patrick.net

Nomograph says

How do you know we aren’t sitting at the top of an inverted parabola? You don’t.

Now I do.

shrekgrinch says

and by moving assets out of the financial system

that's . . . productive. For every buyer there's a seller!

I'm a taxi cab driver and my wife's a waitress in san diego. We heard gold was a good investment....we're thinking about taking all of our tips to Vegas and hitting up the Gold ATM's. Thoughts??

I have $1,000.00 to invest in gold. Can anyone make any recomendations for gold options?

$1,000.00 won't get you very much.. Maybe some a few 1/4 ounce coins or some small gram bars.

Check out Apmex.

All of Obama's job stimulus programs have proven to add nothing as far as permanent employment. His programs are as fraudulent as FDR's New Deal. After 8 years of New Deal policies, Treasury Sec. Henry Morganthau reported to Congress that: “I say after eight years of this Administration we have just as much unemployment as when we started. … And an enormous debt to boot!” The lesson is that government is a hindrance to creating viable, stable economies that employ people in sustainable jobs. Obama, like FDR, is proving this to be true.

http://www.gallup.com/poll/143426/Gallup-Finds-Unemployment-September.aspx

For Moraganthau's statement:

http://blog.heritage.org/?p=2233

The bankers are in for some interesting times.

Buying gold in Dubai is supposed to be the best place to buy actually. Low overhead costs and strict rules on quality.

Especially gold jewelry, where you never know what might be in it! The places over there are tightly controlled.

What I found interesting in shopping in those stores over there is that they charge per gram for jewelry. So if you wanted a broach, the price was listed right there. $150/g (or whatever it is now+markup for workmanship), and then it would list how many grams of gold was in the piece. Every piece was charged in this fashion, unlike our jewelers here who charge based on the workmanship put into the pieces.

How about setting up a gold pawn shop on mall kiosk and collect gold for 15-20% off.

Monthly rent of kiosk: 3K
Estimated margin per oz $200/oz
Salary, overhead, fixed cost 10K
Total fixed Cost 13K
Oz/month to break even. 13,000/200 = 65oz
per day 2.0 - 2.5 oz per day

buy 5 oz a day and you'll be making 15K+ a month in addition to salary draw included in fixed cost. I imagine there will be some people who would sell their jewerly for christmas gifts.

2oz is about 2-3 2mm 16" 24 karat gold necklace

Actually, I think I was way off. When I saw these jewelery shops it was about $16/gram. Of course gold was only about $400/oz back in 2002 range.

I've seen a few articles on those "gold collectors", where you mail in your "gold" and they send you a check. Apparently they're incredibly sleazy, giving you only a few days to tell them "no" on their offer, they mail it late and of course put up lots of walls to block you. After X days, they melt your product down apparently, so you're stuck with whatever cash they've given you.

Gold kiosk around here would be pretty hard to operate I think. I'm betting there would be quite a few laws in handling and selling gold, especially appraising it.

Gold is pretty easy to appraise if you treat them like they will be melted. There are equipment to measure the gold unit oz. and equipment to weigh it. The value is strictly gold unit. The markup is simply what the gold pawn is willing to accept. The design of the jewelry is irrelevant. So if you bring something from Tiffany's, it would be appraised the same as a no-name.

Zlxr says

Ray just enjoys giving ellie mae some of her own medicine. Nothing more

Wow, I'm so awesome you're bringing this up a couple of months later? I do enjoy that ya'll can't get enough of me, but I do understand why.

My ex used to work for a huge-ass govt contractor - they'd say "a million here, a million there ... pretty soon it adds up to real money."

I think being in political office is like working in a casino cash cage - you see so much money go past you that it loses its meaning. A million bucks doesn't seem like much when you're dealing with millions or trillions, but a hundred dollars is the difference between eating and starving for many people.

RayAmerica says

Morgenthau made this “startling confession,” as historian Burton W. Folsom Jr. calls it, during the seventh year of FDR’s New Deal programs to combat the rampant unemployment of the Great Depression.

How did he make this startling confession about being "8 years of this administration" in the 7th year of the FDR's presidency. Especially since the date it was 6 years and 5 months after FDR was elected. That doesn't make sense. I would like to see the whole statement, not just the abridged out of context part that Burton W. Folsom Jr provided. What is in the "..." that he didn't want us to see. Even more odd the quote is attributed to a meeting at the ways and means committee, but is cited as being from the Morgenthau dairy. Where are the meeting minutes? I'm no fan of FDR or the new deal, but something isn't right here.

By the way, was that the same Burton W. Folsom Jr that wrote a book calling the robber barons "constructive visionaries who benefited consumers"? Same guy as writes for NRO? Just curious.

What do you ALL think the EFFECTS will be on the MARKET (total freeze, Price squeeze, Banks unwilling to make new loans?) {doubtful as they sell them to GOV anyway}, I see Realtors suffering greatly without inventory, and an unsure outcome, who would buyers be of course some but by and larger most will likely choose to sit and wait it out and now millions of people could stop making payments knowing full well that they can live now maybe 36-48 months enough to save 3K a month say, 24 =75K 36=108K and if they can hold off banks 48 months 150K I mean wow, I don't know how to figure this out I would love to hear everyones thoughts on what the effects will be, I wrote Patrick and asked that he consider writing something from his educated point of view.

So you are calling the architect of FDR's New Deal economic policies a liar?

RayAmerica says

Bob … seriously … get the book that Folsom wrote. It is very well documented and a real eye opener.

I'm open to reading it, I'm not a great fan of FDR. He actually reminds me a lot of Bush II (except the flip side of the political coin) in terms of abuse of power and politicizing every issue. Like Bush he was an utter and total failure in the business world. Like Bush he used government agencies to hound and harass anyone who disagreed with him. Like Bush he desperately wanted to centralize more power in Washington and hated the supreme court. As political operators they are very much twins.

But since you have the book in hand then provide the citation from the quote that you are so enamored with. Was it from the diary or the actual minutes from the meeting. If the diary, then why didn't he back it up with the minutes? Something in there that contradicts his claim perhaps? I'm still very suspicious of this.

Ray--

Morgenthau was hardly the architect of the New Deal. From the little I have read about him, he seems to been against most of it--in fact he was not Keynesian at all. He was actually one of promoters of the balanced budget in 1937 that pushed the US back into recession.

If you have the book, you surely know this. Why do you continue to post the rubbish about him being the architect of the New Deal

It will take decades for the interest rate to go to 10%.
It is not something you should worry about.

Let’s assume that currently, a $200k house can get a mortgage rate of 4.0% 30 yr fixed.
Down payment: 20% ($40k)
Loan: $160k
Monthly payment (less property tax): $763.86

@10% interest rate, an $85k mortgage would be $745.93 30 yr fixed (those 2 monthly payments are close enough).

So at 10% interest rate, the same house would be $106,250.
Down payment (20%): $21,250
Loan: $85,000

You’d be losing ~45%-46% just from interest rates going from 4% to 10% if purchasing power does not change.

If interest rates went to 10%, inflation would be humming. The ~$750 payment would be more like $900 in today's dollars....incomes would be rising in step. And that would be if interest rates rose to 10% in a small amount of time, like 3 years. If it took like 10 years, with inflation the $750 would likely have doubled.

A house would be about $130,000 given your terms if inflation rockets interest rates to 10% in three years. Thats about a 35% loss.

In ten years, the house would be about $215,000 given your terms. Nominally, it would have increased in value.

The calculation itself should be fairly straightforward.

$200,000 @ 4.0% APR (30 year fixed): $954.83

at 10% APR (for a 30 year fixed loan) the comparable house price is $108,803.66

$108,800 @ 10% APR (30 year fixed) = $954.80

But the correlation between interest rates and prices is not nearly as straightforward as the above example. Second, you ask how much will you "loose". Loss is subjective. If your talking about lost equity, it depends on whether or not you have a loan, the loan balance, etc.

If you have a fixed rate mortgage, then a rise in interest rates won't effect you.

I guess I'm having difficulty determining what you are really asking. If rates were to suddenly go from 4% to 10% overnight, then all heck would break loose. But this isn't reality. Rates will (eventually) trend upward over an extended period of time. If anything, rising rates (if sustained) may cause a slight increase in house prices, as buyers on the sidelines start to buy in order to "lock-in" the lowest rate they can. Plus, rising rates would most likely occur only after growth is seen in the economy, so a broader recovery (including rising home prices) is possible.

At the end of the day, I expect we will see rates low for an extended period of time. (Sub 5% until mid 2012). Followed by a semi-dramatic rise in rates. prices, and yes even wages, as inflation finally starts to take hold.

Look at the past 30 to 40 years. The stagnation of the 70's lead to the growth of the 80's. We may be in a rut right now, but eventually things will turn the corner in a big way. Even the great depression didn't last for ever, and it was followed by a period of rapid economic expansion.

You should assume the other ways --> 0% not 10%.

xenogear3 says

It will take decades for the interest rate to go to 10%.

It is not something you should worry about.

No it doesn't. Once the market realizes the sovereign debt crisis and once the magnitude of the problem exceeds the fed's ability to manipulate the market, it can take all of 2 days for interest rates to rise 10%. That's what happened to Greece. The US is only able to delay the problem by temporarily forcing interest rates down through currency manipulation.

theoakman says

No it doesn’t. Once the market realizes the sovereign debt crisis and once the magnitude of the problem exceeds the fed’s ability to manipulate the market, it can take all of 2 days for interest rates to rise 10%. That’s what happened to Greece. The US is only able to delay the problem by temporarily forcing interest rates down through currency manipulation.

I sure hope so then. I can retire now and just live off interest income from my savings account. Who needs a 401k's, social security, and pension?

theoakman says

xenogear3 says

It will take decades for the interest rate to go to 10%.
It is not something you should worry about.

No it doesn’t. Once the market realizes the sovereign debt crisis and once the magnitude of the problem exceeds the fed’s ability to manipulate the market, it can take all of 2 days for interest rates to rise 10%. That’s what happened to Greece. The US is only able to delay the problem by temporarily forcing interest rates down through currency manipulation.

That's not what happened in Greece. Greece could have addressed large parts of its problems through controlled inflation, but since Greece doesn't have its own currency it was unable to do so.

The US doesn't really have much in common with Greece at all, unless you really squint, get drunk, and look at it upside down. Very different economies, very different sets of problems, very different solutions needed to address them.

Hell, Greece's GDP is only about $350B. We have multiple companies in the US that do that much in sales in a single year.

Ah Mr. Kevin, spouting your ludicrous ideas on this blog now! Wake up and smell the reality. The US is no longer the mega-power it once was, and it is loosing that 1st world status just as we speak. There is no company in the US today, which is as big or bigger than companies in our nations like Brazil or China or India, for that matter. There is only one thing , which is still great about this country, though, and which is why I am here to stay. The price of real-estate is soon to be the cheapest of any other country in the world with a population of over 100M! And that you can take to the bank!

dunnross-

Are you by any chance related to Apocolypse?

No, I am related to "Realismus"!

dunnross says

Ah Mr. Kevin, spouting your ludicrous ideas on this blog now! Wake up and smell the reality. The US is no longer the mega-power it once was,

In what sense? Is there some other country with a larger GDP already? Some country with a stronger military? No? Ok.

and it is loosing that 1st world status just as we speak.

Oh, yeah, the US isn't a 1st world country anymore. Largest economy on the planet, the only country with a population over 100M with a high standard of living. Yep, we're going to be exactly like Mexico pretty soon.

There is no company in the US today, which is as big or bigger than companies in our nations like Brazil or China or India, for that matter.

I'm not sure how to parse this (is English not your primary language?) You're either saying:

- There is no company in the US that is as big or bigger than companies in Brazil, China, or India, which is simply false. 400 of the 500 largest companies in the world are American.

- There is no single company in the US that is larger than than the entire economy of Brazil, India, and China. That's true, though both Wal-Mart and Exxon come pretty close to the GDP of Brazil.

I'm not really sure what that has to do with anything though.

There is only one thing , which is still great about this country, though, and which is why I am here to stay. The price of real-estate is soon to be the cheapest of any other country in the world with a population of over 100M! And that you can take to the bank!

Just so we're clear:

You're claiming that US real estate is going to be cheaper than real estate in India, China, and various third world shitholes, and yet you'd want to stay here? Have you ever even been to any of those countries?

This is more of a troll than your "real estate will fall to 1975 levels" claim. Keep it up.

Kevin says

dunnross says

Ah Mr. Kevin, spouting your ludicrous ideas on this blog now! Wake up and smell the reality. The US is no longer the mega-power it once was,

In what sense? Is there some other country with a larger GDP already? Some country with a stronger military? No? Ok.

and it is loosing that 1st world status just as we speak.

Oh, yeah, the US isn’t a 1st world country anymore. Largest economy on the planet, the only country with a population over 100M with a high standard of living. Yep, we’re going to be exactly like Mexico pretty soon.

There is no company in the US today, which is as big or bigger than companies in our nations like Brazil or China or India, for that matter.

I’m not sure how to parse this (is English not your primary language?) You’re either saying:
- There is no company in the US that is as big or bigger than companies in Brazil, China, or India, which is simply false. 400 of the 500 largest companies in the world are American.
- There is no single company in the US that is larger than than the entire economy of Brazil, India, and China. That’s true, though both Wal-Mart and Exxon come pretty close to the GDP of Brazil.
I’m not really sure what that has to do with anything though.

There is only one thing , which is still great about this country, though, and which is why I am here to stay. The price of real-estate is soon to be the cheapest of any other country in the world with a population of over 100M! And that you can take to the bank!

Just so we’re clear:
You’re claiming that US real estate is going to be cheaper than real estate in India, China, and various third world shitholes, and yet you’d want to stay here? Have you ever even been to any of those countries?
This is more of a troll than your “real estate will fall to 1975 levels” claim. Keep it up.

Mr. Kevin,

English must not be your primary language, because you don't even read what other people have written. I told you, before that I just came from New Delhi 2 weeks ago, and then you ask if I've been to other countries. Also, you like to contradict yourself, a lot, like in:

"English is not your primary language" and "Have you ever even been to any of those countries?"

Now as far as US RE being cheaper, it is already cheaper than China, and not to mention Europe, South America and many other places in the world, to which I have been.

Now, what I meant to say is that other countries in the world like Brazil and India already have corporations which are on the same scale, or bigger than the biggest companies in the US. I think that is quite difficult for somebody as myopic as yourself to comprehend, but that is reality. For example Petrobras, Brazil, recently raised $70B through a secondary offering, more than any American company in history ever received.

Your gonna find much of the economic/corporate data from China and South America politicaly driven by governments and highly inflated using different methods and accounting standards, not to mention not as transparent as their US counterpart. Corruption is way of life in those nations.

Oh yes, we already know about the transparency of these US banks who are hiding all their losses, not to mention Enron, World Com, and many others. How about CTO's of many of silicon valley companies back-dating their stock options. In fact, even the biggest silicon valley companies of today, have off-shore accounts which they don't make known to their stock holders.

dunnross says

Now, what I meant to say is that other countries in the world like Brazil and India already have corporations which are on the same scale, or bigger than the biggest companies in the US.

The largest corporation in the world is Wal Mart with gross revenue of 413 billion followed by Exxon Mobil at 310 billion. The biggest company in Brazil with revenue 91 billion is the only company in Brazil to make the top 250 corporations, the biggest company in India is Tata Group revenue 72 billion followed by India Oil at 52 billion the only two companies in India to make the top 250. Over 90% the companies on the top 250 are headquartered in America or Europe. Myopic or not it just ain't so joe.

Here is a list of the 10 biggest companies in the world. Only 2 out of 10 is in the US:

http://money.cnn.com/magazines/fortune/global500/2010/

dunnross says

Now as far as US RE being cheaper, it is already cheaper than China, and not to mention Europe, South America and many other places in the world, to which I have been.

No, it isn't.

Let me guess, you saw that there are apartments in Hong Kong and Bangalore that are more expensive than houses in Detroit and decided that housing in China and India is more expensive than in the US?

Hey, there are apartments in Seattle that cost more than apartments in Tokyo. Tokyo must have cheaper real estate prices than Seattle!

dunnross says

Now, what I meant to say is that other countries in the world like Brazil and India already have corporations which are on the same scale, or bigger than the biggest companies in the US. I think that is quite difficult for somebody as myopic as yourself to comprehend, but that is reality. For example Petrobras, Brazil, recently raised $70B through a secondary offering, more than any American company in history ever received.

Brazil has 7 companies i the global 500.
India has 8.
China, the second largest economy in the world, and light year ahead of both brazil and India, only has 46.

Want to keep making this argument? Really?

The US has GDP that is 12x India, 10x brazil, and 5x china. It's not even fucking close.

dunnross says

Here is a list of the 10 biggest companies in the world. Only 2 out of 10 is in the US:
http://money.cnn.com/magazines/fortune/global500/2010/

And zero are indian, zero are brazilian, three are chinese (all state-owned oil companies, essentially the same company).

Are you trolling, or just ignorant? Take a look at the numbers for the whole 500. No country comes close to the US.

Lets list your completely false claims from this one thread:

- Housing is cheaper in the US than it is in China
- Brazil, India, and China have the largest companies in the world

False information that you use to support these projections:
- America is on the verge of becoming a third world country
- American housing prices will fall 80%

And yet you apparently think that it would be a good idea to live in a third world country with massive debt problems that it can't possibly afford to pay off.

Truly bizarre.

dunnross says

Oh yes, we already know about the transparency of these US banks who are hiding all their losses, not to mention Enron, World Com, and many others. How about CTO’s of many of silicon valley companies back-dating their stock options. In fact, even the biggest silicon valley companies of today, have off-shore accounts which they don’t make known to their stock holders.

What hidden losses ? How are they hiding 90+ day late payments. Like it or not they are written off against earnings every quarter. If the companies didnt, the auditor would have forced the issue.

Enron, Worldcom... what does that say about the 10,000s of other public companies. Wanna pick another 2-3 out of your ass? Are you saying they are all equally crooked ?

Backdating ? ... ask the idiots who came to SV from the East Coast with their Ivy League degrees after 2000 who were too greedy to take a standard salaries and wanted "special attention". Did you even see backdating back in the 80s and 90s in SV before the tech boom? No! And many companies didnt have back dating more recently anyway.

Every bank account offshore is disclosed and audited by US auditors and foreign auditors who tax foreign sub earnings. How the frack do you pay your overseas people with anyway? You have to be an idiot to believe in that left wing crap. There are so many checks and balances regarding transfers of cash in and out of the US. Only Demo party puppets keep taking about these things.

Every foreign or domestic subsidairy of a US corporation is disclosed in the SEC filings, and each one has bank account they use for their operations. How difficult is that to understand ?

Kevin says

dunnross says

Now as far as US RE being cheaper, it is already cheaper than China, and not to mention Europe, South America and many other places in the world, to which I have been.

No, it isn’t.
Let me guess, you saw that there are apartments in Hong Kong and Bangalore that are more expensive than houses in Detroit and decided that housing in China and India is more expensive than in the US?
Hey, there are apartments in Seattle that cost more than apartments in Tokyo. Tokyo must have cheaper real estate prices than Seattle!
dunnross says

Now, what I meant to say is that other countries in the world like Brazil and India already have corporations which are on the same scale, or bigger than the biggest companies in the US. I think that is quite difficult for somebody as myopic as yourself to comprehend, but that is reality. For example Petrobras, Brazil, recently raised $70B through a secondary offering, more than any American company in history ever received.

Brazil has 7 companies i the global 500.

India has 8.

China, the second largest economy in the world, and light year ahead of both brazil and India, only has 46.
Want to keep making this argument? Really?
The US has GDP that is 12x India, 10x brazil, and 5x china. It’s not even fucking close.
dunnross says

Here is a list of the 10 biggest companies in the world. Only 2 out of 10 is in the US:

http://money.cnn.com/magazines/fortune/global500/2010/

And zero are indian, zero are brazilian, three are chinese (all state-owned oil companies, essentially the same company).
Are you trolling, or just ignorant? Take a look at the numbers for the whole 500. No country comes close to the US.
Lets list your completely false claims from this one thread:
- Housing is cheaper in the US than it is in China

- Brazil, India, and China have the largest companies in the world
False information that you use to support these projections:

- America is on the verge of becoming a third world country

- American housing prices will fall 80%
And yet you apparently think that it would be a good idea to live in a third world country with massive debt problems that it can’t possibly afford to pay off.
Truly bizarre.

Well, here you are cherry picking again. Let's even the score, here:

1. House prices in Beijing and Shanghai are now higher than prices in most large American cities, not just Detroit. You can currently find reasonably priced houses (close to the 80-90's prices) in a lot of 2nd rank US cities like Las Vegas & Miami, which is much cheaper than anything you can buy in Europe, China or even some places in South America.

2. I never said America is going to be like in the "Mad Max" movie, and falling to the 75 level, doesn't mean that there will be Nukes all over the place - that's your assumption, not mine. There are many cities in the US which are at 75 or close to 75 level already, and they still have McDonalds and Wall Mart, and there are no motorcycle-driving cavemen anywhere in sight.

3. America house prices falling 80% is also your own assumption, I never said that either. What I said, is 75 level, because 75 is where this bubble started, and some cities are already there.

4. I never said that we are on the verge of becoming a 3rd world country. I did say that we are losing super-power status and losing our economic edge to other nations like China, but this is another example, where you exaggerate my words, you take them to an extreme, and then you try to argue with me based on your own words, not mine.

As far as living here, yes it would be a great idea. UK is no longer the British Empire that it used to be, but, it's still not a bad place to live. So will the US, but it will have much cheaper RE, because it has lots of land, and it's not as crowded as China and Europe, and this is what always attracted people here, until the last 30 years, when greedy people started speculating on RE and drove the prices up.

dunnross says

What I said, is 75 level, because 75 is where this bubble started, and some cities are already there.

Skip Bush, Skip Clinton, Skip Reagan and Carter..... so lets bash Ford! Oh thats good!
1975 ? you can pretty much blame the Unions for that one !

dunnross says

1. House prices in Beijing and Shanghai are now higher than prices in most large American cities, not just Detroit.

Some properties in some areas of Beijing and Shanghai are more expensive than prices in some american cities, yes. On average though, it's still much cheaper to buy property there (though, of course, what you get for a "house" is debatable...)

You can currently find reasonably priced houses (close to the 80-90’s prices) in a lot of 2nd rank US cities like Las Vegas & Miami, which is much cheaper than anything you can buy in Europe, China or even some places in South America.

Cheaper than some parts of Europe, some parts of China, and, yes, some parts of South America. Cheaper than some places in Africa, too.

OH MY GOD, THIS HAS BEEN TRUE FOR HUNDREDS OF YEARS. Why didn't anyone tell me?

Still, not even close to your original claim. Way to redefine!

dunnross says

2. I never said America is going to be like in the “Mad Max” movie, and falling to the 75 level, doesn’t mean that there will be Nukes all over the place - that’s your assumption, not mine. There are many cities in the US which are at 75 or close to 75 level already, and they still have McDonalds and Wall Mart, and there are no motorcycle-driving cavemen anywhere in sight.

There are a tiny number of places where the entire local economy collapsed to a level *WELL BELOW THAT OF 1975*.

Again, not going to happen on the whole. If it did, you *would* see mad max style desolation. Ever been to Africa?

dunnross says

3. America house prices falling 80% is also your own assumption, I never said that either. What I said, is 75 level, because 75 is where this bubble started, and some cities are already there.

Jesus fucking Christ on a pogo stick. TO REACH 1975 LEVELS We WOULD HAVE TO LOSE 80% OF CURRENT VALUE.

Median house price in 1975: $39,000
Median house price right now: $180,000

39,000 is 21% of 180,000. That's a 79% decrease.

dunnross says

4. I never said that we are on the verge of becoming a 3rd world country. I did say that we are losing super-power status and losing our economic edge to other nations like China, but this is another example, where you exaggerate my words, you take them to an extreme, and then you try to argue with me based on your own words, not mine.

I said that we'd be a third world country if the 80% devaluation scenerio came about, because it would. But that won't ever happen, which is why it's a crazy proposition.

What you *did* say, in this thread and the other, is that China, India, and Brazil have the biggest companies in the world, and that America isn't going to be a "first world" country anymore. A "first world" country like the UK, or France, or Germany, or Japan.

All absolutely ridiculous and false claims.

A rational claim might go something like this:

"In a few decades, the United States will no longer be the country with the highest GDP in the world"

...and that means very little. The "super power" argument is absurd, and was only ever true for a very brief period in the early 90s. The EU, Japan, and China are "super powers" in an economic sense, and have been for a decade.

But back to your original claim. You said that 100% of home owners are going to be underwater because prices are going back to 1975 levels, an eighty percent decrease from where we are today. It's an absurd claim, and it occurs to me that you finally realize how absurd a claim it is, but are trying to find a way to not sound like a complete idiot.