patrick.net

Randy is the best thing to happen to this blog since Surfer-X. Delightful, measured, intelligent and eminently civilized posts.

Have a beer, Scott. It'll be OK.

Cheers,
prat

Randy is the best thing to happen to this blog since Surfer-X. Delightful, measured, intelligent and eminently civilized posts.

Here here.

Or would that be "Hear hear?" ;)

In other, non-defending-the-only-person-making-anything-resembling-sense, news:

http://tinyurl.com/cfoqy

Down 13% in NY?

Cheers,
prat

Thanks, I was not aware of the single member penalty for . I also thought the LLC would provide the limited liability even with one member.

"However, in 1999/2000 the value of the LLC was seriously reduced by court rulings, and they found that the partners could still be held severably liable in most cases."

What jurisdiction/state was this in?

Or would that be “Hear hear?”

To quote the philosopher: "A little bit from column A, a little bit from column B."

Also: "My Homer is not a communist. He may be a liar, a pig, an idiot, a communist, but he is not a porn star."

cheers,
prat

Randy, thanks for the insight on LLC.

SactoQt, how is your new home?

Also: “My Homer is not a communist. He may be a liar, a pig, an idiot, a communist, but he is not a porn star.”

Huh? What? Doh!

Loooooooooooooooove the new home. I'd buy it if I could. :)
The move was grueling though......

First of all, Asians and Asians are different. There are quite a bit of cultural difference between the Koreans, Japanese, Chinese, Vietnamese, Indians, so I was making more of a generalising comment, which is probably a bit unappropriate. Second, these Asians all come from different economic backgrounds, and as we all know, our behavior is more driven by economic differences than anything else, regardless of the race.

Asians who are more acclimatised to the mainstream Christian, WASP culture, educated and grew up here act no different from any other native citizens. What I try to avoid are neighborhoods comprising a high density of the FOB (fresh-off-the-boat) types. They are less hygiene conscious, don't speak English at all (and don't try to), sharing single homes among 5-6 families, and run shops that only cater to their own people with no respect to non-Asians in the community. They watch no American TV, watch satellite TVs broadcast in their own languages only, make no attempts to understand the local culture, history, social norms or laws.

In a nutshell, some of the FOBs don't melt, they try to create a little China or little Vietname in a country called USA. I am fine with little China or little Vietnam for tourism, or for eateries, we all love that. But I don't want to live a Chinese lifestyle or a Vietnamese lifestyle, or have my kids grow up speaking English with a thick unrecognizable accent. No, that is not why I came to this country.

So when I say I want to avoid neighborhoods with high Asian density, I mean I want to avoid Asians-at-heart, I am Asian by heritage but definitely not at heart.

so with the big picture in mind, what will this inflation do to the US? Will there be further polarization of income and wealth so that the US is only comprised of two classes: the rich and the poor? Will that make this country rather unattactive to live in?

Disclaimer: I am in the camp of those who thinks inflation can be severely damaging, both economically and socially. Others disagree, often on sound theoretical grounds, but nearly all agree that inflation is not "good".

In general inflation reduces purchasing power, especially for items which aren't price sticky like food, commomdities, and energy. Durables like cars, and real estate move much slower, RE being probably the slowest and really not well correlated to inflationary movements. But the big problem is wages. Wages tend to not inflate until very late in an inflationary cycle, and there is loss-lag when they do. There is an entire area of study devoted to personal income inflation behavior, with the current thinking being that people just don't understand inflation that well because it's kind of invisible and hard to measure at a personal, real-world level. What is observed is that each inflationary cycle tends to reduce wages in real terms by a small amount, permanently.

What happens in companies is a kind of wage-efficiency, that is those who can hold onto their jobs fare significantly better than those who are recyled into the eonomy. This is because it is (in theory) better for companies to avoid higher turnover and pay the demanded increased wages for known-workers. But entrants earn the market-clearing wage, which has been depressed by higher unemployment (which lags inflation cycles by about 1-2 years), so they lose not only nominal wages but exagerratedly lower real wages.

Inflation itself probably doesn't cause all too much transfer of wealth IMO, but stagflation--a cycle of persistent high unemployment, slow growth, and inflation--destroys wealth quite effectively. This is measurable and pretty certain. Of course, the wealth isn't destroyed, it is redistributed mainly to one of two places: (1) the wealthy, (2) the government. In the 70s stagflation, much of the wealth went to the gov't due to the tax structure and regulatory structure; during the early 80s cycle much more went directly to the wealthy, mainly as real-asset appreciation and corporate equity.

Broad wealth distribution seems to only occur during periods of (1) steady, healthy GDP growth, (2) low unemployment, (3) low inflation; some add (4) good productivity, but I think this is redundant and not always necessary. We have just gone through an incredible period of broad wealth distribution, which is probably doomed to slow/stop at some point since these things are cyclical. Note, that wealth rarely ever reaches the _true poor_ class; those at the bottom with no education or skills and no likelihood of obtaining either. They are only enriched by the government directly...which leads to a much bigger discussion that is best left to socio-economic-political blogs.

Milpitas, Fremont especially. Most educated Indians speak English well, so at least it is easier for them to melt. Everytime I go into Milpitas, it sort of makes my head spin, it is so Chinese that some Chinese even find it repulsive.

I was referring to LLC's in CA exclusively. I only know CA and IL corporate law very well. I think pretty much every state has ruled on LLCs in one way or another.

Remember that the LL doesn't give you any extra indemnity. In fact, all these corporate structures are just tax elections (ok, LLCs are a bit more complicated, but for the purposes we're discussing). All corporations have equal corporate shields of indemnity so long as you, the owner/manager/director don't pierce that shield through your actions. That is, don't use the company's bank account like it's your own. If you run it like it's a real company, then you get the indemnity.

If you don't want all the hassel, and aren't worried about being sued, then just file as sole proprietorship, which costs you only self-employment tax and an extra form on your return.

Economic theory, econometrics or macroecomics or whatevernomics, has nothing to do with real estate.
Real estate is a willing seller and a willing buyer agreeing on a sales price, with full disclosure. It is never anything more than that.

The funny thing is you just described a microeconomic equilibrium. Seems whatevernomics might be a good field for you to look into after all.

Vee, there is nothing that I am ashamed of my heritage. But there is no point for those so proud of their heritage to come to the US to preserve that heritage. They can stay where they are and preserve it even better. Won't Chinese staying in China preserve Chinese culture better?

The whole point why we fled our countries because there were something wrong there that we felt beyond our ability to fix, one way or another. When you go to a new soil, it will be a lost opportunity not to embrace the new culture and new way of living entirely. Nobody can choose which culture or race can be born into, but one certainly can pick and choose the best culture to follow. The fact that some immigrants are clinching so hard onto so many habits that only make sense in their own country is a fact that they are complacent, unadaptive, and timid when it comes to embracing their new country.

If they like their old country, own language and old way of living so much, why bother with emigration? Won't it be for their own good to bind with their countrymen and build a better home country?

These same people when go to native land try to behave American!

LOL

Anyway, this is a topic for a different blog.

vee, can you write a short paragraph about how this aspect of immigration is related to the housing bubble? I can put it up as the topic for the next thread.

I have been scanting through craigslist, it seems that the rent is going down for the same-quality inventory compared to 3 months ago. I am wondering if it is possible for BOTH the rent and the housing price to go down when the bubble pops? Why? Because there are many homes being built right over the mountain of East Bay that are banking on investment interest. Once the investment interest dries up, who will buy these homes? What kind of rental pressure will add to the market?

ScottC,
Show me two economists who can agree on anything, and I’ll show you one economist standing in front of a mirror.

It is the job of the economist to make forecasts based on economic theory. However much we like to think that theory will be fact, other factors will arise to prove the forecasts less than perfect.

I guess investing in RE is similar in that we make assumptions on performance of the investment, but unfortunately you cannot guarentee the results:- tenants move, prime becomes unprime etc.

It would be blind folly to expect tomorrows returns to be the same as yesterdays ones, if you do not understand the underlying conditions that gave results. This is called analysis. I would have to say that most shrewd investors would analyse their investments and try to forecast how the fundamentals may change.

ScottC,
Real estate is a willing seller and a willing buyer agreeing on a sales price, with full disclosure. It is never anything more than that.

It would also depend on how the money is obtained.
I'm sure the lender (if they are sane) would want to ensure that the borrower can meet their obligations.

Unless of course the lender is a wrapper that has overpriced the property and offered vendor fincancing with repossession if the buyer defaults. (This of course represents minimal risk to the vendor, and is obviously a bad deal for the buyer)

“There are some immigrants who refuse to accept and assimilate into the society they have moved into”

Somethings never change.
I guess this was the case for the first settlers in America, and Australia in that we did not integrate into the pre-existing native cultures.

All I have to say about the US is, all those immigrants who came to this country obviously vote with their feet, and money too. Those who think that this country is broken and reluctant to be a part of the solution should just go back to where they come from, and this comes from ME, a first generation immigrant.

It is just myth that Americans have a higher divorce rate. I studied in Europe for a while and was shocked to find out most people don't even bother to get married. They move in, they move out. The divorce rate is obviously lower. Another surprise is China, which has the highest number of prostitutes per capita, if prostitution becomes legal, that will probably becomes the largest industry employing the most people on the face of earth. Lots of upper middle class men in China have a second wife/ extramarital girlfriend, there goes your Asian family value. America is actually a very prude country with lots of established family/religious values, for better or for worse.

"Not too many intellectually-inclined people are being produced here."
Just out of curiousity, Face: of all the people being produced here, what percentage do you figure are "intellectually-inclined?"
And a follow up question, how do you think this compares to the percentage of all people produced in other nations who are "intellectually-inclined?". Just curious, 'cause it sounds like you've researched this a lot & should be able to offer up something reasonably quantitative.

ScottC,
Everybody is bitching about realtors, blaming them for the rising price of homes. Instead, everyone ought to bitching about sellers and buyers.

Agreed.
I think the problem is GREED and people would always like to blame someone else.

As for economics being the artificial structure to define the economy, I think the problem is that PEOPLE and GREED will always distort an equilibrium to their benefit. As such bubbles will always form (have done for centuries) as people (the herd) do not like to think rationally whenever there is a chance of easy money.

BUT maybe this is necesary as an incentive for people to do things and perhaps the economic structures put in place have been for this affect.
Maybe we do need more houses built now before the boomer tradesman retire and the workforce is reallocated to looking after them (hospitals, retirement homes etc).

BUT that would mean that government has been organised to engineer this ???????????

ScottC,
I agree with what you say in the sense that realtors are only REALLY necessary for paperwork, administration, etc...basically contractual knowledge.
HOWEVER, consider this. In most real estate transactions there are the following 6 parties:
seller
seller's agent
buyer
buyer's agent
mortgage broker
appraiser.
We would all agree that a higher, rather than lower, sale price is in the best economic interest of exactly 5 of those 6 parties (yes, in these times, even the appraisers...job security, and all). I believe it is an impossibility for this fact to NOT have SOME effect on the final sale price of a given transaction...and if it is impossible for this fact to have absolutely NO effect (I suppose a few would argue this), then the effect must therefore be to cause either (A) a higher sale price or (B) a lower sale price. So which one??? And what happens when the effect is compounded over 100's of thousands of transactions??? Now we all believe in caveat emptor out the wazoo...but 1/6 odds can be pretty formidable to overcome.

ScottC,
Well, more ignorance prevails here in SFBA. My impression is that many, if not most, typical residential real estate transactions involve 2 agents and mortgage broker...especially of late. I think this is because of the fervor...people are diving right in due to the Big Fear (I did the same, admittedly, not too long ago...luckily I didn't get stuck with the condo LOL). I'll continue to look for knowledge & good advice in your posts & those of many others here...including Randy of course! Thanks.

The problem I have with all this is that any attempt to impose an artificial structure on the market only results in the market circumventing that structure. History has proven this so. A lot of people think of the economy or the market as a machine to be tinkered with. It is not. The market is more like an ecosystem, an organic being capable of self-organization and self-regulation.

I am one of the most fundamentalist proponents of free markets you might ever meet. That said, I also recognize that your statement above is not supported historically. The reason we endeavor to "tinker" with the markets is because markets are not perfect, can optimize the wrong thing (get stuck in non-optimal local maxima) and suffer from catastrophic failure from time to time.

We have a treasure trove of data relating to laissez faire policy from history. It didn't turn out so well, by the way. Some regulation of markets and the economy is necessary, if for no other reason, then to ensure a fair, non-coerced playing field. Was Keynes an interventionist? I guess by some measure, in that he advocated use of fiscal and monetary policy as levers. But Keynes also strongly opposed what I consider to be real economic intervention: trade barriers, gov't regs and taxation. I'm not sure controlling the money supply is "intervention". Someone has to print the dollars, which means some one has to decide when and how many to print.

There is no economics except micro-economics.

That's like saying there is no math except addition. Just because micro is a first principle doesn't mean more complex postulates cannot be formed atop it.

Primetroll
Glad to see you back and posting poetry again. :)

Beware of the politically correct police throughout our society that try to end debate and serious discussion by calling people names. If you want a perfect example of this, scroll to the bottom of the “Rising Inventory” thread. Sometimes you just have to laugh.

You seem really stuck on this point. Maybe we should stay away from discussions about immigration, it seem to stir up too much animosity in everyone.

Meanwhile at a birthday party yesterday everone was saying that RE wasn’t going to go down..not here..they hoped.

Moonvalley...yeah, I suppose everyone feels the same way about their own neighborhood! Nobody wants to lose what they assumed was a sure thing: home price.

I never understood personal bankruptcy; it never really seemed like that great of a deal unless one was in truly dire straits. Could someone explain the basics of how it worked before (mainly what you're still liable for), and how it will change with the new rules? I only know corporate bankruptcy law, which apparently is entirely a whole different ball game.

Interesting article in the Boston Globe: "A stay-at-home mom tries her hand at 'flipping' real estate"
http://tinyurl.com/7dxpt

And take a look at housing stocks today:
http://tinyurl.com/bl5rm

I think the only excuse for bankruptcy is a health related issue…Can anyone think of anything else?…

How about lawsuits that are possibly wrongful?

FNM is down again. :-D

New thread: Immigrants and housing prices

Thanks vee!

HZ,
Good riddle. The debit-side of the new money creation is the "inflation-tax", which fuels the seigniorage the gov't receives by printing new money. This assumes that you accept the Quantity Theory of Money which indicates that growth of money stock results in inflation (holding velocity and output even).

Money is permanent as soon as it's printed because of this identity. I guess the real riddle is what happens to seigniorage during deflation? What if the Fed were printing money but there was negative inflation?

On the Merc headlines today:

LOAN LANDSLIDE ON SHAKY SOIL

It is going to be a shock for many.

What % of the money supply is counterfeit?

I don't know how much is counterfiet, it would be interesting to see. I do know that there was a tracking study sometime in the 90s that showed that $20 bills tend to be the most "active", moving with the highest velocity through the economy. More interestingly, some whopping percentage (I recall 85%+) end up either in South Flordia or South California after less than 12 weeks in circulation. This was supported by surveying banks to find out how much currency they were moving out of these banks and redistributing North. I leave it to the reader to figure out why all the cash heads south and to the coasts.