patrick.net

astrid, at one point I was listening to Jim Cramer's podcast daily. I know, I know, most people here hate him. But if you can get past the ridiculous antics, the guy has some intelligent observations. He stopped that podcast now.

On my current list are Coffee Break Spanish and LearnItalianPod.com. The former is a little slow and the latter a little hokey, but they are useful (mostly as a refresher). I've tried Nature, but their podcast doesn't really lend itself well to words.

Brand,

I don't think those Lexus driving people are practicing Buddism. What do you think?

Just recently, Paulson assured foreign investors that US assets were safe and would not crash.

Yet more and more subprime lenders are falling by the wayside because they did not hedge their risks. Instead, they sought after and leveraged risk with no regard for the potential consequences. And they made a lot of money doing so. But few things last forever.

Hedge funds have also been making a lot of money. And they have been doing it the same way as those subprime lenders... chasing risk with no conscience. That's because they had to attain those lofty yields and justify the hefty expenses.

Paulson could be right. But I just wonder who owns all that debt in the subprime area or the $2.5 trillion worth of equity value that disappeared last week. If Paulson were wrong, would anyone care to guess where the crash will manifest itself next. You have probably guessed my suspicions.

Re: Violence & Crime

My only point in starting this is that the AOL article talked about how crime had fallen to very low levels from the early 2000's and was spiking significantly in 2006. It was funnily enough going up in all the bubbliest areas. The other interesting crimes to consider that are literally out of control are identity theft and credit card/mortgage fraud

I didn't imply that nice areas are turning into ganglands, but changes are happenng, There are some very nice areas that are now overgrown ghost towns. Some of Patrick's news links talk about neighborhoods with 200+ vacant homes. I should send a pic of the half completed project across the street from my neighborhood still with the sign up saying 22 beautiful homes coming in 2006! Construction has basically stopped and the only people around there are the sign twirlers on weekends. Speaking of which, they are getting older and older. It used to just be a fun job for a few young hip kids, now I see guys my age and older doing it.

A huge percentage of the guys stung by the subprime meltdown are minorities like Mr. G, but the largest $ crimes are by whites. These people make me sick, and are an embarrassment. Ever since it came out, I have told people to go see "Fun with Dick and Jane". That type of stuff is what I predict will happen. A bunch of overextended FBs who can't live anymore when they don't have their silly Yukons & Escalades, and have no more credit cards to wave in their waiters' faces.

Like everyone else, I'm enjoying this equalizing paradigm shift, but I have a real concern for what happens to these kinds of peole when they lose everything.

sybrib says: I don’t think those Lexus driving people are practicing Buddism. What do you think?

I think most people in California struggle with sarcasm. I'd love to chat about that more, but I'm off to meditate about a McMansion in gangland. ;)

Malcom: Speaking of pathetic sign-twirlers, there are a few middle aged guys that walk the streets here dressed as the Statue of Liberty, waving a sign for Liberty Tax Service. Like I would entrust my finances to a bunch of dorks in costumes.

I doubt that most FB's would turn to criminal activity in high-cost areas. The people who bought those homes have no idea how to rob anyone. However, I would expect to see a spike in white collar crime--embezzlement, tax fraud, office theft, insider trading--as those middle class folks try to save themselves from a foreclosure.

I don’t think those Lexus driving people are practicing Buddism. What do you think?

But even Ford's new CEO said that Lexus is "the finest car in the world."

What is wrong with driving a Lexus?

Didn't say there's anything wrong with driving a Lexus. DIdn't say there was anything right with practicing Buddism.

Driving a premium car CAN be a fashion statement.

Kind of like, non-Christian Chinese buying a "traditional Christian wedding" from a willing pastor. Lifelong resident of the Bay Area, I've been invited to a few of these.

A "wonderful" article on Yahoo! about neighborhoods that are great buys. Their algorithm was to take the places where the median house had experienced the greatest gains in the last 5 years. What's that word that goes with savant? Because these "journalists" are definitely savants of some kind...

http://tinyurl.com/2bwmz3

fremontrenter Says:

> Guys, I am currently a renter in CA. So I have to pay
> after tax money to landlord every month. I claim standard
> deduction on my tax return, but still have to pay AMT.
> I was wondring if buying a ($780K) house (with a $130K down
> payment) would solve both of these problems.

Fremont Renter needs to talk to a CPA since if he has $130K in cash and is making enough to even think about buying a $780K home he should not be taking the standard deduction. The California taxes will be more than the standard deduction at just over $75K a year in income (about $70K salary + the 1099 interest on the $130K). I’m not a CPA, but I didn’t think it was possible to take the standard deduction “and” pay the AMT…

Does nirvana involve a Lexus?

not usually. Enlightened Buddhists are supposed to practise 'the middle way', just like Tony Blair... The middle way would probably be a Camry, then...

(Buying a Camry would probably prove you have renounced all desires...)

fremontrenter,

Yes, the Interest part of PITI is AMT deductable, but the "T" part is not. I know it is screwy, but the whole tax code is screwy and the more you make, the nuttier and nuttier it gets.

FAB is right, you should not be taking the standard deduction in any case, unless you mean the $42,500 AMT deduction ($62,550 for married couples). It gets even worse when you start making more than $150k/yr (one HaHa), because then your deduction starts phasing out, making your federal marginal rate 35%. Add in 9.3% CA and 1.3% SDI and your overall marginal rate becomes 46% which makes home buying look more attractive. Make sure you use the right numbers in your calculations.

http://www.smartmoney.com/tax/filing/index.cfm?story=amt

Your tax situation is complicated enough that you should probably talk to a professional. Unfortunately, I cannot recommend one, since my CPA is not very bright.

If you think that home prices are going down, it is probably not that good an idea to buy a home. I think all the regular posters here think that at least real home prices are going down, most think that marginal prices are headed for a drop as well. If you believe inflation is going to take off, this might be the one, since the interest on your mortgage will depreciate in real value along with your home. Check out Randy's bubblizer for details.

astrid, my Vietnamese father-in-law is Buddhist and he is one of the worst examples of a bubble flipper I know. At one point he had six properties, but he never talks about it now. One thing I have noticed about him is that he tends to be pessimistic when things are going well and relaxed and hopeful when things are going poorly. My wife is the same way. This balances out my natural optimism nicely, actually, though I get annoyed at her sometimes when she doesn't want to celebrate our successes. Is that a Buddhist trait or something else, more akin to Taoism or just the Vietnamese or even family personality?

I guess I might as well throw in my two cents on politics: I think John Edwards would beat any Yankee the Republicans might nominate, but it is really hard to say how Clinton or Obama would do against Guiliani. I always assumed that the GOP would never nominate an abortion rights candidate like Guiliani, but maybe they realize that McCain's pro-war stance has made him toast.

Jimbo,

If Obama gets elected, they will try to undermine him with a scandal. If the scandal doesn't do him in, I'm afraid that he'll be the 5th U.S. President to be assassinated in office.

Which is a shame, because otherwise McCain is a stand-up guy.

OpinionsPlease Says:

> Quick question for anybody who knows. I heard that
> deductions on rental property phase out after you make
> something like $150,000? But is that entirely true?

It is partially true. Anyone can deduct all rental property expenses (passive expenses) against all rental property income (passive income). There is a way that people who “Actively Manage” investment property but don’t make much of a salary (less than $150K) can reduce their taxable income (people that make a lot of money can just carry the passive loss forward).

> Let’s say you are buying a 3rd property as a vacation or
> rental home. On one’s taxes, can you treat it as a business?

Yes, but if you treat it as a “business” you will need to prove to the IRS that you have a plan to make money (most people just cash the vacation rent checks and don’t mention the renal income to the IRS). It is actually legal to rent a home for up to 2 weeks a year and not declare any of the income (as long as you don’t deduct any expenses).

> i.e. it costs $45,000/own through interest, HOAs, and property
> taxes…. and if you only bring in say $25,000, you can reduce
> your taxable income by $20,000 no matter what your income
> is since it’s treated as a business?

If you rent the place for 100 days at $250 a night and bring in $25K you will be safe telling the IRS that your net income is only $12,671 (before 100 days of depreciation and other expenses related to renting the place) since at $45K a year your expenses are $123 a night. It you want to claim more expenses you will need to prove that you were 1. not using the place and 2. actively trying to rent it…

OP: Don't know the answer to your question. I'm sure many people enjoyed the beautiful day. Have you played poker with the boys recently?

OT - just read this while looking for rental properties in Mountain View - what a deal - not!

"my house is currently on the market for sale, because the housing market
is very slow right now, and I haven't found a buyer yet, so I put it for rent;
if you rent my house, you also agree that you will let my agent show
the house to protential buyer when it needed.
asking $2300.00/mth +deposit+ credit check. "

But it is encouraging to know that Mountain View IS being affected and we ARE NOT special!

"The Repos have learned to spend better than any Demo. "

Bap33,
Look at what the current Republican administration has done to domestic spending and to the national debt and the national deficit. There is a higher percentage of people receiving financial assistance than at any previous time (this after Republican control of all three branches of government for years). You have been hoodwinked.

These guys are in no way fiscal conservatives, they are massive, massive spenders. Bill Clinton looks like the most astounding, amazing fiscal conservative compared to the current administration. Take your blinders off, this administration has all of the fiscal restraint of a pack of drunken sailors with somebody else's credit card. They'll be long out of town and the damage done by the time the bill comes in.

"Buying a Camry would probably prove you have renounced all desires…"

Except the desire for decades of hassle free, low cost ownership :)

Lexus is a fashion statement.

Camry, built by Americans somewhere in the midwest, is a good value.

SFWoman,
I believe he was implying that Republicans are now as financially irresponsible as any democrat you'd care to point to.

I assume true Buddhists walk everywhere...mindfully...

Tantric Buddhists can fly...

New thread: Ask a JBR.

This piece is on the front page of the Sunday New York Times today:

http://www.nytimes.com/2007/03/11/business/11mortgage.html?_r=1&hp&oref=slogin

A login password is needed. An excerpt is below. As usual, the NYT is a day late and a dollar short, but it is on the front page...

"Crisis Looms in Market for Mortgages "

By GRETCHEN MORGENSON
Published: March 11, 2007

On March 1, a Wall Street analyst at Bear Stearns wrote an upbeat report on a company that specializes in making mortgages to cash-poor homebuyers. The company, New Century Financial, had already disclosed that a growing number of borrowers were defaulting, and its stock, at around $15, had lost half its value in three weeks.

A Booming Market What happened next seems all too familiar to investors who bought technology stocks in 2000 at the breathless urging of Wall Street analysts. Last week, New Century said it would stop making loans and needed emergency financing to survive. The stock collapsed to $3.21.

The analyst’s untimely call, coupled with a failure among other Wall Street institutions to identify problems in the home mortgage market, isn’t the only familiar ring to investors who watched the technology stock bubble burst precisely seven years ago.

Now, as then, Wall Street firms and entrepreneurs made fortunes issuing questionable securities, in this case pools of home loans taken out by risky borrowers. Now, as then, bullish stock and credit analysts for some of those same Wall Street firms, which profited in the underwriting and rating of those investments, lulled investors with upbeat pronouncements even as loan defaults ballooned. Now, as then, regulators stood by as the mania churned, fed by lax standards and anything-goes lending.

Investment manias are nothing new, of course. But the demise of this one has been broadly viewed as troubling, as it involves the nation’s $6.5 trillion mortgage securities market, which is larger even than the United States treasury market.

Hanging in the balance is the nation’s housing market, which has been a big driver of the economy. Fewer lenders means many potential homebuyers will find it more difficult to get credit, while hundreds of thousands of homes will go up for sale as borrowers default, further swamping a stalled market.

(continues)

Of course,

Brand,

The Yahoo article is written by fools, as you say. For Boston they mention Dorchester as an up and coming neighborhood. One of my friends rented an apartment in Dorchester for a while. He works for a federal agency that involves him carrying a gun, so let's just say he's not the type to shy away from a bad area. Well, after a year there he moved because it was too dangerous. When he would go for a jog (in plainclothes), the locals would tell him to "keep running, boy". And not in a friendly way either.

Bap33: Maybe BostonTransplant's friend is black.

Driving a premium car CAN be a fashion statement.

I think being driven in a true luxury car (e.g. RR, Bentley) can be a fashion statement.

Too many people are driving Lexus for it to be a "statement". :)

Unless the statement is "I am part of an original crowd."

Peter P,

Numbers never stopped the SUV drivers or the BMW 3 series crowd (though some of them might have bought them just for the car).

Nothing seems to disrupt the flow of lemmings.

Unless the statement is “I am part of an original crowd.”

That is an such a non-statement. :)

'Too many people are driving Lexus for it to be a “statement”. '

A Prius makes a more noticeable statement than a Lexus.
People driving around in overpriced American luxury SUVs like Hummers, and Yukons now look like utter morons. Especially when you know that they used a HELOC to buy it. Ha ha ha ha ha.