The Housing Bubble

when said securitized rental housing becomes available, it will siphon off demand from the owner-occupied housing market, resulting in affordability improvements

“You don’t know the power of the Dark Side!”

In a text-book example of a free and open [housing] market, your statement would ring true. However, we have seen the extent of the manipulation and support the government and banks have been willing to use to support prices and manipulate inventory levels and, to some extent, demand.

In that regard, what has changed recently? is there any evidence that this government price-support and inventory manipulation is going to end or that new programs won’t be implemented? I don’t see any evidence to support this, so my stand is that efficient market theory is not the correct model to describe future price action in housing for the foreseeable future.

Exactly Northeastener. $38T in existence is offset by debt, and that is collateralized, largely, by real estate.

Real estate prices drop, debt defaults, real estate debt default triggers cascade default into depression…

The powers that be will do everything in their power to manipulate a soft landing in real estate prices. If they fail, then you can pretty much kiss the modern global economy goodbye.

“is there any evidence that this government price-support and inventory manipulation is going to end or that new programs won’t be implemented?”

We agree that it is government-sponsored price support and inventory manipulation that keeps prices artificially inflated. I offer no predictions on whether these taxpayer-funded residential real estate price-support measures are indefinitely sustainable, except to repeat Herbert Stein’s oft-quoted Law of Economic Permanence:

Anything which cannot go on forever will stop.

“If they fail, then you can pretty much kiss the modern global economy goodbye.”

First you say that only coastal real estate prices haven’t cratered, then you say that if real estate prices crater, we are all doomed.

The logical conclusion to your argument is that everywhere but coastal areas where prices haven’t yet come down can kiss their modern economies good-bye.

“If they fail, then you can pretty much kiss the modern global economy goodbye.”
I am not sure what that means. If it means an end to “globalism”, well, that might not be a bad thing. If you think it means the whole world would collapse into world-wide depression, I am not so sure.
Economic activity tends to go on, no matter the circumstances of the world about. It seems to me that all of the tales of past MAJOR Depressions were precipitated and aggravated by government ‘do-gooders’, trying to “do something” to “fix” the problems.
Even Herbert Hoover tried to “do something” and failed. Followed by Roosevelt, who has the creation of mythological tales as succeeding, but failed.
Bernanke has created massive problems with forcing people out of a “savings” stance into acts of desperation for some return to counter the inflation coming in food and energy, and taxes, and insurance, etc, etc. The final unwinding is, as yet, unseen.
If you mean all the Banksters would be vilified for the fraudsters and thieves that they are? Well now, that would be good. But I think we are past that stage, many of us agree the banks should be broken up and the ‘managers’ have their bonuses clawed-back. But the FED and the President want to save them. And keep doing so.
What would a global ‘failure’ look like? I don’t know, but as long as there is available food and gas, we probably won’t collapse as a country. It might make a good discussion: what would global ‘collapse’ look like to each of us??
Marshall Law? Open borders? Rioting in the Cities? God only knows. It’s sure to be different. And, I, for one, am for CHANGE, as in something different(not the Obama Kind).

Anything which cannot go on forever will stop.

Indeed, the above is a true statement. In response, all I can say is:

“The market can remain irrational longer than you can remain solvent.”

“First you say that only coastal real estate prices haven’t cratered, then you say that if real estate prices crater, we are all doomed.”

That is not what I said.

I said that coastal area are among those that have not cratered. I would add places like TX, that is not really that “coastal” but has not crashed. Colorado is another where the manipulations have overcome market forces.

Enumeration of specific areas that have not crashed, should not be construed to be a comprehensive list of areas that have not crashed.

And, what % of real estate value is in those coastal areas?

Hint, population of AZ and NV, added together, is a tad over 9 million people. CA and NY are 58 million people. Half the population lives in the 10 most populous states, with the other half scattered across the other 40 states plus DC.

And, what is the value of the real estate in those markets? Double?

If it is 4x as many people, and 2x amount of debt per, then that would mean 8x as much debt.

Allowing 15% of the total market value to fall is a lot different from letting the 85% of the market fall a lot.

“The logical conclusion to your argument is that everywhere but coastal areas where prices haven’t yet come down can kiss their modern economies good-bye.”

Dude, you clearly have no concept of macro economics. I can stop spending, and it does not effect my income since my spending is a drop in the ocean of global GDP that my income is based upon. We can not ALL stop spending without it effecting our income, since the global GDP is the sum of all of our spending.

AZ debt can crash, and if AZ debt is 1% of total debt, it can be absorbed.

Let CA, NY, TX and other mega markets crash, and if those areas are 50% of total debt, then the banking system can NOT absorb that kind of loss.

I don’t know, but as long as there is available food and gas, we probably won’t collapse as a country. It might make a good discussion: what would global ‘collapse’ look like to each of us??

The doomsdayers and apocalypse predictors are out in full force, and some of them are making good money selling ammo, freeze-dried food, etc.

Mayan Calendar folks, Evangelicals, Aryan nation, back to the land/off the grid, gold hoarders - you name it, they are out there preparing for end of days, martial law, sunspots and meteors, and/or alien invasion. Some of them have been preparing for the past 20 years.

James Kunstler is still waiting (not so) patiently.

I have my 72 hour earthquake kit and I like a full pantry (thanks Costco) but personally I think that a strong network of family, friends and community may be your best bet against natural disasters and societal upheaval.

Maybe someday in the future I’ll change my mind and wish I had bought 3 years worth of freeze dried food.

Or maybe tomorrow I’ll get killed instantly by a piece of ice that falls off an airplane.

“Or maybe tomorrow I’ll get killed instantly by a piece of ice that falls off an airplane.”

That will happen on the way to closing.

“Economic activity tends to go on, no matter the circumstances of the world about.”

Thank you, Diogenes. I lack the time, energy, patience or enthusiasm to shoot down any more of Darryl’s myriad doomsday strawmen.

This story reminds me of one of the things I most admire about Mormons. No matter how badly Megabank, Inc screws things up from the top of the political-economic food chain, Mormon communities will survive. They long ago figured out how to organize local economic activity to foster independent prosperity.

EUROPE NEWS
August 26, 2012, 10:30 p.m. ET

For Spain’s Jobless, Time Equals Money
By MATT MOFFETT and ILAN BRAT

[image] Edu Bayer for The Wall Street Journal
Eduard Folch, left, and Israel Calvache work in a shared garden near Barcelona. Members of the group are primarily growing food for themselves, but they also plan to sell their excess fruits and vegetables for ecos, a local currency that was created by Mr. Folch and his friends.

VALLADOLID, Spain—Even though she’s one of millions of young, unemployed Spaniards, 22-year-old Silvia Martín takes comfort in knowing that her bank is still standing behind her. It’s not a lending institution, but rather a time bank whose nearly 400 members barter their services by the hour.

Ms. Martín, who doesn’t own a car and can’t afford taxis, has relied on other time-bank members to give her lifts around town for her odd jobs and errands, as well as to help with house repairs. In return, she has cared for members’ elderly relatives, organized children’s parties and even hauled boxes for a member moving to a new house.

The time bank not only saves her cash, she says, but also lifts her spirits by making her feel “part of a community that’s taking some positive action during hard times.”

As Europe’s leaders struggle with a five-year-old economic crunch that has saddled Spain with the industrialized world’s highest jobless rate, young Spaniards are increasingly embracing such bottom-up self-help initiatives to cope. The diverse measures—some commonly associated with rural or disaster-zone economies—supplement a public safety net that is fraying under government austerity programs.

Besides time banks, they include barter markets springing up in barrios, local currencies designed to spur the flagging retail economy, and charity networks that repurpose discarded goods. An environmental group recently launched Huertos Compartidos, or Shared Gardens, that links up owners of vacant land with those willing to plant vegetables in them and share the harvest.
…

“The market can remain irrational longer than you can remain solvent.”

That’s a lovely platitude, but in reality, doesn’t solvency depend far more on free cash flow and avoidance of foolish leveraged gambles, such as purchasing an artificially-overpriced home in a falling price market, than on the supposedly irrational market?

Then how about, ‘In the long run, we’re all dead’?

“First you say that only coastal real estate prices haven’t cratered,…”

That is not what I said.

I said that coastal area are among those that have not cratered.

OK.

“…then you say that if real estate prices crater, we are all doomed.”

Real estate prices drop, debt defaults, real estate debt default triggers cascade default into depression…

Sorry if my paraphrasing of what you said somehow missed subtle distinctions from what you actually said. If there is any substantial difference, I am still missing it.

“Let CA, NY, TX and other mega markets crash, and if those areas are 50% of total debt, then the banking system can NOT absorb that kind of loss.”

Ergo the burden of propping up housing prices in expensive coastal areas should be borne by Mom and Pop taxpayer who live on Main Street in flyover country?

Darryl, please enlighten me what macroeconomic theory supports this kind of wealth transfer from the heartland to the coasts? I’m genuinely interested, since you apparently believe some area of macroeconomics justifies wealth transfers from relatively poor local economies in freshwater country to wealthier saltwater economies. I have actually sat through quite a few macroeconomics courses over the years, and never recall any discussion of this topic.

“The market can remain irrational longer than you can remain solvent.”

That’s a lovely platitude, but in reality, doesn’t solvency depend far more on free cash flow and avoidance of foolish leveraged gambles, such as purchasing an artificially-overpriced home in a falling price market, than on the supposedly irrational market?

I thought that implicit in the saying was the assumption that leverages gambles were being used to get rich quick.

The saying has more to do with the fact that your [ir]rational view on why a particular position should be profitable has nothing to do with the timing of the market deciding that your view was the correct one.

Put another way, you have to be right on the direction AND the timing to profit. Why? Leverage and opportunity cost…

“…Marshall Law? Open borders? Rioting in the Cities?…”

Who is this “Marshall Law” of whom you speak, Dio? Is he some sort of Super Sheriff? Or does it have something to do with post-WW2?
Or maybe he’s the cousin of “marital” law? Just wondering….

Or maybe he’s the cousin of “marital” law? Just wondering….

Saw that one a lot recently. I’ve been tempted to make my facebook status “Black belt in marital arts” :-).

WHAT?

Touche: “Used to acknowledge a hit in fencing or a successful criticism or an effective point in argument.”

Him calling me a liar like the pot calling the sun black. I provide links and data. He provides failed attempts at insult.

He actually demonstrates how wrong he is, by being forced to use bullying techniques rather that facts. Being forced to counter an argument with bullying and threat of force simply demonstrates that lack of ability to provide a logical, cogent counter argument.

No Darrell…. I merely refute and demonstrate how frequently you misrepresent the truth. And of course the only one here that doesn’t see that is you.

Carry on with your pimping my friend. It’s mildy amusing.

” I merely refute and demonstrate how frequently you misrepresent the truth.”

Name one untruth I have told. Just one! Please…..

We all know who the pimp is, and it is you pimping your position that buying a house, under any circumstance other than having 100% down, is always stupid.

I’m still waiting for a link to the data showing 25,000 excess, empty houses built over 15 years, since TOTAL construction of housing, including apartments, over the years you claim, was 25,000 units.

I and others have provided the data indicating 25 MILLION excess empty houses. The fact that you don’t like it or disagree with it will never change that truth.

Worse yet, you conflated the 25 MILLLION excess empty houses with construction. That’s you’re misrepresentation too.

Now back to your unwillingness to be truthful with the blog.

Why are you misrepresenting the truth about housing market?

“the pot calling the sun black….”

There is nothing more amusing than a confusing mixed metaphor.

Nor anything more confusing than an amusing mixed metaphor, for that matter…

Then provide it again, because I don’t remember where you got it from.

“I and others have provided the data indicating 25 MILLION excess empty houses. The fact that you don’t like it or disagree with it will never change that truth. ”

Then it should be a piece of pie for you to present this data one more time… Since I seem to have missed it, repeatedly.

There were 25 million housing units built between 1993 and 2008 (16 years). It is not my fault that your claim of how many empty, excess houses there are PERFECTLY aligns with total construction over the, using your words “15 years of over building”.

Just proved a link to data showing your 25 million, EXCESS, empty houses is correct.

And, while you’re at it, name ONE lie I have told.

You clearly live in the world of “truthiness” where just saying something enough, and wanting it to be true, magically makes it true.

I live in a world where facts and data represents the truth.

And…. what is our real major point of contention? Whether there are 25 million excess empty houses or 5-9 million. Even if you were to accept the 5-9 million excess, empty houses as demonstrated by various data, that is still 10-20 years to work off the excess based upon current demographics and construction rates….

Oh yeah, I’m such a housing pimp when I say that nationally housing is still 20-30% overvalued and it would take 10-20 years to work off the excess supply based on current construction and demographics.

Heck, I think most major CA markets are probably more like 40% overvalued and due for a major crash. DC, NYC, Boston, etc, are all atleast 30-40% overvalued and due for a major crash. China is about 1,000% overvalued, needing to fall from 300x annual income to 3x income. India, Australia, Canada, etc are all in massive bubbles and likely to crash, taking the global economy with it….

Yeah, I’m such a pimp, because I point out that some segments of the Phoenix market are off 60-70% from peak, and are now below fundamental value….

And you’re another one who just doesn’t like the data. Maybe Stucco will humor you.

‘Yeah, I’m such a pimp, because I point out that some segments of the Phoenix market are off 60-70% from peak, and are now below fundamental value….”

Yes. Precisely.

You assert prices are “below fundamental value”.

Clearly you don’t have a small idea what “fundamental value” is.

Now go on and write another raft of lies.

I’d like to see the data. I didn’t catch it on any of the earlier postings.

It’s here. http://www.ritholtz.com/blog/

And Stucco posted the Census Bureau information.

Clearly you don’t have a small idea what “fundamental value” is.
No. And neither does anyone else on this blog. Value is determined by “market forces” of supply vs. demand. That has been the entire issue with the “housing bubble inventory”.
The FED’s are not allowing market clearing to allow Price discovery. They are gaming the system with the banks.

The FED holding Bankster assets at “contract price” and allowing to use Marked to “whatever price we want” accounting practices has made “fundamental value” a moving target. We can all only guess.

What I think most of us can agree upon is that the 2004-2007 price levels are probably NOT ‘current market value’. We won’t know what the market would be until Bernanke stops fiddling with the markets. We might be shocked as to where market price gets set, or we might be overjoyed. who knows? I don’t. and i don’t think anyone else does, either.

I just googled “25 million empty houses.” After I told the google that I meant “houses” not “homes” it provided a list. The first two items were about the UK. The third was one of Cratering’s posts on the HBB (August 17th for some reason and no link to his data on that one, either). The next is from a site called occupyamerica dot crooksandliars dot com and refers to 18.5 estimated empty houses (the 25 is from a date). Most of the rest refer to places outside the US and none talk about 25 million units being empty.

I’d like to point out that in NYC, even when the whole world is talking about how impossible it is to find and apartment to rent, the vacancy rate is 2%. I can’t remember ever hearing it reported as less than that.

Cratering, there is nothing about 25 million excess housing units in that blog. It was about the stock market. There was one post on the budget surplus. Link to the actual post, if there is one. I don’t have time to sift though a few years or months or whatever of blog posts.

You’ve been provided multiple links by stucco and I. Go look at them.

Then you didn’t look.

Maybe Stucco will link the CB data for you.

Yes, please. I have no idea what connection that blog has to the assertion.

“It’s here. http://www.ritholtz.com/blog/

And Stucco posted the Census Bureau information.”

Followed your link. No story on 25 million excess empty houses. Tried searching their archives for 25 million. Best I could find was a link to 25-30 million underwater mortgages. Tried searching their archive on empty excess housing and just got stories from China and one….

One stating 18.7 million vacant housing units in 2009. Even that story admits it is including things like vacation homes that are lived in only part of the year…. The article makes no attempt to claim that is 18.7 million excess, empty houses.

http://www.ritholtz.com/blog/2009/07/near-record-home-vacancies-in-us/

Stucco’s numbers also include seasonal vacancies, like my father’s hunting/fishing cabin in the woods that he lives in 4-5 months a year, in the count of vacant houses.

By definition, excess means the amount above normal. If normal is X, and we’re at 2X now, then the excess is X, not 2X.

Looking at census data, we see homeowner vacancy rates double the normal of the 50s-90s. Multi-unit structures are also up significantly from 50 year normals.

http://www.census.gov/hhes/www/housing/hvs/historic/

Yes, there are lots of excess, empty housing units.

The number is no where near 25 million. It is more like 5-10 million depending on what data you use. 5-10 million is still 10-20 years excess inventory at current household formation - construction rates.

Yes, housing is still a good 20-30% above fundamental value on a national level, with some markets way above that. Some markets are not as overvalued.

Not everyone reads the blog every day. It is easy to miss a link. Please provide a source for your data.

I looked through a lot of the Ritholtz entries and didn’t find any entries on empty homes (10 pages took me back to 8 Aug). I did a Google search and found an entry from 2011 in which Ritholtz refuted an article by Dianna Olick. She claimed there were 14.2 million vacancies; Ritholtz conclusion was “The answer is that the 11%* is a sensationalistic number, one that is meaningless to those following housing.”

* 14.2 vancancies / 130.2 units = 10.9%

http://www.ritholtz.com/blog/2011/02/us-homeowner-vacancy-rate-is-2-7-not-11/

Vacant is excess. Including your daddies shanty in the middle of no-where land.

Stucco/Bear/Cantakerous/etc.

Can you provide the link or links that Cratering is talking about? Do you know what data he is talking about?

There is nothing more amusing than a confusing mixed metaphor.

We could stand here and talk until the cows turn blue, but these hemorrhoids are a real pain in the neck.

“Comment by Housing Is Cratering
2012-08-27 10:00:03

Vacant is excess.”

Wrong. Excess is defined as the amount above normal.

If there are usually 10 million vacant and seasonally vacant, and we’re at 19 million vacant and seasonally vacant, then the excess is 9 million….

Unless you are like Bill Clinton, arguing the definition of “is”, “alone” and “sex”.

And I do not know why you are hunkering down in the doomed Alamo of 25 million excess empty houses, when the data shows 5-10 million excess housing units. 1 million household formation + 200K replacement rate - 700K construction rate = 500 burn down rate of excess = 10-20 years to work off the excess supply.

10 million too many houses and 20 years to burn that off makes your point, and it doesn’t even require you bully and attack those that question the source for your 25 million excess, empty houses claim.

You don’t even have to lie and say that EVERY empty house is an excess empty house, as if 0% vacancy is normal and no one should own a vacation home.

Hey, renter. How are the kids dealing with waiting to hear about the house. I assume you are managing to insulate them as much as possible, but since they are a little involved already (letter to the fairies in the garden), they must be thinking about it a little.

When my uncle and his husband moved from their town house to their current house, their middle son seemed a little concerned, but once he was assured that all the pets and his toys were moving with them, he was fine. I think he was around 5 or 6 back then.

WRONG again Darryl….

25 MILLION excess empty houses…. you can call them whatever you want.

Diogenes, I am curious if the situation on the ground in Tampa is as bad as this story suggests?

I’m sure the Republicans can figure out a way to stick the blame for this on Obama, even though most if not all of the loans involved were made before he took office.

Monday, August 27, 2012

A Tour Of Tampa’s Devastated ‘Suitcase City’

An abandoned home in Tampa’s “Suitcase City” (Here & Now)

One of the most poverty and crime-ridden areas in Tampa is now plagued by another scourge: foreclosures. The neighborhood is just west of the University of South Florida, and it’s known as “Suitcase City” because of its large transient population.

Some people lost their homes, some were sold mortgages they couldn’t afford, others are doing all right but are walking away from homes with values that have dropped below the mortgage.

We took a tour with Sylvia Alvarez, a licensed realtor and executive director of the Housing and Education Alliance, a HUD-certified counseling agency helping the 15,000 homeowners in the Tampa Bay area facing foreclosure.

You need a guide, because as Sylvia explained, most real estate agents don’t display “for sale” signs anymore, because they don’t want the neighborhood to look blighted.

Alvarez took us along streets with abandoned, boarded-up houses and said that there are even alligators in some of the abandoned swimming pools.

“It’s taxed the animal shelters, all of the homeless shelters,” she told Here & Now‘s Robin Young.

This woman said that despite her house losing most of its value in recent years, she plans to stay. (Here & Now)

We stopped by the home of one woman who said that her house has been in the family for 50 years, but, along with other homes in the neighborhood, it has recently lost most of its value.

“I think everybody’s in the same position,” she said. “Some subdivisions out in Pasco County had $6-7000 homes that investors bought to flip around and ended up losing a lot of money. And now those good-valued homes are actually like living in a poverty-stricken community. People are losing their jobs, their homes and everything is falling apart.”

She says the homes in her neighborhood used to be worth around $120,000, but now they’ve fallen to values of just $30,000. Still, she plans to stay.

“This is my home,” she said.

Robin (right) speaks with housing counselor Sylvia Alvarez and Tampa resident Miguel, who said his $200,000 home is now worth less than $70,000. (Chris Ballman/Here & Now)

A man named Miguel, from Haiti, has also seen the value of his home plummet. In 2005 he put down $10,000 for the $200,000 home, but now the value is $60,000.

Alvarez says there is a better solution than the large number of foreclosures and abandonments she sees.

“I think banks need to sell these mortgages in blocks to investors but with requirements on them,” she said, “that we’re going to discount this mortgage to you, but you in turn have got to discount it to the homeowner. And try to work it out to where the homewowner stays in the house because every foreclosure hurts every other home that’s around it.”

Hey, renter. How are the kids dealing with waiting to hear about the house

45 day escrow waiting is hellish. The actual waiting is not that bad, it’s the knowing that it’s not a sure thing until I have the keys in my hand.

The kids don’t want to move (they’ve both lived their whole life in our rental and change is hard) and my oldest is iffy because she will still have to share a room with her sister. Which is a drag, to be sure, but I am also glad to be getting a small enough house so that when the kids fly the coop we aren’t banging around in a too-big house. I’m happy with 1.5 baths. I don’t see why anyone would need more bathrooms to keep clean.

The downsizing is refreshing: we are throwing away, selling, and donating anything we don’t really need.

Anyone want to buy an antique miter saw and box?

Sorry about that. I guess moving to a much bigger place made it easier for my uncle to “sell” the move to the boys. And now that I think about it, they may not have had their youngest (of three) when they moved. I certainly remember him still being a very young toddler in the new place. It was also very close to their old house and no one had to switch schools which helped too.

I’m also not finding anything dealing with 25 million excess homes. Heck, I just moved away from one (right next door - but it did partially burn and I think the landlords took the money and ran) and 500k empty houses per state, with CA, AZ, FL, etc. averaging far more and others far less, does not seem unreasonable to me. But still, a real link to something showing that data would be nice.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=am4VMDGoSAPY&

There is a link to over 19 million. Read it. Since then, an additional 2.5 million housing units have been added.

We’ll find another 3 million somewhere.

That is from 2009. Want to try something a little more recent?

No. The inventory is up since then.

Wait, here it is:

Snapshot for Vacant housing units for sale or rent or seasonal or other in thousands (HOWNVAC)

http://www.bloomberg.com/quote/HOWNVAC:IND

That is from June 30th of this year. Looks like 18,474,000 to me. Now we need to find out if someone can exclude the “seasonal or other” portion so we can find out the ones that are actually looking for buyers or tenants rather than just being held by people who have more than one house and like it that way (see Romney, Mitt or McCain, John or whoever).

“That is from 2009. Want to try something a little more recent?”

Ditto.

And again, I can see 25 million being vacant - but you can’t keep talking about proof that isn’t current/doesn’t exist. We just want to know where you’re getting this number.

Oh I see so they just disappeared? Hardly. The inventory got LARGER by 2.5 million new units.

By the way, the chart I posted above is from a link that was provided by the archived news story you used as your source.

“http://www.bloomberg.com/apps/news?pid=newsarchive&sid=am4VMDGoSAPY&

There is a link to over 19 million. Read it. Since then, an additional 2.5 million housing units have been added.

We’ll find another 3 million somewhere.”

Again, a vacant house is not an excess empty house.

The article says it is including vacation houses and the normal empty houses.

The definition of excess is the amount above normal. If normal vacant, then the excess empty is 9 million.

And 9 million excess empty houses is still a huge number that will take upto 18 years to work through at current demographic trends and construction rate.

Why do people keep having to use bull sit numbers to try to misrepresent a problem, that the actual real data represents as a HUGE problem.

What is so wrong with the truth, that there are something like 5-10 million too many houses and at current construction rate it could take upto 20 years to get back to historical normal vacancy rates?

I do not understand why a few people cling so tightly to their LIES when the truth makes their point so well.

RAL et al,

Do you have any explanation where you got the 25 million empty houses from? You’ve been very insistent that this is a hard number that’s been supported on many occasions by both yourself and PB (who’s been quite silent), and yet you’ve haven’t backed it up. Why not go back to one of the many times you’ve provided a link and cut and paste it? So far you’ve provided a bogus reference (Ben, do you insist on APA style?) and a bit of scrambling, but no actual explanation. At this point no one has any reason to believe anything you say.

So there are 21 million excess empty houses. Imagine how that weighs on prices over the coming years and decades.

Darryl,

You been provided the data over and over again. You just don’t like it.

Come on RAL, you’ve been called out as a LIAR. PB is not coming to your rescue. All you need is one little link to redeem yourself.

PS. Not Darryl

The data speaks for itself. You don’t have to like it.

Ps- You’re a coward.

What data? The stuff you make up? The data you can’t produce…. because YOU ARE THE LIAR.

You can ignore the data all you want Darryl. But you’re still a liar and a coward.

more doom and gloom today?

So how much is the condo worth?

How much would it cost to build it today?

“You further lie to the readers here by falsely asserting that prices aren’t still inflated. Guess again my lying friend. Prices are still at 2003-2004 levels. ”

But he didn’t say that. He said in some areas prices are down and in many others they are not. He clearly used as an example coastal California which has not corrected the way it needs to. But some places have corrected significantly.

We’ve seen some areas that are down to 1997 prices and some that are still at 2007 prices even though they clearly need to correct. I used to say (being fleeing) that I would buy in San Diego when prices were back at 2000 levels. I’m not sure that would even do it anymore. With a prolonged economic downturn and politicians STILL selling our jobs overseas, I’m not sure where prices will be when this all shakes out.

I’m not sure early 1990’s prices are a good thing. CA was in a bubble still and prices were lower in 1997. But do we have the economic activity and wealth distributions we had in 1997? Don’t know and am a little afraid to find out.

I’m not sure what sins Darrell has committed, but the attacks on him (assumed, maybe a her) seem irrelevant to the points he is trying to make and I think he is making some good arguments. I haven’t heard him say we should all run out and buy or that San Diego is a great bargain, quite the opposite. And we’re talking 49k, not 490k. A 20% loss probably won’t break him, as it will to San Diego buyers.

“more doom and gloom today?

So how much is the condo worth?

How much would it cost to build it today?”

More misrepresentations and lies today?

Again…. explain to the public how dramatically lower housing prices isn’t bullish optimism?

Go on now explain it.

Secondly, you know what it costs to build so depreciate the used structure from that amount.

Why ask the same question over and over again?

being fleeing = before fleeing

$49K is pretty cheap for a condo. We paid 90K for one in 1988, in San Marcos, CA (We sold it a year later for 130k)

Then again, you couldn’t pay me to live in Phoenix.

Well, I’m not sure if my comment got lost in HBB land or not.

$49K is pretty cheap for a condo. There are some units here in Palm Beach selling for less, but they aren’t the desirable waterfront type.

If PITI plus the association are SUBSTANTIALLY less you can’t fault Darrell for buying. Remember assessments though. They can hit hard and heavy. Buy as much loss assessment coverage as your insurer will allow. You will be happy you did. Just remember it doesn’t cover every possible scenario.

once they recognize that our federal tax dollars are being siphoned off to foreign real estate investors?

Clarify, please.

Our federal government has openly encouraged foreign real estate investors to buy U.S. housing when prices were down, crowding out fundamental (”end user”) demand and pushing up prices for U.S. families who just want to buy a home to live in.

And federally-sponsored measures to make real estate prices start going up again translate into taxpayer-funded capital gains to foreign real estate investors.

It may seem mean-spirited of me, but I sincerely hope foreign investors in U.S. residential housing lose their asses. What entitles them to profit at the expense of American families’ God-given right to affordable housing, not to mention the U.S. taxpayers who fund the price-support measures?

August 8, 2012, 1:01 PM

Could a Housing Rebound Discourage Future Foreign Buyers?
By Stefanos Chen

There are hints of late that foreign buyers, particularly Europeans in search of bargains, could be poised to pull back from the U.S. housing market.
…
Foreign buyers have played a major role in the U.S. housing market of late. For the past year ending in March, international home buyers accounted for 4.8% of total U.S. sales, according to the National Association of Realtors. That’s a total sales volume of roughly $82.5 billion, up from an estimated $66.4 billion in the prior year.

Foreign buyers come from a range of countries. Canada, China, Mexico, India and the U.K. represent the highest percentage, according to the latest NAR data.
…

Our federal government has openly encouraged foreign real estate investors to buy U.S. housing when prices were down,

I thought that was called ‘fleecing the suckers’?

And how much taxpayer money went into this open encouragement?

‘$49K is pretty cheap for a condo’

A condo isn’t even real estate.

“A condo isn’t even real estate.”

Whatever. The one’s across the street from Oracle’s Santa Clara campus go for 500K.

” But you don’t seem to grasp how the price declines that have already occurred are against a backdrop of extraordinary (first-time in history?) government-sponsored interventions to prop up real estate prices.”

Oh, I get it.

“Do you think those interventions are sustainable,”

Every bit as sustainable as $600B a year international trade deficits and 70% of the $1T in corporate profits going to those that already have more money than they can spend.

“especially when the Republicans who may soon take charge of the executive branch have already talked about “letting housing bottom out””

Etch-a-Sketch. Withdraw the government intervention like 3% interest rates, 3% down, and government guarantee of GSE bonds, and there will be no bottom to real estate prices. $13T, ($9T housing mortgage and $4T commercial real estate debt) almost half the total USA debt is put at significant risk of default. There is no way that does not cascade default into depression.

So, IF you believe that they will “let house prices bottom” by withdrawing government support, then you SHOULD also believe that the logical result will be massive global depression that makes the GD look like a mild recession.

Everything, and I do mean EVERYTHING in our economy is manipulated. Interest rates held low by government liquidity and loss guarantees. Stock and commodity prices are manipulated by government liquidity. The very value of the dollar is maintained by government propping up debts and manipulating markets. Demand for goods and services is maintained by government deficits and stimulus.

And, that is my main point. How can we talk about houses being overpriced and manipulated when the unit of measure (dollar) is nothing but a unit of debt that is overpriced and manipulated.

I’ll call your manipulated housing market with a manipulated monetary system, and raise you one giant manipulated global economy.

Cherrypick much?

‘The one’s across the street from Oracle’s Santa Clara campus go for 500K’

Fine, but that 500k doesn’t buy any real estate. Test me on this; buy a condo and try to sell some of the actual land. You can’t because you don’t own it.

“Fine, but that 500k doesn’t buy any real estate.”

By “real estate” I assume you mean “land”. In that regard you are correct. The land is jointly owned by all the condo owners, so you can’t sell the land.

Anyway, I still think that 49K for a condo is relatively inexpensive. The cheapest condo’s I’ve seen in my little burg run in the low 100’s and sell quickly. I’ve seen SUVs on car lots that cost more than those Phoenix condos (and those SUVs don’t come with “land” either).

To be factually correct, you do “own” it as a share, given the “tenants-in-common” concept of the law. You can sell your “share” which is an Undivided portion. You can’t say I want to parcel my 1/57th part and canker out a piece, other than the “space” in your unit.
However, if ALL the tenants agree to liquidate their tenancy, you could indeed sell the land. A technicality, to be sure.
This only happens during real estate bubbles when the prices triple and developer see an opportunity to turn it into Condo-hotel “resort” where the really big bucks are.

‘if ALL the tenants agree to liquidate their tenancy, you could indeed sell the land’

You are more likely to be sued by the little old lady downstairs than to ever see a penny from your HOA.

Have you ever lived in an apartment, or visited one and thought, ‘man, I sure wish I could pay all the expenses associated with this thing.’

“You are more likely to be sued by the little old lady downstairs than to ever see a penny from your HOA”…….

On this, I would be inclined to agree.
I never suggested it was “likely”, only that it was “possible”.

I agree with you to an extent Ben, but resale is one real benefit to a condo purchase. If you buy it, live in it for 10 years and then sell it for 1/2 you’re still really out nothing in the end because you lived for 10 years cheaper than you would have rented and will still break even upon sale assuming you put 20% down and sell direct.

I know someone who went through foreclosure, stashed away every dime they had, paid $18K for a condo in a building that no one would lend on. A year and a half later it sold for $29K also while no one would lend. FHA approves the building and the condo went for $52K just 6 months later.

A condo isn’t even real estate

There are plenty of New Yorkers that would disagree with you.

I personally am glad that San Francisco has SFH ‘cuz I would never buy a condo or townhouse or apartment. I would hate to try and buy a SFH in Manhattan. I guess you’d have to buy an entire building.

Lets see if I can offer some insight into this Condo/Land question;

#1. Ben is correct…You do not own the land in a condominium complex…The Association owns it…You also don’t own a share of it as tenants in common…When the association was formed, the developer grant deeded the land to the Association. The corporation owns it which you may have a interest in since you are member in it….

#2. You can have a “exclusive use” rights to land though which is damm close to owning it…This is very common in backyard patios…The exclusive use right goes with the condominium unit in subsequent sales since it is a recorded grant on the map…

#3. Remember, in a condominium, you own the air-space within…Thats it…You do not own the fiscal structure…The Association owns that…Looked at another way…You own up-to and including the paint…

#4. Condominiums are known as Planned Unit Developments (PUD)…Here is a twist on what many may think is a Condominium but is quite different…A townhome can be a fee simple ownership of both the building and the land…In other words, you own it like a single family home “subject to” the rules in the CC&R’s…The common area (driveway lets say) is owned by the association…So, in this instance when you sell your townhome you are also selling the land with it…

” I still think that 49K for a condo is relatively inexpensive. The cheapest condo’s I’ve seen in my little burg run in the low 100’s and sell quickly.”

Most of the condos in Phoenix Metro were not built as condos, they were originally apartments. So you are buying a converted apartment with frame and drywall separating units. You can hear your neighbors on all sides, above and below. (Think Peter’s neighbor in the movie “Office Space”)

The real kicker is the association fees, which are $250/mo and up, that puts a damper on your cash flow potential. But I don’t think the current group of Phoenix condo buyers using financing are concerned with cash flow, no, they think 2005 prices are coming back which will provide a big payday.

Cash buyers can make a good return assuming full occupancy and no depreciation, so I can understand their appetite for lower priced units. In my 20+ years in the Phoenix metro area, if you exclude the 2005 bubble, condo prices (for real condos) did not seem to move much, which would make them a better traditional RE investment vs a flip.

“It may seem mean-spirited of me, but I sincerely hope foreign investors in U.S. residential housing lose their asses.”

I seem to recall Japan doing that in the 90’s. Notice they are not big buyers right now?

You can hear your neighbors on all sides, above and below

This is the standard anti-renting NAR blather on the City Data forums.

The squad lives in a rental apartment on the top floor with no shared neighbor walls. And no dogs in the building. And a resident building manager who will enforce the building’s noise policy. Renting is better.

Do condo and apartment buildings have different fire codes? I think ’round here they both have to have a fire wall around each unit. In the old days they didn’t, and can get grandfathered in, but that’s true of apts and condos.

$49K is pretty cheap for a condo. We paid 90K for one in 1988, in San Marcos, CA (We sold it a year later for 130k)

Wow, profits like that must be intoxicating?

And yet again, people seem to think that rent is freeeeeeeeee…

I’m not making up numbers.

Smaller unit, right next door to mine, with smaller fenced in private yard. You can see the public record sale dated 2000 showing a sale price of $62K.

http://www.zillow.com/homedetails/3327-W-Tangerine-Ln-Phoenix-AZ-85051/7752258_zpid/

Again, not using Zillow for current market price, just for pubic record of recorded sale in the year 2000.

So, yes, it is a slight leap of faith to say the recently remodeled unit that is larger and has a larger fenced yard was worth closer to $70K 12 years ago.

Then, I put that $70K into the BLS cpi based inflation calculator to get $93K adjusted. Then using the $49K contracted purchase price….

Sorry, but that is math.

Exactly, 30 years of $800 month rent (which will increase over time) is $288,000. With inflation, it will probably end up being more.

You do get something in return for renting: you don’t get stucco and the landlord pays for the repairs.

At least you can see both sides of it Colorado. It drives me nuts with all of the anti-home ownership people here. To each their own.

In my case I could have been saved a lot by taking the advice of the haters, but when you’re talking about $49K…seriously?

And yet again, people seem to think that rent is freeeeeeeeee

Hence my pondering yesterday if the supremely bearish folks on this blog are living in mommy and daddy’s basement.

Again, more power to you if you have cheap rent (or at least low enough rent that you can save and invest) and a reasonable landlord.

Had that been my situation I probably never would have found HBB in the first place. Many of us found this blog because we were wondering WTF was up with the cost of housing.

Yeah yeah, Housing is Cratering can now freak out on me for being a victim because I think the housing bubble ever existed and that shelter should be affordable.

‘living in mommy and daddy’s basement’

That’s such a compelling position, I don’t know how to reply. Give me some time down here in the dark and I’ll try to come up with something that starts with, ‘Oh yeah? Well your mommy…’

‘Oh yeah? Well your mommy…’

As a teenager we used to derogatorily call certain other kids “Hey ma’s”, as in: “Hey Ma! Is my Led Zeppelin tee-shirt dry yet?”.

Does your mom wear combat boots?

Oh come on, Ben. Have you even once reprimanded the cranks who call people lying pimps simply because they disagree with them?

Ben, in this case, “living in mommy and daddy’s basement” is not an empty insult. There is a solid reason behind this.

Several HBB permabears just don’t seem to factor in the cost of renting when calculating a house purchase. Although there are others, RAL/etc is a prime example of this.

Renters are pretty sensitive to what they pay in rent, and are therefore very willing to consider rent increases in part of the rent v. buy equation. But RAL* refuses to consider rent. Has he somehow forgotten that people have to pay rent? Maybe he forgot, because he himself doesn’t pay rent? Hence the hypothesis that he lives in mom’s basement and doesn’t have to pay rent.

————-
*at least RAL’s online persona. For all we know, RAL could be Warren Buffet having a lark at our expense.

I’ve permanently or temporarily banned everyone involved in that at one point or another.

‘Does your mom wear combat boots’

I don’t know if she wears them, but she almost certainly owns a pair or two.

“Several HBB permabears just don’t seem to factor in the cost of renting when calculating a house purchase.”

Sure we have… again and again it’s repeatedly been shown that rental rates per square foot are a fraction of the cost of buying at current inflated asking prices.

I’m not sure why you debtors continue to run, duck and weave from this fact and the massive inventory overhang.

I don’t care about the mommy thing; I think it’s funny. I thought it was funny in 2005.

‘Several HBB permabears just don’t seem to factor in the cost of renting when calculating a house purchase’

Permabear. Meaning we are incapable of reason or use of a calculator. Stopped watch is right twice a day. We’ll be renters for life. Oh yeah, the oldie but goodie: ‘if you think house prices are going to go down, you’re bat-sh*t crazy!’

These things are proof that market participants aren’t seeing the mania they are a part of. And that’s the only way a mania can exist; a popular delusion. I fully realize people don’t like to be told they’re deluded. And when they are, even by bloggers suggesting it in an obscure corner of the internet, they will react like this. I should know.

Every day, I find more evidence of how big this thing is. People writing love letters to buyers. Dozens of condo towers going up in Miami. Bidding wars over worthless dumps in Orlando. Flipping. Shortages. Easy money. You name it, it’s all still there, for anyone to see, like it’s always been.

Yes Ben and this is where we agree. There’s no doubt that real estate in most markets will continue on its decline. It’s inevitable with the kind of inventory that’s available though not actually available and the games being played.

Where I can’t always agree is the notion that no one should purchase a home. I made a big mistake buying a home believing that PITI vs. rent alone would be a sound decision. What I didn’t realize is how little I could actually live with. PITI that comes in at 50% of comparable rent and less than or equal to ANY rent, ownership becomes compelling…unless you want to live in your parents’ basement or become a squatter.

“Where I can’t always agree is the notion that no one should purchase a home. ”

Why buy 1500sq ft at an inflated price when you can rent 1500sq ft for half the amount?

I don’t know if she wears them, but she almost certainly owns a pair or two.

More power to her. I’m a mom and I have a pair (combat boots, that is).

“…living in mommy and daddy’s basement.”

Oedipus would leap at the opportunity though dad might resent it.

OK, case in point. 1500 square foot home in Western PBC runs $1,500 +- per month. Same home sells for $125,000 assuming you’re buying from the bank or distressed seller. PITI is $750 ish assuming 20% down.

So look at the other side of the coin. Where can you rent for $750 per month? 2 Bedroom apartment on the bad side of town.

Nowhere am I advocating for wish prices that are still 75% of peak.

You forgot to add;

insurance, taxes and 3%/yr maintenance escrow. And don’t forget the PMI.

Yes Ben and this is where we agree. There’s no doubt that real estate in most markets will continue on its decline. It’s inevitable with the kind of inventory that’s available though not actually available and the games being played.

Where I can’t always agree is the notion that no one should purchase a home.

I also agree that we are still in a bubble and that housing is still overpriced (in most places). According to Housing is Cratering, stating that housing is still too expensive makes me a victim.

Thanks to Ben and HBB, the very same people that insisted that “Real estate in San Francisco never goes down” now openly tell me, “You were right 7 years ago when you said it was a bubble”.

What some posters refuse to acknowledge is that long-term renting is less than ideal for some of us (pets, kids, pianos, decent jobs, etc.) and that while we have been waiting for the mania to end we have paid A LOT of money in rent.

Would I like to pay cheaper rent and pocket “the difference”? You betcha. Have I looked for a cheaper rental? Hell yeah. Should we quit our jobs, uproot our family, say goodbye to our friends and the place we love and call home and move to South Dakota? If necessary, I guess we would. (Isn’t that what immigration - migrating to find a better life for you and your family is all about). Fortunately, I don’t see South Dakota or even Oakland as a necessity quite yet.

Most people here thought the collapse would be fast and furious, and in some places it was. None of us expected that the gov’t would prop up housing and meddle to the extent that it has.

I am fully aware that I am taking a big chance here. Rate lock (thanks Fed minutes, we waited a day last week and scored) and GFE arrived today by email. 31K cash down, closing costs included and monthly PITI $600 less than rent.

Time will tell.

Principal
Interest
Taxes
Insurance

PMI is only required when you don’t put 20% down.

$125,000 example with $25,000 down has a monthly payment of $454.08. You’ll pay $1,200 for taxes and about $1,800 for insurance in this part of the world so you’re looking at $704.08…$750ish was a guess.

So now let’s assume for a moment that you’re renting at $1,500 per month in a similar home. In 33 months you’ve paid that down payment just in extra rent. Now can the homeowner sell in 33 months and break even? My guess would be no. Would that person be in a better position than a renter in 30 years?

You forgot to add;
insurance, taxes and 3%/yr maintenance escrow. And don’t forget the PMI.

Do you not know what PITI stands for?

Just a word to all you kids watching at home…you can never renegotiate the principal. Once you buy a house, the price is yours to keep.

I also have a word problem for you today:

Suzie’s parents bought a wonderful colonial house in the best neighborhood and school district, they paid $550k and have a 96.5% loan at 3.65% with approximately $20k down. This left them with a payment of $3200/mo including taxes, insurance and PMI.

Little Johnny’s parents waited until 2016 and bought a similarly beautiful red brick home in the same neighborhood, they paid 200k and have a 96.5% loan at 9.5% with approximately $7k down. This left them with a payment of $2200/mo including taxes, insurance and PMI.

Who’s parents are most likely to be financially screwed for the rest of their lives?

Little Johnny’s parents waited until 2016

Ok so 2016 it is.
Who else has bottom predictions?

If you are renting - and assuming you are paying 20-30% of your current income on rent - how long do you plan on waiting?

Where’s my crystal ball? I know it’s around here someplace…

Hmmm, (3200-2200)*360…uhhh…hrrmmm…carry the one…what?!?!?!

“Suzie’s parents bought a wonderful colonial house in the best neighborhood and school district, they paid $550k …

Little Johnny’s parents waited until 2016 and bought a similarly beautiful red brick home in the same neighborhood, they paid $200k…”

UNFAIR!

“Where’s my crystal ball? I know it’s around here someplace…”

Not a crystal ball, just food for thought. Don’t want the kids out there getting the wrong idea about real estate.

“Who else has bottom predictions?”

If all you saw in mys post was price, you missed the point.

my not mys (”mys” actually sounds better when you speak the sentence out loud)

Who says rates can’t stay down forever?

They can only go down to zero bear, then there is no money to be made on interest. Just a guess, but you would think anything below 3% on a 30 year fixed loan begins to look unappetizing to all but the government sponsored banks, even with private banks being able to borrow from the FED at near zero.

What we have now is nothing more than another social justice program for the housing market and it will only grow as more banks find that there is no profit in the home loan business. I would like to see the pandering stop and find out just how strong the housing market would be if left to true market forces.

“They can only go down to zero bear, then there is no money to be made on interest. Just a guess…”

And a wrong one, …

MARKETS
July 11, 2012, 3:41 p.m. ET

Negative Thinking Is Driving Bond Yields Lower
By NICK CAWLEY

Risk-averse government-bond investors are becoming increasingly willing to accept negative returns on their short-term cash holdings, as havens in the euro zone that offer positive returns become increasingly rare.

The European debt crisis and the recent decision by the European Central Bank to cut interest rates has prompted market participants to concentrate on capital preservation rather than return on their money. That has resulted in record-low yields on short-dated government T-bills and bonds in the euro-zone countries deemed to be safe.

“Things are going to get worse rather than get better. Negative yields will become even more negative for some countries in the short-term,” said Nicola Marinelli, portfolio manager at Glendevon King Asset Management, a leading independent fixed-income group.
…

Bingo.

When the unit of measure is “other people’s debt”, then to stimulate demand, you just make sure other people can borrow more “other people’s debt” into existence.

You say manipulated housing market, I call you with a manipulated monetary system, and raise you one manipulated global economy.

(yes, I know in poker you can’t call and raise… one or the other.)

No. but you can check-raise. It always surprises the other players.

“Yes, Diogenes, what is your answer?

Answer: The Federal Reserve steps in to manipulate interest rates, money supply and Bank reserves to support high prices, thereby side-stepping the natural workings of market forces.
(smiles for knowing the correct answer).”

That’s fantastic! I can’t wait for the forthcoming Fed audit to bring this out into the open!!

“I can’t wait for the forthcoming Fed audit to bring this out into the open!!”

What do you expect the Fed audit to show?

They publish all their actions. How much they loan, for how long, for how much. They publish their full results in how much they earn, spend, set aside, hand to the treasury.

The only thing that will show up in an audit is TO WHOM the money was loaned.

The reason the Fed does not release that is because they do not want to trigger runs on banks from known liquidity fears.

A Fed audit would NOT put to an end that it is the Fed’s job to prevent liquidity issues at member banks through loans and repo agreements, maintain an acceptable level of inflation by manipulating lending conditions through various rate setting and balance sheet operations (QE), and to attempt to stimulate the economy to a sufficient level to attempt to hold down unemployment.

“What do you expect the Fed audit to show?”

I’d be curious to learn more about the origins of their real estate price support policy.

The reason the Fed does not release that is because they do not want to trigger runs on banks from known liquidity fears.

I agree real-time audits wouldn’t be a good idea, but I think we should regularly audit the books from, say, five years ago. Just to make sure everything’s kosher.

Then don’t invest in rentals in states with stupid laws.

My world was commercial rental complexes, not individual houses. And yes, I’ve seen notices to evict the day after the grace period, and once or twice I’ve seen stuff on the sidewalk.

I live in Florida and I won’t invest in places that are not near where I am living, as I can’t monitor or control what is happening with them.
Absentee Landlord is a difficult job, especially when the property is in another State.

“I am also taking a 2nd job to make sure I have that income.”

Thank you.

“One of the benefits of owning a house is your monthly payments are fixed for the life of the mortgage.”

I wouldn’t count on it. Recent history has proven that anything can be changed, revised, etc.

There are no rules anymore.

“If I buy a house, I know I can afford to keep it, …

I am also taking a 2nd job to make sure I have that income.”

Hmmmm…

“If I buy a house, I know I can afford to keep it, and if I get a big enough house my whole family will be able to live there (theoretically without killing each other).”

And your options erode to ZERO as a result of your decision to pay current inflated asking prices for an depreciating asset. Furthermore, you won’t ever get your money out of it if your hyperinflationary dream date occurs.

Dudes,

I have a very secure job, but I want more. The 2nd job allows me to work where ever I might be and also allows me to write off some of expenses. I will be able to make sales calls just about anywhere I can imagine and am currently lining up some in So Cal, Chicago, Idaho and Sweden.

HIC, I am looking for a house that I do not plan to leave. Yes, the kids will grow up, the parents won’t be able to stay with me forever, but the extra room will always be “rentable”. Besides I think having something from my ownership is better than have nothing.

Many people in their 40’s and 50’s have zero life savings. Some are simply living for the moment. Although I would rather not have to rent out rooms to some of these folks, having the ability to do so also gives me some fiscal opportunities in the future.

So I know that some of you don’t agree with this kind of thinking but for me it works. Besides I miss doing the landscaping/gardening.

“One of the benefits of owning a house is your monthly payments are fixed for the life of the mortgage.”

I wouldn’t count on it. Recent history has proven that anything can be changed, revised, etc.

FWIW, in Mexico during the near hyper inflation days of the late 70’s and early 80’s, fixed rate mortgages were honored. Few borrowers had them, as the interest rates charged were much higher than adjustables (before the big inflation hit). IIRC, fixed rate was close to 15% while adjustable was 10%. The adjustable rates soared later with inflation, going as high as 50% IIRC.

“HIC, I am looking for a house that I do not plan to leave.”

I’m indifferent to your motive as it has nothing to do with paying massively inflated prices for a depreciating asset.

The tax part of PITI goes up.

I will be able to make sales calls just about anywhere I can imagine and am currently lining up some in So Cal, Chicago, Idaho and Sweden.

MLM?

They are still waiting in Japan, over two decades since their real estate bubble burst in the early 1990s.

So the Japanese guy who was 45 years old in 1990 is now better off as a 67 year old renter?

I guess some of us could wait until we are 60 to buy our first house. Personally, a paid-off house is part of my retirement plan. I’ve seen too many elderly people lose their rentals to think that life-long renting is a good plan.

“I am also taking a 2nd job”

Still one job shy of being “uniquely American”.

“So the Japanese guy who was 45 years old in 1990 is now better off as a 67 year old renter?”

Do you ever stop with your pimping and lies?

“I’m indifferent to your motive as it has nothing to do with paying massively inflated prices for a depreciating asset.”

Well said.

“I am also taking a 2nd job”

I’ve been working 1-3 jobs (including part time and occasional work) for a quarter of a century. It does seem uniquely American to have a ‘career portfolio’ rather than just a single avenue of employment.

I have a very secure job, but I want more.

I think Richard Nixon felt this way too.

“The US, in comparison, owes much of it’s debt to foreigners, and it’s people have little in the way of savings.”

And the mistake you make is to ignore an army of soon-to-retire Baby Boomers, many of whom will depend on fixed-income pensions for their subsistence over the next three decades. This is the group the Fed has to throw under the bus again, just like they did in the 1970s, in order to play the inflation card.

I agree NE. I’m tired of people quoting the Japanese example, when they are one of the few cases (the only one since WWII?) of deflation with a fiat currency.

Far more likely is inflation. When? and how extreme? are the two difficult questions to ask.

You have to ask, who does the inflation help, and who does it hurt?

1) It, without question, helps borrowers.
2) The effect on banks is unclear. Demand for debt will increase, but interest rates will also increase, subduing that demand.

Who does it hurt?
1) Senior citizens. And they’re organized, and they vote.

With the low continuous level of inflation, the government and the Fed are favoring debtors over savers. And doing it without damaging the lenders who aren’t forced to charge usurious rates.

The government gets the most bang for its policy buck by threatening inflation. The problem is, that by doing so, they also weaken faith in the currency. Currency is the most basic logical construct, the edifice on which the rest of the financial system is built. With a fiat currency, we simply agree that the slugs of metal and the slips of paper have value with which we can purchase the things we need to survive and thrive. We accept that a slip of paper with a “1″ on it has a different value than a slip of paper with a “10″ or “100″ on it. All identically sized and similar-in-appearance slips of paper.

ON THE OTHER HAND… It takes a lot of political will and courage to raise interest rates. Greenspan didn’t have it. Politicians didn’t call for it. If the economy does pick up… they seem to think they can reduce liquidity at will. I’m not sure of this at all.

All these novel approaches the government has taken has been to protect the FIRE sector and their resulting political contributions and tax revenues. Instead of forcing bankrupt companies out of business, forcing malivestment to be burned out, they keep intervening to centrally plan the economy. They keep using tax money to keep Wall Street profitable.

Summary: Subtle inflation is in the government’s interest, higher levels of obvious inflation are not. We’ve seen significant price increases in gas, food, medical care, housing, education. November will show whether the populace will accept more of the same, or if they’re willing to try something different. The two big political parties - private organizations - have used the state apparatus to squelch any competitors. So people seem to believe they must choose one head or the other of the hydra, instead of not voting for the hydra at all.

And the mistake you make is to ignore an army of soon-to-retire Baby Boomers

From a political standpoint, I agree that the Boomers will vote their wallets, which means that political support for inflationary policies may not stand. The question is who has more political clout in Washington? The AARP or Wall St, the Banking Sector, and the 1%?

This is the group the Fed has to throw under the bus again, just like they did in the 1970s, in order to play the inflation card.

Hey, we used to just set them adrift on an ice floe.

Besides, if the GOP gets its way, they’ll also be the last generation getting Medicare and Social Security. So they should be happy, as they leave a scorched earth for the rest of us.

AARP will have a lot more votes.

But they will be stuck between the proverbial rock and a hard place. The only way to collect their promised bennies will require inflationary policies.

I think that a lot of seniors had best plan on working P/T through their golden years. The SS check, savings and whatever else they have probably won’t be enough.

‘I’m tired of people quoting the Japanese example, when they are one of the few cases (the only one since WWII?) of deflation with a fiat currency.’

Oh, you’re tired? Sorry about that, I guess what you mean is please shut up. Don’t tell me this very similar outcome is possible in the US, or even occurring as we speak. So I’ll try not to tire you by pointing out long term bond yields under 2%. Or incomes that have been stagnant or declining since the 70’s.

‘Far more likely is inflation.’

I’ve been reading that since I was able to read (which was well before the Japanese bubbles, deflation and 20 years of recession even happened). But people never get tired of the inflation genie!

Inflation helps those who own hard assets and who have debt. While I agree that inflation hurts seniors, it hurts the working poor more. Something like 80% of seniors own their home…inflation will feel good with that asset, even at it’s stealing from their pocket everytime they go to the grocery store. Those scraping by are going to have a harder and harder time.

The biggest name on the list of beneficiaries is Uncle Sam.

I agree with NE. Subtle and steady inflation is in the US government’s interest…

As I heard Chuck Schwab say at a conference: “The Fed is trying like hell to create inflation, and eventually they’ll be successful.”

‘The biggest name on the list of beneficiaries is Uncle Sam…eventually they’ll be successful’

Deflation occurs despite what the govts and central bank wants.

I’ve said this before; when significant inflation is in place, every man, woman and child is aware of it. You don’t have to search for it.

As stated before inflation in needs deflation in everything else (ie manufactured goods and services) which of course means more unemployement.

Inflation increases GDP when people can afford to pay more

because of savings,
because their salaries are rising, because they can send their wife (formerly stay at home) off to work,
because they can borrow money

We have gone through all of these. From now on inflation will just shift spending from wants to needs. It won’t increase GDP or stimulate the economy or create employment if the free money is just handed to the elite and banks. The gov needs to do something to increase peoples abillity to spend if they want GDP and tax revenue to increase. That will mean creating jobs, changing tax policy that favors the elite, and cutting back on global trade with slave labor states or getting other countries to go along with stimulating the middle class to the same degree.

This will not happen we will keep printing money to keep the gov on life support, and pump up the elites wealth while everything else withers and the top 0.01% wealth and control of the country are solidified.

What we should do is tax gas and the elite while cutting or eliminating payroll taxes. We should put up trade barriers and protect our industries from state backed companies that undercut them on price. We should stimulate job growth and energy efficiency

I’ve said this before; when significant inflation is in place, every man, woman and child is aware of it. You don’t have to search for it.

I see inflation in food, from higher prices to smaller quantities per unit sold. I see gas prices near all time highs. I see college and private education costs higher. I see health care costs higher. I see ammunition and gun prices higher. I see car and truck prices higher. I see rents higher (Boston). I see home improvement costs and home (service) maintenance costs higher. I see airline travel and hotel costs higher. I see a stock market near it’s highs. This doesn’t even take into consideration relative values of goods and services from foreign countries where our currency has in fallen.

Everywhere I look, I see inflation, with the sole exception of single-family housing for purchase. Depending on who you talk to, some markets may in fact have bottomed. So, yes, there is massive inflation occurring.

‘Everywhere I look, I see inflation’

Like I said, every man, woman and child, not just one or a few.

Everyone I rub elbows with is sure seeing it.

OK then, how can interest rates be where they are? Feel free to keep talking about pasta and gasoline.

OK then, how can interest rates be where they are? Feel free to keep talking about pasta and gasoline.

Fed manipulation of the yield curve. I’ll say what I said to Cantankerous in the above post: This is not a free market, to include the bond market. In a free market, if bond yields were high and interest rates low, it would signal low inflation or even deflation.

In the current activist Fed environment, bond yields mean nothing other than what the Fed wants the market to think, to wit: that inflation is low when in fact it is quite high [shadowstats has inflation pegged around 5% currently].

‘what the Fed wants the market to think, to wit: that inflation is low when in fact it is quite high’

‘around 5% currently’

5% is high? Silly me, I thought we were discussing significant inflation.

“I’m tired of people quoting the Japanese example, when they are one of the few cases …

Far more likely is inflation. When? and how extreme? are the two difficult questions to ask.”

The law of averages does not apply in this case.

What does apply is conditional dependence on the backdrop of similarities or differences from previous episodes in the history of financial crises. And the backdrop is a lot more similar to Japan, 1990 (deflation) than U.S., 1975 (inflation).

“Hey, we used to just set them adrift on an ice floe.”

I wonder whether Ben Bernanke and his colleagues on the FOMC will point that out before undertaking an effort to inflate away the value of Baby Boomers’ fixed-income pensions?

5% is high? Silly me, I thought we were discussing significant inflation.

You do realize that at 5% annual inflation, if you earn $100,000 today, in ten years you’ll need to earn $162,000 just to break even. In other words, at 5% inflation, you’ll lose more than half the value of your currency in 10 years…

I don’t know about you, but 10 years to lose half your net worth if you stay in cash is not a pleasant thought. Yes, 5% is high, especially when the “target” is 2-3% annually… about 50% too high.

I wonder whether Ben Bernanke and his colleagues on the FOMC will point that out

It’s the kind of thing they say in private, not to the press.

And once again- whaa! No generation coming after them will have any pension at all. So the boomers get to retire on (if the GOP get their way) the last of Social Security, the last of Medicare, and the last pensions. Boo frickin’ hoo.

Yes, 5% is high, especially when the “target” is 2-3% annually… about 50% too high

Plus the bank only gives you 1% for your savings.

Northeasterner: Not to be the math police, but 5% vs. 2-3% is ~100% higher than the target (100% too high).

And William Dudley (Fed of NY) has stated that the Fed should publicly telegraph their desire to have inflation run at 4% for a time to catch-up on the years that we’ve had below normal inflation.

Not to be the math police, but 5% vs. 2-3% is ~100% higher than the target (100% too high).

Good catch. I was thinking in terms of needing a 50% drop from 5% to 2.5% vs. being 100% higher than 2.5% at 5%.

“You do realize that at 5% annual inflation, if you earn $100,000 today, in ten years you’ll need to earn $162,000 just to break even. In other words, at 5% inflation, you’ll lose more than half the value of your currency in 10 years…”

Wouldn’t more than half be >200K needed in 10 years? 62% is high, but it isn’t more than half the value of the currency.

Or am I miscalculating?

” Subtle and steady inflation is in the US government’s interest…”

Well they better work on a “subtle and steady” way to create wage inflation at the same time. Interest rates can only go down to zero, from there they run out of bullets to support inflated asset prices…although I guess they could create a mortgage payment subsidy, anything is possible when you have no rules or common sense.

I don’t understand the argument that rents are going up, unless there is a looming supply shortage in the rental market or a large growth in incomes ahead.

Because you’re trying to look through the lens of supply and demand to gauge where rents are going. That is certainly part of the picture, but the other part is the inflation in carrying costs: utilities, labor, insurance, taxes. I my case, my costs have increased in electricity, water/sewer, insurance, taxes, and labor on maintenance and upkeep.

What do I do? Raise rents to help cover the costs. These costs are being absorbed by every owner. These costs are often being passed onto renters, who can shop for a cheaper apartment, but that too costs money [moving, first/last/security], etc. In fact, the moving cost alone can be more than the increase in monthly rent annually. Bottom line, rents can continue to increase regardless of supply and demand.

I’ll just skip work one day, and buy every house in my town with my savings from not buying a bus ticket.

I know your comment was tongue-in-cheek, but the part you’re forgetting is that the wealthy, who are probably hedged against such hyper-inflation, would have the means to buy the property for more than you, in the case of market miss-pricing of assets as you describe.

the wealthy…would have the means to buy the property…in the case of market miss-pricing of assets as you describe.

That was my point, really. It’s absurd to think that in times of hyper-inflation that somehow housing prices will still decline.

Yes, and when people double up, it will make it even easier for the landlords in the best locations to charge higher rent.

Indeed… look at the college housing market in Boston. Landlords charge huge premiums for college students to double and triple up in rooms in sub-par [aka slum] housing.

This already happened in my former rental complex. And I know it’s because of the doubling up because the rent for a 3-beds was rising as faster than the rent for a 1-bed.

I was speaking with a gentleman a while back, and he noted that “doubling up” enabled rents to go much higher in the 1970’s. It didn’t decrease demand sufficiently to keep a lid on rents.

And I know it’s because of the doubling up because the rent for a 3-beds was rising as faster than the rent for a 1-bed.

What about when there are 2 people in each of those 3 bedrooms, unbeknownst to the LL? We all like to have our own room, until we can’t afford our own room.

No, the ice rink is not operating.

A similar attempt is being made with the old HP plant in Loveland.

Same with Corvallis and Vancouver, WA. SOME of Corvallis is rented, although the parking lot is longing for cars not weeds.

Haven’t been up to the Vancouver site in a LONG time, so can’t say for sure up there, as I’ve not received a call from them in 8 years or so…

I visited the Vancouver site once. It was DeskJet city back then.

HP’s Greeley site remains empty. I was under the impression that it had been sold to either the city or school district, but I could be wrong. I worked there for almost 5 years. When I started there the lower level was abuzz with manufacturing. The workers weren’t union but earned decent pay and bennies.

Then the manufacturing was outsourced but remained onsite. It didn’t take long for the manufacturing outsourcer to take it all to Asia. Then what was left at Greeley was moved to Loveland, which had also experienced similar offshoring. A few years later, after the HP/Agilent split, what was left of HP in Loveland was relocated to the Fort Collins site, which had also been split in half into HP and Agilent. Agilent later sold the Fort Collins operations to a group called Avago. The Fort Collins site, while not yet a ghost town, is a shadow of its former self.

The Loveland site was sold to the City of Loveland (about 1 million sq ft of finished space for 5 million), which it intends to redevelop it into a business park (the so called ACE Park). There was a lot of hype and excitement about that two years ago, but it’s pretty much died out. The silver lining on the cloud was that the city did get some water rights as part of the deal.

And when you consider that the city paid $5/sq ft for the buildings, plus the hundred acre campus, it really brings home just how worthless that site is.

The water rights they got in the deal are supposed to be worth 1 million, so its actually more like $4/sq ft. I’m thinking that it might cost more than the purchase price to bulldoze and clear out the old buildings.

http://extras.mnginteractive.com/live/media/site47/2012/0209/20120209_082734_AERIAL_HP_LOVE_400.jpg

http://www.drexelbarrell.com/media/portfolio/comm_agilent1.png

How hard is it to set up a cubicle farm in an old building ??

Not hard at all…Just not needed…Besides, the rent and terms that a “cubicle farm” can afford is lesst then what most owners would accept….

A couple of different things are happening to these types of buildings….

#1. Major re-hab…And I mean “MAJOR”….

#2. They are just tearing the building down and building a state of the art facility…

#3. They et t sit vacant and wait for a suitable user…In some cases, 5 years or more…

“Just not needed”

And that is the real problem. If there are no jobs, there are no jobs. Building fancy new buildings doesn’t change that.

But they were incompetent, just like the French in Indocina.

I take it you think the French were actually competent in the execution of their war in Indochina?

From Wikipedia:
As a result of blunders in French decision-making, the French began an operation to support the soldiers at Điện Biên Phủ, deep in the hills of northwestern Vietnam. Its purpose was to cut off Viet Minh supply lines into the neighboring Kingdom of Laos, a French ally, and tactically draw the Viet Minh into a major confrontation that would cripple them. The Viet Minh, however, under General Võ Nguyên Giáp, surrounded and besieged the French, who were unaware of the Viet Minh’s possession of heavy artillery (including anti-aircraft guns) and their ability to move these weapons through difficult terrain, up the reverse slopes of the mountains surrounding the French positions, dig tunnels through the mountain, and position the artillery pieces overlooking the French encampment. This positioning of the artillery made it impervious to counter battery fire. When the Viet Minh opened fire, the one armed French artillery commander accepted responsibility for his failure and committed suicide with a hand grenade. The Viet Minh occupied the highlands around Điện Biên Phủ and bombarded French positions. Tenacious fighting on the ground ensued, reminiscent of the trench warfare of World War I. The French repeatedly repulsed Viet Minh assaults on their positions. Supplies and reinforcements were delivered by air, though as the French positions were overrun, the French perimeter contracted, and the anti-aircraft fire took its toll, fewer and fewer of those supplies reached them. The garrison was overrun after a two-month siege and most French forces surrendered. A few escaped to Laos. The French government resigned and the new Prime Minister, the left of centre Pierre Mendès France, supported French withdrawal from Indochina.

The French built their base in the low-lands, allowing the enemy the high ground. They allowed their supply routes to be cut off and their troops to be isolated. If that doesn’t speak to incompetence, I don’t know what does…

I did not say that at all. Whether the French were competent is irrelevant. Thinking the French were incompetent led the US war leaders to underestimate the scope of the task.

I will gladly concede that point, as I’m sure hubris was as much to blame as any other factor in the US failure in Vietnam.

Ever hear of T.E. Lawrence, NE? Rudyard Kipling? Ask yourself why a group of wealthy engineers and physicians 8,000 miles away would commit mass suicide to protest the United States’ constant and continual meddling in their region, their religion; the intentional starving their children and theft of their natural resources?

Evil? If they were Americans who’d volunteered for a secret suicide mission, we’d call them patriot heroes. Attitudes like yours are PRECISELY why the World Trade Center was hit and 3,000 American innocents were killed.

The Taliban were originally sponsored and trained by the State Department to tweak the Soviets in Chechnya. (Remember Dan Rather with the brave freedom fighters?) Why do you suppose they have been supported by so many of their fellow countrymen for so long? More to the point, how do you think they’ve been able to make fools out of Americans like you who thought they’d “bomb them back to the stone age?” Like those funny little brown people in Vietnam….

Sorry, but your neocon war with Iran ain’t gonna happen unless the Israelis fight it themselves.

‘The Afghanistan area has been invaded many times in recorded history. Invaders in the history of Afghanistan include Alexander the Great, Genghis Khan, Timur, the Mughal Empire, Russian Tsars, the British Empire, the Soviet Union, and currently a coalition force of NATO troops, the majority of which are from the United States’

http://en.wikipedia.org/wiki/Invasions_of_Afghanistan

For once, we agree on something….It probably won’t happen again anytime soon.

I agree, which means it just happened again!

‘more about the ability to project force against Iran’

Don’t forget the oil pipelines.

It is possible, given our forces in Afghanistan and our bases and allies in Iraq and Turkey effectively surround Iran.

Our occupation of Afghanistan is two-fold:

1. Pakistan has nuclear weapons and a very unstable government that is as close to the Taliban as you ever want to see.

2. Power projection not to Iran, but to China, Pakistan and Russia. You can damn well bank on the fact that we are a burr up their butts by being so close AND active. Iran is just the distraction from the real threat.

The dynamic is simple enough: China, India and Pakistan all hate each other. They all have nuclear weapons and delivery systems. But of the 3, Pakistan is the least stable. By far. If the Pakistan government fails, it WILL be directly caused by the Taliban or its agents. Which means they get the nukes.

The fact that the Afghani people allowed the Taliban to exist and allowed the Taliban to support a terrorist organization on Afghanistan soil that attacked the US is enough cause, in my opinion, for them to suffer the repercussions of a full scale military invasion.,,………

In the United States and Italy there is a Mafia. I don’t support it or “allow it to exist”. I can’t do anything about it.
the “people” have NOTHING to do with your claims. They are just victims of tribal lord society. They are powerless to stop it.
I can’t control what the US Military or government does. i would like to stop this madness. Yet, I have no say.
So, I am to blame for what happens. I didn’t even vote for Obama.
Your reasoning that ALL people should suffer for the actions of a few, that were powerless to stop the others, or had nothing to do with any of it, strikes me as misguided.
The US ARmy blamed the people of Germany for the Nazi’s takeover of the government. Many people tried to eliminate Hilter and were themselves “eliminated”. The people were dragged out to the “Death camps” to see for themselves what had been going on. They lived in a police state. Were they responsible?
Stalin had 10’s of millions of people killed to support the soviet system. WEre the people trapped behind the wall responsible for not killing off the politburo?
It’s easy to assess blame. It’s even easier to annihilate people when you have massive weapons of mass destruction, a monopoly of the US armed forces. America has become an IMPERIAL nation, dictating world affairs via FORCE. Our way or DIE.
I would prefer we leave these people alone.

I can’t control what the US Military or government does. i would like to stop this madness. Yet, I have no say.

You have plenty of say. You can vote in elections to change policy and you can actively protest actions you feel are wrong.

The Northern Alliance fought against the Taliban. What did the rest of the “tribal regions” do? They acquiesced. They stood by while the Taliban allowed Al Qaeda to plot to kill thousands of Americans. Just like the German people supported the extermination of the Jews through their inaction and supposed “ignorance”. Nazi Germany got what they deserved, and civilians were not spared. Why should the Afghani people be treated any differently?

You mean like how 70% of American were against TARP and stopped it?

Oh wait….

But then they protested against the bailout?

Oh wait… they were called dirty hippies.

No NE, we DO NOT control our gov and haven’t for a long, long time. The last time the people actually made the government responsive to their wants and needs was in the 1960s, and cities still had to burn before the gov. took notice.

You mean like how 70% of American were against TARP and stopped it?

For better or worse, we live in a Representative Republic where our elected representatives do whatever they feel is in the best interest of their constituents [or themselves]. As I said, if we don’t like the policies in place, we can vote Congress and/or the President out every 4 years.

he last time the people actually made the government responsive to their wants and needs was in the 1960s, and cities still had to burn before the gov. took notice.

I have a feeling we may see burning cities again in the not-to-distant future. Time will tell.

…where our elected unelected representatives central bankers do whatever they feel is in the best interest of their constituents [or themselves].

“The fact that the Afghani people allowed the Taliban to exist and allowed the Taliban to support a terrorist organization on Afghanistan soil that attacked the US is enough cause, in my opinion, for them to suffer the repercussions of a full scale military invasion.,,………”

So all Catholics are responsible for the actions of a few pedophile priests and the church hierarchy that protected them?

And all US citizens are responsible for the McVeigh OK City bombing, because our government did not prevent it?

I don’t think either of those examples warrants comment as they are clearly not the same as allowing your government to do whatever evil it desires.

Tell me, do you blame the Yugoslavian government or the Serbian people for the atrocities committed against Albanians prior to the 1998/99 NATO conflict?

Do you blame the Nazi government or the German people for the atrocities committed to the Jews, among others in 1939-1945?

The answer is both. “All that is necessary for the triumph of evil is that good men do nothing.” — Edmund Burke

The answer is that I blame some of the German people and some of the Serbian people. Even in Nazi Germany, there were people who worked against the government. There were military folks who attempted to assassinate Hitler. Should they be blamed because they were unsuccessful?

And NE, if you don’t even know that “Afghani” is a currency not a people, you’ve no business judging their motivations or culture, let alone condemning their citizenry.

And I think you’re blinded by the false two party dichotomy.

I could be wrong, but I think you underestimate Mitt Romney. At Bain he bought companies that had been mismanaged and were failing. Some he rescued and some he couldn’t.

I agree that his has some successes in his past that are encouraging. But what do you think of him bullying people and “not remembering”? And what do you think of him hiring people like Glenn Hubbard?

A big difference between being a CEO and being President is that a CEO can pretty much do whatever he wants, as long as the board backs him up. A CEO doesn’t have to play the kind of political games the president is faced with.

Can he fix the USA? I suppose it depends on how hard the lobbyists and donors yank his leash.

Can he fix the USA??

Wrong question

Can he liquidate all US assets extracting wealth for his kind (top 0.01%) shield them from taxes use debt to finance further tax cuts AND destroy the retirement and health plan for the majority of Americans.Then sell the dieing husk with lipstick to someone else.

That was his job at BAIN

Carl M,

Bullying problem? Oh my, did you fall for that? Mitt is a genuine Mormon and I am sure that this bullying never happened. I know it’s hard to believe some of the stories about his life, but some people are actually kind, loving, considerate, etc.

Regarding Glenn Hubbard, I have no idea what the concern is about. But considering how Romney hires, I suspect he’s a good choice.

Bullying problem? Oh my, did you fall for that?

Sorry, too many eyewitnesses to the forced hair cut incident.

Regarding Glenn Hubbard, I have no idea what the concern is about

No, you obviously don’t.

Bullying problem? Oh my, did you fall for that?

I guess The Mittster “fell for it” too.

Romney apologizes after report of bullying as a teen

http://articles.latimes.com/2012/may/10/nation/la-na-romney-apology-20120511

Romney apologizes after report of bullying as a teen
Mitt Romney apologizes after the Washington Post reports that while in prep school he bullied a classmate because of the student’s ‘nonconformity and presumed homosexuality.’

The Washington Post detailed a 1965 incident at Cranbrook School in which a buttoned-down Romney apparently was incensed by the dyed blond locks of a junior known for his “nonconformity and presumed homosexuality.”

He led a “posse” of students in a charge against the boy, the Post reported. “He can’t look like that,” Romney reportedly told a close friend at the time. “That’s wrong. Just look at him!”

Romney “tackled him and pinned him to the ground,” the Post reported, then hacked off his hair with scissors as the crying boy screamed for help. The Post said it interviewed five witnesses, four of whom spoke on the record and recalled the incident in vivid detail. One man said he had wondered whether Romney would get in trouble at the school, known for its discipline, but that no one was punished.

Bullying problem? Oh my, did you fall for that? Mitt is a genuine Mormon and I am sure that this bullying never happened. I know it’s hard to believe some of the stories about his life, but some people are actually kind, loving, considerate, etc.

How can you go from “genuine Mormon” and “some people are actually kind, loving, considerate” (both of which I can agree with) to “I am sure that this bullying never happened”? Speaking as a “genuine Mormon” myself, that seems very naive. Lots of young “genuine Mormons” do some really mean, stupid things growing up. Few claim to not remember, though.

Regarding Glenn Hubbard, I have no idea what the concern is about. But considering how Romney hires, I suspect he’s a good choice.

Wow. You certainly are a trusting soul. Have you watched “Inside Job”?

So you guys are really concerned about the bullying problem? Huh, that is hard to believe. I haven’t really looked into Glen Hubbard I have no interest, but I will watch Inside Job and get back to ya.

How about worrying about:

1) Fast and Furious, the administration’s attempt to make gun ownership so vile that they could take our guns away.

2) Government spending that has sky rocketed (to the moon).

3) Tony Rezko dealings in Chicago.

4) Unemployment over 8% and actual unemployment much higher.

5) Demonization of all things rich. Those of you work for someone else, do you work for a rich person?

I can come up with a huge list of all the things I abhor about the Prez but I have to get back to work.

Demonization of all things rich. Those of you work for someone else, do you work for a rich person?

Yea right. The rich are “demonized” in America. That’s a Laffer.

Romney is THE reason why they are demonized. Him and Jack “The Slasher” Welch.

Romney sold us down the river and now people want him to be president? You really, really can’t fix our kind of stupid.

So you guys are really concerned about the bullying problem?

Yeah, I am…not because something that happened between high school kids decades ago is that important. Because it (and the “inability” to remember it) might be an important clue into the personality type of the person asking for my vote. I have plenty of reasons that I might conclude Romney is the best candidate with a chance of winning, but I don’t want to accidentally help a sociopath get elected. And trust me, I’m no fan of the Ds.

“and now people want him to be president?”

See also: Carly Fiorina in CA for US Senate.

I keep trying to tell the unemployment-screeching Romney supporters in my circle, but to them these people are “successes.” Maybe it should be mandatory for every American to work in the manufacturing space for a few years to understand this…oh wait.

“Mitt is a genuine Mormon and I am sure that this bullying never happened.”

I live with Mormons and occasionally witness Mormon bullying first hand. It happens.

That said, I think this is normal teenager behavior and should have no bearing on the election, anti-gay stance of Mormons and other fundamentalist Christian churches notwithstanding to the contrary.

Posted at 05:02 PM ET, 05/11/2012
Mitt Romney bullying story holds up to scrutiny
By Patrick B. Pexton

The ombudsman is being bombarded by input from readers, via e-mail and phone calls, about the story that Post reporter Jason Horowitz wrote on Mitt Romney’s teenage years at the prestigious Cranbrook School in Michigan.

The story leads with an anecdote about Romney and some of his friends in his dormitory tackling and pinning to the ground an unpopular classmate and forcibly cutting off his bleached-blond, longish hair. The boy, John Lauber, was frightened and in tears, Horowitz explained, and the boy turned out to be gay.
…

“Regarding Glenn Hubbard, I have no idea what the concern is about.”

Are you culturally illiterate?

A Searing Look At Wall Street In ‘Inside Job’
All Things Considered
[8 min 20 sec]
October 1, 2010

Host Melissa Block speaks with director Charles Ferguson about his latest film, “Inside Job,” a documentary about the downfall of Wall Street. Ferguson says he underestimated the level of unethical and fraudulent behavior he would come across.
…
Mr. FERGUSON: I started doing research for the film in the fall of 2008, and when we were already filming, in the middle of 2009, the world first learned, and we were among the first to learn, actually, that not only had the investment banks been creating and selling securities that they frequently knew were defective and likely to go bad, but they had been in fact designing them to go bad so that they could profit by betting against them.

And if somebody had told me that in the fall of 2008, that this had gone on on a huge scale, tens of billions of dollars, I would have said no, that’s just too extreme. People don’t do that. And if you do do it, you would go to jail.

They did do it, and nobody’s gone to jail.
…
BLOCK: You make some claims toward the end of the film that have to do with academia, with people at institutions of higher learning. And your claim is that the financial industry has corrupted the study of economics itself. What do you mean by that?

Mr. FERGUSON: What you find is that very prominent professors of economics, often people who have also held high government posts, are paid to testify in Congress. They are paid to be expert witnesses in both civil and criminal trials. They’re often paid to write papers that praise the financial services industry and argue on behalf of deregulation of the industry. They make millions, in some cases tens of millions, of dollars doing this. And this is usually not disclosed. And in fact, university regulations do not require disclosure of these payments.

BLOCK: You include an exchange that gets increasingly angry with Glenn Hubbard, he was the chief economic adviser to President George W. Bush, he’s now dean of Columbia Business School. And you’re asking him about this outside income that you’re talking about, the income he gets from being on the boards of companies in the financial services industry. And it leads up to this. Let me play you this bit of tape.

(Soundbite of film, “Inside Job”)

Mr. FERGUSON: Do they include other financial services firms?

Mr. GLENN HUBBARD (Dean, Columbia Business School): Possibly.

Mr. FERGUSON: You don’t remember?

Mr. HUBBARD: This isn’t a deposition, sir. I was polite enough to give you time, foolishly I now see. But you have three more minutes. Give it your best shot.

BLOCK: Charles Ferguson, tell me about that moment in Glenn Hubbard’s office.

Mr. FERGUSON: Well, the entire interview was fairly contentious, as you can imagine. It surprised me somewhat to realize that these people were not used to being challenged, that they’d never been questioned about this issue before. They clearly expected to be deferred to by me and I think by everybody.

BLOCK: You have not been invited back, safe to say, to Glenn Hubbard’s office.

Mr. FERGUSON: No, I think it’ll be quite a long time before I have lunch with Glenn Hubbard.
…

Tell you what folks, I will watch Inside Job if you guys will watch

2016

http://2016themovie.com/

You are comparing apples to oranges.

The Wall St crimes are a proven fact. Bain Capital records are fact. Mitt’s actions are recorded fact.

2016 is speculation.

So no, there is no obligation of any kind to reciprocate.

“Tell you what folks, I will watch Inside Job if you guys will watch 2016″

I went to see Inside Job with HBBers including the one who got me here 7 years ago. It was a great summary of everything we talked about for the last 5 years (saw it Jan. 2011.) It wasn’t a political smear campaign - it was stuff that had happened and we had talked about for ages. All the HBBers learned nothing new, but agreed it was put together in an organized way and a great summary for anyone who had not followed the blogs for years. Excluding the RE shrills and trolls who plagued (and continue to) this blog, I doubt any serious HBBer would have any major issues with what was presented. Both parties, all politicians, the banks, the media, the people all played a role in the problems explored.

2016 seems very self-serving and simply a huge ad campaign for the Republicans. More annoying cries of socialism and how Obama wants to turn us into Kenya.

I don’t think the films are equally well done and equally balanced. Propaganda is never thoughtful and fair - it induces fear which is what the fanatical right is great at. No, I probably won’t watch 2016 unless someone I trust to be thoughtful and not apt to give complex problems simple origins and solutions advises me to.

And before you start spewing about my Obama loving core, six months later I am STILL voting for Ron Paul. Don’t agree with him on everything, but I think he’s the only one not owned by the corporations. (And yes, BO serves the corporations same as Mitt. At least IMHO.)

‘I expect the Gold Standard’

This is Romney trying to get Ron Paul voters on board.

This is Romney trying to get Ron Paul voters on board.

That’s what I thought. What about the foreign and military policies? Are they less bellicose this year?

“This is Romney trying to get Ron Paul voters on board.”

TOUCHDOWN!

‘ What about the foreign and military policies’

Not to mention the police state. This is what every liberty minded voter faces.

‘An audit consists of the process used by properly trained and experienced persons, who are independent from management of an auditee, to gather evidence from both inside and outside an organization to allow the formation and communication of a professional opinion about the fairness of the organization’s financial reports and its compliance with applicable legal requirements. Auditing is the art of objectively evaluating the evidence gathered, making judgments, and reaching logical conclusions from the evidence. Auditing cannot be reduced to rote.’

‘Financial statements prepared by management and transmitted to outsiders without first being independently audited, suffer a lack of credibility. In reporting on its own administration of government affairs, management can hardly be expected to be entirely impartial and unbiased, any more than a basketball coach could be expected to serve as both coach and official referee in the same game.’

http://legislativeaudit.sd.gov/Taxpayers/what_an_audit_is_all.htm

Was that the ENRON definition?

“…it’s all about the rules. Rules for me and you and other rules that apply only to them. It is what it is.”

Yes. Yes it is.

Speaking of ENRON, I was there and they were guilty as hell.

“…I was there…”

Thanks for sharing. You probably have already seen this movie, but in case not, my wife and I enjoyed it:

The Smartest Guys in the Room

Enron dives from the seventh largest US company to bankruptcy in less than a year in this tale told chronologically. The emphasis is on human drama, from suicide to 20,000 people sacked: the personalities of Ken Lay (with Falwellesque rectitude), Jeff Skilling (he of big ideas), Lou Pai (gone with $250 M), and Andy Fastow (the dark prince) dominate. Along the way, we watch Enron game California’s deregulated electricity market, get a free pass from Arthur Andersen (which okays the dubious mark-to-market accounting), use greed to manipulate banks and brokerages (Merrill Lynch fires the analyst who questions Enron’s rise), and hear from both Presidents Bush what great guys these are.

+1 Bethany McLean = Hotness + Smarts
http://www.vanityfair.com/contributors/bethany-mclean

Yeah, some kid in South Korea just won 10 million in a championship there. 10 millions WON that is…about 9 grand in USD.

I’m not good enough at multitasking in real time to ever be really competitive at SC2, but I love the game. I just need to build a real computer for it. I was watching a video from the beta of the new Zerg campaign and the new units look interesting.

If you’re actively playing online, let me know your handle. We can team up in some 2v2/3v3 matches…

I need a real computer before I slow down other people’s games online. I think I’m carldmorris2, but I don’t remember because I never try to play with anybody online :-).

My handle is Mav.

Wait, I just remembered my son messed with the account. I’m pretty sure it’s “CodyMan” now. I’ll look for Mav if I can remember next time I’m on.

Real estate never normally went up 6% per year. Buy a house for your college kid and have them drop or relocate in a matter of months or even after the 1st full school year and you’re out closing expenses plus sales expenses. Never would it make sense in my head.

Yeah, same thing in my neck of the woods. The shiny, late-model cars are driven by people from Bellevue or Vancouver, or else they’re RE agents (in their Lexus or Mercedes SUVs).

Is there a shabby chic quality to driving an older/non-luxury car in Denver? It could just be whatever is locally hip. In oil boomtown ‘conservative’ Houston, that might be a luxe car, in granola green liberal Denver, an older Subaru may make you ‘one of us’.

That would make me super trendy!

New soobies are considered “cool” by the Mile High granola crowd. If you’re of the redneck persuasion, then a Chevy Tahoe or a pickup truck might be more your style.

What in hell is a Sooby?

Subaru.

I think you guys are right. Darrell is a liar.

Can you kindly explain to Darryl in PHX that there is no support in macroeconomics theory for his whacked out notion about a choice between bailing out saltwater housing markets or financial Armageddon?

I’d like to hear it too. Sometimes math points in directions we don’t personally like.

Prediction: Silence from the Pussycsat. Since Darrell is right.

“I’ve run out of patience with shooting down his doomsday scenarios.”

I’m sorry to hear that, but infrequent posters like myself read this blog to see both doomsday and rosy scenarios presented and shot down. Request denied, return to your post.

“Can you kindly explain to Darryl in PHX that there is no support in macroeconomics theory for his whacked out notion about a choice between bailing out saltwater housing markets or financial Armageddon? ”

Cantankerous…. Exactly what do you think was happening in 2008 that we had to step in with hundreds of billion of government TARP, bailout of AIG, tens of billions of FDIC rescues , near 0% interest rates, billions in Fed repos, and then repealing FASB157 to allow financial corporations to bald faced lie about the value of assets on their balance sheet?

Falling real estate prices caused Lehman Brothers to default, triggering defaults in institutions that Lehman Brothers owed, everyone was forced to try to sell assets to cover margin calls on their assets. With all sellers and few buyers, stocks, commodities, bonds, everything was going down, down, down, causing cascade defaults as falling prices triggered more margin calls and more forced selling.

S&P dropped from 1500 to 700, oil fell from 150 to 60, even the precious fell from $1000 an ounce to $700 an ounce.

Job losses hit 750,000 a month. Corporate revenues were falling like a rock. Many large corporations, unable to roll over debt and having lines of credit cut off, went bankrupt.

Cantankerous… there is $38T in dollars in existence, backed up by $38T in debt. $13T of that debt is mortgages. Houe prices crash, the debt defaults, mass money poofage, crash in prices of other assets, loans against those assets default, more money poofage….

You can say I don’t know what I’m talking about, but then you better be able to offer a better explanation for 2008….

“Exactly what do you think was happening in 2008 that we had to step in with hundreds of billion of government TARP, bailout of AIG, tens of billions of FDIC rescues , near 0% interest rates, billions in Fed repos, and then repealing FASB157 to allow financial corporations to bald faced lie about the value of assets on their balance sheet?”

Absolutely nothing.

I hope Mitt Romney and Paul Ryan are paying attention. If they want to get themselves elected, I suggest they look out for the future survival of our Nation by offering to drum the Godless alliance between too-big-to-fail Wall Street banks and K Street out of existence. A failure to do so will result in financial Armageddon, right here in America.

Top Economists: Iceland Did It Right … And Everyone Else Is Doing It Wrong
by Washington’s Blog
Global Research, August 25, 2012

Iceland Shows the Way

Nobel prize winning economist Joe Stiglitz notes:

What Iceland did was right. It would have been wrong to burden future generations with the mistakes of the financial system.

Nobel prize winning economist Paul Krugman writes:

What [Iceland's recovery] demonstrated was the … case for letting creditors of private banks gone wild eat the losses.

Krugman also says:

A funny thing happened on the way to economic Armageddon: Iceland’s very desperation made conventional behavior impossible, freeing the nation to break the rules. Where everyone else bailed out the bankers and made the public pay the price, Iceland let the banks go bust and actually expanded its social safety net. Where everyone else was fixated on trying to placate international investors, Iceland imposed temporary controls on the movement of capital to give itself room to maneuver.

Krugman is right. Letting the banks go bust – instead of perpetually bailing them out – is the right way to go.

We’ve previously noted:

Iceland told the banks to pound sand. And Iceland’s economy is doing much better than virtually all of the countries which have let the banks push them around.

Bloomberg reports:

Iceland holds some key lessons for nations trying to survive bailouts after the island’s approach to its rescue led to a “surprisingly” strong recovery, the International Monetary Fund’s mission chief to the country said.

Iceland’s commitment to its program, a decision to push losses on to bondholders instead of taxpayers and the safeguarding of a welfare system that shielded the unemployed from penury helped propel the nation from collapse toward recovery, according to the Washington-based fund.
…
Iceland refused to protect creditors in its banks, which failed in 2008 after their debts bloated to 10 times the size of the economy.

The IMF’s point about bondholders is an important one: the failure to force a haircut on the bondholders is dooming the U.S. and Europe to economic doldrums.

The IMF notes:

[The] decision not to make taxpayers liable for bank losses was right, economists say.

In other words, as IMF put it:

Key to Iceland’s recovery was [a] program [which] sought to ensure that the restructuring of the banks would not require Icelandic taxpayers to shoulder excessive private sector losses.

Icenews points out:

Experts continue to praise Iceland’s recovery success after the country’s bank bailouts of 2008.

Unlike the US and several countries in the eurozone, Iceland allowed its banking system to fail in the global economic downturn and put the burden on the industry’s creditors rather than taxpayers.
…
The rebound continues to wow officials, including International Monetary Fund chief Christine Lagarde, who recently referred to the Icelandic recovery as “impressive”. And experts continue to reiterate that European officials should look to Iceland for lessons regarding austerity measures and similar issues.

Barry Ritholtz noted last year:

Rather than bailout the banks — Iceland could not have done so even if they wanted to — they guaranteed deposits (the way our FDIC does), and let the normal capitalistic process of failure run its course.

They are now much much better for it than the countries like the US and Ireland who did not.

Bloomberg pointed out February 2011:

Unlike other nations, including the U.S. and Ireland, which injected billions of dollars of capital into their financial institutions to keep them afloat, Iceland placed its biggest lenders in receivership. It chose not to protect creditors of the country’s banks, whose assets had ballooned to $209 billion, 11 times gross domestic product.
…
“Iceland did the right thing … creditors, not the taxpayers, shouldered the losses of banks,” says Nobel laureate Joseph Stiglitz, an economics professor at Columbia University in New York. “Ireland’s done all the wrong things, on the other hand. That’s probably the worst model.”

Ireland guaranteed all the liabilities of its banks when they ran into trouble and has been injecting capital — 46 billion euros ($64 billion) so far — to prop them up. That brought the country to the brink of ruin, forcing it to accept a rescue package from the European Union in December.
…
Countries with larger banking systems can follow Iceland’s example, says Adriaan van der Knaap, a managing director at UBS AG.

“It wouldn’t upset the financial system,” says Van der Knaap, who has advised Iceland’s bank resolution committees.
…
Arni Pall Arnason, 44, Iceland’s minister of economic affairs, says the decision to make debt holders share the pain saved the country’s future.

“If we’d guaranteed all the banks’ liabilities, we’d be in the same situation as Ireland,” says Arnason, whose Social Democratic Alliance was a junior coalition partner in the Haarde government.
…
“In the beginning, banks and other financial institutions in Europe were telling us, ‘Never again will we lend to you,’” Einarsdottir says. “Then it was 10 years, then 5. Now they say they might soon be ready to lend again.”

And Iceland’s prosecution of white collar fraud played a big part in its recovery:

[The U.S. and Europe have thwarted white collar fraud investigations ... let alone prosecutions.] On the other hand, Iceland has prosecuted the fraudster bank heads (and here and here) and their former prime minister, and their economy is recovering nicely … because trust is being restored in the financial system.

Iceland has the same population as Lexington, Kentucky. Where do Stiglitz and Krugman say that the US could or should do what Iceland did? They don’t. Here’s Krugman:

For the most part, Iceland’s lesson is relevant to countries that experienced big capital inflows followed by a sudden stop — that is, the European periphery, not the US or the UK.

It’s a macro/ micro thing. Iceland is micro compared to the world economy, the US isn’t.

That is news to me. When did Pussycat ever suggest there would be global financial Armageddon if Darryl’s policy prescriptions were not adopted, or rant on and on about how running a trade deficit was the reason we are all doomed?

“He makes the same macroeconomic points Pussycat does.”

Good observation!

Comment by Faster Pussycat, Sell Sell
2012-08-24 18:48:05

Dead-cat bounce.

Because of official policy, ironically. The latter part should be p00-inducingly scary.

There are very very few that understand all the brilliant and horrible consequences of “mv = pq” but I assure you the Fed is definitely playing that game to the very edge.

Simple micro will win. Debt that can’t be paid won’t be paid. No salaries, no payment.

It’s really as simple as that.

And here was my macro-ignoramus response to FPSS’s erudite (aka Darryl-like) post:

Maybe you think the answer (to why future real estate prices will continue to fall) is in there somewhere, but my question is really about what sort of unforeseen black swan could trigger the horrible consequences of “mv = pq” to manifest themselves? So far the Fed has offset the drop in “v” with a huge influx of “m”, plus supported policies to artificially prop up “v,” such as federally-insured mortgages up to principal north of $700K from the three F’s (Fannie, Freddie, FHA), and pushing the interest rate pedal ever closer to the floorboard.

On the “pq” side of the equation, “q” has been limited in the housing market by severely reducing inventory; a historically low rate of transactions, with commensurate inability of Realtors™ to earn a living, has been the only cost I can discern for limiting “q” to prop up “p.”

But as many posters here note on a daily basis, it all seems to be working, as “p” and “q” are both on the increase in recent months. What convinces you the trend isn’t sustainable?

And as to this issue, “Debt that can’t be paid won’t be paid. No salaries, no payment,” since the overwhelming majority of recent mortgage loans are federally guaranteed, won’t all U.S. taxpayers be paying off the lenders’ guaranteed principles on any loans made by the three F’s which go into default? It’s turtles taxpayers all the way down.

That was a great exchange a couple of nights back!

Comment by Faster Pussycat, Sell Sell
2012-08-25 09:03:36

“Debt that can’t be paid won’t be paid.”

Applies to the taxpayer too. Witness Greece!