patrick.net

Bellingham Bill says

"But by your reasoning North Korea should be the paradigm..."

Norway and Denmark, actually.

Norway and Denmark are actually high on the freedom index, so are doing more right than wrong.

Socialism is a charade. There are 3 things you can do with resources you can spend it, save it, or invest it. With socialism one way or another it is the first one, IOW they are eating the seed corn.

If you want to understand Karl Marx look at dialectic materialism. It is shit but it is the vehicle Stalin used to rule with an iron fist. And yes he was insane and should have been shot by reasonable men.

tr6 says

Well, how about 40-50 years? I would say that's not temporary.

Yup since Nixon took us off Bretton Wood. Temporary in the scheme of things, it will end with the collapse of the country, IMO about 15yr.

thunderlips11 says

It does, because the wealthy use their superior incomes and ever building wealth to bid up the price of housing,

If the wealthy person is living in the same housing as the average guy, then he is not really consuming more housing supply than the average guy; if he is buying up housing units to rent out, then he is not bidding up the price of housing but driving down the price of housing by keeping housing units on the market as supply. The same housing units that may well have been abandoned because the renters/ex-owners could not afford to or did not have the good habit to maintain the houses.

of stocks (creating volatility) beyond their Fundamentals, and buy up assets.

Then we are talking about the wealthy being foolish and paying for a bubble. The market place would normally soon administer medicine via bubble burst. . . except you are also for the government bailout of the wealthy gamblers on taxpayer dime via the FED! You are the idiot who support the ideology of privileged gamblers (too big to fail).

These items do go up enormously in value relative to the incomes of the 99%, and it creates even more income streams going upward and less circulating among the majority of the population.

If the asset value is beyond what the cashflow can support, the income stream does not justify the opportunity cost. Make up your mind which position you are supporting and which position you are against.

As was said on other threads, it wasn't unusual for a guy in a town to own a couple of duplexes, maybe even an older home or two rented out. What is unusual is Wall Street getting involved with buying up SFHs for rental income. And not just luxury apartments but ordinary Suburban SFHs. This is a symptom of the problem.

There is a price for everything. When the market hit the 2009-2011 bottom, you were too chicken little scared shitless to buy, so someone else stepped into the breach. The trade was over by late 2013, so there is little point decrying it a year later.

Reality says

; if he is buying up housing units to rent out, then he is not bidding up the price of housing but driving down the price of housing by keeping housing units on the market as supply.

The fallacy is that Joe Potential Homeowner is bidding against another Homeowner. He's not. He's competing with either cash-flush wealthy local investors, or more frequently, professional, well capitalized Wall Street Firms handling huge amounts of money and buying properties in bulk to rent. In some areas, he's competing with Russian and South American Oligarchs (Miami) or Chinese Businessmen (West Coast Cities) as well who are looking to park their illicit gains.

Joe's Household makes $60k/year, not capitalized to $600M with leverage.

Reality says

The same housing units that may well have been abandoned because the renters/ex-owners could not afford to or did not have the good habit to maintain the houses.

Or, the prices would drop to normal levels of affordability for the John Doe family.

Reality says

If the asset value is beyond what the cashflow can support, the income stream does not justify the opportunity cost. Make up your mind which position you are supporting and which position you are against.

When homes are too expensive for Joe Schmoe to buy, he has to rent. Since many Joe Schmoes are priced out or wisely refuse to gamble on a mortgage payment when they don't know if they'll be laid off tomorrow, or simply can't afford the price, they are all trying to rent at the same time, so rents go up along with the home prices - for a while, anyway.

This explains why mortgage rates are so damn low, but homeloaners aren't buying.

Reality says

. When the market hit the 2009-2011 bottom, you were too chicken little scared shitless to buy, so someone else stepped into the breach. The trade was over by late 2013, so there is little point decrying it a year later.

I brought a home in 2009 and I rent it out. :)

My only regret is the market I brought it in. If I had brought in Miami, I would have doubled my money.

indigenous says

Temporarily, to think otherwise is folly

Temporary is right, but guess who will feel the pain?

Remember who felt the pain the last time?

thunderlips11 says

indigenous says

Temporarily, to think otherwise is folly

Temporary is right, but guess who will feel the pain?

Remember who felt the pain the last time?

Yup but this time there will not be any subprimes. This time there will not be any TBTF MBSs. But the investors who are leveraged will get hurt. If not leveraged then their balance sheet will change a bunch.

thunderlips11 says

Reality says

; if he is buying up housing units to rent out, then he is not bidding up the price of housing but driving down the price of housing by keeping housing units on the market as supply.

The fallacy is that Joe Potential Homeowner is bidding against another Homeowner. He's not. He's competing with either cash-flush wealthy local investors, or more frequently, professional, well capitalized Wall Street Firms handling huge amounts of money and buying properties in bulk to rent.

Joe Potential Homeowner does not have to own a house to be living in a house. If the bank mortgage rate is 4%, property tax is 1.5%, insurance+maintenance is 0.5-1% . . . while the landlord is charging only 3-5% rental yield, most readers of Patnet should know that it is better to rent than buying. I did rent when given those parameters. I was quite grateful to my then landlord despite having paid him $180k+ over 6.5 years renting from him; the cost of ownership would have been higher still. I documented that quite extensively back in 2010-2011, just before I flipped around on the rent-vs.-buy position. It was a good summary on how to "short" housing during a bubble in one's life, via renting.

In some areas, he's competing with Russian and South American Oligarchs (Miami) or Chinese Businessmen (West Coast Cities) as well who are looking to park their illicit gains.

Joe's Household makes $60k/year, not capitalized to $600M with leverage.

If Joe makes $60k/year, he has no business trying to compete in the most sought-after zip codes in terms of ownership. Those zip codes have huge stocks of rental houses that compete to such a degree that the rental yields are typically in the 3% range. The foreign buyers of real restate are usually the bag holders in an economic cycle. The dollars they earned from exporting whatever stuff to the US have to be repatrioted and liquidated somehow; wasting it on a RE bubble on prize properties that have little bearing for most middle class Americans is better than them trying to buy up all sorts of commodities and drive up PPI and CPI.

thunderlips11 says

Reality says

If the asset value is beyond what the cashflow can support, the income stream does not justify the opportunity cost. Make up your mind which position you are supporting and which position you are against.

When homes are too expensive for Joe Schmoe to buy, he has to rent. Since many Joe Schmoes are priced out or wisely refuse to gamble on a mortgage payment when they don't know if they'll be laid off tomorrow, or simply can't afford the price, they are all trying to rent at the same time, so rents go up along with the home prices - for a while, anyway.

This explains why mortgage rates are so damn low, but homeloaners aren't buying.

If Joe Schmoe can not be certain about his future income, he is of course better off renting instead of buying on mortgage borrowing. Why would you want him to buy, and then get foreclosed and also getting the housing stock ruined. Your position seems to be rather emotional, instead of rational.

thunderlips11 says

I brought a home in 2009 and I rent it out. :)

Then aren't you just a little hypocritical?? ;-)

My only regret is the market I brought it in. If I had brought in Miami, I would have doubled my money.

I see. Well, at least you didn't buy pets.com stock.

Reality says

I see. Well, at least you didn't buy pets.com stock.

I brought the Iraqi Dinar to back freedom (and fund my retirement) --- and I lost it all!

https://www.safedinar.com/

thunderlips11 says

Best point of the lecture: Helping the bottom 1% is a lot less effective than curtailing the top 1%.

Yes. But nearly every time the government, which is universally owned by the 1%+ group, steps in to make things more equal the middle class is destroyed, the 1% do even better and the poor are still poor.

Thomas Jefferson wanted every citizen to own an acre of land and be under a use it or lose it type arrangement but with oligarchs and a rentier class we see here today where people strive only to make unearned income this will only get more and more ridiculous.

VOTE YES ON PROP G! If only to send a signal to the out-of-touch landed elite in SF. If it's bad long-term policy (which I doubt it could be), it can be reversed later.

Speaking of competing with All Cash buyers:

http://patrick.net/?p=1250852

It's one third of all homes sold nationally, and down from last year:
http://www.centralvalleybusinesstimes.com/stories/001/?ID=26934

50% in Florida.

Reality says

Why would you want him to buy, and then get foreclosed and also getting the housing stock ruined. Your position seems to be rather emotional, instead of rational.

See above. I explained how increasingly, landlords are faceless investment trusts, rather than local well-to-do. Money goes out, does not necessarily come back, except in the form of more bids on more housing stock.

Furthermore, instead of Joe Sixpack having an asset where his actual job is, he's got to schlep miles away. Since 3% yields suck anyway, it's better to have a resident owner that cares instead of increasingly absentee landlords that are number crunchers that don't give a shit.

Bad for the economy, the environment, and certainly the trade deficit.

When you fill up your car, you fill up ISIS' coffers.

I really love how this speaker discusses the inefficiencies of hoarding housing. Rich and thoughtful debate.

The old lady who speaks around 1:01:20 is quite odious. Just sayin'.

lahossain says

I really love how this speaker discusses the inefficiencies of hoarding housing. Rich and thoughtful debate.

The old lady who speaks around 1:01:20 is quite odious. Just sayin'.

I don't see the link?

thunderlips11 says

I explained how increasingly, landlords are faceless investment trusts, rather
than local well-to-do. Money goes out, does not necessarily come back, except in
the form of more bids on more housing stock.

That's the unfortunate side effect of QE and zirp. They find that rental returns are attractive especially in areas with "proximity to jobs."

thunderlips11 says

I don't see the link?

Just your link. I just keep waxing poetic about this great talk. I get excited hearing people talk about this issue--which means recognizing it in the first place.

CaptainShuddup says

You guys make it sound like wealth inequality is first a bad thing, and second something that just came along when Bush got elected.

Do you really lack the ability for nuance and detail so much?

lahossain says

Just your link. I just keep waxing poetic about this great talk. I get excited hearing people talk about this issue--which means recognizing it in the first place.

OH. I listened to it several days ago, but I know EXACTLY the questioner you're referring to. The old Posh cunt.

Wouldn't it be funny if ordinary Schmcuks got the Bankster treatment from Politicians?

"Billy Bob is here, sir."
"Show him in, show him in. Billy Bob, sir, how great to see you. I did enjoy attending the latest Nitro Burnin' Funny Car rally with you last week."
"Hey, so did I, hoss. But hoss, listen. I put all my money down on Iraqi Dinars in the name of Freedom, even HELOC'd the house. Now I can't afford any Monster Truck Rallies"
"Well, Billy Bob, you need a bailout, sir. I will lend you thousands of dollars at no interest, guarantee your mortgage, give you a subsidy and a tax write off for supporting the important Race Car and Demolition Derby Industry, and we'll pass a bill giving you funeral money for Old Yeller."
"But don't give my ex-wife, who just lost her job at Manny's Diner, any money."
"No, no Billy Bob. That would be socialism."

thunderlips11 says

Reality says

I see. Well, at least you didn't buy pets.com stock.

I brought the Iraqi Dinar to back freedom (and fund my retirement) --- and I lost it all!

https://www.safedinar.com/

Hope you learnt your lesson. Anything that says "In Allah we trust" will eventually be worth zero.

zzyzzx says

Wealth equality destroys societies:

Now I know why they say "A picture is worth a thousand words."

thunderlips11 says

Wouldn't it be funny if ordinary Schmcuks got the Bankster treatment from Politicians?

That's why communism/socialism/central-planning (central banking is one of the 10 planks proposed in the Communist Manifesto by Karl Marx) is just slavery dressed up in fancy words: owner privileges at the expense of the vast slaves.

thunderlips11 says

See above. I explained how increasingly, landlords are faceless investment trusts, rather than local well-to-do.

That's the result of central planning of money. How is this significantly different from mortgage payment to far away big banks?

Money goes out, does not necessarily come back, except in the form of more bids on more housing stock.

That is not correct. What the central banking cabal and their cronies want is not money per se (which they can print) but the fruits of labor from the economic periphery.

Furthermore, instead of Joe Sixpack having an asset where his actual job is, he's got to schlep miles away.

Renting actually provides better mobility than owning.

Since 3% yields suck anyway, it's better to have a resident owner that cares instead of increasingly absentee landlords that are number crunchers that don't give a shit.

Are you talking about local landlords vs. big banks? In that case I agree with you. Many home debtors however have proved themselves incapable of taking care of the houses. It seems to me that only about 60% of the population are capable of taking good care of their houses. The other 40% need to be housed somehow.

Bad for the economy, the environment, and certainly the trade deficit.

When you fill up your car, you fill up ISIS' coffers.

ISIS is just another leg of the Petro-Dollar Complex. The US is rapidly becoming the largest oil producer in the world.

Reality says

That's why communism/socialism/central-planning (central banking is one of the 10 planks proposed in the Communist Manifesto by Karl Marx) is just slavery dressed up in fancy words: owner privileges at the expense of the vast slaves.

Oh? Look to the left of North Korea. It sure doesn't look dim there.

Which goes to show that Capitalism != Democracy.

Reality says

ISIS is just another leg of the Petro-Dollar Complex. The US is rapidly becoming the largest oil producer in the world.

For a few years at most...

Production from wells bored into these formations declines by 60 percent to 70 percent in the first year alone, says Allen Gilmer, chairman and chief executive officer of Drillinginfo, which tracks the performance of U.S. wells. Traditional wells take two years to slide 50 percent to 55 percent, and they can keep pumping for 20 years or more.

In North Dakota’s Bakken shale, a well formally known as Robert Heuer 1-17R put out 2,358 barrels in May 2004, when it went live. The output proved there was money to be made drilling in the Bakken and kicked off an oil rush in North Dakota. Continental Resources (CLR), the well’s operator, built a monument to it. Production declined 69 percent in the first year. “I look at shale as more of a retirement party than a revolution,” says Art Berman, a petroleum geologist who spent 20 years with what was then Amoco and now runs his own firm, Labyrinth Consulting Services, in Sugar Land, Tex. “It’s the last gasp.”

http://www.businessweek.com/articles/2013-10-10/u-dot-s-dot-shale-oil-boom-may-not-last-as-fracking-wells-lack-staying-power

Not to mention that traditional wells put out a lot more energy than they use; fracking consumes almost as much energy as it produces.

And one more interesting tidbit about claims:

thunderlips11 says

And one more interesting tidbit about claims:

Both those numbers are massive. The difference could be proven reserves vs. expected reserves. Just 10 million barrels per day is the size of Saudi Arabias output, and would last us 50 years without any new technologies to increase output or reserves.
Gentlemen, our energy problems have been solved.

thunderlips11 says

Reality says

That's why communism/socialism/central-planning (central banking is one of the 10 planks proposed in the Communist Manifesto by Karl Marx) is just slavery dressed up in fancy words: owner privileges at the expense of the vast slaves.

Oh? Look to the left of North Korea. It sure doesn't look dim there.

Which goes to show that Capitalism != Democracy.

Chinese economy used to be worse than that of the North Korea only 35 years ago. It was the capitalistic free market liberalization process that brought that country into a modicum of prosperity. As for Democracy, depending on what you mean by it. Majority/Mob rule is just a process for a prosperous people to destroy themselves.

Karl Marx may have been correct in observing that recorded human societal history consisted of 3 phases: slavery, feudalism and capitalism. His apocryphal "primitive communism" before slavery and post-capitalism social-communism may well be non-existential (i.e. before birth and after death for each individual, all are equal). Human society may well just cycle through the 3 phases: slavery, feudalism and capitalism. "Socialist" and "Communist" may just be tricky ways of introducing slavery to a formerly free people.

19M Barrels per day is what we consume, however.

About 7B Barrels per Year.

http://www.eia.gov/tools/faqs/faq.cfm?id=33&t=6

Assuming the companies aren't exaggerating to hype their share price and reporting accurately, and that all the reserves are accessible at a price economic to drill, their entire reserves would last the USA about 4 years.

Reality says

Oh? Look to the left of North Korea. It sure doesn't look dim there.

Which goes to show that Capitalism != Democracy.

Chinese economy used to be worse than that of the North Korea only 35 years ago. It was the capitalistic free market liberalization process that brought that country into a modicum of prosperity. As for Democracy, depending on what you mean by it.

No doubt about that. It was capitalism, only capitalism, and nothing but capitalism that propelled China to the success it is today. If communism worked, Cuba would be a superpower, instead of a pathetic basket case that drives World War 2 cars, and produces nothing of value.

We have prosperity because striking workers, who lived horrible lives of back breaking toil, struck and struck and struck, and Capitalism faced a huge crisis of underconsumption - much like today. With police getting beaten and the economy tanking, the rich panicked and listened to Keynes.

It's no surprise that as Keynes has been supplanted by Friedman, life is starting to suck again.

The rich need a solid beating now and again, when they get uppity, so everyone can prosper.

thunderlips11 says

19M Barrels per day is what we consume, however.

About 7B Barrels per Year.

http://www.eia.gov/tools/faqs/faq.cfm?id=33&t=6

Assuming the companies aren't exaggerating to hype their share price and reporting accurately, and that all the reserves are accessible at a price economic to drill, their entire reserves would last the USA about 4 years.

We already produce half of it through conventional means. That will obviously continue. So if you look at the 33billion number, it would last close to 10 years as a replacement for imports. I would go with the higher number, even though we will never use it all, because solar power will reign supreme.
In the meantime high oil prices are history. Rejoice my friends...praise the Lord.

Reality says

. As for Democracy, depending on what you mean by it. Majority/Mob rule is just a process for a prosperous people to destroy themselves.

Well, the Soviet Union and China and Saudi Arabia have no free voting, no universal suffrage.

Sweden, Norway, and Iceland, on the other hand...

Strategist says

No doubt about that. It was capitalism, only capitalism, and nothing but capitalism that propelled China to the success it is today.

It was corporate socialism: The Corporations outsourced all the jobs there, and collected tax benefits for doing so.

And in the 90s, with the help of the "Third Way" Democrats, convinced the Republican dummies and Limo Liberals that unilaterally cutting tariffs by giving one-way free trade MFN with China. China still has massive duties against most US finished goods, which is where the value-added money is (not in scrap metal and timber).

Stop listening to Oligarchs, they don't have the country's best interests in mind.

thunderlips11 says

It's no surprise that as Keynes has been supplanted by Friedman, life is starting to suck again.

Life only sucks for the countries that still foolishly embrace Marxism like Cuba. Venezuela is swimming in oil, yet their people lead pathetic lives. They would much rather sneak into America and live the good life by collecting welfare. Religious nations like Saudi arabia are even worse, surviving on their oil lottery, which will soon be worthless. oooohh, I can hardly wait. :)

thunderlips11 says

Strategist says

No doubt about that. It was capitalism, only capitalism, and nothing but capitalism that propelled China to the success it is today.

It was corporate socialism: The Corporations outsourced all the jobs there, and collected tax benefits for doing so.

Corporations do not outsource jobs unless they profit from it. China was competitive, hard working and talented, which led them to be the country with the lowest manufacturing costs in the world. Even other third world countries find it cheaper to import from them. Now they have billionaires coming out the wazoo.

Strategist says

Venezuela is swimming in oil, yet their people lead pathetic lives.

Like Nigeria?

Mexico is a paradise for Juan Average, I hear.

Strategist says

Corporations do not outsource jobs unless they profit from it.

Did I say they didn't?

Strategist says

China was competitive, hard working and talented, which led them to be the country with the lowest manufacturing costs in the world.

That and they work people 72 hours a week for chump change. And disappear any pesky democracy activists, unionizers, etc. for involuntary organ donation.

Vietnam also.

Companies didn't outsource to China for glittering generalities about work ethics. They went there for cheap labor, no environmental laws, etc.