Thursday, December 25, 2008

What's It All About, Anyway?

I'm sure by this time of year, you've most likely heard about the "reason for the season." This now-trite phrase is used to remind us that we're not supposed to be wrapped up in the consumerism that masquerades as Christmas.

I heard an interesting bit on NPR about "personalized" Christmas cards--you know, the ones where you take the photo of your kids or your dog down to Costco and get it made into a card to show your friends and family how well everything is going for you.

Not that I'm against them. I've sent them myself--taken the picture of our kids in their festive red outfits in front of the tree nearly eclipsed by presents, rushed down to the local big-box store eight days before Christmas in the hopes that we could get new cards minted and mailed to show up on time. We've all done it, and we will all probably continue to do it.

But the next time you prepare to do it, think about this:

On your next birthday, how would you like to get a picture of me, my house, my kids, my kids' pets, my family on vacation, or my deck?

Saturday, December 20, 2008

Gin Rickey

After bustling around a bit today, I was tired and needed a cool, refreshing drink. Yes, I said cool, refreshing drink in December.

The Gin Rickey is that drink. It is the most refreshing drink on the planet, next to water. Its a very simple drink, and one that can be made in just a few moments.

Gin Rickey
1 1/2 oz Gin
1/2 Lime
1 tsp suguar
Club Soda

In a highball glass, drop in a few ice cubes. Squeeze in one half a lime, and drop the squeezed lime rind in. Add the sugar and Gin, and fill the glass to the top with club soda. Umbrellas optional.

Good to go.

Monday, December 15, 2008

A New Beer

For the ritual beer tasting Thursday this past week, I purchased a six-pack of Budweiser American Ale. After a refund program left me with 108 bottles of various Budweiser beers, I was pretty sure I'd never touch another Budweiser product for the rest of my life. Granted, Budweiser Select isn't too bad, but it's not usually in my top five choices when drinking out.

My opinion of Budweiser has changed after tasing Budweiser American Ale. I'll admit it--maybe I was marketed upon. The label is very rugged-looking, definitely a throw-back to more classic styling. It immediately resurrected feelings of nostalgia, and for some reason, with a bald eagle on the label, I felt almost patriotic purchasing it.

But, what's inside is even more important. It's very rich tasting, definitely a full-bodied flavor. Just hoppy enough, not a bitter aftertaste. It's like a microbrew. It smells like beer should, and dammit, I think it tastes like beer should.

Thursday, December 11, 2008

Why Does Our Economy Suck Right Now?

Unless you've had your head in the sand or been under a rock for the last year, you know our economy has been in a downward spiral. The release of the official word on December 1 by the National Bureau of Economic Research confirmed what we've all known--we're in a recession.

So, how did we get here? Listening to all of the talk of securitized loans and collatoralized debt obligations (CDOs), it may be easy to think that the repeal of the Glass-Steagall Act of 1933 and subsequent beginning of deregulation of the banks by Clinton with the Gramm-Leach-Bliley Act is to blame. Maybe partially so. Allowing investment banks to act as commercial banks (and vice-versa) definitely opened the door to these "complex financial instruments," as they've been called.

Some of these "complex financial instruments" include the securitizing of mortgages. What that means is mortgagors divide up their mortgages into tradeable securities and then sell them on the market. The idea is supposed to be that they're less risky because slices of so many different mortgages go into each security. Maybe they are--as long as the mortgagees are paying.

If you're a pro-business kind of person, then you'll probably see the hobbling of businesses (particularly auto makers) by unions as the cause. Yes, American car makers sell vehicles that cost more to produce, acquire, and maintain, and which also suffer quicker depreciation than their foreign counterparts. Union officials claim that they only account for about 10% of the cost of a vehicle; other sources say that number is as high as 25-30%. The truth is probably somewhere in the middle.

If you're more populist, you might think that the relaxed lending guidlelines from banks and the high-pressure tactics employed by mortgagors is to blame. Traditional guidelines said that you shouldn't buy a house that cost more than three times your annual income. With the takeoff of the CDOs, we quickly reached a point where everyone who wanted a home and qualified for a conforming loan had a mortgage.

To feed the beast, banks started offering "no verification" loans of all sorts, including "no document" and "stated income." These "creative" financing options allowed borrowers to merely tell the mortgagor how much money they made and the mortgagor would take it at face value. The inevitable happened--banks started lending money to people who had no way to pay the debt.

Adding insult to injury, a whole host of new loan options became popular, including interest-only and ARMs with ridiculous terms, designed to draw borrowers in on the promise of a low rate. The idea is that with a housing market rising at double-digit rates every year, you could continue to bank on your "investment" and just refinance (with cash out, of course) every so often to make sure you took advantage of your home's fake equity.

For example, a friend of mine recently related a story of when he was purchasing a home about 18 months ago. He makes a pretty good salary--about $70,0000 a year. He filled out the loan paperwork, and his mortgage broker told him that he qualified for a $600,000 mortgage. That's $3,000 a month for only the interest. Not to mention the taxes (most places in Michigan, that would be about $8-12,000 yearly) and insurnace (around $1,000 yearly). All of the sudden, you end up with a $4,000 per month commitment to your house; not too good when your take home is only about $4,100 after taxes and health care. Fortunately, he heeded Dirty Harry's advice, and knew his limitations.

But, for someone who wasn't as aware of what that would do to their finances (aka, no business getting a mortgage) or who was overpowered by the allure of an envy-causing house, it's the path to financial ruin.

People watching this happening from the outside would have called this "abso-f'ing ridiculous."

While all of these are definitely contributors, I'm going throw in the last piece of the perfect storm. Folks teetering on the edge of their financial demise were OK until the incredible rise in oil prices. All of the sudden, something that used to cost $2.00 per gallon doubled in the space of a few months.

The oil industry holds some blame, I think--they claim that percentage-wise, their margins never changed. That may be true, but it was obvious what the effect on the consumer was. 7% of $4bn per month is a lot different that 7% of $1bn per month or whatever it was. While they were recording month-over-month record profits, they were also setting the stage for the collapse of the entire world economy.

Suddenly, people had to choose between paying on their massive credit card bills, paying on their overpriced mortgage, paying on their gas-guzzling SUV, putting gas in their gas-guzzing SUV, or putting food on the table. Most people chose food. Food prices rose somewhat (mainly due to fuel surcharges), but stayed relatively flat when compared to the precipitous fall of home and car prices.

As people spent more that the pump, they started defaulting on their mortgages. People defaulting on their mortgages led to companies like AIG collapsing, due to having to pay unprecedented insurance claims to banks (AIG was one of the biggest players in the mortgage private insurance market--the folks you pay your PMI to when your house is at more than 80% LTV). With defaults and foreclosures flooding the housing market, prices plummeted. With all of the collatoralized debt obligations based on the fact that people pay their mortgages, securities started falling apart, leading to financial institution bailouts (Bear-Stearns, AIG), takeovers (Wachovia) or collapses (Lehman Brothers).

Demand for oil plummeted as well--since you no longer have a job or a house, you certainly can't afford to be driving anywhere. While oil is still almost double the 2004 OPEC target price of $29/barrel, pump prices are the lowest they've been in almost a decade.

With the impending passage of the bailout for the Big 3 and subsequent appointment of a Car Czar, one can't help but wonder if it's going to do any good. After all, we have also had government oversight in banking (Senate Banking Committee) and financial trading (Security and Exchange Commission), and that hasn't helped out a whole lot.

All I can really say is that there's no time like the present to analyze your spending and debts and figure out how to live within your means instead of leveraging assets with declining values (such as your home) to fund your future.

Friday, December 5, 2008


This is a very tasty treat, great for summer evenings out on the deck.

1 bottle Cabernet Sauvignon
2 oz Hennessey VS Cognac
1 oz Cointreau orange liqueur
1 12-oz can of frozen orange juice concentrate and 6-10 oz water -or-
24 oz orange juice
1 1/2 C sugar
2 apples (I use Gala), peeled, cored, and sliced into wheels
2 oranges, sliced into wheels
1 lemon, sliced into wheels
1 C sliced strawberries

The Pampered Chef Apple Peeler/Corer/Slicer is great for taking care of the apples. My good friend Becky Zale can hook you up if you need one.

Combine all ingredients in a pitcher or punch bowl and refrigerate overnight, stirring occassionally. If you're like me, you'll find an excuse to sample it every time you stir. :-)

Ladle into red wine glasses, including fruit. Serve with spoon.

Hot Buttered Rum

As the cold sets in here in Michigan, it's increasingly important to stay warm. How better to do it than with a great hot drink? This is great to share among your Euchre-playing friends on a cold night.

Hot Buttered Rum
1 Stick of Butter
2 C Brown Sugar
16oz dark rum
8 Cinnamon sticks
Boiling water
Cream or milk
8 mugs
Whole cloves (optional)

Place 1 Tbsp of butter and 1/4C (4 Tbsp) of brown sugar in each mug. Pour in a little boiling water to melt the butter and dissolve the sugar. Pour 2oz of dark rum into each mug, and fill each mug with boiling water, leaving a little room at the top. Top each drink with a splash of cream or milk and drop in a cinnamon stick and and a single clove (optional).

Some folks add a sprinkle of nutmeg to the top. For the proper pronunciation, ask the Target Lady.