patrick.net

I've got the addresses mostly automated through Google maps now. For some reason Google thinks it's Palm Springs.

Right on the former site of the Mustang Ranch!

This place has been abandoned for about a year. It sold for around $225,000 during 2007. Then briefly listed for $189,000 around the end of 2008 before appearing abandoned. The blackberries appeared to be growing into the side of the house this past summer, 2009.

What is wrong with not WANTING OR NEEDING to buy crap? Can someone please tell me what is wrong with deflation? I like the fact that my dollars will buy more, even if I don't NEED what it is they can buy for less. As for houses falling in price, what is wrong with that? Don't people NEED houses? Why must houses be expensive? We need food, and yet we don't like it when that costs more; we need gasoline for our cars, and we're always whining about how expensive it is (it still seems cheap to me, but then again, I don't drive much). If a nation cannot or will not live within its means, then it gets what it deserves, and from where I sit, this whole deflation thing is a nonstarter.

"thomas.wong87 Right on the former site of the Mustang Ranch!" Mustang Ranch hundreds of miles from Henderson NV. Its better to be thought a fool that to prove it. . .

thunderlips11 says

Tenounce, deflation is the loss of pricing power throughout the economy. Usually happens after a credit bubble as people tighten their belts, buying fewer and fewer goods and services. Firms then lay off people and reduce production, but then there is even less buying, and then firms cut markups down to the bone from the factory to the truck to the warehouse to the point of sale… everybody hoards cash… no spending… no jobs. Company is making so little per product sold at all levels they can barely afford to service their obligations (if at all).

You rip those lines off the front news page today and yet talk about it, like it's another era.

Originally, Henderson was the industrial area outside of Vegas, with railroad access. Pepcon (the rocket-fuel company) exploded there. There are still many companies operating here that the Clark County Commission has encouraged to move to Apex, about 20 miles north of Vegas. Even with financial incentives, the companies were there first, are grandfathered in and if they don't want to move (most don't), they don't have to. Henderson's population exploded in the 80's & on with the inception of Green Valley, a huge master planned community. Henderson is located at the valley's lowest elevation, so pollutants collect there. Having lived in Vegas for awhile, I can recall the protests of Green Valley residents, demanding that the chemical plants be moved. Especially after the chlorine leak described below. There are some very expensive, very exclusive homes and gated communities in this area and the buyers had no recourse - the chemical plants were there first. http://www.usfa.dhs.gov/downloads/pdf/publications/tr-052.pdf May 6, 1991 A massive leak of liquefied chlorine gas created a dangerous cloud of poison gas over the city of Henderson, Nevada, in the early morning hours of May 6, 1991. Over 200 persons were examined at a local hospital for respiratory distress caused by inhalation of the chlorine and approximately 30 were admitted for treatment. Approximately 700 individuals were taken to shelters. It is estimated that from 2,000 to 7,000 individuals were taken elsewhere. The Pioneer Chlor Alkali facility is located in an industrial area, approximately 10 miles southeast of Las Vegas, Nevada. It is one of several chemicals and materials processing facilities that are located in the Basic Management Inc. complex. When the BMI complex was established, during World War II, it was located in the desert, several miles from any existing populated areas. Henderson was established nearby as a support community for the industries that were located in the complex. The Las Vegas metropolitan area has experienced rapid growth during the last decade and the City of Henderson has become a heavily populated suburb with more than 60,000 residents. The BMI complex currently occupies an unincorporated “island” under the jurisdiction of Clark County and is almost completely surrounded by the incorporated City of Henderson. Public concern with the materials that are produced and stored in the BMI complex has created pressure to relocate the complex, away from populated areas. Several Hazmat incidents have occurred in the immediate area, including an explosion of ammonium perchlorate at an adjacent facility in 1988, which resulted in two deaths and 372 injuries that included 15 firefighters. The most recent incident occurred while the Nevada State Legislature was considering a bill to require the complex to be relocated to an isolated area, approximately 15 miles north of Las Vegas. (For a detailed description of the earlier incident, refer to Report 021 of this series, “Fire and Explosions at Rocket Fuel Plant, Henderson, Nevada.”)

thunderlips11 says

Computers falling in price has to do with technological innovation and the increased economy of scale in production costs that comes when manufacturers are increasing supply. It’s not deflation.

My dear Thunderlips, we didnt scale production, far from it. Silicon Valley did all it could to keep prices high to rack in revenue and keep industries going given there were few players and sky high demand for information products, we certainly had incredible profits and huge demand for labor/skilled labor. Once the Japanese figured on their own to create microprocessors, harddrives, mother boards, mainframes and minis... that was it for our pricing power. The Europeans were not far behind them. You can be as 'innovative' as you like but you still have inherit deflation in tech products.

As such Japan/Taiwan/Korean entered the US markets and dropped prices forcing us to exit markets and/or ship jobs creating plenty of deflation.

Look up the last point on Japans deflation on Wiki:
http://en.wikipedia.org/wiki/Deflation#Major_deflations

"Imported deflation: Japan imports Chinese and other countries' inexpensive consumable goods, raw materials (due to lower wages and fast growth in those countries). Thus, prices of imported products are decreasing. Domestic producers must match these prices in order to remain competitive. This decreases prices for many things in the economy, and thus is deflationary."

Not even Moor's law foresaw deflation. In fact "technological innovation" requires considerable amount of new capital and retooling which is expensive. As such to keep up with innovation requires cheaper labor and materials because pricing pressure still remains. We haven't had price inflation goods/services in decades.

"If that was the case, then cars are really deflated. A $360 Model A Ford is about $20k in modern dollars. For less than $20k, you can buy a Camry today. The former does not come with power windows, 10-CD changer, airbags, seatbelts, interior heating, etc. etc."

And yet, Detroit's mistake was to increase costs in labor in face of competition with lower prices from Japan.
High Tech product SV produced also had high labor costs, but they have pay limits with limitless layoffs/restructuring over the past decades.

Can you compare pre-war Toyota car prices to Toyota today without add on features?

thomas.wong87 says

My dear Thunderlips, we didnt scale production, far from it. Silicon Valley did all it could to keep prices high to rack in revenue and keep industries going given there were few players and sky high demand for information products, we certainly had incredible profits and huge demand for labor/skilled labor.

My dear Thomas-- Of course you scaled production. Regardless of what you can sell your product for, you still want to produce for as little as possible. So you can reap the "incredible profits" that you mention.

@nomograph

“But wait”, you cry. “Investments are risky!” Well, life is risky and there are no guarantees. There will always be winners and losers. Try not to be a loser.

“But wait”, you cry. “I read on Patrick.net that America is toast and that there will be rioting and the economy will never recover, so I’m putting all my savings into gold!” Congratulations, you are well on your way to being a loser.

I agree, however, we can all take steps to reduce our personal risk. Now is the time to reduce debt, increase savings for when those opportunities arise if your not already in a position to do so.

I'm gonna take a loan against my home and invest in real estate. Real estate ALWAYS goes up.

4X says

I agree, however, we can all take steps to reduce our personal risk. Now is the time to reduce debt, increase savings for when those opportunities arise if your not already in a position to do so.

+1

More so than since shortly after the Depression, will there have ever been a greater opportunity for "Two Mules and Goat" stories. I think with in the next year and onward for a few years, those that managed to save. Will be in an extraordinary position to find cheap niche opportunities in almost every Brick and Mortar business, as well as other private investment opportunities, that will make the fantasy Real Estate market look like a suckers bet.

The trick is going to be, having a Mule and Goat to start with. Because the banks aren't going to be in the business of actually loaning money anymore. They will just have schemes and complex financial investment vehicles that allows banks to prosper and grow, on the ebb and flow of the myriad of Zombie banks siphoning off profits through losses.

"Regardless of what you can sell your product for, you still want to produce for as little as possible. So you can reap the “incredible profits” that you mention."

Clearly you don't have any financial background and haven't worked in an competitive enterprise.

A prime example of a bubble buster, sold for $1.2million in 2004 and now the banks don't even want 700k for it.

I tried to find the Steve Martin line from "let's get small" (recorded at the boarding house in San Francisco) where he talks about charging thousands of dollars per seat for his show, culiminating in the statement, "One show, I'm out."

...or some variation thereof. But I couldn't find it. It would've applied here.

I remember listening to that album as a kid pretending I got his humor.

I think if he didn't use props, crude bodily function humor, and played the banjo too, he wouldn't have had a career out side of doing stand up in the UCLA faculty lounge.

thomas.wong87 says

“Regardless of what you can sell your product for, you still want to produce for as little as possible. So you can reap the “incredible profits” that you mention.”
Clearly you don’t have any financial background and haven’t worked in an competitive enterprise.

lol--yes clearly.

It does not take 30 years to save the cash for a house. Make a spreadsheet. Some of you can look back upon the last 10 years in which you could have been socking it away -- you would have enough by now. Perhaps you can buy a cheaper house in a different city. Anyway, why are you not buying a business that can make money instead? A house can save on rent -- I wouldn't count on gains for a long while. That bubble is gone for good.

I tried to find the Steve Martin line from “let’s get small”

LOL! how about Robin Williams early line... "Reality, what a concept".

Lost Cause... no the bubble isn't gone just yet! As for socking away money, be sure to mention you are buying a house and not retiring the former homeowner, before his/her time. Recent homeowners made a huge gain at someone else's expense.

This is in the Toluca Lake/North Hollywood area of LA, less than a mile from the border with Burbank. It sold 2 months ago for $451k, but was never listed on the MLS (foreclosure? private deal?). Now its on the market for $670k. $220k increase in 2 months? What am I missing? The interior has been spruced up a bit (pergo, granite, paint) and has been well staged for sale, and it is 1800sf. But it is steps away from a secondary highway (Camarillo), and 3 blocks from the 134 freeway. It has no grass, no garage. A similar house about 500 feet away recently sold for $481k, after being on the market for 20 months, with an original asking price of $770k. Again, what am I missing here?

There's just looking for a sucker who doesn't know the facts you have listed here.

Nomograph says

Well, anyone who keeps their long-term savings in an exchange medium (cash) is being very foolish.

Hello from a fool. I have been putting my long term cash into bank and credit union CDs for quite some time. I shop and ladder for the highest rates. I still have a few CDs that are paying 5%-6%, although they will be coming up for renewal soon. I do not feel foolish at all compared to those I know that have invested long term in mutual funds or with a portfolio from an investment manager. I made money, and it is insured to boot.

I think it is foolish for common folk to invest any other way but the following:

Live within your means, so you can:
Pay off all credit cards first and then pay in full each month
Pay off car and then pay cash for replacement
Pay off mortgage by age 45
Put you savings into insured CDs, avoiding all the Churn&Burn, commission generating portfolios of stocks, bonds, commodities, and other inventions of the skimmers.

There may be a place for puts, calls, shorts, warrents, futures and other gambling. Just understand these are for fun and you will lose in the long run. Just like Ceaser's Palace.

I did do rental property, but that is more of a moonlighting part time job than an investment.

Right now I have a paid off residence, one paid off rental property, no car loans or any loans at all, and have over $500k saved up and stashed in various local banks and CUs.

I agree with chrisborden - Deflation, BRING IT ON!

HeadSet
November 1st, 2009 at 8:40 pm | top | quote | email this
Nomograph says

"I agree with chrisborden - Deflation, BRING IT ON!"

Very similar situation here. Agreed with the above post 100%, Gents. The day is coming fast where we will buy the internet genius posters so-called 'assets' for mere pennies on the retail dollar... Some will want pity, they certainly came to the wrong place for that. We tried to help them, they refused to listen. Now suffer. Have children? Too Bad. They will have to suffer too.
Get a Obama flu shot. That will solve all your problems...

The so-called 'financial' people who seem to be the most clueless people here. How do they hold on to a job? This recent statement especially amusing: "Clearly you don’t have any financial background and haven’t worked in an competitive enterprise". Ouch. I guess that means all my paid for hard assets and positive cash flows were mistakes.... Doh.

Joe whentheygonnaputyouout?

javco says

I agree with chrisborden - Deflation, BRING IT ON!”
Very similar situation here.

Unless you are retired, I don't think you will like deflation. Because you will likely lose your job. And even if you have enough savings to live on for the rest of your life, you still probably won't be happy as your kids lose their jobs and have to move back in with you...

Deflation is ugly. Definitely not something to wish for.

Deflation is the great leveler, it will be the Game over financial Reboot that was damn needed over 13 months ago before every Criminal Politician in Washington turned into a Crack addict.
It is now the inevitable unfortunately.

But much like the Flippers didn't give a Rats ass, about my questions of whether my kids would be able to afford a million plus for a Shit hole slum, in a ghetto in Detroit by the time they were old enough to buy a house; at the rate the bubble was going. I will not lose one second of sleep, at the thought that millions of lil crumb snatchers are going to be dolling out, in the form of a horse pill sized dose of Karma on those very same assholes that were perpetuating the myth real estate only goes up.

My daughters living home with the wife and me for an extra Decade, I say Where do I sign up.
I actually love my kids.

Money in the bank and prudence wins every time.

Tenouncetrout says

Money in the bank and prudence wins every time.

Not every time. During periods of inflation, money in the bank and prudence are big losers...

tatupu70 says

Deflation is ugly. Definitely not something to wish for.

The only way to stop deflation would have been to stop he runup in the first place. But the gov was more than happy to encourage massive public and private debt on the way up. Since so many spent future earnings to buy stuff today, they will have nothing to make purchases with in the future. Deflation is here whether you wish for it or not, and despite grand efforts by the gov to prevent it.

tatupu70 says

Tenouncetrout says

Money in the bank and prudence wins every time.

Not every time. During periods of inflation, money in the bank and prudence are big losers…

With money earning hardly 1% money in the bank is safe if not as stupid as putting into current real estate and losing it the very next day.

tatupu70 says

Not every time. During periods of inflation, money in the bank and prudence are big losers…

Compared to what? During the Carter inflation era, one could get 14% all day in CDs. Also, using accumulated cash to buy a house beats the tar out of using the then current 20% mortgage. The very high rates kept home prices low enough for cash purchases.

HeadSet says

Compared to what? During the Carter inflation era, one could get 14% all day in CDs. Also, using accumulated cash to buy a house beats the tar out of using the then current 20% mortgage. The very high rates kept home prices low enough for cash purchases.

Are you really arguing that having cash investments is OK during high inflation times? Yes CD rates will rise during inflationary times, but with most CDs your money is locked for a certain time period. And during inflation, your yield might look good when you invest, but won't match inflation by the time it matures.

HeadSet says

Also, using accumulated cash to buy a house beats the tar out of using the then current 20% mortgage.

Not necessarily. For example--right now I can get a 30 year mortgage at 5% (or so). Historically, buying the S&P 500 will get you somewhere in the ballpark of 7-9% annually depending on who compiles the numbers and when exactly they were calculated. Either way, you're ahead putting down 20% and investing the rest. Especially after you can deduct the interest on the loan. And it's also a pretty good inflation hedge.

Before all you doomsayers tell me I'm an idiot and that stocks are due to drop 80% in the next year--they may. They may not. Noone knows--not Buffet, not Roubini, especially not anyone on this board. One thing I do know--you don't make money in the long term by trying to time the market.

Looks like you're near a park, and Okanagan lake/valley area isn't bad to live...I would live there myself. :-)

tatupu70 says

Tenouncetrout says

Money in the bank and prudence wins every time.

Not every time. During periods of inflation, money in the bank and prudence are big losers…

So spend less and charge more.

It only takes one bad day on the stock market to make savers look like the velvet rope crowd.

Saving is parking your money somewhere you can add to it and make it grow by adding more to it.
Interest on it, was just gravy and an incentive to get people to not stash it under your mattress.

Investing is investing that is putting your money to work for you. This is a different motive all together than saving money.
And the smart investor should always go into each day with the idea that today could be the day your investments are gone.

One can save and invest, it is just not smart to consider either, one and the same.

Save money(pay your self), Pay your debts, invest the rest. That is classic prudence, and in that order. That has worked for over 60 years or more.
This neo Keynesian economy is like Windows Me, where the Financial gurus, keep applying patches and service release updates. While not addressing the issue that it don't work, rather than just going back to operation system worked best last.

Nomograph says

“But wait”, you cry. “Inflation punishes savers!” Well, anyone who keeps their long-term savings in an exchange medium (cash) is being very foolish. There are many time-tested investment and savings vehicles that provide safety, growth, and protection from inflation.

This is complete and utter nonsense. Where are these safe vehicles? They do not exist. If this statement had any validity at all we would not see gold at $1060 and rising.

The only way to protect yourself from inflation is to take risks.

@tenouncetrout

Save money(pay your self), Pay your debts, invest the rest. That is classic prudence, and in that order. That has worked for over 60 years or more.

LOL. If you have used that system for 60 years then you are one old dude. What are you, like 80 years old?

Purchased 1172sqft 4th floor corner unit in 06 for 260k. Thank goodness this is a long-term investment, as we have no plans to move for at least a decade or so. And yet, this was one of the cheapest places in Kelowna at the time. Especially on a per square foot basis. Sad, actually.

@Thunderlips

Don’t forget that Auto Workers have been putting up with massive “Give Backs” for 20 years already. The days of making $30/hr + benefit costs are long since over. It’s more like $15/hr or less. When the Big Three whine about the costs of Labor, they’re factoring in all the money they SHOULD have put aside to pay for their retirees.

That is interesting, I always thought they were griping about paying HIGH wages. So, it was the pensions that were running up their costs?

The AMA represents the interests of the AMA.

Ortho's are boning up on the proposal. Gastroenterologists are finding it hard to swallow. Cardiologists didn't have the heart for it. Dermatologists are pretty thick-skinned, can go either way. Dentists are looking down in the mouth at it. Gerontologists think the whole thing's getting old...

HOA $485 Property Tax ~$400? --------------- Asking Rent - $1750 to $2100 Asking Price - $325k to $399k

thunderlips11 says

I know little about chips used in other products, but in personal and desktop computing the Japanese were never big players.

Did you list DRAM dumbing in the 80s and Semiconductor Manufacturing Equipment bundled and sold below cost to capture market share ? Illegal copy infringement on Intel's CPU Patents (NEC V20, V30)? Do you think they play by the rules?

"Don’t forget that Auto Workers have been putting up with massive “Give Backs” for 20 years already. The days of making $30/hr + benefit costs are long since over. It’s more like $15/hr or less. When the Big Three whine about the costs of Labor, they’re factoring in all the money they SHOULD have put aside to pay for their retirees"

The typical line workers get a lot more in salary and benefits.
Compare that to their Japanese counterpart.

"Represented by the UAW, Detroit's auto workers have long received wages and health care plus a "30-and-out" retirement plan that provides a full pension and health care for retirees and their spouses after three decades of service. Those benefits have made Detroit's labor costs the highest in the auto business: The three makers estimate that unionized workers cost them more than $70 an hour, factoring in benefits and retirement, compared with $40 to $45 for Honda and Toyota. Health-care costs alone increase the price of Detroit-brand vehicles by as much as $1,000 to $1,500 compared with a U.S.-made Toyota, they estimate"

At these wages, it would make any Tech worker blush! Benefits for a SV worker runs around 10-15% so Detroit worker gets about the same as here. The outcome for SV may well be the same one day.