Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
Post off-topic ideas, links, and Craigslist finds here.
Posted By: Ben Jones @ 12:51 am
Houses depreciate rapidly.
Did you dump your long-term bonds too soon?
Paul Tudor Jones says don’t sell Treasurys until you see the whites of the Fed’s eyes
May 5, 2014, 7:08 PM ET
With Treasurys rallying, pushing yields on 10-year notes to their lows of the year, Paul Tudor Jones weighed in on the perennial debate over when to sell.
“My message to bond bears is to wait till you see the whites of their eyes before you sell fixed income,” he said at the Ira Sohn conference Monday.
Jones argued that yields in the U.S. don’t tend to rise until around three months before the Fed pulls the trigger on higher rates.
And Sohn pointed to the action Friday in the Treasurys as a sign for caution.
So when is there an “actionable event?” Jones argues the time to get short is probably in April of 2015, three months ahead of the implied rate hike in July 2015.
Stubborn Treasury-Bond Yields Touch a Low
10-Year Treasury Rate, Briefly Hitting 2.566%, Continues to Defy Expectations of U.S. Growth
By Min Zeng and Steven Russolillo
Updated May 5, 2014 7:01 p.m. ET
Anxious investors are powering a rally in U.S. Treasurys few would have expected this year.
U.S. government-bond yields, which move inversely to prices, briefly touched their lowest level in six months Monday as geopolitical fears combined with uncertainty over global economic growth to push fund managers toward havens. The surprise strength in Treasurys is confounding bond-market bears: In 2014, U.S. government bonds have gained more than the Dow Jones Industrial Average.
The bond action is the latest sign of anxiety among investors surveying the outlook for U.S. and global growth.
Many investors entered the year expecting Treasury prices to decline, as they did last year, and yields to rise as U.S. economic growth and interest rates perked up. And many forecasters still expect Treasury yields to rise before the end of the year. Managers position for higher yields by holding fewer Treasury bonds than benchmark bond-indexes suggest, while hedge funds and bank traders place bets on bond prices falling, and yields rising, known as short bets.
But bonds haven’t yet behaved as bearish investors expected. On Monday, the yield on the 10-year Treasury note fell in early U.S. trading to 2.566%, its lowest since Nov. 1, before rebounding to 2.611%. The Treasury yield has dropped from 3% at the end of 2013.
Soft economic data and harsh winter weather have thwarted many forecasters’ expectations of a steady rise in yields as the Federal Reserve reduces its monthly bond purchases. A standoff in Ukraine, reversals in developing markets such as Turkey and Brazil and a slowdown in the once-roaring U.S. stock rally all have conspired to prod more investor cash into safe-harbor bonds.
“Falling bond yields have been a big surprise,” said Erik Weisman, a global bond-portfolio manager at MFS Investment Management, which has $420 billion in assets under management. “The compelling story” at the start of the year—higher yields and faster growth—”didn’t pan out.”
I don’t hold long term bonds, but I did sell my GNMA fund too early at $10.54. Today the VFIIX is $10.66. Oh well, I still think interest rates are going to increase.
Of course, I have been saying that for the last 5 years!
I rarely chomp on the bait of Series I savings bonds, anticipating when interest rates rise, the fixed rate of Series I bonds will rise. I will settle for 1.6% yield on VTCLX and its own inflation-protection properties for now. Fixed rates on I bonds are 0.10%.
Seems counterintuitive but I also am adding more to 0.10%-yielding 52 week T-bills. If I get to $104,000 worth of them before I-bond fixed rates get to 1%, I will ladder into 2 year notes, $4,000 worth every 4 weeks.
If the stock market is rigged, why isn’t the bond market also rigged?
Bond market is rigged. The Frauderal Res has been buying down the rate for a long time now.
But I thought we were the cleanest dirty shirt?
Hey Housing Analyst are you DATADRIVENANYLSIS on CNBC message forum? It sounds like you.
Interesting. You’re lying through your teeth over there too.
It’s totally rigged. And the fully-understood rigging in the face of dismal fundamentals is what explains the current bizarre circumstance, where bond yields are falling in the face of the QE3 taper.
My take on it is that the market got way out ahead of itself between last May and September, with bond traders pricing in rising rates due to tapering.
But those rising rates were predicated on the latest incarnation of the Green Shoots meme. Since the bad, bad winter weather froze all the Green Shoots, economic fundamentals turned out uglier than expected, obliterating support for long-term Treasury yields.
Well now they tell us!
U.S. economy probably shrank in the first quarter
May 6, 2014, 10:36 AM ET
The U.S. economy probably contracted in the first quarter for the first time in three years and only the second time since the Great Recession ended in mid-2009, new data suggest.
Initially the government said the economy barely grew in the first three months of 2014, rising at a 0.1% annual rate. Yet fresh reports on the U.S. trade deficit, construction spending and business inventories have been softer than Wall Street expected.
The result: economists now predict gross domestic product will be revised down to a decline of 0.2% to 0.4% in the first quarter. A handful of Wall Street firms trimmed their growth forecasts after Tuesday’s trade report.
The last negative quarter was in early 2011, when growth fell by 1.3%.
Please ignore the fact that we have negative GDP growth and concentrate on the fact that if housing completely collapses in China, China may have only 5% growth.
May 6, 2014, 1:47 p.m. EDT
Long-term Treasurys extend gains after auction
3-year note sells at highest yield since May 2011
By Ben Eisen, MarketWatch
NEW YORK (MarketWatch) — Treasury prices inched mostly higher Tuesday as demand for longer-dated U.S. government debt remained strong, extending gains after an auction of 3-year notes at the highest yield since May 2011.
The Treasury Department sold $29 billion of the securities at a yield of 0.928%, slightly below where the broader market was trading at the time.
Buyers offered to purchase 3.40 times the amount of debt for sale, compared with 3.38 times in the last six sales. Indirect bidders, a group that includes foreign central banks, took down 28.1% of the sale, below the average of 33.1% in recent auctions. Direct bidders, which can include domestic money managers, bought 25.5% of the auction, well above the recent average of 18.4%.
After the sale, the 3-year note (3_YEAR +0.23%) yield, which rises as prices fall, was up 1 basis point on the day at 0.886%, according to Tradeweb.
The 30-year bond (30_YEAR -0.82%), which has rallied strongly in recent sessions, continued to be the biggest gainer on Tuesday. Its yield dropped 2.5 basis points on the day to 3.381% and now trades around levels from last June.
The 10-year note (10_YEAR -0.54%) yield fell 2 basis points to 2.593%, while the 5-year note (5_YEAR -0.24%) yield was unchanged at 1.681%.
The rally in long-term U.S. government debt since the beginning of the year has led to returns of over 11% for the Barclays U.S. Treasury 20+ Year index. It’s also brought out corporate issuers like Caterpillar Inc., who are taking advantage of low rates to buy long-term debt.
How about them bond?
ft dot com
May 6, 2014 8:21 am
Why US and European bond yields will fall
By Steven Major
The key to conflict resolution is to put yourself in someone else’s shoes. To understand the apparent disconnect between the stronger US economy and lower US Treasury yields, consider it from the perspective of the US Treasury market.
Conventional thinking holds that better economic data lead to expectations of higher short-term interest rates and that bond yields will rise as a result. After all, if the economy is growing, the output gap should narrow and capacity constraints could be reached. The resultant threat of inflation means monetary policy is likely to tighten.
But the causality can run in the other direction, and it is more interesting to consider what the bond market says about the economy than what the economy should say about bond yields. This ‘tail wagging the dog’ approach requires a closer look at three factors: what bond yields tell us; historical precedents for bonds moving independently of official rates; and what bond yields mean for the various actors in the economy.
What bond yields say about the future is even more important in setting monetary conditions when official rates are close to zero, as they have been in the US since 2008. One year ago the US Treasury five-year yield, starting in five years’ time (a key forward rate), was 2.8 per cent.
By the end of 2013 the same forward yield was at 4.6 per cent, above the Fed’s long-run nominal GDP growth forecast, thereby reflecting much more restrictive financial conditions than a year earlier.
Stronger economic data and projections of higher official rates, most dramatically so in the UK and US, had already been factored into long forwards. Now at 3.90 per cent, there has been a return to the middle of the range established over the past 12 months.
This independent movement of bond yields from the official short-term rate set by the US Federal Reserve happens all the time. Fed tightening (or raising of official short-term rates) will only mean higher yields if the market is not expecting it. What former Fed chairman Alan Greenspan labelled a “conundrum” in 2005 was the puzzle of how there could be simultaneous increases in the Fed funds rate and declines in longer-term yields.
Markets are now more comfortable with “buy the rumour, sell the fact” and there is statistical support for this independent movement of long yields, confirmed in a 2013 report by the St Louis Fed. The conclusion was that long yields were mostly driven by macroeconomic factors while the short rates were more influenced by monetary policy.
Our forecasts for lower US and European bond yields are variously described as non-consensus and even counterintuitive because they do not fit with the mainstream thinking. Longer-dated bond yields are lower than where they started the year partly because the overwhelming consensus has been positioned for higher yields. If the incoming data start to respond to last year’s tighter monetary conditions and expectations of tightening are priced-out, there is scope for intermediate-to-long yields to fall further.
What would happen if DC stopped encouraging low-income households to become homeowners?
Overhaul Bill Criticized For Ending Affordable Housing Goals
May 05, 2014 5:00 AM ET
4 min 54 sec
There’s a fight in Washington over the future of homeownership in America. At issue is a bipartisan bill to dramatically reshape the housing finance industry — the industry that was at the heart of the financial crisis. It’s also an industry that’s at the heart of the American dream — and the bill before Congress may affect who can afford to buy a house.
The Obama administration supports the bill. But civil rights groups and housing advocates say it would weaken rules that push banks to lend to low- and moderate-income homebuyers.
Historic Overhaul Of Housing
Since the housing crash, there’s been a lot of talk about doing a major overhaul of the U.S. mortgage market. by Sens. Tim Johnson, D-S.D., and Mike Crapo, R-Idaho, leaders of the Senate Banking Committee, could be the last, best shot at doing that during the Obama presidency.
Shaun Donovan, secretary for Housing and Urban Development, is trying to help push it forward. “This is the most important piece of repairing the damage from our financial crisis that remains,” he tells NPR.
The bill aims to protect taxpayers from having to bail out financial firms in another housing crash. It would do that by putting a buffer of private money ahead of a government guarantee for home loans.
Donovan says the bill would do a lot to promote affordable housing. “We would be able under the current bill to dedicate $5 billion a year to affordable housing,” he says. “That’s the largest new investment in affordable housing we’ve had in more than a generation.”
Groups Worry Over Softening Goals
Housing advocates and civil rights groups say they are worried about the bill though because they say it would end requirements that a certain percentage of loans be made to low- and moderate-income people.
“The bill explicitly abolishes affordable housing goals,” says Mike Calhoun, the president of the Center for Responsible Lending.
The bill would get rid of these mandatory goals, replacing them with voluntary ones and a set of financial incentives. Many conservatives say the mandatory lending rules helped cause the financial crisis. And Calhoun says the bill needed support from Republicans, “those who argue that the crisis was caused by over-government regulation, encouraging banks to offer loans to low- or moderate-income families.” So the new bill softens those regulations.
Wade Henderson is the president of the Leadership Conference on Civil and Human Rights, a coalition of 200 groups, from the NAACP to the AARP. “Many of us are skeptical,” he says.
Henderson is concerned that this new proposed system would replace affordable housing goals with “a relatively nebulous, flexible system.” He says the new system promises to deliver more money for affordable housing, but he says there are “loopholes and it’s not clear that that will be the case.”
Shifting Power From Government To Wall Street?
Donovan, the HUD secretary, says the foreclosure crisis shows that the current system is broken and needs to be fixed. “African-Americans lost half their wealth between 2005-2009,” he says. So, he says, “anybody who tells you that the current system is serving those families well is missing the point.” The country needs reform, “to serve those very families that those groups” are representing, Donovan says.
NY Real Estate Residential
Affordable Housing Plan to Cost New York City $8 Billion
Program Seeks to Build or Preserve 200,000 Homes Over Next Decade
By Laura Kusisto
Updated May 5, 2014 9:01 p.m. ET
The rough parameters of Mayor Bill de Blasio’s affordable-housing plan—that it would seek to build or preserve 200,000 affordable homes across the city over the next decade—have been known for months.
But the plan, introduced formally by the mayor in public appearances on Monday, provided more detail than many in the industry had expected about City Hall’s effort to dramatically increase the amount it spends on housing.
The city plans to lay out $8 billion, part of a $41 billion program that also will leverage investment from federal and state governments, private developers and lenders.
For the next five years alone, City Hall intends to more than double the capital budget of its Housing Preservation and Development Department.
Politicians would fail to be reelected and we can’t have that. No politician left behind.
Bankers would make less money, and we can’t have that. No bankers left behind.
“No bankers left behind.”
Bankers go to the head of the line, next come the women and children.
Thought it was bankers, then politicians then women and children.
Do the bankers control the politicians in China? I’m pretty sure they would have no problem executing whoever it becomes expedient to execute. And they’d do it much more efficiently than 43 minutes.
DC policy people couldn’t even consider this, but it would be a great idea. The idea that “everyone” should be able to “own” their home is akin to religion in DC. The reality is, of course, that maybe 1/3 of Americans should own their own home–quite possibly less. Most people just make payments forever and never own their home outright. And for those that do own, they only own because they carry credit card balances or do absurd trade-offs of their time and energy such as long commutes, long hours, not taking care of their health, and so forth. All for the “privilege” of owning some floors and walls.
Downlow Joe has entered the building.
Encouraging low income people? Was that really the problem, all that CRA stuff?
They need to stop encouraging people who can’t afford houses to buy houses. The live on credit live for today types. It’s a much larger swath of the population that the low income home buyers.
Apparently one of the problems with “affordable housing” policy is that it extends to federally-guaranteed mortgages in amounts north of $500K. I assume these aren’t targeted at low-income families who otherwise could not “afford” to buy a home, but I honestly can’t say.
There was a post here yesterday from the LA times about a woman who put 25K down and owed another 70K. I didn’t go to the story, but I’d assume it was somewhere in Southern Ca. Where’s the affordable housing problem if there are houses being bought for 100k?
It’s all BS gifts to the REIC, 500k homes have nothing to do with affordable housing.
That didn’t really pass the smell test. There are no homes available in Southern California for under 100K. The article was talking about homes in the 450K range situated in rather marginal areas (I know, I live and work around there).
Not even in Palmdale or Moreno Valley?
It was prolly a condo.
I assume these aren’t targeted at low-income families who otherwise could not “afford” to buy a home
You might think that, I couldn’t possibly comment.
The idea that “everyone” should be able to “own” their home is akin to religion in DC.
Are you suggesting home ownership is not guaranteed by the Bill of Rights?
The Bankers’ Bill of Rights perhaps
A well guaranteed mortgage being necessary to the security of a free state, the right of the Bankers to not mark to market shall not be infringed.
Who knew China’s property bubble has already popped?
7:10 pm HKT
May 5, 2014
Economy & Business
China’s Property Bubble Has Already Popped, Report Says
China’s great real-estate bust has begun, says Nomura.
A combination of a huge oversupply of housing and a shortage of developer financing is producing a housing market downturn that could drive China’s GDP to less than 6% this year.
“To us, it is no longer a question of ‘if’ but rather ‘how severe’ the property market correction will be,” three Nomura analysts wrote in a report released Monday. And there isn’t much the government can do to head off problems. “There is no policy that is universally right,” says Nomura analyst Zhiwei Zhang.
For some time, Nomura has been among the most bearish of the big investment houses when it comes to China. And it has made some gutsy calls, although they haven’t always turned out to be right. In early April, for instance, Nomura forecast that China’s current account—the widest measure of trade—would be in the red in the first quarter of 2014. When the numbers came in recently, China still had a current account surplus, though at $7 billion, it was the smallest quarterly surplus in three years.
So it remains to be seen whether Nomura this time will be Paul Revere warning of trouble ahead or Chicken Little, warning of trouble that never seems to occur.
Nomura bases a lot of its argument on the observation that that property investment turned negative in four of China’s 26 provinces in the first quarter of 2014, and in two of them, Heilongjiang and Jilin, the fall was greater than 25%. To Nomura, that’s a warning sign of similar problems to come in other Chinese provinces.
2:29 pm HKT
May 2, 2014
Economy & Business
Leaked Comments From Top Property Developer: China Is Built Out
Spring hasn’t sprung for China’s chilly housing market and it may not for some time, a high level executive with the country’s largest real-estate developer said in rare remarks leaked online.
A glut of apartments and tightness in the credit market don’t bode well for property developers, said Mao Daqing, vice chairman of China Vanke.
“Overall, China has reached its capacity limit for new construction of housing projects, only some coastal third- and fourth-tier cities have potential for capacity expansion,” Mr. Mao, who oversees the firm’s Beijing operations, said at a closed door meeting in Beijing on Wednesday (in Chinese). “As to whether there is room for home prices to rise, I don’t see any possibility for a rise in home prices, especially in cities with large housing inventory, unless the government pushes out another few trillion (in stimulus).”
Money & Markets
There Are 6 Things That Could Trigger A Property Market Crash In China
Mamta Badkar in 2 hours
Talk of a Chinese property bubble is back in the headlines.
Recently, leaked recordings showed that Mao Daqing, vice chairman of Vanke Group, made some bearish comments on the property sector.
The recent slump in property sales and housing starts prompted Societe Generale’s Wei Yao to write “the housing sector now poses the biggest downside risk to the Chinese economy.”
UBS’ Tao Wang is out with a new note titled “Bubble Trouble: Are We There Yet?” Wang sees a 15% probability that a sharp property-market correction could cause GDP growth to slump to 5% in 2015.
For the most part, chatter on property bubbles tends to focus on home prices, but when it comes to China, Wang thinks we should focus on construction volume.
That’s because Chinese homebuyers use large down payments: 30% for their first home and 60% for their second mortgage. So a decline in prices doesn’t trump up the pressure to sell homes, and the risk of mortgage default is smaller than what we have seen in the U.S., for instance.
“A big drop in construction activity even without a large price correction would likely have serious negative impact on the industrial complex and, through that, economic growth and bank balance sheets,” Wang writes.
“Given that property investment accounts for almost a quarter of fixed investment, construction value-added is 13% of GDP, and there are extensive linkages between property and industrial sectors including steel, cement and construction machinery, the impact on the economy from a drop in construction volume is bigger than that from a worsening household balance sheet and consumption,” she writes.
A 10-percentage-point drop in construction-volume growth could cause a 2.5-percentage-point drop in GDP growth.
I was just about to post this article. I think the keys to this article are two things: (1) down payments of 30% on the first house and 60% on the second home (2) even with the housing bust GDP growth will be around 7% for both 2014 and 2015.
You have to go back far in U.S. history to find a 30% down payment requirement. This really does insulate the system from great pain although not the individual buyer. Since the ghost cities are really second homes there is even more of a buffer between the system and a sharp decline in prices.
even with the housing bust GDP growth will be around 7% for both 2014 and 2015 ??
The stated GDP growth is 7.5%…The article suggested this;
“A 10-percentage-point drop in construction-volume growth could cause a 2.5-percentage-point drop in GDP growth”
That would take the GDP to 5%….
Yes, if it occurred and China did nothing to stimulate the economy in other areas, two very big ifs. But even if it happened it would be more real growth than probably three years in the U.S. if you took out our artificial housing growth. If would be more than two years if you left it in.
no, it wouldn’t. A 2.5% drop in growth from 7.5% would be 7.3% or if rounded off, the 7% the article stated which is a little sneaky. To go from a 7.5% growth rate to a 5% growth rate, that would be about a 33% decline.
(1) down payments of 30% on the first house and 60% on the second home
Lots of Chinese households are likely to see their life savings wiped out by falling real estate prices, thanks to having all of their skin in this game.
Was that your point?
No, my point is that unlike in America where a ten percent drop in housing prices causes millions to be underwater and thus strategic defaulters, most Chinese will still have equity and an incentive to hang on to his or her house even if prices drop 30% in first home areas and 60% in second home areas due to the large down payments and a subsequent increase in equity due to payments and appreciation.
I guess you don’t see a problem with 60 million plus empty housing units, while I do see a problem.
I see a problem but it sixty million units in a country with more than 1.3 billion people with many people needing housing. How many empty units do we have in a country of just over 300 million? So who has the bigger problem?
“How many empty units do we have in a country of just over 300 million?”
Good point. I believe HA’s number is 25 million?
Seems like they have a lot of room to loosen up the standards until they get to NINJA LOANS.
Exactly and the fact they are not moving in that direction should be praised on this blog. Why is it that declining housing prices in the U.S. is considered to a positive development but in China it is considered a terrible economic development? People on this blog seem to have drank the Kool-Aid that keeping housing prices up is good for the economy instead of believing like I do that misallocating capital to construct excessive housing is bad for the long term performance of an economy and China by allowing housing prices to fall is helping its economy in the longer term.
The Chinese even have a term which explains how they feel about housing debt, Fang nu which translates to housing slaves. While we may say things like that on this blog very few people think like that in America.
Not exactly housing slave translation but very close.
China’s property bubble has burst - report
By Charles Riley @CRrileyCNN
May 6, 2014: 5:14 AM ET
HONG KONG (CNNMoney)
Economists at Nomura have made their call: China’s property bubble has burst, they say, and the country’s economy could slow dramatically unless Beijing steps in with new stimulus measures.
“It is no longer a question of ‘if’ but rather ‘how severe’ the property market correction will be,” three of the bank’s analysts say in a new report. “We are convinced that the property sector has passed a turning point.”
Analysts at the Japan-based broker are among the most critical of China’s property sector, which has powered ahead for years despite frequent warnings that a collapse is just round the corner.
Skeptics say the real estate sector is emblematic of problems such as rapid credit expansion and policies that promote short term growth over a more balanced economy. The building rush means property supply now outstrips demand in some parts of the country.
Bulls counter that the boom is sustainable, especially as hundreds of millions of Chinese migrate into urban areas.
The size of the sector — somewhere between 15% to 25% of the economy — underscores the importance of the debate for a world that is increasingly connected to China.
Disappointed by property sales during the May Day holiday, mainland developers are likely to deepen their price cuts, since there is no sign of any relaxation in mortgage policy to try to reverse a wait-and-see sentiment among homebuyers.
Residential property transactions in Beijing plunged 80 per cent during the May 1-3 holiday from the same period last year to a seven-year low, according to data from consultancy Centaline.
Well the South China Morning Post seem to know.
“Who knew China’s property bubble has already popped?”
Ben Jones, that’s who.
Yes, he did.
But what are the implications, really? They’ll just do their own version of what the US has done: manipulate.
their own version of what the US has done: manipulate ??
= Print more money….
And by extension, those of us who regularly read and post here have had an inkling for months already.
Here’s my conspiracy theory of the week.
We all know Russia and China have a relationship that defies the US self interests.
I see Russia staging an all out invasion of Ukraine as the perfect cover for a major State owned bank failure in China and vice versa.
When the equities bubble tanks here, each of them can say “blame the other guy!”
It will be truly awesome when China’s leaning residential towers PHYSICALLY collapse to the ground.
Wait for it!
The metaphorical collapse is destined to occur much sooner.
China’s leaning towers
David Keohane | May 06 12:11
We are now fairly sure there is a serious mismatch between the supply of and demand for charts about China property — more are being produced than will ever be seen. That said, here are a few worth paying attention to:
They’re from Nomura’s latest on China property stress which, they say, is increasing at pace. Apparently every property market leading indicator at the national level turned down in Q1, and for most monthly indicators the rate of decline accelerated through the quarter. That, says Nomura, means the question is no longer “if” or “when”, but rather “how much” China’s structurally oversupplied property market will correct.
The problem at root is monetary policy tightening since mid-2013 which has severely limited the supply of hot money available to property developers from the banking system.
Nomura have funding for property developers tightening considerably in Q1, with total funding rising only 6.6 per cent y-o-y, a significant slowdown from the 21.2 per cent growth seen in Q4 2013. That, they say, was due to an obvious fall in advance payments — down 33 per cent on the previous quarter and 4 per cent lower than a year ago — and a drop in self-financing of 19 per cent over the previous quarter as tighter regulation bit.
Will it be two decades, or less, before we see scenes like these filtering out of China?
“Give me your tired, your poor,
Your huddled masses yearning to breathe free,
The wretched refuse of your teeming shore.
Send these, the homeless, tempest-tossed, to me:
I lift my lamp beside the golden door.”
Lube ‘em up and send them to me and with nothing more than a signature or two placed above a dotted one I will allow all their fondest dreams to come true.
You cannot lose with the stuff I use.
“dotted one” = “dotted line”
You mean you don’t tattoo or brand them; your missing a trick there.
Tattooing or branding implies ownership. I don’t want to own them, just dip my beak a bit now and then.
The concept of they work, I reap works well for me.
Strangely, they don’t seem to mind all that much, in fact they
willingly seek me out.
Like holes punched in the pockets of Debt Junkies, so these are the days of our lives.
Lube em up?
You’re getting soft.
He didn’t say what lube he used, Fiery Jack perhaps
“WASHINGTON (AP) — Sen. Elizabeth Warren wants the next debate in Congress on student loans to focus on helping borrowers refinance their debt.
“The Massachusetts Democrat was to file a bill Tuesday that would open the door for potentially millions of recipients of federal loans to refinance at the same rate current recipients can get. Undergraduates, for example, qualify for loan at a 3.86 percentage rate.
“The bill is part of a larger effort by Democrats to focus on college costs leading up to the November election. Reps. George Miller, D-Calif., and John Tierney, D-Mass., were to file a companion bill in the House.”
The term “focus on college costs” as used here has nothing at all to do with the price and has everything to do with financing.
The intelligence of the American people: The gift that keeps on giving.
That really is funny! Refi to lower rates, ignore the huge principal. Hmmm, where have I heard that before?
What were college costs back when interest rates were double digits?
Thank you for that one. You just confirmed that woman is a fraud.
You know… Warren’s focus on student loan rates, instead of the root cause of bubble-like college costs… had struck a discordant note with me.
I just figured it out - She was a Harvard Law professor. People are people - everyone advocates for their self interest and that of their friends and families. She has benefited from the high tuition.
I personally like a lot of what Warren says. One of the few people in DC not (yet) in the pocket of the FIRE sector. But it’s just people being people.
A Senator from Massachusetts not in the FIRE Sector pockets?
O.k., so I am *not asking for investment advice* but simply asking what some of you are doing with your “didn’t buy a house” savings.
I’m thing about a vanguard IRA. The problem is, I keep waiting for “the big crash.” I’ve been in cash since 2008. Not whoops/whoops.
How do I effectively plan for retirement/college for the kids in this environment? I’m not sure DCA’ing into the market at this point would be a good idea. I also view my actions as super-contrarian… in other words, I’d be the last guy to buy stocks, which means, if I bought stocks the market would crash.
I’d like to be as BILA as possible - nimble and mobile - keeping in mind that I do have two kids. My wife and I started a conversation a few weeks ago about the future. There are some structural issues in the Tampa Region that won’t be resolved for our children (mass transit, decent housing, predictable schools/development, etc.) In other words, our concerns are real and right now, and not getting better. Ideally we’d raise our kids in a place they’d want to stay; the thing is, I don’t think this works anywhere.
I’m starting to feel a little drifty. I’ve been on HBB since 2006, and back then the near future was easy to predict. Now… are we turning Japanese?
I know it’s a big question, but I’m curious: how much “future proofing” are you reasonably trying to accomplish?
I agree with whoever posted the other day: if you can make a living via the internet, that would be ideal. Oil City on steroids.
“Structural issues” in Florida, you say? You can’t mean it’s shocking to you that the public schools there are awful. I feel like that’s something that everyone knows. And I don’t blame FL residents — FL is the demographically oldest state and also has one of the highest levels of immigrants and of Hispanics overall. The old people don’t want to spend money on the kids of immigrants or Latinos.
I’m also pretty sure that good FL schools are pretty expensive. How much does Bolles School cost per year? I’m guessing at least 30k/student?
I’m glad I’m not paying you $600/hr. to read.
Why would you move to FL if you have kids and don’t intend on sending them to private schools? Even in wealthy areas the schools are bad because those wealthy residents send their children to private schools anyway.
I’m sure there are places with good schools in Florida just like there are places with good schools in the Phoenix area. The downtown schools stink, but the suburban bedroom communities have good schools.
The private schools for kids thing is another elitist racket. Schools ain’t parents. And formal education is overrated. All the most important stuff I learned on my own.
The private schools for kids thing is another elitist racket
It is a way for the elites to avoid putting their children in a school with minorities while still pronouncing the advantages of diversity.
Even in wealthy areas the schools are bad because those wealthy residents send their children to private schools anyway ??
Wealthy people do not make good public schools….Its about parents & teachers…
Its about parents
Who are typically upper middle class in the better schools.
I read somewhere not long ago that the majority of people consider themselves contrarian.
The majority of people consider themselves to be good looking, intelligent and irresistible to prospective partners; strangely enough they are wrong.
You should be reading more here than there.
I think the majority also concedes it needs to lose a few pounds.
If only we had some objective measure like a scale for other things, particularly honesty.
it was from a somewhat respectable stores, something like bloomberg orBankrate.
.it begs the question however if the majority of people consider themselves contrarian, who are the contrarian investors?
If you aren’t sh*tting your pants when you push the buy button for the first time after major downturn, you aren’t being contrarian.
If you don’t have the stomach to do that, then just buy a Vanguard S&P ETF, and ignore it.
If you have the stomach to do that, then wait for the next recession, and buy when the most people are sh*tting themselves.
I enjoy being contrarian. Bought houses in 2008-10 when everyone said I shouldn’t. Bought VDIGX in 2009 when it was at $10, when everyone said the market was going to take another header.
Those moves have been quite rewarding over the last 5 years. Up about 20%/year on houses (leveraged) and up 15%/year on unleveraged stocks.
IMHO, the harder part of being contrarian is choosing the selling point…I tend to be early, but am trying to learn from my past mistakes. I’m not trying to squeeze out the last dime, but leaving forty cents is too much.
The buying part is easier for me–although I might sometimes enter early as well–averaging in helps in that regard.
When Maria Bartiromo’s voice goes up two octaves at 4:05 PM, that is a definite buying signal!
IMO your model should be Carl Morris, not Bill in Irvine. This is not an insult to Bill; it’s just that your situation better matches Carl’s. Carl is likely the most sensible person here. He found a cheap trailer park in the midst of good employment, without much of a commute, and supports a family.
At this point, I have no good financial advice. The market is clearly rigged to take 500 steps forward and 450 steps back, with the big boyz taking advantage coming and going. At best, we can invest to keep up with inflation.
Instead of saving for college, the best option may be to find a way to avoid college, depending, of course, on your kids. If they show talent for STEM or scholarships, that’s one avenue. But if they seem rather blah, and just go to college for any old degree, that’s a waste. The odds will be never in their favor. Better to put them on a trade track when they’re young, like the European model.
“At best, we can invest to keep up with inflation.”
Go ahead. Speak to this inflation. They’re your words.
IMO your model should be Carl Morris, not Bill in Irvine. This is not an insult to Bill; it’s just that your situation better matches Carl’s. Carl is likely the most sensible person here. He found a cheap trailer park in the midst of good employment, without much of a commute, and supports a family.
Wow…thanks. Not feeling particularly sensible, though. In the middle of a separation that will probably result in splitting the bubble savings down the middle. Plus totally misjudged how long this would go on, both the housing market and the stock market. But I’m doing my best and at least there are savings to split. No regrets about having and supporting a family all this time in spite of the situation.
Before anyone asks, China didn’t contribute to the problem…if anything it was a nice safety valve for a while. Also living in the trailer park didn’t cause the problem, although stbxw does not like it and may choose to move instead of me moving because of that.
“IMO your model should be Carl Morris, not Bill in Irvine.”
Refresh my memory: Carl owns a double wide, and lives it up, yes?
I don’t have a beamer, but in family terms, we live it up. Our original plan was to maximize our free-time so that we could take our kids all over the place and give them ALOT of experiences (Grand Canyon, Niagara Falls, Glacier National, etc.). We’re not that far off the mark in the “right now,” but we’re not ahead of the game enough to be positioned for later. IIRC, Carl is also saving a lot, yes?
I suspect at some point we will be squeezed as you were, Oxy.
How much are we talking in general and for how long? $50K or less for the down payment and I wouldn’t expose it to anything where I could lose much. But aren’t all those non risky options just paying a pittance and not much more than just a bank account?
I know jack about such things, but I’m not gonna let that stop me from giving my opinion.
I’m thing about a vanguard IRA. The problem is, I keep waiting for “the big crash.” I’ve been in cash since 2008. Not whoops/whoops.’
Read Boogle’s book on mutual fund investing
Can you be more specific? I am seeing multiple books on Amazon. Thanks?
Bogle on Mutual Funds: New Perspectives for the Intelligent Investor (McGraw-Hill, 1993), ISBN 1-55623-860-6
he wrote a bunch of books because the first one was a hit, but I bet they are all about the same.
He says you can’t time the market, nor can the pros so why pay them to even try just buy a low cost index fund.
He does say you can switch between bonds and stocks based on comparing interest paid by either for the best deal. Bonds pay very little now so stocks have run way up. anyway you can buy a mutual fund that does this for you , a low cost mutual fund like about .15% not 1 or 2% and no 12B fees or other crap.
I agree with Jack Boogle , the pro charging 2% fee would have to beat a low cost index fund by 2% a year just to break even with a .15% index fund, it is not possible to predict which hot shot fund will do this year after year and the hot shot funds tend to get over run with investors pushing their performance down, or closing them off.
the book goes on and on about this offering all kinds of proof and charts. It could really be 15 pages long.
You are asking the same questions that people used to ask before the big crash. I am asking them too. The stock market just keeps going up, and I am like “deeewwwwwwddddddd”. What should I do?
I know houses will crash again though, because of the inventory.
No stock market crash until most HBB posters throw in the towel and go all-in.
Best thing to do Muggy is get out of debt if you have any debt. Make that a habit to have a zero balance credit card at the end of each month. If not, then at the end of each year might be easier. But when you get to the point of zero debt each month, it is an easy habit to follow.
Next, raise cash. I mean cash. Your teacher’s credit union or whatever is a good place to keep it if you gotta go electronic.
When I was in my 30s I needed to establish discipline for saving cash. My credit union with the US Navy was the best way. It had a “Christmas stocking” account. It basically forbid you from tapping into that account until around Thanksgiving, presumably for gifts.
I used it as a way to develop a good savings habit that I stuck with and it made Bill in LA…”Bill in LA.” The kicker is that every November instead of taking the money out, I would use my cost of living increase with the feral gubment and add another $25 per paycheck or so. Some Novembers it was $50 more than the previous. I did this for five years at the least. That was enough to establish my tightwad / miserly ways.
And I haven’t even begun to be mobile. But by golly I dumped my house by selling for a loss and then moved to a big city and went into private industry. Then I became mobile! 1996.
I’ve found a hole in one of RAL’s sacred verses about conforming loan limits.
RAL has said that the lower limits on conforming loans would make it hard to sell homes in the ~700k range. (You’d need a jumbo loan whereas before you could finance the whole thing with a conforming loan.)
I just checked and the rates are lower for JUMBO loans than for conforming.
(Note: It’s still stupid to spend that much for a house unless you make 7 figures/yr and have significant assets. I just think it’s noteworthy that a point RAL has made over the years technically isn’t even correct anymore. This speaks to the ridiculous nature of home finance here in the US, IMO.)
I thought that “conforming” means that you can buy the home through FHA. The advantage of FHA isn’t the interest rate, it’s the 3.5% down. That’s why it’s harder to sell houses above the conforming limit. A buyer can afford* a $700K house with a 3.5% down FHA loan, but can’t afford the same $700K house with a jumbo 10% down, regardless of interest rate.
*I agree that few people should be buying $700K houses. If you need FHA for a $700K house, then you should be thinking about a $300K house. If no houses are that low, like in CA, then seriously think about going Oil City. Two Wal-Mart workers are financially better off in a house in Buffalo than a $150K engineer is in SF.
Because Jumbo loan borrowers have better credit than regular “poors” and Banks want to get paid back.
sad huh ?
I asked a co-worker if people back East really use the word “poors” or “Bronies”
He says no unless they are from Delaware.
I never thought we’d see this so soon… An NC Republican candidate who is against same-sex marriage but is himself gay and actually danced at a gay nightclub. (He claims he is no longer gay, he was “cured”, LOL!)
Steve Wiles, a Republican state Senate candidate who supports North Carolina’s constitutional amendment against same-sex marriage, once worked as a female impersonator at a gay nightclub in Winston-Salem and was gay at the time, according to a co-owner of the nightclub and a former employee.
Wiles, 34, was in his early 20s when he worked at the now-defunct nightclub, Club Odyssey, according to co-owner Randy Duggins and former employee Gray Tomlinson.
Do you think the revelation will have any impact on the race? Why or why not?
“He is Mona Sinclair,” Duggins said, referring to Wiles’ female persona.
All these years later, Wiles is a real-estate agent who lives in Belews Creek. He filed papers to run in the Republican primary May 6 against two other GOP candidates – incumbent Joyce Krawiec and East Bend resident Dempsey Brewer – for the largely conservative Senate District 31, which comprises Yadkin County and rings around most of Forsyth County.
He claims he is no longer gay, he was “cured”, LOL!
Warren Wilhelm, Jr. at it again curing gay people?
Stop this war!
I think a date with Lola has “cured” many a gay guy.
Dead giveaway, isn’t it?
I had sex with three women.
Am I a hypocrite if I don’t believe in polygamy?
Can this gay guy be “cured” just like the former lesbian wife of the new mayor of NYC?
No cure for gay Republican Congresscritters who hang out in bathroom stalls.
buy d.c. housing now or get priced out forever
An interesting (and revealing) Supreme Court case that is currently up for decision (should be in the next 4-6 weeks).
Basically, this fisherman was caught in the Gulf of Mexico with fish aboard his boat that were 1-2″ shorter than the minimum allowed. The federal agents boarded his boat and called in his boat number and name to the agents on shore. He probably would’ve gotten a fine and might have had his fishing license suspended for a while.
A couple of hours later, the fisherman (Yates) instructed his workers to throw the undersized fish off the boat into the Gulf of Mexico, leaving just a few 19.5″ fish (that would look like legitimate mistakes, based on the measuring technique they were using).
Well, the Feds decided to charge the guy under a statute used for FINANCIAL CRIMES where accountants or lawyers manipulate reports or destroy documents. They charged him under Sarbanes-Oxley. The Feds won at District Ct and the Court of Appeals. Supreme Court took cert to consider whether destroying the “fish” falls within the language of Sarbanes-Oxley, which uses the phrase “tangible objects” but was truly referring to hard drives, spreadsheets, documents, etc.
Issue: Whether Mr. Yates was deprived of fair notice that destruction of fish would fall within the purview of 18 U.S.C. § 1519, which makes it a crime for anyone who “knowingly alters, destroys, mutilates, conceals, covers up, falsifies, or makes a false entry in any record, document, or tangible object” with the intent to impede or obstruct an investigation, where the term “tangible object” is ambiguous and undefined in the statute, and unlike the nouns accompanying “tangible object” in section 1519, possesses no record-keeping, documentary, or informational content or purpose.
You should read it verse and chapter and give up fishing Liberace. You’re horrible at it.
$600/hr for your low quality work?
Relax, RAL, or you’re going to have a stroke. My rate’s only in the mid 300s. Associates are usually paid ~1/3 of what their revenue for the firm. Those boomer shareholders/partners have such a skim operation going, I should start calling them Tony Soprano, Phil Leotardo, Carmine Lupertazzi, etc.
600+ for associates only happens at top vault-rated firms (top 15-20). And that’s even more of a scam because sr associates just assign work to the other associates, add a few comments in track changes/redline, and brief the partner before he has to do a dial-in with the client, client’s in house counsel, and their auditors or other compliance people. On the rare occasion when a sr associate or partner “writes” a pleading or brief, it’s heavily cut/pasted from a template someone like me updates periodically to insert new case law. Out of a typical 25 pager, they might write 5 pages.
Low quality Liberace.
I dunno, seems like a pretty clear cut case of destroying evidence — not sure why they would need Sarbanes-Oxley. But even under Sarbanes-Oxley, wouldn’t the fish itself be considered a record and/or a source of data? The feds could confiscate the fish and measure it later the same way they would confiscate a hard drive and look at files later.
The question is about fair notice. There are 2 kinds of crimes — malum in se and malum prohibidum. For “in se”, a person doesn’t need to be “on notice” that their actions might be illegal. For example, homicide is malum in se. There are many other crimes that are in se.
For crimes where are malum prohibidum, it’s less that the act itself is obviously bad and more that it violates a procedure or standard that society has adopted. In this case, there is no question the guy violated the malum prohibidum regulation on minimum fish length. The question is whether he therefore would’ve had notice that he was subject to a statute such as SOX which was debated and passed with the intention to limit financial crimes.
Now, if they wanted to charge him with another malum in se crime for destruction of evidence, that seems fair. But they went after him under SOX specifically because it allowed them more latitude as far as penalties. There were lesser options open to the prosecutors and they instead picked to use a law initially intended to cover another type of behavior entirely. People have a right to some fairness in criminal proceedings, not to have laws used for corporate executives turned against them.
Is it unusual that such a case would go all the way to the Supreme Court? I wonder how a fisherman can afford the legal fees.
So the SOP doesn’t have a Scope section? People should learn how to write laws, seriously.
because warmists gonna warm
those pointy headed science people need to take their gay, socialist science and go back to europe, america doesn’t need these nattering nabobs of negativism wetting the bed on our exceptionalism and rugged individualism
See Lola above:
And formal education is overrated. All the most important stuff I learned on my own.
I’m so sick of all this science crap.
Fortunately, the one third of Louisiana Republicans who blame Obama for Hurricane Katrina are not alone. Their like-minded voters in other states will cement the GOP House majority in 2014 and nominate a candidate who will sweep to victory in 2016 and ban all of this gay science from the USA for good.
She blinded me with science!
Because lukewarmists have to deal in reality:
So many Kochs, so little time…
You are a fluffer for the Globalists, G.W. Bush or George Soros, Warren Buffet, and the Bush family
Koch on the brain again, Dannyboy?
Goon, I have not mentioned Koch, only you. Pot on the brain?
These messages sponsored by Koch.
If you were not stoned today you would not have missed this, I am posting for two today due to Goon’s condition:
Not sure if I mentioned this before, but the other week I did some reverse-FOIA work for the Kochtopus. We submitted a request to EPA Region 5 to see who has been requesting info on this one (dirty) coke plant in [Midwestern state] and have the EPA provide a copy of anything that has been released to them.
Koch organization is freaking out now that SCOTUS has ruled that states can be held responsible for pollution that ends up crossing state lines. Like, you can’t have a plant in Indiana and circumvent pollution guidelines just because your pollution ends up blowing 5 miles east into Ohio (etc.).
Hey Obama, go back to Kenya!
Excerpt from one of two links which are about to post:
Countering that, Dr. Roy Spencer has what I think is the best take on it:
The report is gripping the nation like a global warming polar vortex trapped in place by the swirling toxic vapors emitted by a swarm of possessed SUVs.
The report contains claims of U.S. floods, droughts, severe weather, and heat waves, all of which are not unprecedented compared to centuries past, but are nevertheless known to be the fault of humans.
Ronald Wobbles, the report’s lead author, was quoted as saying (I am not making this up), “We’re already seeing extreme weather and it’s happening now”. This finding stands in stark contrast to 100 years ago, when ‘we saw extreme weather that was happening then’.
Who would believe anything published by someone with a name like that?
Hey Ronnie, why don’t you wobble back to Europe. And stop huffing balloons of jenkum, they’re making your brain wobble.
The housing propagandists have a vast organization and they work it hard.
You got that right, Mister!
Of the 0.1%, by the 0.1%, for the 0.1%
“Hedge fund managers heavily populate the so-called 1 percent in the United States. And they’re getting richer.
The 25 highest-earning hedge fund managers in the United States took home a total of $21.15 billion in compensation in 2013″
Pathetic, not even a billion per.
Under Obama that make them eligible for SNAP benefits.
Under reublican plan, they would be bailed out.
But they have to earn that much. Otherwise, how could they afford to hire armies of people to troll internet boards and make fun of poor people in an effort to eliminate the minimum wage, increase offshoring, decriminalize the hiring of illegal aliens, and oppose equal pay for equal work?
They NEED that much to stay afloat, goon.
Warmists gonna warm
“More than half the U.S. population lives in coastal areas that are “increasingly vulnerable” to the effects of climate change, which will ripple throughout the U.S. economy, a White House advisory group’s report concluded.
“Global climate change is projected to continue to change over this century and beyond, but there is still time to act to limit the amount of change and the extent of damaging impacts,” the report said.
I’m so sick of the relentless climate queers’ propaganda it makes me turn up the volume on Rush Limbaugh and cut off every Prius I see. They want to take away our Big Gulps and make us all live in socialist apartments.
Take your gay science and go back to Europe, we don’t need it here.
‘Merica f* yeah!
The real headline should be 100% vulnerable to Obama’s AGW taxes.
You really think warmists aren’t gonna warm, just cuz you post links to some internets website?
Because nothing says “I’m not gay” better than a pair of oversized plastic testicles swinging from the trailer hitch of your F-350.
I think rubber looks more natural but I defer to your superior knowledge.
It’s a Koch Koch world, Dannyboy.
Does it still work if you hang them from the rear bumper of a Nissan Leaf?
In terms of demonstrating one’s manhood, I think putting bull’s balls on a Nissan is as useful as putting ti#s on a bull as we would say in Vermont.
What about brass balls?
Brass balls are forbidden?
Housing is cratering….. kumbaya… Housing is cratering….. kumbaya.
A nation of broke azz loosers
Don’t be a debt donkey
And remember that Bill in Los Angeles = WIN
Oh gosh. First people buy depreciating stucco boxes in future ghettos. Then they tap their 401ks. Can’t fix stoopid.
Cash is king. Debt is dumb.
BTW….. my dodfx is doing well. And MSFT dividend is cranking up…. $1 in 2013.
DODFX is a keeper. I first put money into that in 2006 and I mostly do that once a year in December after dividends and capital gains in that fund are distributed.
Europe is socialist. IOW they have the central bank inflating their stocks too. But you have to bet with the banks or eat dog food later.
This is precisely why you need some tangible assets for insurance. Not a stupid house, but physical precious metals, ammo, guns, spare car parts, liquor, a couple of classic cars… You also need cash for insurance the other way…
During the 2008 campaign, President Barack Obama proposed allowing penalty-free withdrawals of up to $10,000 from retirement accounts. That idea went nowhere and wasn’t included in the 2009 economic stimulus.
Obama is the broke azz looser in Chief. Like Mugabe instead of fixing the real problem, he goes for the short term fix which makes things worse in the long run. This epitomizes his entire economic policy and is the reason why we have never had a real recovery.
Obama is the broke azz looser in Chief. Like Mugabe instead of fixing the real problem, he goes for the short term fix which makes things worse in the long run.
Hasn’t this been our strategy for the past 40 years or so? Bubble after bubble? As long as the offshoring juggernaut continues to roll, how can the problems be fixed?
I thought Obama was going to be different from the other political hacks? All he has done is put the worse policies on steroids, deficit spending and inflating the money supply. Policies to encourages production in the U.S. were needed, Obamacare has just discouraged real job growth in America.
Obamacare has just discouraged real job growth in America.
This could be said about many government programs or laws - Social Security, Medicare, the minimum wage, worker safety rules, environmental laws that have cleaned up our air and water.
Danny’s client list: the Koch Bros, the GOP, the Chinese government, the Russian government.
Should we be concerned about that combination?
Igor’s list: Pelosi, Obama, Gore, the communist party and every GBLT organization in the country, should we be concerned about that combination?
“Should we be concerned”
Yes, if I ever shilled for any of them, which I don’t. Conversely, we’ve all had the pleasure of watching you run to the defense of your various bosses all morning. It would be amusing if, as I said, the combination of your bosses wasn’t so unsettling.
What’s their common interest?
As a shill I do not expect you to admit it but it is clear that you are one for the Pelosi wing of your party. Saying that China is in less trouble than the U.S. is hardly being a shill for China and the rest of your charges equally lack foundation.
Coolists cooled in the 1970’s but today warmists gonna warm.
Dannyboy could care less either way, he posts what he gets paid to post.
Really Goon? So the Koch brother’s pay me to post against illegal immigration and for Rand Paul and not their candidates?
“The rest of your charges equally lack foundation”
Except for anyone who reads your posts, today or any day.
You are the most defensive poster on this blog today, Dannyboy.
You sound just like Rio.
Do you and Pelosi share Botox and make-up?
My comment was meant for Igor but Goon, I would be careful about being to close to Igor/Rio especially when you are stoned.
Hey Lola to know Obamacare is to hate Obamacare, so much for it becoming more popular with age:
You two guys, hit the showers.
I think it is funny how “Lola” is becoming a generic pejorative here!
What a Lola this one is.
So, last year, at age 56…
…Still unemployed, Cromie is trying to avoid tapping what’s left of her retirement savings — $7,000
56, with $7000 in retirement savings.
Sum Ting Wong.
The average Chinese has far more saved and a good part of his or her life he was making ten cents an hour.
How many dollars does the average Chinese person have?
I wish I could find you an exact number but here are figures that show what the average Chinese person made and their savings rate. Remember two things, this is for an average middle class worker and before China had two years of double digit wage growth. Also, if you note in the article the official number might underestimate real income by almost half. The savings rate of the rich is much higher and taken all together China has between a 30 to 50% savings rate. Even using these numbers the average Chinese person was saving more than the average American in dollars.
The article says
“Somehow people always seem to have a lot of cash, even though official data shows income at about $3,000 per capita,” said Wang. “There’s a lot of grey income in China.”
Let’s hope all the grey income is not 100% invested in the “shadow banking” funds collateralized by real estate and commodities, both which seem to be peaking in China.
The Great Depression, the Savings and Loan Crisis, and the 2008 world debt crisis. What is one common thread? Real estate price increases driven by real estate speculation and imprudent lending.
So it seems to me that a red flag on policy makers’ dashboards should be real estate speculation and price increases.
Why might this be so? Excessive household debt leads to a hangover as it has to be paid down.
It’s hard for a banker to wrap his head around the concept that debt might, in some instances, be bad. Debt is his source of profit - his business model. And we have central banks of the world setting economic policy. So they push debt and can’t understand why these policies lead to slow growth.
“policy makers’ dashboards”
Politicians love “growth.”
The beauty of debt is that it’s just like an injection of printed money into the economy. The economy gets a spark. Policy makers love that. It means politicians get re-elected, and no one really cares about what they’re doing.
The problem is, debt, just like a drug, leads to a hangover. It must be paid for.
This forwarded e-mail just landed in the Arizona Slim Ranch’s in-box. Author is a real estate lending officer. Here goes:
The second home, winter “snow bird” season is over in Arizona. You can drive with less traffic on the streets, find your favorite restaurant and not have to make reservations two weeks in advance and find tee times at your favorite golf course with green fees half or even less than the high winter rates. That’s the good news. The not so good news is if you had a home to sell, you may have been disappointed as the high winter and early spring season has been challenging. 2014 so far has been a tough one for home sellers. Thankfully, interest rates have remained low. The refinance market has come to a halt. If you had the opportunity to take advantage of the low rates the past three years and most of you did, you should revel in the historic low rates that you received. For those homeowners who, for whatever reason could not take advantage, I am not sure there is going to be any more help from the Feds.
If you read the headlines, you would think the economy is taking large positive strides. Economic growth would seem to moving forward and with that, a complete recovery should be expected. I am not so sure that is the case. While the key indicator, unemployment figures keep declining, the truth is those declining percentages are not taking into account the hundreds of thousands of jobless people that monthly, have given up looking for jobs. The drop in unemployment was due to the decline in the labor force. If more people have giving up looking for work, the economy is not as strong as the headlines suggest.
I am not trying to be all gloom and doom, only giving reality to the situation. Housing values have stopped falling and real estate owned foreclosed property has dramatically declined. Many US markets are seeing property appreciation. Many US markets have had a brisk selling season. This is good news and will eventually trickle down to Southern Arizona. While our Arizona markets have seen improvement, we still have a ways to go. The good news is it looks like we are moving that way. It just has not been as robust as hoped.
Despite the Feds reducing each month their involvement in keeping the rates low, the rates have not been increasing. Banks have loosened up on some of their overly tough underwriting scrutiny and have added loan mortgage programs to their arsenal of products. Rates can be anywhere from the low 3% range for the 15 year fixed and the 5/7/10 year ARM products, to the low to mid 4% range for the 30 year fixed rate. Jumbo loans are anywhere from the mid 3% for the ARM products to the mid to high 4% range for the 30 year fixed. The financing environment is extremely attractive for all loan products.
“T. Rowe Price is ending, for now, any pursuit of a Pasco corporate campus with 1,600 jobs. “We don’t need that space now,” T. Rowe Price CEO James A.C. Kennedy said at the firm’s annual meeting.
The Pasco plot of land on State Road 54 was bought for $13.5 million five years ago and will remain untouched. As T. Rowe Price states in its 10K annual report to the SEC: the Pasco land is for “potential future development as business demands require.”
13843 Olive Park Pl,
Poway, CA 92064
3 beds, 2 baths, 1,300 sqft
Not for Sale
Rent Zestimate®: $2,048 /mo
Est. Refi Payment:
See current rates on Zillow
when I rented this dump I paid 1600 a month in 2009
WTF happened !! Zillow claims the house I bought in the 300K range a few years ago is worth more than 500K !!
The Poway dump is worth almost as much !!
I think Zillow is on Crack
They are claiming that my investment house (which I purchased independently of the Joshua Tree Fund), which I rent out to an elderly couple, is now worth 277% what I paid in 2010. Needless to say, I called a realtoR.
The realtoR tells me that the value is currently only about twice what I paid, so Zillow is about 50% too high. They’re crazy.
Read it and weep, boys!
Fetch me a fresh bag of Cheetos…. NOW
Do those $40 per square foot houses you build have electricity or indoor plumbing?
Does the 6% commission you charge include a massage with a happy ending?
My realtor bought me an Edible Arrangement.
(actually I didn’t pay, because i was the buyer…but anyway…)
(interesting… The word “realtor” is underlined with the red spelling-mistake squiggle. Evidently only the capitalized version correct. NAR musta slipped some dough to Teh Goog.)
Why hello Donkey…. nice to know who you’re Amy.
Yeah, I think Amy’s been unmasked. We called it back in January.
Cheetos. Sandwich. FETCH.
Don’t you need something to wash all that down?
Amy, how come I never hear you in the morning on NPR anymore?
AMH announced earnings yesterday.
At quarter end, they had 20,666 leased properties out of 25,505 total (81% occupancy). However, of the 25,505 total properties, 2,237 (8.8%) were acquired during the quarter.
They generated $0.12 per share of cash to support their dividend of $0.05.
I’m still not a buyer, but it doesn’t look like they are going away anytime soon.
“The Company reported a net loss of $6.9 million for the first quarter of 2014.”
Lots of non-cash charges, the biggest of which is depreciation–at about $31 million for the first quarter.
AMH is spending money on maintenance (which is expensed). The government allows residential rental real estate depreciates over 29 years.
Do you honestly think that if you spend money on maintenance, that the useful life of a home is only 29 years?
Do you honestly think the depreciation doesn’t accelerate after 29 years?
HA, do you think, honestly? Ha, ha, ha.
Still pretending to be a general contractor or are you an F-117 pilot today?
The median age of the housing stock in the US is about 35 years. It is higher in the Northeast (over 50 years old in NY, for instance).
41% of all homes are more than 40 years old.
Being able to depreciate the value of the homes to zero over 29 years is an accounting gift.
AMH’s acquisition strategy was to buy homes less than 10 years old.
Rents were about 6.5 mil in 2013, but were close to 74 million in the first quarter of 2014. While a loss of 7 million sounds bad, they had depreciation and amortization expense (non cash expense)of 35 million. They’re 28 million positive cash flow.
With total equity at 3.6 billion, the cash based ROE is a bit less than 1% but it’s still early.
Concerns, cash dropped from 150 million to 100 million in the quarter.
On the upside, debt is relatively negligible compared to equity.
What to watch for? The debt growing compared to equity, if they take on a strategy of borrowing to pay the dividend. Common strategy for REITs.
These guys already admitted they’re cash flow negative.
They’re raising their money like PS did…round after round of preferred equity.
I imagine this only includes the very small number of homes that American Homes for Rent actually bought from Blackstone, after originally being a mere property manager. Blackstone still owns most of their own portfolio.
Where did you see that AMH bought homes from Blackstone? Wayne Hughes started AMH (billionaire founder of Public Storage), and was never just a property manager.
Where are you getting your information? Are you just making up the story of the history of AMH?
Sorry, I got American Homes for Rent mixed up with Invitation Homes.
I went sniffing around AMH’s SEC Form 8-k and ran across this tidbit:
Quarterly lease renewal rate:
For March of 2013 it was 62.3%
For June of 2013 it was 68.3%
For September of 3103 it was 73.0%
For December of 2013 it was 73.4%
And for March of 2014 it was 71.8%.
And this means the average quarterly lease renewal rate for these past five quarters is 69.76%, which suggests (to me at least) that the average for those who do not renew their quarterly leases for these five quarters is over thirty percent.
I’m not a real estate guy but this seems to me to be a lot of turnover.
The common estimate of renewal percentage for commercial properties is 70-75%.
However there are differences between commercial leases and renting homes:
1. Leases for commercial space are longer than 1 year (generally);
2. Downtime for commercial space if tenants leave is much longer (can be years).
Think of it this way, their occupancy rate for homes available for 90 days or more is about 95%. So, what is the average downtime for a home between tenants? 2 months? Less?
Let’s say 2 months.
So, as an approximation, 30% of the time, you have 60 days of no rent over a 14 month period (12 months on, 2 months off). The other 70% of 14 month periods, you have no downtime.
So, 30% * 60 days = 18 days of downtime every approximately 420 days.
Or an occupancy rate of +/- 96%…structural vacancy rate of 4%.
If you say the downtime is an average of 90 days for a non-renewal (which seems too high based on 95% occupancy for homes available for 90 days or more), 30% of the time you get 90 days of vacancy for every 15 months of occupancy, or 30% * 90 days = 27 days of downtime every approximately 450 days, or a structural vacancy of 6%.
If the downtime is 30 days on AVERAGE, then the structural vacancy would be 2% or so (using the same logic).
In any event, given that 95% of homes are rented when available for 90 days or more, it seems like they will be in the mid-90’s leased pretty commonly.
Why do you keep posting links to farming jobs?
L O L
I think he’s just illustrating how barked up the work world is these days.
It’s Maine, Jake, forget about it.
Back from running an errand.
Walked past an attempt-to-flip house that has been on the market since last fall. Original asking price was $170k. It’s now on its second real estate agent and the price is down to $155k.
One of my neighbors is a commercial interior designer and gave this place a thorough looking over. She thought that the renovation was very cheaply done. Didn’t think that the $170k price was justified.
Unlike most of HBB, I’m interested in the actual houses, not just the money process. What would be some evidence of a “cheaply” done renovation? Admittedly, I can pick out Behr Swiss Coffee paint, and Home Depot Pro-pak molding from a mile off. But is it the materials that are cheap? The labor?
Tile floor has grout that will crack and separate in a few months, requiring new grout job.
In this case, cheap materials.
You should have learned that stuff before you committed financial suicide.
Why didn’t you lean on the expertise here?
NEW YORK (AP) — Stocks are falling in early afternoon trading Tuesday following mixed earnings from U.S. companies. Home builder stocks fell broadly after more signs of weakness in the housing market.
Don’t worry, the stock market always goes up.
So glad I am not driving on I-15
Shovel ready jobs…
the Beastie Boys: “Hey Ladies”
“A person that has to get from point A to point B, they’re not going to jeopardize their job. They have to pay the car payment before they pay anything else.”
Subprime Loans Are Boosting Car Sales
By Sarah Mulholland and Tim Higgins
November 27, 2013
A woman came into Alan Helfman’s showroom in Houston in October looking to buy a car for her daily commute. Even though her credit score was below 500, in the bottom eighth percentile, she drove away with a new Dodge Dart. A year ago, “I would’ve told her don’t even bother coming in,” says Helfman, who owns River Oaks Chrysler Jeep Dodge Ram, where sales rose about 20 percent this year. “But she had a good job, so I told her to bring a phone bill, a light bill, your last couple of paycheck stubs, and bring me some down payment.”
The interest rates on subprime auto loans can climb to 19 percent, according to Standard & Poor’s (MHFI). “Right now, you have to have fairly bad credit to be paying above 3 percent,” says Jessica Caldwell, an analyst with auto research firm Edmunds.com. Chrysler Group (F:IM) has been a beneficiary of the subprime boom. Fifty-eight percent of loans taken out to purchase its Dodge brand vehicles in October were above an annual percentage rate of 4.2 percent, the industry average, according to Edmunds. The average loan for a Dodge charged an APR of 7.4 percent, and 23 percent of the loans had APRs of more than 10 percent, making Dodge the brand with the highest percentage of loans at more than 10 percent, followed closely by Chrysler and Mitsubishi (7211:JP). Dodge’s U.S. sales rose 17 percent this year through October compared with a year earlier, propelling Chrysler Group to 43 straight months of rising sales.
About 13 issuers have raised money in the asset-backed bond market to make subprime auto loans this year, according to Citigroup (C). Among them are GM Financial, the lender known as AmeriCredit before it was acquired by General Motors (GM) in 2010, and new entrants such as Exeter Finance, owned by Blackstone Group (BX). Exeter has issued $900 million of bonds linked to subprime auto loans this year, data compiled by Bloomberg show. Exeter has higher loss rates compared with other lenders, S&P said in a Sept. 17 report. A spokeswoman for Exeter declined to comment.
Shoddy home loans packaged into bonds by Wall Street banks fueled the financial crisis. Subprime auto loans are a good investment, Helfman says: “A person that has to get from point A to point B, they’re not going to jeopardize their job. They have to pay the car payment before they pay anything else.” His Dodge Dart customer with the bad credit had to pay a higher-than-average interest rate on her loan. “It wasn’t pretty, but it wasn’t crazy,” he says. She was “so happy she couldn’t see straight.”
http://www.businessweek.com/articles/2013-11-27/subprime-loans-are-boosting-car-sales - 74k
“The interest rates on subprime auto loans can climb to 19 percent …”
“She was ’so happy she couldn’t see straight.’”
People are smart.
Admittedly, being a renter with a nice new car that gets you to work may be wiser than trying to own a house and drive a beater to work to defray mortgage payments. Just a hunch. Cost effective in one sense and practical too. Plus, all the people at work see your nice car and probably will never see where you live.
Ya gotta admire this guy for his timing!
DoubleLine’s Gundlach Recommends Betting Against Housing
By Saijel Kishan
May 5, 2014 11:01 AM PT
Jeffrey Gundlach, manager of the DoubleLine Total Return Bond Fund, recommended betting against an exchange-traded fund that tracks an index of homebuilders because declining affordability will reduce housing demand.
Gundlach, chief executive officer of Los Angeles-based DoubleLine Capital LP, recommended shorting the SPDR S&P Homebuilders ETF (XHB), he said today at the 19th Annual Sohn Investment Conference in New York.
“Single-family housing is overrated,” he said, citing younger people living with their parents. “Renting is more appealing across all age groups, all parts of the U.S., city, suburb, small town and rural. This is a generational preference; all young people are scarred by the housing crash” and they don’t think current interest rates are low.
Gundlach joins Sam Zell, chairman of landlord Equity Residential, in predicting a decline in owning homes. The homeownership rate in the U.S. has already dropped to the lowest level in almost 19 years as rising property prices and mortgage rates hold back demand. The share of Americans who own their homes was 64.8 percent in the first quarter, down from 65.2 percent in the previous three months, according to a Census Bureau report last month.
Gundlach, 54, started DoubleLine Capital after being ousted as chief investment officer of TCW Group Inc. in December 2009 following a dispute. Since his first mutual fund was opened in 2010, his firm has attracted about $47 billion in assets of Dec. 31. Gundlach’s $32 billion Total Return Fund (DBLTX), which specializes in mortgage bonds, has advanced an annualized 6.1 percent over the past three years, beating 97 percent of similarly managed funds, according to data compiled by Bloomberg.
The SPDR S&P Homebuilders ETF fell 1.5 percent to $31.27 at 1:39 p.m. in New York. The number of shares in the ETF sold short by investors expecting the price to drop almost doubled from April 25 to 2.9 million as of May 2, according to data compiled by Markit Ltd. That represents 5.5 percent of the fund’s outstanding shares.
Gundlach said there will be more supply of housing when investment firms, who together with cash buyers have supported the property market, liquidate their holdings. Baby boomers selling their houses will also add to supply, he said.
“The argument of pent-up demand is wrong,” Gundlach said.
Younger people don’t have good job prospects and face difficulties in saving for deposits because of rising rents, he said.
Zell, at the Milken Institute Global Conference in Beverly Hills, California, last week said the homeownership rate in the U.S. may fall to as low as 55 percent as Americans postpone getting married and having children.
Stocks close lower on weaker earnings; Twitter plunges
May 6, 2014
U.S. stocks fell broadly on Tuesday as investors found little to cheer in corporate earnings reports. A plunge in Twitter led Internet companies sharply lower.
Twitter dropped 18 percent after company insiders were allowed to sell stock for the first time since the initial public offering last year. Netflix fell 5 percent, Facebook and Amazon, 4 percent each, and Google, 2 percent.
Nine of the ten industry groups in the Standard and Poor’s 500 fell, led by a 1.4 percent drop in financial companies after results for insurer American International Group fell short of analysts’ expectations. Home builder stocks dropped after more signs of weakness in the housing market.
Jack Ablin, chief investment officer of BMO Private bank, says investors are worried that corporate results over the next few quarters will not justify the surge in prices from the start of 2013.
“We ran ahead of fundamental valuations, based on revenue and earnings,” Ablin said. “Either revenue or earnings have to catch up to the market, or prices have to come down.”
The S&P 500 dropped 16.94 points, or 0.9 percent, to 1,867.72. The Dow Jones industrial average fell 129.53 points, or 0.8 percent, to 16,401.02. The Nasdaq composite dropped 57.30 points, or 1.4 percent, to 4,080.76.
Even utilities — the biggest winners so far this year, up 12 percent — did not escape the selling. They slipped 0.5 percent.
The drop in the S&P 500 and the Dow Jones industrial average was the third in four trading days, and comes despite recent upbeat news on the U.S. economy. Payrolls increased by 288,000 last month, the fastest pace since 2012.
Steven Ricchiuto, chief economist of Mizuho Securities, noted that, for all the job gains, wages for U.S. workers have not increased significantly, and that is holding back consumer spending.
“People are getting weary of the `things-are-getting-better’ story,” said Steven Ricchiuto, chief economist of Mizuho Securities. “We’re hiring more workers, but we’re not paying them more.”
U.S. home prices rose at a slightly slower pace in the 12 months that ended in March, according to data provider CoreLogic. It was another sign that weak sales, caused in part by rising mortgage rates, have begun to restrain the housing market’s sharp price gains.
Home builder stocks fell broadly. Ryland Group fell $1.08, or nearly 3 percent, to $37.68. D.R. Horton fell 55 cents, or nearly 3 percent, to $22.43.
World’s dumbest commuterz?
How can humans even live where commute conditions are THAT bad?
Q1 GDP Cut To -0.6% At Goldman, -0.8% At JPMorgan
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