The Housing Bubble

I have the same type of card service with my BA credit card. It is called Shopsafe.

t is called Shopsafe.
I’ve used it on many purchases over the years, but on one a couple of years ago, it didn’t work very well for me. I used it to order a month’s trial of NYT digital for 99 cents, card limit was $1. When the trial was up, NYT cheerfully charged me $35+ for the next month, and Bank of America charged my substitute card despite my best effort at preventing such an outcome. They eventually reversed the charges & apologized, but it shouldn’t have happened in the first place.

“There is no such thing as good debt.”

….. Truth.

Wrong! Debt can be a wonderful thing if one is positioned on the right side of it.

commie talk!

http://www.picpaste.com/america_open_for_business_2005-ItbH7DSP.jpg

Bill, that’s simply not true. In business, there are a ton of good reasons to use debt as part of a tax avoidance plan, to offset other assets that you have. In the tax code, it all depends on what is given preferential treatment.

In the M&A world, debt is often used to fund buyouts to take a company private or to strip down a company with a lot of cash reserves and then sell it off. There are entire branches of law and strategy consulting that deal with this. Bain Capital was one of the big early players there, along with a few other consulting shops and law firms. The whole purpose is the pay as little as possible (sometimes nothing), then strip down the target company but only make minimal payments on the debt used to fund the deal. The debt gets moved to the balance sheet of the target co so it can be wiped out in BK if need be. You could argue this is sometimes done by design. Mittens & Co. was a pioneer in this regard as well.

“Wrong! Debt can be a wonderful thing if one is positioned on the right side of it.”

Them that understands interest, gets it.
Them that don’t understand it, pays it.

“In the M&A world, debt is often used to fund buyouts to take a company private or to strip down a company with a lot of cash reserves and then sell it off. … Bain Capital was one of the big early players there, along with a few other consulting shops and law firms.”

How’d that work out for the stripped-down companies and their workers?

Joe, I tried to explain “good debt” a couple weeks ago. That’s why it started showing up in the h8ter posts.

They’re not acquiring the company to benefit the workers. If anything, PE guys enjoy firings and layoffs. The way these deals are structure (with the debt taken on) it’s a near-certainty the target company will show losses. So the layoffs and firings look to outsiders like they’re for a good cause–underperformance. Or high union salaries. Etc. etc.

“The debt gets moved to the balance sheet of the target co so it can be wiped out in BK…”

I’d call that fraud.

“The way these deals are structure (with the debt taken on) it’s a near-certainty the target company will show losses. So the layoffs and firings look to outsiders like they’re for a good cause–underperformance.”

I think I am beginning to catch on:

1) Use margin debt to acquire a mature, profitable company with cash on the balance sheet.

2) Fire enough workers or otherwise gut the company so that it can no longer function.

3) Liquidate the company when its negative profitability makes that a logical move.

4) Use liquidation proceeds to pay off all creditors, including the accrued pension liabilities* of former workers.

5) Cite poor performance as the reason to “restructure” the company.

* In many cases, after the big stock market runup of the 1980s, the value of assets in pension funds far exceeded worker pension liabilities, making pension funds particularly attractive cash cows…never mind all those age-65+ folks living out their remaining days in penury.

More commie talk!

It’s not fraud, it’s perfectly legal. Once in a while, the takeover actually does “turn around” the target. Even if not, it’s justified in the minds of shareholders and boards of directors on both sides because it “liberates the value” in the company by paying the cash reserves out as a dividend and selling off the pieces of the company to get money out. Yes, the workers lose, but the shareholders on both sides usually do fine. Sometimes they do extremely well. And obviously the consultants/bankers/lawyers make bank. Workers lose, towns are destroyed, but capitalism runs on resources being deployed in the most productive way possible. If you believe in capitalism at its purest, the freeing up of money and assets benefits us all in the long run.

Not sure why this is news in 2014. This had to have been discussed here at length during the Romney candidacy, no?

@Whac, you’re missing step #6: Run for President on basis of expertise in “healing sick companies” until the wheels fall off when you hear the words “Please proceed, Governor”.

http://oi46.tinypic.com/21l34tv.jpg

I knew there had to be a step #6 in there that I was missing.

He has a very nice family and his kids love him…

“In business, there are a ton of good reasons”

We’re not “in business” like you where we can deduct expenses like harpsichords, parties, sex toys, etc.

There is no “good debt” for wage earners Liberace.

‘discussed here at length during the Romney candidacy’

So a discussion on mortgage interest deduction turns into how many references to Romney? Don’t mind the wars, the spying, the unemployment, the disaster of Obamacare, or how Bernanke and pals put 95% of the wealth is in the hands of the few. Let’s talk about Romney! ROMNEY!

You wouldn’t know capitalism if it paid your way through college. Get back to work you ungrateful bore.

1(a) Cause the company that you just acquired to hire you as a consultant to tell them how to improve their operations for a gigantic fee which is paid up front. Please note, that this means that you get to take a large portion of your cut before anyone actually does any work to “turn around” the company and that you still get the huge fee even if the IPO of the newly stripped and improved company goes bust (it never does, but you are a private equity guy which means you don’t take risks like the plebians who actually make stuff or provide services).

@ben, I don’t have a big problem with what Romney did or with capitalism’s role in it. But you’re kidding yourself if you don’t think liberating capital so that it can be put to it’s most profitable use isn’t a big part of capitalism. It’s just reality. The only question, rather, is what moral or ethical constrains we should place on people following this point to it’s inevitable conclusion.

As far as how the topic came up, I don’t think you’re right to criticize me there. Bill said “no such thing as good debt”. That’s just not true, because it depends on the deal. I don’t even mean you have to be a creditor for debt to be good, I really mean that if you’re using debt to acquire something and you can spread out the debt obligation over a long period (say, 10 yrs) while you can distribute cash to shareholders and sell off company segments, that is a good thing in some respects.

There are lots of companies that employ lots of workers in a profitable way. Sometimes they are sitting on a _ton_ of cash. Sometimes they are profitable but could be more profitable if they were merged or split up or moved offshore. Again, corps are owned by shareholders and in the ideal sense they serve the shareholders. So if someone can deliver more to shareholders by shutting down/selling off/etc… why not? The question is one of ethics, not of capitalism.

“As far as how the topic came up, I don’t think you’re right to criticize me there. Bill said “no such thing as good debt”. That’s just not true, because it depends on the deal.”

Lib,

Paying interest on a depreciating asset as a wage earner is never a good deal unless you’re a lender.

Get your facts straight.

@ ben, you should also note that the M&A/PE example was the 2nd example I gave of “good debt”.

I mentioned tax avoidance first. You can keep your company’s assets outside the US (avoiding tax) and fund your company’s US operations by using debt. Debt that is repaid by money _slowly_ repatriated from offshore. But for tax purposes, you aren’t actually bringing any more money into the US than necessary.

I could go on and on (I won’t) with examples of other good debt. Think of assets that you can depreciate and then imagine if you buy them with debt instead of cash. You can match the depreciation to the payment of debt and offset profits that way. OK that’s enough for now…

@Whac, you’re missing step #6: Run for President on basis of expertise in “healing sick companies” until the wheels fall off when you hear the words “Please proceed, Governor”.

If you would have avoided this last comment, I would be willing to accept that you were just trying to make a general comment about the use of debt. I agree with some of your points and there is no question that corporations have been eager to take out thirty year debt. This means that they at least expect inflation in the future and want to lock-up cheap debt. However, with the above post, it does seem like you want to re-fight the last election instead of focusing on the actions of the present administration.

BTW, I don’t know why or how “its” become “it’s” throughout one of my posts above. Kind of embarrassing. My apologies to anyone offended!

There are two types of entities we’re dealing with here:

1) An individual - an actual physical thing.

2) A logical construct - a corporation.

The costs and benefits of debt on both are very different. When people try to structure their finances like a corporation (which can dissolve, paying off the people directing it, regardless of how bad its financial situation) they run into trouble.

adan, it was a general procedure. The Romney mention was probably a joke, not a political battle.

Acquisition for the purposes harvesting itself has been going on for decades. Think of BlueStar Airlines’ overfunded pension.

“He has a very nice family and his kids love him…”

Most hundred millionaire’s kids do…

If you were a consumer in Zimbabwe in 1992 and bought a house at a fixed thirty year interest rate, you had done very well by 2008:

http://www.dallasfed.org/assets/documents/institute/annual/2011/annual11b.pdf

Excerpt from link that will soon post about Zimbabwe sound familiar?
Uncontrolled government spending accompanied
the weak economy. In 1997, authorities
approved unbudgeted expenditures, amounting to
almost 3 percent of GDP, for bonuses to approximately
60,000 independence war veterans. Efforts
to cover the payment with tax increases failed after
trade-union-led protests, prompting the government
to begin monetization (printing additional
money to “pay” for the expenditure). In 1998, the
government spent another significant share of
gross national product (GNP) for its involvement
in Congo’s civil war.

A Zimbabwean Ten Trillion dollars note will make a perfect present for seasoned travellers and history buffs. The Ten Trillion dollars note can be given to those hard-to-buy-for friends, or kept as a bookmark.

The Zimbabwean dollar (Z$) was abandoned after hyperinflation eroded its value until it was the least- valued currency unit in the world. This series of notes was in use from October 2008 and January 2009. To try to satisfy demand, Fidelity Printers needed to produce a new denomination approximately every two weeks, and worked 24 hours a day, trying to print up to 2 million notes a day. Within a 30-day period, the 1, 5, 10 and 50 billion (19/12/2008), the 10, 20 and 50 (12/01/09) and the 100 trillion (19/01/09) notes were introduced. The 100 trillion note was the largest denomination ever used. On 10 February 2009, after a series of revaluations, with inflation running at 80 billion % per month, Zimbabwe moved to the US dollar. Long after this note fell out of general use; it was still used as a “return coupon” on the commuter omnibuses in Zimbabwe.

If you would like to have your Ten Trillion dollars note laminated (as shown in the bottom image), please email rory@savetherhino.org after placing your order to request this free of charge.

The evil “raider” Warren Buffet:

http://finance.yahoo.com/news/buffett-closing-plant-shows-loonie-110001440.html

Excerpt from link that will soon post about Zimbabwe sound familiar?

Zimbabwe and America do not sound very familiar because I have a Passport, eyes, common sense and the ability to differentiate reality from propaganda.

(As if America is Zimbabwe.) Jeeze.

Avoid the middle man, for every $1 you send me, I promise to promptly send you back 28 cents. You will not have to wait to you file your taxes.

I don’t think you want pix of that.

But you are correct in that new apartments will not be available below market rates, or even at reasonable rates, definitely not downtown, or in a desired location.
Builders only offer “grade A” type units with pools and gyms and shiny glass. Charging high prices for the unneeded extras is the only way to make a profit with the high land prices.

Oxide:

Sometimes builders and building owners lose money.

Construction contracting…. you can lose your ass or make a killing.

Yes, Detroit is filled with the highly educated people (Not). If education is placed on a bell shaped curve, liberals would be on both ends of the curve. I think that as the Yale study showed about AGW knowledge, conservatives are actually better educated. However, there are very few conservatives that have an advanced degree in LGBT studies, I will concede that point.

Yes, Detroit is filled with the highly educated people (Not)

Yes, the sciences are filled with “conservatives”. (Not)

I think because the far right is terrible at math when it bothers their “beliefs” or rattles their dogma.

Example:
When a Christian “liberal” sees that 2+2=4, it does not shake his belief in God, because God created the math.

But when 2+2=4 threatens the dogma of many far right “conservatives”, they say that the liberal media is “messin’ with the math”, because “George Soros kicked a Jewish dude in the nuts when he was 11.”

2014-03-10 14:29:58
“Liberals are more highly educated than conservatives.”

Let’s see, those who redistribute wealth at gunpoint from taxpayers to give to scumbag welfare types are more highly educated than those who redistribute wealth at gunpoint from taxpayers to give to defense companies and engineers.

Got it Big V. I am convinced now.

Let’s see, those who redistribute wealth at gunpoint from taxpayers to give to scumbag welfare types

How can you be so angry in the face of history?
The wealth was already redistributed at gunpoint from the now “scumbag welfare types” whilst they were working taxpayers - and redistributed to the rich. How? By redistributing their jobs overseas and pushing the less than 20% of the top to the point of societal failure - so a few could profit. That’s not American.

But it was not at “gunpoint” you might say? If you think not, you are wrong. Look at America’s “libertarian” prison policy and the number of formally employed now in prison. Coincidence? I think not.

You might still wake up someday Wilhelm of Wherever.

With you rather hear about Allah?

with=would

Liberace….. Have you figured out why you’re spared no quarter here?

Wrong Dan. I’m supporting (actively) GOP candidates for Governor and for Congress. I think the GOP has a very good chance to win the Governor’s mansion if we get the right candidate.

When I lived briefly in Utah I supported Democrats. That just says something about the Republicans in Utah like your voting habits says something about Maryland Democrats. It did not ever really make me a Democrat. Maryland is the birthplace of Pelosi and is about as far to the left as the Bay area.

Hillary is old and sick. Who else they got on the bench when she goes down?

So is your point that the GOP people I favor tend to be moderates? I still don’t think that is correct. I would not really call Ron Paul or Gary Johnson moderates. It’s just that they’re not telling us one thing while doing another.

The reason Rand Paul, Ted Cruz, and Paul Ryan don’t deserve people’s support is that they demonstrate on a frequent basis that they really don’t “get it”. They think the GOP can do business as usual (in bed with special interests) and get votes by claiming their special interests are more valid than the Dems’ special interests. No thanks.

MD had a GOP governor in the 00’s, btw. He defeated a Kennedy. And he was/is not a moderate (Bob Erlich), he is a traditional conservative. His Lt. Gov. was Michael Steele, a traditional conservative who happens to be black. Erlich lost reelection bc of 2nd term Bush fatigue and the shitlibs took over.

So is your point that the GOP people I favor tend to be moderates? I

No, I think the point is that you support the Republican when even you believe the Democrat is off his or her meds.

Maryland is the birthplace of Pelosi

That’s really relevant, isn’t it?

Yes. Next question?

Adan: Maryland is the birthplace of Pelosi

Adan: Yes. Next question?

It is relevant in the same way AlGore’s big Carrier air conditioner is relevant to the science of climate change.

Somebody firing up the Philadelphia Experiment again?

some reports claim the users of the “stolen passports” were black. Any black Tibetans?

You cannot be a black Buddhist or a black Muslim? If it is religious and not ethnically based terrorism, it could be people of any race. However, when in doubt the Muslims do top my list of suspects in a terrorist incident.

From a November 18, 2012 Huffington Post article:

Born in South Seattle in a largely black neighborhood, Sala grew up in public housing projects. Her younger years, she says, were full of violence. She was raped. She was abused by an ex-husband. As an adult, she was nearly always in financial ruin. Raised as a Missionary Baptist, she instantly turned to faith to cope with pent-up anger and emotional distress. For 15 years of her adult life living in Kansas City and Seattle, she hopped between Baptist, Presbyterian and Catholic churches.

Sala’s Buddhist journey began with her own suffering and a resolve to improve her life, a path similar to that of many other Buddhists. She’s practiced meditation for 20 years, and credits it for freeing her from emotional turmoil. Her life’s goal, she says, is to bring Buddhist practice to those who are suffering. On weekends, she teaches Buddhism to prisoners, and has found herself spending vacation days from her day job as a criminal prosecutor to attend Buddhist retreats to be certified as a “community dharma leader.” One day, she hopes to leave her job to be a full-time meditation teacher.

“Hopefully, to people like me,” she says.

“THE EXPRESSION OF OURSELVES”

SIMS’ largest meetings are on Tuesday nights, when about 100 experienced meditators come to St. Mark’s Episcopal Cathedral in Capitol Hill for a weekly “sit” and dharma talk. A sit is exactly what it sounds like. In a semi-circle, members sit on cushions and in chairs in silence for 40 minutes. While most people would get lost in their own heads and daydreams in such a situation, the idea in meditation is to avoid any complex thoughts, often called “hindrances.” Instead, the meditators are supposed to become aware of their own bodies and breathing, and pay attention to how one interprets the sounds and feelings around his or herself.

On a recent Thursday, Sala was one of seven non-whites in the crowd. Facing the group was Rodney Smith, a nationally known Buddhist teacher and former hospice caretaker who founded SIMS 19 years ago. After the meditation, Smith, who was trained in Thailand and Myanmar as a monk, gave a dharma talk, a Buddhist teaching, on one of his favorite topics: the Buddhist view of the body versus the spirit. Meditators, he said, too often get caught up in comparing themselves and their own spiritual progress to other people, a negative vortex of practice. For an hour, Smith told the crowd to let go of attachment to individuality, be it self-assessment based on outward appearances, career, money, power or something else entirely.

“What we are doing in our spiritual journey is we’re transforming what we thought we were, which was the expression of ourselves in form, to spirit, the expression of ourselves formless.”

Very good article, while it does mention a black man it talks about two Asian men having the stolen passports.

http://www.dailymail.co.uk/news/article-2577185/Missing-Malaysia-flight-Probe-5-passengers-checked-never-boarded.html

point taken, it is just that no regions of black buddhists come immediately to mind (this is also assuming that the people using the stolen passports had anything to do with the planes demise).

An article which will soon post suggests that the two who used the European passports were Asian. No area with black Buddhists but I have attempted to post an article from the Huffington posts about black Buddhists.

I respect craftsmen over political hacks.

Me too. I’d never want a right-wing blinded, babbling dogmatist plumbing my house.

(But maybe in Brazil if they were good, because those types don’t bark or snarl a lot here)

How would that turn out, if you had a left wing babbling dogmatist plumbing your house? Would it work better? At all?

How would that turn out, if you had a left wing babbling dogmatist plumbing your house? Would it work better?

Much better. Let’s go to American history.

In the context of 2014 America, a “left-winger” would work out much better because America’s right has shifted so far wacko right that today’s “left-winger” is akin to a moderate of yesterday.

And by definition, a moderate would not be babbling dogma.

I think most people use the 1946-64 range but there is no question that births started to pick-up even before then and were still high in 1965.

We’ve been at about 4MM births or so annually for a while. The cohorts turning 21 today were born in 1993. There were 4.039MM people born in the US in 1993.

So, what really matters from a housing perspective is the time when there were a lot more than 4MM people born (ie the folks for whom there is no younger replacement coming of age). The first time during the boom that we exceeded 4MM people born was in 1954 (4.078MM people born). They will turn 60 this year.

In 1965, there were 3.76MM people born in the US, and it didn’t get back above 4MM until about 1989. The peak during the baby boom was in 1957 (4.308MM).

So, what really matters from a housing perspective is the time when there were a lot more than 4MM people born (ie the folks for whom there is no younger replacement coming of age).

Sorry but that is like saying what really matters from a population perspective is how many births occur. No, it has to be comparing how many births compared to how many deaths. Similarly, in housing it has many people are entering the market for housing as opposed how many people are leaving the housing market by death or nursing home, moving in with family member etc. Never in this country’s history has the destruction of demand for housing been so balanced with the creation of new demand.

You need to drill to get NG, Carter’s policies were in direct conflict with each other just like Obama’s policies. Both have kept drilling from occurring on Federal land and Obama has held up pipelines. The recession was over by 2009, it was not the worse since the great depression, it happened due to a panic and the country would have recovered without Obama’s excessive intervention which just created uncertainly depressing the recovery and the worse uncertainly was created by Obamacare. High gasoline prices and high unemployment are certainly not better than low gasoline prices with high unemployment.

The recession was over by 2009, (for the rich only)

USA GDP stats to judge a recession are bogus nowadays because after 34 years of trickle-down, almost all of any “increase” in GDP is flowing only up to the rich.

Today’s productivity and GDP gains flow mostly to the rich which is in contrast to most of America’s history.

“in reality world oil prices declined during the first three years of Reagan’s term largely because of reduced demand — world consumption declined 15 percent (9 million barrels per day) between 1979 and 1983. In the US, oil consumption declined 20 percent (3.6 million barrels per day) between 1978 and 1983

Once again you ignore the key reason for the decline in oil demand substitution to coal and NG which would not be possible had Reagan not opened up federal lands to development in a way that Carter would not allow.

Once again you ignore the key reason for the decline in oil demand substitution to coal and NG which would not be possible had Reagan not

Once again you ignore math and the fact that oil is a global market and it’s a big ol’ world out here and Reagan’s “policies” were a drop in the bucket in world demand and prices. Let’s do the math.

world consumption declined 15 percent (9 million barrels per day) between 1979 and 1983. In the US, oil consumption declined 20 percent (3.6 million barrels per day) between 1978 and 1983

World consumption dropped 9 million barrels per day - USA’s dropped 3.6 million barrels per day. The WORLD did not drop 9 bpd just because the USA dropped 3.6 bpd. And the USA did not drop 3.6 bpd just because of “opened Fed land” and switching to NG and coal.

Far from it. Most of that 3.6 bpd drop was because of conservation and people were broke. Therefore, the math bears out that Reagan’s policies had little to do with GLOBAL oil prices. Reagan got lucky on energy. It’s math and history.