The Atmosphere Is Getting Very Thin
A report from CBS San Francisco in California. “The housing crunch in pricey Silicon Valley is not only hitting those who are barely scraping by. Even millionaires are not making money fast enough to keep up with the surging real estate market. In some cities, even having two or three million won’t be enough to get you in the door. Earlier this week, we reported that in Santa Clara and San Mateo counties, about one out of four people is at risk for hunger because many are spending almost all of their income on rent. ‘People are skipping meals, cutting back on meals or having to make less healthy choices, like having cereal for dinner,’ said Leslie Bacho with the Second Harvest Food Bank.”
From Bisnow on Massachusetts. “Boston’s housing shortage is perpetually painted as what makes the city so unaffordable. Many say that is simply because there are not enough homes to accommodate the city’s explosive growth. But in an era where even smaller micro-units, built as more affordable housing for millennials, fetch between $2K and $2,500/month in the Seaport, some say the response is not enough. Cost-effective solutions could mean Boston’s next wave of multifamily housing comes outside the Seaport.”
“‘The atmosphere is getting very thin,’ Mount Vernon Co. Chairman Bruce Percelay said. ‘There is a real question as to the direction of rents. We believe the luxury downtown Seaport product is, if not already overbuilt, on the verge of overbuilding. We would not touch high-end, super-luxury rentals.’”
The Real Deal on Florida. “Amid a continuing oversupply of inventory and shrinking buyer pool, Miami’s luxury home sellers are issuing increasingly substantial price reductions to move their properties, The Real Deal’s research shows. The increasing glut of luxury inventory isn’t helping sellers get their hoped-for sale prices. There was a staggering 53-month supply of luxury condos on the market in the third quarter, according to the latest Douglas Elliman report on the Miami coastal mainland. That’s up from a nearly 40-month supply at the same time last year.”
“And yet there’s even more inventory to come. Peter Zalewski, founder of Cranespotters.com, has started offering what he calls ‘condo correction tours,’ during which he takes prospective buyers through downtown Miami, pointing out all of the inventory that hasn’t yet hit the market. Zalewski said that as the Miami condo market continues to soften, investors are signing up for his tours with the eventual goal of buying as prices continue to drop. ”
“‘We’ve had almost 150 buildings delivered in coastal area, and we have another 100 buildings under construction,’ said Zalewski. ‘So really, what you are seeing is all of the early effort of the beginning of this cycle from 2011 starting to come to fruition, while at the same time you are seeing sellers start to realize the jig is up.’”
From Quartzy on New York. “If you’re in the market for a piece of ultra-luxury Big Apple real estate—you’re totally in luck. An unprecedented wave of deep discounts across the New York City region means that the city’s priciest pads are now available at lower—though not exactly low—prices. The market for deeply-discounted penthouses wasn’t always so robust. Nearly half-a-decade ago, there was a scarcity of new-build, ultra-luxury, super-premium condos in New York—particularly along what’s become known as ‘billionaires’ row,’ a broad swath of Midtown just below Central Park.”
“But the arrival of One57 to the area in 2014 super-charged the top end of NYC’s real estate market and spurred a bit of a pricing war. One57 offered penthouses close to the $100 million range—and suddenly, penthouses with eight—and even nine—digit price tags became the norm. The problem was, that many didn’t sell—causing owners and developers to begin seriously slashing prices. Indeed, a firestorm of cuts has emerged over the past year in both New York and nationwide—none more spectacular than a unit at One57 itself.”
“Industry insiders attribute much of this overpricing to one key transaction— the sale of an $88 million condo by former Citigroup chairman Sandy Weill to the 22-year-old daughter of a Russian Oligarch at 15 Central Park West in 2011.The sale was far above its asking price and sent shockwaves through the real estate industry.”
“But the sale was also highly unique. 15 Central Park West was in an established building that had already seen record prices; plus the buyer, it seems, may have used the purchase to try and hide assets from his estranged wife rather than actually secure a solid home at a solid price. Whatever the motivations, this single sale had very little to do with the true value of the overall market.”
“Nonetheless, other luxury sellers, seeing Weill’s success, began inflating prices to what Jonathan Miller, of real estate appraisal group Miller Samuel calls ‘aspirational prices.’ Sellers across the US were throwing $100 million price tags on $15 million properties, more or less to see what happens.”
“From 2013 going into 2016, record prices were seen across the country. This high powered buying period might have led to solid actual sales numbers if the homes and been truly priced to sell. But many weren’t—and many remain on the market to this day. Need proof? How about billionaire Jeff Greene’s palatial Palazzo di Amore in Beverly Hills, which was bought for $35,000,000 in 2007, and reintroduced to the market for $195,000,000 in 2014, since dropping down to $129,000,000.”
“If you’ve dreamed of scoring a luxury property, you’re in luck: despite the cuts, developers continue to build pricer pads than ever. Which means, most likely, even deeper discounts to come.”
This is what I mean by wallowing in their own BS:
‘The housing crunch in pricey Silicon Valley is not only hitting those who are barely scraping by. Even millionaires are not making money fast enough to keep up with the surging real estate market. In some cities, even having two or three million won’t be enough to get you in the door. Earlier this week, we reported that in Santa Clara and San Mateo counties, about one out of four people is at risk for hunger because many are spending almost all of their income on rent. ‘People are skipping meals, cutting back on meals or having to make less healthy choices, like having cereal for dinner,’ said Leslie Bacho with the Second Harvest Food Bank.’
We’re so rich we’re poor! Pity us, and watch us writhe in our cereal and helplessness! We can’t build anything but we’re surrounded by old shacks that cost a gazillion yellencoins! Get a life already.
Alameda, CA Housing Prices Crater 11% YOY
https://www.movoto.com/alameda-ca/market-trends/
“many are spending almost all of their income on rent.”
Obviously this is propaganda trying to panic marginal buyers into taking the plunge - ‘look, even rich people skip meals to pay their enormous mortgage!’
But there is also some truth. Because of the bubble, workers from most tiers of society are, as it says above, spending almost all their income on housing.
I know it’s unpopular to point out that we’re all in the same boat, but aside from the people with an 8-figure net worth, we are ALL affected by ruinous policies like easy credit, suppressed interest rates and inflated asset prices. No one - NO ONE - except the mega-millionaires are living better than their parents did, and most have a lifestyle much worse than previous generations at 10x the cost.
78% of people with a full-time job live paycheck to paycheck - and these are the lucky ones with full-time employment, the so-called “winners” of globalization. It is important to keep this potentially huge voting block of people divided by encouraging resentment over who is slightly less devastated by government attacks on our collective prosperity.
I’m not defending the $50 mil a year + use of the corporate jet CEO looter class. But think what could be accomplished if we would stop flattering the high-salaried urban working poor into aligning their interests with this looter class by continually conflating the two. In reality, a dual-income Google couple struggling to pay the mortgage on their $1 mil 1-bedroom has a lot more in common with a middle class flyover family with the same worries than they have in common with their CEO headed off to Davos.
But its important to maintain the illusion that, because of the number of 000s on their overdue notice, they are “rich” and therefore can’t complain about the economic precarity deliberately engineered by a party and a government they continue to elect.
Excellent post
My employer just announced that they will be spending $12B on stock buy backs. It won’t be investing it in new products, R&D or in creating new jobs.
I suspect that other companies that will be repatriating profits under the new lower tax rate will be doing the same.
Q: if they buy back so much stock that they take the company private, would that relieve some of the pressure to “please the stockholders,” resulting in possibly a nicer company. Or will the CEO just switch to “pleasing himself” with hundreds of millions of dollars?
Do massive stock buybacks affect how the VC’s think of the company? If I were a VC, why invest in it if there’s no profit for me? That might be the only way to help workers, if you can call it that: cut off the VC and force the company into making a profit.
Depends on Corp finance structure
Nes paw?
Of course no one will ever let American companies repatriate the money at a ZERO tax rate…….with this restriction the money must go to increase your employment, build plants bring back all your call centers, create jobs and the money is tax free
You can pay bonuses too if you want a 20% bonus you will have to give that same 20% to ALL your employees the janitor mail clerk secretaries everyone, then repatriate your loot tax free
Buy back that 12B in stock as long as it also goes to fully fund employee retirement accounts too.
Q: if they buy back so much stock that they take the company private, would that relieve some of the pressure to “please the stockholders,” resulting in possibly a nicer company. Or will the CEO just switch to “pleasing himself” with hundreds of millions of dollars?
It’s all about boosting stock price. I works wonders for the mountains of stock opens the executives hold.
Do massive stock buybacks affect how the VC’s think of the company? If I were a VC, why invest in it if there’s no profit for me? That might be the only way to help workers, if you can call it that: cut off the VC and force the company into making a profit.
Large companies typically don’t work with VCs. VC’s invest in start ups hoping to make a killing either when they IPO or get bought out by Facebook, Google or Amazon.
Colorado,
You sure they’re not issuing debt to buy back that stock? Been a lot of that lately.
My employer has 60 billion in cash and cash equivalents on the balance sheet, and about 10B in debts. It has the cash. Annual net profit is usually in the 9-10B range.
There was a rumor a few months ago that it was going to buy Accenture, but that didn’t come to pass (I think was a good thing it didn’t happen)
Phenomenal write-up, Lurker. Thank you.
Speaking for myself only, it all boils down to liberty for all individuals. If all people made liberty paramount, and made policies decisions accordingly, much of what ails us now could be addressed with reasonable success over the next 50-100 years.
It is up to adults living now - us - to get that ball rolling.
It’d be interesting for those of us here to have a discussion of what “lowered standard of living” actually entails. Most people tend to equate that with purchasing power / stuff accumulation.
For me, lower standard of living = less freedom. Freedom of choice, freedom of opportunity, freedom to be.
A hard landing is baked-in, IMHO… just a matter of when.
I’m going with “crash.” A “hard landing” is wishful thinking, imo.
“The irony is that Silicon Valley is a victim of its own success,” said Clark. “So somebody who wants a nice house, a high end house, wants to pay a lot of money for a house, is very challenged.”
wants to pay allot of money…
like my old boss says if your house isn’t making 10K a month for you yo’re doing something wrong .
He got a quote to paint the inside of his new house a 3 bedroom 1700 square foot somewhere in silicon valley probably San Jose
20K
The contractors have mortgages to pay, too.
20K? Does the paint have gold leaf in it?
Nope. Just contractors casting their line out to see how big of a fish they can catch.
Try to get a contractor in Seattle or Portland right now, to do anything at your house. They are so busy that they won’t even show up, and if they do, they will throw a sky-high number at you. If you say ‘yes,’ they will work nights or weekends to get it done for that amount.
The same thing affects commercial work as well. We are trying to get two chillers and cooling towers replaced in Portland right now, and our estimate is around $750K. We had three major mechanical contractors come in, and their bids were all in the $1.2 - 1.3M range. Crazy. One bidder wants $125K for the electrical work that will take two guys a week to do, with $20K worth of materials included.
‘People are skipping meals, cutting back on meals or having to make less healthy choices, like having cereal for dinner,’
A situation that desperate could be a sign from God that it is time to leave California.
While much of this country could stand to skip a few meals (a day), this is not a good sign. If 2-3M cant get you into a house, you need to get out of that slice of the universe because its gone full retard.
“While much of this country could stand to skip a few meals (a day),…”
LOL!
That’s exactly what I did. Never looked back.
It still surprises me that some of these companies aren’t fanning out to flyover and bringing the whole staff with them. Imaging how well google could do if they moved a division of 5000 employees to, say, Youngstown Ohio. Pay them all $100K/year so they can buy a $60K house and fix it up nice. Put a couple clubs and Sbux on Main street.
Meetings? They have skype and video for that.
Of course, I doubt it would happen that way. When I lived in the Midwest just before the crash, managers were pulling $150K/year. Did they buy the nice 1985 Colonial with a nice yard and 4-minute commute for $150K? They could pack away like nobody’s business… Nope, they had to buy the new $560K McMansions in the sardine caul-de-sacs up by the golf course. I hope they got stuccoed.
As for making people move to flyover, I suspect that the majority would simply quit and get another job in Silly Valley.
I can tell you that almost no one from the Santa Clara campus would consider transferring to Broomfield. And the top reason they give is that it will be a lot harder to replace that job in Denver should they have to move on.
As I’ve shared before, we had a monster layoff in my division earlier this year. The Santa Clara people had new jobs (that paid more) lined up by the time the layoffs were official (we got a heads up about 4 weeks before), whereas the Broomfield people needed months to find a new job that paid about the same. Many people in Santa Clara could have even left before the layoff, but timed it to get the severance (some got as much as 6 months severance)
Good point, Colorado, I didn’t think of that.
We need more than one Silly Valley, that’s for sure. Tech is already spreading out: Silly, Denver, Austin, possibly Boston. Here’s hoping that Bezos picks a new smaller city to put his new Amazon HQ — maybe Charlotte or Huntsville or Cincinnati — to start up a new tech hub. IMO that’s the only way to solve this housing crisis.
Good point, Colorado, I didn’t think of that.
We need more than one Silly Valley, that’s for sure. Tech is already spreading out: Silly, Denver, Austin, possibly Boston. Here’s hoping that Bezos picks a new smaller city to put his new Amazon HQ — maybe Charlotte or Huntsville or Cincinnati — to start up a new tech hub.
IMO that’s the only way to solve this housing crisis. To repeat a cliche, they are’t making any more land.
Anywhere but Charlotte.
Donk,
With a globe full of land where 95% of it goes undeveloped, there is no shortage of land. That’s why it’s better known as worthless dirt.
> or having to make less healthy choices, like having cereal for dinner…
Pretty funny. I read this right after I got done having some Raisen Bran for dinner. It was just something I felt like eating.
Check this out:
https://www.msn.com/en-us/money/realestate/the-11-worst-cities-for-homeowners-if-the-gop-tax-plan-passes/ss-BBGJlpP#image=12
1. Long Island, New York
Effective property tax rate for 2016: 1.9%
Household property tax bills above $10,000: 46.5%
Home value at which property tax bill exceeds $10,000: $522,432
There were two surprise entries on the list:
9. Austin, Texas
Effective property tax rate for 2016: 1.6%
Household property tax bills above $10,000: 11.4%
Home value at which property tax bill exceeds $10,000: $619,641
And
11. Houston, Texas
Effective property tax rate for 2016: 1.7%
Household property tax bills above $10,000: 10.2%
Home value at which property tax bill exceeds $10,000: $583,371
Granted, they don’t have a state income tax, so it could be worse
Remember - the $10,000 limit under the GOP plan is for both state income and property taxes COMBINED.
So the folks in Texas who are just slightly over the $10,000 for property taxes alone will make out fine with the LOWER overall Federal tax rates.
The folks in NYC are fooked.
Besides high property taxes. NYS has a 9% income tax rate and NYC adds on an additional 3.5% city wage tax.
So let’s say you are making $200,000 - which puts you in the lower middle class in NYC.
You are going to loose at least $25,000 Federal income deduction. The lower tax rates won’t make up for that kinda loss.
But keeping voting for democrats in your state!
Remember - the $10,000 limit under the GOP plan is for both state income and property taxes COMBINED.
Hence my comment “they don’t have a state income tax, so it could be worse”
Of course, Texans can deduct their sales tax, which could be a big chunk of change after springing for a new Benz or F-350.
This is why my father keeps a home and claims residency in Nevada.
Ray Dalio goes into a lot of detail about the tax migration effects (among other things) of this tax cut:
Consider the fact that this change in SALT deductibility is one of the largest increased sources of revenue in the tax bill, accounting for nearly $1 trillion in new taxes over the next 10 years. In other words, it is expected that those people who stay in high tax states will pay nearly $1 trillion more to stay there. Of course, these changed rates will prompt more people in high SALT locations to consider moving.
https://www.linkedin.com/pulse/watch-out-effects-tax-reform-migration-fiscal-conditions-ray-dalio/
“You are going to loose at least $25,000 Federal income deduction. The lower tax rates won’t make up for that kinda loss.”
Old: $25K at 28% = $7000. So you lose $7K of SALT deduction. Oh dear!!
But as I mentioned above you get $4K in the child tax credit, plus instead of 28%, the top rate is 24% for someone at $200K. And instead of the top rate of 28% kicking in at $153K like it does now, the top 24% kicks in only at $16K. Now, 25% kicks in at $77K, starting next year $77K to $165K will be at 22%. 15% has been replaced by 12%.
So more or less, everyone’s taxes will be reduced by 3%. 3% X $200K = $6K less tax. Plus $4K child credit = $10K.
Lose $7K, gain $10K. Hmmmm…..
But you will never see any of this type of analysis anywhere in the MSM. Hell, you won’t see it on any blog as well.
“Old: $25K at 28% = $7000. So you lose $7K of SALT deduction…”
Eventually you may learn the difference between a deduction and the tax itself.
Of course you won’t see this kind of analysis anywhere else.
And he may eventually learn not everybody gets the kiddie money. Even worse, Rubio made sure that you get that kiddie money even if you don’t make any money. Watch the welfare queens start popping out again.
Huh? $25,000 deduction in a 28% bracket is $7000 less taxes paid. What on earth are you talking about? In other words, the lost $25K in deductions will mean paying an extra $7K using today’s tax code. Have you ever itemized taxes? Doesn’t sound like it.
As for Rubio, that’s irrelevant. I will get an extra $4K, regardless of what welfare queens do or don’t do.
“$7000 less taxes paid…”
Just to be clear, you referred to the $7000 as a “deduction” above. I guess you’re just excited and racing ahead of yourself.
I was itemizing deductions when you were still in short pants, if you care.
“Watch the welfare queens…”
A neighbor of my Canadian partner had seven kids and they all had different fathers (none present). Up there you get paid $1000 a month for each.
OK fine, I wrongly said deduction when I meant to say taxes. Heh, yeah maybe I am excited. I stand to pay significantly less in taxes. $4K in the kid credit is just the start. The lower rates and higher brackets is also significant. Plus the pass through changes. And the AMT changes will mean I will probably not have to worry about for years to come.
Now granted I don’t live in a high tax state. But even I did, I’d still be coming out ahead, although not quite as much ahead.
The entire narrative pushed by the MSM that people in CA and NY will get killed is - like all narratives pushed by the MSM - false. I wish it were true, but most Calis will be just fine.
$1K per kid, are they nuts? Good thing Canada is bordered by oceans. Could you imagine if they were in, say, southern Europe? 3/4 of the Middle East and 4/4 of Africa would be banging down the doors.
“Remember - the $10,000 limit under the GOP plan is for both state income and property taxes COMBINED.”
Think of all the snowbirds with second homes in Florida, Arizona and Cali. No more federal subsidy for the property taxes on the second shack, assuming they hit the $10K limit on their SIT and primary RE taxes. Housing is going to crash big time in Florida and other vacation spots popular for second homes when millions of houses are suddenly put on the market as these greatest fools rush to the exit. The first ones to try to get out will be the ones with the biggest mortgages, eventually jingle mailed to the lenders, lowering prices, leading to the next tier of jingle mail…rinse, repeat…
SWEEEEEEEEET!
And once again, the story leaves out the lower tax rates, the higher tax bracket theresholds and the doubling of the child tax credit to $2K. And even better, for high income earners, the phase out is increased from $110K to $400K. Which means a couple with 2 kids earning $250K in one of these high cost areas, will get a $4k tax reduction right off the bat, just through the child tax credit that they could not claim before.
But you know….narrative!
Losing the exemptions though, right? That’ll hurt.
Castle Rock, CO Housing Prices Crater 12% YOY
https://www.movoto.com/castle-rock-co/market-trends/
What gets me about this article.
One of the richest men in Canada used to live in a $5.4 million dollar house (asking price).
That is barely a shack in some bubble cities in America.
+++++
Canadian Billionaire, Wife, Found Dead In “Suspicious” Suicide
ZeroHedge - Dec 16, 2017
The billionaire founder of Canadian generic drug Apotex Inc, Barry Sherman, and his wife Honey, were found dead in their Toronto home on Friday under what police described as “suspicious” circumstances.
The Shermans recently listed their home for sale for nearly C$7 million ($5.4 million). A real estate agent discovered the bodies in the basement while preparing for an open house, the Toronto Globe and Mail reported, citing a relative.
Sherman, 75, founded privately-held Apotex in 1974, growing it into the world’s 7th largest drugmaker and the largest Canadian-owned pharmaceutical firm, with annual sales of more than C$2 billion and over 11,000 employees, by introducing large numbers of low-cost generic drugs that took market share from branded pharmaceuticals. He stepped down as chief executive in 2012 but remained executive chairman.
IIRC Warren Buffet lives in a non mansion in Omaha and drives a Ford Crown Vic (or used to)
Oh yeah. He reuses zip lock bags and washes his own socks by hand every night.
I realize those anecdotes may very well be apocryphal, but I have met wealthy people over the years who lived modestly.
Is it gullibility or deliberate misrepresentation?
Maureen Dowd did a profile piece on Anne Wojcicki, former spouse of Sergey Brin, co-founder of Google, last month. In one paragraph of the article she talked about Wojcicki’s desire to establish “normalcy”:
“I have people who clean the house three days a week,” she says. “And I just told them to stop doing laundry on Fridays because my kids need to learn how to do laundry on Fridays. It’s so easy to be like, ‘I don’t have to do laundry again. I don’t have to cook again.’ But then you’re not normal. I have a new rule lately. I just don’t go out on weekdays. If I’m raising kids, I need to be focused on helping implement that normalcy.”
Because nothing says “normal” like having people come clean the house only three days a week. Elsewhere in the article it says she cuts her kids hair, ostensibly to save money. Fine, cut your kids hair, but don’t pretend it’s about saving money. I mean, one trip of the maids during the week probably costs about the same as a year’s worth of haircuts.
‘Because nothing says “normal” like having people come clean the house only three days a week.’
We know some folks who are similarly situated, with millions of inheritance monies gradually trickling down from the older generation. Family life looks much different when you have lots of hirelings coming by on a regular basis to help out with housework, child care and chores. Albeit, our landlords graciously cover yardwork and home repairs out of our rent, so in some ways I have it easy at home as well. The main difference is that we have to work quite a bit to fund our lifestyle, rather than having old money available to supplement our incomes.
Cutting kids hair is probably the worst thing for their ego. I went to elementary school with bowl hair and it wasn’t pleasant. If Ms. Brin wants to be one-with-the-people, she should drive an older car* and mow her own lawn like Senator Rand Paul.
——————
*However, I understand that rich kids are chauffeured everywhere for safety reasons. Wealthy kids are targets for kidnap and ransom.
It’s a conundrum: how to live like the normals without actually suffering.
It’s a conundrum: how to live like the normals without actually suffering.
I guess you live like millionaires instead of billionaires.
“Listen children, we aren’t taking the Gulfstream to Hawaii this year. We’re going to rough it and fly first class on a commercial airline.”
“Elsewhere in the article it says she cuts her kids hair, ostensibly to save money. Fine, cut your kids hair, but don’t pretend it’s about saving money.”
She’s a billionaire but she’s saving money by cutting her kids’ hair? Disgusting. Billionaires are the ones who should be throwing their money everywhere for services in order to support local businesses, etc. Nothing worse than a stingy billionaire.
How much you want to bet that those housecleaners are illegal immigrants?
“Oh yeah. He reuses zip lock bags and washes his own socks by hand every night.”
It’s like those people who used to claim they were a “child of the Depression” when in fact they were nothing more than embryos at the time, if even that.
So buying a $2M house you can’t afford is bad. But having enough to buy a $2M house but choosing to live in a $200K house is also bad.
Got it.
Billionaire CEO Warren Buffett’s California beach house is on sale for $11 million—take a look inside
Leah Ginsberg | @lginzy 12:00 PM ET Sat, 27 May 2017
https://www.cnbc.com/2017/05/27/see-inside-warren-buffetts-laguna-beach-house-on-sale-for-11-million.html
So much for the oath of poverty pablum puking.
😂
According to the video he paid $150K for it in 1971.
I wonder how much time he actually spends there.
$150K in 1971 to $11M in 2017.
So tell me again why owning real estate is a bad idea…..
Warren Buffett Disowns Granddaughter
The Billionaire’s Black Sheep posted on Marie Claire
When the holiday ended, Nicole raced into Buffett’s arms. “We’re not a touchy-feely family, so when I did it, the rest of the family seemed a little surprised,” Nicole says, beaming. “But he gave me this great big hug back.”
It was the last time the pair would share an embrace. Two years later, Nicole agreed to appear in The One Percent, a documentary by Johnson & Johnson heir Jamie Johnson about the gap between rich and poor in America. “I’ve been very blessed to have my education taken care of, and I have had my living expenses taken care of while I’m in school,” she states on camera. None of the Buffetts, a famously press-averse bunch, had ever before appeared in so public a forum to dish about their upbringing. Though Nicole informed her father of her role in the film and he had no objections, she failed to give her grandfather a heads-up. Asked in the film how he’d react to her interview, Nicole responds, “I definitely fear judgment. Money is the spoke in my grandfather’s wheel of life.”
Nicole concedes that the remarks may have sounded brusque. “I meant that my grandfather is like a Formula One driver who only wants to race — he just loves the game and wants to be the best,” she says. But Buffett was galled. He had for some time felt ambivalent about Nicole and her sister’s claim to his fortune — though Peter had legally adopted them, he divorced their mother in 1993 and remarried three years later. To make matters worse, while plugging the film on Oprah, Nicole confessed, “It would be nice to be involved with creating things for others with that money and to be involved in it. I feel completely excluded from it.”
The perceived sense of entitlement and Nicole’s self-appointed role as family spokesperson prompted Buffett to tell Peter that he’d renounce her. A month later, the mega-billionaire mailed Nicole a letter in which he cautioned her about the pitfalls of the Buffett name: “People will react to you based on that ‘fact’ rather than who you are or what you have accomplished.” He punctuated the letter by declaring, “I have not emotionally or legally adopted you as a grandchild, nor have the rest of my family adopted you as a niece or a cousin.” Nicole was devastated. “He signed the letter ‘Warren,’” she says. “I have a card from him just a year earlier that’s signed ‘Grandpa.’”
https://aparalleluniverse.wordpress.com/2011/03/30/warren-buffett-disowns-granddaughter/
She isn’t really his grand daughter. In this day and age of “blended families” some think it’s normal to consider other people’s kids as your grandchildren, but obviously for Buffet that is not the case. She behaved stupidly and paid the price, at least for now. I’m sure that once WB kicks the bucket that her stepfather will shower her with cash.
Bullsheet. Warren Buffet has numerous mansions and is ripping off the poor with predatory financing on mobile homes.
https://www.seattletimes.com/business/real-estate/the-mobile-home-trap-how-a-warren-buffett-empire-preys-on-the-poor/
If I recall correctly, Buffett’s main house in Omaha is the one he bought for $38k around 1960 or so.
In 1960, in Omaha, $38k gets you a very nice house.
Correction:
$31,500 in 1958.
$31K in 1958 = $270K today. Decent house in Omaha for $270K but nothing extraordinary.
I remember when a “quarter million dollar” house was a very nice house, even in DC metro. Today, these are only found deep in the ghetto. Lots cannot even be had for that.
It seems incomes didn’t keep up with the house price inflation.
I remember when when gas was a quarter too. Well OK I don’t remember it since I wasn’t born. But once upon a time a gallon did cost $0.25. And today it’s $2.50.
Things used to cost a lot less back in the “good old days”. But the other part of the equation people never remember is incomes in the “olden days” were a fraction of what they are today.
1963 median income was $4400. Median home cost $18K.
Today median income is $55K and a median home is $205K.
The ratio is virtually unchanged from the “good old days”.
Incorrect.
Median sale price of a new house in 1963 was $17k, median household income was $6200.
Median sale price of a new house in 2017 was $360k, median household income wa $56k.
Data my good friend…. stick with the data.
Bothell, WA Housing Prices Plunge 19% YOY On Rising Unemployment
https://www.movoto.com/bothell-wa/market-trends/
SFMF: 1963 median income was $4400. Median home cost $18K.
Today median income is $55K and a median home is $205K.
The ratio is virtually unchanged from the “good old days”.
I’m not sure where your numbers are coming from:
1) https://www.ssa.gov/oact/cola/central.html
2) https://fred.stlouisfed.org/series/MSPNHSUS
So, looking at new homes in 1990 versus today, and using the median income (half make above, half make below):
Year: Annual Median Income - New House price - ratio
1990: $14,498.74 - ~120K - 8.2x
2016: $30,533.31 - ~315K - 10.3x
For averages:
1990: $20,172.11 - ~120K - 5.9x
2016: $46,640.94 - ~315K - 6.75x
It’s higher today, just from 1990, based on numbers from the SSA. That’s for individuals, not households.
The ratio is an interesting data point, certainly, I’d be quite curious to see other reliable numbers on it, going back further.
SFMF: 1963 median income was $4400. Median home cost $18K.
Today median income is $55K and a median home is $205K.
The ratio is virtually unchanged from the “good old days”.
I’m not sure about the source of your citations. Your 1963 numbers show a 4.0x ratio of house price to median (I’m assuming household) income. Your ‘today’s’ number shows a 3.7x ratio, making them even relatively cheaper.
I found the ones below (for new houses not existing):
1) https://www.ssa.gov/oact/cola/central.html
2) https://fred.stlouisfed.org/series/MSPNHSUS
3) https://www.census.gov/data/tables/time-series/demo/income-poverty/historical-income-households.html - “Regions - by Median and Mean Income - All Races”
So, looking at new homes in 1990 versus today, and using the median income (half make above, half make below):
Year: Income - New House price - ratio
Median individual:
1990: $14,498.74 - ~120K - 8.2x
2016: $30,533.31 - ~315K - 10.3x
Average individual:
1990: $20,172.11 - ~120K - 5.9x
2016: $46,640.94 - ~315K - 6.8x
Median household income:
1990: $29,943 - ~120K - 4X
2016: $59,039 - ~315K - 5.3X
Average household income:
1990: $37,403 - ~120K - 3.2x
2016: $83,143 - ~315K - 3.7x
It’s higher today, just from 1990. The one that’s not too much higher is average household income.
This ratio is an interesting data point, certainly, I’d be quite curious to see other reliable numbers on it, going back further. Those are hard to come by.
Median household income back in 1963 typically was generated by 1 individual.
Not so in 2017.
doh! Apologies for the double-post: browser crashed on first submittal, couldn’t tell if it went through - I thought probably not. I went back made some edits, resubmitted and everything went normally. Apparently though submittal 1 did work.
Sam Walton drove a 30 year old truck and Buffett lives lives in a “shack” as well. Barry Sanders (NFL player for those who don’t know) is famous for having lived in a $100K house while earning millions every year.
Some people don’t need extravagance. If you have me $1B tomorrow I’d buy a nice house, but I wouldn’t want one of those 30K ft. monstrosities with an army of employees needed just to maintain it and the grounds.
And even in most American cities, $5M gets you a very nice home. Let’s not go overboard.
I was trying to remember where I had heard this Buffett thought of “don’t let anybody know you have anything” and it went all the way back to 1983 and a movie I saw with my first wife.
Terms Of Endearment Script - Dialogue Transcript
Sam Burns: Tell me, do you prefer Texas to lowa?
Emma Horton: I don’t know, there seems to be an absence of wildness, you know?
Even in the people!
Sam Burns: Well, we’re farmers and we talk poor, because the farmer aspect is “don’t let anybody know you have anything” and “don’t call attention to yourself”
http://www.script-o-rama.com/movie_scripts/t/terms-of-endearment-sccript-transcript.html
I have heard that many rural folks got burned when the government began confiscating gold after the 1929 crash and that after that they kept their wealth as hidden as they could. Heard stories about hiding gold coins in paint cans in the cellar or the barn
Omaha, NE 68107 Housing Prices Crater 6% YOY
https://www.zillow.com/omaha-ne-68107/home-values/
Don’t forget to select price from dropdown menu on first chart
Shouldn’t be a problem for those taking out 2nd and 3rd mortgages to buy bitcoin or become subprime lenders to other Canadians…
“households, on average, owed C$1.73 for every dollar of after-tax income earned”
That shouldn’t be a problem either…
++++++
Canada Home Values Hit “First Quarterly Decline since Q1 2009” as Household Debt Binge Hits New High
by Wolf Richter • Dec 14, 2017
Household debt in Canada rose to a new record of C$2.11 trillion in the third quarter 2017, up 5.2% from a year ago and up 10.7% from two years ago, Statistics Canada said on Thursday in its quarterly report on national balance sheets. Mortgages accounted for 65.6% of the total. Canada’s infamous household-debt-to-disposable income ratio, one of the highest in the world, rose to a breath-taking record of 173.3%.
The ratio means that households, on average, owed C$1.73 for every dollar of after-tax income earned. This chart shows how the indebtedness in relationship to after-tax income has soared since 2001, when Canada’s housing boom took off in earnest:
The debt-to-disposable-income ratio of 173%, scary as it is, is just a national average. But it’s not normally the top of the income categories that get in trouble. It’s the lower categories.
This comes as the value of residential real estate owned by households declined by $3.0 billion “due to weakening housing resale prices,” Statistics Canada said, adding. “This was the first quarterly decline since the first quarter of 2009.”
“It’s not normally the top of the income categories that get in trouble. It’s the lower categories.”
This is true of student debt as well. When you start talking about average student debt, that includes a good deal of medical school and law school debt, professions which usually result in salaries that allow debt servicing. The biggest losers of student debt are those that graduated with suspect degrees or, worse, who never graduated at all but racked up debt (often at a for-profit-college).
Silverton, OR Housing Prices Crater 7% YOY As Housing Correction Expands
https://www.movoto.com/silverton-or/market-trends/
“Nearly one in four renters in Denver spend half or more of their monthly paychecks just to keep a roof over their heads.
As high as that number may sound, an even larger share of households renting in Boulder, Pueblo, Fort Collins, Grand Junction and Greeley pay that high an amount of income in rent and utilities”
http://www.denverpost.com/2017/12/15/metro-denver-renters-spend-majority-of-income-on-rent/
No 20% down being saved here, and no pent-up demand for $500,000 starter homes happening here. Not today, not tomorrow, not ever. EVER.
“This sucker could go down” — George W. Bush
But…but…legal pot.
And mountains.
In Fort Collins, a third of renting households are severely burdened
It’s a college town, but wages are low in the Fort and rents are high. A recruiter contacted me about senior engineer position with Airbus in Ft. Collins. He told me that the most they could pay was $80K. I thanked him for his time.
Wow - most engineers students out of decent engineering school are close to $50-55k…
Penny wise and a pound foolish by many employers…
uh what ?? we pay 80K right out of school and that’s for H1B
Its EE though
Engineer…. Not keyboard jockeys “writing code” for a pets.com outfit like Facebook. Engineer…. The real thing.
yep. we pay at least $70k for new college engineer grads. less than $100k for any engineer ANYWHERE in the country who has 10 years experience is TOO LOW. the only place i’ve seen super low pay rates like $80k is at EPC firms where they hire H1B folks from out of country.
I’ve heard plenty of stories about low professional pay in Fort Collins, especially with smaller, local firms, but I foolishly assumed that Airbus would pay better. I know of a lot of HP, Agilent, LSI and Intel people who packed up and left the Fort after they were laid off. Staying local often meant a 20 to 30% pay cut, assuming they could find a job as the competition was and remains fierce.
But even though good jobs are hard to find in Ft. Collins, the housing bubble made itself right at home.
Hey, we’re in a global race to the bottom, don’tchaknow?
A few years ago, I interviewed at a local consulting engineering firm (senior EE with 25 years experience). Their best and final offer was about $90K/year, in the Seattle area which is not exactly cheap to live in. The reason they couldn’t offer any more? The principals of the firm were making that much!
I thanked them but declined to accept the offer. And it would have been a really good job with major clients (Boeing, BNSF, food processing companies, and the like).
This is the new normal. It’s just another indicator that the middle class is dead in this country, and that our standard of living is declining.
But I thought renting was the path to prosperity. Weird.
Why buy it when you can rent it for half the monthly cost? Buy later after prices crater for 75% less.
Pocatello, ID Housing Prices Crater
18% YOY
https://www.movoto.com/pocatello-id/market-trends/
Then;
How about just speaking truthfully for once.
http://articles.latimes.com/2006/jul/21/business/fi-soft21
“Maybe we need something new. That’s all I’m prepared to say,” Appleton-Young said Thursday. “I’m sorry I ever made that comment,” she said Thursday. “When I get my new term, I’ll let you know.”
A new moniker for Leslie, anyone?
Will “crater” suffice?
Chuck Yeager used to use the term “auger in” when describing pilots who, er, cratered.
So, how ’bout this: “The RE market just may auger in.”
Nah, it doesn’t work. I’ll stick with crater.
The OP who posted this compiled a list of 100+ links about the economy:
https://www.reddit.com/r/The_Donald/comments/7k6gw1/how_trump_turned_obamas_faltering_economy_around/
Our contractor Christmas party (Christmas party, not “holiday party) was last night. It’s been a very good year
What’s your prediction for next year? A bumper crop of repo’d pickup trucks? Or will they just keep building “luxury” apartments until whoever is financing them say “no more”?
Maybe 2019 it will fold ?
2018 IDK It’s going parabolic now with bitcoin, RE, stocks, everything except wages and who knows maybe that will start going up next?
The trick is to call the top and get out not a easy thing to do. And then get back in at the bottom.
“The trick is to call the top and get out not a easy thing to do. And then get back in at the bottom.”
That’s the secret to investing in the bubble-churn era.
I know a few people who sold everything when Trump became president sure he would cause a crash..
I find the best time to think about selling is the “shoeshine boy moment” like when my 16 year wants to buy bitcoin. And that’s here. I will guess that a crypto crash will be the sign of a bubble bursting then the broader market will follow and then RE after that. RE is kinda slow going down.
Last time it was a mother wanting to buy my townhome for her 18 year old kid.. 2006 only 400k which I thought was crazy high. Townhome not back to that level yet but closing in at about 365K per Zillow, it was as low as 150K around 2009.
‘I find the best time to think about selling is the “shoeshine boy moment” like when my 16 year wants to buy bitcoin.’
I will have to poll my teenagers on this topic.
I will guess that a crypto crash will be the sign of a bubble bursting
That will be this cycles “Lehman moment”
It’s all my students are talking about.
“2018 IDK It’s going parabolic now with bitcoin”
Bitcoin’s already gone parabolic, though its moonshot continues as it’s now approaching $20k. All the suckers are rushing in now.
I periodically check my email trash because sometimes stuff ends up in there, and I’m seeing a lot of “crypto” crap. This world’s gone mad.
People are allegedly taking out mortgages to buy Bitcoin. I’m almost certain that there used to be laws requiring that mortgage funds were used to pay off or reinvest in your house. This notion of borrowing against the value of your house to gamble seems crazy.
autos are in for a shellacking from 2018-2020. record lease returns will kill used car values and bring down new car values with them.
follow daniel ruiz on twitter. he’s got the best auto insights.
http://blindersoffllc.blogspot.com
We have three new rental apartment jobsites right now: near Broncos stadium, near Five Points north of downtown, and one a few blocks north of the state Capitol.
I’m planning to jump contractors next summer to one with a more diversified portfolio of projects that also does service work for existing structures.
Regarding the Denver economy in general, expect more construction of garden style rental apartments in outer suburbs as the land costs for urban towers won’t pencil out to be profitable. I’ve only worked on one site that wasn’t in central Denver and that was a transit-hub anchored site down in Lone Tree.
SNL cast member shows off Clinton tattoo
BY JUDY KURTZ - 12/15/17 08:09 PM EST
Hillary Clinton is leaving a permanent mark on Pete Davidson — the “Saturday Night Live” cast member just debuted a new tattoo of the 2016 Democratic presidential nominee.
“Wanted to get @hillaryclinton a Christmas gift so I got a tattoo of my hero. Thanks for being such a badass and one of the strongest people in the universe Tatt by @jonmesa,” he wrote.
http://thehill.com/blogs/in-the-know/in-the-know/365206-snl-cast-member-shows-off-clinton-tattoo
That’s disgusting.
I honestly can’t remember the last time I watched SNL but it’s been at least 15 years.
I don’t have any tats but I work with alot of people who do. One with the Kansas City Chiefs logo tattooed on one side of his neck (um, OK) and a fake lipstick kiss one the other side of his neck. Lots of Mexicans like to get their kidz’ names tattooed on their arms. A plumber on my site has Dead Kennedys’ vocalist (and former presidential candidate) Jello Biafra’s name inked on his arm.
Anyone who gets a HRC tat deserves to die in a fire
Liberalism is a mental disease.
SNL is not worth staying up for, but there are a couple priceless clips on YouTube.
Tina Fey as Sarah Palin:
https://www.youtube.com/watch?v=vSOLz1YBFG0&t=99s
Alec Baldwin and John Goodman as Trump and Tillerson.
https://www.youtube.com/watch?v=3Ar80sFzViw
“If you can persuade the customer to tattoo your name on their chest, they probably will not switch brands.” — Robert Hall, on Harley Davidson
Billy Goat Tavern
“Boston’s housing shortage is perpetually painted as what makes the city so unaffordable.”
HAH! Boston had a “housing shortage” during the 1970s. The older sister of a friend of mine worked for some rental placement company called The Great Boston Apartment Hunt or some such thing.
With that said, I don’t recall apartments as being unaffordable back then, just hard to find. I lucked out because a friend of a friend just happened to manage rentals in those old bow-front apartment buildings up in Brighton near Boston College. Parking kinda sukked, though. And if you lived on the ground floor, like we did, keep those windows shut if you’re not physically in the room. People walking the alley would just reach in and take a wallet off the bed.
Of course, that was a kinder, gentler time when they were just after cash and dumped the wallets or purses or briefcases (they even took jeans off the beds in hopes there was some cash in the pockets) in the alley with the ID and checkbooks still intact. They got a whole three bucks off me, and I got my wallet back after rooting through the alley.
How much physical cash is in circulation? My guess around 1.6 trillion
How much debt is there? Between govt debt of 20 trillion and private debt such as credit cards , car debt, house debt, student loan debt, u are talking about 13 more trillion.
20 + 13 = 33 trillion of debt
33 trillion / 1.6 trillion physical cash is a leverage ration of over 20 - 1
total savings in deposit institutions = ~ 9 trillion
9 trillion/ 1.6 trillion cash = 5.62 leverage ratio
in 1996 the physical cash in circulation was 427 billion dollars
A trillion here and a trillion there… before you know it, you’re talking about real money.
Bethesda, MD Housing Prices Crater 6% YOY As Rental Rates Plunge
https://www.movoto.com/bethesda-md/market-trends/
They say an insurance CEO cries every time a multi million dollar home burns in Santa Barbara, lots of tears ahead
https://www.nytimes.com/2017/12/16/us/thomas-fire-santa-barbara.html
What good is your sweet sweet pension if you’re dead?
More than 8,000 firefighters have been deployed and hundreds had been ordered into a tactical retreat. “We are not going to put them in harm’s way to defend a building and have the chance of them not going home to their families at the end of this event,” Mr. Rosa said.
Among the evacuees were Candace Dauphinot and Richard Brumm, real estate investors who retired to Montecito in 2003 and since 2012 have been living in the Birnam Wood Golf Club, a gated community of about 140 ranch-style homes valued at $3 million and higher.
real estate investors is that a real job?
From my house it looks like a hydrogen bomb has gone off to the North west.. And more wind..
If I am not mistaken, the folks who fight wildfires tend not to be the overpaid, municipal firefighters with the fat pensions.
Fir fighters have to pull back 60MPH winds throwing 100 foot flames you can’t fight that.
Event: Wind Advisory
Alert:
…STRONG AND GUSTY WINDS EXPECTED ACROSS PORTIONS OF THE
SOUTHWESTERN CALIFORNIA THROUGH SUNDAY…
.Gusty north to northeast winds will affect the Santa Barbara
South Coast and adjacent Santa Ynez Mountain Range through late
this evening, especially affecting the Gaviota and Refugio areas
as well as above and around the hills of Montecito. Winds will
then shift to the northeast this evening and strengthen as another
moderately strong Santa Ana wind event develops across the wind
prone areas of Los Angeles and Ventura Counties then continue
through Sunday afternoon.
…WIND ADVISORY REMAINS IN EFFECT UNTIL 3 PM PST SUNDAY…
* WINDS AND TIMING…North to northeast winds 20 to 35 mph with
gusts to 45 mph are expected by early evening, then winds will
become northeast 25 to 40 mph with gusts to 55 mph by Sunday
morning. Local gusts to 60 mph possible Sunday morning. Winds
are expected to diminish some by late Sunday afternoon. |
It’s horrible.
Yup. But it’s been happening for millions of years, like any other natural disaster. When the next big earthquake hits the Seattle area, it will be even more devastating. Or when Mount Rainier blows again.
Republican congressional leaders and real estate moguls could be personally enriched by a real-estate-related provision GOP lawmakers slipped into the final tax bill released Friday evening, according to experts interviewed by International Business Times. The legislative language was NOT part of previous versions of the bill and was added despite ongoing conflict-of-interest questions about the intertwining real estate interests and governmental responsibilities of President Donald Trump — the bill’s chief proponent.
The Trump organization and the Kushners (the family of Ivanka’s husband, Jared) have overseen vast real estate empires, and top GOP lawmakers writing the tax bill collectively have tens of millions of dollars of ownership stakes in real-estate-related LLCs. The new tax provision would specifically allow owners of large real estate holdings through LLCs to deduct a percentage of their “pass through” income from their taxes, according to experts. Although Trump, who became famous for his real estate holdings, has transitioned into branding in recent years, federal records show Trump has ownership stakes in myriad LLCs.
The new provision was NOT in the bill passed by the House or the Senate. Instead, it was inserted into the final bill during reconciliation negotiations between Republicans from both chambers. The provision, said experts, would offer a special tax cut to LLCs with few employees and large amounts of depreciable property assets, namely buildings: rent generating apartment and office buildings.
“This helps people who have held property for awhile, like Donald Trump,” David Kamin, an New York University law professor who served as a special assistant to the president for economic policy in the Obama administration, told IBT. “If you’ve got an LLC that’s a trade or business with a bunch of real estate holdings and few employees, [I] think you’re now golden. You get the deduction.”
Similarly, Urban-Brookings Tax Policy Center senior fellow Steve Rosenthal told IBT the provision would specifically benefit real estate investors.
“It would benefit real estate businesses especially, which typically operate as pass-through businesses, most often LLCs,” said Rosenthal, a former tax attorney at Ropes & Gray. “An LLC’s building, and other depreciable property, would be ‘qualified property’ for purposes of the new test, as long as the LLC had not fully depreciated the property. That would be unlikely, as commercial real property is currently depreciated over 39 years.”
IBT previously reported that 13 GOP lawmakers directly sculpting the bill —including U.S. House Speaker Paul Ryan — have between $36 million and $163 million worth of ownership stakes in real estate-related LLCs. Those entities generated between $2.6 million and $16 million in “pass through” income and could benefit from the new provision.
Sen. Bob Corker, who was considered a potential “no” vote on the bill, abruptly switched his position upon the release of the final legislation. Federal records reviewed by IBT show that Corker has millions of dollars of ownership stakes in real-estate related LLCs that could also benefit.
“Pass throughs” are business entities that don’t pay corporate income taxes, like partnerships, LLCs and S-Corporations. Instead, they “pass through” income to partners, who then pay personal income taxes on the money they receive. The Senate version of the tax bill would have added a 23 percent deduction for income from pass-throughs to the tax code. The new reconciled tax bill shrinks that deduction to 20 percent but, in a last minute change, added a new way around restrictions that would have kept pass-throughs with large income but few employees from benefiting.
The new bill still has the same income provision but adds a loophole: depreciable property. So instead of being being able to get a large tax cut only if you pay a lot of wages, now you can get the tax cut if you own a lot of property.
IF the first housing bubble were truly a population-based phenomenon:
1) Why did prices start collapsing?
2) What would have happened if the governments and central banks around the world hadn’t stepped in to start supporting the housing market?
3) Is the world economic system then really dependent on high and rising financial asset and house prices? Will the governments and central banks now defend these prices going forward, essentially guaranteeing continued upward trajectories, or was that a one time experiment with QE?
seems like stawks and homes are now providing americas income now. let the rest of the world make our consumable goods.
The bubbles tend to collapse on themselves eventually. Seems they keep lasting longer. I was saying there was a housing bubble back in like 2003. Had heated arguments with people for awhile and it lasted a lot longer than I thought.
Stawks are in a major bubble. I swear im having the same conversations about stawks that I had with real estate in 2003. Its great at the holidays when I rain on the parade.
Bonds are also in a huge bubble but most americans dont buy bonds. Its central banks here lately.
Stawks are in a major bubble.
how can you tell?
CAPE ratio makes stocks look pretty overvalued.
about how big will the downturn be?
will it likely happen within 6 months? longer?
If I only had a crystal ball…
I’m not good at predicting the future, but I’m excellent at predicting the past.
If I only had a crystal ball…
i thought your crystal ball was shiller’s CAPE..
Nope, just a useful tool for gauging the price of the stock market as a whole. The CAPE gives no insight as to what will happen as a result of stocks being overvalued relative to historical past. Maybe “this time is different” and we’re in a “new normal,” but strongly doubt it. The stock market is a Keynesian beauty contest right now.
CAPE = Cyclically adjusted price-to-earnings
http://www.multpl.com/shiller-pe/
just a useful tool for gauging the price of the stock market as a whole.
useful? how? do you use it for investment decisions like maybe shorting an ‘overvalued’ market?
The CAPE gives no insight as to what will happen as a result of stocks being overvalued relative to historical past.
then how do you know they’re overvalued? just because stocks are priced differently now than in the past, doesn’t mean you know anything about their future.
useful? how? do you use it for investment decisions like maybe shorting an ‘overvalued’ market?
I’ve never sold short. I don’t consider myself a savvy trader by any stretch of the imagination. I’ve held low-cost index funds and done very well over the years. Some of this was luck due to timing. The other part was just being broadly diversified and dollar-cost averaging in very methodically.
I’m smart enough to know that the market can remain irrational longer than I can remain liquid. Going short is far riskier than going long. So my current decision is not to short, but rather to overweight cash and look for more attractive buying opportunities. I would rather buy when the prices are at least within one standard deviation of historical norms.
Did you ever watch The Big Short? Christian Bale played the real life Michael Burry (Asperger’s syndrome) who absolutely knew the bubble existed. He was right about the housing bubble (at least we know now, in retrospect). But other investors were losing their shirt because it took longer for the correction to occur than they thought it ought to. It can be very lonely and painful waiting for the correction to happen, even if you are right. You can be right, and still be wrong, if you understand what I’m saying. Or, you can be right in your general assumption, but wrong on the timing. My investment decisions are purely my own and are suited to my own risk tolerance and financial situation. Other individuals may look at things and take the opposite take. Apparently this is why the market keeps going up (and so does Bitcoin).
Let me try what you wrote above and substitute “housing” in there:
Then how do you know housing is overvalued? just because houses are priced differently now than in the past, doesn’t mean you know anything about their future price.
As a matter of pure argument, this may be technically correct. My counter would be that we’re dealing with a distribution of probabilities. If you take the assumption that the best predictor of the future is the past, then it is quite unlikely that the broad US markets continue their torrid appreciation, at least at the pace we’ve seen in the past 8 years. Of course, inflation or a structural increase in earnings growth would cause me to change my thesis.
Then how do you know housing is overvalued?
housing isn’t an investment. that is, it isn’t meant to grow in value. no matter the price fluctuates, its value is in constant decline from the moment it was built.
stocks on the other hand, ARE meant to grow in value. they are a different animal than just about anything else, including housing. in other words, you have made a faulty analogy.
cape or no cape, you haven’t shown me anything that truly indicates stocks are overvalued. but that’s ok since it’s just about impossible to do. everything is 20-20 in hindsight.
just so you know, i’m not claiming that stocks won’t sell off. but isn’t it interesting that over the years, they seem to do better than just about everyone expects?
i read an article recently that said coca-cola was $40 dollars for 1 share in 1919. if it was held until 2012 with reinvesting the divies, the holding would be worth 9.8 million. that’s an increase of 245,000 times the original investment.
berkshire went up 9,800 times from 1964 to 2014.
microsoft went up over 5,000 times from 1986 to 1999.
the point is that the returns on many stocks outpace inflation many times over. of course many go to zero too.
and since most people don’t know the difference between money and currency, they get fooled on how much things have truly moved up in price. they think dollars tell the whole story. but they don’t.
Did you ever watch The Big Short? Christian Bale played the real life Michael Burry (Asperger’s syndrome) who absolutely knew the bubble existed. He was right about the housing bubble (at least we know now, in retrospect). But other investors were losing their shirt because it took longer for the correction to occur than they thought it ought to. It can be very lonely and painful waiting for the correction to happen, even if you are right. You can be right, and still be wrong, if you understand what I’m saying. Or, you can be right in your general assumption, but wrong on the timing.
You do know that we (some commenters here) were here back before anybody had heard of Micheal Burry and we’ve lived everything you just described, right? There is no “in retrospect”…we knew then too.
I recognize that. It’s easy to curve-fit the data and start rationalizing lofty valuations (be they stocks, bonds, or real estate). But my gut says that we are in multiple bubbles due to loose monetary policy. Funny money has entered in at all levels.
Signing Off: AOL Instant Messenger Officially Closes Down
http://www.breitbart.com/tech/2017/12/15/aol-officially-closes/
Steve case bio:
AOL pioneered the concept of social media, as its focus from day one was on communication features such as chatrooms, instant messaging and forums.[11] Case believed that the “killer app” was community — people interacting with each other — and that was the driver of much of AOL’s early success. By contrast, competitive services of the time such as Prodigy funded by IBM and Sears, focused on shopping, and CompuServe focused on being an information utility.[12] A
n 1996, Prodigy was acquired by the former founders of Boston Technology and their new firm International Wireless, with Mexican businessman Carlos Slim Helú, a principal owner of Telmex, as a minority investor. IBM and Sears sold their interests to this group for $200 million. It was estimated that IBM and Sears had invested more than $1 billion in the service since its founding.[7]
Are there still chat rooms online? They seemed kinda slimy to me.
Hate it when dh says I visit chat rooms when he means blogs and message boards.
“California Is America’s Poverty State”
http://www.laweekly.com/news/california-is-americas-poverty-state-7380756
“Like the castle in its corner
In a medieval game
I foresee terrible trouble
And I stay here just the same”