patrick.net

But as a middle class person, I don’t expect my kids to be “accepted” even if I send them to Ivy League schools.

I've seen it happen. Believe it or not, your ability to drink really helps. Joining the right frat (in the east coast) may really help your chances of getting a good finance job.

Peter P Says:
Welfare only works in smaller population with proportionally abundant resources. The US has 300M people. Welfare will not work.

That's ridiculous. You can upscale or downscale a welfare state to any sized population, it's simple math. America does have proportionally abundant resources, it's the most affluent country on earth, a large land mass with ample resources, and the largest oil consumer. Further, you already have a welfare state working in a multitude of ways, it's just that it's arguably not as good as other countries, and there are prevailing 'discourses' that have been generated in the public mind about why it should remain as it is. What we see is a huge abundance that is not distributed very well -- huge wage multiples, extremes of wealth and poverty, etc.

America does have proportionally abundant resources, it’s the most affluent country on earth, a large land mass with ample resources, and the largest oil consumer.

That last part isn't exactly an asset. :)

And it's that last part that will screw us over when Peak Oil hits thanks to our no-hope-in-the-future style of car-based living.

@DS,

There is an important difference between price-bargaining and price subsidies. In the case of subsidies, all that is occurring is the taxpayer is absorbing part of the cost, while the ultimate cost is never even a consideration. There are cases where this is a socially desirable solution (providing expensive medicine to poor people for example), but in the end, everyone else bears those costs.

In the case of collective price-bargaining, the government itself acts as "informed consumer" on our behalf to negotiate a better price from competing suppliers. In other words, it uses free market capitalism to the consumer's and the taxpayer's advantage. IMO, a far more effective solution at containing costs long-term.

they are doing both, HARM :cry:

because one method by itself is not enough to guarantee affordability to the public...

Well when you put it -that- way.
I prefer to identify myself as a New York-American.
And our government isn’t in corrupt shambles… compared to Somalia.

heh, no.

oil is definitely a problem going forward. I've got some uranium I can sell you...

DS,

Your analysis is correct, but I think the cost of the PBS is going to become a big issue going forward. And people do abuse it; because, sad to say, they will always over-consume a "free" good.

What do you think of last May's Super changes? I was in the UK at the time, but I've been to a couple of seminars since returning and I consider the current rules absurdly generous to self-funded retirees (even though I fully intend to take advantage insofar as I can :twisted:).

I did west coast schools admissions as an alum officer for an Ivy League college for about four years

I did interviews for my non-ivy league east coast school for 2 years.

But I didn't really care so I would tell the kids that they could ask me questions about any east coast school, and I would just give them frank advice I wish people had given me: "Don't take it too seriously. Those are 4 years of your life you'll want to remember." "Get a job in the summer. Period."

But the one piece of advice that I gave that would always trigger fear and shock was: "DON'T BRING YOUR CAR."

Especially the kid who was driving a brand new Toyota Highlander.

"Seriously?"

And was also thinking of going to Columbia.

Ah, California.

StuckinBA,

I was reading an article only this week that pointed out that an unusually LOW percentage of CEO's at the 50 biggest US companies have Ivy League backgrounds at present. IIRC it was something like 7 out of 50.

Something like 60% of kids attending Ivy League schools receive financial aid of some sort.

But just to be clear, the school offering semi-subsidized loans is considered financial aid. When I was applying and read that, I thought it meant "grants". Boy was I in for a surprise. :(

And people do abuse it; because, sad to say, they will always over-consume a “free” good.

Yes, game theory 101. There is no free lunch.

Looks like my earlier question about an Email point for 'Guest Thread Suggestions' black-holed. Pity, I still think it's a good idea.

I was reading an article only this week that pointed out that an unusually LOW percentage of CEO’s at the 50 biggest US companies have Ivy League backgrounds at present. IIRC it was something like 7 out of 50.

Stanford's not an ivy - how does that factor in? :)

I hear Google doesn't require a 3.0 GPA anymore to be employed. Hurray!

Especially the kid who was driving a brand new Toyota Highlander.

And was also thinking of going to Columbia.

LOL. Was it a lot of work doing the writeups after the interviews? I've been thinking of doing something like that to help kids out. But don't have a ton of time.

There was 1 unofficial frat at Harvard, and a good number of what they called "finals clubs," which I think are pretty similar to frats except you don't get to live there. That's where the real old boys clubs were.

Was it a lot of work doing the writeups after the interviews?

Not really. But I wasn't invited back after I was too real and word got back that I had said some negative things about the school. :(

It's not like any of those things were exactly secrets. Oh well. Their loss.

HARM,

Wouldn't it be a piece of really useful research if someone was able to plot subsidy level against abuse level for a particular good or service? Especially if the result could be extrapolated.

Here in Australia there's been a bit of discussion about EMTR (= Effective Marginal {Income} Tax Rate) recently. Where I live there are points at relatively low income levels where people on welfare face an EMTR of 80%+, due to a combination of taxes and withdrawal of benefits.

My own nephew has told me he carefully schedules his work to keep his income just under one of these threshold points, and I can't say I blame him. It basically makes no sense for him to earn more than about $140 a week unless he's going to get $500 or so.

This is, of course, a huge incentive to get into the black economy.

eburbed,

The article writer actually referred to "Ivy League + Stanford + MIT", my bad.

http://www.prudentbear.com/articles/show/90

They’ll probably come through great, but having drug addict and convict parents and having to keep younger siblings doctors appts and register them for school, etc.

When I interviewed for Harvard, the interviewer strained to find some sob story for me to get in on. "Do you parents have any problems that you had to overcome?"

I knew I wasn't a very good candidate - but that certainly didn't make me feel better.

BTW, I didn't know the kids could read your report. I thought it was confidential.

“Do you parents have any problems that you had to overcome?”

Easy question.

Even if you had perfect parents, you could always say that your parents were trying to be too perfect and that you had to learn to face reality yourself. :-P

eburbed Says:

> I’ve seen it happen. Believe it or not, your ability
> to drink really helps. Joining the right frat (in the
> east coast) may really help your chances of getting
> a good finance job.

This is not just an East Coast thing…

It is biggest in the South where there are many firms with over half the guys from the same frat, but even here in SF there are many firms with a high percentage of guys who were in the same fraternity. More than fraternity ties it is after college groups that seem to help people get jobs. I can quickly think of a dozen firms in SF where over half the guys are Guardsmen, Bohemians, or members of the St. Francis YC or O Club…

I thought the report was confidential too. But my wife had a work-study job in the admissions office just doing filing. I bet she could have went into the archives and pulled out anyone's file.

I shouldn’t say the kids were losers, they actually weren’t. They were exactly the types I’d hire as babysitters. They do as they are told and are nice and responsible. They were just over programmed and not very individualistic.

This is gonna be great. I need a source of potential baby sitters. On second thought, these kids sound like sort that are most likely to get into trouble when they're left completely alone for the first time.

I just thought interviewing would be a nice way to talk to ppl I wouldn't normally have the chance to, and get some good stories to tell. Maybe I'll do it next year when I have more control over my schedule.

ajh Says:

> I was reading an article only this week that pointed
> out that an unusually LOW percentage of CEO’s at
> the 50 biggest US companies have Ivy League
> backgrounds at present. IIRC it was something
> like 7 out of 50.

Can anyone name a top 25 VC firm where half or more of the partners DID NOT go to Harvard, Stanford, or Wharton?

FAB,

The interesting thing to me is the article in condemnatory and IMHO rather elitist. It proposes that this low Ivy (+Stanford/MIT) percentage correlates with the overriding characteristic of the current crop of large-cap CEO's being greed rather than intelligence.

I would personally consider noblesse oblige somewhat obsolete as a business principle.

(Link to article posted in reply to 'eburbed' above.)

yeah, sorry to imply FAB's comment were yours, SF, just omitted to cite everyone's names for less typing, and just addressed a cluster of similar ideas. ;)

ajh said:
I think the cost of the PBS is going to become a big issue going forward. And people do abuse it; because, sad to say, they will always over-consume a “free” good.

I don't think it's as bad as all that, because there is a small contribution or 'hurt money' when you buy scripts at say $15-30, and how many extra antibiotics are you going to want to buy anyhow? Plus the prescribing doctors themselves act as gatekeepers - both quantity and type of med. It's free or very low cost only to pensioners, and, once again, why over-consume antibiotics, and there's not so many pensioners around. The system has been in place for many years now, and is not in fiscal crisis. Similarly, bulk-billing and free provision of medical services has also been in place for many years. The HIC has to watch its costs, of course, and make decisions about what it will subsidise. Sure, there is an aging population, but maybe that's where the $12bn Federal surplus will come in handy...

What do you think of last May’s Super changes? I was in the UK at the time, but I’ve been to a couple of seminars since returning and I consider the current rules absurdly generous to self-funded retirees (even though I fully intend to take advantage.

Not entirely sure. I haven't really appraised it this time around, there is the 'free choice' of provider feature now, which is fine, I guess, but not worth the expense of running ads all over buses and TV to tell people about it. (More 'you deserve free choice' voodoo rhetoric.) The Labor party had a number of Super reforms in mind such as tying it to tax file no to trace 'lost super' amounts better, and so forth, which I endorse -- as a govt-mandated pension replacement, I believe govt needs to guarantee Super won't be lost, etc and make it easy to roll over amounts.

Coincidentally, I linked to an article in The Australian a couple of threads back which suggests the Super scheme has stabilised the Oz economy, and set up upcoming retirees in a way EU and US retirees simply won't have access to...

SFWoman Says:
Eminent domain is considered to be very extreme in the United States, and is extremely unpopular, as can be seen by the recent uproar over the Supreme Court decision upholding the right to transfer property from one individual to another for private development uses, while paying the owner the going MARKET RATE for the property. To not pay the owner market rate would be considered an illegal seizure of private property, which is one of the few constitutional rights this administration hasn’t considered tinkering with.

I agree it's not terribly popular with people at first sight, although it is ultimately in the community's interest. It could be managed reasonably easily in the case of redeveloping unused commercial premises in brownfield sites, though. And mandating an affordable housing developers levy is one way of forcing down 'market prices'. The Roads Authority here is always buying up houses to demolish for freeways, so it is exercised regularly. Further, the state govt claimed it would 'resume the land if necessary' to build a desalination plant at Botany Bay. It requires some leadership and planning, something govts are supposed to provide. There is nothing illegal about exercising eminent domain, it in fact IS the law -- nobody really owns land but the state, in fact, which is on-granted as supposedly 'freehold' title. Some of the 'market rate' prices offered by govt can be pretty begrudging also.

The North Beach projects (Fisherman’s Wharf) are attractive on the exterior, but aren’t exactly some sort of urban utopia. The cable car turn around to one of the Fisherman’s Wharf lines is there, and there are a lot of muggings, and the last time I walked by the projects (to take my kids to Barnes and Nobles to redeem gift certificates) there was a stabbing in a street fight in front of them.

These sorts of things are unfortunate. Unfortunately, the 'middle middle' and 'lower middle' are missing out with these sorts of band-aid housing affordability schemes. You have to show up pretty broke to be eligible, and with that comes social problems. I see the FW's project as the merest beginning of a solution. Note that FW apartments are not for sale, only for rent. I am arguing for a forced cooling of the market regarding land price inflation, involving the sale of cheaper housing with price covenant caps as well as providing rentals.

I think it's fairly well established that the 'housing boom' is really a land value boom based on location -- the value of the house itself is fairly immaterial. I'm suggesting ways of depressing land values by fiat, if necessary, although there will probably be an automatic market-based depression in prices in the near future, as we are already seeing.

DS,

everything is great about Oz except for the water problem. I was down in your neck of woods a month ago, and the drought was so severe that all the major cities were put on a water alert level of 4 (max 5). I read somewhere that you guys need to start drinking recycled water pretty soon. I tried some of your recycled water, all I have to say is, god bless the Ozzies who have to live with this thing day in day out.

Since you guys have so much energy and such an extensive coastline, why don't you just build more desalination plants? Recycled water sounds like the last resort for a landlocked country which you are not.

They could be recycling more, and using less. However, things like swimming pools then become a luxury and a cardinal sin. The stormwater design of the coastal cities, where the rain tends to fall, has been to get it out to sea as quckly as possible, like the European model, rather than try to harvest the rainwater. City populations have increased, and the rainfall patterns have retreated to the coast away from catchment areas. Major cities are on Level 3-4 generally, some other areas are Level 5.

They have to look at desalination, however most of the power to the plants would be from coal-fired power stations, so there is an environmental dilemma of sorts -- do you produce more CO2 to solve the water problem? The other option is to start building nuclear, but there has been a longstanding tradition in Oz to never construct a nuclear plant. (Selling uranium to other countries is fine, however...) There could be a nuclear future there though... The desal plant was put forward in Sydney as the best choice, then taken off the table because it was unpopular for those reasons. Now Melbourne is deciding. I think they just built one in Perth for about $400M...

As they point out, they need "a 'security through diversity' strategy. This approach comprises seven key platforms - water trading with irrigators, water recycling, enhanced catchment management, demand management, new groundwater, new surface water and the construction of the new desalination plant."

There's a page of links to 'environmental' stories I just stumbled upon while discovering that desal plans are back on the table. Buried amongst the links are references to desal, drought, etc. There's an amazing technique using 2 satellites and the gravity of water which measures global water levels:

Environment

Something about world poverty, Warren and Bill, and top US earners from Peter Singer of Princeton:

Hey buddy, you can spare a few billion?

Lastly and equally worstly, on rent control, etc, something from NY Times about selling Stuyvesant Town and Peter Cooper Village and taking off all rent controls. Long article. On topic, is this how development and housing allocation should be conducted?

The firm that ate Manhattan

The two complexes were designed to provide budget accommodation for middle-class tenants. Around three-quarters of the apartments have regulated rents at a third to half of market rates, though the caps are expected to be progressively removed.

The sale of what had traditionally served as an affordable, middle-class oasis for firefighters, civil servants and nurses hit a nerve in a city exhausted by skyrocketing real estate prices that had sent the cost of an "average" condominium well beyond $US1 million. Tenants, housing advocates and much of the rest of the public feared the new owners would remould the complexes in a way that would put them beyond the financial reach of many New Yorkers - a process already under way in most of Manhattan and a good portion of Brooklyn.

For all of the deal's accolades, it also illuminates the financial leaps of faith that real estate buyers are increasingly taking. Once, buyers priced properties based on existing cash flow. Real estate executives say that calculus would have generated a $US3.5 billion price for the complexes that Tishman Speyer bought. But buyers are now looking to the future, building models of anticipated cash flow when determining how much to bid. The Stuyvesant Town deal, with its $US5.4 billion price tag, reflects the new math, and analysts and rival bidders say the hefty price means that the deal will not show a profit for as many as six years.

Tishman Speyer declined to discuss financial terms of the transaction. But in the view of most real estate executives, the apartments in Stuyvesant Town and Peter Cooper Village will emerge from price caps imposed by rent regulation laws at an increasing rate. When that occurs, the executives say, rents and profits will then rise steadily. If that doesn't happen, however, the deal could turn out to be a very costly minefield.

A moment of silence please for the man whose invention may sustain FBs for many months to come -

http://tinyurl.com/y6q6pk

Paul,

Mr. Ando will be missed by FB's everywhere. For a goof search youtube for: "Real Financial Heros". You'll laugh your @ss off!

Different Sean Says:

> Lastly and equally worstly, on rent control, etc,
> something from NY Times about selling Stuyvesant
> Town and Peter Cooper Village and taking off all rent
> controls. Long article.

Can you quote where the long article says they will be “taking off all rent controls”?
Rent control in NY (like here in SF) is not going away any time soon. You may have read that the sentence “But in the view of most real estate executives, the apartments in Stuyvesant Town and Peter Cooper Village will emerge from price caps imposed by rent regulation laws at an increasing rate.” means that they are getting rid of rent control but all it really means is that since rent control keeps rents so low huge numbers of people will stay in the apartments for their entire lives. Since a lot of young working class people moved in to the apartments in the 1940’s and 50’s are at (or past) the magic number that the Met Life actuaries calculate every year statistically there will be high turnover in the next few years but “rent controls” will still be in place (for most tenants) and will keep restricting the increase in rents for (most of) the new residents. I had a long discussion with a friend from Carmel Partners before his firm bought the Parkmerced here in SF (the sister property to Stuyvesant) back in 1989 (from the “Queen of Mean”) for just over $300mm. Sitting at his desk in front of the Argus screen I could not see any reasonable way for them to make any money at that price (over the years I’ve spent a lot of time on a much smaller scale putting SF rent control deals in to Argus for my Dad). It turns out that I was right and Carmel didn’t get much cash flow from the (old begging for capx) property (less than they would have got from a CD) but they ended up selling right around the top of the market (at the end of 2005) for over $600mm to a JP Morgan Investment fund.

> The two complexes were designed to provide budget
> accommodation for middle-class tenants.

In America everything we do is for the “middle class”, but the truth is that 50 years ago those were nice apartments that only upper middle class whites (the article mentions that Met Life was strict on the white only policy when they said: “Negroes and whites do not mix.”) could afford. My parents (who rented a nice clean older apartment in the Mission after they got married) still refer to the young couples that rented at Parkmerced in the early 60’s (paying TWICE as much as they were) as “rich kids”… I hate to see anyone loose money (even idiots like Casey from I am facing foreclosure), but over the past year I have been blown away by the crazy pension fund deals (and the crazy financing that allows them to happen). This is not going to end well and I won’t be surprised if we will end up having rich real estate guy jr. begging the city of NY to bail him out in a few years…

CleansingSphere,

Very disturbing. Their "Just Pay" motto will bite both WFC and ORIX in a big way. What I found particularly offensive was their "double-recovery" tactic of writing off a defaulted loan as a total loss (for tax purposes) and then concealing any monies actually recovered from co-investors! That's where they really screwed up. Now the IRS is involved.

Oh and the part about sticking their investors with THEIR needless "Rambo" litigation expenses was simply golden. Fortunately I parted ways with MBS paper in 2004. After reading this I doubt seriously I'll ever revisit them again.

Actually, score 1 for Mt. View Renter! In his example it was crooked REIT managers but this is close enough. I now trust these guys about as far as I could throw them. Nice work CS!

"But hey, Top Ramen tastes a lot better when you eat it off a granite counter top"

I bet this video feels more like a documentary than comedy to many.

DinOR,

The financial heros are hillarious! I was thinking of part 3 when I read the Ando article. Thanks for pointing it out though. I didn't realize that 3 parts existed. Good times!

Paul