The Housing Bubble

Good to know that all those brain cells are firing on target, PB!

That one is such a no-brainer, I’m quite amazed even FOMC members don’t “get it.”

They’re paid to dissimulate. You and I aren’t.

Therein lies all the difference. As simple as that.

What’s the time horizon on that “permanent discount on rent”?

My sense is, the current 18-25 year olds are screwed and will be for the rest of their life.

IAT

PS — For the record, I am a lot older than 25.

IAT

the current 18-25 year olds are screwed and will be for the rest of their life.

You must’ve missed Econ 101. I suggest you start with Samuelson’s text. Also, a few history textbooks specifically targeting the early 1930’s in Europe. Law history would be an excellent start but I doubt you read German.

Oh, p1mpy, p1mpy, p1mpy, you were right all along. These people are so obvious.

Had to look that one up — thanks!

And it was spot on, by the way. As a policy, lying about economic reality is a failure by design.

dis·sim·u·late/diˈsimyəˌlāt/
Verb:
Conceal or disguise (one’s thoughts, feelings, or character): “he dissimulates his wealth beneath ragged pullovers”.

a few history textbooks specifically targeting the early 1930’s in Europe.

I would say that if you were 18-25 years old in early 1930s Europe you were indeed probably screwed, seeing as how you’d be in the middle of a world war in a few years. And you’d be fighting age.

I never said these are the only 18-25 year olds that were ever screwed. Geez. Guess Romney is right; everyone wants to claim victimhood. (I presume FPSS was 18-25 in 1930’s Germany. Judging from FPSS’s claims, the implications for FPSS’s age seem about right.)

IAT

Yes I have run my own businesses my entire life which has nothing to do with my statement. My statement is based on a lot of research into wealth creation. If you study wealth in the U.S. you’ll find that approximately 80% of households that are wealthy got there through self employment. Only a few percentage of the wealthy got their via what most people conceive of (incorrectly) as the usual paths to wealth i.e. doctors, lawyers, etc. And even fewer inherit it. Those are the facts. Pick up a copy (or the audio version) of “The Millionaire Mind” by Dr. Thomas J. Stanley. That’s a good start. The BLS is also a good source of info on the subject. Younger generations are disproportionally *not* self employed and that is *the* problem.

“become self employed”. Had an interesting experience of late. Have an out-of-town friend who has some commercial property nearby. I needed to get it bug sprayed for him (single time, one spray job around 5 outside doors. I called Clark Pest Control, and Terminex two of the advertised local bug critter hitters. Neither could give any info over the phone as they had to come to the site to make an estimate.(Red flag goes up, high pressure sale contract). Clark guy comes out looks and says I have to go back to my truck and write up an estimate. After 10 minutes he comes back and hands me an estimate for $1000, $750 up front for a once a month spray job for a year. I was informed that they only do once a month or once every two months and no single job. I informed him that I can buy some bug spray to do the job and re-weather strip the door. He was a young kid trying to make a living so no need to scream and shout at him.
Next day I’m at a door store looking to re-rubberize the door bottoms and I bring up the Pesticide Company scams with the high pressure sales and contracts with the proprietor. He says “no problem, call this guy. He’s a young fellow with his licensure that has his own business on the side while he works in another field elsewhere. He charges $35/ per visit on a small job like that.”
You just got to get out in the community and do your homework to find the best buys and services.

Same premise in this book:

The Millionaire Next Door: The Surprising Secrets of America’s Wealthy by Thomas Stanley and William Danko

Worth a read.

Personally I could never stomach working for someone else for the wage offered when I knew darn well I could compete with them directly and keep 100% of the profit myself.

Perhaps some day I’ll get a job after I retire for a year just to see what it’s like. My guess is (based on the stories my friends tell me) it is overrated.

Regarding your bug story - one of the best secrets I ever came upon was the unemployment line. If you are looking for solid help at a good rate look there. You can find all kinds of skills.

When I was young I used to bid jobs, hire someone from the unemployment line to do the job (keeping the profit) and then and watch and learn how it’s done. Then do the next job myself.

Personally I could never stomach working for someone else for the wage offered

What line of business are you in, SF Bay Area? My personal opinion is that some businesses are far more suited to entrepreneurship than others…

I’d rather not disclose my current line of business. But I tried out several before finding the formula that worked best. I think practicing running a business, no matter what kind, even if it isn’t a huge money maker is key. Once you understand how it is all done - then you find the proper field and you are on the fast track. You can start with anything.

What you say is true, you can not for example be a self employed central banker for example You may not get to do what you feel is your life’s work. But at least you won’t be eating cat food when you get older. You won’t have to deal with the pressure of money (or lack thereof). And you can take time to do other things when you get older.

Younger people are missing out.

But at least you won’t be eating cat food when you get older.

There is another formula that I think works equally well, and perhaps has a higher probability of success. The “Millionaire Next Door” (MND) points out that some of the people you would not suspect are millionaires may be, but what it does NOT go into is what percentage of people who follow that path end up wealthy vs end up broke. They provide zero data there.

The other path is to pursue a career in some field that has above-average income potential, and live well below your means. In a way, the MND path is similar—they too were living relatively modestly relative to their net worth.

Not every wage-slave is indentured forever…

Well, being self employed myself for my entire life other than a few years early, I can understand and agre with how you feel about being self employed…

Here is the rub, as I see it today…First is Capital…Have the money to start, and the reserves to carry you through the lean times….

Second would be the cost of doing business…Its very expensive to be self employed unless your willing to take huge risk…For instance, your example of hiring out of the unemployment line…First, working for pay while you collect unemployment is illegal isn’t it ?? Secondly, what if that person gets hurt while working for you ?? Are you providing liability and workers comp insurance ?? I suspect not, because I am sure that unemployed person wants no paper trail record of them working while collecting unemployment..

With all that said, I think your thinking about watching, learning and then doing it yourself is spot on…

By the way, you need not disclose specifically what you do for a living, just generally…My suspicion would be that you are in the trades of some sort…

Not every wage-slave is indentured forever…

Not to mention that as your savings grow, you have far greater latitude in doing work that grows your career, and get remunerated for it fairly.

Having an excellent Eff-You plan actually guarantees above-average income raises (assuming you have skills, of course.)

Think about it.

Having an excellent Eff-You plan actually guarantees above-average income raises (assuming you have skills, of course.)

Not only that—I also found that around the time I hit the “Eff-You” #’s, that I strangely found myself enjoying my job more, and feeling much less of a need to escape from it.

Yes, the universe definitely has a sense of humor.

You make three good points.

“Millionaire Next Door” goes into depth regarding the difference between the “balance sheet affluent” and the “cash flow affluent.” The bottom line is you can’t fill a bucket with water if it is leaking water faster than you fill it. A lot of people that you suspect are rich because they have all the trappings actually have nothing on their net balance sheet and actually have a very poor psychological profile and end up not so well in life in the end. And there are many mulch-millionaires out there that dress in casual clothes, drive a typical rice-burner and live in a rented house. They tend to be very productive and life works out better for them all things being equal. It’s not just living withing your means, it’s also about realizing what is important in life and divorcing yourself from what our culture tries to sell us on. Stop playing the game and instead create a whole new game from the ground up.

Your point about picking a field and having a plan is also solid. But think about this - all things being equal even if you do go into the best field - being the boss still beats out in most cases. For example you can be a genetic engineer and go work for big-pharma or biotech and do great. Alternately you be a genetic engineer and start your own medical device company and be much more successful.

Finally you bring up the issue of failure. And you properly point out that there is a self selecting bias to the study in question. I agree. I see people fail at business. But people fail at all kinds of careers too. Most of the kids I entered Berkeley with dropped out. Of those most that tried to get into their chosen career didn’t end up doing it. But still what you are saying is a very valid criticism of this study.

One thing I’ll add is this - interview other people in business. Learn from them. People love talking about themselves and their work and the most successful people are usually the most likely to be willing to sit down and teach you. Just be humble and listen up. That will greatly reduce your risk of failure. I do it all the time. And the more I do it the less I realize I know.

You make three good points.

You restated them better than I even thought them the first time… Well said.

My brother was 30 before he realized that the people with two BMW’s in front of the huge McMansion wearing the designer clothes talking about what the bought that week are living on a mountain of debt.

I personally like being self-employed ??

As do I….I think the best advice I got early on was;

“Always remember, when you are self-employed you are un-employed each day when you walk out the door…There are no guarantees”…

I personally like being self-employed.

Are you current self-employed? If so, what are you self-employed at, Rio?

RioAmericanInBrasil, please don’t take this personally, I reject this thesis.

It’s perfectly possible for every person to be self employed and not have any employees. So what we are really looking at here in the U.S. is the *ratio* of the self employed to the employed. We need to up the proportion of self employed in the younger cohort to match that of the older cohorts (or I would argue to exceed that of the older cohorts). If you look at the BLS data just the opposite is happening. More and more youth are working for big box stores and monopolies. Monopolies are the end of capitalism. That’s been know for a hundred years. All we have to do is increase the ratio of self employed to employed in the younger cohort and suddenly things will become much more dynamic. They don’t all need to be self employed. Just a larger proportion of them.

Second you state that running is business isn’t for everyone but the point of the study I cited contradicts this. Self employment is probably the single easiest path to success for those without skills or brain power. I would argue the opposite being a super-successful employee can require much more education and brain-power. And the evidence backs up this point.

You also state that most people wouldn’t be happy doing it. Well tough luck. They can go work as Walmart greeters then and let’s see how happy they will be in 40 years. You can live it up while you are young and be happy and end up miserable or you can get to work and stretch out that happiness over a lifetime. Hey I know that is harsh. But young people need to be told the truth. They are very lucky to live in a world with relative peace and stability and one that allows them to pursue happiness. But they may not be able to pursue their dream job. We shouldn’t lie to them and tell them about it.

Last you bring up the old saw about not being able to start a business without money. I started out dirt poor so did my wife. Her dad was a Cajun sheer cropper (you don’t get poorer than that)). I had to work when I was still a schoolboy just to put food on the table and pay my rent. So I started businesses that didn’t require an initial investment. Hey I would have loved to have had a sugar-daddy to bankroll me. But you do what you need to. And I would posit that most of the really successful business people in this country came from either very meager beginnings or from war torn pasts. They knew hunger. In my current business which I’ve had for a couple of decades, I had no capital to start, no one knew my race, my education or any of that. So I would like to debunk this.

RioAmericanInBrasil please understand I’m not trying to single you out or pick on you. I’m arguing a point (or points).

scdave, to satisfy your curiosity, I’ve been in high tech for the last couple of decades (like many people in the SF Bay Area). However, in the past I’ve done almost everything at one point or another.

To qualify for unemployment you need to be actively looking for work. Most cities have one or more unemployment agencies that try to actively place workers even for day jobs or sub-contracting work. Some of these people may be collecting unemployment but many have either not qualified for it yet (just became unemployed) or have fallen off the unemployment rolls and just need work to eat and pay rent. These agencies will find you someone if you need help. Many of them hold their own valid licenses and can subcontract legally, they are just on hard times.

Risk of failure? For a young 20 or 30-somethings living in their parents basement, they basically have no assets to risk. I think they face a bigger risk of never reaching their potential by being unemployed.

I read one study about the students that came out of high school or college in the big early 1980 recession - that last big one we had. Their careers were permanently damaged because they could not get into the work force fast enough. They were basically damaged goods for life. Well not all of them but you get the point. Slaking 20-sometings depreciate in value.

RioAmericanInBrasil I posted a response to your comment but unfortunately it was eaten by the moderation software. But to sum up - the evidence does not back up your points about capital (or happiness). Also it’s the *ratio* of self employed people to employed people in the younger cohort that needs to increase to make a dynamic economy again.

And as for them just not wanting to? Well I can want a pony but it’s not going to make it happen. I think we just need to be honest with them even if it isn’t what they want to hear. To do otherwise will cause them much more pain down the line.

But to sum up - the evidence does not back up your points about capital (or happiness)

Maybe not but most small-business fail within 5 years and most fail from lack of capital and when that happens the former owners are not too happy.

it’s the *ratio* of self employed people to employed people in the younger cohort that needs to increase to make a dynamic economy again.

I agree with that.

I’m not trying to single you out or pick on you. I’m arguing a point (or points).

(and civilly to boot)

I’ve been in high tech for the last couple of decades ??

Okay…So you may be a Contract IT worker or something of the sort…So, if so, you have a technical skill, likely with a technical education to go with it….Most young people likely don’t have either and even if they did they would be competing with people the likes of you for the work…My point is, it is as difficult as I have ever seen it to venture out in self employment today…

scdave, OK I’m talking my book here

I would posit that a recession is absolutely the *best* time to start a business. I’ve started many businesses myself and helped many other businesses get started. Based on my experience I believe you want to start a business when blood is in the streets, jobs are scarce, margins are slim and conditions are brutal. The bigger the recession the better the chance of success.

What is the small guys biggest advantage? Price. You can start with little or no overhead. The big guys have lots of overhead. Start in your garage. Don’t got a garage? Start in your bedroom. You can sell with no margin to create market share. Can the big guys do that? Nope, not for long. You can put them out of business. They’ve got to pay for their labor. You can provide your labor for the cost of food and rent. You are your competitions worst nightmare. And as you gain market share - add quality, add better service, personalize and most of all find “the niche.” There is always a niche market where a small business can thrive. Sometimes it’s something that is too marginal for the big guys. But you can own it. Then you are set - as the recession ends and the economy booms you are ready to grow into it and launch. Don’t wait until times are good. It is much *harder* to start a business is a good economy.

Also when the economy is bad, rents are cheaper, labor is cheaper, materials are cheaper. You can buy discounted equipment and inventory. You can buy out not only failing competitors but you can also expand vertically and take over everything from the supply chain to the retail end. And this is true even if you don’t have capital to deploy. You can invest as you earn it. Expect to be poor for the first couple of years - just keep reinvesting.

You don’t need a special skill. You can learn how to do almost anything. When I was young I needed money to eat and pay rent. I was still a student, just a kid and I had to do homework and stuff but unfortunately I didn’t have the support of a family. So at night and on weekends I would work on bicycles. I would take them completely apart, clean everything, replace the consumables, etc and give them back to their owners as good as new. I had no overhead. I worked at a fraction of the cost of a traditional bike store. I did a *better* job than they did, had fast turn around and people saw that I worked hard and took what I did seriously. Pretty soon by word of mouth I had a booming business and it brought in real cash. I paid my rent, I bought food and I paid utilities. And I was just a kid. And I had enough left over to slowly build up my dream Serrota racing bike and buy Haagen Daz LOL

Take your customer’s needs seriously. Prioritize *their* needs above your own. Don’t ever think how much you will make doing X or Y - just do it for the sake of being of service but always make sure not to burn cash. People will learn to respect you and the profitable work will come your way. That’s how you start a business.

If you do have a skill or special education well that’s all the better. I’m all for acquiring skills and education. But don’t let lack thereof limit you and stop you from going into business. There are lots of low skill business opportunities. Heck you can get rich just selling carpet. It doesn’t take that much skill.

Anyway - I’m just talking my book

RioAmericanInBrasil you make a good point about failure which I think is key - capital. But I first want to tease out one nuance if I may. You are citing the fact that most businesses “fail” in the first five years. You are correct sir. They do indeed. But the department of labor never defines or digs into “failure.” I’m going to go out on a limb and state axiomatically, without proof, that a lot of business don’t in fact “fail” they actually complete the purpose for which they were intended. And that my friend is a beautiful thing. I came up with this theory watching many businesses come and go - both as an insider, an arms length player and as a matter of anecdotal evidence. My theory is that most of what is counted as “failures” are in fact successes. Let me give you examples. A student has to put himself through college. He is offered to be a lab assistant at a meager wage. He decides, “heck no!” and starts a small part time business. He runs it while at school and pays for room and board. He gets a degree and a skill and lands his dream job. His business now “fails” - at least according to the labor department. While I on the other hand call that a success - not only does he get his dream job, a new skill, a degree but something the other grads don’t have - a sense for business. And that my friend will do him well. How many people do you know that have done this in college? How many put themselves through night school for nursing this way for example? What about the kid that starts a business painting houses or doing construction or fixing computers so that one day he can work his way out of what he thinks is a hell hole and move to paradise. He runs the business, banks the cash and one day he has enough saved up to make the move and he fails - at least according the to BLS. And what about the old guy - laid off at 60 - damn! He was counting on seven more years of income and now who’s going to hire his old self? Right? And so he opens a consulting business - makes it to his Social Security / Medicare age - and dodges a bullet and retires happily with his nest egg in tact and “fails!” According to the BLS. Or the young family that starts a side business to save a down payment on a house or the you guy who starts a small business to save for a trip to Europe and “fails!” According to the BLS. Do you see my point? Some of the best businesses that make the most difference in our lives are the ones that “fail.” All failure means is you stop doing them and for many businesses - that’s good!

Regarding capital at risk… I’m getting too long winded today so I may leave that be. But I agree this is vital to understand. And it is very possible to start a business and run it without ever putting capital at risk. I started a small business in a rented room, I put no capital at risk and turned it into a mulch-million dollar venture. And I’m not an inspirational speaker like Tony Robins LOL I’m just the guy next door.

Ye…ah. No.

9 out 10 new business fail in the first YEAR. Not 5 years. Of the remainder, half of those fail within 5 years.

Some people have the gift. Some people have the luck. Some people have the skill, persistence and capital. Some claim to have the magic formula. Some have the connections. Most do not.

I’ve seen all kinds come and go.

And the accoutrements of middle class life (cars, electronic toys, etc.) are just as expensive there as in the first world.

In Brazil, the accoutrements are much more expensive than in the USA.

The average hidden sales-tax in Brazil is (get this) almost 40%.

The average hidden sales-tax in Brazil is (get this) almost 40%.

??? Hidden in what way?

Import and sales taxes, one assumes.

Do they still have regulated import licenses? That would add a premium too.

From Brazil-help dot com: Taxes on Goods and Services — ICMS — Impostos Sobre Circulação de Mercadorias e Prestação de Serviços
While there is no sales tax per se in Brazil, every manufacturer, distributor, retailer or provider of almost every type of merchandise or service pays the state ICMS and passes the cost along to the consumer. While there are some exemptions (mainly pertaining to goods bound for exportation, raw minerals and interstate transmission of electricity and fuels), the only exemption that really impacts consumers is an exemption on newspapers, magazines and books.

Because this tax is largely a “hidden” tax—in that it is not noted on any receipt nor directly on the price of the goods—most Brazilian consumers have no idea how much the ICMS is actually costing them. The following chart provides a partial listing of various items and services together with an average percentage of their total cost that is directly attributable to the ICMS:

powdered chocolate
37.84%
gasoline
53.03%
rice
18.00%
pencil
36.19%
car (w/ 1.0 liter engine)
39.29%
bed sheet
37.51%
cookies
38.50%
books
16.72%
toys
41.98%
pasta/macaroni
21.52%
notebook (school)
36.19%
table
30.57%
coffee
36.52%
microwave oven
56.99%
footwear
37.37%
tomato sauce
36.66%
bed
30.57%
toilet paper
40.50%
pen
46.69%
plants/flowers
14.64%
beef
18.67%
cymbals
44.76%
house (average)
49.02%
soda pop
47.00%
beer (canned)
56.00%
clothes
37.84%
cigarettes
81.98%
powdered soap
42.27%
computer
38.00%
bath soap
42.00%
water service (utility)
29.83%
sofa
34.50%

RioAmericanInBrasil I’ve been to Brazil - I love the country but sadly I can back up everything you are saying. People in the U.S. generally have no idea how cheap everything is here compared to most of the world. Brazil puts huge tariffs on everything they import. I’m into photography and I know a Canon 300mm f/2.8L I can buy in the U.S. for say $7,200 goes in Brazil for around $14K. It is insane.

Brazil has so much promise, I really believe that. I even took some Portuguese in college because I was fascinated by the country. But they try to protect all their home grown industries to protect their population and in my opinion they are choking off a lot of potential with these taxes and tariffs. So many items are just not affordable in Brazil. We do the say for a few things in the US like trying to prop up our sugar industry for example. But nothing like Brazil.

When will they see the light?

But they try to protect all their home grown industries to protect their population and in my opinion they are choking off a lot of potential with these taxes and tariffs…..When will they see the light?

I am more a fan of the tariffs (maybe not as high as some of them are) than I am of the sales taxes. When you add them both together, it is pretty insane. I’ve heard that the sky-high sales taxes was a guaranteed way for 3rd world, and historically corrupt countries to receive revenue especially when about 47% in Brazil are too poor to pay taxes. However the Brazil sales tax is highly regressive which I am against.

Now as Brazil has developed into more than a 3rd world corrupt country and millions have left poverty and moved into the lower-middle class, Brazil is starting to receive revenue in more areas and the new president has talked a lot about making the tax revenue system more in line with other richer nations.

It looks to me that she is cracking down on corruption much more than presidents past as well.

BTW, it is city elections here in October and I saw NYC’s Mayor Bloomberg on Brazilian TV with Portuguese subtitles endorsing Rio’s incumbent Mayor Eduardo Paes. That was a trip.

I am more a fan of the tariffs (maybe not as high as some of them are)

Of course, you would be. Your income probably depends on it.

Can anyone get the Brazilian consumers’ opinion in here for a change?

Seen v/s unseen. So simple, so obvious, so incomprehensible.

Your income probably depends on (high Brazilian import tariffs).

I can’t think of how it does.

Can anyone get the Brazilian consumers’ opinion in here for a change?

Yes. Brazilians don’t like the high import tariffs and they grumble about them as they’re driving their Brazilian-made cars to their factory jobs.

I can’t think of how it does.

In that case, why would you be in favor of it?

It must otherwise your position literally makes no sense.

You’re probably lying. Your income almost certainly depends in some indirect way on these tariffs.

Or you’re a freakin’ 1diot. I suppose that’s a possibility too.

In that case, why would you be in favor of (Brazilian import tariffs) It must otherwise your position literally makes no sense.

That is telling but expected. By your thinking, my income HAS to benefit from Brazilian import tariffs in order for you to understand why I support Brazilian import tariffs.

I’m not surprised because that kind of attitude is a narcissistic trait characterized by self-preoccupation and lack of empathy.

I try not to put myself above the general good fostered IMO by the high Brazilian import tariffs. The import duties might end up costing me money on the whole but I think that they protect Brazilian jobs.

Brazilian import tariffs do not directly contribute to my income and the only way I could argue that they indirectly contribute to my income is if one considers the protected Brazilian general economy contributing to my income. But then again, that indirect influence on my income can be negated every time I buy something imported.

You’re probably lying.

I’m not lying and again, your thinking that It has to benefit ME for me to be for it is the type of self-focusing thinking typical of a narcissism.

Or you’re a freakin’ 1diot.

And again, an attitude typical of narcissism.

The import duties might end up costing me money on the whole but I think that they protect Brazilian jobs.

It protects YOUR job.

At this point, you’re a Brazilian, no?

You’re lying, flat out, lying. The hole gets deeper each time you open your mouth.

The tariffs benefit one branch of Brazilians over another branch of Brazilians. Unless you were in the benefiting branch, why would you support them?

I, for example, couldn’t give a fleein’ f__k about Brazilian tariffs. It means nothing to me.

Oh so simple, so direct, so brazen, my tariff-benefiting darling. You’re just a charlatan like all others.

Stop talking your book because some of us will call you out for it.

The tariffs benefit one branch of Brazilians over another branch….Unless you were in the benefiting branch, why would you support them?

I don’t think it works that way. I think the higher tariffs benefit the country as a whole. I think keeping Brazilian jobs in Brazil adds more good than the higher prices on imports cause harm.

(Brazilian tariffs) protect YOUR job.

I have no “job” and Brazilian import duties do not contribute to my income.

You’re lying, flat out, lying.

Good try but sorry. I’m not lying.

you’re a Brazilian, no?

No. I am a “permanent” resident. I have a “green card”.

I, for example, couldn’t give a fleein’ f__k about Brazilian tariffs. It means nothing to me.

Of course you care not about anything that does not benefit you. As I and others have pointed out, you display obvious narcissistic traits.

Stop talking your book because some of us will call you out for it.

Please continue to think you are “calling me out” and keep “calling me out” This is actually fun seeing how you think. I’m sure any lurking clinical psychologists are making some popcorn.

LOLsies.

I’ll let the data speak for itself.

Pussycat - why the aggressive stance - your busting my bubble man! Why go all terminator on the man? I was hoping for some of your whit or some of your references that require a quick trip to Wikipedia. Bring on some of those!

RioAmericanInBrasil I personally don’t find the argument that tariffs in Brazil on net add to growth in general. But that’s not to say there are not many that would agree with you. There is a guy on this board that things we should go back to a 1950’s regime of tariffs and high tax rates on the wealthy. But I think his argument is based on ending a huge trade imbalance in the US not to protect a given industry. I’m not against tariffs but those in Brazil seem heinous to me. 40% is almost criminal. I can only see that on an emergency basis if some foreign country was grossly abusing some specific product. But Brazil has sky high tariffs across the board and all the time. Also some of them can’t be defended in terms of job protection. I gave the example of Canon camera lenses costing thousands more down there. Why? Is Brazil protecting a native camera lens manufacturing industry? No, there is none. So it serves no end. And also you can argue about the jobs it protects but what about all the export jobs in destroys? Clearly Brazil doesn’t do this in a vacuum. When they punish imports from other countries than those same countries put up blocks against Brazil exports in like kind. I think of it like China. They had a good thing going several hundred years ago. Then they closed themselves off from the outside world and the result is they stagnated. The rest of the world overtook them and when the rest of the world showed up at their front door and collapsed (the opium didn’t help). Unless you want a thousand year stagnation like the old Kingdom of Egypt you need to trade and open up. Not everything - not 100% free - but within reason.

Funny that 47% of Brazilians pay no taxes. Didn’t I just hear someone trying to gain some high office in the U.S., speaking candidly to their supporters, make the same claim about the U.S., and say that the U.S. 47% non-taxpayers think they are entitled, that they don’t think they have to work, the government should just give them things? Am I mistaken? Didn’t someone just say that? Anyone remember who? Anyone?

IAT

Itsabouttime, that’s too funny because I was thinking the exact some thing when I posted my last missive. But I decided to drop it so I could stay on target with the main point and not get into too many dog fights at once. It’s not the rich to poor divide that’s so much the issue as you so keenly pointed out using the 47% tax figure, it’s the Gini coefficient - the size of the gap between rich and poor that is the issue in Brazil.

RioAmericanInBrasil throughout your posts above I see the same theme - one that I hear from many people from Brazil and that is that the *government* must protect the poor Brazilian “victims” and their jobs from “the them” from abroad. OK I put that kind of sarky-like. I apologize. I don’t mean to offend but I want to let you hear it the way outsiders see hear it. To many of us over here - we just don’t see it that way at all. If the Gini coefficient shows anything at all it is that the government there is choking off the economy and creating poverty. Let me put it this way… a 10 or even 20% tariff - OK that produces revenue and protects some home grown industries but a 40 or 50% tariff is there for one reason and one reason only and that is to completely control trade. And when the government is given complete control only one thing results and that is corruption. And corruption breads poverty. And that’s exactly what you see in Brazil. Stop thinking of Brazilans as fragile wallflowers. You guys would kick my b3tt at futibol! You have many natural competitive advantages. Believe in Brazil’s power to advantage your people via trade. Not all at once and not in every sector. But you can’t with a straight face tell me there are not *many* sectors where Brazil could benefit from free trade and open competition and lack of governmental interference. OK there I said it. If I’m wrong please school me.

I’ll put this another way. One reason why socialist (or even communist) countries fail is the same as the reason capitalist systems fail and that is the “monopoly of power.” In the first instance you get a corrupt state that controls everything (euphemistically called central planning but we all know what they do) and in the second instance we get corporate monopolies that take power and eventually even take control their own government regulators and use them to squash competition. You can sit there with a calculus and prove that central planning or one big corporation is far more efficient that thousands of competing players but history shows that is never the case. If you want to bridge the gap between rich and poor you need to foster more small business and not protect the oligarchy.

I’m not against tariffs but those in Brazil seem heinous to me. 40% is almost criminal.

There are 2 issues. The 40% average I referred to was not import tariffs. The 40% was the average of the hidden sales tax in Brazil that is charged on most all services and most everything made in Brazil and imported. The import tariffs are a separate cost. Check below to see the other internal crazy taxes.

Best I can find the average Brazilian import tariff is officially about 14% but expect another 12-15% in other “fees” and taxes. But it has come down in the past 30 years. Brazil is opening up to foreign trade but at their own pace. I happen to think the Brazil pace is about right for Brazil. If they would have opened up at the pace of the USA, it would have destroyed the Brazilian economic base as you see what that pace has even done to the American economy. I feel USA dropped import tariffs way too fast.

Comparing an almost 100% closed China of the past is not a valid comparison with countries like Brazil with high import duties of today. It’s like apples to oranges. There are plenty of imports in Brazil.

Brazil: Since the late 1980s, the government has reduced import duties incrementally to encourage trade. Tariffs are based on the MERCOSUR common external tariff, known in Brazil as the TEC. The average applied tariff rate was 13.7% in 2000, down from 32% in 1990. There is an industrial products tax (IPI) that usually ranges from 0% to 15%, but goes up to 365% on cigarettes and alcoholic beverages. There is also an ICMS (merchandise and service circulation) tax on goods moved through Brazil, at 18% in Sao Paulo, and 12% in other Brazilian states. All imports and exports are controlled by SECEX, the Foreign Trade Secretariat, with the help of the SISCOMEX computer system.

Certain sectors, including petroleum products and weapons, require departmental or ministerial approval for imports. Importers must pay state and federal value-added taxes at ports, but these may be recovered for goods to be manufactured or sold in Brazil. There are eight free trade zones, including the oldest one in Manaus, and others in Macapa/Santana, Tabatinga, Guajaramirim, Bonfim, Paracaima, Brasileia, and Epitaciolandia. These zones and some energy development projects are exempted from import duties, as long as they export at least 90% of production. nationsencyclopedia dot com

the 47% tax figure,

I used that figure on purpose to be a smart-a$$ because of Romney, but it might actually be 47% because I’ve seen estimates of about 50%. But this is misleading because there are many federal taxes in Brazil that are “hidden” like the sales tax.

You guys would kick my b3tt at futibol!

I’m not “you guys”. I am not Brazilian. I’m American.

If the Gini coefficient shows anything at all it is that the government there is choking off the economy and creating poverty.

The Gini coefficient is a snapshot. The trend in Brazil is that it’s “socialistic” policies have brought 35 million people (almost 20% of its population) OUT of poverty and into the middle-class the past 15 years or so.

Yes there are many areas Brazil would benefit with freer trade just as there are many areas that Brazilian manufactures benefit from higher import duties. As I said, I think the pace of the Brazilian “freeing” of its markets is the right pace for Brazil.

(stop thinking) the *government* must protect the poor Brazilian “victims” and their jobs from “the them” from abroad.

I absolutely think that there are many areas that the Brazilian government needs to protect Brazilians from unfair trade and slave type wages. (Especially from China) As I think America should have done.

Hi RioAmericanInBrasil, I just got back from my run so my brain is a little O2 deprived so I may have to digest some of what you said tomorrow A.M. But thanks for taking the time to make a reasoned and informed response. I do appreciate it. I really do want to be informed on this topic and you do seem to have a unique perspective that I could learn from.

Regarding your statement about slow progress in the right direction versus sudden change I have also been a long time advocate of slow progressive change in economic / tax policies as sudden shifts don’t allow for adjustments to take place in the private sector. Slow progressive changes also allow for course corrections or even reversals should the change prove to be toxic. I think of it like steering a tanker - no sudden moves. So you make a very valid point in my opinion. It does sounds like Brazil is slowly reducing barriers which is good and that’s a nuance lost on some of us yanks.

Regarding the statement “The Gini coefficient is a snapshot…” and then the claim that the socialist policies have helped 20% of the population out of poverty. What is the evidence? Isn’t this just a counter-factual? In other words if they hadn’t had these socialist policies maybe 40% would have risen out of poverty. Can you elaborate on this?

Also you make the claim that the government needs to protect local Brazilians from unfair trade but then don’t back it up. I’d like to hear more about that. I’m not willing to just take that on faith. This is clearly a separate argument than the argument about the pace of change which I agree with.

And yes I agree - Brazil is not the Egyptian Old Kingdom or the Ming dynasty of China. I sometimes us historical caricatures to elucidate a point. And clearly you got the reference. I’ve spent a lot of time studying history and one this is clear - nations that trade in goods also trade in ideas and that is a good thing and leads to progress. You can not separate the two. Progress in productivity and general wealth is imported and exported along with physical goods. And as a counter-factual you can’t know what these types of exchanges in ideas could caused in Brazil. Maybe something big that could have created many job…

The taxes just look insane to me taken in total. Although honestly I like the idea of a service tax - identical to the goods tax. In the US people get all up and arms about the taxing Internet sales but frankly when you move to a service economy you lose the tax base when tax just goods and you don’t tax services. Likewise if a sales tax applies to goods only and not services it can totally run amuck. Whereas if it applies equally to good and services it won’t go off the rails as much. I could elaborate but sales tax on goods in the US has gotten a bit abusive and if the service industry had to put up with them I don’t think they would have ever gotten this way. I don’t know if what I’m saying makes sense I’d have to state it more clearly after the O2 has made it back into my brain.

You are an American - so maybe I could kick your back side in futibol after all! (not likely). But I would like to know - what is required to live in Brazil as an american - what did you go through - what kind of VISA requirements, etc. There are times in my hours of fringe fancy that I’ve thought of starting a new life there. And then I remember that I don’t like manioc. Blah!!!

President of Brazil - Dilma Rousseff - Former Marxist Guerrilla.

Nuf said.

Did Brazil have to bail out their bankers in the last few years?

President of Brazil - Dilma Rousseff - Former Marxist Guerrilla.

Nuf said.

Nuf said? If you were a real capitalist, you would put Dilma Rouseff and Lula on a pedestal.

Are you a total moron?

Guess I touched a communist nerve, hence the name calling.

I’ve followed up on one event here and found where the perps lived, etc

Out of curiosity, how did you track them down?

Sometimes I forget how lucky I am to live in boring, podunky Loveland.

I spotted them in the act, I followed them. I lost them in a certain neighborhood (in a very bad part of the Bay Area). So I just criss-crossed the neighborhood one street at a time until I found the license plate # I was looking for. I came back the next day, interviewed the neighbors. Then I did a stake out with my trusty Canon + telephoto and snapped away. Easy-peasy. By the time I was done I knew everything about them. I even looked up their mortgage docs and they had been flipping the property back and forth between family members and cashing out each time.

I’ve always been naturally curious. Everywhere I go I always interview people. It is just second nature. I want to know the when, where, how and why of people’s lives and not just rely on my prejudices. There are a lot of secrets out there to be found just by talking to people and you get to see why some people become successful and others not so much.

Colorado - Loveland is a dream. You aren’t missing out not living in a major metro. I especially like the spring and summers up there. The dark cold winters though give me cabin fever. I always thought the best life would be to have a home in Colorado and another one on the beach in S. Cal and just migrate bi-annually.

I want to know the when, where, how and why of people’s lives and not just rely on my prejudices.

Interesting story; thanks…

BTW, I would argue that the quote above is why you’re successful in your small business. A “natural curiosity” is unfortunately unnatural to many.

Diogenes, I am sorry to hear you experienced that. If you’re in an unincorporated area patrolled by the sheriff, you can check here:

http://www.pcsoweb.com/active-calls/

SF Bay Area, have you considered being an independent journalist? I swear, the fact that you follow up on your curiosity puts you heads and shoulders above the grand majority of “journalists” whose main accomplishment is graduating from journalism school, where they learn to write an inverted pyramid story and not to use words above an eighth grade reading level. (I took some journalism classes for my degree, to my sorrow. It took my already low opinion of mass media to a new low.)

No. That is National Policy. No prosecutions, arrests or investigations by Blacks by the FBI.
That is OBAMA’s Policy, with his head enforcer Eric Holder.
Also, Latino’s get a get out of jail free card and replace it with a Green Card.
A lot of us aren’t fooled by the “newsmedia” about what’s really going on in America.
Unfortunately, except on the INternet, the stories about what happens day to day in cities throughout the country are FILTERED by the Media Centers to tell the story THEIR way.

Kill your Televison.

Wow. Seriously?

That was just a tad racist, or were you going for satire?

Was that addressed to me? If so, then yes.

Very funny. Want a comprehensive analysis of race and crime? Here’s key information to begin the analysis:

Financial managers — White 78.3%, Black 6.7%

Property, real estate, and community association managers — White 78.3%, Black 7.7%

Financial analysts — White 78.5%, Black 11.6%

Loan counselors and officers — White 74.9%, Black 9.9%

Securities, commodities, and financial services sales agents — White 80.8%, Black 6.4%

Real estate brokers and sales agents — White 83.8%, Black 5.3%

People in these occupations were (and still are) ripping off people left, right, and center. Their practitioners steal millions of dollars with every keystroke. And the people in these occupations are almost all white.

Seems a true criminal class, if you ask me. If I were inclined to make racist claims (i.e., claims about the inherent evil of some race(s)), well, you can see where this would be going . . ..

IAT

The racial/ethnic and gender breakdown of occupations is available at:

http://www.census.gov/compendia/statab/2012/tables/12s0616.pdf

Itsabouttime I like to stay out of this type of stuff but I have to point out grossly misleading analysis which this is. These figures are not adjusted by the percentage of population by race. So I look at your figure that only 9.9% of Loan counselors and officers are black. Black make up only 13% of the population. Ergo at 9.9% of the industry they are well represented.

That’s like saying I have 100 marbles and 90 are white and 10 are black. If I toss 10 marbles at a window they break the window and I find that 9 of those marbles are white and one is black. Therefore clearly white marbles break windows. It’s faulty logic.

I agree with your point, but you misunderstand the implications of your very point. Blacks are 13 percent of the population. They are under-represented in every one of those occupations. Whites are, say, 70 percent of the population. They are over-represented in every one of those occupations.

So, my point stands — the racists on this list should be running from white people, because the statistics indicate they are the ones doing most of the criminal damage.

As I am not a racist, I will not run from people because of their race, whatever that race may be.

IAT

I understand the point you are making is but this is just junk science is all I’m saying.

Let’s take another example here:

Financial analysts — White 78.5%, Black 11.6%

And blacks make up 13% of the population. Your data basically comes down to rounding error (how do you tell economist have a sense of humor - they use figures to the right of the decimal point) not to mention that there is no room for random noise and other factors. There is no science being done here.

If you want to back up your point make sure your arguments have a real scientific backing is all I’m saying. If not don’t present it as anything more than just a hypothesis to be tested. Hypothesis are actually very helpful. If you have a spare one - someone might find it helpful. I might find it useful but just say upfront - I posit that…

Okay, stickler, you asked for it, you got it.

1)There are 97,000 people in the occupation. And, if blacks are 13% of the population, there are 39,000,000 blacks. With the large sample on which these figures are based, the difference between 13.0% and 11.6% (or even 12.5%) is statistically significant. Statistical significance is the serious way to address your rounding error issue. When we address it, the concern is revealed to have no impact.

2)The concern with rounding error does not make something non-scientific. In fact, scientists, unlike non-scientists, are concerned with error. The experiments that provided the first evidence in favor of relativity theory, for example, depended crucially on evaluating whether the difference between Einstein’s predictions and observed data were too small to be explained by error. They were.

3)On this blog it is basically common knowledge the the FIRE sector have been leeches sucking the blood of the nation dry. At the same time, several racists have become less and less constrained in their comments, sounding like I suspect Nazi’s sounded in the months before they took power in Germany, ushering in the Final Solution. Somehow, these geniuses don’t make see their complaint that the FIRE sector is composed of bandits as implying that whites are probably engaging in serious theft, costing the livelihoods and even the lives of their fellows. Instead, they blame everything on blacks, Latino/as, and sometimes they toss in unions. Faced with their idiocy, I provide real data — who, really, has the jobs in the FIRE sector, the sector that is doing real damage? IF one wants to blame the FIRE sector for damage, AND one wants to make a racial argument (as some on the blog seem committed to doing), THEN those people have to reconcile their racist rants against blacks and Latino/as and the massive theft done by whites in the FIRE sector.

4)I indicated that I, a non-racist, don’t think race is relevant to theft. The data I presented is to force those who claim otherwise to follow their claims to their logical conclusion.

IAT

Honesty and Truth need to make a comeback in this country or we are doomed.

OK. I want to help our country. I think Dio is a racist.

“Honesty and Truth need to make a comeback in this country or we are doomed”

Sorry Rio, it is you and your ilk who are the racists. You know it, I know it, the whole HBB knows it…Take ownership.

You know it, I know it, the whole HBB knows it…Take ownership.

No way. The far-right has far more racists than the left.

PIC-

I understand your point if you are trying to come up with an approximation using median income/median price methodology. However, I might argue for slightly more than the median of the top 3 quintiles; even if retirees are a stable proportion of the population, those over 65 have a higher than average ownership rate–meaning that if you only looked at homeownership rate of those under 65, you would come up with a homeownership rate lower than the current published data.

My point is that the market dynamics are sufficiently complex that any simple rules to come to an approximation of “reasonable market prices” is very difficult (if not impossible). I just think that for a multitude of reasons (outlined above) that matching median income to median prices is far from a reasonable method for approximation.

In matching the median of the top 3 quintiles with median prices better? Unquestionably.

In matching the median of the top 3 quintiles with median prices better? Unquestionably.

On that we agree, then.

You have a fair point that it is much more complex, and some of the elderly owners are certainly being tossed out with the bottom two quintiles in that approximation.

But I bet if you graphed the median income of the top three quintiles vs median house price, that ratio would be relatively stable over the long term—ignoring the recent bubble, of course.

“But I bet if you graphed the median income of the top three quintiles vs median house price, that ratio would be relatively stable over the long term—ignoring the recent bubble, of course.”

I’d actually bet that it’s no more stable than the median income of all households vs. median home price, just a lower ratio of home prices to income. The variability is coming from the home price end, likely less so from income.

The squad used to work with one who b*tched when the elevator broke and she had to walk downstairs from the second floor to go outside to smoke LOLZ!

Yes. Wear that debtorship like a badge of honor.

“Oops, forget I have a new username.”

Good for you, enjoy your house and your kids.

Life is short.

Renting money from the bank to buy at a market top.

Nice.

I’m just waiting for the “Oh my G_ddess!” moment. That should be entertaining.

Of course, they all just slink away furtively into the darkness just like the customers who couldn’t get into Applebee’s.

Some people “need” what they cannot pay for.

PITI is $600 less than rent. It’s a toe tag home.

“Opportunity cost” of capital, sweetcakes.

Try learning a few new things.

“Toe-tag home” is an annoying phrase and, seeing how most people sell homes within 7 years of purchasing, likely wishful thinking. I’d call it an “anchor home.”

The opportunity cost of renting money from the bank is not having to deal with a landlord. And the real possibility of having a paid-off house before I retire.

Worth it to me.

And the near-guaranteed chance of a capital loss.

In any case, why brag about it to us? Shouldn’t you be at Home Depot going into further pawnership while us renters have minions to do all that stuff for us?

SF is different…no, really, it is.

In any case, why brag about it to us?

Leave her alone…she’s not bragging. Hope it works out for her.

SF is different…no, really, it is.

Then why did Pacific Heights fall in price by 40% in 1994?

Wasn’t it different back then?

Hope it works out for her.

It won’t.

That, my friend, is precisely the point. “Hope” is not a strategy. Never was; never will be.

Oh okay it’s an emotional thing with me. I really love that place but knew I could never afford it.

That, my friend, is precisely the point. “Hope” is not a strategy. Never was; never will be.

I agree with your sentiment. The problem is you are being rational for a what seems like an emotional decision. BTW most housing purchases are emotional than rational IMO.

Show me an opportunity cost that pays $600/month for a year. And then $800/month for the next two years, then $950/month for the next five years…and then at about year 22, that opportunity cost pays $3500 per month for about 15 years at which point we’re all dead.

Because that’s your opportunity LOST cost of renting.

Aah, the sorority sisters band together to to defend their lack of spreadsheet skills.

Math is hard, per-oxide!

“that opportunity cost pays $3500 per month…”

There it is. The delusion of a generation.

and then at about year 22, that opportunity cost pays $3500 per month for about 15 years

Tell us, O Great Shamaness, Wondrous-Eyes-Of-Thine that can clearly see 22 years out!

Tell us what glorious industries will be arising. We’ll invest in those with our humble paltry meager savings that are left over each month.

We grovel like lepers before thine Shining-Eyes that can see so far.

Why is it a delusion? Are you saying that rent won’t be $3500/month 22 years from now?

Faster, I’m still waiting for you to show me that opportunity cost. Actually you’ll probably have to find two or three opportunity costs better than housing to prevent me from promoting housing investment as part of a plan to diversify.

And if sffairyowner is not at Home Despot 24/7, then maybe houses don’t need as much maintenance as you would have us believe?

“Opportunity cost” of capital, sweetcakes.

FPSS, I always think of opportunity cost in the purchase decision in terms of the down-payment, though obviously the principal contribution could also be looked that through this lens.

In sfrenter’s case, though, IIRC there is hardly any downpayment (or it’s being paid by the state), so the opportunity cost there would be low. And the principal contribution is so miniscule early on that the opportunity cost there is miniscule at this point in time (though it will grow in the future). Plus there isn’t much around today in terms of alternative investments that pay a decent yield relative to the risk, so I’m not seeing this as a bad move in terms of opportunity cost.

In terms of the likelihood of capital losses, I totally agree—I think this will be a LONG and rocky ride, and sanity does not appear to have returned to pricing, particularly in high-cost markets such as SF (and unfortunately my hometown as well). So the odds of significant capital losses are relatively higher, IMHO. So that’s a great reason not to buy now.

What am I missing? Why were you focused on opportunity costs?

Tell us, O Great Shamaness, Wondrous-Eyes-Of-Thine that can clearly see 22 years out!

I have a 22-yr forecast: rents are likely to trend up over the next 22 years, roughly at the rate of inflation.

I have a 22-yr forecast: rents are likely to trend up over the next 22 years, roughly at the rate of inflation.

Only if wages rise at the rate of inflation. This is by no means a given.

How many times do we need to state this “obvious” fact?

Inflation in the “needs” of life I believe is relatively guaranteed. In that category, I put only food, shelter, and energy.

All else can and will get squeezed out if necessary if there is inflation in those segments.

Wages need not go up to squeeze discretionary spending into non-discretionary needs; when all the discretion is gone from the equation, then I agree that further inflation in the “needs” cannot occur in excess of the rate of the “needs”.

Do you really believer that there is currently no discretionary-spending that can be squeezed out?

cannot occur in excess of the rate of the “needs”.

Doh. I meant “cannot occur in excess of the rate of wage inflation.”

Do you really believer that there is currently no discretionary-spending that can be squeezed out?

This belongs to the “percentage of income going to housing will increase” category, and I do not subscribe to that fallacy.

Housing is fungible.

I could move to Astoria tomorrow. I would have no problem keeping my rent below what I pay on the UWS. Sure, I’d displace someone in Astoria and they’d move to Forest Hills. And so it goes.

Ergo, no, I do not subscribe to that theory.

The collapse is always outwards in. The most marginal buyers fall first, the middle falls later, and the “prime” appears to escape the bust but has a cataclysmic “Come to Jesus” tryst with destiny.

Only if wages rise at the rate of inflation. This is by no means a given. How many times do we need to state this “obvious” fact?

If wages don’t rise but rents do, then people will shack up 2-3 incomes per unit. Add in a little Section 8, a little military allowance, grandma with SS, and competition with people whose wages do rise with inflation (remember I live in a government town) and there is a lot of capacity to pay high rent without having high wages. As Prime said, people will stop going to Applebees, stop going to Sbux, and live tenement style to pay the rent, or their butts are on the sidewalk. Which is how it was 100 years ago. Because you have to live somewhere.

And I have stated this “obvious” fact probably a dozen times on HBB.

Still waiting on those 2-3 opp cost strategies which beat housing.

“Then why did Pacific Heights fall in price by 40% in 1994?

Wasn’t it different back then?”

Well, actually, weren’t interest rates going up in 1994? I can’t recall the Fed making an explicit effort to prop up housing prices with $40 bn in monthly QE injections into MBS.

It seems like it really is different this time, no?

‘…and the “prime” appears to escape the bust but has a cataclysmic “Come to Jesus” tryst with destiny.’

Reminds me that my colleague at work and spouse finally got an acceptable offer on their (upscale) family home as of last week. They needed to sell, so there was a mood of remorseful relief regarding the outcome, with a recognition that things could have gotten a lot worse going forward if a current sale hadn’t materialized.

It seems like it really is different this time, no?

No.

Cash-flow is not increasing. Not on the tony neighborhoods of NYC like the UWS that are “mostly” cash-flow dependent and certainly not in the marginal neighborhoods like Inwood that are entirely cash-flow dependent.

Outside-in literally means what it does. Even the very tony UES shall not escape the carnage.

Why is this so hard? It’s just basic fungibility at play.

“Why is this so hard? It’s just basic fungibility at play.”

I guess it’s safe to assume you are not a true believer in the Fed’s housing bubble reflation efforts?

You can comfortably assume that.

(Read below in the Kondratieff thread for “why”.)

Which is not to say that I do not believe that they can’t do other things. They can, and I’m quite happy to take advantage of it.

I’ve never seen a reflated bubble in history. I’ve seen plenty of dead cat bounces though.

I’m still not seeing any evidence of a reflated bubble. If anything, I’m seeing a vast lack of cash flow. It’s a straightforward exercise what I think of the situation.

If wages don’t rise but rents do, then people will shack up 2-3 incomes per unit.

Oh, peroxide, bottle-blonde darling, if they do, there will be even more shacks on the street. Didn’t that ever occur to you?

You’re making even less sense than you used to (assuming that is possible.)

It’s basic Econ 101. More shacks, less rent.

Maybe all that peroxide has addled your math-challenged brain?

(She’s a “research scientist”, folks. Government dollars. Tells you everything there is to know about DC.)

Your basic Econ 101 covers only the thermodynamics, not the kinetics.

You assume that the new shacks will appear instantly. They won’t. Construction takes years.

You assume that LL’s will read your textbook and instantly lower rents accordingly. They won’t. They’ll lower rents only when they truly don’t have the tenants to support the units. That makes rents sticky on the way down, and they don’t go down at all in a paid-off complex (as mine was). Again, this will years.

You assume that if someone doesn’t make a payment, any bank will instantly go bankrupt and instantly liquidate its housing. They won’t. Uncle Ben takes care them.

You assume that we can all teleport to work. We can’t. They aren’t making any more land within commuting distance, and people are willing to pay to be close in.

Got an opportunity cost for me yet?

“Your basic Econ 101 covers only the thermodynamics, not the kinetics.

You assume that the new shacks will appear instantly. They won’t. Construction takes years.”

He considered dynamics (that is economists’ name for what real scientists call “kinetics”). The fact is that in real estate market time, which is glacially slow compared to stock market time, construction is better thought of as instantaneous than subject to a posited “time-to-build” effect. For instance, someone actually wealthy enough to buy a home generally chooses between renting, buying or building, with the understanding that it will take a few months to build.

Then there are the big Megabank, Inc funded homebuilders who build hundreds of homes on spec with the assumption that if they build it, the buyers will come. A buyer interested in a new home who doesn’t want to wait can go into any of 131 “New Home Communities” around San Diego and purchase a never-been-lived-in new home next week.

And there are also whole future subdivisions that have been designed, graded, and are shovel-ready for construction to begin whenever the builders decide to build. We are heading to a wedding in the backyard of a home in one of these areas tonight; when I looked on MapQuest for the home’s location, I noticed the surrounding area was already parceled out, but construction ground to a halt around 2006.

And finally, as you know, there are millions of homes in shadow inventory which could potentially enter the market with an end to the collusion which currently holds them off the market.

So for various reasons, your “time-to-build” assumption is not applicable.

“If wages don’t rise but rents do”

I can’t tell if you’re serious or you’re competely detached from reality. Did you *think* about this statement before you typed?

You need to step back and *think* about this.

“If wages don’t rise but rents do”

Canadians? Chinese? Illegals? Rent Fairy? Where does the demand come from?

Muff Diving?

It’s your money so spend it any damn way that pleases you ??

There it is right there….

Actually, it’s not her money. It’s her future earnings, and those things tend to be just a tad bit nebulous.

Thirty years is a long time. “Hope” that teaching doesn’t go online. There’s a good bet for ya!

Exactly, her money has yet to be earned, and yet to be paid to the bank. People who flaunt borrowed posessions are posers. People who go into debt for 30 years to pay double or tripple what an asset costs so that they “can afford it” are completely without insight. To do this in an overpriced market is self destructive.

Yes, there is always an opportunity cost with money. A lot of people during the bubble removed equity from their homes to take advantage of that and put the money into the stock market and lost knickers. Others took out the equity to invest in property and lost their knickers too. Prudence and due diligence are nice but at some point you either spend some of that cash or watch it waste away. I locked cash up years ago at 5% in a tax free account, but any money earned today on a non free account is just letting financial institutions use it while paying me just enough to throw me into the next tax bracket and watching it go back out the door. I locked up some gold too at $220/oz, so what, it doesn’t do anything for me.
This is a housing blog and while I might not agree with someone’s decision to buy or not buy I find it refreshing to see how people approach to their particular circumstances in the area of the country where they live at this point in the bubble unwinding.

People who go into debt for 30 years to pay double or tripple ??

Nothing wrong with leveraging capital if properly balanced…

Nothing wrong with leveraging capital if properly balanced…

Only works in the “UP” part of the credit-cycle.

Pipe in some Kondratieff and there you go.

(Poor man. He worked in the “gold standard” era so he phrased his theory in terms of fixed years instead of “max credit”. Discredited because nobody got him then and nobody gets him now. But he “got it”.)

“Kondratieff”

Can you suggest a good reference?

Historically, this is a rare event. I would bet that for the past 60 years, any time PITI was less than renting in SF was a “good time to buy”. I know that has been the case since the mid 80’s.

I also think that there were very few times in the past 50 years in SF where PITI was cheaper than renting. When I lived in NorCal from 94-08 I can’t remember a time when buying cost less per month (with 0 down) than renting. I remember “million dollar” houses renting for $2,500 a month whereas PITI would have been something like double that.

Now, she’s buying a house in SF with PITI about 20% less a month than renting with not much down and squat for interest? In a non-recourse state? And she’s getting hammered that it is a dumb bet? Because no one knows the future? If no one knows the future then could it not be a decent bet?

And hasn’t everyone said that buying a house is a consumption item - a place to live and “not an investment”? And if that is the case, did she not just buy a consumption item - a place to live for less per month than renting?

There is none or at least, none that I have found to be precise.

Perhaps I shall write one.

I doubt it’ll change anything at all (look at the super-smart sizzlin’ sorority sisters up there!) but I might as well do some good in the world.

The short version of it is just what you would expect - credit up-cycle, deleveraging (which “authorities” try to “solve” by monetary debasement), massive inflation, stable values followed by a repeat.

We’re in #2 and shall not be in #3 for a VERY long time. No, this time is not different. It’s exactly the same and in fact, a little bit worse made by all that non-dischargeable student debt.

“Perhaps I shall write one.”

Send me a pre-publication copy if you could use some free editing. I’m sincerely interested.

The problem is I’ve already explained it to all and sundry that are likely to listen (and they’ve already listened - including this blog - so there’s a positive outcome!)

Is there a market for this product? (The answer is an overwhelming NO.)

I dunno. I think it’s a waste of time but I can’t be sure.

Rio will never get it. He is a leveraged RE investor too. The end of a multigenerational credit expansion is either too simple or too unbelievable.

Rio will never get it. He is a leveraged RE investor too.

No. How am I leveraged or an “investor”? I own one house outright with a cost basis of about 35% of what it’s “worth” today. I don’t owe anyone a dime on my house. Where is my leverage? My property taxes are very low and my HOA fee is $25 a month to pay for a big gate on my “cul de sac”.

How can I be an “investor” when houses are not an investment but rather a consumption item?

How am I anymore of an investor than you?

OK, I am willing to be wrong on that. It was something you said, long ago.

Actually, it’s not her money. It’s her future earnings, and those things tend to be just a tad bit nebulous.

I don’t know about sf fairy yard renter, but if my future earnings become nebulous, then I can sell the house to someone who will buy it with HIS future earnings.

You are all still making it sound like renters pay 0 dollars per month, and houses suddenly are worth 0 the moment you buy them.

I don’t know about sf fairy yard renter, but if my future earnings become nebulous, then I can sell the house to someone who will buy it with HIS future earnings.

I assume you mean “for a price I can afford to sell it for”. The whole point of this blog is to point out that’s not a sure thing if you didn’t put a lot down.

“I can sell the house to someone who will buy it with HIS future earnings.”

Sure you can. But no where near the inflated price you paid.

You should have continued renting.

Ha ha good thread. And I am only just now reading it because instead of being out surfing I was *gasp oh no* getting the new house ready for our imminent move.

I did indeed stop at Lowes to pick up bags for garden compost.

Yes, we love our new house. And choosing a place to live is almost always an emotional decision, EVEN IF YOU ARE RENTING. Deciding where to live (rent OR own) will always have some element of emotion to it.When I chose this place, which I have rented for the past 14 years, I chose it because of the price and also because of the light, the view, the garden, the wood floors.

I have also paid close to $367K in rent during that time.

Everything said above is correct, though: we received 90K in interest free down payment assistance an put down less than 35K of our own cash.

Continuing to rent from a batty landlord in a non rent-controlled rental in a city where rents are high actually involves MORE risk, not less.

I guess I could’ve taken that cash and bought a mini cooper convertible and continued paying $2800 month in rent.

Pushing 50 years old, so yeah, I took a risk. I may or may not have a paid off home before I retire.

But as Oxide says, rent ‘aint free (or even cheap) so I gotta pay to live somewhere. Renting was getting old after 30 years.

Nonsense.

Housing is an emotional decision for uniformed, emotional fools like yourself.

And quoting Housing Hookers won’t change matters for you.

Are you calling the 50 Miss America candidates blowhards?

Kind of. Some of them shouldn’t open their mouths at all. Smile and walk away and let me enjoy the beauty.

Blackstone should have spent their $1 billion in the DC area

Maybe they are. They just don’t have a blowhard there announcing it.

He has what is called “itchy-fingers” with money.

There’s a solution for that too. Put the money in a bank CD escrow and sign a piece of paper that he can get it back if he does 500 push-ups in the front of three lawyers all of whom stand on one leg while he does it.

That’s his “investment” decision right there.

Sir, you are quite skilled in the traditional British arts.

A double-edged compliment if ever there was one.

One party will definitely be getting a “happy ending” and it’s not going to be Angela.

Aah, schadenfreude.

One of the great joys of life. So cheap, so simple, so underappreciated. (Just like “opportunity costs”.)

One party will definitely be getting a “happy ending” and it’s not going to be Angela. Aah, schadenfreude.

schadenfreude: pleasure derived from the misfortunes of others

I know Pussy! This is so great! What part gives you the most pleasure Pussy?

The 5 month since widowed, 43 year old, arthritic, now single mother of a 6 year old losing her mate and now losing her 140K house that she owes 89K on?

Or the part where her former small business owner, 46 year old husband got hurt on the job in 2006, then lost his income in the Great Recession, was in constant pain and then (my favorite part) died of a massive heart attack in March?! Sweet!

Or the BEST part about the 6 year old who just lost her Daddy?! (ya just can’t make this stuff up!)

LOL!! Aah, schadenfreude….That story just made my day!

Definition An individual with narcissistic personality disorder exhibits extreme self-importance, inability to empathize with others and … (psychforums dot com)

The part where she “took out a couple of home loans”.

It’s the “couple” that makes it so amusing.

So quaint, so delicate, so self-serving.

It could be two or it could be seven. No way to know, right?

But she’s lying.

’she’s lying’

It’s more than that. Let’s look at this little story:

‘Back in 2006, her partner of 11 years got injured on the job’

That was 6 years ago.

‘the payoff is roughly $89,000. Realtors have told her she could sell it for $140,000. So Agrippa is not like other homeowners who are underwater in their homes. That’s why she’s so confused as to why she is still begging her mortgage company for a loan modification.’

I’m confused too. Why not just sell the house and cough up what she agree to pay back? Oh yeah, she wants to get out of the debt AND keep the house.

‘If she doesn’t get the modification, Agrippa and her 6-year-old daughter must be out of their home by January 21.’

Damn that’s tough! Of course, if I stop paying my rent today, I’ll be out of this house before she will. And she knows this too, as she used to be a landlord. I wonder if she let her tenants stick around without paying?

‘Once they serve those papers and file them, that’s it. You’re in for the battle of foreclosure, and you’re at their mercy. They’re in complete control,” Agrippa continued.’

No you’re not. Just get some boxes and shazam, you’re no longer at their mercy. Of course, that’s a hard decision to make when you are living in a house for free. Maybe the people buying this sob story should cry a tear for the poor bastards that loaned her the money. They are the ones who are going to take the loss. And guess what, readers? That poor bastard may be you.

Couple = 2.

A married couple is not 3 or 4 or 5 people.

She may be lying, but she’d be lying, not ambiguous.

IAT

“No you’re not. Just get some boxes and shazam, you’re no longer at their mercy. Of course, that’s a hard decision to make when you are living in a house for free.”

It’s made all the harder by Democratic politicians who play along by serving up myriad ’save our homes’ bailout programs.

If R&R had come right out and called BS on this stuff, I would be planning to vote for them (not that my vote even matters, as a Californian living in Obamaland).

“And she knows this too, as she used to be a landlord. I wonder if she let her tenants stick around without paying?”

LOL Having dealt with 2 Deadbeat LLs I am fairly confident in saying if her tanants were 5 days late she was screaming bloody murder. As someone here once said…. Hell hath no fury like a Deadbeat scorned.

B.S.
I was “ripped-off” by the housing bubble too. Waaaaaaaaa. I cried like a baby, as many of you are and will forever but I got over it. Why don’t you stop b!tching and be men. (or women)

We got had. It affected my life too. It sucked. Damn. Sometimes I feel like sh!t about it….I could have done different….. but I didn’t.

Listen: We did not mess up….Everything changed on us. The rules were changed in the middle of the game. IMO, it sucked but you and I are not to blame.

“I was “ripped-off” by the housing bubble too. Waaaaaaaaa.”

Calling someone out for a BS sob story is not crying it`s calling someone out for a BS sob story. Ben made me think of how nasty the Deadbeats I rented from were when “their” money was a couple of days late.

You guys are great at highlighting the victim stories with children, layoffs and sickness while you run down anyone who dares to call BS on the sob stories. A couple of weeks ago I posted a story about a stripper who made $85k a year in cash and had been busted for $25k in SNAP fraud. The story said how she had plastic surgery, paint jobs for her car etc. 5 kids and a screwed up boyfriend. She was defended the way you just did here by someone highlighting her plight. Well BS! Spend your $85k on your kids and buy them food and pay some GD rent. That`s more money a year than I have made in each of the last 4 years by a good bit and I still have to send a $3,500 tax deposit on the 15th of every month.

And we don’t?

Never mind, silly me. Having policies that encourage job creation is having the government “pick the winners and losers”

And we don’t?

How many Americans are willing to go to Africa to dig dirts?

“You think the beard is in control? He’s already panicked.”

That was my thought when QE3 was announced. So I was quite surprised to see the bulls go hog wild. I was thinking, ‘If The Bernanke is panicked, why are the bovines partying like it’s 1999′?

Not RE, sweetheart, not RE.

Something quite different.

Read again.

Doubt it.

Rocket science is considerably easier than social science. After all, planets don’t change their orbits on a whiff of news or whim.

IAT

What are you going to say when they demand a multi-billion federal bailout and GET IT.

Because it is only fair. And it is for the children.

What makes you think they’ll get it? By the time their pension funds go kaput the Feds will be even more broke, no longer able to borrow money and run deficits. There won’t be any money to bail them out.

When they go BK, I’ll just yawn again ??

Well, one thing to watch is the Stockton California BK….

Vallejo California went BK before Stockton…When they did, they protected the unions & pensions because Cal-Peers threatened to sue because they said they had standing before anyone including bond holders… Vallejo blinked…

Stockton is now working through its BK…Unions & pensioners again demanding protection…However, this time, you have bond holders and re-insurers that are pushing back in that they are looking at a 100-mil haircut…They are threatening a suit if they take the huge haircut and unions & more specifically existing pensioners take no hit…

A Judge has already suggested that he is not sure that the pensioners would prevail…It could go all the way to the Supreme Court…The Bond holders are saying they will take it there if necessary…

So, there are probably hundreds if not more municipalities that are watching closely…If this was to go to highest court and the bond holders prevailed, every municipal pension would now be fair game in a BK filing…

IMO, if Romney wins,…we raise taxes,…

Romney’s tax cut numbers don’t add up
| The Salt Lake Tribune
First Published Sep 18 2012 01:01 am • Last Updated Sep 18 2012 01:01 am

The following editorial appeared in Sunday’s Washington Post:

For several weeks, we’ve been asking Republican presidential nominee Mitt Romney to explain how he can cut taxes, as promised, without adding to the nation’s debt, as also promised. Now he’s effectively let the cat out of the bag: He can’t.

Romney’s tax plan calls for reducing income tax rates by 20 percent. The top bracket would go from 35 percent to 28 percent. He has said that he can do this in a revenue-neutral way by eliminating loopholes. While the rich might pay more, he has said, the middle class would pay less.
…

Who pays you to dissimulate lies about Romney on the HBB, Mr Lip?

Lies? That was just my opinion/hope, which is why I put IMO in the front of the post.

You guys just cannot fathom a politician that is genuinely honest, hard working and who actually got into politics for the right reason.

So Romney, where’s my check?

Why offer an opinion that directly contradicts Romney’s pledge to reduce taxes?

If that was not meant as propaganda, then it sounds a heck of a lot like hopium/changium.

“we drill baby drill, and the petroleum industry pulls us out of this depression (all while the US moves towards energy independence).”

The petroleum industry will sell the newly drilled oil on the global market, moving us no closer to energy independence.

If I owned a house, it would make personal energy independence a reasonable (and in some places, subsidized) investment. As a renter who can have my residence sold out from under me, it does not make sense for me to do it. And there are no subsidies for renters.

IMO, if Romney wins, we curtail spending,

Wow. That sounds deep…. naive and so innocent, but sounds really deep.

You guys just cannot fathom a politician that is genuinely honest, hard working and who actually got into politics for the right reason.

Really? Speaking of Repubs the past 20 years??

Maybe we could fathom a Rebub that is “genuinely honest, hard working and who actually got into politics for the right reason” if you could produce one.

Your Repub party has digressed into a parody of misrepresentations, hatred and fomentations of class-warfare, and all the while the Repubs are pointing the finger at everyone else but themselves.

The Dems suck too but, I sense a newly dangerous hatred amongst some of the Repubs today.

Yo, Paulie…. check it out - the taxes are only $600 a month!