The Housing Bubble

That bread should be a dime or two.

Those philharmonic coins are awesome. Next time PMs tank, I will get some…

As with gold, silver has a true history as money. The old British Pound Sterling was weighed in as a pound of sterling silver and that says enough for me but both India and China have a great history of silver as money as have so many other countries.

The use of gold and silver as currency was called bimetallic currency and the monetary ratio used to be that one ounce of gold was equal to sixteen ounces of silver (currently one ounce of gold trades at about 55 ounces of silver) and some day i think people will get serious about having physical silver in their holdings.

I think it’s the greatest bargain out there as a way out of the Fiat Ponzi Scam and i have bought a bunch and will continue to do so.

When all this breaks down, there is no doubt that silver coins, etc will be a good and sound basis for trading imho.

Nickels have the most metal value after pre-1982 pennies:

http://www.coinflation.com/

The low point was around 1939, when we got our first glimpse @ television, at the World’s Fair in New York.

It’s been all downhill, since then.

Of course the Fed themselves control the numbers.

Don’t forget that Reagan was able to lower the unemployment rate by a full 1% in early 1987 by simply redoing the calculation.

Now a days, we have the birth/death model to help figure out the unemployment rate. So much easier to come out with the numbers you need.

What was that stuff they used to make?

Where’s the number 150 come from? According to a JobBank article published yesterday, new cuts bring their workforce down to “fewer than 30,000.”
http://www.jobbankusa.com/News/Layoffs/more_kodak_layoffs_in_picture.html

I owned a big custom log house on 25 acres in W. Colorado, beautiful views. Same town as my parents. I had a computer telecommuting job with a company located in a large city. The mortgage was only $1000/month, no ARM, but after two years I sold it. My mom, who’s very security oriented, couldn’t understand it. My dad understood. He could never figure out why I bought it in the first place, he hates mortgages, paid cash for his house. Not two months later, the company I worked for declared bankruptcy. No way would I have found a similar job in that little town. I was SO grateful to not have that house hanging over me. People forget that jobs are no longer like they used to be, the secure job of the 50s and 60s and even 70s no longer exists. People are overly optimistic when it comes to buying things and the long term job outlook.

I’m with you on that. People who become mortgage slaves are Pollyannish about jobs and forgot the 2001-2002 period when outsourcing became a serious concern. Indians and Chinese are getting paid too little while we Americans are getting paid too much. We Americans are less than 10% of the world’s popuiation but use up well more than 40% of the world’s resources. What kills me is the anti-traders who don’t say it outright, but secretly wish the Indians would go back to wearing rags and the Chinese go back to working on their farms. Everyone on this earth has the individual right to pursuit of happiness without any government in the way. We’ll see more and more countries competing for fewer and fewer resources. Gold and oil are not renewable resources (BTW: I bought a few ounces of gold already this morning - beautiful shiny metal).

so very true lost in utah

my in laws think it is the 60’s where i should buy a house
and leave myself with like 5k after all is said and done

i just laugh to myself. they are in their late 60’s and early 70’s and do not realize how easily you can be downsized in this new economy

it kills them that we rent.and they even promised to give me a nice chunk of change if we buy.

i told them to keep their money

Lost nailed it. Houseownership doesn’t work in a post-industrial economy irrespective if you agree with the fact we’re post-industrial. A house and mortgage narrows your career possibilities to a 50 mile radius max but the majority of folks have themselves locked into that ugly economic reality and living as if it were 1950-1979. To me, we’re seeing the final dislocation associated with a manufacturing economy and that dislocation is people unwrapping themseleves from a 40 year residence in a suburban neighborhood. Either stay in the place you’ve always known and suffer from declining wages/lifestyle or unroot yourself in whatever way possible maintain a standard of living.

yes exeter and by holding onto a house you limit your mobility greatly

i love the fact i can pack up and go anywhere i want on very short notice if the right position was offered

Mgnyc, regarding your inlaws in post above mine… My inlaws and parents are both in their 70’s and 80’s and they just cannot wrap their minds around the reality that what they did back in the 1940’s and 1950’s is impossible today. I even showed them an article that indicated the average time a person is employed by a single employer is 3.2 years. They all worked for 35+years and retired from USPS, public utilites and manufacturing outfits, never seeing but one employer in their entire life. They just don’t get it. Fortunately for me, construction management has been booming for 10 years and at the same time all the veterans are retiring resulting in a shortage of experienced CM’s, resident project reps. And like most companies, most instituted a hiring freeze throughout the 80’s further constricting the availability of qualified folks. I’m prepared for it to end some time but the forecast looks good for the next 5 years. HR managers at Civil engeering firms will all tell you they cannot find qualified guys. And the beauty is there is always an end to every project in the event I happen to be working with a group of bungholes which is the case on the current project. Mar2009 can’t come soon enough.

Just for the sake of discussion, allow me to give a different perspective.

Another way to do it, if you can, is to tele-consult. I used to do this, and I currently employ a number of people who do this today. The advantage is that you do not have to physically move, but instead you travel occasionally to the customer site. By occasionally, I mean every three to six months. Customer pays for the travel and hotel, and you do the vast majority of your work from home. Not a bad life, and it can pay exceptionally well.

I could’ve maybe got another tele job, maybe not. But I was burned out, so I went back into archaeology, where one has to be somewhat mobile. Love it.

In the future we will all be working when an employer need help. When the project is done there is no need to keep the employee. I see this happening now. This type of business operates differently with heavy profits, no dead weight employees. No paying for fica, ssi, taxes on employees. Companies will employ on a need to basis only. I might not like this trend but this is already happening in our industry.

Bulloney Exeter:

What you should have said HR mangers want people who have 5-7 yrs experience and will work for that pay scale, and not 17yrs exp., even though a 17 year experienced person is just as unemployed as the 5-7 one.

Then they hire that Perfect 5-7 yr employee who lives over an hour away, and is late the first 3 days on the job and gets a warning.

Happened last month to my brother HVAC tech, and he lives 1/2 Mile away!!! And he would have gladly taken a 1/3 pay cut form his last job….Hmmm walk or bike to work…

=====================================-
HR managers at Civil engeering firms will all tell you they cannot find qualified guys.

aNYC. I know what I know. I have delays in the field because I can’t get a designer in the office to answer RFI’s. The response from design manager is “we don’t have anyone to review”. I say hire someone. “We can’t find anyone” is the response. I’m not a PE and I’m running $35million of work which is atypical in this business. I’m getting calls and emails from old employers for work all over the country. It is what it is.

Don’t be conned by this construction engineer shortage BS.

They are looking for someone with 10 years experience in a niche area willing to work for $10 an hour.

If they cough up serious money and/or provide the niche specific job training they would have a pool of dozens if not hundreds to choose from.

Not true. Every lead has been in excess of 100k plus $150/day per diem.

I answer RFI’s and RFP’s for my software firm and i don’t know anything and the guys who do don’t want to get involved. Rather a trying job for me.

P’Bear,

We are very patient and don’t need to relocate.

Hubby needs locked in the closet every so often, as he is a tad more short on patience! (Especially with all the snow we are enjoying here in WI - lawd what this man would not do for a snowmobile, and he deserves it too!)

I encourage the younger ones to WAIT. They can afford to save and rent, not a big deal.

Some of us…er…middle agers want to have a little fun before the life gets sucked out of us!

LOL,
Leigh

re Opportunity: The meltdown in the tech sector is a case study for money to be made after the wreckage is cleared. The summary of my paragraphs below is: There is indeed opportunity, but it happens first on a small scale because it takes quite some time for the wreckage in the big companies to clear.

The lesson (for me) in the tech bubble is that it took about 3 years for most attitudes to change. I will tell you that it has never really “recovered”: The dinosaurs take a long time to actually go from endangered to extinct. Lucent is a good example; the would have already been bankrupt by now, but they merged with Alcatel, much like two drunks attempting to walk by leaning on each other. (I figure cityboy can relate, given his close relationship to Mr Daniels. ) The issue is that you have far too much cronyism in the top levels of large companies (from board to low management), with no real vested interest in the house cleaning that needs to occur.

The only big-company beneficiary for opportunities of the tech wreck that springs to mind is Google. They had a wad of cash and a plethora of engineers willing to work for much less money than during the glory days.

One other outcome: A larger number of small guys who haven’t yet made it big, but are somewhere between hungry and thriving. The rise of the boot-strapped startup is the biggest development of the tech wreck.

you’re right about the rhetoric, although the actual intent is, of course, to save banks … and saving insolvent banks is exactly where Japan went wrong

“Japan, with debt”

ouch.

Agreed — I myself have wondered the same many times.

Fields of American Dreams…

If they build it, will you come?

They bought because of conformational bias.

Exactly, Hoz.

I am amazed how people here in NYC think half a mil is still reasonable for a starter home.

Realtors like David Lereah emphasized homes came with cash dispensing HOE-ATM machine.

What’s more, Greenie and the banking industry regularly re-filled said HOE-ATM machine with freshly printed bills.

Beyond that, if you lived in the house for 2 or more years, cash from the HOE-ATM machine was tax free.

hey ed hopper very true

500k for a crap shack in a marginal area

i don’t care if i do not ever buy a home in nyc area
screw it il rent keep saving and when the time comes
buy my home cash or just build my dreamhome outside
of this overpriced city

“They bought because of conformational bias.”

Pretty funny to think it could happen here in California, land of the self-styled nonconformist.

In psychology and cognitive science, confirmation bias is a tendency to search for or interpret new information in a way that confirms one’s preconceptions and avoids information and interpretations which contradict prior beliefs. It is a type of cognitive bias and represents an error of inductive inference, or as a form of selection bias toward confirmation of the hypothesis under study or disconfirmation of an alternative hypothesis.

For example, why do people invest by Dollar Cost Averaging despite the evidence that shows it is an inferior way of investment?

According to Milton Friedman’s optimum utility theory, this should not occur. Therefore there is another mechanism at work. This other mechanism may be the inability to convert information into knowledge.

Once an individual has a firm belief in something, facts are meaningless. A firm belief in deflation, causes all evidence of inflation to be discarded. A firm belief in inflation causes evidence of deflation to be discarded.

The best way to avoid falling into a confirmation bias mentality is to assign negative probabilities. Most people assign positive probabilities. ‘I am buying this house because it will go up in value in 3 years. I’ll be able to sell it for a nice profit to lots of people.’ A negative probability ‘I am not buying this house, because only 7% of the population can afford to buy this house at this price. Who will I sell it to?’

One aspect of confirmation bias is that after taking a position or opinion, it appears that subsequent events are hard wired in the brain. You might as well be speaking ancient Greek to an inuit, it is improbable that you will impart knowledge in an understandable manner. Most HBBers have noticed this when trying to inform friends, family members etal about the risk of buying a house. Invariably the answer is ‘I still wish to buy.’

We are all subject to confirmation bias. The hard part is recognizing our individual biases.

WHY ARE YOU SO NEGATIVE….

I have been told that most of my life. You are right on the money Hoz, its assigning (or thinking) about the probabilities of a failure or screwup, people just don’t want to hear about it.
=================
A negative probability I am not buying this house, because only 7% of the population can afford to buy this house at this price. Who will I sell it to?’

Enough with the teasing! Tell me your net worth, dammit, to the nearest dollar! Footloose and willing to travel don’t mean jack unless da boy can show me da big clear finger-rock!!

on the psychology Q: One author in early 2005 attributed house buying boom particially to 9-11. People were frightened, wanted the comfort of home/family and the flight to warm and fuzzy fueled some of the housing boom.

How about cleaning mold in foreclosed houses. A 2 to 3 day job, costing less than $1000 and you are making 20K to 30K. Mold is Gold (cleanup in foreclosed homes).

My BiL is an environmental engineer in southwest Virginia. Most of his business these days is doing remediation work inside raided meth labs. The average cost: $30K-40K each. Since that’s a depressed area, a lot of the houses (almost always rentals) have to be condemned and torn down, if the LL can’t afford to remediate the meth hazard. He says a lot of these houses had very young children living amongst the highly toxic meth precusor chemicals and residues.

Yup, you’d be crazy to do that one, but hows about an armadillo rehab center in Texas?

I thought that was “I fart…”

hmm, what’s that smell?

Yeah, I guess my selective memory has better taste than that…

Botox anyone?

Sorry, not the CIA, but NSC. From a Wikipedia entry.

In 1984, LaRouche’s research staff was described by Norman Bailey, a former senior staffer of the National Security Council, as “one of the best private intelligence services in the world.”[4]

LaRouche forecast the debacle in Iraq and strongly warned, unlike George “Slam Dunk” Tenet, that Bush’s neo-con handlers were making a horrific strategic blunder.

http://www.larouchepub.com/other/2008/3502debt_crisis.html

LaRouche has some brilliant minds working for him, most notably John Hoefe and Richard Freeman. Their track record on the housing bubble, the credit crisis, and the next mega-shoe to drop - the $50 TRILLION dollar off-balance-sheet derivatives implosion - speaks for itself. Both take extremely complex subjects, like the securitization of mortgages, and write in such a way that even my mother-in-law can immediately grasp the subject matter and its implications. That takes talent.

“Once you cross the Rubicon from inflation to hyper-inflation, there aren’t any word definitions that describe anything beyond hyper-inflation.”

Images serve nicely to describe the latter…(not sure if the money these kids are seen playing with dropped out of helicopters or was delivered by land?)

http://wildthing.co.in/blog/wp-content/uploads/2007/08/weimar2.jpg

Pyramid $cheme?

Weimar, Argentina, Zimbabwe …

Aren’t we forgetting one?

Revolutionary America.

Yugoslavia in the 1980-1990’s was more out of control, than present-day Zimbabwe.

Are you sure about the yield? Energy trusts are depleting assets. The cash-on-cash yield includes return of capital. Investing in those trusts are like purchasing an amortizing loan. At the end of the investment’s life the residual is 0.

PGH Dividend: 2.73, Friday closing price 17.34. Yield is thus 15.74%. Close to 16%. Granted there are higher taxes on this trust, but it’s miniscule. I’m still netting double digit yield after the taxes.

What Hoz said (about confirmational bias).

Why do you call it “buying low” when it’s individual stocks, but “timing” when it’s a whole market? The same basic principles apply. Things like Q ratio and 10-year P/E can be used to value a broad market. You need to get this “can’t time the market” mantra out of your head. You can VALUE a market. And today’s U.S. market is still way overpriced, so unless you’re good at stockpicking, you should lean away from U.S. stocks. Fair value on the S&P 500 is probably south of 1000.

OK, it’s probably dead topic but looking at:

http://stockcharts.com/charts/historical/djia1900.html

things can go bad for 2 decades or so (29-54 is what I have in mind). I believe that we’re just getting started the downward leg as economic reality gets reflected in the companies’ earnings and the investment psyche changes to be bearish. I don’t know if it’ll take 3-4 years to hit bottom but I don’t see us hitting the stock lows in the next few days and be over with….

“tax relief on short sales, which serves to encourage walk-aways.”

Tax relief is only for short sales…with the banks overwhelmed, and understaffed, and still reluctant to cut prices, more FBs will just walk, rather than be bled dry slowly. The FBs still get hung for the taxes, but the income stream to the banks is cut off. Fair enough.

What is the real story on tax relief for short sales? I heard a few conflicting things from people in the industry.

1. It already passed
2. It is pending in legislation.
3. It passed and it only applies to owner occupied homes.

Can someone help?

Thanks
George

It passed under HOPE NOW.

The Mortgage Debt Relief Act excludes from taxation discharges of up to $2 million of indebtedness that is secured by a principal residence and was incurred to acquire, build or make substantial improvements to the taxpayer’s principal residence. While the determination of a taxpayer’s principal residence is to be based on consideration of “all the facts and circumstances,” it is generally the one in which the taxpayer lives most of the time. Therefore, vacation homes and second homes are generally excluded.

Moreover, the debt must be secured by, and used for, the principal residence. Home equity indebtedness is not covered by the new law unless it was used to make improvements to the home. “Cash out” refinancing, popular during the recent real estate boom, in which the funds were not put back into the home but were instead used to pay off credit card debt, tuition, medical expenses, or make other expenditures, is not covered by the new law. Such debt is fully taxable income unless other exceptions apply, such as bankruptcy or insolvency. Additionally, “acquisition indebtedness” includes refinancing debt to the extent the amount of the refinancing does not exceed the amount of the refinanced debt.

The Mortgage Debt Relief Act is effective for debt that has been discharged on or after January 1, 2007, and before January 1, 2010.

http://www.cshco.com/index.lasso?node=2&pgID=108&set=article

Given the refi activity boom recently, why aren’t banks staffing up and going after the monied walking people with recourse loans? They could conceivably make more money back this way than in workouts (depending on how expensive the legal system is, however.)

The rise was pretty steep in some places.

I want a spectacular crash and see the morons crash and burn.

Incidentally, that’s better for the economy too otherwise you are going to see a zombie economy with no one investing in anything.

I would consider a mirror image of the rise, a pretty fast crash.

Let’s see — 23% rise year-after-year in LA-area prices would have to be offset by a year-after-year
(1/1.23-1)*100 = -18.7 pct drop. Is this what you mean by “mirror image”?

An 18.7 % drop in one year can be digested, so yeah, I consider that a mirror image.
But if everyone, buyers and sellers alike, woke up Monday morning and suddenly, all at once, discovered what their house is REALLY then the market would freeze up.
I’d rather have this price discovery process take its time with an orderly adjustment.

“REALLY” = “REALLY worth”

The moron may actually be those of us who played by the rules.

In hindsight, I could have extracted a few hundred thousand from my house, lived free for the last several years, taken the interest deduction from my taxes, and then just walked away minutes ahead of the sheriff conducting the eviction. Makes me almost wishI lacked a sense of responsibility.

And as has been pointed out here often, the government is rushing to help those that scammed the system while the responsible are left to pay for the bailouts.

Sniggle,

I think that is the aspect of the moral hazard objection that has been forgotten. Those of us who played by the “rules” now see that the “rules” we adhered to are being ignored by our government. This leave me with significantly less loyalty to this governing body. While it may have always been best for me to have more loyalty to myself that my country, it is definitely now the case for me to act in my own self interest first and push any sense of following the “rules” the gov to second. I say this in terms of finance/taxes. In essence I am taking a F-U position with state and federal gov in terms of money. It’s mine and you take it from me under duress. What they have done is a form of taxation without representation. I may not be alone.

It is a sad day when a FB has gotten himself in such a rotten situation in the 1st place! My finances are mortgage / income = .6, CC payed off every month, credit score 820, saving = 10x mortgage. Why are people such FOOLS?

I don’t agree that they’re fools. Think about it - they get to live in a nice house (to them), in a nice area, where they never could have afforded prior. If they managed to cash-out refi and spent the money on new cars (cash purchases), college tuition, and put in a bunch of money into retirement where it can never be seized, they are much better off than when they began. And if the lender doesn’t (or cannot) come after them for deficiency, then they’re totally home-free. For someone making 50k and no hope (to them) of otherwise living that lifestyle, it makes perfect sense to me.

The part that I cannot understand is why the enablers thought they could get away with this scam forever.

No, it’s only in NY and LA now but I’ll see it when it gets here.

Did anyone Notice the fine print in the recent passing of the new bill?
The fine print, W put into an extra $4mill to extract Americans from foreign soil, and an extra chunk of dough for unusual circumstances.
Does anyone see SOMETHING COMING in 08-early 09?
And the executive law W passed that would give the pres martial law rights, and dictatorial rights?

Can anyone see SOMETHING IS COMING?

Not to be paranoid, but when those monies were slipped into the recent economic stimulu package and mormons for the last 2 yrs are being preached to make sure their food stockpile is complete, their larder is full…

I can add.

Be prepared.

now.

One of the funniest things about giving up your American citizenship is that if the IRS decides you did so to avoid taxes then you still owe income taxes for 10 years or so after.

Wesley Snipes, take note.

As Dan Rowan from Laugh In used to say, “Say goodnight Dick.”

DIck Rowan says, “Goodnight Dick.”

After the elections, every American should be thrilled to say goodnight to that DIck.

You have to wonder, just what is Dick up to?

(5 oceanic cables being cut at the same time, in the Med)

Lad, please elaborate…

Over the past week or so, 5 oceanic cables that lay on the bottom of the Mediterranean have been cut, by somebody.

Internet traffic is being disrupted in the Middle East, as a result.

can’t let those evil doers watch porn online

Especially when there are 72 vestal versions, on-line.

Can divers get down that deep or do you need a Cousteau-type sub? Interesting.

Alad is right, the cables were cut, and all connections to India etc were cut off completely.

Adding it all up.

Look on the bright side: W remained healthy and hearty for his full eight years in office

Copper thieves…

lol

Coming to a theater ner you;
“Die Busheke”

We of course, have one prisoner in Gitmo that was captured when he was 14. He is 20 now, so his execution will of course be legal.

PB. Perhaps you could find an open house in SD where a bunch of HBBers could meet up and have a grand old time. Name the perfect place soon.

Wouldn’t a bunch of us swooping in on an open house to eat free technically qualify us as “equity parasites”?

LOL. Gives new life to those foreclosure bus tours vaunts.

Oh no. Just prospective clients liberating some equity.

This is a brand new house with highend stuff. Question I have is can labor and materials actually drop any less in the long run. We have all discussed that prices will fall. How low can they go. This is a neighborhood with dr and layers. So I doubt it will ever be $1 a house. I am wondering are we passing up on some real good deals. Thanks for all the input.

You’ll hate yourself for overpaying early on in the unwinding, as prices plunge into the abyss…

Patience is just as important as timing, right now.

Offer $275 and stick there.

Cash, close in 15 days. or less. Ya never know.
Offer than once per mo.

“This is a neighborhood with dr and layers.”

Are you a dr or layer?

Same advice as above, but start at 300. The following month offer 295, and then 290 the third….

Thank you again. In a week greedy type of a moment I might have made an offer. I will wait. Btw I am also a cash buyer so lowballing with a quick close will work in our favor.

I see. Baptist preacher is playing the faith card so what about the idiot son? It sounds to me that you’ll castigate anyone that doesn’t align with your beliefs. I don’t agree with anything about Huckabee but clearly his faith is genuine.

What scares me about Huckabee is his “Christian nation” viewpoint. He wants to change the constitution to match his view of the bible.

I am Jewish, so I find myself wanting to ask him “In your vision of America, what color armband would I wear?”

That’s how scared I am of him - really.

Actually the irony is somewhat of a reaction against academics who are overly confident about their opinions.

with an MA in wisdom…