The Housing Bubble

Actually, it’s more like “it’s your future wages not mine”.

I’m sure they’re not the cash type.

Actualy it IS your money, if you are a tax payer.

Knife catching is the cure for that ill of being tired of renting.

So is mortality.

Feels like “new” again. Just rearranged all the furniture, moved art work (faux van gogh’s haha) dusted/swept, and voila..other than the non painted walls, this Rental is okay for awhile longer. In fact cleaned out the bookshelves, closets.
Suddenly the “tired of renting ”
feeling is smoothed away and I do not have to pay for the broken things, the HOA of $500. per month,property taxes, and the huge water bill on all the grass here ( in the Desert) and the gardeners who seem to be here every darn day, but, until the houses available in the nicer areas, are less, much much less than what I am paying then I will ignore that “tired of renting feeling” for much longer.

Thanks for the uplifting post, desertdweller. On that note, I will enjoy every second of my racquetball game tomorrow morning, courtesy of my landlord who pays the rec club fee as part of HOA dues. Free racquetball is sweet, not to mention freedom from yardwork!

RE: we can eliminate most of monthly expense (providing we pay a fair price- paying cash), it makes sense to us.

Government is bankrupt at all levels, with massive unfunded pension liabilities for their legions of parasitic union employees coming due.

The avalanche in coming commercial default, which will wipe that specific tax base relative to municipal revenue is just starting down the mountain.

Watch for residential property taxes to absolutely explode in the next 5 years despite a crash in valuations.

The tax goons will have absolutely nowhere else to go.

My guess is there will be a doubling or tripling of current levels.

Anybody stuck in a fixed location during this debacle is a dead duck.

It’s been mentioned on the local news that Gov. Doyle is said to be considering Toll Roads for Wisconsin revenues along with taxing raising the Cigarette Tax 75 cents per pack.

That should PLANT some people to their local bar stool to cry in their beer

Mikey, as a resident of your neighbor to the south, may I express my sincere condolences and alarm at the prospect of toll roads? The open-road tolling that our dear departed ex-gov Blago advocated is painless on the surface, but it hits us in the wallet all the same.

And then there’s the constant and slow-paced toll-road construction. Sigh.

Renters must pay property taxes as part of their rent or the landlord will go bankrupt. If property taxes get out of line with rents then most housing will have a negative value forcing the government to hold it and rent to people directly. They will not be able to auction it off. At this point tax revolts will be the norm and anyone trying to kick me off my land will have to kill me first. (If you have got nothing left to lose…)

Worst case for someone who owns a house free and clear is that they pay about the same “rent” as everyone else only with 0 markup.

Considering the cost of moving is pretty high and could become impossible… no affordable gas or trucks available renting poses just as many risks as owning outright.

Many people are going to end up living with extended family in this depression. This provides a huge opportunity if people do not “resist it” and instead “plan on it”.

My parents and I are both “debt free”. They own their house in NoVa and we have 80 acres that my parents and I own outright.

We know we are getting shafted by the government because we are not one of the “debtors” that is being bailed out and all of our savings is going to be destroyed by hyperinflation. My mother refuses to sell the NoVa house and rent (they have already “lost” 300K in “equity”). My dad and I are devising a plan where by one of us “risks a debt default” and the other stays “debt free with all the assets”.

So we will divide the 80 acres 20/60. I will own the 20 free and clear and he will mortgage the 60. We will take the proceeds and buy gold/silver. He will also mortgage the NoVa house and take the proceeds to buy gold/silver.

By selling my parents the 60 acres they would get an 8K tax credit which should cover most of the interest in the first year. It also minimizes the “property tax” on the 20 acres where we will live (parents in a detached apartment).

The debt is secured by both the land/house and by gold/silver. If we get hyperinflation like I fully expect then we pay off our debts without problem. We also have the ability to pay property taxes for a LONG TIME. If deflation or other events conspire to make the debt “unpayable” then my parents simply default and file bankruptcy. They would have no apparent assets and yet have a place to live in their retirement. When the government/bank goes to auction off the land, then I would simply buy it back at a lower price using the gold/silver!

General strategy, two legally independent individuals allocate all of the liability on one individual and all of the assets on another (a lot of trust required). This is the game the banks play on us, so we might as well play it back on them. Note that the strategy does not depend upon default and we fully expect that the debt will be paid off when the dollar crashes. Unless the combined value of land+gold/silver fall below the loan amount we are not insolvent. Our downside risk is just covered by separation of liabilities and assets.

Better consult an attorney about the risk under VA fraudulent conveyance law VA Code § 55-80, et seq.

NJRenter,
This is why I post ideas to this blog, someone always catches some new risk/angle I might miss. The risk of fraudulent conveyance would apply if we “defrauded creditors” which is not our intent nor could it possibly happen. All debts involved have a security(land/house) backing them that the creditors agreed would secure the loan. This is no different than the “jingle mail” approach suggested by many people on this blog.

I believe that it would be fraud to max out your credit cards to buy gold and then hide your assets in bankruptcy.

Also, if ownership of property was transfered before the debt was incurred then you also avoid fraudulent conveyance as the creditor did not factor in those assets as part of making the loan.

I believe the key is not to misrepresent anything and not to hide assets held for you by someone else in bankruptcy court. As long as there was no other debt, then bankruptcy would be unnecessary as both the government and the bank would just seize the collateral and have no other recourse.

One further thought… most of you know that I find taxes immoral because it is theft. I also find fractional-reserve-lending marketed as payable on demand notes as fraud. In all of my actions I do not want to violate my own principles which means not defrauding anyone.

I do not care what I can “get away with” in terms of the government. In particular, I find using government as a shield from your creditors is just as immoral as refusing to pay a debt by shooting any creditor that attempts to collect.

In light of this, I do not want to “rationalize” a fraud. If anyone can find a place where I violated a contract/obligation with this arrangement then please share it with me as I do not want to wish steal or defraud anyone.

Note: I do not consider taxes a legitimate debt as I did not consent to it.

The only potential “fraud” would be me participating in the FRL scheme by signing the loan document. Considering that what is loaned is “a promise to pay nothing FRN” we really don’t have fractional reserves anymore and so one could argue that you are not participating in fraud at that point. But this is not important because the plan still works if l borrow from a hard-money lender at higher interest rates.

VirginiaTechDan:

interesting, in my country there are similar options to protect against hyperinflation using just real estate and a mortgage to protect ones assets - also using two legally separate individuals. It seems so obvious to me that probably many people are already doing something like it, but maybe there is a catch somewhere. We will find out in a few years …

I have most of my assets on a bank account currently, which makes it an easy grab for the kleptocrats when things go wrong, and vulnerable to hyperinflation

Dan,

Your plan is to out fraud the fraudsters. So it is a game of fraud, no matter how you defend it.

You do not become honest by stealing from thieves, and you will probably get your just reward. Just sayin.

Skye

Skye,
Please tell me where the “theft” or misrepresentation/fraud occurred?

awaiting wipeout,
Didn’t mean to offend anyone. I am just amazed that for those of us who have been patiently waiting for the last several years for the correction - which was painful in the beginning - (we saw it continue on as it was obvious it had to fall) and now that it has been falling you have some people so anxious to jump in instead of waiting a little longer for prices to bottom. If you have endured for 4-5 years, what’s another year? Just reminds me of the dotbomb implosion and fools jumping in during the decline only to deeply regret it later. Shouldn’t be much of a hit? I see another 30 percent drop possible before the bottom and am confident after the bottom is reached that it’s not going to be a v shaped recovery so I’ll have plenty of time to get in, and of course that’s just MHO.

parrish dave-
Thank you for the clarification. Yeah, timing the market is a @itch, and I agree, there is hopefully another 30% to go. I am thinking of re-entering when another 20-25% is out. btw, I don’t see this as a V shaped recovery. I see this housing bubble as a Japanese scenario.
We own a conservatory grand (player too) piano, and really miss our stuff. Not to mention a good night’s sleep. We live among the illegals (noise at 2AM).

We aren’t going to jump in too fast. Look, we didn’t live this h@ll to overpay for some sh@tbox. We lost a chunk of our lives (thank you greensh*t), and want to enjoy the rest.

I feel for you. We moved into a condo after we sold and had most of our stuff in storage for about a year. Then rentals dropped enough on houses that we were able to rent a good sized house and get our things out of storage. We are in our second rental house now and honestly are enjoying it here. We have endured this long and expect our wait to end in the next 12-24 months. Just hang on, the finish line is in sight !!

parrish dave
Thanks for the encouragement to hang in there. You guys sound set up, not like our college kid lifestyle. We can’t have company, let alone read in quiet. We came out of 4,000 sq ft. I learned I am made of steel, but room is a girl’s best friend. Diamonds, I can live without.

We want a one-story older ranch around 2,400 sq ft., on a decent property. Nothing fancy, just a nice homey home. I want a garden, trees, water features, and to be able to play my piano before bed. It relaxes me.

NHZ –

How would you play the odds of a massive crash in your area in one or two years? It seems like the higher the tower of bricks, the less stable and grander the crash.

odds very low, unfortunately.

I think there will be a huge (-75% or so in real terms) slowmotion crash. But most of the crash will probably come in the form of severe inflation (no big nominal price declines), so renters will not gain anything and probably fare worse than most homeowners. Our government is going to throw everything including the kitchen sink at the bubble, and happily bankrupt the country in the process. Our bubble has been growing for 20-30 years, and the downslide will probably take 10 years at least.

Only if mortgage rates go MUCH higher (currently 2.5% for ARMS and 5% for 5 year fixed) the chance of a massive crash will increase - but that seems extremely unlikely in Europe. Everything points to the ECB and governments working together to keep rates artificially low, depreciate the currency and inflate away the problem. I think rates will only go much higher if the euro/ECB itself is terminated for good.

Muir,

Geez, I guess so? Let’s see… receivership, defunct and failed all in the same sentence! Is that like a Trifecta or something?

I’m looking for a car so I was talking to the sales guy ( native Portlander ) and he told a great story about his dad that had sold his place, not out of any sense of “timing the market” but just for basic life events. He tried and tried to rent but at his age… moving all the time at the WHIM of some youthful and clueless LL wasn’t his idea of a good time.

Near as I can tell the best way to “bubble-sit” would, be in receivership, get defunky and fail yo’ damn self! ( Best of both worlds you see! )

DinOR, and others,
You’ll love this:
The receivership court is administrating a dead carcass, but it’s a big carcass, Lehman Brothers, so it amounts to that, for all purposes, there are unlimited funds. That is to say, the court will not allow the building to get behind on taxes, maintenance, etc.
So, in a strange and bizarre set of events, Lehman’s collapse provides stability to the building, it matters not if units are delinquent, the court makes up the difference.
And, here’s the kicker, the management company is the Board of Directors for the condominium association!
Thus, more stability, less feuds and bickering.
In the meantime, and in the foreseeable future, I have a great unit with no liabilities.
I cannot be evicted if the unit is sold. My contract holds and I do not fear a foreclosure, the entire building was foreclosed!
How’s that?

Muir,

Get defunk out of here! Let’s ALL git’ defunky!

Yeah, positively laughable. I’m sure the court ( known as da’ man… ) sees it that way too? I suppose in a way, it’s again the taxpayers ( by default ) no pun intended, that are footing the bill. Just wonderful.

There’s a budget?

don’t know, but I’m sure there are some holes to plug …

Sheesh…I’m a little kinder toward the WS gamblers.

I figured if it went between 6600-6800 and held somewhat steady 10-15 days, you’d have buyers coming out of the woodwork in mass

A little over a year ago I told my friends and coworkers that the Dow would be around 5000. Everyone looked at me like I had worms crawling out of my ears. Yesterday my boss comes up to me and starts bitching about the stock market, he knows I’m in cash and starts telling me I should jump back in. You know the line, DCA and whatnot. I looked at him and said DCA is dead. That machine is broken and can’t be fixed. I then reminded him about my 5000 prediction and said that there’s still a lot more pain coming our way and that it might go lower. He just stood there with a glazed look in his eyes.

I’ve been thinking DOW in the low 2000 range and gold in the $2000 range. Today’s market action leads me to think the next leg down takes us to around 6500 (roughly the midpoint of another 10-15% decline).

The US still consumes far more than it produces, and that is not a situation which leads to wealth creation…

I’ve already cut my 401K contributions to what is required to get my companies match.

Getting the match, I figure that it will break even. Putting in anything more this year (and maybe next) is just pissing into the wind.

It may fall to such levels, but as long as it doesn’t happen in one fell swoop we’ll probably be ok. We’ve had panic on the way up expressed as euphoria, and now we have panic on the way down expressed as fear. What’s the economic equivalent of Valium? We need to relax for a bit.

Three points about this:

I’m not sure if I agree with you, but either way, DOW 1500 would be an absolute disaster for this country. It would be worse then the Great Depression, and, for that reason, I don’t think that the govt will even consider letting it happen. The reason, of course, is because our entire retirement system now depends on the performance of the stock market. Also, there is continually money fed into the stock market by 401K/IRA contributions.

If the stock market fell to 1500 a much bigger problem will be getting guns/ammo. That’s an Armageddon scenario, it would rip the fabric of society apart for it to fall that far. I personally, think that the govt would step in an buy shares (using printed money) to keep the ponzi going before they let it happen.

1. The feed of 401k contributions is certainly slowing drastically right now, due both to unemployment and also people just stopping the contributions for now to save money. That I think is in part what’s feeding the bear market.

2. As the baby boomers retire, there will be about a 20-year reversal where 401k and pension contributions decrease, and withdrawals increase. This is being deferred some right now as many people just aren’t retiring due to the economy, but this factor will be a long-term drag on the market. IMO short of hyperinflation we may not hit 14,000 on the Dow again for 20 more years.

3. Many guns and ammo are already very hard to get. Go to any sporting goods store and have a chat with the person at the gun counter. Up to now it’s been mostly due to “Obama fear”, but will probably continue due to the economic meltdown.

add on to point #1: many companies are reducing or eliminating the match

1. The feed of 401k contributions is certainly slowing drastically right now, due both to unemployment and also people just stopping the contributions for now to save money. That I think is in part what’s feeding the bear market.

An excellent observation. The DCA approach is wearing thin for a lot of passive 401k investors, and rightfully so.

Why feed a dying horse when you can come by later and sell the carcass to a rendering factory?

1. The feed of 401k contributions is certainly slowing drastically right now, due both to unemployment and also people just stopping the contributions for now to save money.

Yup. We just had a 5% permanent pay cut at work, and the 401(k) is toast. I think that a lot of people will simply stop contributing altogether.

I said Dow 1300 in 2008 dollars not nominal dollars. If we get an average of 20% inflation/year for the next 5 years (best case in my opinion) then that would put DOW at 3300 in 2008 dollars. This is why I think that the DOW/Gold ratio is a better way of picking the bottom. By the time the DOW falls to 5000 gold will probably be well above 1300.

Also, we will not “hit a bottom” and stay there for 15 days… when we finally do hit a bottom it will have a rapid correction as the bottom is surely to “overshoot”. If it lingers for a long time near the “bottom” then there is probably going to be another leg down.

In Colorado, do you work at HP or something?

In Colorado, do you work at HP or something?

Que comes que adivinas?

But just like houses, more money in the market just means higher prices. And just becasue a large number of people want higher prices doesn’t mean it will happen. With earnings and dividends down, runaway inflation would seem to be the only thing that could raise the stock market.

In 2000 I wrote a guest editorial for a now-defunct online magazine geared toward the 25-40 year-old set. The editorial focused on the Ponzi scheme effect of the 401(k) and parallels to Social Security, namely the number and dollar quantity of contributors will be outpaced by the number and dollar quantity of those looking to get cashed out.

I was ridiculed in every letter to the editor for my shortsighed prediction that around 2006 - when the first boomers start to retire - that we’d see a high point in the DOW that will likely never been achieved again in ourlifetime.

Updating my thesis:

1) Individuals who retire not only are no longer contributing, but are withdrawing - and the number and salary contribution of these individuals is far greater than the number and salary contribution of those who replace them. Effect: market down.

2) Individuals who lose their jobs are no longer contributing. Effect: market down.

3) Individuals in dual-income family units in which one partner loses a job are reducing contributions to cover the operating expense shortfall. Effect: market down.

4) Individuals worried about future job loss and are decreasing their 401(k) witholding to build a cash reserve: Effect: market down.

5) Individuals who are in a state of panic on their 401(k) balance decreasing both their contributions and shifting investments within their 401(k) to ‘conservative’ cash funds. Effect: market down.

6) Employers eliminating 401(k) matches, reducing the quantity of dollars entering the market and reducing the incentive of individuals to contribute a minimum amount. Effect: market down.

No matter how hard I try I cannot come up with a single demographic or social reason why the dollar value of 401(k) contribtuions will increase in the next 20 years of the high-point of the boomer retirement UNLESS massive hyperinflation occurs, in which case having a 401(k) is pretty much useless anyway as the value of the DOW relative to the dollar will sink like a lead Titanic.

Aren’t those close to or in retirement more likely to have most assets in fixed-income type investments. Those individuals should have little effect on the equities market. I agree with your other points but at some point equities become a sound investment again with realistic returns. I think that point is way before DOW 1500. Furthermore, the DOW is a pretty poor measure of the overall equities market regardless of how often it is mentioned/cited by the MSM.

I agree about the DOW, but if my coworkers are any indication, they were all heavily invested in stocks trying to “make up” for not starting to save earlier.

What do you think will change to that will establish a floor on companies that depend upon cheap credit and ever increasing consumer debt? The entire business model of these companies is broken in the brave new world of monetary destruction. Most of these companies have misallocated the vast majority of their resources and so most of these companies will have to fall back to a very primitive mode of operation that can be supported without debt. In fact, if you look at the corporate debt of almost every company you will see that without hyper-inflationary bailouts they will all fail. I suspect that only 2 in 10 companies will be able to survive and thus the DOW should fall to 20% of its peak (in real terms). Those that do survive will be a fraction of their former size thus DOW at 10% of peak. This happened during the great depression, it has happened in many other countries, what makes “this time different?”

Many companies may survive by being bought out by government, this will wipe out share holders. DOW goes down.

Those that say “DOW 1300″ cannot happen without huge social unrest; therefore, DOW 1300 cannot happen are falling victim to the “black swan” syndrome. They are not able to imagine or deal with “social unrest” and therefore anything that could trigger it is “impossible” or very unlikely. They rightly point out that the government will interfere with the market to change nominal values of stocks, but they will not be able to change the real values. Government interference will actually create more “social unrest”.

So by your estimation, of the 30 companies listed below only 6 will survive? Many of the companies have little debt and hoards of cash. Even still, again, the DJIA is a very poor indicator. The ones that do fail will be replaced by healthier companies which will change the composition and value of the DJIA. I am not saying we are not in for a world of hurt, i’m betting on it myself, but we are still quite a distance away from mad max territory.

3m Co
Alcoa Inc
American Express Company
AT&T Inc.
Bank of America Corporation
Boeing Co.
Caterpillar Inc.
Chevron Corp
Citigroup, Inc.
E.I. du Pont de Nemours and Company
Exxon Mobil Corp
General Electric Company
General Motors Corporation
Hewlett-Packard Co.
Intel Corporation
International Business Machines
Johnson & Johnson
JP Morgan & Chase & Co
Kraft Foods Inc.
McDonald’s Corporation
Merck & Co., Inc.
Microsoft Corporation
Pfizer Inc
The Coca-Cola Company
The Home Depot, Inc.
The Procter & Gamble Company
United Technologies Corporation
Verizon Communications
Wal-Mart Stores, Inc.
Walt Disney Company (The) (Holding Company)

Bad Chile - some good thoughts, and worth addressing:

In 2000 I wrote a guest editorial for a now-defunct online magazine geared toward the 25-40 year-old set. The editorial focused on the Ponzi scheme effect of the 401(k) and parallels to Social Security, namely the number and dollar quantity of contributors will be outpaced by the number and dollar quantity of those looking to get cashed out.

I was ridiculed in every letter to the editor for my shortsighed prediction that around 2006 - when the first boomers start to retire - that we’d see a high point in the DOW that will likely never been achieved again in ourlifetime.

Updating my thesis:

1) Individuals who retire not only are no longer contributing, but are withdrawing - and the number and salary contribution of these individuals is far greater than the number and salary contribution of those who replace them. Effect: market down.

Yep.

2) Individuals who lose their jobs are no longer contributing. Effect: market down.

3) Individuals in dual-income family units in which one partner loses a job are reducing contributions to cover the operating expense shortfall. Effect: market down.

4) Individuals worried about future job loss and are decreasing their 401(k) witholding to build a cash reserve: Effect: market down.

Well, really effect: market no longer up, all all those.
Lack of contributions and withdrawals would be flat market.

5) Individuals who are in a state of panic on their 401(k) balance decreasing both their contributions and shifting investments within their 401(k) to ‘conservative’ cash funds. Effect: market down.

Yep. (I did this some time ago)

6) Employers eliminating 401(k) matches, reducing the quantity of dollars entering the market and reducing the incentive of individuals to contribute a minimum amount. Effect: market down.

Same - effect is flat.

No matter how hard I try I cannot come up with a single demographic or social reason why the dollar value of 401(k) contribtuions will increase in the next 20 years of the high-point of the boomer retirement UNLESS massive hyperinflation occurs, in which case having a 401(k) is pretty much useless anyway as the value of the DOW relative to the dollar will sink like a lead Titanic.

Don’t underestimate the hyperinflation (or just high inflation) effect. As soon as I think most of the debt is wrung out of the system, in the form of all these writedowns - I plan to get aggressive again. It’ll be hard to judge, more just looking at various macro data and going with gut feeling.

While the long-term market growth may not be as good as it has in the past, due to government social programs overhead and due to factor 1 above, I really don’t care to see my savings get wiped out by the coming inflation when the credit spigot is turned back on again. Yes equities may not keep up with true inflation, but they’ll probably be way better than things like money market and bonds.

What are the stock values of these companies on a “hoards of cash” per share basis?

American Express became a bank last year and accepted TARP money in order to keep from folding.

You are right, DJIA is just one number, the 90% down from peak average of all current stocks is my real prediction.

There are a lot of big names on there. I would like to see a debt/income ratio for these companies at today’s incomes. Then look at the same figure with 50% the revenue or less. The vast majority of their resources are currently malinvested which means that their working capital will take a big

Many companies may still be around in “name” but are really just extensions of the government or bought by other companies.

Most of these companies depend upon the middle class which will be wiped out. I am also predicting hyperinflation of most major currencies, so that is part of my prediction of DOW 1300 in 2008 dollars.

Those that do survive will be operating at much lower revenues and profit margins. The average american can no longer afford the long supply chains, the packaging, marketing, and bureaucracy at most of these companies. All of the associated industries will shrink to a small fraction of their current size and with it their stock prices.

Exxon should survive. Wal-Mart may survive. The banks will not survive but in name only.

If you guess enough about the future, you’re bound to be occassionly right…sooner or later ?

Just yanking az_lender’s chain for predicting the market would go down again to the Oct/Nov lows. That seemed like a no-brainer.

Multiple coworkers have 8+ cars for 2 drivers. I wish I was kidding. Ok, having a weekend car is fun.

I wish a bike path system would be set up. Parts of Orange county have an ok system, but its only useful for some.

I’m for Airport and rail growth, but I’m more for bus terminal construction. That’s what we need (with ‘off grade’ dedicated bus lanes too).

Got Popcorn?
Neil

Multiple coworkers have 8+ cars for 2 drivers. I wish I was kidding.

I’m trying to wrap my head around that ratio of cars to drivers, and I just can’t do it. It’s absurd.

Ah, Volvos

Friend of mine back in the UK has one made in 1967. The interior of the car looks like a badger made its home there, but the engine still purrs, and runs, like a kitten.

He’s had it so long its gone out of fashion, back into fashion, back out of fashion and now back in again.

speedingpullet
Mine is a 1995 940 Volvo I bought new. Its been a gem, although when it needs something they vacuum my pocket. For 300K, its been cost effective to own. It seldom needs something big. IIRC,it was the last year they made them in Sweden before Ford bought them. I had my leather seats redone. My car is no MBZ 500 (sweet & sexy looking) but it is safe and gets me around.

MBZ makes the Maybach, which is in the neighborhood of $8M. No car on this earth is worth that kind of dough.

LOL, I had to help push my sister’s Taurus wagon off the highway when the tranny died.
It was a great breakdown - the car rolled to a stop on an exit ramp and we pushed it about 20 feet before it got rolling downhill into a service station that was about 200 yards away. Just coasted into a parking spot and got a car rental from the place next door.

we have a HMD (home mortgage deduction) system where all payments related to buying / owning a home (mortgage and closing cost, garden decoration, swimming pool, garage, you name it …) are 100% deductible for income tax. And income tax is by far the highest tax over here, about 50% of gross income. So most people buy the most expensive home they can get a mortgage on: either spend the money on the tax office, or spend it on your own home - easy choice. Most of the high income earners here don’t pay any income taxes as a result.

While all the costs are tax deductible, any gains from selling your home are totally tax free (even with multi-million euro homes). There is a 7% ‘transfer’ tax although there are tricks to avoid it; and with an average 15-20% yoy home price gain for many years, nobody worried about the 7% transfer tax.

We also have a national mortgage guarantee system which acts as a free put option for homeowners, currently for mortgages up to 265K euro (but people use piggyback etc. to include mortgages of over a million). When you have to sell your home at a loss, a semi-gov. fund will pay off the mortgage. The homeowner can never end up in debt! Of course, you have to make sure that you don’t have official savings at that moment, which is pretty easy. This is a bit similar to what is going on with the Fannie & Freddie stuff in the US. Privatize the gains, socialise the losses.

Apart from that, the government spends huge amounts on rental subsidies through housing corporations, which effectively also pushes up home prices. The housing corporations have huge waiting lists (4-10 year, depending on area) which forces people to buy.

Every economist agrees the current Dutch housing subsidy system is crap and totally disfunctional, but no one dares to change it. They currently spend 30 billion a year in homeowner subsidies, that is roughly 7000 euros for every household.

Thanks for the info!

This:

“Apart from that, the government spends huge amounts on rental subsidies through housing corporations, which effectively also pushes up home prices. ”

Sounds just like Section 8, and something I’ll bet we’ll hear a lot about in the coming years. You’re right it definitely helps push housing prices up, since subsidizing rent also causes rent prices to rise, which in turn encourages more rental house investors, on down the line.

yep, very similar to Section 8, judging from what I have read about that.

next elections in 3 years … long time in these conditions.

I think Netherlands had the capacity to help save the PIGS until half a year ago. Things are looking very different now, the budget is being stretched to the max. No discussion about foreign bailouts over here, I think the chance of that happening is zero.

of course, it might be that the EU/ECB makes some ruling that effectively forces Germany and Netherlands to pay e.g. by further inflation/ currency depreciation. Countries with the biggest savings (e.g. pension buffers) will suffer the most in that case.

What style capitalism do you prefer? Dutch?

The kleptocracy in current Russia is mostly the remains of their recent experiments with US style capitalism.

The kleptocracy in Russia is comprised largely of people who were A.) well-connected in the Soviet era (whether in the ruling party or not) and B.) criminal/shady elements who took advantage of a relatively unstable transitional era. Either way, they parlayed that power and influence into a lucrative power base and/or assets in the current phase of the country’s existence.

Putin and his cronies are prime examples of this transition from Powerbroker, Soviet-Style to Powerbroker, New Kleptocrat Style. To suggest otherwise is to misunderstand that country’s recent history.

I think Dutch capitalism is currently close to the US/UK version (and certainly not real capitalism). I’m not very happy with our original version of capitalism either (involving slave trade, piracy/looting, colonialism and other very opportunistic activities).

I think I prefer the mercantilist style, like what I see now in Singapore, China etc. Make sure people get the very basic necessities from the government (basic shelter and healthcare, education) and leave the rest to the individual.

just to be sure: I don’t favor the Russian style of economic policy or government. I just think the Russians need strong leadership because that is what they are used to. Democracy and liberalism does not work well there.

The Santelli RANT had access to WORLDWIDE TV and internet.

“Concerned” is an understatement, Rick scared the living $hit out of a lot of rich and powerful people

You’re right on the money mikey, here’s an AP report about the White house reaction.

White House objects to ‘rant’ on its housing plan
Friday February 20, 4:49 pm ET

Gibbs countered that Obama’s housing plan would help those who have acted responsibly but yet could lose their home.

“Here’s what this plan won’t do,” Gibbs said. “It won’t help somebody trying to flip a house. It won’t bail out an investor looking to make a quick buck. It won’t help speculators that were betting on a risky market. And it is not going to help a lender who knowingly made a bad loan.”

Later, Gibbs acknowledged that “there will be people that made bad decisions that in some ways will get help,” but that they are not the focus. “I also think it’s tremendously important that for people who rant on cable television to be responsible and understand what it is they’re talking about,” he said.

http://biz.yahoo.com/ap/090220/obama_fighting_back.html?.v=1

“Was that you?”

No, I wish, that’s a good one.

That was pretty funny.

I just remembered. It was wmbz. Good one.

Me.

“Timmay!”

LOL. What does he say before that? Is it “Livin’ the life”?

GM’s stock price is about to catch Ford’s, but not in a good way (1.55 vs. 1.51).

Told you I was gonna do it!

I can’t stop laughing at that last comment.

Hey, I didn’t say I like to drink PBR, I just thought it was interesting they evidently had requests for “cheap beer”.

Although I have been considering switching to PBR. It’s cheap.

And upon further consideration, I agree that my linguistic choice was poor. “Nice” probably should be reserved for the way you use the term and something else (e.g. “good”) used for what I was trying to describe, in order to better facilitate communication regarding the quality of restaurants.

So, it’s a good little italian place. It doesn’t have menus in the table, just the small thing with the two beers listed (among other decorative type things), which I tihnk is really supposed to be some kind of cutesy thing…

It’s nicer than a diner or what I would thing of as a taqueria, but not as nice as that fancy-ass restaraunt I went to in NY that had small portions of marginal-quality food.

Which brings up the question, should an otherwise “nice” restaraunt with crappy food ever be referred to as “nice”? I’m thinking no.

“It’s a nice restaraunt with exceptional service and wine options but the food makes you want to hurl.”

Well, that’s the problem with NYC-Chicago-SF, etc.

There is this mid-level restaurant which are basically working on people’s need to “go out”. We call them the $20-entree-Italian restaurants. They are designed to be just “nice” enough and food just “good” enough but they are not the real deal. (C’mon city folk! back me up here - surely you know what I’m talking about?)

I’d rather just go to the best food places even if they have rickety formica tables. Also, they tend to BYOB which I’m down with.

And I do occasionally do “nice” restaurants (most recently in Philly) but I follow chowhound. Yeah, the place was pricey but the food freakin’ kicked serious @ss. I am willing to pay for that.

Thinking about my question further, I would go further and say that a restaraunt loses it’s label of “nice” if the quality of food does not scale at least linearly with the price. So between two restaraunts, one could be “nice” and the other not, only differentiated by price.

If there is enough cheap vino and fresh real bread, I can eat anything in the house that doesn’t eat me first

”the $20-entree-Italian restaurants” - there are tons of them in Chicago. They serve to the crowd that goes out to socialize, rather than to have great food.

Some of my favorite restaurants do not have great atmosphere, but have great food, very good service, and by accident most of them are BYOB, which makes them easy on my wallet. Unfortunately, you cannot find them on your own, since you can never guess by their look that they have such a great food. You learn about such places by someone else.

pabst blue ribbon is popular with the Brookly hipster crowd.

pabst blue ribbon is popular with the Brooklyn hipster crowd.

Nope, it’s a jungle out there.

Yes, but it’s always ignored and it always comes back and bites them in the a$$.

Current events anyone?

Grad school and pretty much everyone here is a non-traditional, 30-ish working student (she is also married, mentioned her husband). But yeah, losing the deposit like that still sucks.

Joey, not sure I follow what you posted as usually residential renters don’t make leasehold improvements on rented property. Not sure what expenses she would have had relative to a new apartment, and I guarantee that if she is smart about it, they can’t get her out before she gets her security deposit “back” by not paying a month or two of rent. It does bite to have to move, but in this mess of a world we have, I don’t think its too bad.

realestateskeptic
i agree.. i was just presenting an opposing view for kicks. I do think people should treat eachother with some compassion, of course.

she seems a little nieve.. the words “no guarantee you’ll have a place to live” tells me that.
Well, yeah. Life has few guarantees and staying where you want to stay isn’t one of them.

She probably felt entitled to stay as long as she wants to… and thought she’s deserves that by paying rent.

I hear you. Hope she rides the gravy train for a while. Hopefully she figures out what you say about life having few, if any, guarantees and learns from this. A small, not to painful lesson she can learn at this point in her life. Have a great weekend.

Only four so far on the list at 4:45 Eastern Time.

Wonder if the website will go down with everyone hitting the refresh button. LOL

Sorry, that was last week’s info.

which website?

I prefer liquidation over nationalization. Nationalization is only to keep the pigs on life support. Sheila Bair is being prevented from doing her job.

A lot of times, nationalized companies are privatized again, when the situation improves.
I’d trust bank nationalization to the degree that I trust the political leadership that is proposing it.

The main reason you nationalize big banks rather than let the FDIC liquidate, is who could buy a part of Citi or BoA’s business. JPMorgan, maybe, but that is just setting you up for anti-trust problems later.

http://www.nakedcapitalism.com/2009/02/greg-mankiw-in-favor-of-nationalization.html

Good arguements infavor of nationalizing a failed “too big to fail” bank.

I was talking of Monday but we shall see.

My experience of how the game works v. your belief that the game is played out.

All I’m saying is if you’re looking for well built old houses in a fairly small town that is half empty but not dead, complete with cold winter, you could do worse. The houses are several cuts above the steel mill workers’ houses in Pittsburgh, and the place - while NOT a paradise - is perfect for inexpensive living. If you are handy, and know how to replace the oil burner with a pellet furnace, upgrade insulation, upgrade windows to high-E, do something to the ductwork to make it flow better, and procure a good deal on a metal roof, you’re set. A solid house one could be quite happy with is very inexpensive. Buying the house with one of those FHA rehab loans would do the above even with the work at retail, and your PITI would be around $800/mo. No, I’m not a realtard.

On the FHA rehab loans - M&T bank is THE only place to get these. Originally inc’d in Buffalo a century ago with Great Lakes trade steel money IIRC, and with a strong presence in Western NY and the rust belt even now, they have greased the skids on these loans, as in having THE market share over the past generations. Ergo, they know how to do them, and they have retained, licensed (don’t know by who) building inspectors to ride herd on the contractors. I don’t work for them, never have, never will, but I get a genuine KICK out of sheer competence.

Not going to Oil City, either. Just looking. A person who leaves without an already supplied and secure destination is a ‘refugee’.

Usually the person that gets in between a husband and wife fighting is the one that gets hurt the most.

Democrats and Republicans have a marriage made in hell.

“What’s even more fun is how, when you flame someone on one side of the coin, people automatically assume you’re with the folks on the other side of the coin and start jumping all over you, when the truth is that you’re disgusted with both camps”.

LOL!
Yep, it doesn’t and can’t sink into their brains that a person can not be connected too or support one of the two parties. I gave that chit up close to 20 years ago now!

+1 Palmy, w

+2

Well said palmetto! Same here. I would not define it as “fun” though, since it usually moves the topic of the discussion to something else and it is quite irritating.

I don’t get it.

I don’t want a poster of a bikini-clad Joe Biden on my basement wall, for starters.

Blechhh!