The Housing Bubble

“This statement is true but it can be said in such a manner that one will come away believing that eighty-five percent of his social security benifits will be taxed away, which is not true.”

The other thing which undoubtedly was not clarified is that most folks end up in a lower tax bracket after retiring, implying that the 85% of social security which is subject to tax will be taxed at a lower rate than a comparable amount of income would have been taxed during the individual’s working years.

If the purpose was to scare seminar attendees, I’m sure most statements were led to believe Uncle Sam was planning to use taxation to take away all of their retirement savings.

I’m also willing to guess that the biggest retiree “tax threat” of all, inflation, was not even mentioned during the seminar. Unless an annuity is inflation-protected, you are exposed. And inflation-protected annuities at a time when high future inflation is a reasonable outlook tend to be quite expensive compared to fixed annuities. This is one reason that financial planner types tend to encourage at least some level of exposure to the stock market. Over the long run, stock prices tend to increase with inflation; fixed annuities systematically decrease in value as inflation heats up.

Did they even bother to tell you what income level the cut off is? Or did they leave it as just “a certain level”?

They did tell us the cut off level but this level depends on whether you are married, single, head of household, etc. I used the term “certain level” in order to keep my post brief.

“If you don’t know how to read a balance sheet and income statement, you should’nt be investing in the stock market.”

And fine print, too.

‘Do NOT ever “invest” in the latest and greatest technologies. Almost by definition, you are speculating not investing.’

Moreover, by the time you find out about whatever ‘it’ is, there is a very good chance that the price already reflects not only the full value of the technology’s future promise, but also a large head of bubbly froth that was added by the hypesters of Wall Street.

Before you invest, there are exactly two questions and one fact that you must nail down.

[1] Will I get my principal back?
[2] Does the enterprise/investment generate “free cash flow”?

and the fact:

[A] Do I have a margin of safety that if my judgment on the above two were wrong, it would still satisfy [1] and [2]?

If the answer to any of the three is NO then bail out immediately.

And for the “growth” types, that’s just the gilding on the lily on [2].

Naturally, doing this is hard work but it would be, wouldn’t it?

‘[1] Will I get my principal back?
[2] Does the enterprise/investment generate “free cash flow”?’

Unless you thing Uncle Sam Amalgamated is going to go out of business over the next thirty years, it sounds like you would recommend buying U.S. Treasurys, as they guarantee free cash flow and return of principle.

Am I correct, or is there actually more to the story than [1] and [2]?

Hints:

(1) A thirty-year Treasury is a fixed annuity with a lump sum return of principle after thirty years.

(2) See my comments on fixed annuities in another post on this thread.

(3) Lots of reasonable people (perhaps even FPSS) seem to believe that as long as you get all your money back in nominal dollars, an investment is completely safe. They are wrong.

I only think in real terms never nominal.

Sorry that was an unstated assumption.

Lots of reasonable people (perhaps even FPSS)

If you’re so book-smart, why aren’t you rich?

I wouldn’t have gotten where I am in life if I didn’t understand the difference between nominal and real.

It’s not rocket science. It never was.

“If you’re so book-smart, why aren’t you rich?”

If you understand the difference between real and nominal, then you probably also understand the difference between real wealth and nominal wealth. Spending your free time playing the viola for enjoyment isn’t the ticket to maximizing nominal wealth.

What does the viola have to do with anything?

Almost every person on this planet arranges their economic affairs so that they can actually do what they want to do.

Some are not so lucky and live lives of penury.

Others find solace in playing with their grandkids.

Apparently, you love your viola. Sounds great to me since I love it too!

However, it still has nothing whatsoever to do with financial matters.

I stand by my original statement:

If you’re so book-smart, why aren’t you rich?

“Smart” and “rich” are more often anomalous than conflated unless accompanied by a certain disregard for empathy.

I’m not talking about you, ahansen!

I’m trying to slap him out of his habit of posting entirely superficial articles which is basically book-smart but devoid whatsoever of any deep understanding.

I’ll grant you that the “rich” part is basically a slap but in our society you need to have a metric to slap with. Terrible metric, of course.

What’s galling, of course, is the lack of any form of sophisticated understanding. That just drives me insane.

I couldn’t care less about the money.

Then let me rephrase:
“Smart” and “rich” are immeasurably enhanced by the addition of “elegance.”

Touché.

Like that.

“I’m trying to slap him out of his habit of posting entirely superficial articles which is basically book-smart but devoid whatsoever of any deep understanding.”

You can’t fix people, Cat. I consider it a major triumph when I can teach someone something. Getting him to use that new knowledge to actually change his habits? Uh uh. And if I could I would use that magic capability to try to get my parents to take the occassional walk, not to get someone to stop posting articles that I don’t want to read on a blog I like to read.

Pussycat or anyone, please be gentle:

Do you have any overall advice or reading material on how to proceed if you are older, female, single, not investment savvy, but need to get your act together retirement wise? If you don’t have a lot of savings, don’t make a lot of money annually, but want and need to do whatever you can starting now that has the best chance of working out? If you are somewhat cynical and overwhelmed by the investment industry and financial advisors? But are willing to read up, study, learn things . . . Any books you would recommend?

Again, please be gentle in the response. No need to tell me I’m an idiot for asking for advice on the internet, or that it is hopelessly too late, or some other form of personal insult. I am quite capable of admonishing myself and don’t need any help in that capacity. Just reaching out to see what nuggets may come back. Thanks. (It it helps, I am not a major consumer, and am not in debt. My situation is not based on owning a home I can’t afford and having a boat and escalade in the driveway.)

“However, it still has nothing whatsoever to do with financial matters.”

It some times amazes me when otherwise seemingly-bright people appear dense.

So let me try to spell this out for you:

When I was younger, I chose to invest time and money learning to play musical instruments. I didn’t spend that time making as much money as I possibly could, because that wasn’t my primary goal in life. However, to suggest that this choice, which I am happy I made, to pay for expensive music lessons and to spend my free time practicing, has nothing to do with financial matters, seems patently ridiculous; of course if I had spent this free time studying balance sheets, or tending my financial portfolio day-in, day-out, or just finding the most lucrative, long-hour form of work my meager skill set could support, I would be financially wealthier but spiritually poorer today.

Start with the barebones basics:

[1] Spend far less than you earn.

[2] Sock it away.

[3] When in doubt, refer to [2].

I don’t think female has anything to do with investment but older and single does. You have fewer options but it’s not unsurmountable.

After the basics (= have an emergency fund, have a laddered CD for unemployment, etc.), I would start by understanding the basics.

What is a mutual fund? What is a no-load fund?

Depending on your age, I’d lean more conservative but that’s just me.

I dunno about books but you could to a lot worse than start with Bogle’s book. I don’t agree with quite a bit of what he says but I must say he does have the average investor’s best interest at heart. Which is more than I can say for most stuff!

“…not to get someone to stop posting articles that I don’t want to read on a blog I like to read.”

I have three words for you:

Joshua Tree extension

Thanks, Pussycat!

I have one more piece of extraordinarily non-conventional advice that you’re never going to find in an investment book.

Learn how to cook. As in seriously not superficially. And learn the tricks of the trade that allow you to buy expensive ingredients and yet use every single one down to the last detail.

Ask ahansen. She’ll back me up!

I was bored on Friday night so I went to Queens to the ethnic markets. I bought about $40 worth of stuff. That’s going to provide for more than 10-12 “fancy dinners”. That’s cheaper than McD’s and I assure you that as a food-blog writer, I shall be dining in extreme luxury not penury.

Megalurker- try ‘The Only Investment Guide You’ll Ever Need’, by Andrew Tobias. It’s a good, fun-to-read, basic investing guide, and the author is as skeptical about most of Wall Street’s scams as we are here.

You’re more than welcome, megalurker. My bark is worse than my bite. You must be new here.

My sister jokes frequently that I should run an “investment bootcamp”.

I don’t think anyone would sign up for it even though it would be the right thing to do.

I don’t think I’d be suited to the concept even though, ironically, I’d actually be the right honest man for the job.

Oh well!

Bear,

I don’t choose to ignore you completely. I just don’t read the overwhelming majority of your articles. And I can’t install software on my office computer, anyway.

Megalurker,

Everything Cat said plus this. Don’t count on a “retirement” of the type that you see in the TV commercials. If your current job isn’t the kind that can be done well into your 60s and preferably into your 70s try to transition to one that can be.

The single most valuable thing about my current job is that as long as I can read, think and write a coherent analysis, I can do it until I drop.

Thanks again, Pussycat for all the great advice! You are so right about learning to cook. To eat 5-star meals as you save money by cutting back on food expenses is the way to go!

I would definitely take your bootcamp! Thanks again for the great advice, which I am definitely taking to heart.

tricks of the trade that allow you to buy expensive ingredients and yet use every single one down to the last detail.

‘Cuisine Economique’, by Jacques Pepin is great for teaching how to pinch a penny while eating like a king. French home cooking is very frugal- they eat every part of the pig but the squeal, as we say ’round here (where our country cooks do much the same thing- ever enjoyed head cheese?).

Thanks, Polly! I work on ecommerce websites, loading products, coordinating projects/promotions, working with store directors, etc., so this is the kind of thing I could continue to do. I also teach yoga to regular classes and to seniors. If you can keep doing the yoga yourself, people are inspired to see someone older doing it. However, teaching yoga is more of a recreational activity, as there is not a lot of money in it. (I am also working on learning Spanish as I live in California and have seen “bilingual a plus” on so many job descriptions, and I think that that will continue to be a valuable extra skill.)

What is great about moving into yoga, though, is that you can choose to embrace simplicity in your life and finding happiness from within, which are definitely skills needed in a cost-saving retirement.

alpha-sloth, thanks so much for the book recommendation. I will definitely check it out!

I am looking at Mint.com right now and may join up. Generally I don’t like to put all my info on the web like that, but I think it may be more for the greater good in this case in that it will inspire me to really look at where I am and where I am going.

Geez man let us know when you do this..my GF used to work at Adrianas caravan in GC market…we love spices.

I was bored on Friday night so I went to Queens to the ethnic markets. I bought about $40 worth of stuff.

mega,

I’m old enough to recognize that you need to take what everyone here says seriously.

We’ve all been around the block more than a few times to recognize that there are a ton of people who all sing the Halleluia Chorus but then fall off the wagon a month later.

If you do, just remember that this is not an AA group.

I, for one, will come down upon you like the wrath of vengeance that you never saw ahead of time.

If you are serious, you must make changes in your lifestyle, save every penny you earn, etc.

That, dear mega, is the question of the era. If you come up with a clue, please let the rest of us in on it? In the meantime, adjust your comfort level downward, cultivate charitable friends , and plant a garden.

(Do take that literally or metaphorically, as you best see fit.)

Pussycat - Yikes : ) May the fear of your wrath keep me on the path . . .

ahansen - Lovely advice! Thank you.

“I just don’t read the overwhelming majority of your articles.”

I don’t necessarily read every article I post from top to bottom, either. Lots of times the point I am trying to make is that of what topics or positions the myopic MSM is focused on. I take the content, tone or journalistic posture of MSM articles as an indication of which direction the political winds are blowing. I also hope to elicit discussion of current political issues, though most posters here seem very reluctant to engage in policy discussions.

“And I can’t install software on my office computer, anyway. software on my office computer, anyway.”

If your employer won’t let you, I suggest you buy your own and install on it whatever you want or need.

I dunno, I never heard of 3-D printing before and the on line vids I’ve seen are pretty cool. It’s really just a way of machining, so to speak, but it looks like that technology transforms manufacturing as we know it. Imagine printing out an entire house? Geez.

3-D printing (and digital modification,) was used in my reassembly for grafts and matrixes. Already, commercial dentists use it to make crowns from digital x-rays as a template. Prosthetic limbs, valves, joints, organs….

The last time I got to see such a cool modality in prototype was in 1974 when I watched an angiography (at the LA VA hospital, in fact.) Imagine– being able to see inside a beating human heart in realtime on a video screen! Some inventions literally leave one breathless with the possibilities.

“transforms manufacturing as we know it”

Not unless we move away from most manufactured goods being made out of identical parts.

Problems with 3-d printing:

We can already make stuff that you need a few hundred thousand of very efficiently with existing technology. So why use a very expensive new one for that? It only makes sense to use it for items that have to be highly specific to particular parameters. I’ve heard a lot about using this for medical stuff, especially things that have to go inside the human body where it would be nice to have something the exact right size and shape and what is exactly right is different each time. Ahansen’s example is a good one. I’ve also heard about it maybe being applied to creation of artificial arteries and veins and valves and such.

The other issue is the materials science aspect. I don’t know exactly what they are making it out of, but not everything can be made out of epoxy resin or bonded metal, or whatever else they use. And I certainly haven’t heard that they are at a point where they can make stuff out of multiple materials at the same time. Lots of manufactured goods require that.

There may be ways to use this tech to make it easier to retool factories sometime down the road. But this isn’t going to be a quick transition from highly specialized, high value, low volume medical stuff to 3-d printing kiosks in the mall where you can pick up a piece of electronics sculpted to fit the shape of your hand.

And in case you hadn’t noticed, this sort of thing is financed by venture capitalists/private equity investors who don’t share their profits with the masses until most of the big increase in value has already occurred. They buy low and sell high. Your only option for getting in is to buy high and hope it goes even higher. Unless you have over $1.5 million of liquid assets and can be certified as a qualified investor for unregistered securities. Even that isn’t enough to get a seat with the big boys.

3-D printing is going to be huge.

It will be like desktop publishing of the 80’s .

The money will be made in selling the virtual plans used to create the 3-D items.

I was thinking Steely Dan as in the steam-powered dild0 from Naked Lunch.

Different strokes (literally!) for different folks.

If you can draw it, they will come.

LOL

“So politicians who warned about…the housing bubble, etc.”

I think you are confused, pal. Those who warned on the housing bubble include many who read and post here; politicians, not so much.

I like the idea of geothermal, too, Anon. In fact, I was watching a program on our local PBS station about the energy available beneath the earth’s crust. Most of the program was about various volcano eruptions over the centuries and pyroclastic flows and other phenomena, but twoard the end of the program, there was information on harnessing that power for energy and how that has been successfully done in Iceland, for example. Then, the point was made that the entire US could be geothermally powered from Yellowstone National Park, but that it would never happen due to its status as a National Park and tourist attraction.

Now, I’m the first one to howl about incursions into government property by private interests, as in cutting down redwoods and that sort of thing (no, I’m not a tree hugger). But given our dependence on foreign oil and various polluting sources of energy, I would feel that Yellowstone would be a small sacrifice to provide the country with cheap, clean fuel. I don’t know how it would be done, I wouldn’t be a fan of having private interests having a stranglehold on the source, but if something could be worked out on a government level for the benefit of the citizens of the US, I say, have at it.

twoard = toward. Brain fart, sorry.

http://www.mammothpacific.com/awardfacilities.html

Like Yellowstone we are sitting on a super volcano. There is a geo-thermal plant just down the road, its fairly big (see photo) and produces enough power for 40,000 homes.

I’m having a hard time seeing Yellowstone as sufficient to power the entire nation.

Natural gas and “do-it-yourself” sound like a new HGTV series.

LOL, skrood. Brings a whole new dimension to the term, “Flip This House.”

Pipe compound, quality fittings, and a bucket of soapy water are our friends. Wouldn’t want to mess with municipal gas lines but propane is pretty straightforward stuff.

Agree. Besides, “natural gas” and “do-it-yourself” sounds more like an episode of Rescue 911. No thanks.

Hello All, I installed a recirculating hot water pump about 6 months ago. It easily attaches to the HW heater and has a timer on it so it only runs/circulates hot water per your preferred times. I estimate we save 100s of gallons of water per month by not having to wait 5 min every time we want to shower. These gadgets are great for two story homes and run about 189.00 at Lowes. We considered tankless, but I understand that they are really more effective in smaller homes( 1000-1500 Sq ft). Our water bill is steady at 40/mo and gas is about the same thus far. I do feel better about not watching 100s of gals of perfectly good water going down the drain just to get a hot shower. Hot water is practially instant now! I realize that the HW heater has to work a little harder so as to keep water hot for instant access, but I prefer to use a little more nat gas and not throw away precious water, which will likely be more precious than oil in the not too distant future.

I’ve had a similar vision. It doesn’t involve a cinderblock room, though. It involves the government cutting off funding for life saving meds and surgeries mostly because the debt service has grown so onerous. Eventually we will go back to survival of the fittest, however, the wealthiest will just pay out of pocket. We won’t be in that cinderblock room in our 90s because most of us won’t be making it into our 90s anymore.

So we revert to historical numbers. Below are lifespan info on the founding fathers who were wealthier and with access to better medical carer than the general population:

(From Wiki) For their era, the 1787 delegates (like the 1776 signers) were average in terms of life spans.[10] Their average age at death was about 67. The first to die was Houston in 1788; the last was Madison in 1836.

Secretary Charles Thomson lived to the age of 94. Johnson died at 92. John Adams lived to the age of 90. A few—Franklin, Jefferson, Madison, Williamson, and Wythe—lived into their eighties. Either 15 or 16 (depending on Fitzsimons’s exact age) died in their seventies, 20 or 21 in their sixties, eight in their fifties, and five only in their forties. Three (Alexander Hamilton, Richard Dobbs Spaight and Button Gwinnett) were killed in duels.

The is a bell I have been ringing for quite some time. We might run into a quasi Logan’s Run scenario regarding health care in the near future.

You also to have to keep in mind that most of the signers were rich, so they probably lived longer than the average American in those days.

Here I have to seriously disagree the average life span during Washington’s era was 42…So these men lived well past any normal we could come up with….it would be like living to 140 today….I firmly believe in aliens and creating our planet and visiting our forefathers, they had some help in living as long as they did…

(From Wiki) For their era, the 1787 delegates (like the 1776 signers) were average in terms of life spans

“the average life span during Washington’s era was 42…So these men lived well past any normal we could come up with….it would be like living to 140 today”

Yes and no. So many died young (children), that the average is skewed.

The major difference in life spans comes from elimination of many childhood deaths. Going back over 200 years you also get a lot of increased average lifespan when many fewer women die in childbirth.

Once you got to 50 or so, the average life span is shorter but not anywhere near what you see in the overall numbers.

“Have you ever tried giving / buying them food or a ticket? 90% of the times I take that appoach they disappear.”

Panhandlers Are Liars.

P.S. The reason my high white collar (electronic paper pushing) job will go away is because I don’t add that much value compared to less costly alernatives.

I had a conversation with my uncle a few years ago about the Honeymooners. He was born in the ’50s in a working class neighborhod of Queens. From what he remembered, a New Yourk City bus driver in the ’50s could actually afford to have a decent apartment, significantly better than what Ralph Kramden had.