patrick.net

DinOR,

I sent you an email about a week ago. Did you get it?

Are blogs media?

Oops, I guess they are! Just one of those people that stayed blonde after the age of 14. I will leave the blogging up to you smarties from now on!

The Federal Reserve has no intention of preserving all of the recent gains in home price values, said Federal Reserve board governor Donald Kohn on Thursday.

"If real estate prices begin to erode, homeowners should not expect to see all the gains of recent years preserved by monetary policy actions,' Kohn said in a speech prepared for delivery to a European Central Bank forum in Frankfurt, Germany.

In his remarks, Kohn attacked the popular 'Greenspan put' theory that Fed policy would always protect investors from sharp asset market drops while doing nothing to restrain these markets when prices rise.
"This argument strikes me as a misreading of history," Kohn said.
"Conventional policy as practiced by the Federal Reserve has not insulated investors from downside risk," he said.

"He told me that there were only 5000 permitted and being constructed at the moment"

5000 is still somewhat remarkable considering SF's obvious geographical limitations.

surfer-x
I strongly recommend not using the words vigorously, fondle, and breast in your request for test subjects-- it just sounds painful.

As for the other bust: I keep seeing posts suggesting moving into gold or cash or offshore for other investments. What about just having a diversified portfolio that includes some of the above, but also has US investments?

SFWoman-In my experience, it is the women who talk about ideas, books, and culture who reveal their "elite" background the best. I mean, goodness, it is rather tacky to talk about money in polite company. That is how I see the "classes" breaking out. I know it sounds catty, but those who talk about shoes, bags, cosmetic experiences, fancy vacations, fancy schools, over the top consumption-- they are the ones who reveal their "lower" origins the most. When the person has to call out the distinction of class, that's when their insecurity about their place in it is made most obvious.

Sassy Says:

"SFWoman-In my experience, it is the women who talk about ideas, books, and culture who reveal their “elite” background the best. I know it sounds catty, but those who talk about shoes, bags, cosmetic experiences, fancy vacations, fancy schools, over the top consumption– they are the ones who reveal their “lower” origins the most."

In my experience talking about shoes, handbags and cosmetics only revels a persons gender and sexual orientation. I can't think of a single female or gay guy (from any background) in SF that does not spend a lot of time talking about shoes, handbags or cosmetics...

Randy H,

No actually I didn't and I apologize. HARM has my email and I'd look forward to getting yours as well. Many thanks!

Prices crash..I buy a decent 4 bed 2 bath (instead of 3/2 that I wanted) about 1800 sq feet for $385,000 with 6.8% 30 year fixed mortgage and 30% down.

You may have to prepare for 8% interest rate just in case.

I would love to see another thread on economic and Fed policy. I could learn a lot.

I'm not quite up to the intensity of such a thread just now, even when tempted by tall, thin women with natural hair color, who smartly avoided augmentation.

DinOR,

I emailed to your verizon email. If that's not it, email me from my blog when you get a chance.

even when tempted by tall, thin women with natural hair color...

In my humble opinion, what makes SFWoman so attractive is her keen intelligence, wide range of interests, depth of insight and curiosity about life. She would be "hot" regardless of social stratum or physical attributes.

"I was told by a couple of friends that 20,000 units were to be erected in the next couple of years. Let’s see.

20K units in SF? I thought they weren't 'making any more land' over there (not counting that Marina fill).

Elsewhere in the world, price/sqft is used to compare housing price. Why is US using median housing price instead of price/sqft?

Not necessarily true. Often median price and median income are used. By doing the ratio, you get an immediate indication of affordability. On a large, heterogenous sample this is a fair measure due to a randomisation effect, if you are going suburb by suburb, it's a bit less reliable, as the release of a block of new luxury apartments or houses will skew the figures, as somebody else pointed out. Also, they are building new houses 50% larger than some years ago, so that's another variable to consider in some cases, and, indeed, average house sizes vary from country to country. Further, units of measure and currencies change from country to country - Britain would be £/sq ft, France €/sq m, Oz $/sq m, etc...

the Fed’s primary objective (in practice, not on paper) is to ensure full employment of the US.

There is structural unemployment caused by minimum wage, caused by collective bargaining contracts, caused by corporate wage efficiency, and caused by “unexplained” inefficiencies in the employment market. Some people think 5-6% is a reasonable number, others argue the real number is closer to 15% or even 20%.

I think there is structural unemployment solely due to a lack of demand for labour by employers, don't you? Saying a bare minimum wage (which hardly anyone gets anyway) is causing unemployment is like saying the presence of air traffic controllers is stopping the airlines working efficiently and stopping planes from roaming freely around the skies... Either you need your toilet cleaned or you don't, refusing to pay someone $5 an hour to clean your toilet because it's too much is the height of eco-rat insanity. Anyway, haven't illegal immigrants effectively dismantled the minimum wage system? Not that even they would take the presumed $2 an hour you are offering - it would be better to sell drugs at those rates - I know I would...

I think there is structural unemployment solely due to a lack of demand for labour by employers, don’t you?

There is a lack of demand at a price that is much higher than the fair price of labor.

Saying a bare minimum wage (which hardly anyone gets anyway) is causing unemployment is like saying the presence of air traffic controllers is stopping the airlines working efficiently and stopping planes from roaming freely around the skies…

Huh?

Either you need your toilet cleaned or you don’t, refusing to pay someone $5 an hour to clean your toilet because it’s too much is the height of eco-rat insanity.

People rather have dirty toilets at $5 an hour. See, the minimum wage system is promoting dirty toilets!

Anyway, haven’t illegal immigrants effectively dismantled the minimum wage system?

Let's look at it his way, illegal immigrants created unemployment in this country because they have an unfair advantage of working below minimum wage. They have the absolute economic advantage of NOT GIVING A SHIT about the law.

Different Sean,

I was just enumerating the neoclassical models for structural unemployment. There is probably marginal unemployment caused by the minimum wage, even though I believe that the minimum is ethical and virtuous. Nonetheless, there would be more (extreme low quality) employment if it did not exist.

Collective bargaining, on the other hand, is known to cause structural unemployment. In fact, any not-easily-broken labor contracts, including service worker contracts and even high-knowledge worker contracts, all add to structural unemployment because they put stickyness to wages and inhibit employers from reacting quickly to labor market changes.

Wage efficiency is, in my opinion, the cause of most higher-end structural unemployment -- the kind that affects college educated workers. There are actually many theories comprising this "meta" theory, but they all collapse to "it is more efficient for companies to pay higher-than-market wages for some time after the labor market softens". This causes a long tail of structural unemployment, much like we have today. It also causes dramatic salary discrepencies. Thus the PhD, MSE, MBA, BSEE, etc. who gets $200K per year for the same exact skills that his 6+ months unemployed doppleganger just accepted a $110K a year job for.

Mankiw has a good summary of this in Macroeconomics.

There is probably marginal unemployment caused by the minimum wage, even though I believe that the minimum is ethical and virtuous.

I am not sure if it is ethical. It is perhaps popular for obvious reasons but I still think it creates inflation and unemployment.

Up in Santa Rosa my friends who use the landscape and light construction laborers (illegal I am sure) over on Fulton Road pay $12-$15/hour. They aren’t undercutting the minimum wage.

Then $12-$15 is probably the fair market price.

My point is that minimum wage will not help.

Bush's guess worker program is probably a good idea because it opens up the "hidden" labor market to all employers, instead of just those who are willing to break the labor law. But anyway, getting rid of the minimum wage system is essential. I believe the living standard of workers in general will go up more if there is no minimum wage.

so 'unemployment' is bad, but paying people below subsistence levels is good? once again, self-contradictory stupidity. don't we want decent employment up at decent wages so you don't need welfare? you guys never refer to the dignity of the individual or to the need for a living wage when you make these bizarre neo-classical assumptions. You put inhuman conditions on other people that you would never accept for yourselves. Nice to be in that position. But completely immoral.

What is the price of labour anyway? What arbitrary market force says that I can get $100 an hour to be a crack C++ programmer to program video games (essentially a luxury item), $25 an hour to do systems development/business analysis in MS-Access/VBA, when C++ is much less efficient in terms of outcomes but the skills are rarer. A mortgage broker can make $250K a year working from home just by filling out a few forms. A doctor saving lives and making responsible and liable decisions every moment may well make much less than this. A nurse may make $40 K to monitor vital signs of patients, while the pony-tailed 20-something video game programmer makes $100 an hour. The lying politician who is doing nothing for the public is making good money, as well as taking kickbacks. Michael Jackson made something like $600 million for singing and dancing a bit. Maybe there is something deranged in the way the market values labour and rewards people? Why are you such market fetishists?

You guys overlook all the massive surplus incomes many people make, the money they waste on boondoggles and status symbols, and choose to try to penalise a new serf class instead. Utterly shameful.

Peter P said

You may have to prepare for 8% interest rate just in case.

I think HeliBen will actually start reducing short term rates at the end of this year. The Contrarian Bill Fleckenstein has been saying that on MS Investor site for some time now. That does worry me a lot.

On the long term, the 10 year treasury rate dropped below 4.7% today again. It seem to have found a support there - or resistance if you look at yield. The 10 year T note is one real tease. God knows when it will jump to 5% ? :-(

So it seems interest rates MAY NOT help in killing this bubble. So that leaves us with what ? Only panic and change in psychology ? Unless the secondary MBS market somehow disconnects itself from the treasury market, and actual mortgage rates rise anyway.

I hope we don't get that dreaded "elevated plateau" which supposedly has happened in UK and Aus.

SFWoman Says:

"Up in Santa Rosa my friends who use the landscape and light construction laborers (illegal I am sure) over on Fulton Road pay $12-$15/hour."

I pay from $15 to $20 an hour cash to the people that do yard work and clean apartments for me. They work their ass off so I don't ask their immigration status, but if we assume that they "might" be illegal and are not paying federal, state, social security and Medicare taxes like the rest of us at $15-$20 an hour they are taking home as much as a legal tax paying worker making $60-$80K a year...

You guys overlook all the massive surplus incomes many people make, the money they waste on boondoggles and status symbols, and choose to try to penalise a new serf class instead. Utterly shameful.

If the market values certain things, what are you going to do about it?

If being a mortgage broker makes so much more than a doctor, then over time more people will go that "easy" route. Market adjusts itself.

if you guys resent paying people even $5 an hour, and worship the outcomes of a 'perfect market system', which has never existed anywhere in reality, then you have no right to be on this site complaining when 'the market' prices you out of a house. if the market is always right, and you can expect no social justice component, then you have no right to your own dwelling either - if a landlord can exploit you for life, leaving you to rent in retirement and live off catfood, then so be it. Thus spake the market, and you will just have to accept it, sorry. The market is never wrong. And the market is a reified person like God or the blind Lady of Justice. We can't have one standard of expectation for you and another for unskilled labour and people at the bottom. So we need to close this site immediately. And forget those who say the measure of a country's ethics is how it treats its poor.

Up in Santa Rosa my friends who use the landscape and light construction laborers (illegal I am sure) over on Fulton Road pay $12-$15/hour. They aren’t undercutting the minimum wage.

exactly - so if even illegals are getting over minimum, the presence of minimum doesn't affect the (un)employment market, but it does provide a statutory safety net to avoid extremes of exploitation. it also serves to flush out the sociopath ideologues.

i know someone in DC who was paying legal unskilled labourers $9 an hour to dig out basements. they would probably get double that (in relative currency terms) as an award wage condition in Oz, where income differentials are flatter. for some reason she couldn't keep them. this was a broker making $250K a year who bought loads of properties directly before the boom, some incredibly cheaply, seeking to refurb and develop them further. she finally ended up turning the whole project over to a builder using subbies, who would probably pay their workers better.

if you guys resent paying people even $5 an hour, and worship the outcomes of a ‘perfect market system’, which has never existed anywhere in reality, then you have no right to be on this site complaining when ‘the market’ prices you out of a house.

I don't know... I am not complaining here. But we certainly need to discuss what to do about the coming bust, if and when there is one.

Different Sean,

I'm not making ehtical claims when I refer to neoclassical macroeconomics. The problem of harmonizing the pressures of economics realities with social outcomes is a time-honored conundrum, and one we're not likely to resolve on a blog. Of course you already answered your own answer about why C++ game coders make more than a VBA hack (although I would posit there is usually a skill differential too). It's supply and demand. One is closer to a commodity than the other. Kind of sucks when figuring out who "deserves" what, and which efforts contribute more to the overall fabric of humanity, but it's the way it is, and wishing won't make it otherwise.

By the way, do you work for a game company? If so, I'd like to converse with you sometime about technical feasibilities of dynamic economic systems in MMOGs.

As to minimum wage laws: I think they are a necessary cost of running a virtuous society, even with the implied inflation and unemployment. We kind of cheat in the US though, because we have porous borders and tolerate illegals. In much of mainland Europe, minimum wage laws have wreaked real economic strife, well measured and studied. But, their people believe it's in their moral interest to do so, despite the costs. And I agree with them, so long as it can be paid for. (This is an open question in Europe today, as they can't pay for much they demand in terms of societal structure).

exactly - so if even illegals are getting over minimum, the presence of minimum doesn’t affect the (un)employment market, but it does provide a statutory safety net to avoid extremes of exploitation. it also serves to flush out the sociopath ideologues.

The idea is to allow legal guest workers so that they can be taxed and accounted for. This way, extreme exploitations can be avoid.

But, their people believe it’s in their moral interest to do so, despite the costs. And I agree with them, so long as it can be paid for.

It makes sense... Well, minimum wage is infinitely better than welfare - at least people will have to work to get it.

SFWoman,

Does anybody know if there is a tightening up of standards for the purchase of loans in the secondary mortgage market?

There is indeed an article in today's SJMN - link has already been posted - that points to some tightening of standard. It will help burst the bubble. But it's a slow process. Increase in interest rate has more dramatic and percived impact. At least we won't hear "Interest rates are still low by historic standards, and hence there is no bubble" type of arguments.

Perfect Markets:

I may be one of those around here closest to a "market fundamentalist". But even I don't claim markets are perfect, nor do they solve all problems. In fact, markets have a nasty tendancy to get stuck in local maxima and non-optimize. This is the function of government, to "ustick" markets and push them off a local high-point so they can find a better optimization.

But, I defy you to provide an example of a non-market function which has historically demonstrated more efficient allocation of capital and resources over any sustainable period of time. Markets may be a natural state of human affairs, only occassionally interrupted by political-command structures.

Heli-Ben will definitely lower rates and I think he will wait till the end of the year or next spring. If the Feds have learned anything from the debacle in housing prices in NZ, AUS and Britain, thats what they have learned. They will reduce the rates, and not a little, a whole lot to create interest in the market. Those people who can ride this storm for sometime when they cant refinance to pay their homes but tighten their pants to pay their bills first, will come out alive and will still be able to sell their houses without a loss - to people who are waiting and watching and will jump in since they believe that the rates have tanked or is stagnant and wont move down anymore. Feds will keep at this cycle until Japan, China and India and other nations decides that enough is enough and dump all the $ reserve and the T-bonds.

This way, extreme exploitations can be avoid.

Ordinary exploitation is fine though. So, why object to a statutory minimum wage if your social aim is to avoid extreme exploitation?

This contradicts the earlier argument that you should be able to pay a non-teen $2 an hour, and how the whole economy is being completely devastated because WalMart workers get a whopping $6.25 an hour (with no shift penalty rates), which is obviously way too much for their station in life, even if it's not even a living wage... Meanwhile, doctors and lawyers and stockbrokers and mortgage brokers and DC lobbyists and Congressmen and heiresses and Hollywood stars who can't construct a sentence but were lucky to be born with a pretty face can swan around as much as they like... It's all about the individual's cleverness in being able to assert power due to some attribute they possess and claim an hourly rate... the perfect market... Oops, getting into Foucauldian post-modernism now...

The illegitimate uses probably pay pretty well. I think our society places a premium on basketball players and v.c.s over neurosurgeons, astrophysicists and teachers. What do you do about it?

SFWoman
Absolutely. Sportspersons and entertainers get paid obscene amounts of money quite unnecessarily, due to that glitch in the market that lets some people raise almost unlimited revenues due to repeat sales. Watching football or basketball playoffs is an indulgence and a luxury if there are homeless people wandering around or rampant poverty and want in general. But that's modern society for you. I'm obviously against people being paid or accumulating obscene amounts of money in general...

Why is someone's right to live decently and with dignity predicated not on their personal qualities or who they are, but on what they do, how well they process symbolic logic, how well they can lie, or how well they can sing and dance or run? Fortunately, most people can complacently get a reasonable job without a strain, but for many it is a struggle. Not to forget all the bullshit that goes on CVs, all the empty bloated language and fakery, the constant struggle to keep a job or get the next one, etc, especially in a time of employment constriction.

I agree with the dilemma of people who do very difficult science courses at college only to find there is not much market demand for their knowledge on graduation - there are loads of under-utilised biology graduates here as well, who can't get meaningful jobs - they are considering giving them minimal retraining and breaking down the demarcation boundaries in medical practice to allow them to take more of a role in healthcare if they want it. And sometimes govt insists on, say, training loads of aerospace engineers because of the space race only to find the need has evaporated after a couple of years, leaving a huge pool of people who need to retrain into something else. It takes a lot of time and money and personal resolve and commitment to throw away your interests and beliefs and expensive college training and start all over again to do something the market wants -- maybe in real estate sales next time : )

Why is someone’s right to live decently and with dignity predicated not on their personal qualities or who they are, but on what they do, how well they process symbolic logic, how well they can lie, or how well they can sing and dance or run?

Life is not fair. Live with it.

delete the troll quickly before it breeds

That’s a 60% return on your 20% downpayment, and all you had to do was live in your house!

If you sell the mother fucking house you gain, if you take out the "equity" in a HELOC, you are a fucking idiot. So fucking what your house went up, what does that mean exactly other than posting inane fucking messages.

25% of all mortgage to reset....

There is an impending wave of mortgage resets in 2006 and 2007: $2 trillion dollars worth of mortgages, to be exact, or about 1/4 of all mortgages.
Many borrowers in this category still have plenty of equity. For instance, someone who took out an ARM with a 3-year reset is sitting on a pile—although these folks will receive quite a payment shock. Recipients of 2-year resets have less equity, but still a little something. Those who got a 1-year ARM in 2005 will get a substantially higher payment with no equity to show for it. As time progresses, this mix will get worse... as will the number of resets. If interest rates don't cooperate things will be ugly in 2007... but either way, this is yet another headwind facing the housing market.

Wow...that troll just dissappeared....

I’m not PC, so I just think that you, Harm, and surfer-x just have bad visual acuity and are in need of more information than most researchers into this issue.

No problems with visual acuity here at HARM-X. We just believe in the scientific method and no breast shall be declared fake until a sufficent sample (fondling and/or nuzzling) has taking place. I say 50 real, perky, set and 50 fake perky sets ought to be sufficient for an informed opinion.

Wasn’t poverty rather accepted until fairly recently? I don’t think there were safety nets until the 20th century. Poor? Go to the poor house or the orphanage. Can’t pay your bills, go to jail. I think we developed more concern for the poor as the society became richer as a whole. I also think that other societies (not Europe) have a large number of poor, and they don’t seem to be as concerned with them as we are in the US.

yes. i can't address all those remarks in terms of the entire anthropological history of man, as it would more or less become a book, which might even become a bestseller... ; )

all good points, but i don't take european civilisation beginning from the Renaissance up to a couple of centuries later as a good starting point for the journey. you're broadly right about increasing affluence leading to raising the bar for poverty relief, etc, which is a Good Thing, which is why I resist arguments that attempt to dismantle those safety nets 'to see what happens'. Wanting to go back to the 18th century prior to poor laws seems to me to be regressive. Note the evolution from poor laws and church charity and debtors prison to the spectrum of organised welfare today, from cradle to grave, guaranteeing a good measure of wellbeing to all, hopefully — pre-natal and neo-natal health checks, school programs, free basic education, college scholarships, unemployment benefits, old age pensions. 150 years ago, only 20% of the population could read. free education has changed all that. recruiters in england in WWII were astonished at the rates of lifelong malnutrition they observed in ordinary Londoners fronting up, leading to more welfare reform. Society and the state was asking these people to die for their country, but couldn't even provide them with adequate nourishment through their lives in a time of unprecedented overall prosperity.

we can obviously create a massive surplus these days very easily, through agrarian, industrial, scientific and medical revolutions, the morality is in how we choose to distribute it. e.g. amassing fortunes, denying healthcare to many, etc.

Simple neolithic and paleolithic societies were much 'flatter' in structure and had strict rules around sharing, distribution, and 'mutual reciprocity', which is much more civilised, I guess. The advent of many civilisations in some ways was a Bad Thing.

Anyway, back to work!!... [kerr-acckkkk]

So Mosher is sellind Mosh-pits? How 80s of her.