patrick.net

"I don’t even understand the points you are making they are so far removed from what I have said in my posts."

Now you are admitting that it is you who don't understand my posts, I thought it was I who misunderstood your points. I have for the last couple of days made a very consistent point that I disagree with your/article notion that an investor who loses money on a house is somehow subsidized at the cost of taxpayers. You moved the topic from not just personally occupied homes for the MID deduction (which is what the topic was) to basically saying that interest as an investment expense was a tax loophole to be closed. (paraphrased feel free to correct me if I am misquoting). When I asked you if you realized that income tax is designed to tax income you said yes, but then continued with the same drivel about gurus talking people into buying houses and somehow this was at the detriment of the taxpayer.

Different Sean Says:
July 8th, 2007 at 7:51 pm
"Let’s not forget it’s the rich who control how much the poor get by wage setting. The rich also control how much the rich get…"

Really? No other market forces at work? The poor are paid just what the rich FEEL like paying for their services? I'm really not trying to be rude but you seem off today, have you been drinking? Not judging, I am really curious, you seem half cocked today.

Randy H Says:
July 8th, 2007 at 7:55 pm
"And why the focus on “the rich”? Working class people waste their money too. Why should we subsidize them for buying X-Box gaming systems, Ben & Jerry’s cookie dough ice cream, or high-class bio-dynamically NO GMO milk? If Nascar Ned wants to buy a PS3 or get his wife an iPhone then it *should* cost him exactly the same amount as it does me. Income taxation subsidizes his behavior and penalizes mine."

See this is where I start getting a little nervous. Even the smallest pleasures are now being scrutinized as waste, luxury, or excess. I do agree conceptually, I just can't bring myself to start passing judgement on what other people do. I live my life pretty conservatively, well within my means and I know others can't for some reason.

>> Not that any one cares, but here’s an update on my search for a rental: Not Going well.

FED will make conditions such that everbody has to pay:

* traditional renters: pay rent for space

* so called owners (debt slave) : pay rent for money

FED serves only one master -- the banks.

Here is a story on Chindian mafia:

http://www.mercurynews.com/ci_6326347?nclick_check=1

`Honors students' Niehoff received a fax from SBC on Feb. 8, 2006. The IP addresses belonged to a 49-year-old man named Greson Ma who lived at 766 Beechwood Drive in Daly City. It was a nice neighborhood with ocean views. Homes there sold for more than $600,000.

The Daly City police knew Ma's address well. Three and a half years earlier, they had arrested his eldest sons - Alvin and Calvin - for using stolen credit cards to buy stuff on the Internet. Greson Ma was not charged in that case.

Daly City police detective Joseph Bocci caught the brothers in October 2002 as they were picking up a $1,900 minibike they had ordered from an Internet retailer with a stolen credit card. When confronted by the detective, Alvin politely explained he had gotten the credit card number from someone he met in an Internet chat room.

Then in their late teens, the brothers were unlikely criminals, Bocci recalled. They were mild-mannered and respectful. They looked like "honors students," he said.

Their criminal scheme was similarly clean-cut: They stole identities, bought stuff online and resold it.

The brothers were convicted of grand theft and placed on probation in 2005. However, little changed in their daily lives.

Calvin Ma graduated from Westmoor High School and joined his brother at the College of San Mateo. The brothers took turns watching a younger brother after school. They worked at Circuit City in Daly City.

Alvin organized an Asian-American beauty pageant in San Francisco with support from See's Candies and the Oakland Vietnamese Chamber of Commerce. The videos of Alvin Ma's girlfriend, Linda Phung,being named Miss National Asia in the summer of 2006 are posted on YouTube.

From outward appearances, no one would have guessed Alvin and Calvin were living a double life as digital gangsters.

Niehoff served a search warrant on the Ma home on Feb. 14, 2006. The two-story house was painted pink and protected by a locked security gate. Neither Alvin nor Calvin was home when the detective arrived, but there was a Dell computer in the living room. Niehoff took it and gave Greson Ma a receipt.

Back in San Jose, Niehoff quickly found a folder on the computer containing e-mails written by Twnkletoe. He also found logs of Internet chats. In stored instant-message conversations, Alvin Ma bragged of using stolen credit cards to buy things on Craigslist and eBay.

Ma boasted how he used a free software program called "Dark Mailer" to create e-mails with fake headers that appeared to be from AOL or PayPal. This practice is called phishing, and security experts say it represents one of the most serious threats to consumers' safety on the Internet today.

Phishing for passwords "It's quite easy to make up an e-mail that looks just like it's coming from a legitimate company," said Robert Chestnut, eBay's global head of trust and safety. "Everybody gets these phishing e-mails with the eBay logo and PayPal logo, the Bank of America logo, the Amazon Logo. . . . They send them to me at eBay."

Phishing e-mails contain a link to Web sites created by fraudsters that are designed to trick victims into entering their passwords. The fraudsters then use the passwords to break into accounts in order to steal identities or money.

Phishing is one of the fastest growing forms of electronic fraud. According to the Anti-Phishing Working Group, the number of phishing Web sites grew to more than 55,600 by April 2007 - a 60 percent increase over the previous year.

Niehoff found a template for the phishing Web site "AOL.com Billing Central" on Ma's computer, along with more than 20,000 AOL e-mail addresses.

Niehoff's investigation was clearly just beginning.

PayPal was particularly helpful, he said, and assigned a company investigator to the case to help identify additional victims. Niehoff spent the next few months contacting more than three dozen victims.

As Niehoff's collection of cell phone and e-mail records grew, so did the evidence against the crew. Along with computers, they had bought and sold more than $50,000 worth of Xboxes and Rolexes. Niehoff found the Gmail account that had been used to collect passwords entered into the phishing Web site, and the PayPal accounts the group had used to resell stolen machines on eBay.

Victim snaps photo One of the victims - who by coincidence was also an eBay employee - provided Niehoff with a photo he had snapped of Kevin Lum, 26, one of the four members of the ring, with his cell phone, after Lum picked up an Apple PowerBook the employee had listed for sale on Craigslist on Jan. 11, 2006. Lum and the fourth member, Frank Lin, 22, are from San Francisco.

The Santa Clara County District Attorney's Office filed charges of computer intrusion, grand theft and identity theft against all four members of the crew at the end of July. By the end of November all four had struck plea bargains. Niehoff estimated they made off with $60,000 to $75,000 in this case.

"It was a very strong case," said Deputy District Attorney Thomas Flattery.

Now in jail in San Quentin, the Ma brothers did not respond to requests to speak with a Mercury News reporter. Their mother and brother declined to speak with a reporter who knocked on the door of their home on Beechwood Drive. None of the four defense attorneys would return phone calls.

In a letter to the judge written on April 27, 2007, Alvin Ma insisted he was "not a bad individual or just any repeating offender." Though he acknowledged he had pleaded guilty to 40 counts of felonies, he asked the judge for a chance to turn his life around.

"I feel like I lost my future," he wrote. "But I completely understand I did this to myself."

Malcom: Okay, so you're an idealist. I think that brings a different light to your statements. I, of course, am a pragmatist. But I did watch a lot of Star Trek: The Next Generation when I was a kid, so I appreciate the utopian viewpoint. :)

Different Sean: This is what I meant the other day when I joked that you're an expert at knocking down straw men, whilst complaining about other people's straw men. Although technically, saying "there's just so much wrong with your argument that I feel no need to address it at all, but trust me, you're soooo totally wrong" might not be a bona fide straw man. It might just be vagueness coupled with an odd strain of deus ex snootiness. I'd have to consult a philsophy major on that fine point. :o

But seriously now, if you're going to attack Malcom for misidentifying your point of view, you could be burdened to provide one specific instance of said transferrence. If Malcom has so maligned you (and I'm not saying that he hasn't), it should be pretty straightforward to call out some examples.

Different Sean Says:
July 8th, 2007 at 8:20 pm
"Malcolm, I have been to many ‘RE guru’ seminars and sales talks, sometimes by 2-tier marketers, and they exhort people to buy property although it is cash-flow negative upfront, as ‘the Tax Office will bail you out’, ‘the taxman is your friend’, etc"

I'm really not trying to be a dick, but you're just baiting me at this stage. You look down your nose at these people as being losers yet you've been to 'many' seminars presumably because you want to be one of them.

Brand,

Star Wars & Star Trek ironically the work of boomers who definitely don't lead by example were basically my foundations of my value system. From Star Trek, I developed my optimism that there is a solution that can make everyone happy. I fail often in doing so, but I believe enlightened people try.

Malcolm, I've been to the seminars because I want to see how they operate, including the crooked 2-tier marketers. Click on my name if you want to read my blog.

Really? No other market forces at work?

No.

Now you are admitting that it is you who don’t understand my posts, I thought it was I who misunderstood your points.

I don't understand how you draw the conclusions you do. They are non sequiturs, and flying to extremes, putting words in my mouth, etc. A straw man argument is to misrepresent another view and then demolish it, which is to demolish nothing.

With no disrespect again, I would ask you for just one example. I'm pretty confident of my conclusions and find it arrogant for someone to just dismiss someone else because not all of us care to hear someone else's points. Let alone someone who actually has a track record in the area of discussion. There weren't that many posts from yesterday or earlier today that involved us, so it should be super simple for you to find one example of me misquoting you.

Malcolm,

See this is where I start getting a little nervous. Even the smallest pleasures are now being scrutinized as waste, luxury, or excess. I do agree conceptually, I just can’t bring myself to start passing judgement on what other people do. I live my life pretty conservatively, well within my means and I know others can’t for some reason.

I am not passing judgment, because I don't view those behaviors as "frivolous". I do state they are *discretionary*, *exceptional*, or *substitutable*.

People are free to buy what they will, for whatever reason they see fit. I am not so arrogant as to pretend to know what is best for other people. I'm not going to try to understand their reasons or motivations. But I want them to be properly incentivized by being forced to pay their full share of that consumption, not stealing consumption from the "mean old rich".

There are of course obvious exceptions, but by and large those people would callously call "rich" are often among the most frugal and sparse consumers around. This is why the "trickle down" Reaganomics had a tough time. If you give wealth to the rich they like to keep it. I note that many on the left-er side of this debate would almost surely agree with me that trickle-down didn't work. But it is then a contradiction to argue that a progressive tax system is anything but regressive in practical nature. You can't have it both ways.

OK, let me call out some examples, to waste some space, whereupon Malcolm will presumably diverge on more tangents, nonsequiturs, and straw men, requiring another 1000 words:

You understand that income tax taxes income right?

Unhelpful baiting to start the ball rolling.

Right, that’s called a business loss, that’s how it works here. A net loss on a rental comes off of your adjusted gross income. You need to come and meet some Americans to really understand the pettiness here.

I don't even understand that last sentence. I've pointed out that it happens regularly, it just depends on how long an investor can sustain making a loss in order to *attempt* to reap a capital gain windfall later. They are trying to ride the inflation wave, plus the property boom, when it is booming. Surveys have shown a 'conditioning' effect, where when a market has been booming for some time, 'ordinary' people believe it will continue to boom indefinitely. AS I've already pointed out, inflation also helps the 'investor' in the long term regardless of booms.

But I’ll help you do the same as the gurus. For every dollar you send me for the next 20 years, I will send you back 50 cents.

Baiting again. However, this is exactly what happens, if 'investors' can sustain say a $50 or $100 shortfall every week for a period. You have to ask what sort of 'investment' loses money for so long, but that is what is happening. The 'investor' hopes and prays for capital appreciation that outweighs the loss, as you have indicated elsewhere.

If you send me 50c back for every dollar I send you for 20 years, and then pay me $1M on top at the end of it, you've got a deal, as that's what these 'investors' expect to happen.

All kidding aside, here you don’t even need it to be an investment property, you can claim a second residence and deduct that interest as well straight off the top. I’ll patiently await the knee jerk outrage before I explain the thinking behind the 2nd residence rule, although I know there are people here smart enough to know the reasoning.

I assume you are talking about using the MID deduction here. However, you presumably could not also deduct HOA fees, council rates, fitting and fixture depreciation, maintenance expenses, and so on, which you could do if you listed it as an investment, not as a principal place of residence.

Hence, owning an investment property lets you deduct a MID amount plus all the other expenses of owning it.

Frankly that thinking scares me, but I realize there are two points of view here. Mine is that the state derives it’s [sic] powers and revenues from taxes paid from wealth, whereas the other point of view is that everthing starts out as belonging to the state, and the state takes what it deems a fair amount. The latter is distinctively un-American.

Who is proposing these 'two points of view'? You are, and only you. I would probably disagree with your viewpoint, but I have not done so anywhere in my writing, nor implied the other binary viewpoint you have proposed. This is the sort of straw man raising I'm talking about. You have defined 2 and only 2 allowable viewpoints, then decided that one is 'unAmerican' whatever that means. Is the Patriot Act 'unAmerican', where it limits freedoms and allows unlimited intrusion into your affairs? However, every act passed by Congress by definition must be 'American', so the 'unAmerican' discourse always trips itself up, as it's self-defining -- all things happening in America are American. (In fact, the other inhabitants of the North and South Americas would justifiably be upset at the co-option of the word America when referring to the US only.) So we have baiting, straw men, acceptance of status quo, unreflexive jingoism and ethnocentrism so far.

I’m not sure still what the problem is. I think you are more irritated by low gains rates since in your scenario you have to have a huge gain at the end for it to work. If it doesn’t work and the house also goes down in value, the house ends up becoming a large loss for the bank when the investor walks away from it

1) I'm not irritated. 2) I haven't indicated there's a 'problem' along the lines you're suggesting. That's 2 more straw men. 3) The house doesn't end up being a huge loss for the bank necessarily, it becomes a huge debt for the investor which he owes to the bank. These are the rules of securities and foreclosure, where the prudent bank has secured their loan against other assets to be claimed at the time of sale or default. Hence the use of 80% LVRs, cross-collateralisation, etc.

Post Script -- there seems to be a distinction being made between the MID as a title for the owner-occupier mortgage interest deduction allowance in the US, which only partially equalises with the landlord expenses deduction, as the landlord can claim a whole lot more types of deduction on a property, and the concept of deductions in general. I have been using MID more as an abbreviation, not as a program.

The MID as a program was allowed for a while in the UK, then taken off again. It has not been allowed in Australia for decades, if ever. There are a number of proposals on the table now however.

Patrick's original assertion was that the MID as an owner-occupier benefit would lead to house price inflation. I maintain that this can only happen once, at the time it is introduced, whereupon it would probably get capitalised into the cost of housing very quickly by the market. This is unfortunate, as it negates the point of introducing the MID. Hence, other types of controls or benefits need to be looked at to prevent these apparently unanticipated consequences of the market-based approach to allocating housing.

DS says: Patrick’s original assertion was that the MID as an owner-occupier benefit would lead to house price inflation. I maintain that this can only happen once, at the time it is introduced, whereupon it would probably get capitalised into the cost of housing very quickly by the market. This is unfortunate, as it negates the point of introducing the MID.

Actually, I would disagree with the assumed point of MID. I understand the intention to be encouraging homeownership.

I think that at best the MID is a mathematical wash, but people don't really understand that. Americans are fairly bad at math. They can't correlate a monthly payment to a yearly loss via interest to a bank. So what they ultimately see is a low, low monthly payment of X, and then a tax deduction of 12*X at the end of the year, resulting in a "refund" of approximately 0.3*12*X. Nevermind that there is a minimum standard deduction, or that they have lost 0.7*12*X to the bank.

In much the same way, Americans can't correlate yearly inflation to the overall rising value of their house. Since they don't understand the cost of leverage or the opportunity cost of time, the resulting gain seems wicked awesome, and they get a tax benefit to boot. Thus, mission accomplished from a government policy standpoint, even if the math is sometimes shaky. It doesn't help that most accountants will tell you that buying a home is great for your taxes. I think that's what Malcom meant when he said, "You need to come and meet some Americans to really understand the pettiness here." They will cut themselves just to prick the tax man.

I can't tell you how many people say in passing, "I wish I would have bought property here in the 1980's." To which I typically respond, "I wish I would have leveraged into the DOW or S&P 500 in the late 80's." Most people seriously have no idea how the math really works, or what the relative asset classes have done over the past 50 years.

Brand Says:
Actually, I would disagree with the assumed point of MID. I understand the intention to be encouraging homeownership.

This is what I meant. However, the MID quickly gets capitalised into the cost of housing once introduced, thus negating the benefit. Clearly the MID is intended to reduce monthly housing debt via a tax break, thus making homeowning easier. However, I find it bizarre, as there is an immediate unanticipated consequence of the market to inflate prices to absorb the saving. For this reason, I always oppose politicians' suggestions for such schemes, including drawing down from your pension plan to afford today's over-inflated prices, and specific home owner grants of other sorts, without some sort of price control or hiding of the grant from the market. There are better ways to get the desired result.

PermaRenter Says:
“Chindian lemmings” and “Chindian mafia” both are very powerful group

This is the second or third time you brought this up, so it looks like you have some sort of bee up your bonnet on this. 'Chindian lemmings' was a joke, they aren't any kind of powerful group. As for the 'mafia' comment, the chindians I have worked with are too busy trying to one-up each other - so it is very unlikely there is an organized gang that is out to keep you down. It is probably something else altogether... :-)

SP

Brand Says:
You know, maybe I’m missing something. Why does everyone keep talking about the Zestimate on Zillow?

You _did_ in fact miss my point. I wasn't relying on the Zestimate as an indicator of value. Just pointing out a couple interesting relative aspects:
1. that _all_ the actual sales were significantly below Zestimate and _all_ the asking prices were above Zestimate.
2. that a year ago, almost all actual sales were at or above the Zestimate.

I ignored the zestimate itself as an absolute number, but was using it as a pivot for these other stats.

SP

Yes Malcolm, 46% is pretty darn close to 50%. As you said before, it is mostly whether you consider the FICA and SDI paid by your employer to be part of your tax rate or not. You can argue either way, but we are almost entirely in agreement.

DS Quotes me:
"Frankly that thinking scares me, but I realize there are two points of view here. Mine is that the state derives its powers and revenues from taxes paid from wealth, whereas the other point of view is that everthing starts out as belonging to the state, and the state takes what it deems a fair amount. The latter is distinctively un-American."

DS, I would love to know a third point of view in this area. Someone else even elaborated on that point that the state view is the traditional one and the concept of government deriving its power and wealth from the people is relatively modern thinking. I did not define the two, it is a pretty standard spectrum view no matter what your opinion of it is. No matter how creative you get, you will either have wealth start out as state owned, or privately owned as you only have 2 choices.

BTW none of your examples have me misquoting or distorting something you said, or consist of non sequitors. Now you have lowered the bar to 'baiting'?

DS, I am going to publish my own newly discovered logical fallacy based on your techniquie. (Kidding)

MOVING TARGET - In a debate, to throw your opponent off, shift positions and claim you never actually said any of the things that you put in print the prior day while throwing different labels at your opponent hoping something sticks.

Related readings - Bill Clinton, Hillary Clinton, John Kerry, Dick Cheney, Al Gore, Richard Nixon, Bagdad Bob

DS Quotes me, and then says
"Right, that’s called a business loss, that’s how it works here. A net loss on a rental comes off of your adjusted gross income. You need to come and meet some Americans to really understand the pettiness here."

-I don’t even understand that last sentence.-

That's because that wasn't the last sentence.

DS Says:

"I haven’t indicated there’s a ‘problem’ along the lines you’re suggesting. That’s 2 more straw men."

Sorry but you did, here you are just not being honest.

Different Sean Says:
July 6th, 2007 at 12:24 am

M- implying that MID is a government handout to an undesireable class.

DS- "In Oz, it IS a govt handout to an undesirable class"

I'll stop now, and yes I realize I misspelled sequitur above.

PermaRenter,

Given your fascination with the "Chindian Mafia," you might be interested in renting the movie, "Better Luck Tomorrow." It's actually a decent flick, and it's pretty much right to your point, especially with respect to that article you posted about the brothers from Daly City.

I thought we were jokingly talking about perceived/real strangleholds that professional Indians/Chinese on the workplace.

Overall, Indians and Chinese immigrants, warts and all, have been model immigrants in this country. Their so called faults are just overdone virtues.

™