patrick.net

Escape,

Believe me, buddy, I feel your anger. It's tough to be surrounded by a sea of buy-now, pay-never nimrods who are busy leveraging the whole country into a very deep financial hole. And we didn't even get a vote on the matter (or it didn't count).

But let's not bite the heads off people who, while admittedly flawed, are at least honest about owning up to those flaws. Nobody's perfect, and Veritas was trying to make a valid point. Our culture of perpetual debt and over-consumption didn't spontaneously arise from nothing. As SactQt pointed out, even the most conscientious parents have trouble protecting their children against the onslaught of advertising and indulgence by well meaning but misguided relatives. Is that an excuse to give in? No.

Please, let's all keep it cordial --there's plenty of room here for everyone to contribute and be heard.

Now for the benefit of the blog and to ensure Patrick continues to allow us to reply here, may I suggest we direct our future responses to the question at hand and not each other. Let’s attack and challange the argument and not the person.

Read this after I'd already posted --well said...

So I banked my cash, got my car payed off, and now have zero debt, and a fair amount of savings in the bank. Scary thing is, everybody says I’m nuts for not buying a house using dumbass financing; ie they owe millions, and I’m actually worth something.

CentralCali,

Yes, unfortunately this is upside-down, debt=wealth New World Order we're living in. People who pay down debt and live within their means are stupid losers, while people who are leveraged beyond all reason are hailed as brilliant fiancial geniuses. But don't worry, all financial manias eventually end, and housing's day or reckoning is (at most) no more than a year or two away --if not sooner. Your patience and common sense will eventually be rewarded.

Until then, don't drink the NAAVLP(tm) Kool-Aid ;-).

I probably don’t make as much as many people on the this board (I work in a factory, yes there still are a few left in Cali), and pull about $70,000 per year (just recently got a nice raise).

That is a respectable salary. I actually admire manufacturing because they are making real things.

Sit tight and buy that house for 300K with 30% down in a few years. :)

heckabrews,

Thanks for the Gold-collar generation atricle. Seems like it was tailor-made for our thread. Btw, next time you can just tell people to use BugMeNot.com - gets around the annoying registration issue.

Veritas:

You asked for some constructive advice on escaping the American spend flow.

This really amounts to having good habits...and it seems for me at least that you can develop habits either from fear (that you'll go broke) or desire (some goal you really want achieve). And you either get this by going through this fear/desire yourself or by seeing a hero do it (depression-era grandparent).

But today, look at fear and desire. There is no fear. My grandparents were not sure we'd win WW2. Who threatens us today? Sure we had 9/11 but there's no draft, and it seems no military can beat us - at least none that isn't connected to an economically-linked nation. Who do you personally know that has ever gone hungry? Who has had to quit school to support a family? Today, who *can't* get a mortgage? In short, there really is no fear motivator anymore...except the fear that you are missing out on the party.

And what about goals? The goal is be a celebrity; to be relevant, wanted, in the limelight. To be Carrie from 'Sex in the City'. Who really wants to do something stupid like build a factory and watch product flow out? That's what lowly people in China do. That's where John Galt would find satisfaction save that he couldn't own property on which to build his gulch.

*We* on the other hand you see are all about *style* and *ideas*. Remember, *we* lead the world. Kids truly think it makes sense to focus on being an NBA or rock star...I dunno, my High School had 2000 people, and I don't know of one of them that is famous today, but who took statistics in school?

So if you can live a pseudo-celebrity life by being a WalMart cashier (rather than manufacture the things you collect money for) with plenty of Taco Bell food to eat living with your parents, then why change? As you said, why not take easy credit and treat yourself?

And the answer is, because 1) Life can be MUCH better than what strip mall living/MTV says it can be, and 2) you need an insurance policy against the pain if and when judgment day comes.

But if there is no fear of judgment day, and no burning desires beyond what you already can attain, then I hate to say it, but I think it's probably hopeless to try and change.

And who knows...maybe you're right and this is a New Paradigm and I'm missing it. Maybe I'm an idiot for hoarding cash for the day when I can cashflow a property. Maybe we can run a indefinitely country on style. Maybe the rest of the world is happy to be nice to us in all sorts of way because we're piggies at their trough. Maybe engineering and production is now as passe as agriculture. Maybe the Government will bail out a crashed property market, and I'll end up footing the bill AND losing out on a market that never drops.

But you see, I'm hopelessly stuck with my attitude as you are with yours.

"He is an Englishman, yes, he is an Englishman!"

Darn it. Note to self - Englishmen and english majors assume the same comportment.

OK veritas, nice response, and thanks for the personal data. I was wrong on both counts.

I apologize to the board for lowering the standard.

HARM

KG,

I would consider the source: "PMI Group, a residential mortgage insurer." Even so, the fact that SF, LA & Sac made their list of "13 Riskiest Housing Markets" at all tells me that even industry insiders are now concerned. Quantifying risk is tricky --there are many variables, not all of which can be precisely measured-- but I would absolutely peg that risk much higher than 40%.

We're in for a rough ride ahead --buckle up.

I apologize to the board for lowering the standard

No worries --no permanent "HARM" done ;-) .

KG, probability cannot be proven right or wrong, no? :)

Inquiring Mind, rising median price is expected when price compression unwinds. A decline in volumne on the lower end will produce just that.

I expect median price to continue going up well into a downturn. I do have a LONG position on SF median price hedgelet.

I expect median price to continue going up well into a downturn. I do have a LONG position on SF median price hedgelet.

Regarding this, I do not mind being wrong on this trade. :)

Veritas:

There are different types of greed. There is greed for other people's stuff, greed for ill-gotten gain (incl. gambling), and greed for short term pleasure. This leads to ruin.

Then there is the kind of greed that builds companies like Toyota. That kind of greed is evaporating. Henry Ford has left the building.

Anway, I have the same panicky feelings about the dollar. Read the Economist. They say the $ will crash but they will also show you that there is no 'perfect country' whose currency/economy isn't at risk too. The EU is far from ship shape; Germany has 11% unemployment, Italy is falling apart & thinking about returning to the Lira, etc. Japan is ageing and becoming the Brittain of Asia in terms of relevance.

Remember also that the dollar has weakened, sure, but that mainly affects you if you visit Europe. There are too many exporters for Germay to have pricing power on BMWs, for instance...so they compress worker's wages and they don't hire people.

What to do? Maybe buy some Chinese currency....but there is instability there too, and you might be waiting a long time for the payoff without much income along the way.

Ireland and Norway are supposedly on fire too. Learn! Research! Take a risk!

BTW, I have *NO PROBLEM* with people taking advantage of cheap credit as you did. Heck, I might very well take advantage of a GM 0% loan even though I had planned to pay in cash. My whole rant previous to this one was talking about the idea of how to take advantage of this AND THEN not spend the money you're saving on other junk.

Does any one know what those indicators are?

Perhaps there is no such thing. That's why they are "absent".

“Hot Bay Area keeps getting HOTTER:”

This doesn't worry me. Tech market had fast gains right before crash. Who knows, this may be a good indicator that a slowdown is imminent.

Somebody may have to alter their predictions soon?

Are you talking about me?

What changed??

Probably because of the "cultural rubbish" on TV. Sorry.

I do believe in cycles but I doubt that they have fixed periods. In his book, The Alchemy of Finance, Soros has a pretty good explanation of credit cycles.

At least I have to agree with one thing : that nobody really knows what’s going to happen next few years...

Yes, but we must act according to our best projection and react to any change in such projection.

RE: CNN Money article (btw, Mocha46 --check out TinyUrl.com)

"Homes: Cashing out might freeze you out - Is it ever a good idea to try to time the real estate market?"

The advice from the real estate industry pros is: Resist this temptation. It's almost impossible to time this market.... "To make a decision on your home on a purely financial basis makes no sense," argues Liebman."

Riiight..... So, according the real estate "pros" we should RESIST the TEMPTATION to "time the market" and sell at/near what we believe to be a price peak. But... buying multiple "investment" properties with $0-down no-doc NAAVLPs is a FINANCIALLY RESPONSIBLE move. And using multiple cash-out refis/HELOCS for 50" plasmas/Humvees/vacations is the height of FISCAL PRUDENCE and conservative decision making.

And they KNOW cashing out's a bad idea because "...many experts predict that the strength of the housing market will continue for the near term", and "They're not making any new land..."

RE: sales volume

It is only 7.7% down because some counties (Solano/Napa/Sonoma/Contra Costa) had big gains in volume. Santa Clara county had double digit decline in volume.

HARM, nice fable. :)

Fake P Says:

Waiting in Vegas: Why puke? The article makes a good point, and it makes the point in relative terms with the use of the word “might” (Homes: Cashing out might freeze you out) instead of absolute terms (like “must” or “will”) often preferred by Bubbleheads, even in fact of so much uncertainty. You have placed your bets when you chose not to buy a house, so lets see who end up the wiser…:p

Fake - the article was overwhelmingly slanted AGAINST cashing out and actually used "not making any more land" as a justification (along with biased RE insider opinions). Good points my ass....

"So PLEASE offer some constructive advice or none at all."

Be a better person. It's hard and the reward, if you are not religious, is unclear. But it is the right thing to do.

Oh, so easy to say... Oh, so hard to do...

Cheers,
prat

Thanks, Peter. Is this the first time you've read it?

Who is MarinaCrime? It is one of us. :)

there was never any promotion of speculation in the article

Well, this is certainly true --and that's not what bugs me about it. What galls me is the appalling hypocrisy (and lack of awareness thereof) on the part of these RE insiders. Gee, when you're "market timing" in favor of rising prices/broker commissions, that's just good decision-making! But hedge against falling prices? Bad "gamblers"!

I don't know if my "bubbly head" is swelling, but my stomach's sure churning.

Your bubbly head is about to burst with so much anger, bitterness and hatred…:p

Fake P, I am sure you hate me more than I hate you.

Hmm... MarinaCrime's writing style sounds suspiciously like TWITs.

So, here's a meta-question:

Why have the trolls come out in such force the past few days? Ben's LA times coverage?

Cheers,
prat

you are currently so Bubbleheaded that you missed the whole point of the article. The gist of the article is merely to let people know that cashing out for the sake of fearing a bubble burst alone is bad.

I seriously doubt that. Case in point: calling people cashing-out "the biggest gamblers". Biggest gamblers --excuuuuse me??? No, not the RE seminar day-trader style "investors", no. Not people who have sucked out most of their existing home equity to finance current consumption --no, not them, either. It's people who are selling their homes to sit out the market a while.

Show me an article quoting the SAME insiders denouncing flipping and debt-financed RE speculation and maybe I'll reconsider my position.

hellboy, you described my position quite accurately. But I am expecting more of a credit market event than a housing market event.

And Btw, I think the REAL point of the article was very self-serving -- to postpone and/or minimize damage from what they know to be the inevitable crash. Yes, agents/brokers get a commission if people buy foreclosed REO property later on. But they will get much smaller commissions then, not to mention the sales volume after a crash is bound to be much lower.

So, here’s a meta-question:

Why have the trolls come out in such force the past few days? Ben’s LA times coverage?

The meta-answer is: trolls are metaphysical begins coming out of metamorphosis. Why now? Planet alignments.

hellboy, MarinaCrime is not the original MarinaPrime though. The newest one is sort of a parody.

hellboy - re-read the last post

I’ll get to continue my education. My first class is 7th grade math. I hear that we learn about negative numbers — Whatever they are.

Also note the name change (MarinPrime to Marina"Crime"). I think we have a Sauce impostor here. ;-)

hellboy, I maintain that the credit market is already rotting from the inside. It is just going to take the usual September/October volatility for us to see it.

Chicken or the egg? I like to eat both. :)

BTW, I think the credit market will be the first to have troubles. I will look for hedge fund failures.

Let me think about it for a while. I am detecting some flaws in my line of thought.