three quarters

Economix Blog: Commuter Nation

September 22, 2011 by NewsMaker Leave a Comment

The average time it takes Americans to commute to work is 25.1 minutes, according to a new report based on Census data from 2009. Of all metropolitan areas, New York-Northern New Jersey-Long Island area has the longest average commute time in the country, at 34.6 minutes, and has the highest share of its workers using public transportation to get to work.

CATHERINE RAMPELL

Dollars to doughnuts.

Here’s a look at the distribution of commute lengths across the country:

Source: U.S. Census Bureau, American Community Survey, 2009Note that the time intervals are not all of equal length.

Interestingly, while the average commute is 25.1 minutes, there are actually relatively few Americans who have a commute of exactly that length. There are just a lot of Americans with commutes shorter than that, and a bunch with commutes much longer than that. A plurality of workers have a commute in the 15-to-19-minute range.

The report also found that the median American leaves for work between 7:30 a.m. and 7:59 a.m.

Here’s a chart showing what percent of workers leave home at a given time:

Source: U.S. Census Bureau, American Community Survey, 2009Note that the time intervals are not all of equal length.

Over time, American commutes have gotten somewhat less environmentally friendly, as you can see in the chart below. Over three-quarters of the nation’s workers drove alone to work in 2009, with another 10 percent commuting by carpool:

Across the country, only 3.5 percent of American workers had zero carbon footprint because they walked or bicycled to work. The metro area with the highest share of its workers commuting by bicycle is Corvallis, Ore., at 9.3 percent. The area with the highest share commuting by walking is Ithaca, N.Y., at 15.1 percent.

Article source: http://feeds.nytimes.com/click.phdo?i=26eec0ef6c610fdf695ce07cfe403a77

Filed Under: Economy News Tagged With: carpool, metro area, three quarters

Mortgages: Exploring the 15-Year Loan for Refinancing

August 31, 2011 by NewsMaker Leave a Comment

Fifteen-year mortgage rates certainly look enticing these days, and the idea of owning a home, debt-free, in less time than it takes to raise a child, sounds grand. So what’s the catch?

To start with, your monthly payment will probably be higher — in some cases, hundreds of dollars more. Then there’s the question of whether you will save for other needs if your mortgage payment requires more of your income. So before you choose between a 15- and a 30-year loan, crunch the numbers on each using an online mortgage calculator.

On a $300,000 loan, for example, you would pay about $1,475 a month for principal and interest over 30 years, versus $2,145 over 15 years. That assumes a 4.25 percent rate on the longer loan and 3.5 percent on the shorter one.

You would save about $145,000 in interest payments over the life of a 15-year mortgage and build up equity in the home faster, according to Tony Clintock, a regional sales leader for MetLife Home Loans, which is based in Irving, Tex. In the first year, principal would be reduced by $15,000, versus about $5,000 on a 30-year loan.

The other advantage of having a 15-year loan is the interest rate: it’s currently hovering around 3.4 percent, according to Freddie Mac, which is more than three-quarters of a percentage point lower than most 30-year loans. They can “shave 5, 7 or 10 years off their loan,” Mr. Clintock said. And if they’re reducing their interest rate from, say, 6 percent, their monthly payment may not change much.

But, “a lot of people cannot afford a 15-year mortgage,” said Robert Rauf, a mortgage loan originator with Real Estate Mortgage Network in Manasquan, N.J. In other words, their income simply cannot support the higher monthly bill.

Those worried about job security or a business failure may also opt for a 30-year mortgage, and the lower monthly payments that go along with spreading out the loan length. “It’s the cheapest way to borrow money,” said Ray Mignone, a financial planner in Little Neck, N.Y.

But “if people are pretty confident on their income stream and they can afford the 15-year mortgage,” he said, “it is a good way to go.”

More consumers are moving into 15-year mortgages when they refinance, according to data from CoreLogic. In 2007, one in nine, or around 11 percent, opted for a 15-year mortgage; in the first quarter it was 53 percent.

Lenders say the 15- and 30-year loans use the same criteria for qualifying. Mr. Clintock of MetLife notes that some banks offer loans in 20- or 25-year terms, but with rates not much lower, if at all, than those on the 30-year mortgage.

When deciding between a 15- and 30-year mortgage for refinancing, borrowers should also take a broad look at other expenses, said Karen C. Altfest, the executive vice president of Altfest Personal Wealth Management in Manhattan. “Some people have such a high mortgage they can’t save for retirement” or their children’s college education, she said. Others may compromise with a 20- or 25-year mortgage, and use the difference to help fund college or retirement accounts.

Ms. Altfest also urges borrowers to think through the tax breaks that home loans provide. The interest on a 30-year mortgage can be important to tax planning, especially in the early years when almost the entire payment is interest.

Then again, you may wonder whether Congress could eliminate mortgage interest and fees as a tax deduction, an idea that has been floated. If it were to happen, the 30-year mortgage would be less appealing, Ms. Altfest said.

“Consider the psychological, consider the financial,” she said. “Consider your family goals.”

Article source: http://feeds.nytimes.com/click.phdo?i=95a1fb6fbf548bd883de1bf22e0eadd1

Filed Under: Your Money Tagged With: business failure, mortgage loan originator, three quarters

This Time, Japan’s Gloom Runs Deeper

July 10, 2011 by NewsMaker Leave a Comment

TRADERS here are fond of joking that no one has lost money betting against Japan since the collapse of the bubble economy of the 1980s.

More than two decades later, the Nikkei 225 stock index is still three-quarters off of its peak. And the economy has been hit by blow after blow, from sagging property prices to mounting debts and intensifying competition from China.

Add an aging population, a lack of jobs for college graduates and persistent deflation and you can see why Japan’s so-called lost decade is a misnomer. Japan has lost decades — plural, not singular.

Natural disasters could be added to the list of economic shocks, notably the earthquake that leveled Kobe in 1995, and, in March, the earthquake and tsunami in northeastern Japan and the nuclear crisis in Fukushima that followed.

In a perverse way, after suppressing growth initially, Japan’s catastrophes have repeatedly jump-started the economy. But such good times generally have not lasted. Japan’s economy rebounded in late 1995 and 1996, for example, before tax increases and the Asian financial crisis plunged the country back into recession, a roller-coaster ride that I covered as a reporter here.

Four months since the triple disasters, there are early signs of another rebound. Carmakers are resuming production, gasoline shortages have disappeared and roads and homes are being rebuilt. Many economists say they expect a “V-shaped” recovery; indeed, the Nikkei 225 index has risen 18 percent since March 15, four days after the earthquake.

But since I returned to Japan in March, it has seemed that the impact of these disasters is far more profound than that of the 1990s quake — a difference that investors in Japan-related mutual funds may want to consider. As a whole, Japan stock funds gained 2.4 percent in the second quarter, and more than 15 percent over the last 12 months, according to Morningstar. Those numbers aren’t bad at all — but the recovery clearly has much further to go.

While the damaged reactors provided electricity to the Tokyo region, fears about the safety of the nuclear industry have led to the shutting of many other reactors, prompting utilities across Japan to ask customers — including the largest manufacturers — to use less electricity. If the reactors are not restarted, shortages could persist into next year.

“This story isn’t over like the Kobe earthquake,” said R. Taggart Murphy, who teaches in the M.B.A. program in international business at the Tokyo campus of the University of Tsukuba. “Once you get inside and see the short-term consequences, things will be pretty bad. You can’t replace that power right away.”

The size and scope of the current disaster are also much larger than those of the Kobe earthquake. The costs to rebuild Tohoku — the northeast region hardest hit by the quake — and to clean up Fukushima are expected to be so large that lawmakers are planning to double the national sales tax, to 10 percent, a move that might send the economy into a tailspin.

Having lived here for a dozen years, I am accustomed to hearing gloomy predictions. Some specialists have predicted that Japan’s economy will be swallowed by China’s. Others say Japan is the next Switzerland, a stable country with a shrinking role in the global economy. For a while, it was even in vogue to compare Japan to Zimbabwe, another country with a large debt burden.

THESE analogies all exaggerate conditions here to one degree or another. But, for the moment, the clouds that hover over the country seem even darker than usual, and the silver lining is harder to find because of the effects of the triple disasters.

Government estimates peg the reconstruction costs at as much as 25 trillion yen ($312 billion), a figure that private specialists say is conservative. Japanese investors buy a vast majority of government bonds, so lawmakers do not have to worry about a Greek-style financing crisis set off by the fears of foreign bondholders.

Nonetheless, relying mainly on debt financing would add to fiscal risks stemming from an already high level of public debt, which at more than 220 percent of gross domestic product in gross terms is the highest among advanced economies. Japan will face mounting pressure to cut spending and raise taxes to keep interest payments from overwhelming its budget.

Optimists note that Japan still has an ample trade surplus and foreign-exchange reserves, and a high savings rate that can be harnessed to pay for the transformation of the economy into, say, a leader in renewable energy.

Article source: http://feeds.nytimes.com/click.phdo?i=578a2e0d49d67f921a100852099b43e1

Filed Under: Business News Tagged With: bubble economy, nikkei 225 stock index, three quarters

Off the Charts: Studying Housing Through Distorted Indexes

May 28, 2011 by NewsMaker Leave a Comment

The Federal Housing Finance Agency reported this week that its national index of home prices fell 2.5 percent in the first quarter, or 9.6 percent at an annual rate.

That was the sharpest decline for any quarter since 2008, at the worst of the credit crisis.

“In the last two or three quarters, we have seen a deterioration,” said Andrew Leventis, a senior economist at the agency. “This is probably due to the homebuyer tax credit going away.” That credit, worth up to $7,500 for first-time homebuyers, ended Sept. 30.

The agency’s index of home purchase prices peaked in the first quarter of 2007, later than some other home price indexes. Since then, the national index has fallen in every quarter.

The index is based on sales whose mortgages are guaranteed by either Fannie Mae or Freddie Mac, the two government-sponsored enterprises that are regulated by the housing finance agency.

The top chart in the accompanying graphic shows the quarterly changes in the national index from 2000 through the first quarter of 2011. It shows a strong market early in the decade that went into overdrive in 2004 and 2005, only to plunge thereafter.

Over the four years since the peak, the national index has fallen 19.3 percent, including a 5.5 percent fall over the most recent four quarters. Such a fall would mean that an average home purchased in the first quarter of 2007, with a 20 percent down payment, would now be worth little more than the amount borrowed. Many homes, of course, have fallen much more than the average.

The charts also show state indexes, with the worst performance since the peak in Nevada, where prices are down by more than half. Houses in Arizona, California and Florida have lost more than 40 percent of their value.

There is some reason, however, to think that the recent price declines may be overstated by the index. The figures are based on sales of the same home over time, but there is no way to measure changes in the quality of a home.

With many homes now being sold in distress, either because of foreclosure or as “short sales” in which the sales price is below the amount owed and all the proceeds go to the lender, it is likely that some of the homes were in poor condition. In addition, such sales are often made for lower prices than comparable homes could obtain if sold without time pressures. If and when nondistress sales become a larger part of the market, that could cause the index to rise even if the overall market is not getting stronger.

For smaller states, the accuracy of the figures may suffer from having a relatively small number of transactions on which to base the index. The states with the fewest sales are noted in the chart.

The housing finance agency also maintains indexes that are based on both sales and appraisals used in refinancings. Those indexes show smaller declines over the last year in some states, with prices in Idaho, for example, off just 9.1 percent rather than the 15.7 percent fall recorded in the purchase-only index, and Hawaii’s decline at 1.4 percent, far less than the 8.7 percent decline shown.

But while using refinancings provides more data, it may also provide its own distortion. The only homes that can be refinanced now are those that are worth more than the amount owed on the existing mortgage, and thus are likely to have held their value better than many others.

Floyd Norris comments on finance and the economy on his blog at nytimes.com/norris.

Article source: http://feeds.nytimes.com/click.phdo?i=bd91946ef6e7ed94c02ad7388a2e4e61

Filed Under: Your Money Tagged With: homebuyer tax credit, quarterly changes, three quarters

Fair Game: A Crack in Wall Street’s Defenses

April 24, 2011 by NewsMaker Leave a Comment

A few weeks ago, the pair was awarded a total of $54.1 million in a securities arbitration case against the Smith Barney unit of the company — the largest amount ever awarded to individuals in such a case, according to the Financial Industry Regulatory Authority.

This legal dust-up involved supposedly conservative municipal bond investments that Smith Barney had peddled to its wealthiest clients. The investments, which were big money-makers for Smith Barney, turned out to be anything but safe for the firm’s clients: various portfolios lost between half and three-quarters of their value during the financial crisis.

Arbitrators rarely, if ever, discuss such cases, and the materials turned over by both sides are kept under wraps. But the outsize award, which included $17 million in punitive damages, is not the only thing that is noteworthy. The arbitrators appeared to reject — resoundingly — three defenses that Wall Street often employs when clients sue:

No. 1: We didn’t blow up your portfolio. The financial crisis did.

No. 2: If you’re wealthy and sophisticated, you should have understood the risks.

And, No. 3, the most common defense of all: The prospectus warned that you could lose your shirt, so don’t come crying to us if you do.

The investors who prevailed here are Gerald D. Hosier, 69, a wildly successful intellectual-property lawyer, and Jerry Murdock Jr., 52, a prosperous venture capitalist. Mr. Hosier and a trust he set up for his adult children received $48 million. Mr. Murdock got about $6 million.

The men, neighbors in Aspen, Colo., suffered $27 million in out-of-pocket losses on their investments. The big clunker was a municipal bond arbitrage strategy that their Smith Barney broker had characterized as safe, according to the men’s complaint. The deal was supposedly designed to eke out more income than a simple portfolio of bonds would generate.

Not only did the men recover all their losses in the award, they also received damages. Mr. Hosier was awarded $15 million in punitive damages and $6.3 million in market-adjusted damages. The arbitrators also awarded $3 million for the men’s legal fees.

Alexander Samuelson, a Citigroup spokesman, said: “We are disappointed with the decision, which we believe is not supported by the facts or law.” He noted that the bank had won a number of arbitrations involving such leveraged municipal bond strategies and said that the bank was considering its legal options in this case.

Mr. Hosier invested in the bank’s municipal arbitrage strategy from 2002 through 2007. Requiring a minimum investment of $500,000, the deals employed the wonders of leverage, borrowing 8 to 10 times the value of the municipal bonds in an underlying portfolio to generate higher income. Calling the strategy conservative and ideal for investors’ safe money, Smith Barney sold the trusts to wealthy investors.

But Smith Barney and its brokers were the prime beneficiaries of the strategy, which generated fees not only on the money that had been borrowed to juice the returns but also through the life of the investment. Clients paid 0.35 percent annually on the portfolios, plus a fee of 20 percent of all income earned by the investors above a 5.5 percent threshold each year.

Smith Barney’s sales representatives kept 40 percent of the total fees paid by their investors, far exceeding what they would have earned selling ordinary municipal bonds. This arrangement encouraged Smith Barney to lever up the portfolios, Mr. Hosier’s lawyers argued, putting the interests of their clients and those of Smith Barney at odds.

Investors who bought these deals agreed to lock up their money for two years and had to pay a substantial fee if they redeemed their holdings during the next three years.

Mr. Hosier was the single biggest buyer of Smith Barney’s municipal arbitrage deals, with $26 million invested over time. But four different portfolios in which he invested raised almost $2 billion from all investors. All of the portfolios performed badly.

“Citigroup mismarketed this product to high-net-worth investors as an alternative to municipal bonds with a slightly higher return,” said Philip M. Aidikoff, a lawyer at Aidikoff, Uhl Bakhtiari in Beverly Hills, Calif., who represented Mr. Hosier and Mr. Murdock. “Our clients never knowingly agreed to risk a significant loss of principal for a few extra points of interest.”

AS for Citigroup’s three defenses, Mr. Aidikoff, along with the co-counsel Steven B. Caruso, at Maddox, Hargett Caruso in New York, demonstrated that municipal bonds did not suffer catastrophic losses during the period. This squelched the bank’s argument that the financial crisis did in the strategy.

Regarding their clients’ sophistication and wealth, the lawyers agreed that both men were comfortable taking risks in certain circumstances, but not with the money they had given to the bank. “Citigroup misled their wealthiest clients and then tried to blame them for relying on what they were told,” Mr. Caruso said.

Arguing that the risks were laid out in the prospectus also seems to have run into a stone wall. Mr. Hosier’s lawyers produced seven different notices on the topic published by Finra and its predecessor regulator since 1994, including a notice from 2009 that states: “Providing risk disclosure in a prospectus or product description does not cure otherwise deficient disclosure in sales material, even if such sales material is accompanied or preceded by the prospectus.”

Mr. Hosier’s victory is particularly noteworthy, given the nominal amounts typically extracted by regulators in cases against major banks. The punitive damages awarded to Mr. Hosier, for example, are more than triple the $4.45 million penalty levied against Wachovia Securities by the Securities and Exchange Commission this month in a suit that the S.E.C. settled with the bank. The S.E.C. accused the bank of selling about $10 million of mortgage-related securities to investors at above-market prices and at excessive markups. Wachovia, now part of Wells Fargo, neither admitted nor denied wrongdoing in the settlement.

The arbitrators in Mr. Hosier’s case seemed keen to hold Wall Street accountable. And his win against Citigroup does not appear to be an anomaly. Since April 2010, his lawyer, Mr. Aidikoff, has argued 16 other arbitrations involving the same type of investment. Mr. Aidikoff and the lawyers who assist him have won every one.

In an interview, Mr. Hosier said the experience had opened his eyes to the disturbing ways of Wall Street.

“Instead of the financial world being the lubricant for business, they are out there manufacturing products with no utility whatsoever except for generating fees,” he said. “Somebody’s got to do something about Wall Street. It is destroying the country.”

Article source: http://feeds.nytimes.com/click.phdo?i=94521b9f5aa8e3bc365483d79ebcccc1

Filed Under: Business News Tagged With: adult children, common defense, three quarters