patrick.net

I've totally flipped on my pessimism btw. I don't think the Yellen Fed is going to taper until we hit the full-employment condition of the 1990s.

It was this graph that enlightened me:

http://research.stlouisfed.org/fred2/graph/?g=sO8

showing we're still 10M jobs away from full employment. If the Fed stops before that, they will be economic terrorists given how dysfunctional Congress is.

also it's the debt-to-GDP thing that makes me think Fed intervention is a bigger game-changer.

actual deficit (not counting Fed purchases, which we shouldn't:)

http://research.stlouisfed.org/fred2/graph/?g=sNm

debt to GDP, ex-Fed:

http://research.stlouisfed.org/fred2/graph/?g=sNo

This indicates Congress will have leeway to boost spending again in 2017. I don't expect the GOP to get with the program before then, but I do expect the program to include tax cuts for everyone later this decade.

I agree that prices in CA are going to continue to climb. I've been to several open houses in the BA recently, and it is just amazing how many people swarm to $1.3M+ houses. One place I went to must have had over 100 people/families visit.

Although I think prices will climb, I'm concerned we're still somewhat close to a peak. Plus, the price to rent ratio isn't very good where I've been looking. So, I've been looking at non-BA real estate.

Any thoughts on where to invest - either other parts of CA or other states?

I'd not invest in real estate right now in the US. If you need a place to live, great, buy a place for that, but not as an investment. There are other assets that shield you from inflation, like commodities or even the stock market.

myob says

I'd not invest in real estate right now in the US. If you need a place to live, great, buy a place for that, but not as an investment. There are other assets that shield you from inflation, like commodities or even the stock market.

I've got a good amount in the stock market already. With the way it is so manipulated too, I'm not that comfortable putting too much more in. I've got a little in commodities, but they fluctuate so much, and as pretty as gold is, I can't do much with it. I can't imagine real estate in all of the US or elsewhere is overpriced.

Because the boomers have climbed the ladder and kicked it down behind them.

The Entry Level jobs have all been outsourced or insourced via H1B. When you have no Programmer Is and IIs, you don't get IIIs, IVs, and Vs later on. Even Accounting and Chart Reading jobs have been outsourced and this trend is rapidly increasing.

Why pay more?

Comp Sci grads have a 9+% unemployment rate.

How many of those jobs are part time?

ch_tah2 says

I've got a good amount in the stock market already. With the way it is so manipulated too, I'm not that comfortable putting too much more in. I've got a little in commodities, but they fluctuate so much, and as pretty as gold is, I can't do much with it. I can't imagine real estate in all of the US or elsewhere is overpriced.

If you don't mind sharing, what is the ratio of your investment, Stocks: RE (include owner-occupied): Cash: Bonds: Commodities? Mine is 57:35:8. Nothing in Bonds and commodities.

Heraclitusstudent says

No one will buy a house returning 2% when inflation is 10%. That means the price would have to fall 80% to return more than inflation.

Correct, the return should go up to 10% and not stay at 2% but it doesn't necessary lead to a price decline. Rent can go up to compensate for the inflation. Why do you think a price decline is more likely than a rent increase?

hanera says

If you don't mind sharing, what is the ratio of your investment, Stocks: RE (include owner-occupied): Cash: Bonds: Commodities? Mine is 57:35:8. Nothing in Bonds and commodities.

I'd say approx 25%: 40%: 30% with the other 5% in bonds and commodities (give or take 5% here and there).

kt1652 says

Housing crash… ok. See ya next time.

That graph shows household wealth going from $60 trillion in 2000 to $80 trillion at end of 2013. That means wealth growth was only about 2% annually over inflation. If inflation is assumed safely to be 3%, then that is a return of only 5% annually.

Now compare that to the S&P 500 which grew about 10.5% annually from 1987 to the end of 2013. Just reaffirms that the 2000's was truly the lost decade (primarily due to the effects of globalization on the middle class and government spending on the wars in Iraq and Afghanistan).

hanera says

Correct, the return should go up to 10% and not stay at 2% but it doesn't necessary lead to a price decline. Rent can go up to compensate for the inflation. Why do you think a price decline is more likely than a rent increase?

Oh sorry... rent goes up 10% so your return in fact is 2.2% and your house loses only 78%.

By bad.

"there is simply no reason for real-estate to outperform inflation"

inflation is not one-size-fits all.

inflation represents the exertion of pricing power on prices, nothing more.

http://research.stlouisfed.org/fred2/graph/?g=sQb

is CPI of 4 items; housing, energy, clothing, computers, all showing different price trends.

Clothing is flat! How can this beee??

And look at computers! Inflation? What inflation?

Thing is, housing is service good of very high necessity. Try living a couple of days without it. New clothing, cars, etc, can be deferred. We can't import housing by the boat from low-wage countries, and if we could it wouldn't matter because the land itself is fixed in supply, and the cheaper the fixed improvement gets we'll just take the savings and bid up the price of land.

This is why houses sold for $40,000 in the 1970s sell for $1M today. Same house, it's the land that rose in value, mostly.

Additionally, as far as purchase prices go, the rise of dual-income households:

http://research.stlouisfed.org/fred2/graph/?g=sQd

and falling interest-rate regime:

http://research.stlouisfed.org/fred2/series/MORTG

has boosted purchasing power and thus prices since 1974, when the Equal Credit Opportunity Act was passed IIRC.

"Let's wait to see how it will flow into these bonds if inflation reaches 10%."

inflation CANNOT "reach" 10% until WAGES rise 10%.

http://research.stlouisfed.org/fred2/graph/?g=sPq

cluephone, ringing for YOU

Bellingham Bill says

inflation CANNOT "reach" 10% until WAGES rise 10%.

Look, I don't know what inflation will be in the future. I don't pretend I know. Maybe we fall back into deflation. It is certainly not impossible. It certainly not impossible either that wages go up 10% because of inflation. It happened before.

I answered a post that claimed real-estate is an inflation edge. So we're talking of a scenario where there is inflation.

Well, in a scenario with 10% inflation, people holding assets returning 2% will get their collective asses handed back to them.
That should be simple enough to understand.

Bellingham Bill says

inflation CANNOT "reach" 10% until WAGES rise 10%.

False. Refer to the 1970's stagflation as a counter-example to that statement.

Inflation is an overloaded word which refers to two economic factors. The first is monetary inflation, which is the money creation by the central bank. The second is price inflation. The two forms of inflation are very loosely coupled, if at all.

Monetary inflation will manifest itself in the market, but it's hard to predict where it will go because it depends on who gets the new money, it depends on productivity, and it depends on the amount of money available to different demographics. For example, if you give money to the wealthy, as is the case with the current QE, operation twist, etc, you don't increase their demand for stuff like food, but you do increase demand for hard assets, stocks, housing, high end luxuries, etc. If those trillions went to the poorest members of society, you would see rampant inflation in basics and some modest luxury items, since you'd have a lot more money being spent be people who had to economize in the past on food, clothing etc.

The reason that monetary inflation is a favored policy is simple - it devalues debt, and the biggest debtor is the government. It is a transfer of wealth from the poor to the rich because wages don't keep pace with inflation, but people with assets can invest around inflation.

So, I think that the Bay Area's ludicrous house prices are the result of inflation - both through tech company valuations which allow option holders to bid up the market, and directly by making credit cheap.

myob says

Refer to the 1970's stagflation as a counter-example to that statement.

http://research.stlouisfed.org/fred2/graph/?g=sQj

blue is per-worker wages YOY % increase

red is CPI YOY increase.

You were saying?

the thing about the 1970s that made it 'stagflation' was mostly the productivity rise of the 1940s-1965 came to a slowdown:

http://research.stlouisfed.org/fred2/graph/?g=sQl

The economy still gained 20M jobs -- the baby boom was absolutely FLOODING into the job market, since the demographic center turned 18 in 1973.

If the Fed hadn't fucked with interest rates to trigger severe recessions, the 1970s would have been pretty great (number of jobs gained in the 2000s: NEGATIVE 1M)

http://research.stlouisfed.org/fred2/graph/?g=sQm

Well, also, all that unpleasant oil-shock business, first with the embargo and then Iran falling apart.

I prefer to throw the bankster into the helicopter blades while they are at maximum rpms. I find it's more fun.

What wine recommendations do you have for serving with grilled bankster?

It's dangerous to skull fuck a bankster, they bite and have venomous saliva.

They have to be boiled first.

I thought skull fucking used the eye socket, necessitating the removal of the eyeball. I feel so naive!

Ceffer says

They have to be boiled first.

NEVER boil banksters! They should be seared on all sides and then broiled in the oven in a pan coated with olive oil and/or butter. Then serve with a red, not white, wine and a side of yams.

Alternatively, as Apocalypse has suggested, they may be battered in barbecue sauce and roasted on an open flame. That's Cajun style.

Iosef V HydroCabron says

I thought skull fucking used the eye socket, necessitating the removal of the eyeball. I feel so naive!

They could still bite ball.

Bellingham Bill says

the thing about the 1970s that made it 'stagflation' was mostly the productivity rise of the 1940s-1965 came to a slowdown:

http://research.stlouisfed.org/fred2/graph/?g=sQl

The economy still gained 20M jobs -- the baby boom was absolutely FLOODING into the job market, since the demographic center turned 18 in 1973.

If the Fed hadn't fucked with interest rates to trigger severe recessions, the 1970s would have been pretty great (number of jobs gained in the 2000s: NEGATIVE 1M)

http://research.stlouisfed.org/fred2/graph/?g=sQm

Well, also, all that unpleasant oil-shock business, first with the embargo and then Iran falling apart.

Did it ever occur to you that you just proved the fallacy in equating GDP to economy or standards of living?

If we chart the GDP of the world's leading economies during WWII, all the bombs, tanks, war planes added tremendously to the GDP, yet the living standards for people all around the world collapsed, with many of the leading economies collapsing, if not literally going up in flames. Fire fighting, the entire city burning down, the clean up and tent cities also boost GDP! in Krugman's broken window fantasy land, that's somehow good for the economy, if one is stupid enough to equate GDP with the economy.

Likewise, the 1970's saw the escalation of government war on the middle class. The rapid expansion of government bureaucracy boosted GDP while degraded the real economy and real standards of living for the ordinary people.

The inflationary monetary policies of the FED during the 70' accommodated the rapid growth of the government. That led to double-digit inflation by the end of that decade. The recession-causing tightening by the FED during 1980-1982 was the only thing that saved the dollar. Otherwise, if gold had been allowed to continue doubling every year like it did from 1979 to early 1980, the dollar would have been finished.

The key to good cooking is simplicity. After you remove the skull, make sure there are no tiny bones left. Make sure to trim off all the fat. Bankster fat is twice as toxic as most animal fat. Fry in butter and garlic with fresh sage, and viola!

They could yell liar & war criminal & shout her off stage.
They could stand & turn their backs on her.
Boycotting commencement would be great.

ch_tah2 says

Any thoughts on where to invest - either other parts of CA or other states?

I like the real estate in the panhandle of Florida such as Pensacola and Destin. Florida looks good especially since there are a lot of foreclosures coming on the market again. Pick a place that is not at risk for sinkholes. I also like Las Vegas.

RT is the fish wrapper of journalism. They missed the the biggest news story in history but at least FOX can be known for it's in-depth news investigations.

Iraq has Weapons of Mass Destruction!

Republicans and Democrats are two sides of the same coin. Although their rhetoric and tactics may differ, similar outcomes are the result. The politicians are the marionettes, the question is who are the marionettistes?

Indiana Jones says

The politicians are the marionettes, the question is who are the marionettistes?

Your lucky day, someone made a list. Look up fortune 500.

"Have You Skull Fucked a Banker and Thrown It Out of a Helicopter Today?"

No. I would never do that to my own kind.

But I have thrown countless peasants (too many to count) from my helicopter after amputating all their arms and legs with a battery powered chainsaw.

As I watched them fall from the air, me and my pals aimed at their mutilated body with AK-47's and began shooting.

Kind of like playing Polo except way more entertaining.

But you know what would really be fun?

Stuffing a slave inside a oven alive and cooking the worthless piece of shit alive in front of it's maggot offspring children who watch their parent tortured to death and cooked.

Afterwards we feed the disgusting meat to the starving slave children. They will eventually eat it after we starve them enough.

If they vomit, we make them eat it back up.

I have a Master's chef kitchen at home with a top of the line oven. Maybe I should try this for entertainment?

What do you think ApocalypseFuck?

The children I keep alive by the way but if they are needed for a Satanic ritual...

I do not hesitate to blood sacrifice all of them in the same violent way I tortured to death their parents.

I'm a sack of shit and proud of it.

APOCALYPSEFUCKisShostikovitch says

Yeah, around the dinner hour if you've already got the bbq hot and want to set up the steaks fast.

You peasants are a bunch of stalkers.

You desire to eat us because you know we are a high-quality specimen unlike you degenerates.

We wouldn't eat you and even your own kind wouldn't eat you. You are a low-quality specimen.

Would you buy if you will have?

jazz music says

The big lie: the pain will stop once GOP is back in the white house.

The big lie = the pain has stopped since electing a democrat.
The bigger lie = Hilary gives a shit about you.

bgamall4 says

Bigsby says

Who? And what has that got to do with anything? Lots of people lost relatives on 9/11. Does that suddenly make all of them experts?

You are such an ass.

Care to address any of the points or is that beyond you?

bgamall4 says

HEY YOU says

RT is the fish wrapper of journalism. They missed the the biggest news story in history but at least FOX can be known for it's in-depth news investigations.

Iraq has Weapons of Mass Destruction!

Lol, that is funny. Interesting that RT changed their minds about 9/11 after Snowden defected. I am sure they know a lot.

You rant against so-called propaganda mouthpieces and then make mileage out of one of the most glaring examples of a corrupt 'news' organization, one that seems to have a liking for peddling fact-free conspiracy theories. That video is a perfect example of an utterly moronic one-sided piece of non-journalism. The fact that the 'journalist' uttered the words 'Jon made a mockery of mainstream science' simply because his guest spouted a bunch of unchallenged nonsense about 9/11 says all that needs to be said about that report.

Bellingham Bill says

This is why houses sold for $40,000 in the 1970s sell for $1M today. Same house, it's the land that rose in value, mostly.

$40k in 1970 would be a very large and fancy house. $20k was more like it for a typical top-20 percentile upper middle class 2000sqft single family house in a suburban neighborhood that is good today and can hope to fetch $500k to $1mil today. Even then you probably need some renovation and expansion to get to the number. In any case, most of the geometric price gain is due to replacement cost. Building such a house today would cost about $200-300k (i.e. 10x to 15x the house price in 1970); the remaining 2x to 3x gain is largely due to market shift: the school busing starting in the 70's caused the middle class flight from the urban cities to the suburbs; the relative desirability of suburban single family in those "good" towns vs. the inner city housing stock turned upside down. There are plenty houses and buildings in the cities that can be bought for less than replacement cost today.

Reality says

The most decisive factor is actually the overall level of production, and often times may not be reflected in pricing per se as when a good approach abundance its price collapse

That's BS. If the overall level of production is high, but the owners share little with the workers, you end up with what we have today. Huge disparity and poor general health

Reality says

Austrians and other free-market believers advocate that the government should get out of the way, so even the poor and mostly the middle class can fully exercise what market power they do have

Yes. And because the poor and middle class have no market power, the Austrian's would get exactly what they want.

tatupu70 says

That's BS. If the overall level of production is high, but the owners share little with the workers, you end up with what we have today. Huge disparity and poor general health

Owners do not share with workers per se any more than you share your wallet with the minimum-wage checkout girl. In a relatively free market economy, owners of capital bid for the labor of workers.

"Production" is not a uniform goo. A cattle is not a walking bag of ground beef. It consists of numerous different "cuts" after slaughtering/butchering, some cost $20/lb, some $2/lb, but all have relatively similar protein content. A rich person may spend $300k on a Ferrari, 10x the average new car today. It may be worth it to the buyer, but is it really worth 10x the average new $30k car to the middle class family? Is $20/lb fillet mignon really worth 10x to the family that get by just fine on ground chuck? For the fairer sex, we can also talk about the $2000 handbag vs. the $20 handbag. That's how the free market place provide for the poor and middle class through relative abundance while letting the rich "waste" their spending power essentially providing jobs making luxury goods.

This is a heck lot better system than the socialist dream of everyone having the same ground goo, some leaders are more equal and therefore have more of the goo! If the entire cattle has to be ground up and sold as ground beef, the price of ground beef actually has to go up in the absence of higher priced cuts subsidizing the lower priced cuts. Likewise, in the absence of luxury cars subsidizing the manufacturer, the price of the plebian cars would actually go up for the middle class buyer of cars! Hand bags with 100x price differential instead of 10x would of course be even more so.

Price differential among end products do not necessarily reflect the natural resources going into making them. Therefore the rich picking up high end products at over-inflated prices are actually taking up less natural resources than if they had been forced to confine themselves to the same goo/production. The free market quality differentiation among goods serve to minimize the overall resource consumption to maximize consumer satisfaction (aka "profit").

"Huge disparity" is grossly over-stated in monetary terms.

"General poor health" is the result of the socialistic healthcare system (one of the most "regulated" industry) providing perverse incentives.

tatupu70 says

Reality says

Austrians and other free-market believers advocate that the government should get out of the way, so even the poor and mostly the middle class can fully exercise what market power they do have

Yes. And because the poor and middle class have no market power, the Austrian's would get exactly what they want.

Utter nonsense. The difference between the poor vs. the middle class is how much market power they have. It is statists like you that want to remove the difference by ostensibly subsidizing the poor but in reality taking market power from the middle class. When the poor is given housing vouchers, free healthcare, etc. etc. making their welfare income equivalent to someone making $50k, the result is that someone actually making $50k on his/her own would now have his/her market power reduced due to the government-subsidzed competition on the consumer market.