to anybody who has defaulted in the past five years, unless there were extenuating circumstances, in which case the rule is three years. (Thanks to Mish for several of these tidbits). In either case, our "smart" investor is likely to miss out on a buying opportunity a couple of years out if he executes this strategy.

  Third, the debt forgiveness is taxable unless you are insolvent at the time. Since this guy would have the cash in the bank, he won't be able to take advantage of the break the IRS gives to truly insolvent individuals. He'll owe regular income tax on any amount foregiven if he walks away.

  Fourth, part of the rationale is that he has an investment vehicle that will provide returns that match his interest cost on the loan. But for how long? Most home equity loans reset pretty frequently. And I know of few investment vehicles that will guarantee sufficient returns to make this work once rates reset.

  Finally, he's really unlikely to follow through. There are some people who truly treat their homes as mere financial assets. Most don't though. It's nice to plan and to think of everything as being financialized these days, but most people don't actually follow through. Putting together a plan that he's unlikely to follow through on seems silly. If he is really so unattached to his house, and really thinks the market is likely to decline in the coming years, then why doesn't he just sell now instead of going for all the financial engineering?

  I think this is another example of the kind of thinking that is going to disappear really quickly as real risk re-enters the system.

• While I'm on the topic of financial TV, it's nice to see that Cody's doing well at FBN. I can't claim to be a real fan of the show (nothing personal, I don't like most finance TV shows), but he's definitely making his mark, often in interesting ways. Must say, this is still one of my favorites.

• And it's too bad that Herb is moving on, though I understand his desire to do something different and he assures me that he will still occasionally be appearing on CNBC. Might actually have to put the volume up for that one, and catch Howard on the repeats.

  Best of luck in your new adventure Herb!