patrick.net

OC Homeowner

Save all the cash you can and be very long term patient before you decide to move up to a bigger freaking house. The housing market in Japan has been declining for 15 years from 1990. So, wait, wait and wait some more. You will need a good credit history and maintain your employment for the consolidated remaining banks to give you a mortgage when you want it.

At least surfer-X had the enjoyment of owning some pimp Camaros. I could never afford one, but glad to know someone’s keeping it going.

Surfer-X is probably one of the last dudes standing from the 80s era. I remember talking to surfers from the 60s, back in the 80s, who said the Cali beach scene was twice as pimped during those days, the Vietnam War notwithstanding.

Senor Holliday, I was very fortunate in that I found original pimp daddy Camaro (camero?) owners who didn't want outrageous profit from their cars. I bought them in original condition, restored them and basically got to drive them for a few years for free. Regarding the Cali beach scene in the '80's, yeah it was flat out pimp. That's the problem, I know first hand how fucking great it can be. But as you probably know the best '80s period occured from 88-91, well at least for me. I was in undergraduate school at Cal Poly SLO and the Morro Bay/Pismo scene was outerworldly, tasty waves and cool buds. Well except for the fact I don't huff the bong. Shit so many parties that like the vile boomer scum and the 60's i don't really remember my undergraduate time all that much, it's all a bit hazy. I am forced to quote my "buddy" Jackie, "you were either throwing up or drunk". Ahhh. California still has pockets of greatness, my friends for one, this blog for another*

*Discounting the obvious troll factor.

on a full scholarship on your D average and shitbrown skin

Are you fucking kidding? Dude I'm a reverse coconut, white on the outside, brown on the inside. Shhhit my cracker friend, us mexi's can always take spanish and get a B*

*Cheech etal.

And my finacial aid package was nothing to write home about, but I must say that back in the late 80's there was much more "free" money for poor mexi college students then now. I got about 1/2 free the rest was loans, but the same package was available to your cracker ass also, but you would first have to stop blaming others for your blue collar hell. Now? It's a different story, all loans, but hey at least you can still go to college, but the problem is that the degrees now typically aren't worth the paper they are printed on. But I digress.

If you mean "The World is Flat..."--Friedman, then you should also read "Globalization and Its Discontents"--Stiglitz in order to gain insight into just how complex the entire global economic situation is. I think both Friedman and Stiglitz are theoretical geniuses, but woefully lacking in practicality. Easterly has a more profoundly realistic view.

"I think the media in every country is a big fraud." -- HessesFan

Your damn right it is! I highly recommend Noam Chomsky's book "Manufacturing Consent" for a very interesting perspective on the media. Chomsky is actually a bit too far to the Left even for me, but he is very smart and observant and has some very good ideas that I never considered untill I read that book. Anyway, in my mind the bottom line with the media is that they'll cover whatever they think is going to sell, and that doesn't make me feel too good about the intellect of your average "Joe Public." I mean seriously, when people are more worried about J Lo's ass than the economic imbalances in our system of the world, our society has got issues. I fully understand that I am more interested in Economics/Finance than your average citizen (as are probably most of us on this blog or we wouldn't be here), but these are SERIOUS ISSUES that affect ALL OF OUR LIVES.

"BTW¨: i dont beleive in abortion. However i also dont beleive in imposing my religious/ social views on any body else." -- HessesFan

THANK YOU. If more people in our country thought this way we could achieve so much more with our Political system, rather than wasting so much time with this ridiculous bickering between the Left and Right.

PS: "Siddartha" by Hesse is one of the best books ever written!

I predict that the debt held by China and Japan in US Treasuries will not be dumped onto the marketplace. The Fed will lower interest rates eventually to rescue the collapsed bubble. The debt held by China etc will then be at a much higher interest rate than the Fed lowered rates resulting in a premium in value and interest earnings.

"This means that there is only a 1-in-5 chance that these statistics accurately predict family income." -- Randy H.

Whatever dude, 67.892% of all statistics are actually made up. Ha ha ha I love that joke! But I'm the biggest dork in the world. I just did a full review of ProbStat because I'm studying for the CFA exam in June. All joking aside, probability and statistics are fundamental subjects for achieving a basic understanding of how the world works. Very important shit.

"or should I say Cal-eidoscope and fantasmagoria of prehistoric images and thoughts." -- Michael Holliday

It's "phantasmorgia." That's a good fucking word regardless; you get bonus points for using that one dude.

DinOR, yeah I have fond memories of that period, we didn't have a pot to piss in, but man we were happy, ahhh ignorance is truly bliss. Dude, our surf equipment bit ass, we had this two piece farmer john wetsuit, the type with the top section that buckles under your ass and the overall bottoms, my buddy Rick and I would split it up. Shit I guess I was the "top" :) Freezing our asses off and a grin from ear to ear. What's odd about this era of unparalled prosperity we live in, the smiles have gone away. A lot of fuck you now, not a lot of happy. Odd. Fucking boomers.

I just rented a house in $anta Barbara, pretty damn pimp, $1900 a month, and get this, the house just sold for 1.67 million. Do the math.

"I predict that the debt held by China and Japan in US Treasuries will not be dumped onto the marketplace." --Jeffolie

Agreed. The Asian countries would be shooting themselves in the foot if they dumped our debt, and they are way too smart for that. The current "Bretton Woods II" system is more beneficial to them than it is to us. I think that is the main reason our current account imbalance is persisting for so long. It will likely persist for a longer than many think.

Ha Ha:

I am currently reading "The Birth of Plenty" by Bernstein and "Empire of Debt" by Wiggin. Both are worth a read.

jeffolie,

I predict that the debt held by China and Japan in US Treasuries will not be dumped onto the marketplace. The Fed will lower interest rates eventually to rescue the collapsed bubble. The debt held by China etc will then be at a much higher interest rate than the Fed lowered rates resulting in a premium in value and interest earnings.

If you follow that logic, the PPP in China will explode into hyper-inflation, and their nominal rate differential will be less than the real rate they earn on the dollar debt they hold. The US categorically will *not* relegate monetary policy to defending the dollar. Remember, with monetary policy a central bank can either fix its currency, or control M, but not both simultaneously. A further weakened dollar will indeed worsen the current account deficit, but it will also largely reverse the direction of capital flows, severely punishing the EU and fixed-currency Asian trading partners.

In simpler terms: don't worry about China so much. They don't have very many short-term options. If they "diversify out of" the dollar, then they will do it over many years, perhaps decades. Short term moves would devestate their economy, and they know this.

Randy H.

I do posit that liquidity will dry up. The hundred of trillions world wide in derivatives based on mortgaged backed bonds will unwind destroying worldwide liquidity. Even the Fed cannot reinflate the world.

In Japan, the economy deflated for 15 years while their central bank reduce their interest rates to virtually zero.

In common usage deflation is generally considered to be "falling prices". But there is much more to it than that. Often people confuse deflation with disinflation or with Depression (as in "the Great Depression"). These three terms are related but not synonymous.

According to Investorwords.com the definition of Deflation is "a decline in general price levels, often caused by a reduction in the supply of money or credit. Deflation can also be brought about by direct contractions in spending, either in the form of a reduction in government spending, personal spending or investment spending. Deflation has often had the side effect of increasing unemployment in an economy, since the process often leads to a lower level of demand in the economy. The opposite of inflation."

If, however, the quantity of money decreases to $5.00 the price will fall to 50¢ (deflation). This is what the first part of the above definition is referring to. The money supply can also be reduced if someone on our island hoards half of it and refuses to spend it on anything no matter what. This is the second part of the definition (reduction in spending) - velocity.

So there are four causes for Deflation.

Decreasing Money Supply
Increasing Supply of Goods
Decreasing Demand for Goods
Increasing Demand for Money

San Francisco RENTER Says:
PS: “Siddartha” by Hesse is one of the best books ever written!

Very true.
Warmly recommended especially if one's thoughts tend to revolve around things that ultimately don't matter (like real estate :-) ). I must go and read it again.

jeffolie,

I am agreeing with your reasoning, just not the deflation conclusion. Sorry if I was unclear. The other side of the QTM equations you invoke require a determination of what happens to savings and investment (and taxes, but we'll reduce that to G since the gov't in the US doesn't save). The US is not Japan. I cannot imagine a circumstance in which reducing the nominal rate in the US to anything near zero would not spur credit driven investment and consumption. Further differences, the US abides by the Large-Open Economy model, whereby the US has the power to set nominal rates outside of real rates (we can sustain differential nominal rates from the row). The US does not interfere with its currency, Japan does, thus reducing Japan's monetary effectivity. Finally, the US maintains an extra "trade credit" in terms its military sphere of influence--it's "umbrella" if you will. That is, the US could always reverse capital flows by retracting its military protection from Europe and Japan, thus forcing their G as a % of GDP to dramatically rise and ours to dramatically fall. (Keeping in mind the US already has a much lower G%GDP than either Japan or the EU).

Randy H

Deflation will happen and I reject your objections:

The US reduced its overnight fed funds rate to near zero in the 1930 while we were in Depression without spurring credit driven investment and consumption until WW II. So, for more than 10 years it happened here.

The US does interfere with its currency often. The US makes agreement and persuades other central banks to revalue relative to the dollar. Very recently, China revalued its currency at our request. Nixon once arbitrarily revalued the dollar by 10 percent and took us off the gold standard.

The US has not and will not remove the forces kept around the world. These bases constitute forward positions to project our superpower might, image and trade.

Surfer-X says:
I just rented a house in $anta Barbara, pretty damn pimp, $1900 a month, and get this, the house just sold for 1.67 million. Do the math.

Heh. Your rent barely covers the owner's property tax liability. Negative cash flow of around $100k per year, plus $100k transaction cost to sell the house. Nice.

Speaking of property tax... Over the last few years, I've witnessed quite a few people be very surprised when their first property tax bill arrived, as if either nobody had told them about it, or they had deliberately ignored that figure in their mental model. Odd.

The US reduced its overnight fed funds rate to near zero in the 1930 while we were in Depression without spurring credit driven investment and consumption until WW II. So, for more than 10 years it happened here.

This contradicts the data. Reference Mankiw et. al.

The US does interfere with its currency often. The US makes agreement and persuades other central banks to revalue relative to the dollar. Very recently, China revalued its currency at our request. Nixon once arbitrarily revalued the dollar by 10 percent and took us off the gold standard.

Neither of the examples you state are monetary intervention, but political intervention. While political urging may indeed affect exchange rates, it is not monetary intervention. Please provide an example of direct monetary intervention by the US in the USD FX post Carter.

The US has not and will not remove the forces kept around the world. These bases constitute forward positions to project our superpower might, image and trade.

You invoked the 30s as an example of historical recurrance. What do you think occurred between 1924 and 1941? If the depression can happen again, so can isolationism and mercantilism.

Randy H

We will have to agree that we disagree politely. I admire your thoughtful comments.

I have a hard time separating politics from monetary actions. I find them mixed together, overlapping, and neither acting in isolation. Just as the US Supreme Court appointees come from political decisions, so do Fed appointments. Central banks in non democratic countries do not act independent of totalitarian powers.

I agree central banks will push money supply; however, I doubt it will overcome the loss of liquidity from derivatives collapsing. I could be wrong at many junctures and assumptions.

Certainly, in the long term as regions of Asia, South America and the Asian subcontinent consume more resources, then commodities will be in short supply with rising prices.

In the relatively short term of months and not more than a couple of years, hindsight will be claimed as foresight by most.

The US has not and will not remove the forces kept around the world. These bases constitute forward positions to project our superpower might, image and trade.

Any possibility the US may need to pull back troops due to budgetary concerns? Just a practical observation--irrespective of politics.

KurtS

There was a great book around 1987about the failures of empires. One of the author's (Paul Kennedy, The Rise and Fall of Great Powers) conclussions was that empirial military overreach would eventually be unsustantable in the waining empires because of diminishing wealth. Certainly the British withdrew troops and bases because of budetary concerns after WW II.

I speculate that China will rise up in 20 years or so and maybe we will withdraw. The US has shown great flexibilty and adaptability to adjust to changing economic and political realities over time. I will not sell the US short as a Great Power, a superpower that projects force.

jeffolie-

Agreed to disagree. Surely we'll find out which theoretical position proves true soon enough. My only point in arguing is that I fear people might prepare for deflation only to get burned worse by inflation. My prediction for the future is a rising risk of stagflation as energy costs establish ever higher floors.

KurtS, I'm not sure budgetary concerns will directly indicate a miitary pullback, although costs will be invoked by politicians for political cover should they ever decide to do it. The larger reasons would be strategic in nature. That is, a marked shift in US foreign policy towards isolationism. This would probably not happen unless the US suffered a severe shock that forced a major turn inwards. Something like a pandemic, major natural disaster (on a regional scale, like a New Madrid earthquake), a catastrophic political crises (like a major state or region trying to seced), or of course another Great Depression.

“...or should I say Cal-eidoscope and fantasmagoria of prehistoric images and thoughts.” — Michael Holliday

It’s “phantasmorgia.” That’s a good fucking word regardless; you get bonus points for using that one dude.

Thanks! I was thinking of Fantasia the Disney movie...Phantasia?

Randy H

Democraghically and economically the vast two paycheck households have no choice but to ride out the collapse whether its deflation, stagflation, hypeinflation or currency collapse. Households have a negative savings rate with little money to prepare for anything on the event horizon. Most of the wealth of households resides in their residence's equity. The upper class may chose to prepare or not since most of the savings and fungible assets reside amongst them.

OC Homeowner Says:

January 14th, 2006 at 11:08 am

Not all Americans are spoiled and only work into retirement because they love their jobs. My mom (65 yrs old) owns her own small business works it everyday herself and is not getting rich. She barely eeks out a living for herself, pays 950 a month for a 1 bdrm apt and can’t afford to get gall bladder surgery that she needs because she has no health insurance. She is too proud to take hand outs from me or my siblings although we try to help her in round about ways
My dad had EKG changes, 8months ago and in the usa he would have been worked up galore and would have been fixed surgically. However he was in india and the best cardiologists( these are my teachers in india and they do excellent clinical work withour resorting to expensive tests) told me that their was no need for me to worry. so I came back to my job in the usa. If that patient presents in the USA with similar problem they would work him up and not wait. 6 months alater my father called me and said he was having chest pains, so i panicked and went back this time i insisted that everything be done. Sure enough the angiogram showed triple vessel disease. Now we had to decide where to get him operated. The us was out of the question because even though i am employed and have full insurance in the usa insurance companies cannot add non us citizens on to the health. insurance,. BTW the best cardiac care in usa is at the Cleveland Clinic, (where i was a resident). or at the texas heart institute. there are no doubts about it. By the way this is not professional advise and i am not payed by either.

So we looked around in India. there was one surgeon who was in bombay called bhattacharya and he it seeems does the best in beating hearts and doing surgery on beating hearts is arelatively new technique mastered by a few. Since we live in hyderabad, we wanted somebody in hyderabad and so i started asking cardiac anesthesiologists for insider information. You see anesthesiologists are watching everyone in the room and wanted their opinion. they all said that dr Gopichand was the best surgeon as well as a good human being. being the doc in the family i took the decision to go to dr gopichand because i felt he truly had the best periop outcome in hyderabad. hE ACTUALLY DID A GOOD JOB AND MY FATHER HAS BEEN DOING OK SINCE OCTOBER 2005.
The total cost was 5000 us $. all cash. No credit accepted.
No problem because dad had worked in the bank and has retired now and was reimbursed for it. If not i would have taken care of it
However my sister who is political philosopher said that we should consider Dr Cherian. Dr cherian was working at the railway hospital basically its a free hospital. HOWEVER THE GOVERNMENT AT THE BEHEST OF CORPORATE HOSPITALS DENY RESOURCES FOR POSTOP CARE AT THE RAILWAY HOSPITAL. SO THE DOCTOR TECNICALLY CAN BE GOOD BUT IF THE HOSPITAL IS NOT EQUIPPED TO TAKE CARE OF ALL THE POSSIBLE SIDE EFFECTS AND MAY HAVE FIORCED DR CHERIAN OUT OF PRACTISE.

Actually in loudobbs there was a piece about medical tourism to India. That segemnt stated that americans are traveling to india and getting 5 star treatment at select hospitals. One has to exercise a lot of caution though. the medical industry is not regulated and therefore outcomes and care not gauranteed. Medicoplegal industry is zip. the docs word is it. But will u blame the american public for not using corporate hospitals in the usa and exploring other options if the only way to pay for all this in the us is declaring financial bankruptcy?

I think The corporate hospitals need to do bette to control costs and not just take away everything that ur mother earn in her entire life in the name of treating her. Increasingly americans are questioning thisstyle of practise and the are seeking out alternatives.

The problem with health careis that if it monetarily driven, it starts feeding into this cycle of profits and more profits and hence will lead to its downfall.
Please dont het me wrong medical innovations of the cutting edge tecnology are only and only availablein the usa. The rest of the world copies everything that is patenetd in the us. So i totally agree with u in that the usa medical care is at a level taht u cannot duplicate thateasily.

So I hope this helps. take care.

Hey, Hessesfan, great story!

But could you make it just a little but longer next time? :-)

Hey, Hessesfan, great story!

But could you make it just a little BIT longer next time? :-)

Santa Barbra? Is that place still reserved for the leisure class and servant hispanics? Last thing I heard about that place was that it had very few jobs and sky high housing costs. You could live there if you didn't need to work. It's a beautiful place though.
It does seem a little ironic that X would live there and have such complaints about San Jose.
I've heard lot's of complaints about San Jose but not for Surfer X'S reasons. I often here that people in San jose tend to be unsophisticated, farmer like.
It's a town of about 1 million people that are at most 2 generations off the farm or orchard as the case might be. Ask yourself if your grand parents worked on a farm? If so, you might be from San Jose

i am having a ball here in buenosaires. My best time was when i played chess for 2 pesos . so much fun because i won. But let me ask u, do these guys at the square loose to make their customers happy? or is it my paranoid brain giving lenghthy explanations to michael,
By the way forget the real estate bubble and enjoy thereal things here. i have smelled the roses and they a rose is a rose.
argentina and brazil are really , really fun. i walked on the streets here at 3 am in the morning and it looks safer. BTW women walk alone at 3Am.

btw can randy or jess explain more about qtw
thanks

Anyone watch the show on chanel 5 about bay area housing costs?
It was pretty lousy. It was all old news. As if people dont know about housing prices in the bay area being too high. And they had the nerve to imply that they might continue to go up. They implied that a natural disaster could cause prices to drop. They also educated everyone on how high interest rates can cause prices to decline. It was geared to someone with an IQ of about 75.

I'm starting to see signs of problems. A recent buyer in my neighborhood
has a for sale by owner sign up. She's been here for less than a year and paid way too much for her shitbox. I guess she realizes it now and is trying to get out anyway she can. I think her world is fucked. She is clearly having a financial crisis.

I'm still surprized at people with so much buying power doing such stupid things. Then I think about it. She's just a hardworking nurse that wanted to own a home. She's not an economist or a financial wizard. She just got tricked into buying something that she really couldn't afford. Every body got paid and she got stuck paying the bill. Every month she's got to come up with $3k plus after taxes, food, utilities and such. She tried renting it out. People are actually renting it now. I guess the negative cash flow is just wearing her down.

That's my impression of what's probably happening to many people. It will begin to happen to many more as the months go by.

sj_oldtimer Says:

"She’s just a hardworking nurse that wanted to own a home....She just got tricked into buying something that she really couldn’t afford. Every body got paid and she got stuck paying the bill. Every month she’s got to come up with $3k plus after taxes, food, utilities and such."

"...I guess the negative cash flow is just wearing her down.
That’s my impression of what’s probably happening to many people. It will begin to happen to many more as the months go by."

Exactly. And the slow-burn crackup as a natural concomitant to fiscal irresponsibility: the day of reckoning.

The multitudes of new buyers--what, 60-70+% are Interest Only and Adjustable Rate Mortgage bag holders?--are sitting ducks and mere grist for the housing mill, set on granny's farm high atop Mt. Hamilton.

I think when the engines of job growth and high-tech prosperity begin to sputter a little, in the direction of recession, it will be the spark that starts the gears of the housing mill turning in wheels of burning fiscal flames.

Then will begin the shrill, slow grind of the hapless, helpless American dreamers into fine grist for the unsavory batter of a tall stack of piping-hot, California buttermilk pancakes!

When the process is well under way, I will raise a signal flag of requiem ensuing with the words, "Pass the syrup, damn it. I'm hungry!"

Then all will know the violent truth that violation of the immutable, financial laws of physics come with a steep price.

"The whole thing started since I VIOLENTLY REACTED to the PURPORTED NOTION that 100K is HIGH SALARY …." -- Ha ha

But statistically it is.

Ha Ha, well shit, if you make that much, everyone else should also. Just like when you walk outside in your tan Dockers and everyone else has tan Dockers, it's freaky man they way you predict what everyone else earns. Just odd. I for one applaud your out of the box thinking, your ready ability to disregard all published data, you $ir are a trendsetter and I for one am continually enriched by your continual boasting over what you make. I am marching into my boss’s office tomorrow and demanding a raise. I say all those other assholes out there that actually "believe" things like census numbers, data published by leading business schools and anecdotal evidence are just ball jiz sniffing whiners. Fuck man do you think $ilicon valley got where it's at, replete with >100K salaries for even the most common of cube farm sitter by actually paying attention to stupid little things like data? I mean after all from your vantage point 160K is the norm.

Let me know what you wear to work tomorrow because I want to be normal also. And continue the good work. I'm sorry if I violently reacted to the neverended hammering from your diatribe, but I can't seem to give up my desire for data. Fuck I guess that's why my salary is so "average".

X, et all,
I feel your pain about these 100k jobs. I deal with it every fucking day.
And I must tell you that there are some sorry sacks of shit making 100k and above. You would be surprized. I know their salary's because some have told me and others I know because of knowing their title and the salary range at my company for that position. I have seen resume's of some of the 100k employees. When I read them I sometimes feel they are underpaid at 100k. They've designed this, they have taught there, they have a patent for this and that. They have an MS from here and BS from there. They have 15 years experience. I work with these people every day and often think that they are total slackers most of the time.

These people are not unusual in my company. My company employs about 35000 employees.

I'm talking high tech jobs. I'm talking about people that survived layoffs.

I bet the average worker in Santa Clara county is NOT a high tech worker.

I've heard the average salary at my company is 60k. I dont remember where I heard that or when.

Knowing what I know, I wouldn't doubt for a minute that HA HA pulls 160k as he describes. Perhaps he might take a pay cut if he left his job and went somewhere else. I feel that way about many of my co-workers.

SJoldtimer, I make just a hair under 100K and am basically a recent graduate. However, I have multiple graduate degrees, patents etc blah blah blah. All my friends, who work at all the industries in the bay area, bio, tech, defense etc all make about 70 or so. Yes, I think there are a substantial number of over 100K folks, but these are management, or programmers/chip designers with a very specific narrow focus. The vast majority of us peons make under 100K. I don't know what Ha Ha's gripe is, my wife doesn't work, and while we can't buy a house, we have a great lifestyle.

@HaHa, I am totally in line with your opinions. The whole thing stinks, but the sheep just don't seem to get it. Borrow means you have to pay back, it isn't your money.

Can't

We

Just

All

Get

Along?

No...

jeffolie says

the fed will "monetize debt as the lender of last resort."

What does that mean?