patrick.net

Randy,
On both sides of me and my wife's families, even though we are from middle class families, I am a tad worried about a few things. Namely that where my parents lived was in the middle of nowhere, but now that place isn't that far from the epicenter of new developments. So the value has gone up.A lot. I'm not too worried about that, but on the other hand, her folks have some vacation property they bought 40 years ago for nothing that's now worth 2 million. She has a lot of sibblings, so I am dreading the day that this property pops up in the will. It'll probably be nasty.

*”True Rich”. Total financial independence. This group requires no income to exist economically. This class leaves long lasting wealth legacy, often esnuring that their families will maintain this level of existence for many generations. It is rare and often spectacular when there is downward mobility out of this strata.

This to me is a perfect reason to bring back the dreaded so-called "death tax". I don't begrudge anyone the right to make a mint by their own industry, brilliance or luck. But what entitles his/her parasitic children to permanent automatic wealth? People bitch and moan about governement entitlement programs all the time (myself included). What about legacy wealth "entitlement"? After your gone, inheritance hand-outs should be strictly limited, and descendants should have to sink or swim on their own merits --just like everyone else.

(-) your
(+) you're

I thought one of the reasons we originally rebelled against England was we didn't want a permanent generational aristocracy?

End American Aristocracy: Bring back the Death Tax and soak the bastards!!

OT- Pulte is opening their sales information office this weekend for the Altura townhomes near Santana Row. Their 220 units are all at least 2br/2ba. It says the prices start in the mid 400's. That price seems "low". Anyone know if they were initially going to offer these at a higher price?

lunarpark, do you really want to live near santana row? I rather live at Vallco, Condotino. :)

Peter,

LOL, no! I'm just observing the market. I have no intention of buying a condo in Condotino or Satan Row. I'm actually interested in the Los Gatos Mountain area but not for a few years - falling knives and all that.

End American Aristocracy: Bring back the Death Tax and soak the bastards!!

I am all for minimizing income tax for the rich but maximizing the "death tax".

LOL, no! I’m just observing the market. I have no intention of buying a condo in Condotino or Satan Row. I’m actually interested in the Los Gatos Mountain area but not for a few years - falling knives and all that.

LG Mountain? Do you also monitor raw land? There are quite a few plots around there if you want to build.

HARM Says:

"Burn rate” –sweeeet!
A term most us haven’t used since the Dot.bomb days. A term most Specuvestors will come to know well in the months and years to come.

Friggen' astute observation!

Wow! The fricken' match has been lighted. The new burn rate is in play!

Man, this is gonna be just like watching the nasdaq crash!

Wow! The fricken’ match has been lighted. The new burn rate is in play!

With lower prices and higher ARM rates, it is like a two-ended match lighted from both ends. :)

There just still is not enough housing in CA!

http://www.inman.com/inmannews.aspx?ID=50255

"Do you also monitor raw land?"

My husband does. But since he's dying to leave CA I don't think he's making a very good effort!

There just still is not enough housing in CA!

Remember, builders and developers are our friends. They are powerful allies that lobby against zoning regulations in California.

"When you get a chance visit the link for the Condo Open House in San Diego from Ben’s Blog."

OMG, what was Belinda thinking - those pants!

Wow! The fricken’ match has been lighted. The new burn rate is in play!

With lower prices and higher ARM rates, it is like a two-ended match lighted from both ends.

Very cool time to be a bear, indeed ;-). I predict it will play out something like this:

1. The worst, most clueless, hyper-leveraged amatuer specuvestors will fall first when they (a) fail to make the minimum payments following "teaser" rate periods on their upward-adjusting ARMs, and (b) cannot refinance into FRM, due to zero to negative equity.

2. Smaller fly-by-night sub-prime mortgage brokers will begin announcing mass lay-offs, folding or be consumed by the bigger industry players (we're already seeing this happen).

3. Next to go will be the newly minted Realtors and MBs, who will have to go back to their former jobs as waitresses, car wash attendants and day-traders.

4. The next domino will be heavily RE-dependent service and retail sectors, such as construction and Home Despot/Crate 'n Barrel chain stores. They will have to lay-off and consolidate heavily to survive in the bubbliest areas.

5. Gradually, your average "bunker-mode" specuvestors (who either bought early enough to have a little equity to burn, or still have some cash) will begin to capitulate in waves, as their patience, equity, cash (or all of the above) runs out.

6. One or more of the GSEs (Fannie/Freddie/Ginnie) will collapse/enter government receivership, and some big MBS/CMO-heavy pension funds/REITs as well.

7**. With the tide of public opinion turned 180 degrees, Congress is finally able to break the NAR cartel and pushes through SEC-type industry regulations, and forces open-MLS nationwide. May also eliminate the MI tax deduction and capital gains exemption on second homes.

**Not sure on this --more of a hope than a prediction.

I move that “Specuvestor” be inducted into the Housing Crash glossary of terms.

DinOR, actually I took care of that last month:
It's listed as an alternate term for "Speculator/Investor"
/wp/?p=63

They have their own “burn rate” for their inheritence, which is very very fast.

I like the term "half life" better in this case. :)

@SFWoman,

I have added your terms to the Housing Bubble Glossary. Your cultural distinctiveness has been added to our own. Resistance is futile. :-)

DinOR,

I don't dismiss regional differences at all. In fact, folks like you and I are in a unique position to really appreciate those differences. The main thing that irks me is that the definition of "wealth" in the part of the Midwest I'm talking about is based upon the continuation of government subsidization for stuff like farms and health-care. Yet, it's these same people who happily decry the foul of welfare mothers, big city entitlements, and taxes. Who do they think is paying for their farms which are often 250% leveraged with gov't backed subsidized loans and habitually unprofitability? The land itself isn't even valuable in many areas, having lost versus inflation over the past 25 years.

I'm not sure what seperates them from the favorite hated "French Provincial Farmers" besides a lot more churches.

Who do they think is paying for their farms which are often 250% leveraged with gov’t backed subsidized loans and habitually unprofitability?

The aggie business may be strategically important though.

Also, the government will just inflate away to pay for all the entitement programs for the people. So it’s a moot point. Inflation = taxes on people with lots of money.

No, this just shows that future inflation will be mild.

I’m poor, but I’d like to leave the best to my kids. It’s their choice to piss it away.

The best you can give your kids is a good education. Challenge them to surpass you.

If we have anything left we will probably want donate it to good causes, like social or scientific research.

. What the hell are they going to do with it that is any better than my drug addeled child? Build bridges in Alaska? Fight wars in Iraq?

I have to agree, somewhat.

Lower tax is good, but if we have to make a choice, I think we should tax the dead man to death before we tax the living daylight of of the living man.

What the consumer pays in subsidies is made up in the form of affordable food.

Very true.

If it gets bad enough that we have to use corn and soybeans for our plastics and fuel, any ag land is going to be used for people food and for mules, horses, and oxen etc.

I doubt biomass can come close to satisfying our needs. The most promising source is still nuclear.

So, are buyers really leaving the market, or have lending standards improved? Have prices gotten so high that even the most creative loan product won’t finance the greater fool, or have the fools wised up?

I think all are happening. They are actually all interconnected.

I’m poor, but I’d like to leave the best to my kids. It’s their choice to piss it away. I’m loathe to give it to government. What the hell are they going to do with it that is any better than my drug addeled child? Build bridges in Alaska? Fight wars in Iraq?

Fewlesh,

like I said, I'm not against people leaving their kids a reasonable inheritance. This does not mean people like you. I just don't see the benefit to society in allowing billionaires to bequeath their whole fortunes in perpetuity.

How is perpetuating a permanent landed aristocracy good for American society? How does this promote the values of "by your own bootstraps" individualism, self-reliance and class mobility? I go into debt and sacrifice for an education, then work my ass off for XXX years to achieve a modest lifestyle. Meanwhile, Thurston Howell, IV inherits his billions and lives off the interest, while amusing himself by screwing supermodels and doing drugs. Wow, some great "incentive" system we have for rewarding hard work here!

Now, I think you do have a point in handing it all over to Uncle Sam is not the best idea. Perhaps we could give people a choice: whatever's left over after the "reasonable' inheritance allowance (if anything) can be donated to charities of the deceased's choosing. Otherwise, it's fair game for the IRS.

The intereresting thing about the concept of using soybeans for plastics resin is that it has been around a long time. Henry Ford Sr. was friends with George washington Carver and Thomas Edison and had the concept of altenative, renewable resources as fuel in 1914, and even produced a number of engines that would run on the stuff. Project Piquet is simply addressing the problems that Henry Ford saw coming almost 100 years ago.

On the subject of death taxes and "pulling yourself up by the bootstraps", I'd like to point out that to have each generation fight their way forward is very inefficient. The only benefit is "it builds character".

In schools, topics that would once be cutting edge are now routinely learned. Calculus, once limited to those like Leibniz and Newton, has slowly migrated down to the highschool level. Imagine if each student had to devise their own calculus on the theory that what Leibniz spent so many years on should not just be handed to them.

Now, wealth is obviously somewhat different from education, and "it builds character" is actually a pretty strong argument. But, I'd like to make sure that once beyond said character building, my children would be able to pursue their own dreams without having to waste 90% of their lives just to get to a level where that's possible.

(Perhaps a death tax exemption for trusts that meet certain payout requirements, i.e. tuition, market rate living expenses, other approved "dreams" would accomplish this.)

Cheese, ground beef. Maybe we should change our priorities and subsidize fresh fruit and veggies.

And foie gras too!

On the subject of death taxes and “pulling yourself up by the bootstraps”, I’d like to point out that to have each generation fight their way forward is very inefficient. The only benefit is “it builds character”.

I do not agree completely. Education is more than schools. Rich parents can teach their kids life and business, which is extremely valuable information. Also, they can provide them with opportunities and startup capital.

I believe foie gras farmers are subsized in France.

Perhaps California should do the same too. :-P

Scott,

Is grid lock in BA better than in the "Buroughs?" I've worked at IB's and the abuse of "employment at will" is taken to extremes. I'm not saying it doesn't happen in Silicon Valley, just not on a daily basis. You did the right thing.

Imagine if each student had to devise their own calculus on the theory that what Leibniz spent so many years on should not just be handed to them.

@Requiem,

I'm not sure I understand your analogy here. How is discouraging a permanent wealth aristocracy equivalent to withholding education? I'm not suggesting everyone should revert to a state of nature and re-invent the wheel here. Just that a tiny minority should not enjoy a free ride in life purely by virtue of the "birth lottery".

All I'm suggesting is levelling the playing field a little for each generation by preventing (some of) the permanent generational transfer of vast wealth. Of course, children of the super-wealthy would still enjoy huge advantages that other children would not have: first-rate private education, top medical care, having a network of powerful/influential friends through their parents' connections, etc, etc... Hardly an "unfair" scenario.

(Perhaps a death tax exemption for trusts that meet certain payout requirements, i.e. tuition, market rate living expenses, other approved “dreams” would accomplish this.)

This is pretty much what I suggested. Exempt inheritance up to a certain level, to allow for college tuition and some reasonable amount of post-graduate start-up costs (transportation, housing, etc.).

I had the most delicious seared foie gras at Silks in one of the hotels (maybe Mandarin Oriental?) downtown.

Yes, Silks is in Mandarin Oriental.

On the other hand, I had not-so-great foie gras at the Ritz Carlton, which is weird because the rest of the meal was excellent.

I did research in London and we had a group called (no joke) the Militant Vegetarians who were always trying to bomb our lab

Yes, when we were at Davis, the monkey lab has tight security too.

My moto is: I will eat a vegetarian before I will become one.

So.. is all that extra money being spent on Ag useless? Absolutly not.

The problem is the ag industry is bimodal. Large factory/corporate farm operations are the most productive and efficient in the world. Small family farms (the "cultural farms") are just the opposite; barely more productive than some 2nd world operations. The free market has been fixing this on its own as family farms are sold off and some are recyled into more organized, scaled operations. But *this* is not what the midwesterns mean when they say protecting farmland. In fact, they actively fight against organized farming operations by passing local laws and lobbying their state gov't trying to establish barriers to efficient farming.

Agriculture as a national strategic resource? Sure. But just not most of the family operations. (In fact, nearly all of the family output is low-grade feed grain and is largely exported with the help of US subsidies to 3rd world livestock operations and the like.)

And now some comments from that Commie-pinko uber-Liberal, himself, Alan Greenspan:

The income gap between the rich and the rest of the US population has become so wide, and is growing so fast, that it might eventually threaten the stability of democratic capitalism itself.

The result of this, said Greenspan, is that the US now has a significant divergence in the fortunes of different groups in its labor market. "As I've often said, this is not the type of thing which a democratic society - a capitalist democratic society - can really accept without addressing," Greenspan told the congressional hearing.

http://www.csmonitor.com/2005/0614/p01s03-usec.html

SFwoman,
I can speak from personal experience at least for myself that not all government money doesn't go towards large evil corporate farmers. My Uncle is a 3rd gen Dairy farmer. His farm was his father's, and before that, his father's father. They are a small operation with perhaps 150-200 cows and roughly 800 acres, which in farm terms is small. He grows all of his own feed, uses cow manure to fertilize, just like his dad and also uses a combination of low impact farming techniqes and technologically advanced processes such as ear tags that help his cows be up to date on their health. He doesn't do this because he wants to be environmentally concious or try to make a statement. He does it because it preserves his land and saves money. Does he get special treatment from the goverment for using these techniques? no. Does he get less of his share because he is a small operation? No. Neither do any of the 10 or so dairies in located around him.
Farming is prohibitivly expensive. A New John Deere Quad wheeler is over 100k. A combine- 200k. Add feed, computer equipment, drugs for the livestock,and so on and so on, and if it were not for government subsidies, Farmers wouldn't be able to survive if there was even the slightest downturn. The cost of farming has simply gone through the roof. That said, my uncle has almost always been self-sufficient.But He would have a hard time getting started now if he had to. I would be willing to almost bet that large farms are actually more self sufficient. In the case of organic farming, there are also large scale operations all over the country that use organic farming techniques, so these too should be lumped into the same equation as the large farms.
Just remember that those subsidies keep affordable food on our tables. it is also not the farmers direct responsibility for the severe obesity in our country. You can thank all those large producers such as Kraft, Nabisco, and the countless fast food chains. But in the end, who's eating the stuff in the first place? The farmer, fast food joint, and food engineers aren't making them do it. If this is supposed to be an argument for promoting health, then I'd rather see MORE money being pumped into education so that special classes, such as healthy eating and health in general can be shown to students. Trust me. My wife worked in the CA school system for 3 years. it is absolutly appalling that the RICHEST state in the union has some of the POOREST schools in the nation. That's another subject though...

Small family farms (the “cultural farms”) are just the opposite; barely more productive than some 2nd world operations.

Many Kobe Beef farms in Japan are very small though. If we let the big farms take over we may lose tenderness in the meat. :(