patrick.net

Of course, in three years when The Boss says we are getting a house, I’m afraid all the spreadsheets in the world won’t make a difference. Viva la bubble!

Perhaps we can convince The Boss over a nice meal of sushi?

PeterP - $5,000 vs. $2,000… is it really that out of whack right now? Perhaps more like $4K to own, and $2K to rent? I thought I read somewhere (Chronicle) that it’s 50% cheaper to rent. But, let’s say you pay $4k, isn’t that really $2,400 after tax ‘benefits’? Not too much more… but obviously too much if the property is going down!

It is probably 4K without HOA and property tax.

A typical condo will cost about $400 a month in HOA and another $700 in tax and insurance. If you factor in possible tax deduction, it may be closer to 4K, but there are serious talk about taking that tax benefit away.

So the difference is more like 4000 vs 2000 after tax.

"I don’t mind paying 1/4th of someone else’s mortgage and making 12% long term on a highly diversified portfolio with the rest."

John Mauldin believes that the pension crisis is far worse than people realize because people assume 12% equity returns over the next 10 years. He believes that equities will actually yield negative real returns due to the current PE and reversion to the mean. We are in a dangerous time with unusually high geopolitical risk, simultaneous asset bubbles, and gobal imbalances. IMO, the one who loses least over the next 10 years wins. Most investors will lose money. Few will get 12% quoted in Mutual fund marketing literature.

QUESTION: What Liability Would a Illigal Alien have in just walking away??? Whats to keep them from just heading back over the border if things dont work out here in the USA??

Liability is irrelevant. One cannot be forced to sell kidneys to repay debt.

NEXT QUESTION: what kind of income level are many of People that cross the Border from Mexico??
I just dont see how someone crossing the border is a good risk??

Usually not very good. However, some may run cash businesses who have "special tax treatment".

ANOTHER QUESTION: How are Illegals Qualifying for Homes.. apparently they are?? … … are People coming from mexico even in the average income bracket?? if people with decent jobs not able to qualify by traditional metheds..

They are qualified for the payment structure, not the principal amount. Someone who come in illegally are unlikely to be risk-adverse. They love the thrill of NAAVLPs.

Sunnyvale_Renter:

I'm certain of a gold bubble, too. I will begin to take profits at $800, and all the way up. I agree that we face the potential for a weimar style inflation. Bernanke must print money. That wipes out middle class savings and disproportiantely harms the poor. Historically, hyper-inflation has lead to dictatorships for this reason. When you look at US politics applying European Balance of power models, you see that we live in interesting times. I mention European BoP models because your allusion to the weimar republic is on the money. I'm working on keeping my comments short, but I've been modelling end-game scenarios for the break-up of the United states. Few people in blue states understand that the South's evangelical christianity is really resurgent Southern Nationalism with the ability to cross Southern borders. This may sound radical, but a student of history would say that it is inevitable.

Check out the history of Arlington Nat'l Cemetery. You will be ashamed to be an American.

While we're on Weimar doom and gloom:
Google yourself one of the many papers about the German currency and bank crisis of 1931. The consensus seems to be that the triggers were
- excessive amounts of risk taking for competitive reasons by banks that were considered "too big to fail", in particular: risky loan policies and small equity covers.
- large amounts of short term foreign debt that was withdrawn as the crisis played out and confidence in the stability of the currency was shattered.

Here's one:
http://www.sfb504.uni-mannheim.de/publications/dp02-48.pdf

Of course, many aspects of the crisis were totally different from the situation today, but it's an interesting case study nonetheless.

In case you're interested how the NSDAP did during these years of depression and economic crisis, here's a distillation of election data from Wikipedia:
1928: 12 of 491 seats (2.4%)
1930: 107 of 577 seats (18.5%)
1932 (July): 230 of 608 seats (37.8%)
1932 (November): 196 of 584 seats (33.5%)
1933 (March): 288 of 647 seats (44.5%)

Sunnyvale_Renter :

I'm working on shortening my posts, so I'll move on from this topic, except to say: We have an ideological and geographically polarized political climate for historical reasons. It will play out according to the pattern that these things always follow, as WWI and WWII did. History does not repeat, but it does rhyme. Bullish for gold, bad for Real estate.

RE: Fencing. My wife was saying that she wanted to take up fencing. She comes from a long line of people who were good with a sword. Apparently, she doesn't have enough useless aristocratic abilities already.

Where do you take lessons?

If there is a sushi party and it is in the Bay area, please invite everyone on the blog.

Of course. Any suggestion?

Perhaps a post about meaningless statistics would be in order.

Done.

Pointless? Resurgent South, collpapsing North good for Gold, Bad for Real Estate! Read "Empire of debt" from the folks at the Daily Reckonning for more on Lincoln's dictatorship.

This topic started with the comment that history is subversive. So either read the thread, or fuck off! I didn't start it! Don't take it out of context, fuck nut! Wipe the smug smirk off your face!

Why is this topic useful? Because it explains the conflicts that underly contemporary American politics, which are good for gold, bad for real estate. The bubble is political in nature. No? Also, many smart people look at history for clues to the future, incuding others on this board. Maybe you should go to your local public library and try the same.

What was my prior comment? I was relaying the tale of my visit to monticello to visit Mr Jefferson and kin barried in the cemetary. I was remarking on the confederate flags set out for memorial day to honor family members for their dedication to the cause and military service. That would include Mr. Jefferson's grandson, George Washington Randolph, the confederate secretary of war.

BTW, Thomas Jefferson was the founder of the anti-federalist party and a defender of states and regional rights. Those rights were guaranteed by the constitution, including the right of succession. Those rights still are guaranteed by the constitution. Thomas Jefferson is widely regarded as the spirtual founder of the confederacy. Our founding fathers are no doubt proud of their children and grandchildren who fought to defend their legacy.

Do you really believe that a transfer of power from one region of the country to another has no economic impact? Do you really belive that given that the red states control the house, senate, presidency, and are in the process of adding a second justice to the supreme court that they have "Failed to consolidate power"? Do you really belive that a change in regime from ultra-liberal to conservative will have no impact on the American economy? Are you wholly ignorant of demographics? Precisely how will this country succomb to the left wing revolution from New England when one in four people said that they would leave Mass if they could? Are you not looking ahead in your investment decisions?

Why did we have a war? Because the Northern industrialsts wanted access to Southern resources, same reason why Germany sought an empire in WWI and WWII. What would have avoided the war? Abraham Lincoln offered the South his blessing to secede if they agreed to pay a 50% tariff on all goods imported. The wealthy yankee industrialsts wanted to continue to benefit from slavery and use its proceeds to build its industrial economy. It was called the Crittenden compromise. Do you need more proof of Lincoln's intentions?

BTW, Do you know who built that house? George Washington's grandson, George Washington Park Custis. For what reason? As a monument to George Washington. Who lived in that house with Gen Lee? His wife, George Washington's great grand daughter. Do you know who Gen Lee's father was? Henry Lee was one of four VA delegates to the continental congress (along with Thomas Jefferson, Carter Braxton, and Edmund Randolph).

Remember John Hancock signing the declaration so large because the others were afraid that they would be hung if their name was legible? Henry Lee SPONSORED the motion to declare independence from England. How's that for patriotism. Henry Lee and Gerge W were so tight, that George W traveled to Westmoreland county to publicly cast a vote for him for governor--getting him elected. Sam Adams said "The family of Lee has more men of merit than any other family in the country".

Did you know that Gen Lee turned downed Lincoln's offer to command the Union forces, even though it would have guaranteed him the presidency after the war? "A union that must be maintained by bayonnets holds no charm for me". Did you know that the only command that Lee ever disobeyed in his entire life was Davis' order NOT TO surrender? Lee, Johnston, Grant and Sherman conspired to end the war--On Lees part to prevent the suffering that guerilla war would entail. Lee was instrumental to reuniting the Union, publicly calling for the Armies West of the Mississippi to lay down their arms to reunite the country. Lee was so popular in the North as well as South that the democrats at the New York Herald started an editorial campaign to try to get him to run for President in 1868. They believed that he was the only man who could be Grant in an election.

The historical fact is that anyone with any breeding or class in America is Epsicopalean and related to Robert E. Lee. That most definitely excludes the white trash Kennedys and the heretic peasants who came over on the Mayflower. Fortunately, that white trash will soon be out of power--a development that is good forgold, bad for real estate.

Finally, you smug fucker, it is very unpatriotic of you to call a great American who represents the gold standard for integrity in leadership a traitor when you have no facts. Not only was he admired throughout America, but he was widely regarded throughout the world for his courage integrity and competence. Jerkoff!

Sunnyvale_Renter : Please scroll up and read my lengthy post. I am a great admirer of Lee and I am looking forward to the white trash yankees getting their due. Which is good for gold, bad for real estate. I hate lincoln's dictatorship. If we ever meet in person, I will tell you some things that will blow your mind if you are a fan of Lee.

BTW, DEO VINDICE is the official motto of the confederate government.

Sunnyvale Renter: Time Will Inevitably Tell called Lee a traitor and said he should be hung. He called the northern boys patriotic. I think we should send him to the Berkely womyn's studies department so that they can un-gender him. Then he will what yankee paradise would actually be like. BTW, long live George Bush, American Capitalism, and real men.

I hope that the “sitting pretty financially chick’ will really take it in the A$$. THat qualifies for handing out financial advice

She will. Mark my words.

Long term investment? Right. It is going to be a competition of staying power. Those who rely on serial refinancing will face reality.

I personally do not condone bashing. But I would love to see some bashing there. You know what I mean. ;)

Looks like the new motto of RE agents is:

If people are looking for a bubble burst, it's not going to happen.

I cannot wait for their demise. :twisted:

TWIT: Please explain SPECIFICALLY my misinterpretation of history. Facts only, please.

Anger at you, sure. By the way, fete accompli means "Party over". You met to say Faites Accompli--done deal (loosely)

I am just trying to put our current political environment into historical context so that current economic policy can be understood, and future policy can predicted. I use the models that have been used in diplomacy for strategic analysis for centuries. where are my mistakes? For example, based on my interpretation of history, it is possible that the Bush administration will:

--Oppose a National healthcare system (duh)
--Allow PBGC (Pension Benefit Guaranty Corp) to go under.
--Allow FNMA, Freddie to go under.
--Allow Ford, GM to go under.
--Keep AMT where it is.
--Cap the mortgage deduction.

These are all SERIOUS potential outcomes.

Why? It will help consolidate red state power. Please answer SPECIFICALLY how the red states have failed to consolidate power considering that they control the house, the senate, presidency, and are in the process of remaking the supreme court. Demographic shifts favor the Red States, and the success of evangelical christianity consolidates republican power in both the red states and blue states.

Given these facts, please explain your suggestions as to how the red states might further consolidate power. What will it take for you to see the dramatic reversal in power that has ocurred in the last 30 years? Tanks rolling through the streets of Boston? I look forward to your infinite wisdom, and remain your obediant servant.

--Deo Vindice

–Allow PBGC (Pension Benefit Guaranty Corp) to go under.
–Allow FNMA, Freddie to go under.
–Allow Ford, GM to go under.
–Cap the mortgage deduction.

Way to go! I hope the congress has the political will let these things happen.

I have always said that changing mortgage deduction to a tax credit will only hurt a few blue states. Homebuyers should not count on it because there will be a lot of political support behind the "deduction cap".

TWIT: by the way, I would appreciate your insights on the current Kondratieff supercycle (the 150 year cycle made up of 3 k-waves) that began in 1865. The cycle generally predicts the replacement of the current hegemon with a challenger. At least it did in Ancient greek times and throughout the period of Eorupean history from the renaissance through WWII.

Is it different this time?

I dont see how many of you here think that housing prices going down 50% is going to do you any good if your standing in a soup line.

The housing market of Hong Kong and Japan went down more than 50% but there were no soup lines. (Both cultures drink soups)

The economy can most definitely take a 80%+ drawdown in the housing market without taking much permanent harm.

Peter P: The ability th threaten to do any of the things on my list is serious political leverage, whether they do these things or not. The blue states can only act to slow their decline; The transfer of power is inevitable. In the end, CA will get what it wants. The Great Lakes will get what they want (except MN, WI, and perhaps IL). Texas and the South East will dominate. The Ivy League/Mayflower/Kennedy crowd is finished as a political force, but they will kick and scream the whole ride down.

Joe smooo:

"I see the run up in the Nasdaq and now the REAL ESTATE as reflection of Boomers needing to prepare for retirement."

On the money. Read "Bulls eye investing" by John Mauldin for a detailed analysis.

Joe smooo:

The Boomers' revolution has failed. Their values (to the extent that they have any) will not persist. The housing /stock bubble are real and will wipe many of them out along with their pension funds. And remember, in the long run, we are all dead. They will be too.

I do think that the next 50 years will be very dark and unpleasant. Any talk of innovation being able to propel us forward is pure silly valley propaganda.

The ability to thrive on the demise of others will be highly valued.

Interesting how we seem to all flock to certain locations and call real-estate limited…

Even in the Bay Area there is no real shortage. There may be artificial rules to halt growth, but the potential capacity is very high. The Bay Area can easily accomodate another 8 million people with some infrastructure changes.

I hate the growth laws. I am not a fan of conservation, it is the "I have got mine so screw you" attitude in disguise.

Peter P, Joe Shmoo, Sorry for the doctoral thesis. I have a lot of time today . (So do the voices).

Yes

Fuck! The forces of evil ate my rant. You would have been impressed had it not disappeared. Is Patrick really a front for Howard Dean. Dammit. I may have to show up for Sushi to set everyone on this board straight!

Did you use > in your post? Everything behind > will be eaten.

Is Patrick really a front for Howard Dean.

Huh?

Sorry, I meant everthing behind < will be eaten.

Also, it is prudent to copy and paste a copy before submitting long posts.

Thanks for the tip. I'll re-rant this evening after a good long soak in the hot tub. It will put me in the right frame of mind.

"For the second consecutive year, Massachusetts lost residents. Observers say the reasons for leaving range from cold weather and soaring housing costs to a high overall cost of living, scarce job opportunities, tax rates and general rudeness. Business leaders worry a shrinking labor pool, and the willingness of more young workers to leave Massachusetts."

Am I a prophet, or what ;)

Am I a prophet, or what

Yes you are!

I have nothing against the Dems, but Deep Blue states like MA and CA may be in Deep Trouble very soon.

I do think that the next 50 years will be very dark and unpleasant. Any talk of innovation being able to propel us forward is pure silly valley propaganda.

The ability to thrive on the demise of others will be highly valued.

_smile_

Come now Peter. I'm all for doom and gloom, but let's not bet too hard against american innovation. Look what we've done with mortgages, in only a few short years!

It is a measure of how spent I am on this topic that y'all can riff on the boomers and I fail to raise a cudgel in the exchange. Summary: they are old, they are broke, they destroyed the culture, ruined our cities, and they are saddling my generation with sharecropper levels of debt.

On the other hand, some of their music was OK.

_collapses in heap_

Cheers,
prat

Come now Peter. I’m all for doom and gloom, but let’s not bet too hard against american innovation. Look what we’ve done with mortgages, in only a few short years!

I guess a little innovation and creativity is harmless. :)

Blue states, red states…..It’s made-for-TV-soundbite-divide-and-conquer- short-attention-span crap. If CA fails, lots of red states will hurt. If TX fails, lots of blue states get hurt.

Very true.

Peter P says:
The housing market of Hong Kong and Japan went down more than 50% but there were no soup lines. (Both cultures drink soups)

The economy can most definitely take a 80%+ drawdown in the housing market without taking much permanent harm.

Exactly. I would argue that a housing market drop would actually be beneficial for the economy, since all of a sudden new home owners would not have to refrain from buying vacation travel, furniture or decent food anymore to make the mortgage and property tax payments.
The sooner, the better.
That is, if the drop does not coincide with nasty events like bank crashes or currency crisis.

TWIT: It's fun to disagree with you. I will light a candle by my shrine to General Lee for you. ;)

(Actually, I do a have a portrait of him in my living room. My Mother inlaw in VA has some possessions that make a truly impressive shrine. The Smithsonian would be hard pressed to do better)

"Rather Eurocentric, wouldn’t you say?"

No. The Kondratieff cycle is an emergent pattern. It would emerge given the same laws of economics in any century, on any continent, or any planet, regardless of culture. Kondratieff was writing about the global system. However, complex systems tend to organize themselves as fractal patterns. Once Karl Marx applied Charles Darwin to sociology, the stage was set for Kondratieff to view economies as emergent complex systems, regardless of culture, time or place.

I am quite certain that large national economies can run an internal cycle at the same time that they are a single particpant in the global cycle. It is the internal US cycle that I am modelling.

RE: China, it is certainy large enough to run an internal cycle, but I need to look more into how central planning effects/distorts the cycle. On the global level, they are definitely a rising challenger from a balance of power perspective. Their ability to drive commodity prices proves that they are part of the gloabl Kondratieff cycle. However, I must confess, I have been looking at North America more, because it interests me to a larger extent. I'll move one level up in the pattern at a future date.

Much more to follow when I get around to posting my master work. I'm going to argue that the conservatives will use the same strategy to bring down their internal enemies (blue states) that they used to bring down the Soviet Union. Centrally planned and managed economies (welfare states of any kind) inherently create what is known as a "stable disequilibrium." These sysems slide in protracted decay and can be caused to spontaneously collapsed if stressed. That's why the Soviet Union broke apart. That's what the quote above about Massachusetts suggests--stable disequilibrium.

When I was in school, I had several profs that had served in presidential cabinets. They are definitely sophisticated enough to look at domestic politics in such terms. In fact, some of them were around to refine cold war strategy over the years. A few of them even knew Goerge Kennan personnally.

Would they harm blue state economies to increase their own power, even if it temporarily harmed their own? Yes, I think so. That's where nationalism comes in, and nationalism is a reason that the Lee discussion is far more relevant than it appears. Do I sound crazy for bringing up things that happened 140 years ago? I hope not; It's the scale that my analysis fits. Wait until I bring up the Cavalier/Puritan rivalry. There are plenty of people in the horsey set in VA that are still bitching about getting justice for their murdered king................

--Deo Vindice

Well, the trade deficit situation is also a stable disequilibrium. Will the bursting of the housing bubble cause the whole system to collapse? It does seem plausible.

Housing bubble is also a stable disequilibrium, isn't it? ;) Interesting.