patrick.net

"...but if you are making a marginally salary ($100K or less) and can’t even afford a house, i suggest moving on and not wasting so much energy."

Well, exactly where is $100K a marginal salary? Oh, yeah--SF BA, where we whip ourselves for not making enough to purchase a house that people elsewhere buy with half the salary.

There are two classes: The haves, and the have-nots.

Nice. One could also say: there are those who feel entitled, and those who work for it.
Despite owning several pieces of property (yawn), I prefer to fall in the latter group.
Wealth is an illusion if you wish too hard for it.

And, while I'm not as diplomatic as Jack, I agree 100%.

"...will most likely get to see firsthand if a 100K reduction makes any difference or not in this market. "

Interesting...what's that--3BR? Keeps us in the loop, that's real data. :)

Does DubbleHubble remind you of anyone?

Could be his dad, trying to "set us straight" ;)

The problem is that those 10 marginal dollars you won’t spend on other consumption. If you multiply that out by the entire consumer economy, it’s many billions of marginal dollars lost to inflation. And, there is a multiplier effect to inputs like energy…I think petrol is a multiplier of something like 5-6 if I recall correctly, so that $10 is more like $50 when considering the increased prices to everyone in the supply chain, depressed incomes, depressed earnings, etc. A little adds up fast, that’s why AG is such an inflation hawk. Inflation is the devil.

I was so focused on the rising cost of other things due to oil prices that I forgot about the impact that $10 could have. But you're right, it might be one less cup of coffee or fast food lunch, but that is going to have an impact if everyone starts cutting back on the little things.

Jack

I was just guessing, but do you think DubbleHubble would take such an attitude for no reason? I doubt it. IMO people usually lash out because of fear.

So far I haven't been able to determine that it's someone we know, but all they'd have to do is use someone else's computer. If the pointless posts keeps coming in, then we'll have a good indication of who it is.

Randy,
Will the Fed have the gumption to keep the rate hike going? The long bond market has either been emasculated by foreign central banks and is not playing any disciplinary role.[...]

I don't really know; there are some other folks here who know the bond market here (like HARM) way better than I. I do think AG will probably continue with rate hikes to check inflation, so the Greenspan Put is a safe bet. But Greenspan ain't gonna be there forever, in fact for not much longer. And, I think I sense that there is increasingly political pressure being put on the Fed. I hope that I'm wrong about that and the Fed remains independent.

I worry less about the foreign reserve problem; but others have made very good arguments to the contrary. I don't worry too much about China because of my reasoning before, but China isn't the only foreign central bank holding a ton of greenbacks, so maybe foreign held debt is a bigger problem than I have concluded.

So far I haven’t been able to determine that it’s someone we know, but all they’d have to do is use someone else’s computer. If the pointless posts keeps coming in, then we’ll have a good indication of who it is.

Some fresh blood for the trolls? ;)

People automatically assume that renters rent and rant because of affordability issues. Gotta love it.

People automatically assume that renters rent and rant because of affordability issues. Gotta love it.

Yeah, that post is interesting to me for that reason. I don't feel bad about renting at all. I pay half as much for my house as I would if I bought it. There was also an interesting article in the NYTimes, http://tinyurl.com/csajh, that basically states that right now renting is a better option than buying for most people. The article goes on to say that there is a misconception that the tax benefits of owning make purchasing a better option, at least when the P/E ratio is so disconnected like it is now.

The article goes on to say that there is a misconception that the tax benefits of owning make purchasing a better option, at least when the P/E ratio is so disconnected like it is now.

People hate taxes so much that they are willing to pay more just to get a deduction.

If having higher interest rates and high oil price ( > $60 per barrel) is going to impact your style of living, then you were not leading the life that have earned..you were probably leading the RE bubble life.

Very well said.

People hate taxes so much that they are willing to pay more just to get a deduction.

lol
I can't tell you how many people who have told me I should buy just to get the tax deductions. Doesn't anyone own a calculator anymore?

I can’t tell you how many people who have told me I should buy just to get the tax deductions. Doesn’t anyone own a calculator anymore?

Perhaps they should pay me some money right now and I will give them a 40% refund next April. ;)

(Not solicitation of money)

Peter P

I think I want to come work for you.

(not a solicitation for a job)

South Bay and East Bay lower-end inventory continues to swell. Is lunarpark from Ben's blog here?

I think I want to come work for you.

And then you will become one of the Bay Area commuters...

I thought you loathe them. ;)

Awwwww I can't work from home? I thought that was the wave of the future. Actually I don't loathe the commutes, I just dislike what it's done to our housing market. But I understand if someone doesn't have a better option----- but how do they do it? I can't imagine driving so many hours a day!

I think many "BA commuters" telecommute. Our company has some people working from the Sacramento Metro area.

I think many “BA commuters” telecommute. Our company has some people working from the Sacramento Metro area.

Judging by the traffic, telecommuting still hasn't fully caught on. I've known quite a few people who share housing in the bay for the work week and only come home on the weekends. I'd rather rent. ;)

Why don't we talk about if telecommute is getting popular, where around BA would you like to live?

I just came back from a party way east from East Bay, man, the new developments there are just astounding. And even more astounding is the price. They developers are trying to sell a 2,500 sft house on a 4,500 sft lot for something like 800K. Grant it these are brand new developments, but they are so plastic and blatantly boring, and there is really no geographical distinctiveness whatsoever. I won't even touch these homes at half of 800K. I wonder how hot it gets further east in the midst of summer.

If I can telecommute, Santa Cruz will be on the top of my list.

Why don’t we talk about if telecommute is getting popular, where around BA would you like to live?

Let me see...

- Vancouver, BC
- Las Vegas, NV
- San Diego, CA
- Victoria, BC

(Not in any paricular order)

I don't have a RE strategy so to speak because I'm not interested in it as an investment, but rather as a home. I think we're pretty realistic about the whole thing, I don't expect a scenario where we swoop in and buy up a bunch of cheap foreclosures. I think we'll wait until the market comes down enough for us to comfortably buy and then we will.

I was joking about the telecommuting. I expect to stay home with my kids until they're older and then maybe go back to work, I haven't decided if I would stay in teaching or go to a different field. I guess whatever is most convenient with the kids. But I actually like the Sacto area, I just like to complain about how pretentious the newly flush RE genius' in my area are becoming.

It's interesting that somebody who likes Vancouver BC would even put Vegas on the list. Peter P, Your list is like one of those IQ tests, which city doesn't fit?

Even if I telecommute, I still need a place with easy access to a divided highway. I cannot drive on 2-lane highways every day.

Btw, I'm going to be really busy over the next week, so I am not going to put up any new threads. I know Surfer-X was going to put up the next one, and Kurt mentioned adding one too. Hopefully more people will step in as I am going to be out of commission for at least a few days.

It’s interesting that somebody who likes Vancouver BC would even put Vegas on the list. Peter P, Your list is like one of those IQ tests, which city doesn’t fit?

LOL

You are right!

Red October!

http://tinyurl.com/cpsvm

Regarding impact of gas prices:
In San Jose (at least), PG&E has sent notices to expect something to the effect of 42% higher costs this winter (perhaps just on gas?). *That* will surely crimp consumer spending. Look for slow xmas sales if winter comes early & cold...fall sure has come early.

In San Jose (at least), PG&E has sent notices to expect something to the effect of 42% higher costs this winter (perhaps just on gas?).

Considering how much NG has gone up, the increase is well justified IMHO. Long winter follows a brutal October. Planets appear to align for something major this year.

Wow, Peter P, that's a rather surprisingly doom&gloom article. Here's what I found this a bit astounding:
"Almost 40 percent of credit-card holders pay only the minimum balance, according to Cardweb.com. The average household credit-card balance is around $9000, according to Boston's Babson Capital. Previously, families paid a minimum of $180 a month. Now, they will have to pay $360 each month."

And this is surprising in that it echos lots of expressed sentiment on this blog:

"The basis of the American economy is consumption financed by debt. The economy's health is measured by its growth, and its growth is dependent on consumer spending and debt. But consumer debt is too high, income isn't growing, and jobs keep disappearing overseas. "It may implode," warns Adler. A perfect storm is brewing -- and San Diego may be in the eye of it."

SJ_Jim, we definitely have an economy of make-believe.

Beliefs may shift during flight...

Donald Kohn:

"But if current expectations are badly distorted, then the way forward may not be so smooth. Eventually, reality always asserts itself over wishful thinking, and such realignments are sometimes abrupt, as illustrated by the collapse of the high-tech bubble a few years ago."

I love this guy. Let's hope that he succeeds Greenspan. I do not want the helicopter man to be the next Fed chairman.

Coming from a conservative Asian culture, my parents used to buy their primary residences with cash, not because they couldn't take out a mortgage, but they would only buy a home that they could pay off right away with cash. Their philosophy is, if I have to pay for something by borrowing, then I shouldn't buy, it is beyond my affordability.

So far, I have had 0 credit card credit and always bought my vehicles on cash, and drove them to the ground. I was astnoished to find out that some of my colleagues, all earning 6-figure salaries, carry credit card debt in the range of 10,000 to 30,000, on top of their car loans, student loans etc. Some of them quoted items to me in terms of minimum monthly payments, like, this LCD TV will only cost 259 a month, or, this cruise vacation will only add another 125 per month, it's so smart of me to do remodeling since I pulled out an home equity loan that is tax deductable... The list goes on and on, it is all about spending now and dealing with the monthly payment later.

I have to say, some Americans are psychologically sick, they need to see a shrink about their spending habits. I sometimes feel like starting a seminar teaching people how to hold back their urge to spend.

Well, debt is not all bad, but revolving debt is all bad. Using long-term debt to meet short-term needs is extremely bad.

Their philosophy is, if I have to pay for something by borrowing, then I shouldn’t buy, it is beyond my affordability.

I do not agree with the American debt culture, but this philosophy is a bit over-restrictive IMO. We can discuss further on this.

StanMan, last post was dead on. I don't know the thoughts are so hard to capture for many.

I"m going to start a new thread . . .

Notes to Escaped from DC, from earlier in this thread -

"Tsusiat wrote . . .
“It’s easy to pull stuff off the internet from some right wing think tank.”

I quote a Canadian Supreme Court decision from Summer 05 and you accuse me of cherry picking information?"

You don't understand the context of that decision or its actual implications. Go read some more.

"You asked me what I meant by the U.S. subsidizing your medicine . . .

When Phizer develops a new drug that wouldn’t exist without it’s capitalist motivation, it sets a price of X$ in the U.S.. Because the Canadian government will only pay Phizer .6X for the drug, the net effect is the subsidation of Canadian drug costs by U.S. consumers."

What are you talking about - it is Phizer who agrees to sell at that price! That's called market economics, and if a customer, no matter how large or small, says I can afford to pay x and the seller agrees, they are probably not doing it as a loss leader!

"in 2003 the average Canadian waited more than four months for treatment by a specialist once the referral was made by a general practitioner.

A simple MRI requires, on average, a three-month wait in Canada."

Well, let's see, the reason for those waits is that people from all walks of life have access to the medical system. The fact rich people can afford to jump the line and go elsewhere is no reason to switch systems unless you are a millionaire!

"Terry Salo, a Canadian resident of Victoria, British Columbia, availed himself of hip replacement in Madras, India after waiting more than a year for the “free” service in his home province."

My step-father had a double hip replacement in the hospital in Victoria BC - he waited a year. Cost if he had to pay - about $200,000. Cost in his case - $0. Which system do you think he preferred? Do you think he minded waiting? And before you say he didn't pay for it, that is the point of paying higher taxes through the years, it all evens out in the end.

Without this medical system his choice would have been, sell my house to fix my hips, or just keep on getting weaker. Not a nice choice to have to make at 75.

"And of course, Tsusiat, let’s not forget that the very rich in Canada have a very good solution to your system - they come here! Isn’t that great? The rich use the U.S. system, the well-off negotiate the system in Canada, and the poor canadians get screwed."

On what basis are you saying the poor get screwed? Are you implying the poor do not have access to the medical system in Canada? You don't know what you're talking about! The fact that they underutilize the system has more to do with socio-economic factors than availability - that is to say, if you are homeless and off your gourd and have no family, you are not as likely to attend a walk in clinic as a young middle class mother with 3 kids.

Additionally, as native Canadians are the poorest and most geographically scattered community in Canada, they are part of that statisitic of under-representation, and a US style medical system would make things worse for them, not better.

BTW, my mother had breast cancer, and was treated wonderfully. There was no delay, she had a lumpectomy within two months of needing it.

My father had serious liver cancer last year that required removal of 80% of his liver - he is still alive and doing well. If he had had to pay on short notice for the treatment he received, he would be DEAD!

Did you know that waiting lists are for people who can WAIT!

My father did not have to wait - MRIs and CT scans occurred within two weeks of him seeing the doctor, he saw three specialists, and received top class treatment.

Finally, I have to laugh at your one sided arguments.

I at least attempt to refute the weak points in your arguments, why don't you try to do that? Why no reply to the statistics about infant mortality being higher in the US than Canada? That is not indicative of a better medical system!

As far as your military subsidizing Canada's defence, I have to laugh. If the US was not bent on dominating the world militarily, your military could be a half or a quarter the size and still protect the United States. Do you think you would be at greater risk of invasion in that case? I have to laugh - no, you would not.

If Canada was to increase our military spending to a level similar to the United States, would that be a normal thing for a country to do? And since our only potential military enemy in the real world is basically the United States, what would the point of that be? Do you think the Pentagon would be happy if Canada had an independent military, adopting an independent policy, of several hundred thousand combat ready troops?

I guess the only other potential military threat might be China, there are a lot of Chinese here, I guess they could all put on combat fatigues one day and tak over the airports and railyards and ports...LOL!

Here are a couple of very interesting lists - comparisons of expenditures on military for all the countries in the world.

US is #3 behing Israel and Singapore - $935.63 per person - newsflash, YOU CAN'T AFFORD THIS ANYMORE!

Do you remember how Reagan bankrupted the Soviet Union by forcing them to overspend on their military?

Canada is #30 - $239.62 per person - which by the way, we can afford!

And check out this expenditure graph for US debt in 2004 as influenced by the military. BTW, these expenditures are not defending Canada, what a joke, they are being spent in Iraq among other far overseas places that we could better have dealt with other ways! Please note, I personally view what happened in Afghanistan and Iraq as completely different, so don't bother going there.

http://www.g2mil.com/Oct2003.htm

Can't wait to hear your ranting response which will, of course, ignore all the facts you can't absorb!

tsusiat

Opps, here is the other link mentioned in my previous post, on military spending per person per country

http://www.nationmaster.com/graph-T/mil_exp_dol_fig_cap

tsusiat

The Social Security system is mostly a pay as you go arrangement, with some accumulation of assets for future needs. The government refers to these accumulated assets as “surplus” because the funds are not need right now.

Pay as you go is fine if the age distribution of the population shifts only minimally over the decades. However, we have an unusually large cohort in the baby boomers. They will be too many for the younger generations to support in retirement on a purely pay as you go basis. This is why the current taxes are higher than what is needed right now, so they can generate surpluses for this future need.

However, the surpluses are not large enough to fund this fully. It is estimated that the surpluses will be exhausted around 2042. After that the current income will cover only 75% of the social security outflow. To cover the deficiency the benefits must be cut or the tax must be increased (by 33%).

It would be much better to fund this in advance at a much lower rate. We need to put more money onto the surpluses while the baby boomers are still working and paying into the system. If we raise the tax by 1% now the system should never come up short.

However, the generations after the baby boomers will not have the same problem. They will have a more normal population distribution following them and social security will be healthy for them, after the current challenge has been fixed. This is a one time problem caused by the population bulge of the baby boom.

I think the shortfall should be fixed with an immediate 1% tax increase. Pay as you go is inadequate, but we do not need to go all the way to full pre-funding.

As for individual accounts, I think Social Security should be provide a basic minimal income to everyone at retirement. Those who want more than that must pay for it themselves. Individual retirement accounts are a good policy to encourage savings. However, I believe that the Social Security system must stand on its own without individual accounts.

BTW, I am refering to a tax increase of 1% of income. Not 1% of the current tax.

Zeph,
Was SS conceived of, and always considered to be, "pay as you go", or has it evolved into that fact?

It started that way. It's a social insurance scheme, where everyone pays in and everyone has the chance of using (needing) it.

It's much like paying for public education, except that we all get our education before we pay for others to get theirs.

With the retirement benefit of SS we pay during our working lives for the retirement benefits of those who are no longer working (and paying in).

Public Education and Social Security are inter-generational support programs.

The very first SS retirees paid almost nothing in and recieved pensions for life.