patrick.net

I note the quote by Lereah saying that paying off your mortgage is unsophisticated.

This is true most of the time. However, there are times when the unsophisticated option is the best choice.

The bull market in real estate ended last year. Prices usually move slowly during the first year of decline. They should decline faster during the next two years.

"The check is in the mail." --The US Gov't.

"They're not making land anymore." --Every Realtwhore

"They don't build houses like this anymore." --Shoeshine Boy Realtor

"Relax...it's only money...ha, ha!" --US Bank Mortgage Repo Unit

"...Irrational exhuberance..." --Paul Schiller

"Ramble on!" --Led Zep

"This is not America!" --Anonymous

"Where's the cheese?" --Anony-mouse :o~~

George,

Thanks. It is indeed very difficult dealing with stubborn parents, especially when they're from that particular generation. Like I've said, it may be fashionable to bash the Boomers, but the Silent Generation have a monopoly on complete, utter ignorance of anything but their own world view. Add that to the normal effects of aging on memory, and you get some tragic comedy.

I note the quote by Lereah saying that paying off your mortgage is unsophisticated.

This is true most of the time. However, there are times when the unsophisticated option is the best choice.

The error in this assumption is the word "sophisticated". Since most people are not, they are always better off pursuing the according option.

Few people can tell you how their fixed-rate mortgage amortization works, let alone figure out the real-option value of an adjustable rate IO, option loan. Come to think of it, how many people know what "yield" means. Hell, they don't even know what it means when they see that word on a triangular sign on the roadways.

Angela Says:

> My favorite quote is from John Husing,
> Economist for the Inland Empire (Riverside/
> San Bernardino, CA). He recently stated that
> “The Inland Empire is the Center of the Universe”

It sounds like part of the cut off and the full quote should be:

“The Inland Empire is the Center of the White Trash and California Illegal Alien Universe”

The "Inland Empire" is a pit that makes Phoenix and Vegas look like garden spots. Back in 1995 I was having a hard time selling apartments in San Bernardino for $15K a door (that were built in 1989 and sold for $70K a door in 1990).

In 1995 San Bernardino had a higher crime (property and murder) rate than Compton and things are going to get scary when thousands of out of work construction guys have nothing to do so they start hanging with their Norteno and Sureno homies...

After reading Randy's in-law post I'm reminded of a couple other favorite quotes:

A man will feel successful if he makes more and has a bigger house than his father in law and brothers in law.

A woman will be happy and feel successful if her husband makes more and has a bigger house than her parents, siblings and friends...

I don't have any statistics to back it up, but in my life every divorce I know of where the woman left the man, he made less than her Dad, and I can't think of a single woman who left a guy that made more than her Dad...

It is hard to change what get's wired in to the brain as "normal" over 30 years. A girl that grew up in a little Novato apartment will be happy as can be living in a split level town home in San Rafael while a girl that was raised in Ross with servants will feel like a looser living in a $2mm 3br/2ba home in Mill Valley where she has to run the vacuum and do a little dusting herself...

Steve The Owner Says:

dont you feel for them
http://money.cnn.com/2006/09/08/real_estate/caught_in_the_bubble/index.htm?postversion=2006090814

No.

The market has stalled here in Noe Valley, but isn't really moving down. The strangest thing is that high end homes are moving, which in this neighborhood mean $1.5M+. In the last month five $2M+ homes were sold. But the more modest homes, 3/2s that are priced $1M to $1.5M are just sitting there. Average price/sq foot is staying at $750 for SFH.

I just did a MRLS search and saw that everything under $1M is still moving fast, so the "starter" 1000 sq ft 800k-1M range is still strong and the high end is strong but everything in between is not.

This is not how I expected it to play out, I have to admit. I thought the high end would soften first. Perhaps it has in other neighborhoods though, I have to admit to only really knowing real estate in this and adjacent neighborhoods.

How are prices going in Pac Heights SFWoman? Is the high end still moving?

Not paying market wages to H-1B holders is unfair to both foreign and domestic high-tech workers.

Huh? Isn't that similar to saying that not paying "market" prices to FB homesellers is unfair to all homeowners.

There is the wage. There are the workers. That is the market.

I thought the high end would soften first.

In a "normal" housing boom, that would have been the case. But this is a credit-driven bubble. I fully expected the lower-end to go down first.

It is not really a "fair" market though Peter, because it is massively influenced by immigration policy. Stop the H1B program and wages would go up. Eliminate border controls entirely and wages would do down.

We have a situation where capital is free to move across borders to find return but labor is not. This causes strange localized distortions.

We have a situation where capital is free to move across borders to find return but labor is not. This causes strange localized distortions.

Exactly. Unless we can stop capital from going across border, controlling immgration will not do much to help workers.

I afraid embracing a globalized economy is the only choice. This would probably entail the abolishment of the welfare system.

I don’t have any statistics to back it up, but in my life every divorce I know of where the woman left the man, he made less than her Dad, and I can’t think of a single woman who left a guy that made more than her Dad…

Those rules don't really hold too well when you apply them to the class of rural, midwestern farmers and working class folks both my wife & I grew up with. In that world, anyone who gets an education and escapes is successful.

By the way, I know a good handful of women who left very successful men--much more so than their fathers or brothers--primarily because their husbands became alcoholics or worse.

Did someone say efficient market? lol. What I love about this debate is you're all right, just you're only looking at it from a particular actor's perspective.

To any individual worker caught in the middle of a dynamic market adjustment, even if the market is becoming more efficient, they will inevitably see their circumstances as very unfair. On the other hand, it is mathematically and empirically demonstrable that with more open markets, globalization, and even "labor arbitrage", everyone does better as a whole than with protected markets.

It's the flaw of the "race to the bottom" theory. It is a race to the bottom only as a static analysis. What is ignored is the fact that during this race, everything is rising for everyone, so floor is being raised. But, for workers sitting in protected, high inflation, usually US & Western European jobs, they will feel like they are losing because their growth is slowing while everyone else's is increasing.

I personally am in favor of more legal immigration and less illegal immigration. I don't like H1B's for the same reason I don't like illegal workers: they are too easily exploited by their employer, driving down wages and working conditions for everyone.

But in general, I like immigration: the people we get tend to the brightest and most adventurous. I know the population pressure drives up the cost of homes and causes congestion and overcrowding, but in balance, I think the tradeoff is worth it.

The only other altervative in a global economy is to just ship all the jobs overseas, which would be even worse for America. I guess you could argue for a return to tariffs and national economies, but I don't think any serious economist thinks that this is a good idea.

Muggy,

Let me go two worse (and your math is not bad, it's just that the conditions for their statement are undefined):

1. That data is inevitably either extrapolated from census data or it is the product of FL's own data, which is very unlikely a census but surely a statistical sampling. The rub is that national census data is very low confidence (and ironically statistical sampling would improve nat'l data), whereas states' own sampled data is usually manipulated for political gain, so it is a bit unreliable in most cases.

2. We don't know the periodic rate the statement is applying to. Perhaps the statement is true when talking about a particular month when a huge boat full of immigrants landed, or more likely some month when a couple of companies happened to all move to FL at the same time. But certainly, over a longer period, the statement cannot be true.

So, it's unethical in my opinion to sell homes saying 1,000/day new arrivals. But it's no less atypical than any type of advertising spin. It's not necessarily false advertising, just highly idiomatic.

Ha Ha,

Please describe for us what a Monopsony is and why it's necessarily inefficient. I assume you know.

(In many industries monopolies, monopsonies, duopolies, etc. are more efficient than competitive markets. Especially when tremendous capital fixed costs are involved.)

Raw deal for Indian H1-B visa holders in US

Again with the small-pox infected blankets?

I get a an investment newsletter daily called Daily Wealth I usually browse and sometimes delete. I saw a shocking article about the head ofToll Brother's Robert Toll. Basically he sold over 100 million of thier company stock at the top. Feb 05 he sold 470k shares at $44 about 21 million. In June 05 he sold 347k shares at $50 approx 17 million worth. Then in July 05 his selling became more acute he sold 1.882 million shares at $51 about 100 million then stopped shortly after. The stock was trading at $25 at the time.

These asshole home builders knew it was all going to shit by summer 05. All the while making public pronouncements about the markets being strong. And do think for one moment that this was not going on all over that sector in the highest boardrooms? Don't you just love capitalist lies and deception? He and his other builder cronies are hunkered down with thier billions. I wish these asswipes could be thrown in prison.

Randy,

There are (mature) businesses that work better as monopolies, such as utilities and maybe airlines. On the other hand, compare AT&T's prices and services in the 100+ years before the breakup and all the great stuff we have now for a fraction os the cost. While breaking up monopolies harm shareholders and employees of the companies, they do seem to benefit the consumers.

Also, long distance traveling was much more expensive before the days of airline price wars. To the exOr the misbehavior of 19th century railroad lines against their small farmer customers?

Walmart's monopsony is accompanied by misbehavior, like not paying their suppliers on time and preventing their suppliers from selling to other companies.

OT: Sorry, if you folks already saw this. I just noticed this after my vacation. Coming from the (w)hor(e)se's mouth?

http://www.realtor.org/Research.nsf/files/Leadership%20Summit%20(August%202006).ppt/$FILE/Leadership%20Summit%20(August%202006).ppt

Robert,

Yeesh, that's even worse than I thought. I've heard stories about Walmart driving their suppliers into bankruptcy (most of my business oriented professors have at least one personal Walmart horror story & I followed the media coverage of Rubbermaid's bankruptcy) but the trade secret/technology transfer aspect is news to me.

I think Walmart demonstrates the inherent problems with most monopoly arrangments - the asymmetry of power create massive incentives for abuse & institutional over-investment & technological inertia. There are some rare and usually heavily regulated exceptions (utilities and patented items), but mostly, we're better off when there's more choice, even if the Government is brought in to do the breaking up.

Or it could all be a Costco cultist's prejudice against Walmart.

OT, and I know some of you despise the host website, but I found a rather good series on disaster readiness. Think of this as rectification for my earlier OT posting on Slate.com's shopaholic approach to disaster preparedness.

As hopefully more encouragment for you all to read it, the poster lives in Fremont and self described "libertarian capitalist Democrat".

http://www.dailykos.com/story/2005/9/9/161748/9747

I don’t like H1B’s for the same reason I don’t like illegal workers: they are too easily exploited by their employer, driving down wages and working conditions for everyone.

At any time, someone must be exploiting someone. I afraid this is an invariable truth.

From the head 'ho of the realtwhores, Consumer Spending Supported from Housing Equity Gains

Maybe I missed something, but how exactly is "housing equity gains" money again? Oh, that's right, I can borrow money and "it becomes mine".

Everyone should really check out the 9/11/06 issue of Businessweek. Excellent article on the housing "market". Sweet baby jeebus this is starting to make the dot.bomb hubris look like an afternoon tea party. Say you are Joe McDebtor and you have an option ARM, you of course make the min monthly because housing only goes up and your only interested in making some free money so you and your vapid big assed highlighted hair wife can buy more shit, this added to the fact that you are stupid lets you mistakenly believe that a) the loan guy is your friend, and b) your 1450 monthly nut is covering everything. The part I loved is that the bank, according to GAAP gets to bank the spread on what you actually paid and what you should have paid as income. Mind you, there is no income.

Fucking genius. I love it. Oh another tasty little tid bit, it has been revealed that the loan broker got paid extra to push the option ARM. Wow, shocking, who knew that they weren't really your friend.

Think Joe McDebtor is getting a reach-around or just straight up violation San Quentin style?

I don't like H1B's either, too small, I like the H3 better.

http://santabarbara.craigslist.org/sls/205216082.html

rp, I stand corrected, thank you sir ;)

I don’t like H1B’s either, too small, I like the H3 better.

Huh? I thought H3 is the smallest... never mind.

CB let me translate this for you That big business need cheap and dedicated workers. Politicians and company CEO(ala Carly F.) that says there is still a severe shortage of tech workers know it’s just plain B.S. along with the idea that U.S. schools are not graduating enough qualified candidates.

What there is a shortage of is worker bee's with BS's who'll do 60hrs for 50K.

Now tell me, there can’t be possibly a “severe” shortage of qualified candidates for such positions.

People always hide their intentions but the market always tells the truth. If such workers are demanded they must be in some kind of shortage.

On the other hand, I still think that performance and reward have little correlation in the workplace. Do not worry about people who "work too hard". Most probably they are politically immature and you should be able to defeat them.

U.S. schools are not graduating enough qualified candidates.

When investment bankers can buy houses in Marina while engineers have to rent, it is clear why "U.S. schools are not graduating enough qualified candidates". :)

Ha ha, don't leave just yet. Situations tend to correct themselves in interesting ways.

I drove by the new Cupertino condo today. It is almost finished. Did you end up buying the 750K 3BR unit with few common walls? :)

Robert,

Very good article and an interesting perspective. The article mentioned that Walmart does not pay delay its bills, but I've heard several different stories about Walmart toying with its smaller suppliers. Maybe Walmart is too savvy to antagonize its larger suppliers, but they don't seem to have that scruple when dealing with smaller suppliers, esp. in China.

The other problem is that Walmart is not particularly cheap for most stuff. They have things like the $3 Jar of pickle loss leaders to draw people in and make believe its really cheap. And their non name branded stuff is really poorly made. Cloth that pills in two washes & tennis shoes that last less than a month. The brand name stuff that I could actually trust (mostly P&G or other major brands) are quite expensive (esp. compared to Costco's huge sizes).

Isn't it common belief that investment bankers (and HFers and VCistas) are not paid for their performance but based on the size of their extended family (whom they've sold to the devil in return for their pay packages)?

We finally joined Costco after checking out their seafood department. They sell king crab legs for less than $12/lb!

Capitalist (or feudalistic or plantation style) exploitation workers have been happening forever. But too much oppression and those oppressed masses gets restless or messianic. The rich Republican donors like the Waltons may think they got the oppressed masses controlled by religion and fear, but that can be a risky move.