patrick.net

Heraclitusstudent says

You call that respect for maths, facts and data? I call that a joke.

I agree with you 100% that you sir believe that is a joke and then some. Trust me on this you will not find a disagreement on me on that

p=1278311&c=1178670#comment-1178670">Heraclitusstudent says

You produced a chart showing an historical linear relation between wages a housing prices.

Do you even believe that young buyers would buy houses if prices today were on this line?

It's not clear at all.

This is more for existing new homes as they are still roughly 27%-30% of the entire housing market mortgage demand

For new homes not that much it's less than 15% of all new home demand

Heraclitusstudent says

Heraclitusstudent  

"To do the same thing over and over again is not only boredom: it is to be controlled by rather than to control what you do"

Ephesus was a beautiful city back in the day, history major here, your name has deep meaning to those who remember the old days

Logan Mohtashami says

Private debt, especially student loan debt has been a issue for household formation as the break down is more like this

Your graphs would indicate that this situation is correcting itself with the exception of SLD, however based off of what you said previously the largest age group is 23-25 yr olds, seems like that would be a contributor to the rise on your graph? Especially the drop outs.

But considering that the total SLD is what 1 trillion? and 70% seems quite manageable that leaves 300 billion that is questionable debt.

But in the scheme of things that does not seem to be the answer either. I still have to wonder how come?

Is this really the reason for the lack of household formation?

It seems to me the overarching problem is a dearth of good jobs. To which I still have to say how come?

indigenous says

It seems to me the overarching problem is a dearth of good jobs. To which I still have to say how come?

#globalization
#Technology
#debt
#demographics

These 4 together will always be my answer, we are no longer in a situation where we are the capital production kings of the world, so we consume more than we produce and there is limits to that type of expansion when incomes don't rise in a meaningful way

Logan Mohtashami says

These 4 together will always be my answer, we are no longer in a situation where we are the capital production kings of the world, so we consume more than we produce and there is limits to that type of expansion when incomes don't rise in a meaningful way

That just doesn't reconcile with our situation.

The main thing I see as a problem and people complaining about is the dearth of jobs. But what you point to does not explain this, if it does it is ambiguous. How come the dearth in jobs?

indigenous says

How come the dearth in jobs?

Do you believe in the thesis that we simply have too many humans around the world and that their simply isn't enough jobs for them, that the equilibrium of economics and mankind is hitting a rough patch for more mature countries

Logan Mohtashami says

Do you believe in the thesis that we simply have too many humans around the world and that their simply isn't enough jobs for them, that the equilibrium of economics and mankind is hitting a rough patch for more mature countries

That would be akin to Malthusian thinking which clearly is specious. By virtue of comparative advantage the opposite should be true.

Not to worry dan sez the police are working on that
Logan Mohtashami says

Do you believe in the thesis that we simply have too many humans around the world and that their simply isn't enough jobs for them, that the equilibrium of economics and mankind is hitting a rough patch for more mature countries

Besides that would only apply to countries whose demographics are not favorable like Japan or Germany or China in a bit, but not the US

SoftShell says

Not to worry dan sez the police are working on that

That's right he was saying that economic opportunity was best right after the Black Plague because there was so much less competition. You have to admit that is some incredible thinking?

indigenous says

By virtue of comparative advantage the opposite should be true.

Look at it this way, the lower end skill jobs and manual labor jobs have been hit on the wage side of the equation but the upper income high wealth
sector simply don't need that many workers

Difference in 2 tech companies

IBM 200 billion market cap 431K workers

Facebook 200 billion market cap 7,500 workers

indigenous says

Japan or Germany

Japan is in demographic hell

Germany demographics are about to hit them

indigenous says

Black Plague

Black Plague did create a lot of wage inflation in the aftermath

Logan Mohtashami says

Ephesus was a beautiful city back in the day, history major here

Really? What else did you study?

Logan Mohtashami says

Look at it this way, the lower end skill jobs and manual labor jobs have been hit on the wage side of the equation but the upper income high wealth

sector simply don't need that many workers

Difference in 2 tech companies

IBM 200 billion market cap 431K workers

Facebook 200 billion market cap 7,500 workers

I hear you, but that still looks like a correlation but not a causation. Again farms need a lot less farmers now, the jobs that were created were not even dreamed up when 90% of the population were farmers.

Logan Mohtashami says

Black Plague

Black Plague did create a lot of wage inflation in the aftermath

That is the economic broken window theory. Not the one involved with policing. But certainly not something to shoot for.

[on second thought that is not really broken window theory]

My thinking is that the driver of 100% of the new jobs is small business, jobs are created by big business are a wash as the one growing are offset by the ones shrinking.

The thing that drives small business into big business is investment. Investment in small business is fraught with peril. So it is preferable to invest in RE or the stock market or even buy backs.

The QE has driven investment capital towards this and away from small business.

Additionally a big part of investing is confidence this was at an all time low under FDR as no one knew what was going to happen next, E.G. gold was confiscated by the government only to be revalued by 50% a short time after the confiscation, they never knew how the interstate commerce law was going to be tortured into a centralized format, they never knew how price fixing was going to change their business, etc etc. The current president instills a similiar amount of confidence certainty, with Obama care and how it will affect business or Frank Dodd and how it will affect business not to mention the wars and executive orders and the ever increasing spending.

So I think that aside from demographics the primary driver is the lack of investment in small business.

Additionally investment in producer goods by business is over half of the economy, not the advertised consumer spending. With manufacturing off shoring I have to think a lot of spending on producer good spending went with manufacturing.

Heraclitusstudent says

Really? What else did you study?

Senior thesis was on the crusades, Chinese history was my specialty, also studied kinesiology. However, got into finance in 1996. Economics was more of natural fit for me since my family has been in banking since the late 1950's. Studying history teaches you great discipline

indigenous says

The QE has driven investment capital towards this and away from small business.

QE is a recent factor, I am talking about a trend that started in 1968.

Obviously capital goes to where it's treated best and shareholder nation creates a system to where investing in your company or people isn't as profitable.

However, the G.T.D.D. in scale for me at least will be reason for the limits of capacity growth. The world grew up and the eastern countries are more the growth while the western more mature economies are acting like how mature economies act.

The problem with having an aging demographics and not enough young workers is the consumption factor model.

Here in America we do have a big young work force and that is a plus for the next 20 years, but they will be spending more money in taking care of their parents due to the fact that we have a lack of retirement.

The lack of proper funding for retirement will be a strain on the young as Americans will simply have to work longer and longer to support themselves and get help from their children. This is more of a issue this century and why I believe you won't see any major entitlement reform

When we look at the U.S. we are still growing but the 3% growth model from 1950-1996 will be less likely this century

If you take the economic data with a grain of salt from 1996-2007 then what we have seen in this economic cycle makes sense.

Recent trends are showing a better economy from the 2013 data line

We are staring to grow again on the prime working for age but we have to have a more realistic outlook for the U.S. economy in this century.

Trust me, we are in much better shape than Japan and Europe who are in rolling recession mode

Logan Mohtashami says

G.T.D.D.

What is that?

But the dollar was de coupled from gold in 1971. this has led to a greater amount of inflation and debt for the past 40 years. Life is lived in the margins, inflation has greatly encouraged speculation instead of investment, since 1971.

I don't discount what you are saying about demographics, OTOH Harry Dent fails miserably trying to explain everything with demographics.

But why can't the economy just shrink because of demographics? Because of fractional banking, the central banks have to have inflation otherwise that asset of a loan that allows then to leverage 10 to 1 works the other way too. So they have to keep the charade going for their own survival. Unfortunately a country like Japan being a net saving country did not have to do the abenomics charade.

Since the US does not have the same problem as Japan it would seem to me that we should be in better shape. But come 2030 the demographics will be in full force though the entitlements.

indigenous says

But come 2030 the demographics will be in full force though the entitlements.

By 2024-2027 just mandatory payouts will exceed government revenue based on a 3% GDP growth model. That math is one sided that it doesn't matter anymore, we lost this battle a long time ago

Logan Mohtashami says

Heraclitusstudent says

Really? What else did you study?

Senior thesis was on the crusades, Chinese history was my specialty, also studied kinesiology. However, got into finance in 1996. Economics was more of natural fit for me since my family has been in banking since the late 1950's. Studying history teaches you great discipline

I'm an engineer. Contrary to what my handle sometime leads people to think I studied a lot of maths and physics but no philosophy. Well, I did read everything that is known of Heraclitus and I encourage people to do the same, considering it can be done within one hour.
I'm working on AI systems. So for example I understand as well as the next guy that describing past data is not the same as creating a model of how the world works.
Clearly I'm not a finance specialist, but I find your references to climate science and Galileo amusingly condescending.

Heraclitusstudent says

I'm an engineer.

Most people I talk to that are non financial workers are engineers. It's the nature of the beast because of the numbers and charting factor models.
Really if you like data and history, go to my personal facebook page. Because I chart all day and at night put historical photos and events timeline to dates
not just American history but Europe as well.

https://www.facebook.com/Logan.Mohtashami

In essence numbers and numbers, doesn't matter what the discussion is it leads to a final fact. Its the why factor model that creates the separation

Heraclitusstudent says

but I find your references to climate science and Galileo amusingly condescending.

If you think about that statement, who am I am referring too? It's no one on the thread if they really were factual people?
I am glad someone kind of got the joke

I am a 100% Republican.

However, being a non religious middle eastern Republican with a Scottish name creates some interesting conversations over time.

Numbers can't have a political or economic ideological belief when we break them down. That's why I always have to model things out as

- causation
- correlation
- representation

Then take all the variable factors with in each cycle because each cycle is very unique and it can't be measured as 1 to 1 model with previous cycles.

This kind of runs against the headline sensationalism society we are in and most people don't even read much anymore so the best line of facts is to show charts as it gets to the point visually and then the discussion can happen.

Logan Mohtashami says

By 2024-2027 just mandatory payouts will exceed government revenue based on a 3% GDP growth model. That math is one sided that it doesn't matter anymore, we lost this battle a long time ago

So in the next 10 years do you see inflation or deflation or a mixture of both?

indigenous says

So in the next 10 years do you see inflation or deflation or a mixture of both?

With more young American working in the next 10 years I expect inflation to pick up from the trend we have had in the last 10

Logan Mohtashami says

With more young American working in the next 10 years I expect inflation to pick up from the trend we have had in the last 10

Harry Dent says the opposite, which means you are probably right. It seems like the temptation for the Fed to print their way out of the coming problem to be irresistible.

It's not a surprise homeownership rate is down, which is quite bullish for the housing market.

Over the past five year, SFH has been institutionalized like a mofo. companies like Waypoint, Silver Bay, American properties, Starwood are 0 properties to 10K property portfolio trading on wall-street. How may more 2K home portfolios are out there, plenty? How many 30-50 portfolios LLC's out there, huge? This bode ill for first time homebuyers.

In the end, the only thing that can slow prices down is building and completing more new homes than that can be absorbed. That has not happened yet and which is why home prices will go up until completions go way up. The economy runs in cycle but in the end, social science tells you people compete for everything, including homes. If you can't afford it, someone else will. many factors are keeping homes off the market, the inventory number amid three years of rising prices reflect that.

Anything based on median metric is quite useless unless everyone has the same wage and wealth and no outside factors. The median household is nearly a retiree or a single person household.

SFace says

Anything based on median metric is quite useless unless everyone has the same wage and wealth and no outside factors. The median household is nearly a retiree or a single person household.

I ask this with all honesty, do you have a financial lending background? Because what you just said is actually the opposite of how residential working in terms of how
Debt to factor models are based. Now we have doing mortgages for over 30 years so this is what we do.

However your thesis that median incomes don't matter when would not have this result in years 5,6 and 7 of the economic cycle with rates near 40 year low

I totally understand when people without a financial lending background say this because they have never worked on a loan in their life. So, this makes sense to me. If this is the case then I realize why you say this

Also, this isn't about home prices, home prices as I have said in 2013, 2014 and 2015 are rising because the demand from the Rich are at historical highs and from main street America are at historical lows

Again, if cash buyers just went back to their normal historical % then home sales would be at the worst level in the Great Recession because Main street American doesn't have the
MI2MP
PITI
DTI
LTI models to get a mortgage and this is why we are at 21st century lows in demand metrics

Wait for more 2022-2024 for first time home buyer to pick up

Ages 23, 24, 25 are big but their net incomes compared to area living gives them no chance to buy let a lone have a down payment and closing cost

Let them

Rent
Date
Mate
Marry

Historically 3.5 - 6 years after marriage with dual incomes and assets they buy. However, they simply don't have the financials to buy back to their historical 40% of the mortgage market level. In fact they have been in a down trend for years

Once the dual income factor model comes back it makes the numbers much better

Almost every single housing economics, analyst, and numbers person uses median income. To this date you're the only person I know in America that discount's this methodology

Logan Mohtashami says

Now we have doing mortgages for over 30 years so this is what we do.

Logan Mohtashami says

this isn't about home prices, home prices as I have said in 2013, 2014 and 2015 are rising because the demand from the Rich are at historical highs and from main street America are at historical lows

So basically you're a mortgage banker and you're whining about the facts that some cash rich people and weak wages prevent you from using high these prices to saddle a new generation with huge mortgages.

Heraclitusstudent says

So basically you're a mortgage banker and you're whining about the facts that some cash rich people and weak wages prevent you from using high these prices to saddle a new generation with huge mortgages.

No, actually 2014 was my best year ever and 2015 production in the first 30 days topped 2014 already.

They wrote an article about me last year on this, this is more marketing that drove the business.

http://digital.originationnews.com/originationnews/august_2014?pg=16&pm=2&u1=texterity&linkImageSrc=%2Foriginationnews%2Faugust_2014%2Fdata%2Fimgpages%2Ftn%2F0016_kennxg.gif%2F#pg16

Also, I am in running for the top 40 people under the age of 40 in Housing in America. It's a gimmick I know. However, I really didn't think this social media would take me to a point that I would be speaking to economist, professors , housing analyst about housing economic trends

Just recently at the BNY Mellon Stock and Economic Conference at the Ritz Carilton in Dana Point I was asked to speak about the housing economic reality since my core thesis since the start of my writing about not having enough qualified home buyers in America this cycle

Here is the Bloomberg Interview on it if you have some time.

The model is a bit more sophisticated that what was said but it gave Wall Street an idea. It's similar to what I told economist at the UCLA Anderson Conference back in 2013 and the Chicago Booth Economic Conference as well

http://loganmohtashami.com/2014/12/04/bloomberg-financial-interview-at-the-bny-mellon-conference-housing-reality/

Logan Mohtashami says

Also, I am in running for the top 40 people under the age of 40 in Housing in America. It's a gimmick I know. However, I really didn't think this social media would take me to a point that I would be speaking to economist, professors , housing analyst about housing economic trends

I would say that makes you part of the problem.

Heraclitusstudent says

I would say that makes you part of the problem.

What is the problem then?

I have the cleanest record on file 0.... yes let me repeat 0 of my clients have had their homes foreclosed on because I don't believe in lending to poor people

This is why my main fight over the years has been to prevent easing of lending standards so poor Americans never get debt they can't handle.

There has been countless articles and interviews of me saying this

CNBC clip

https://www.youtube.com/watch?v=o9O_FDLPdgA&t=10m35s

Interview with American Banker on Tight Lending Myth

http://loganmohtashami.com/2014/05/31/interview-with-american-banker-on-tight-lending-myth/

Rebuttal to Mark Zandi

http://loganmohtashami.com/2014/01/27/mark-zandi-its-the-economy-stupid/

Many more, what I am known for is #TightLendingMyth.. which is not common from people in my industry and I have been in disagreement with David Stevens president of the MBA for years on this

Logan Mohtashami says

What is the problem then?

Part of the people who profit from ultra high housing prices, while the new entrant generation is thoroughly screwed.

Heraclitusstudent says

art of the people who profit from ultra high housing prices, while the new entrant generation is thoroughly screwed.

So you agree with my crusade on fighting to prevent easing of lending standards to allow more people into housing that shouldn't be there.

Housing is terribly subsided already

MID
Capital Gain Tax Structure
Low down payment and low Fico loans
All supported by the U.S. government because they love housing for it's
Multiplier impact on the economy
State revenues
Forced saving thesis

Heraclitusstudent says

ultra high housing prices,

:-) See I knew deep inside you agreed with me that home prices are too high ( from an old article)

Home prices are too damn high!

The term “housing recovery” suggests that home prices are now “returning to normal”. In truth however, prices are rising beyond economic reality of most Americans. While home owners and housing pundits alike were glad to see the return of home values to nearly pre-recession levels in some areas, nary a thought was given to how to how this would impact demand. Prices were up 15%-45% in 2 years — the biggest 2 year expansion we have seen outside the bubble years. While we are seeing some price reductions, there really isn’t any meaningful way to get a price correction in the market until inventories increase or there is another a job loss recession. One of the best things that could happen to the housing market would be a major cooling of prices from the crazy pace we have been seeing in the past 2 years. Nevertheless, I expect home prices will continue to show growth for 2014.

http://loganmohtashami.com/2014/05/05/why-the-financial-media-and-housing-pundits-got-it-wrong/

Logan Mohtashami says

See I knew deep inside you agreed with me that home prices are too high ( from an old article)

Yeah, right, 2005...
You obviously don't agree that prices home prices are too high now since you don't believe that more supply is needed.

Heraclitusstudent says

Yeah, right, 2005...

You obviously don't agree that prices home prices are too high now since you don't believe that more supply is needed.

You have to remember with me I remember everything
Here are 2 articles saying Let the zombie homes just die... it would bring in more supply of homes for the market place.
We can do this dance all day long but you will never get the clip over me, because my model is always consistent

Because I can't hide behind a fake name or fake photo, everything I write on the net gets recorded at read

March 2012 ( Distress Supply To The Market)

Zombie Homes Last Stand

http://loganmohtashami.com/2012/03/09/housing-zombies-last-stand/

Nov 2011

Let foreclosure happens

http://www.benzinga.com/personal-finance/11/11/2097197/let-foreclosures-happen

We didn't due to legal constraints and the fact that many homes were under water and not enough equity to sell

But still today 3.6 million homes in distress, most are all from the housing bubble

it would create 10 months supply of homes for the market place

Logan Mohtashami says

Here are 2 articles saying Let the zombie homes just die... it would bring in more supply of homes for the market place.

...And more people in the rental bucket.

Yes, you're a real Robin Hood: lending only to the rich and letting the poor rent.

I guess it doesn't matter to you if families of 4 live in 1 bedroom apts, as long as you are in the top 40 under 40 or whatever.

Heraclitusstudent says

...And more people in the rental bucket.

Yes, you're a real Robin Hood: lending only to the rich and letting the poor rent.

I guess it doesn't matter to you if families of 4 live in 1 bedroom apts, as long as you are in the top 40 under 40 or whatever.

Now you're just speaking for the sake of speaking, this is not behavior of a engineer, this is more emotional talk

I have written in fact that home prices are too high you deny it

I have written in fact that I don't want poor people to get debt that they don't want and you seem to be against that

Poor people should never ever have debt they can't handle, period.

I forecast ed this back in Dec of 2011

Consequences of an unstable market.

"The longer term consequences of an unstable residential real estate market may be more serious than just the destruction of individual wealth. The ideal of middle class home ownership may be at stake. The census bureau reported a 7% decline in national rental vacancy rates in 2010, along with an overall decline 0.7% in home ownership rates compared to a year ago. There were fewer “organic” buyers, more renters and more investment buyers in the market in 2010 and I expect this trend to continue into 2011. Are we at the beginning of a sociological movement away from middle class home ownership and towards a cultural split between the investment property landlords and their renters both of whom may have less personal investment in neighborhood security, local schools and shared public facilities compared to primary homeowners?"

I can't bend the mathematical model for your liking

I am truly sorry for this, this is about economics more than anything. However, there will never be a day that I would advocate lending debt to poor people who can't handle the payment. This is a cardinal economic sin and a awful Malice that would plague these poor Americans in their life.

I can't advocate this ever.

Logan Mohtashami says

I have written in fact that home prices are too high you deny it

You've denied the obvious fact that more supply would lower prices.
And you keep saying things like "this isn't about home prices".
Tell that to the families of 4 living in a 1 bedroom.

Logan Mohtashami says

There were fewer “organic” buyers, more renters and more investment buyers in the market in 2010 and I expect this trend to continue into 2011. Are we at the beginning of a sociological movement away from middle class home ownership and towards a cultural split between the investment property landlords and their renters both of whom may have less personal investment in neighborhood security, local schools and shared public facilities compared to primary homeowners?"

This amounts to a lender whining that there aren't more good customers.

We can continue this all day, but you can't escape the fact that you are on the profiting side of an evil scheme that robs people from their quality of life.