In reference to my last post, here's an article that details the cost of ownership for three hybrids: the Toyota Prius, and Honda Accord and Civic. Interesting numbers. I need to adjust some of the assumptions and then run the similar calculations for my year-old Scion tC.

UPDATE: In comments, my Costa Rican friend Ruben Alfaro points out that the comparison in that article is between a Prius and non-hybrid Civic and Accord. So, I'm full of shit in what I originally wrote below.

Every time I talk about buying a hybrid, I specifically refer to the Prius, and Katie corrects me 'or a Civic.' Well, here's the reason for my mentioning just the Prius: the article says that the Prius gets 46 mpg, while the hybrid Civic only gets 29 mpg. I don't get the Civic numbers; that's hardly different from the conventional Civic.

The sudden rise in gas prices is affecting all Americans, and people are finally coming to the realization that those prices are here to stay. Here are the things we're doing and thinking about in response to the increase in costs:

First, let me give some context. We live in the Austin suburb of Pflugerville, which is about 16 miles northeast of downtown Austin. I work on the near northwest side of Austin, and my commute to work is about 16 miles each way. Katie teaches part-time at St. Edward's University which is just south of downtown Austin. During the semester, she has to drive to campus three days a week. The city of Pflugerville is not a part of the Austin-area transportation authority, so there is no public transportation in our area. We own a 2002 Honda Odyssey minivan, which gets 20-24 mpg in city driving, and a 2007 Scion tC which gets 25-28 mpg in city driving.

OK, here we go...

Budgeting more money for gas

This is the big one. Gasoline is now costing us a couple hundred dollars more per month than before. We've changed our budgeting and are eliminating other inefficiencies in our monthly budget to free up the gas money. So far, we've managed not to change anything major in our monthly spending, thankfully.

Weighing the gas cost for pretty much every trip by car

I used to never consider the cost of gasoline when driving around town. That quick trip out for one item sounds a lot more frivolous when you consider that it costs $4-8 round-trip just for the gasoline. Now we're making fewer spur-of-the-moment trips and trying to group errands together. I also used to often find some errand to run at lunch, just as an excuse to get out of the office for a while. Not so much any longer.

Considering trading in our cars for more fuel efficient ones

I've run some back-of-the-envelope numbers for trading our minivan for a Prius and trading my Scion tC for something cheap and very fuel efficient, like a Honda Fit. Calculated at $4.00/gallon, each scenario results in at most $100/month savings, probably less. That's a slim enough margin that I'm not going ahead with either of them right now. If gas continues to rise in price, we'll reassess again.

Carpooling

One guy who works in my office lives in our neighborhood, so I asked him about carpooling. No decisive results. I also asked another neighbor who works near my office. Also no positive results yet. I signed up on a bunch of sites that match you with other prospective carpoolers, but there doesn't seem to be enough of them on any of the sites to find good matches. The next step is to post flyers around my neighborhood. I'll decide whether to do that after we get back from vacation soon.

Job change for Katie

Katie is currently employed as an adjunct professor at St. Edward's University, which is on the other side of Austin. She only goes to campus three days a week for each of the two 15-week semesters, so her commute isn't terribly bad to start with. But she's looking into getting certified to teach secondary education and trying to get a job at the high school or the middle school that are two blocks from our house. In addition to doing away with her commute, that would put her close to the kids.

Buying a small motorcycle/scooter

I would have no problem commuting by scooter to work. I used to drive a motorcycle. But the only way to make this really worthwhile would be to replace one car with a scooter. Otherwise, the additional costs of the scooter--registration and insurance--would just cancel out the gas savings. But with kids, this just isn't a good option. Maybe if Katie does get employed near home, it'll work, but I'm doubtful.

Budgeting the cost of gas into our vacation this year

We frequently drive to the mountains of New Mexico for vacation, and we're doing it again this summer. It's a 750 drive each way, so we usually end up driving 2000+ miles for the whole vacation. In the past, we didn't think much about the cost of gas; we just charged the gas and paid it out over the next couple of months after vacation. This summer, however, we've decided that's not feasible; it would take too long to pay off and add/or add too high a burden to our monthly budget after vacation. So, we've budgeted the cost of gas into our vacation costs and will be paying as we go this time.

Moving

We've pondered the idea of moving further into Austin, but so far, this is not a serious consideration. Most importantly, we have lived in Pflugerville for ten years, and we have made a life for ourselves here. The kids are settled into their schools and social circles. Furthermore, we know most of our neighbors, a lot of other people in the community, and many of the kids' teachers. Not only would we have to start over if we moved, but in an urban setting, that intimacy with the community would be much more difficult to obtain (that's a reverse on the usual urban/suburban stereotypes). My point here is not that we prefer the suburbs; but that we've already put down roots here, which happens to be a suburb, unfortunately. And we don't take lightly the prospect of having to start over anywhere in that regard.

Cost and lifestyle changes are a less significant factor. If we moved into town, we'd have to move into a much smaller house. In fact, to live in the Austin neighborhood we like, we'd probably have to move into a townhome that's half the size of our current house. We're not nearly as concerned about the comfort factors of our current suburban lifestyle as we are about the social factors mentioned above.

Finally, compared to other cities and even other suburbs within Austin, we don't live all that far from the center of the city and our jobs. The commuting is a pain in the butt and becoming more expensive, but it's not nearly as bad as many other suburbanites deal with.

I had no idea that people used home equity loans to buy cars until I ran across this NYT article today: Auto Industry Feels the Pain of Tight Credit. Our economy is even more fucked than I've previously predicted (and given my economic pessimism, that says a lot).

Forbes just published an article about top ten most recession-proof American cities.

The selections are based primarily on low unemployment, home prices that continue to rise, and the likelihood that the local economy will continue to grow.

By all three of those criteria, it's no surprise to me that Austin came in at #3.

But what I find strange is the inclusion of San Jose and Seattle in the list. Home prices in those cities may have continued to rise, but as I understand it, those are among the cities hardest hit by the hyperinflation in home prices. In fact, the article mentions that the median home price in San Jose is over $830,000.

Perhaps the economy in those cities is healthy enough that it will continue to attract enough people to support those ridiculous prices, but from what I've read, the cities with home prices that have been speculated into the stratosphere will be hit hard by the building recession. It won't take many job losses in those locations for that house of cards to come tumbling down.

Of course, this is Forbes, which seems to operate in a different reality than I do. The only mention made in the article to the possible severity of the recession is this: "In his statements to Congress' Joint Economic Committee earlier this month, Federal Reserve Chairman Ben Bernanke predicted the economy would possibly move into recession in the first half of 2008 but begin to rebound in the second half."

I guess America's Relatively Recession-resistant Cities wouldn't have made nearly as catchy a title.

Almost two years ago, I became interested in the housing bubble and the bizarre mortgages being offered to support it. I've been convinced for almost that long that the current mortgage crisis was coming.

Since the shit did indeed start hitting the fan, I've asked myself numerous times: if someone like me with a minimal knowledge of economics and no real stake in investments could see this coming, why did professionals in banks, mortgage companies, and investment companies run headlong off this cliff?

The only answer I can come up with is that it's plain ol' greed. Either they were making so much money at the time that they deluded themselves that it would continue, or they cynically hoped to make theirs and get out before the crash. Either way, it's not a very comforting answer. We see this cycle repeated with every new generation (or more frequently): the savings and loan crisis, junk bonds, etc.

My friend Rafe Colburn alludes to this in a new blog post:

Why were banks so eager to sign people up for such incredibly risky mortgages?

The reason is that they had already originated as many good mortgages as they could, and there was still more demand for mortgage backed securities. So mortgage brokers had to find more mortgages to sell, and the easiest way to do it was to loan money to people who really shouldn’t be buying a house, or to convince people to upgrade into larger houses that they couldn’t afford by offering them low monthly payments.

So when you search for the source of the crisis, look in the direction of the big investors who were willing to buy up any old mortgage backed security, no matter what its risk profile was. Those people put billions and billions of dollars on the line, and funded an avalanche of loans sold to the confused, the ignorant, the overly optimistic, and the dishonest.

Economist Kevin A. Hassett offers an only slightly tongue-in-cheek economic analysis of halloween.
For instance:

The first law of economics [is] that lump-sum transfers are more economically efficient than in-kind transfers. If you are going to give a gift to somebody, you should just give them the money. They will be a better judge of the best way to spend it.

...

At Halloween, each house on a typical American block picks out one type of candy, and they give that exact same candy willy-nilly to everyone who shows up at the door. It's an economic nightmare.

If you can't change the Halloween gift-giving habits of your typical American family, he also offers a workaround:

Many schools prohibit children from taking Halloween candy onto the premises. That is exactly the wrong policy. Schools should encourage all children to bring their entire haul to school, and allow them a lengthy period to trade candies among themselves. That way, the Take 5s and the 100 Grand bars will find their way to individuals who cherish them.

I love it. I can't wait for his Valentine's Day analysis.

I try to keep up with basic US economics, and I am very concerned that the US (and thus much of the world) is going to face a severe recession in the next few years. There are many causes, but the primary one is the international monetary house of cards that has allowed Americans to maintain our current lifestyle.

We Americans buy lots of imported goods from the likes of China and oil from the likes of Saudi Arabia. In turn, these countries buy bonds to finance our federal deficit spending. The federal government then devalues the dollar in order to make imported goods cheaper and to keep the whole process going.

But as the value of the dollar falls, so does the value of foreigners' investment in US federal bonds. These supplier countries begin taking such measures as buying less American debt, pricing their goods in other and more stable currencies. It's a balancing act for them: on the one hand, they want to limit their losses on dollars; on the other hand, they need to continue to enable Americans to buy their goods.

It's not a cycle that's infinitely sustainable. At some point, it all comes crashing down. The question is only when and how quickly.

UPDATE: Even the CEO of Wells Fargo bank said recently: "We have not seen a nationwide decline in housing like this since the Great Depression."

A couple of weeks ago, Rafe Colburn pondered whether we're in 'Boom 2.0'. I now have conclusive evidence that we are indeed in a boom, in the form of a short article from the Austin Business Journal:

NaturallyCurly.com Inc. has raised $600,000 from angel investors.

The company will use the funding for marketing and technical development. NaturallyCurly.com is a Web site devoted to curly hair. Board members include entrepreneur Tim Wall, Dr. Philip Sanger and NEA Venture Partner James Treybig, who founded Tandem Computers.

"Companies like NaturallyCurly have been able to see opportunities that have gone unnoticed by high-tech nerds like me," Treybig says. "The movement to communities like NaturallyCurly is the foundation for the future of advertising."

NaturallyCurly.com was founded nine years ago. The Web site provides articles, product information, salon recommendations and tips for curly-haired people. The site has registered members from around the world and nearly 10,000 visitors daily, according to the company. Last year, founders Michelle Breyer and Gretchen Heber also launched CurlyKids.com for children with curls.

NaturallyCurly.com has been nominated this year for the Ernst & Young Entrepreneur of the Year award in Austin.

I just wish I could figure out a way to cash in on the insanity. I'd create a site for bald guys, but we just don't use very many hair products. No retail or ad profit there.

A New York Times Magazine article ponders why the 'hidden fee' economy works--why, for instance, consumers put up with hotels charging outrageous sums for items in the mini-bar.

The article summarizes the explanation theorized by some economists. But I've long felt that a big factor in the case of hotel fees and other travel-related fees is the expense account. Consumers are more willing to pay an unreasonable charge if the company foots the bill than if they had to pay it themselves.

The effect of expense accounts may not explain the 'hidden fee economy' as a whole, but it's bound to play a big role in the travel-related sector.

As a side note, on the few business trips I've made over the years, I was so outraged by the fees that I refused whenever possible to incur them, even though my company paid the bills. Maybe if I traveled regularly, I wouldn't be so diligent. Who knows.

Every time I hear a news report about the problems of General Motors or Ford, I get pissed off. Their current problems are all their own damn fault. I heard years ago that pretty much ALL of their profits came from high-margin, cheaper-to-build, gas-guzzling trucks and SUVs. So, now that the price of gasoline has inevitably gone up and consumers are buying fewer of their profitable vehicles, these companies are in poor economic shape. Shocking! Who could have predicted such an event!

My astounding observation is corroborated by The Truth About Cars:

We’re looking at two strategies here. Toyota: build affordable transportation for the masses at a quality level that slightly exceeds expectations relative to price. GM et al: build oversized, under-engineered and fuel inefficient cars for people who don’t care about money while palming off sub-standard cars on mainstream customers. Is it any wonder that the truck-crazed domestic manufacturers lost mission critical market share to the transplants?

I paid only $2.059 for gas yesterday in San Antonio. Thought I'd photograph the sign for posterity

I've been concerned about the U.S. housing bubble for a couple of years now. The Big Picture blog has a post that explains the U.S. housing situation quite thoroughly yet in a way that an economic layman like me can understand. Here's a simple to understand bullet list of some aspects of the current situation:

• 32.6% of new mortgages and home-equity loans in 2005 were interest only, up from 0.6% in 2000;
• 43% of first-time home buyers in 2005 put no money down;
• 15.2% of 2005 buyers owe at least 10% more than their home is worth (negative equity);
• 10% of all home owners with mortgages have no equity in their homes (zero equity);
• $2.7 trillion dollars in loans will adjust to higher rates in 2006 and 2007.

When we decided to 'upgrade' houses in 2003, we decided how much we could comfortably spend each month on mortgage, insurance and taxes, correlated that to a home price range, and got a fixed rate 30 mortgage at a very good rate (6%)for a house in that range (and not at the top end, like I'd expected!).

The house we bought is relatively well built, in an area that's still experiencing big growth (won't start to suffer suburban blight soon), is one of the less expensive homes in the neighborhood, is right around the median home price for Austin, and had a very good price per square foot for Austin. We also put some of our equity from the last home as downpayment on this one (though not much). So, barring an unforeseen family economic crisis, I think we made a very conservative and sensible purchase.

A few months ago, Apple was criticized for the working conditions in its iPod factory in China. So, Apple made an investigation--good for them (and good for PR)--and put the investigation's findings on its web site. This caught my eye (emphasis added):

We found no instances of forced overtime and employees confirmed in interviews that they could decline overtime requests without penalty. We did, however, find that employees worked longer hours than permitted by our Code of Conduct, which limits normal workweeks to 60 hours and requires at least one day off each week. We reviewed seven months of records from multiple shifts of different productions lines and found that the weekly limit was exceeded 35% of the time and employees worked more than six consecutive days 25% of the time. Although our Code of Conduct allows overtime limit exceptions in unusual circumstances, we believe in the importance of a healthy work-life balance and found these percentages to be excessive.

So, working more than 6 days a week and more than 60 hours per week jeopardizes an employee's 'work-life balance"? Wow.

A while back, I wrote about an experience I had in the grocery store. But this grocery-store story is amazing.

Over at slacktivist, Fred has another post about wealth (see my earlier post). While reading the comments to Fred's latest post, I was reminded of an experience I had a couple of years ago.

One evening, I stopped on my way home from work at the local grocery store to grab a couple of items. As I was waiting to check out, I noticed that the couple at the register were doing something I didn't immediately recognize. I started to pay attention and realized that they were checking the balance on their EBT card. The cashier told them their balance was less than three dollars. Then the woman dug in her purse and came up with two or three dollars. They ended up putting back part of their intended $5 purchase and paying with the couple of dollars that they had on them. It suddenly dawned on me that this was all the money they had to their names.

We've certainly had to budget carefully and do with less to make it from paycheck to paycheck sometimes. After doing the checkbook, I've said to Katie numerous times, "We're broke until payday", but, I realize, not broke like the couple in H.E.B. I have little idea what this couple's life is like. It makes me grateful for the blessings that I have and I try to keep in mind how fortunate I am.

I've recently started reading several good economics blogs. Via one of those blogs, I ran across this post about the economics of charity races:

Charity runs where participants solicit friends, family and colleagues for donations have always perplexed me. . . The puzzle is the wastefulness of the training effort. Those soliciting me for sponsorship have cited upwards of 40 hours spent training for the event; we can view this training time as being pure waste from the charity's perspective. An alternative arrangement where race participants instead devote their training time to providing volunteer work for the charity, followed by a parade of volunteers rather than a race, would seem to satisfy the criteria listed above: costly and verifiable effort coupled with publicity. And, the hours of wasteful training would be converted into useful work.

This analysis reminds me of my own thoughts regarding fundraisers for school and other groups. Children and their parents spend vast amounts of time peddling stuff that people may or may not want in order to earn the group a margin of the money collected (to be fair, it seems the margins vary widely from one campaign to another).

As such a parent, I don't really see that my child is gaining any particularly useful experiences from the endeavor (not compared to the experiences of spending time with the actual organization for which they're collecting money), and I think that I could just donate more money than the profit margin on the goods that my kid sells and save everyone a lot of hassle.

One of my favorite fund raising events of the last few years was when the local high school band was raising money to participate in a parade across the country. They sold band booster signs to put in your yard. In reality, you got a sign in return for a donation. Yes, the band members had to spend time raising the money, but I assume the cost of the signs was small compared to the donation being requested ($20 or $25, as I recall), so the profit margin was high. They were not exactly just begging for handouts, they got free advertising with every sale, and they weren't trying to sell people something that they didn't really want or need.

Don't get me started about Girl Scout cookies.

According to the Wall Street Journal, some companies rushed to grant stock options to executives in the days after the September 11 attacks. The company's stock price had fallen after the attacks and the options were pegged to the current stock price. When the stocks recovered, the executives would profit. Just slimy.

Over at The American Prospect's blog, Ezra Klein takes a closer look at U.S. economy growth. In 2004, the economy grew by a respectable 2.4%, but real income growth was as follows:

• Richest 1%: 12.5%
• Everyone else: 1.5%

Klein observes:

In fact, it's no longer just the middle class and the poor who're falling behind. The distribution has grown so uneven that the 95th percentile is making meager headway -- even the merely rich are falling behind. It's the richest of the rich making headway. But they now account for so much wealth and holdings that their acceleration can effortlessly outweigh everyone else's deterioration. Add in that the reliable income growth conveyors of yesterday, like education and hours worked, no longer heavily correlate with income increases (earnings dropped for college graduates in 2004) and you've got a real problem on your hands...

As a firm believer in progressive taxation, I find this article really disheartening. The heart of the matter:

A decade ago, when publishing magnate Steve Forbes ran for president, he vowed to deliver a new era of prosperity with just a simple change in the federal income tax: Instead of people with more money paying higher rates, all would pay the same "flat" tax rate -- unleashing "the fantastic growth waiting to burst forth in our economy."

Forbes' "flat tax" plan was dismissed as simplistic by many mainstream economists and viewed with horror by the legions of special interests that benefit from all the deductions and loopholes that flat tax advocates would eliminate.

But this weekend, as millions of Americans faced the perennial deadline for filing their federal tax returns, most of them were operating in something very close to the world Forbes and other flat-tax visionaries proposed. Without any fanfare or philosophical debate, millionaires and middle-class Americans now pay taxes at almost the same rates.*

In addition to outlining briefly the history of U.S. federal taxation and explaining how we've gone from sharply progressive taxation to the current situation, the article asks the most important question: What have we gained from this change?

Advocates of the flat tax have long argued that it would stimulate economic activity and thus ultimately benefit everyone. Bush shares that view, though he has not officially advocated a flat tax.

And in recent years lower tax rates do seem to have contributed to healthy economic growth. The economy has been producing goods and services at a rising pace since the end of the 2001 recession. Unemployment is a low 4.7 percent.

But the health of the economy as a whole has not translated into gains for most workers. Because of global competition, the decline of manufacturing, weaker labor unions, immigration and other factors, most workers have not been able to obtain higher pay.

Instead, "flatter" income tax rates have contributed to an economic landscape that David Kelly, economic adviser to Putnam Investments, likens to an hourglass. Some from the traditional middle class are rising into the top, while others are being squeezed out into the bottom.

Average family net worth has continued to grow, in large part because of rising home prices, but at a rate that sagged from 29 percent between 1998 and 2001 down to 6 percent between 2001 and 2004. And for most Americans, whatever nominal pay increases they got in the last three years were more than offset by higher costs of things such as health care.

Meantime, the disparity between the wealthiest Americans and everyone else has grown.

Okay, so that bit is not a direct cause and effect analysis, but the general gist is that this flattening of effective taxation rates has been one contributing factor to the trend of the rich getting richer of the last few years.

* The article mentions income tax, dividend taxation, and social security and medicare taxes, but it's a little too general on the details for me. I'd like to see a more detailed breakdown on the types of taxes paid by each income group.

A while back, I read an interesting Fast Company article about how the manufacturer of Snapper power lawn equipment turned down Wal-Mart as a retail outlet. This interesting piece shows the muscle that Wal-Mart--and in this case, I think, the big home improvement outlets--can exert over their suppliers. Or not, in this case.

Today, there's an article about the influence that Wal-Mart holds over video game developers:

Publisher sales reps inform Wal-Mart buyers of games in development; the games' subjects, titles, artwork and packaging are vetted and sometimes vetoed by Wal-Mart. If Wal-Mart tells a top-end publisher it won't carry a certain game, the publisher kills that game. In short, every triple-A game sold at retail in North America is managed start to finish, top to bottom, with the publisher's gaze fixed squarely on Wal-Mart, and no other.

Crazy.

Here's a great analogy from Fred Clark, a.k.a. Slacktivist:

I might be less skeptical of the Bush administration's claim to be planning to cut the federal deficit in half over the next five (now four) years if they produced even the hint of something resembling a plan or an explanation of how they intend to do this.

It doesn't help their credibility on this point that they're also playing "Mom, I'm pregnant" every year with their deficit projections.

My friend Michelle got a tattoo, a modest, but conspicuous little dolphin on her ankle. This was bound to freak out her mom. So before showing her mom the ink, she told her she was pregnant. After letting her really freak out over that for a bit, she said, "Relax, mom, I'm not pregnant. I just got a tattoo and I didn't want you to blow this out of proportion."

No offense to Michelle, but this is a pretty dishonest trick. In her defense, she only did it once. The Bush administration has done this same thing year after year.

They project record-shattering deficits of half a trillion dollars or so, so that later, when the merely record-breaking figure of around $400 billion comes out they can claim that they've actually reduced the deficit from their previous, Mom-I'm-pregnant projection.

Mindless sports team loyalty meets mindless consumerism:

Academy Sports gears up for Longhorn sales

Academy Sports & Outdoors Ltd. is so sure that the undefeated University of Texas Longhorns will win the Rose Bowl that the retail chain already has purchased official Longhorns Rose Bowl Championship merchandise.

Academy stores will open at 6 a.m. Thursday to cater to Longhorn fans scrambling to be the first to buy Texas Rose Bowl Championship gear, including the official locker-room cap.

The Rose Bowl, pitting UT against the University of Southern California, is being played tonight in Pasadena, Calif.

Katy-based Academy is hoping to see the same long lines that formed -- at one time reaching 102,000 people in one night -- when the retailer was peddling Houston Astros apparel and products during the team's World Series run.

My friend Susan's daughter Sophie was diagnosed with leukenia eight months ago. Susan and her husband Randall have been keeping a blog about Sophie's health. In yesterday's entry, Randall totalled up the insurance claims so far (not including co-pays and other expenses that they've borne themselves). He writes:

The grand total (and still counting) is $173, 670.35. Basically that amounts to over $700 a day. We are incredibly, incredibly thankful for the terrific insurance coverage that we have, but can you possibly imagine how families manage without the kind of coverage that we have, or, worse yet, without any coverage at all? Granted, you cannot put a price on having a healthy, thriving child, but I fear for those who have to make tough decisions that we have never had to make in this process. There is no wonder that an experience like this can devastate families financially for years and years and years.

If you like to shop at warehouse 'club' stores, and have a CostCo in your area, I urge you to support them over Sam's Club because CostCo is a forward-looking corporation that views better pay for its employees as an important part of its corporate strategy.

This Business Week article attempts to answer a question that I've wondered about:

One of the more puzzling aspects of the current housing boom is that mortgage lenders have been offering ever-sweeter deals on loans. These days it's increasingly easy to qualify for a loan with little or no money down. . . Why have lenders been so liberal when they run the risk that many of their marginal customers will go into default?

The answer, according to the article, is just shortsighted greed:

Many lenders are just plain desperate for business, according to some experts. In a bid for market share, mortgage lenders are offering highly favorable terms to borrowers. That's forcing the rest of the industry to match their terms or lose customers.

I find this answer believable, but incomplete. Still searching...

This LA Times article discusses middle class investors who are putting their money into real estate:

The astounding rise in home values is enticing many middle-class Californians to bet on dirt, gambling their retirements that they can do better with property than with any other investment.

...

They're cashing in retirement funds, selling stock and taking out second mortgages. They're pouring the money into real estate, often in distant states, often without seeing the property.

Back in the 80s in Texas we had the oil boom and bust. In the late 80s, I sat on a civil jury. In the case, the plaintiff was a fairly small investor who had bought a house for rental property when the economy was good. He was suing the bank that had repossessed (or was in the act of repossessing) the property. This guy really had no case, but apparently his young lawyer had convinced him that if they took it before a jury, the lawyer's astounding power of persuasion might win.

The plaintiff's lawyer played the little guy vs. big faceless corporation card. His primary claim was that the plaintiff did not know that the house backed up to a major expressway (Mopac) and was therefore less valuable than he thought.

After a more deliberation than the case deserved, we found in favor of the bank.

At the time, I kept thinking: who buys a house--even as rental property--without walking the property enough to know that the back yard abuts a freeway? I'm still sure that the plaintiff's claim of ignorance was a lie, but after reading this article, I understand that the investor probably thought he couldn't go wrong with real estate. I'm afraid the people investiing in real estate in the current boom markets will find themselves in the same boat as this guy did.