patrick.net

Alright Vertas, you deserve this, but I'll try to go light . . .

Vertas: "this was a better utilization of my money."

Buying a convertible for 31K when your business is only break even is a miserable utilization of your money, if one views it from an economic perspective. If one views it from a "look at me and my shiny new car, aren't I sexy, baby" perspective, then your point holds. Then, of course, it's a juvenille point.

"Good thing the wife is a nurse, they get paid pretty well." Here's a reality check for you - nurses get paid crappy, they get treated like crap by patients and doctors, that is, they have a crappy job, they are victims of hospital and state monopoly, and a couple whose total income is "break even" added together with "nurse salary" is poor and can't afford a 31k car.

Does everybody see now why I have no friends left? Who wants to hear the truth screamed into their ears like that?

Vertas further notes:"Therefore an attempt to live outside the societal norm is at best difficult and at worst impossible."
This is so absolutely silly, that my 10 year old could spot how silly it is.
It's simple to live outside of the norm. Just do it. "At worst impossible"??? Huh? I do it every day. I suppose I couldn't live in Miami and be cool. Aw shucks. I won't have the approval of a bunch of Miamians, most of which have less of what they want than me. Life is hard.

How old are you Vertas? 28? You 30 yet?
You know how I know these things? Because I had a business that was break even at one point, and my wife has been a nurse for 13 years.

Your attitude of "well, that's the culture, I'm weak, and what can you do," makes a certain side of me swell up. Your weakness makes me want to wait until you crawl up begging for bread, metaphorically, one day, and then kick you in the teeth one time before I give you the bread, metaphorically, as your comeupance for being smart enough to recognize the truth but too weak to act on it.
In many ways you're worse than these idiots who are buying negative amortization loans to speculate on houses - at least they will later be able to accurately claim that they were too stupid to see the train coming.
Yuck.

I'm not angry Vertas, I'll be angry when you ask me for bread. I read your whole response and there was very little in it that amounted to something resembling a thing that warrants a response.

Vertas, here's some constructive criticism - which is what you requested -
I advise you to spend less time using words such as "albeit" "pabulum" and "veritas" and spend more time thinking about what it might be like some day when you are hungry but can't eat GRE words. You remind me of a lot of my English major friends. Lots of talk, lots of theory, but can't change the oil on the car. They are versed in using words unfamiliar to many, and they sling them about like bricks and mortar, hoping their skill with the trowel will hypnotize their listeners. If anybody steps back, however, the big, useless pile of bricks and mortar is observed, and the canard is ended.

So veritas, be honest and make me look good . . .

How old are you?
What is/was your major in college?

Nurses are well paid in Cali? Love it there? Rich, eh? Somebody claim that?

Please.

I did 3 minutes of google searching and found . . . $27.82 per hour as the average wage of a nurse in CA in 2001. At 40 hours per week, that's about 55 grand a year. Several sites said California paid slightly higher than other states.

Who thinks that's a lot of money for somebody with a college degree?
Who thinks that's a lot of money in Cali, where it costs 1/5 mil to buy a crap box?
If you're making 55k in Cali, you're poor.
And what do you get for your 55K?
You get to work weekends, holidays, night shifts. You get to work for hospitals that suppress your wage because you are not allowed to strike. You get nasty patients and jerk off doctors. You get ugly stereotypes. You get virtually ZERO wage growth with experience.

What lots of available overtime? Great. You can work you life away to make 80 grand a year. I can make 80 grand a year driving for Dominos if I want to work 70 hours a week, and I didn't need to go to college and spend 100 grand for the priviledge.

Finally, and then I'm done, for you people who have state pride, please dump it.
You think Cali is a great place? Why? What I see is crummy education, crummy water temperature, a huge state economic problem, untenable illegal immigration, overbearing social service costs, earthquake risk, a huge housing bubble, unfair real estate tax proportionment, and high taxes.
What am I missing? Please let me know.

From ChooseNursing.com

"Salaries for new RNs in California range between $62,000 and $74,000 per year"

And I meant 1/2 mil for a crap box, not 1/5 of a mil, which gets you a dog house.

I think debt is not necessarily a bad thing, so long as one has a positive and steadily growing net worth, especially if it is possible to finance at a rate that is lower than your conservative investments.

But debt should not be seen as a way to amplify consumption. And watch that leverage! Getting increasing debt-heavy is walking a tight rope. Will the "live rich, die broke" dream becomes "live rich young, live miserable later"?

Escaped from DC, how is your new house?

"You think Cali is a great place?"

There is no more great place in the world. Sad. :(

I think human is the problem. Our so called civilization with incredible short-sightedness is ruining what used to be God's green earth. I

Veritas, your are 36 and you had a Town Car already? I thought that is a car for people that are 63. ;)

Veritas, you have not seen any personal attack yet. Just try saying, "they are not making land anymore."

I am a firm believer in living beneath your means. My definition of that is putting money aside every month into savings/investments and not ratcheting up the debt.

But we seem to live in a culture that defines success by your stuff. Can't afford that expensive new car? Lease and even more expensive one, who cares that you don't really own it as long as you're seen driving it. Why buy a house you can afford when you can use a NAAVLP and buy a bigger house that all your friends can admire. And the beat goes on. I am not surprized that we are seeing a phenomenon like the "gold collar generation" when you look at the example the parents are setting.

Is the situation of Veritas a social norm in USA?

I do not think so. I believe Veritas is still far too responsible to be the norm. Scary.

Has Americans learned to cope with the stress of handling so much debt?

I believe most Americans are not aware of the situation yet.

Escape,

Believe me, buddy, I feel your anger. It's tough to be surrounded by a sea of buy-now, pay-never nimrods who are busy leveraging the whole country into a very deep financial hole. And we didn't even get a vote on the matter (or it didn't count).

But let's not bite the heads off people who, while admittedly flawed, are at least honest about owning up to those flaws. Nobody's perfect, and Veritas was trying to make a valid point. Our culture of perpetual debt and over-consumption didn't spontaneously arise from nothing. As SactQt pointed out, even the most conscientious parents have trouble protecting their children against the onslaught of advertising and indulgence by well meaning but misguided relatives. Is that an excuse to give in? No.

Please, let's all keep it cordial --there's plenty of room here for everyone to contribute and be heard.

Now for the benefit of the blog and to ensure Patrick continues to allow us to reply here, may I suggest we direct our future responses to the question at hand and not each other. Let’s attack and challange the argument and not the person.

Read this after I'd already posted --well said...

So I banked my cash, got my car payed off, and now have zero debt, and a fair amount of savings in the bank. Scary thing is, everybody says I’m nuts for not buying a house using dumbass financing; ie they owe millions, and I’m actually worth something.

CentralCali,

Yes, unfortunately this is upside-down, debt=wealth New World Order we're living in. People who pay down debt and live within their means are stupid losers, while people who are leveraged beyond all reason are hailed as brilliant fiancial geniuses. But don't worry, all financial manias eventually end, and housing's day or reckoning is (at most) no more than a year or two away --if not sooner. Your patience and common sense will eventually be rewarded.

Until then, don't drink the NAAVLP(tm) Kool-Aid ;-).

I probably don’t make as much as many people on the this board (I work in a factory, yes there still are a few left in Cali), and pull about $70,000 per year (just recently got a nice raise).

That is a respectable salary. I actually admire manufacturing because they are making real things.

Sit tight and buy that house for 300K with 30% down in a few years. :)

heckabrews,

Thanks for the Gold-collar generation atricle. Seems like it was tailor-made for our thread. Btw, next time you can just tell people to use BugMeNot.com - gets around the annoying registration issue.

Veritas:

You asked for some constructive advice on escaping the American spend flow.

This really amounts to having good habits...and it seems for me at least that you can develop habits either from fear (that you'll go broke) or desire (some goal you really want achieve). And you either get this by going through this fear/desire yourself or by seeing a hero do it (depression-era grandparent).

But today, look at fear and desire. There is no fear. My grandparents were not sure we'd win WW2. Who threatens us today? Sure we had 9/11 but there's no draft, and it seems no military can beat us - at least none that isn't connected to an economically-linked nation. Who do you personally know that has ever gone hungry? Who has had to quit school to support a family? Today, who *can't* get a mortgage? In short, there really is no fear motivator anymore...except the fear that you are missing out on the party.

And what about goals? The goal is be a celebrity; to be relevant, wanted, in the limelight. To be Carrie from 'Sex in the City'. Who really wants to do something stupid like build a factory and watch product flow out? That's what lowly people in China do. That's where John Galt would find satisfaction save that he couldn't own property on which to build his gulch.

*We* on the other hand you see are all about *style* and *ideas*. Remember, *we* lead the world. Kids truly think it makes sense to focus on being an NBA or rock star...I dunno, my High School had 2000 people, and I don't know of one of them that is famous today, but who took statistics in school?

So if you can live a pseudo-celebrity life by being a WalMart cashier (rather than manufacture the things you collect money for) with plenty of Taco Bell food to eat living with your parents, then why change? As you said, why not take easy credit and treat yourself?

And the answer is, because 1) Life can be MUCH better than what strip mall living/MTV says it can be, and 2) you need an insurance policy against the pain if and when judgment day comes.

But if there is no fear of judgment day, and no burning desires beyond what you already can attain, then I hate to say it, but I think it's probably hopeless to try and change.

And who knows...maybe you're right and this is a New Paradigm and I'm missing it. Maybe I'm an idiot for hoarding cash for the day when I can cashflow a property. Maybe we can run a indefinitely country on style. Maybe the rest of the world is happy to be nice to us in all sorts of way because we're piggies at their trough. Maybe engineering and production is now as passe as agriculture. Maybe the Government will bail out a crashed property market, and I'll end up footing the bill AND losing out on a market that never drops.

But you see, I'm hopelessly stuck with my attitude as you are with yours.

"He is an Englishman, yes, he is an Englishman!"

Darn it. Note to self - Englishmen and english majors assume the same comportment.

OK veritas, nice response, and thanks for the personal data. I was wrong on both counts.

I apologize to the board for lowering the standard.

HARM

KG,

I would consider the source: "PMI Group, a residential mortgage insurer." Even so, the fact that SF, LA & Sac made their list of "13 Riskiest Housing Markets" at all tells me that even industry insiders are now concerned. Quantifying risk is tricky --there are many variables, not all of which can be precisely measured-- but I would absolutely peg that risk much higher than 40%.

We're in for a rough ride ahead --buckle up.

I apologize to the board for lowering the standard

No worries --no permanent "HARM" done ;-) .

KG, probability cannot be proven right or wrong, no? :)

Inquiring Mind, rising median price is expected when price compression unwinds. A decline in volumne on the lower end will produce just that.

I expect median price to continue going up well into a downturn. I do have a LONG position on SF median price hedgelet.

I expect median price to continue going up well into a downturn. I do have a LONG position on SF median price hedgelet.

Regarding this, I do not mind being wrong on this trade. :)

Veritas:

There are different types of greed. There is greed for other people's stuff, greed for ill-gotten gain (incl. gambling), and greed for short term pleasure. This leads to ruin.

Then there is the kind of greed that builds companies like Toyota. That kind of greed is evaporating. Henry Ford has left the building.

Anway, I have the same panicky feelings about the dollar. Read the Economist. They say the $ will crash but they will also show you that there is no 'perfect country' whose currency/economy isn't at risk too. The EU is far from ship shape; Germany has 11% unemployment, Italy is falling apart & thinking about returning to the Lira, etc. Japan is ageing and becoming the Brittain of Asia in terms of relevance.

Remember also that the dollar has weakened, sure, but that mainly affects you if you visit Europe. There are too many exporters for Germay to have pricing power on BMWs, for instance...so they compress worker's wages and they don't hire people.

What to do? Maybe buy some Chinese currency....but there is instability there too, and you might be waiting a long time for the payoff without much income along the way.

Ireland and Norway are supposedly on fire too. Learn! Research! Take a risk!

BTW, I have *NO PROBLEM* with people taking advantage of cheap credit as you did. Heck, I might very well take advantage of a GM 0% loan even though I had planned to pay in cash. My whole rant previous to this one was talking about the idea of how to take advantage of this AND THEN not spend the money you're saving on other junk.

Does any one know what those indicators are?

Perhaps there is no such thing. That's why they are "absent".

“Hot Bay Area keeps getting HOTTER:”

This doesn't worry me. Tech market had fast gains right before crash. Who knows, this may be a good indicator that a slowdown is imminent.

Somebody may have to alter their predictions soon?

Are you talking about me?

What changed??

Probably because of the "cultural rubbish" on TV. Sorry.

I do believe in cycles but I doubt that they have fixed periods. In his book, The Alchemy of Finance, Soros has a pretty good explanation of credit cycles.

At least I have to agree with one thing : that nobody really knows what’s going to happen next few years...

Yes, but we must act according to our best projection and react to any change in such projection.

RE: CNN Money article (btw, Mocha46 --check out TinyUrl.com)

"Homes: Cashing out might freeze you out - Is it ever a good idea to try to time the real estate market?"

The advice from the real estate industry pros is: Resist this temptation. It's almost impossible to time this market.... "To make a decision on your home on a purely financial basis makes no sense," argues Liebman."

Riiight..... So, according the real estate "pros" we should RESIST the TEMPTATION to "time the market" and sell at/near what we believe to be a price peak. But... buying multiple "investment" properties with $0-down no-doc NAAVLPs is a FINANCIALLY RESPONSIBLE move. And using multiple cash-out refis/HELOCS for 50" plasmas/Humvees/vacations is the height of FISCAL PRUDENCE and conservative decision making.

And they KNOW cashing out's a bad idea because "...many experts predict that the strength of the housing market will continue for the near term", and "They're not making any new land..."

RE: sales volume

It is only 7.7% down because some counties (Solano/Napa/Sonoma/Contra Costa) had big gains in volume. Santa Clara county had double digit decline in volume.

HARM, nice fable. :)

Fake P Says:

Waiting in Vegas: Why puke? The article makes a good point, and it makes the point in relative terms with the use of the word “might” (Homes: Cashing out might freeze you out) instead of absolute terms (like “must” or “will”) often preferred by Bubbleheads, even in fact of so much uncertainty. You have placed your bets when you chose not to buy a house, so lets see who end up the wiser…:p

Fake - the article was overwhelmingly slanted AGAINST cashing out and actually used "not making any more land" as a justification (along with biased RE insider opinions). Good points my ass....

"So PLEASE offer some constructive advice or none at all."

Be a better person. It's hard and the reward, if you are not religious, is unclear. But it is the right thing to do.

Oh, so easy to say... Oh, so hard to do...

Cheers,
prat

Thanks, Peter. Is this the first time you've read it?

Who is MarinaCrime? It is one of us. :)

there was never any promotion of speculation in the article

Well, this is certainly true --and that's not what bugs me about it. What galls me is the appalling hypocrisy (and lack of awareness thereof) on the part of these RE insiders. Gee, when you're "market timing" in favor of rising prices/broker commissions, that's just good decision-making! But hedge against falling prices? Bad "gamblers"!

I don't know if my "bubbly head" is swelling, but my stomach's sure churning.

Your bubbly head is about to burst with so much anger, bitterness and hatred…:p

Fake P, I am sure you hate me more than I hate you.

Hmm... MarinaCrime's writing style sounds suspiciously like TWITs.