patrick.net

"So maybe surfer-x is right, they ain’t making mo’ land brother."

I saw them making new land within 20 minutes of downtown San Francisco on Saturday on my drive up to the Cal game. A huge new development on the 13.

There is plenty of land. Unfortunately, there is also plenty of credit and plenty of moral hazard in the current market.

Cheers,
prat

There is plenty of land. Unfortunately, there is also plenty of credit and plenty of moral hazard in the current market.

When psychology changes, credit will implode. Sadly, moral hazard may get yet another boost.

ChIneal (China, India, et al) already have a problem figuring out what to do with it. Buying brick and mortar companies in the US hasn’t worked out so well…witness the failure to obtain Unocal from the clutches of Chevron.

Some my question vis-a-vis ChIneal is this? What is their alternative? China is exclusively an export-driven economy. If they fail to maintain between 6-8% GDP growth, their entire gamble implodes with catastrophic social and political results. Who are the alternative consumers with paper they can hold? The Europeans? The entire reason that CFIUS (the guys who halted Unocal) is active is in direct response the the EU's merger blockages, not to the Chinese. The EU is *much* more restrictive on all fronts, including severe import limitations on most Chinese goods. The Chinese simply cannot accrue enough EURs to power their industrialization.

I just don't see our debt collapsing. That is unless the rest of the world decides to throw in the towel and willingly relive the 30s and 40s again. (Of course a heartless economist would say that maybe this would solve everything, given that wars would erupt everywhere and destroy capital stocks, spurring subsequent real GDP growth).

Then again, never say never.

Although we are China's only option, have you considered that once our buying power dries up, they have no more money (and hence the trade surplus) to buy our bonds any more? All it takes is the property crash that everyone is expecting here to dry up our consumption power entirely. We stop buying, China stops buying our bonds, here you go!

They are not as rich as Japan, and their banks are leaking as much money as the country pours in. Japan, though holding more of US bonds, does have an option. They can afford to take hit on the reserve value, and especially when they are coming out of recession. Europeans will definitely not come to our rescue especially after the Iraq war.

So it is not a question of option for China, it is a question of ability. We stop buying, they stop buying.

H.Z.,

I've invested in TIPS through a mutual fund; so yes, I have a duration problem. In all truth, TIPS only make up a very small portion of my portfolio. It's a bit of an experiment for me to try to see if they are advantageous or not. Our tax situation is very fluid right now. Most of my weighting is in CA Muni tax exempt (Vanguard) because I found that with the tax shield and the monthly yield adjustments I'm beating CPI with this vehicle alone. I'm using some commercial paper too, to round out the sharpe ratio.

I haven't applied a full Black-Litterman approach to all this yet, primarily because I'm trying to keep the funds very liquid so I can buy a house when I find the "perfect deal". I have toyed with the idea of plowing it into a more advanced position at an investment bank so as to be able to borrow against it for liquidity if and when that becomes necessary.

***no investment advise should be taken from these comments***

OwnerOccupier,

I agree with your reasoning, especially considering the larger picture with Europe/EU. I see rising protectionism in the EU -- especially given the upcoming WTO talks and Europe's position there regarding subsidies -- as a big part of the risk to the US. It feels to me like a bit of a big race, which no one wants to win. In your scenario it is just as likely that the Europeans reach crises stage before we do. (Europe has crushing fiscal problems which are much worse than ours all things considered, and is much more dependent on exports) If that happens, and the euro loses its dual reserve currency status, then we will be [again] saved as the currency of last resort. I don't see the yen ever becoming a reserve currency--at least not in our lifetimes.

That is in a city that already has 4,000 skyscrapers, almost double the number in New York. And there are designs to build 1,000 more by the end of this decade.

This is what both terrifies and comforts me about China. The destabilizing effects of halting their current march would be so unthinkable that I don't believe it is likely. Yes, China *could* begin running deficits and attempt to shift away from a pure export economy, which would have a bad effect on the US. But I also think this would spur China to politically need to become aggresively expansionary, not just economically but probably militarily. Such an outcome would solve itself also, but not in a pleasant way.

American homeowners are going to be slapped with bigger monthly payments just when they’re already drowning in debt and lining up at the bankruptcy courts by the thousands.

Fuck em.

H.Z., nope they get an A from San Diego health board. Bring a diaper refers to the fact you'll likely eat until you poo yourself. Or maybe that's just the crowd I hang out with :)

HZ, great place for the kids! Full on Mexi crew and they love children.

...Something ominous has got to be on the horizon. Wait till the credit card payments double.

Think of guys like Surfer-x--with Tier 1 PhDs in hard-ass sciences--getting locked out of the market because of affordability. What does it say about all the money, and time, and sacrifice to obtain what 96% of the population is mentally incapable of pulling off, only to have your efforts not be rewarded by a society who’s mantra is, “get educated?”

California’s in deep, deep shit…

Around Century Park, Shanghai, the equivalent of Central Park in NYC (maybe not but you get what I mean), there are endless rows of buildings, 70-80% unoccupied. Each building is around 20-30storeys high, each storey 4-8 apartments, there are about 300 of those packed around the park, mostly empty. When I was just there a few months ago at night, except for the lightings of the public area and some ornamental neon lights on top, almost no lights were lit at 9PM at night.

Yet, cranes are everywhere and they just keep building. Guess how much these apartments are sold for? You cannot own land in China at all, all residential land is leased for 70 years. And yet, you are expected to pay around USD 300K - 500K (pay attention, not Yuan, but USD) for a 1,000 sqft (gross area, which means you only get 75% wall-to-wall area of the 1,000sqft) apartment around Century Park. Speaking of RE bubble, welcome to the king of all bubbles. I just don't think the Chinese can defy the law of physics for much longer. How it is going to end I don't care, but it won't last, that I am sure of.

only to have your efforts not be rewarded by a society who’s mantra is, “get educated?”

California’s in deep, deep shit…

Isn't that the truth.

What annoys me is not taking the anal pounding necessary to get that seemingly worthless degree, it is the lies that surround it. Education used to be the path to at least a comfortable middle class lifestyle. That's gone daddy gone. Looking at the history of companies like IBM really saddens me. That company used to be great, not any more, Mr. Watson must be turning over in his grave. My experience has demonstrated that the only thing that is truly important is what your Father did, as your particular social class is not likely to be breached. I just get the feeling and have for a long while, that we are just really getting the shaft. What's the point of all the intangibles if you have to work 60 fucking hours a week to just get by. And don't give me that bullshit that you make 150K a year, or your buddy does, and they work 40hrs a week. Doesn't happen. 60hrs a week, think about that, it's 12hrs a day, figure in a 1/2 to 1 hr commute each way, dude, that 13-14hrs a day, wheres the intangible in that? Yeah that diploma looks good on the wall, but I don't know if I'd do it over. I think I would go the trade route and be a plumber or electrician. Just seems to be too much stress, I just feel the boomers have sucked the well dry and just won't get away from the trough. Seen the latest financial planning commercials? "your generation did everything (que hippys by VW van, now segway into aged boomers standing by VW van) and you still do, you need a financial services company that understands you!. Ack. But I must say, Central Coast boomers are better than BA boomers in that they at least buy you a drink before they talk at you.

Fuck the education, doesn't matter, perhaps it used to. Doesn't now. There is a wall of Gen-Y jerkoffs in the pipeline and they've gutted the educational rigor out of the system, trust me, I've actually heard this more than once "but I deserve a better grade". So even if you think you're secure and have a decent skill set, you can easily be replaced by 2 Gen-Y jerkoffs driving a Scion Xb or Honda Element. Don't know what's going to happen, I feel a lot of friction and stress in society that I just didn't feel before. The chill nature of Ca is long gone I fear, and the only thing left
is aging boomers pushing back the comb over and fumbling for their bong and pushing you out of the way so they can get their cave aged gorgonzola that much quicker.

Oooooooooh, this'll do!

I can't confirm that Hubba Bubba is MP, but he sure sounds like him. Speaking of sound, my house is oh so quiet right now. :D

Newsfreak

This link will show you how to do the emoticons we all love so much.
http://codex.wordpress.org/List_of_Emoticons

oops

Looks like they changed the page for the wordpress emoticons.
Try here instead.
http://codex.wordpress.org/Using_Smilies

Sphuh?

SPHUH is in the house!

"Wow, this thread even has a long post by Surfer-X talking about an anal pounding and everything"

SurferX sure likes to talk a lot about anal poundings... Hmmm....

Hey where is everyone? Better not be over on the damn Huh thread messing up my nice round numbers!

"Classic how Jamies post was 2021, the one that screwed up her own perfect 2020 number! LOL"

Oh shut up.

SurferX sure likes to talk a lot about anal poundings… Hmmm….

I don't want to risk the wrath of Surfer-X by going there.

Now children.

My son got a hold of the phone and bumped me off the net for a minute. You don't think he's trying to tell me something do you? Naaah.

"The kind of hurt where your body shuts down to only 30 percent functionality,"

I really didn't need to know about your bodily functions shutting down.

" The 18 hours of sleep a day, sleep=metaphor for death pain, Jamie"

I'm so sorry.

Your son is displaying talking stick qualities early on in life SQT!

Precocious isn't he? _sniff_ I'm so proud.

2024 is the new 2020. Nobody screw it up!

Bye newsfreak. But you're on my shit list for blowing 2022.

Wouldn't want to mess up your thread count Jamie.

Do you get to be on your own shit list for messing up 2020?

"I don’t want to risk the wrath of Surfer-X by going there."

Oh, I DARE him. :-P

"Do you get to be on your own shit list for messing up 2020?"

I'm always the number one name on my shit list.

Jamies thread count is saturated beyond recognition I am afraid…

All that SPHUH.

"Jamies thread count is saturated beyond recognition I am afraid…. "

Damn SPHUH.

Oh crap SQT beat me to it.

"Putrifying to a ripe smell of dread.. "

Damn zombies.

LOLOL, it looks kind of like Squirt when you use the lower case letters. Which brings to mind... Oh never mind.

"I am not going to let you forget about the pain you have caused me Jamie. You know this, dont you? "

Is this actual pain or feigned pain for the purpose of manipulation? I'm sure it's the second, so please, go ahead, act all hurt and stuff.

"Thanks Jamie. Kind of makes up my mind for me. "

Glad to be of service. ;-) SQT looks much better. No suggestion of squirting at all. None.