patrick.net

Would you say that those people who are saying "My home will be my retirement plan" are smart enough to dodge stock market crashes? junk bonds? the enrons of the market? The derivatives markets? (pick your favorite investment vehicle).

In 40 years, they might own their home and not be able pull anything from it. Lets say it's value is far below todays value, and the government has changed regulations not allowing them to pull any value from it. Maybe they can't sell it now for some reason. If they didn't invest well, and didn't own a home, they would now be paying rent + have potentially 0 savings. In this scenario, they have a home and very little savings. Another possibility is that due to bad investments and inflation(etc) their savings are completely inadequate. A final option is they've done some amazing savings and now they have enough to buy a house outright anywhere and live on the beach until they die. If they aren't financial geniuses now, it's unlikely the third option is going to pan out for them. They are more likely to buy into the next hype and lose it all there too. A few enron investments, some inflation they couldn't deal with, whatever the case be.

A home might not guarantee the best retirement if they can't pull from it, but at the very least they have a home. For many, buying a home is the only way they'll be secure when they retire. Whether they understand the reasons or not.

I agree w/ you pkennedy. I guess my views are clouded by Portland's ugly bubble not that it was any worse or better than anywhere else it's just that I watched a lot of folks get in way over their heads. I guess those that strategically walk away can have somewhat of a fresh start but to start off your investment 50-100K underwater ain't exactly a great path either.

I am just a nurse but I was able to dodge much of the this stock market crash, only lost about 10%, I also sold my house at the peak. But I think the markets are to the point of 'it's any one's guess'. Fundamentals are out the door and government involvement makes it even more complicated. Lot's of unpredictable things. What happens when oil gets traded in EUROS? what if we follow Japan's lead?

Yes, a lot of investment tools are over our heads. I know some just using good ol' CDs and savings bonds.

You are right about one thing for sure. At least they have shelter and ideally didn't dip into the equity. And of course, pride of ownership. I just hope folks aren't getting in over their heads. Money is the number on cause of divorce and we have had quite a few murder suicides and suicides in this area caused by financial hopelessness.

My coworker is maybe 24 years old. She does not make much money at this job or at her other job, but she bikes to work, brings her lunches, and saves a certain amount each month before she even thinks about spending. At 24, she is jaded by what she has seen so far, and she is careful. I don't know where she is on housing theory or whether she is representative, but she seems a lot more cautious and smart than I was at that age. I know she has no plans to buy at this time.

Brand says

Guys, no offense, but a lot of people who call themselves “software engineers” are working in IT functions like databases, web servers and such. These days anything that even remotely involves coding gets labeled as engineering.
When I think of a real software engineer, I think of an embedded code designer at Qualcomm, or a search engine scientist at Google. Maybe a DSP algorithm designer at TI. I knew a legion of CS-degree coders working for $60-70K/year. I’ve also known architects and other bona fide software engineers; they contribute a lot more to their companies, and they make at least 50% more as well. Plus they get all the goodies like stock options and performance bonuses.
I say that independent of whether Kevin is spinning straw into gold (which is impossible to prove anyway). I’ve observed plenty of software engineers making $100K+ outside of the Bay Area, and $125K+ in San Diego and Silicon Valley. Is it everybody who touches code? Well, no. But “engineer” is a pretty subjective term these days.

If you aren't designing software and writing code, you're not a software engineer, and you're probably easily replaceable in the industry. Some people do more of one than the other, but lacking in either discipline is a sure path to irrelevance and crappy employers.

I doubt that in 2009, new hires will get the red carpet pay package. But companies didn’t cut pay or demote rank for everyone who survived all the recent layoffs. The pay level mentioned is a B+ or A- pay range, but it’s not completely crazy, at least in my anecdotal experience.

New hires start pretty low compared to people who have proven themselves. It's typical for a talented engineer to see pay increases of 100% during the first 10 years of their career.

Based on what I know from people being hired today at major bay area engineering-focused companies, a salary in the range of $65-70k is normal (I can't speak for elsewhere) for someone fresh out of school with a BS, and maybe 75-80k if you have Ph.D. The PHD path typically leads to "research" positions which pay a lot less than the "engineering/ development" positions in the long run, but still generally pay pretty well.

That said...

You guys must be dealing with some shitty companies. If you know good people with 10+ years of experience who aren't bringing in $150k, please send them my way. Note that knowing how to write some PHP and set up MySQL does not make one "good people".

Anyway, back on topic:

I know that these forums tend to be a "most bearish" contest, but some of this stuff is kind of laughable. Really, if you guys think the prospects for the future in the US are so dire, why are you still here anyway? You act like there has never been a recession before or that we're some third-world country without the resources or knowledge to grow.

So, yeah, there's a good chance that in our lifetimes China and India will have a larger GDP than we do. You still wouldn't want to live there because most places won't have potable water and a third of the population will be living in abject poverty. Global economics isn't a zero-sum game.

I thought this article was appropriate on the original topic.

Easy FHA Loans in Expensive Areas (nytimes.com)
http://www.nytimes.com/2009/11/20/business/20limits.html?ref=patrick.net

Having read some of the comments, I do feel 'ordinary', thanks ;)

To add to Kevins post. Even if China or India have higher levels of income than the US at some point for all of their citizens, it won't change how we live in the US. In fact, it will likely reverse all of our debt problems here instantly. With a massive market for the US to sell into, it wouldn't have to compete with other countries selling to US citizens. US citizens could save, while we sold to other citizens allowing them to go into debt!

For those worried about the trade deficit, actually look at the numbers.
# Exports increased to $132.0 billion in September from $128.3 billion in August. Goods were $90.3 billion in September, up from $86.8 billion in August, and services were $41.6 billion in September, up from $41.5 billion in August.

# Imports increased to $168.4 billion in September from $159.1 billion in August. Goods were $138.0 billion in September, up from $128.8 billion in August, and services were $30.5 billion in September, up from $30.3 billion in August.

Gas and related products make up a good amount of our deficit as well. Without that, things don't look too bad. Exports of Products still makes up 2/3rds of exports. Obviously people claiming we make nothing in the US have never looked at what actually makes up the trade deficit.

http://www.census.gov/indicator/www/ustrade.html

Yeah, we produce/export a lot of heavily subsidized crops.

And we don't import much oil so I'm not sure we even fight about it;O)

But I'm intrigued. Let me see what else we export.

edit 10 minutes later:
Browsing the chart...capital goods look like our forte...anyone want to elaborate on what that exactly is?

It doesn't appear that agricultural exports make up a huge amount. I couldn't find a lot of information, but it didn't seem to be a large number in terms of actual dollars.

Oil.... The US produces around 40% of what it needs. Oil from Canada and Mexico make up about 30% of the total oil imports. Another 35% from Venezuela, Nigeria and Saudi Arabia. Of all the oil we receive, only a small portion comes from Saudi Arabia, less than from Nigeria!

http://www.eia.doe.gov/pub/oil_gas/petroleum/data_publications/company_level_imports/current/import.html

Oil imports can change, as the energy policies of the country change. If oil becomes expensive enough, we will adjust the way we live, and our deficit will reduce by itself in that case.

It is definitely not doom and gloom.

It definitely means some changes in the next decade though.

Wonder what our exports would look like if we didn't force the countries that receive our foreign aid to buy our goods?

Israel and their weapons come to mind.

And the main reason we can export corn, wheat, etc is since it is heavily subsidized we can flood markets like Mexico with our cheap crops and screw up their agribusiness. Anyone wonder what Mexicans did before they crossed the border into USA?

You think we could really export crops without heavy subsidies?

Yahoo for our 'free' market!

Oh those captial companies! Caterpillar making all those trucks and other goods used to make houses! Landlords better watch out! Soon houses will be a dime a dozen if they keep this up!

Corn isn't being exports as much anymore, is it? Corn has become hugely more expensive because we're using it in gas now, and so many farmers are turning their crops over to corn for the higher selling values. Corn isn't exactly a crop most of the world likes either, it was considered pigs food for a long time.

Canada exports a lot of wheat and corn with less incentives. Farmers might be making good money with the subsidies, but obviously without they would survive and do the same. Lots of whiners would say they would fail but they would figure it out.

Lots of doom and gloom. Things change, and people change with them. The gloom and doom sayers have been around forever. Claiming it's all going to blow up, but it never really does. It gets bad, then gets corrected as free market thinkers bring things back in line and keep the whole machine running.

Corn often gets exported as High Fructose Corn Syrup, HFCS. The only reason farmers make money on corn is due to the subsidies. It is subsidized to keep food prices low. Pick up ten items in your kitchen cupboard and look at the ingredients. Corn is expensive to grow partially because you can't save seed anymore and the need for heavy fertilizing, herbicides and pesticides. It's a monopoly for Monsanto and AMD: seed and fertilizer, pest and herbicide. Yes, our yields are higher and we can feed the world but at what price to our soil. Our topsoil is down to 2 inches in some places in the Midwest where not long ago it was 2 feet.

I'm not anti-Capitalism. I just think folks need to look at the big picture as the world gets smaller and production/manufacturing can occur ANYWHERE! To ignore the fact that MADE IN CHINA, MACAU, INDONESIA, VIETNAM, etc dominates our goods is naive and well, ignorant. So what does America make anymore?

Yes, things change. Give me an idea why things will change for the better here besides the hope that more people will value family instead of the big house and 2 new SUVs as those days are gone for many and never were truly there because it was all a house of cards.

The US obviously exports a lot. Once oil is removed the equation, the US exports more than imports. That says something.

The world is becoming flatter. Right now the world competes for US consumers. That is the only place to make money. As these countries start growing out their middle class, they will become the target for businesses, and the US will be right there, targeting those same consumers.

China is already starting to build out a middle class, but they haven't started spending much yet. They will. Most of these countries have a huge penalty for losing a job. Here, you might go in debt. Maybe have to move into a crappy ghetto house, or move into your car. There you get nothing. Absolutely nothing. If you lose a job, it might take years to get another. Most of these countries have massive savings rates because they need it. They're currently stashing away everything they make. As the countries loosen up and become less scared they will start spending more on everything. Tv's, cars, movies, etc.

pkennedy says

The US obviously exports a lot. Once oil is removed the equation, the US exports more than imports. That says something.

What do we export...specifics. I know in the Pacific NW we export cherries, apples, and pears. My brother has worked in the meat industry which is why I know we do export a lot of beef (once again, cows are fed heavily subsidized corn keeping beef prices low!) What else do we export?

"The US obviously exports a lot"

Pretty much all our products from Apple, HP, SUN, Juniper to Cisco to Intel etc etc outsourced to contract manufactures such as Selectron, Flextronics and others like Asus, TSM to sites overseas in Asia. Last we made anything was back in the late 80s early 90s. If a product is sold, its shipped from Asia to other continents never crossing out from our borders. We don't export much of anything except food products.

We dont even ship Pepsi or Coke.. since that is made locally in China with their own production plants.

"What else do we export?"

If you want the big $$ amounts...We will be known for exporting our toxic debt/mortgages/credit card bills.

Leigh says

pkennedy says

The US obviously exports a lot. Once oil is removed the equation, the US exports more than imports. That says something.

What do we export…specifics. I know in the Pacific NW we export cherries, apples, and pears. My brother has worked in the meat industry which is why I know we do export a lot of beef (once again, cows are fed heavily subsidized corn keeping beef prices low!) What else do we export?

First off, the US is the largest manufacturer in the world -- larger than even China. It's important to remember this in any discussion. We aren't the largest exporter (China edges us out by about $200bn), but we are by far the largest producer as well as the largest consumer.

On to specifics. Our largest manufactured exports are (and you really could have googled this, these are the CIA figures for 2008):

Civilian aircraft … US$74 billion, up 1.3% from 2007 (5.7% of total US exports)
Semiconductors … $50.6 billion, up 0.3% (3.9%)
Passenger cars … $49.6 billion, up 13.3% (3.9%)
Medicinal, dental and pharmaceutical preparations … $40.4 billion, up 15% (3.1%)
Other vehicle parts and accessories … $39.9 billion, down 10.1% (3.1%)
Other industrial machinery … $38.1 billion, down 0.6% (3%)
Fuel oil … $34.9 billion, up 124.1% (2.7%)
Organic chemicals … $33.4 billion, up 5.5% (2.6%)
Telecommunications equipment … $32.9 billion, up 4.6% (2.6%)
Plastic materials … $31.6 billion, up 8.7% (2.5%).

Notice the distinct lack of cheap crap.

The reason that it seems like China and other countries produce "everything" is because ordinary people don't buy very many of the things on the above list. The US exports *very* few consumer goods -- mostly automobiles, but it is by far the largest producer and exporter of heavy machinery and precision instruments.

In other words, stuff that machines can make is imported, and it's made with the machines that we export.

We're also one of the top agricultural and raw materials exporters

And this is why I think the people who insist that the US is doomed if we aren't producing cheap plastic toys and furniture are dead wrong.

The claim that if we stopped importing oil we'd eliminate the trade gap entirely is still wrong though. We import about $300bn of oil annually, which is less than half of the trade deficit.

Kevin says

Leigh says

pkennedy says

The US obviously exports a lot. Once oil is removed the equation, the US exports more than imports. That says something.

What do we export…specifics. I know in the Pacific NW we export cherries, apples, and pears. My brother has worked in the meat industry which is why I know we do export a lot of beef (once again, cows are fed heavily subsidized corn keeping beef prices low!) What else do we export?

First off, the US is the largest manufacturer in the world — larger than even China. It’s important to remember this in any discussion. We aren’t the largest exporter (China edges us out by about $200bn), but we are by far the largest producer as well as the largest consumer.
On to specifics. Our largest manufactured exports are (and you really could have googled this, these are the CIA figures for 2008):
Civilian aircraft … US$74 billion, up 1.3% from 2007 (5.7% of total US exports)
Semiconductors … $50.6 billion, up 0.3% (3.9%)
Passenger cars … $49.6 billion, up 13.3% (3.9%)
Medicinal, dental and pharmaceutical preparations … $40.4 billion, up 15% (3.1%)
Other vehicle parts and accessories … $39.9 billion, down 10.1% (3.1%)
Other industrial machinery … $38.1 billion, down 0.6% (3%)
Fuel oil … $34.9 billion, up 124.1% (2.7%)
Organic chemicals … $33.4 billion, up 5.5% (2.6%)
Telecommunications equipment … $32.9 billion, up 4.6% (2.6%)
Plastic materials … $31.6 billion, up 8.7% (2.5%).
Notice the distinct lack of cheap crap.
The reason that it seems like China and other countries produce “everything” is because ordinary people don’t buy very many of the things on the above list. The US exports *very* few consumer goods — mostly automobiles, but it is by far the largest producer and exporter of heavy machinery and precision instruments.
In other words, stuff that machines can make is imported, and it’s made with the machines that we export.
We’re also one of the top agricultural and raw materials exporters
And this is why I think the people who insist that the US is doomed if we aren’t producing cheap plastic toys and furniture are dead wrong.
The claim that if we stopped importing oil we’d eliminate the trade gap entirely is still wrong though. We import about $300bn of oil annually, which is less than half of the trade deficit.

I dont agree, I know that we could use those "cheap crap" jobs right now. We need to increase incentives and/or raise tariffs to match China, Japan if we are to end the offshoring of American industries. Textile, electronic industries have dissappeared yet we continue to buy clothes and televisions. Returning some of these plants to US soil will be important piece of the pie if we want to improve our economy.

We will only increase the poverty in the USA without these industries.

4X says

I dont agree, I know that we could use those “cheap crap” jobs right now. We need to increase incentives and/or raise tariffs to match China, Japan if we are to end the offshoring of American industries. Textile, electronic industries have dissappeared yet we continue to buy clothes and televisions. Returning some of these plants to US soil will be important piece of the pie if we want to improve our economy.

We will only increase the poverty in the USA without these industries.

You're wrong. Kill the exports from poorer countries and poorer countries stop buying those items that we export that are on the top of the list.

Are you really advocating that we sacrifice high paying jobs at boeing, intel, or Cisco in favor of shit jobs at some random toy factory?

Thanks for finding additional information Kevin! I was only quickly looking information up. Not only does the US export all of those goods, the GDP is almost 10T while the trade deficit is a fraction of that.

The below link is a few years old unfortunately. But it does show how oil is impacting the trade deficit. It states that trade deficit went from 30B to 68B in this particular time frame, but oil went from 6B to accounting for 26B. 26B of 68B. That is quiet a bit. From 20% of our deficit to over 38%.

http://www.frbsf.org/publications/economics/letter/2006/el2006-24.html#sub1

"Has the increase in oil prices affected the U.S. trade deficit?
Figure 1 plots monthly data from January 2002 to July 2006 for both the overall trade balance and the petroleum-related trade balance; the latter includes imports and exports of crude oil, fuel oil, liquefied petroleum gases, and other petroleum products. It shows that the overall monthly trade deficit went from $30 billion to $68 billion, and the petroleum-related trade deficit went from $6 billion to $26 billion. These numbers imply that higher oil prices and the resulting higher cost of petroleum imports have accounted for over 50% of the deterioration in the overall U.S. trade deficit during this period. Indeed, looking at only the last two years, from August 2004 to July 2006, the data are more striking. The overall trade deficit grew from $54 billion to $68 billion and the petroleum-related trade deficit rose from $14 billion to $26 billion, indicating that the deterioration in the petroleum-related trade deficit accounts for 80% of the worsening in the overall trade deficit."