patrick.net

SP,

I managed to avoid multi-variable calculus, thank God/gods/liberal arts curriculum!

astrid,

NZ has a bigger property bubble than the US. I went there twice, and all I have to say is, this freaking place is a hyped up Lake Tahoe with no jobs, no infrastructure, and horrible weather.

The general pay level is extremely low in NZ, a highly educated professional will have a difficulty finding a position there worthwhile of his experience and education. That is generally the problem for places outside of any metros in the world. It doesn't matter how valuable or how talented you are, there simply no such high profile jobs locally to pay you the market price.

Auckland has about over half of the population of NZ, about 2M. You have to stay north of Auckland to get a decent weather, because the rest of the country is only inhabitable between Dec and March, South Island will freeze you butt off for most of the year, think Scotland. General cost of living is VERY high, comparable quality of grocery, clothes, electronics cost MORE than the Silicon Valley in absolute terms, and they have a higher tax rate. Good suburbs in Auckland are generally in the inner east area and north shore, they cost about $500K-800K NZD. While it seems affordable on the surface, what if I tell you the highest local pay hardly pushes over 100K NZD and they have a higher tax rate?

The biggest source of immigrants (note: immigrants) for Australia has been NZ for many years, until recently. I used to be puzzled by such statistics, but after visiting there, I totally understand why so many NZers pack and leave for the Oz.

To sum it up, you can do better by going to Lake Tahoe over the weekend than camping out down there. The daily wind chill makes Boston winter feel warm.

SP,

i think the composition of housing stocks compared to distribution of median income makes more sense.

Median housing price is just too much bullshit. The key is about the distribution of types, and cost of the housing stock compared to the number of target customers for the stock. Also, housing is priced by the next marginal buyer who is willing to hand over X amount for it, so one should also take into consideration the number of marginal buyers left who don't have a home yet (assuming they are not going to buy for investment purpose). Median household income to median house value measure is assuming that all households are willing to pay for all houses available out there, a better measure will be the median household income for people don't have a home yet to median house value of stocks that are being offered on the market. But I guess I am being overcomplicated.

All in all, the current measure is too crude and misleading.

Owneroccupier,

Thanks!

I wasn't thinking of NZ as a place to work, just a place to retire. I'm not convinced NZ prices will come down, it's still perceived as extremely attractive for a lot of wealthy expats. As for prices...Tahoe is already awfully expensive for retirement. Groceries and consumer goods are not a huge concern either, since they're a relatively small portion of overall expenses. The main concern would be healthcare and education expenses

The cold weather is kind of surprising. I heard about the wind, but I thought the North Island was sub-tropical and the South Island was temperate.

You guys won't believe this.

When I was down in NZ in Marlborough region, the northeastern tip of the South Island self-proclaimed as the sunniest area of NZ, also a winegrape area with tons of acres coming online, I met two SoCal specuvestors going down there checking out on houses to buy. I am talking about a small tourist town with about 2,000 population, with scant infrastructure, no broadband, one oil station and one local grocery market. They were telling me that they bought 4 houses over the weekend at 150-220K NZD a piece. They also commented on the booming vineyard business believing that this will be the next Napa Valley.

I didn't want to ruin the weekend. What I should have told them is, the local wage hovers around 25-40K, and the unemployment rate is around 25%. I also didn't tell them that the world is so flooded with wine supply that Oz growers start to bury winegrapes locally instead of paying for their transportation going elsewhere. When gas price jumps, it will cost more to ship their wine around the world than the value of the wine they produce. NZ has only 3M population, they'd better be working on a drinking campaign now to make sure that the NZ population can absorb all that extra supply.

@Owneroccupier,

I just spent a month in NZ last October. While I think you're spot-on about their RE bubble --it's like the whole country is California-- and the overall cost of living is quite high, it's really not quite as bleak as you portray it.

Both islands get plenty of good weather well outside Dec-March (we had plenty of sun in October). While much of the South Island's does stay rainy during their winter --especially along the coasts-- it really doesn't get much colder than Portland or Seattle. Quite liveable really.

Can't comment on the job market as I've never looked for work there, and it's true the cost of groceries & electronics in high vs. the U.S., but consider that you also get free education and cradle-to-grave healthcare, good unemployment benefits, etc. And they do not have to operate under the considerable burden of millions of illegals/free-riders, as we do. Unemployment is somewhat higher among the native Maori, but their numbers are not large enough to swamp the rest of the economy.

In terms of scenery and cleanliness of the environment ("intangibles"?), all I can say it is simply stunning. Definitely beats out NoCal and rivals the Pacific NW coast in terms of sheer variety and natural beauty. We no doubt disagree, but I'd take living in NZ over most parts of Oz anyday.

astrid,

wealthy people are actually bailing out of NZ.

Lots of million plus properties at the northern tip of North Island that falls into the so-called sub-tropical zone are being offered at big reductions from the price they were bought for. The locals pointed at these properties and told me that the owners never showed up, and nobody was hired to take care of them. Old people need 1) warm weather 2) high quality healthcare and 3) good public infrastructure to get around, NZ has none of that.

NZ healthcare is free for NZ citizens and PRs, but the quality is much worse than HMO. The problem of NZ is, it is a resource-poor country (except for sand, sheep and lumber) with too small of a population.

There are much better choices than NZ for retirement. If you have gotten housing taken care of, retiring in the Bay Area is actually CHEAPER than retiring in NZ.

The cold weather is kind of surprising. I heard about the wind, but I thought the North Island was sub-tropical and the South Island was temperate.

You heard right, astrid. The North Island is quite warm most of the year, and many parts (Coromandel, Bay of Plenty, Bay of Islands, etc.) have a beach atmosphere somewhat similar to Cali.

HARM,

I have cousins who are first generation Kiwis, and I hear them complain about the weather ALL the time. When I was there in Oct and Feb, I just couldn't stand the hourly weather changes with rain and sun alterating every 10 minutes under a terrible wind chill.

While education and healthcare is free, the quality is very low, especially that of education. NZ is known among Chinese as the "trash haven", meaning that usually the students who fail in Hong Kong, Taiwan or China, and are denied access to US, UK, Canadian and Australian universities end up in NZ. I didn't check out any schools there, but I have yet to meet any world class scientists coming out of the NZ system, there are plenty from Oz. Both of my cousins left NZ for Oz precisely to give their kids a better education.

Yes, I admit that the scenery is stunning. But I am a city person, and I can't stand living among too much nature, especially if it is inconvenient to do so. I would rather head for Canada for that kind of stunning beauty, saves me 18 hours of flight.

Old people need 1) warm weather 2) high quality healthcare and 3) good public infrastructure to get around, NZ has none of that.

Again, I think OO is overstating the cold weather meme. As far as the healthcare goes, can't really say from personal experience. Of course, the U.S. is really in no position to judge, as we have something like 40 million uninsured and still pay the highest rates per capita in the world for rather mediocre-quality healthcare. The fact that they cover 100% of their population for considerably less should count for something, IMO.

On the subject of public infrastructure, I would agree --especially where the roads are concerned. Most of the country is accessible only by little windy 2-lane country roads. Even the major cities (with the exception of AUK & Hamilton) aren't linked with anything remotely resembling our freeway system. I was amazed to see how many bridges --even on the relatively populous North Island-- were single lane.

HARM,

I think the US has a much better chance of fixing our healthcare than most people think.

First, the boomers will put a stress on our system, forcing it to add capacity while enhancing efficiency, not to mention we do have the best healthcare that money can buy. There are parts of the world that money cannot buy much of a healthcare. What we need to figure out is how to get our money stretch further.

Second, size matters. A big population means scale economy. It also means innovation, competition, and more free market pressure to make things work. A country needs to reach a critical mass for population.

Third, if you are in below 40 or so, we are actually going to be the luckiest age group when we reach retirement. Why? Because the bigger boomer wave will pass by the time we retire (hopefully in late 60s or early 70s). So while they were being shoveled through the medicare system forcing it to expand, by the time we reach there we will have more beds per person and more doctors/nurses per patient left over by the legacy system.

So if I were to retire today, I would want to avoid competing with other boomers for that limited resources, probably I would head for some other choices like Spain, Oz or Chile. But if I am going to retire in another 30-35 years, I think the US will again become an attractive place for retirement.

Owneroccupier,

In America, I don't expect to have any government/healthcare coverage when I'm ready to retire, in 20-30 years. Thus, even a pretty basic healthcare system is fine by me. Kiwis live pretty long and healthy lives, compared to Americans. If it's bad, I can afford to supplement my healthcare with out of pocket visits at lower costs (since local wages are lower) than in the BA.

The bottomline is: In America, if I'm uninsured (and I am currently uninsured, I pay my dentist appointments and clinic visits out of pocket) and get really sick, I would have to file bankruptcy. In most OECD countries, I would be able to recover financially because of universal coverage. Even if I get private coverage, I would worry that the insurance company can try to kick me out or try to deny coverage.

Healthcare is something 40M people in this country has almost no access to, except for emergency care. A good chunk of those people are children, who don't get proper care early in life and suffer for it later in life. I bet NZ has a superior conception to 10 care on avg., compare to this country. On the other hand, old people lingering on respirators...maybe that's not the best way to spend healthcare dollars. If they want that, maybe it's most economically efficient if they pay for it, if they can.

As for infrastructure. The reason why America has relatively good infrastructure in the boonies is because Californians and New Yorkers and Bostonians subsidize them for it. NZ has nobody to subsidize them for the infrastructure so they go without.

@OO,

Well, given that you've visited more than I and have close relatives living there, I'll defer to your expert opinion, sir. :-) Personally, I'd rather take living close to nature over dense urbanized living (though I too need to have some basic technology & modern plumbing/electricity/internet, etc.). To me NZ represents high Q.O.L. over high GDP, which counts for a lot in my book. Too bad about the education system & employment situation, though --sounds like they just need to start investing heavily in education, R&D and roads/infrastructure.

Alterego,

Sounds like some locals decided to go the self-employment/consulting route. No doubt you hung out amongst the elites there. ;)

astrid,

it is very difficult to speculate on situations 35 years down the road. As I said, if you are retiring today, then perhaps NZ is not a bad choice (but they want 2M NZD if you want to retire down there). Well, with $1.2M USD (2M NZD), I think you will be just fine retiring in the US. No free lunches here.

Now, if you are looking at NZ as a place to work and build your career today, forget about it. There is no career to be built, the income distribution in NZ is like Peter Jackson and everybody else. After the Bush re-election, lots of disgusted Californians look at NZ as an utopia, so I went down with an open mind to see what it is about, not that I was serious about thinking going there. I was just genuinely curious in living situations around the world wherever I went.

The key for younger people like ourselves (not that I want to pretend to be as young as you are) is, opportunities come first. Perhaps when you get beaten up enough later in life, then you go to a lower-cost, lower-earning place. But as Joe Schmoe once said it, mental stimulation and working with the best people is also part of the intangible. You really get none of that in NZ.

Also, many so-called lower-cost places are deceiving in the true cost of living. Housing usually skews people's perception. If you look at just the rental situation in the Bay Area, the cost is relatively reasonable. Housing in NZ compared to wage is even more outrageous than here! Since NZ has a tiny housing market, a few SoCal or NorCal specuvestors can easily bid up the market 100%. Healthcare is a big plus, but again no free lunches, you pay with your tax. And because of the smaller healthcare market down there, you get even less efficiency. If a country has exceptionally good healthcare, it may either not last, or something else has to give.

If gas price keeps climbing, countries like NZ will suffer a lot. It is too isolated from the rest of the world, even hopping over to Oz will take 3 hours of flight. I would want to see the sustainability of their model under higher energy cost.

SP,

NZ feels colder than it should because of the wind chill.

What happens here is, the wind coming down from Arctic is mostly blocked by the huge mountains range up in Canada, yet down in NZ, there are no big mountain ranges in the south stopping the wind blowing from Antarctica. The wind chill effect usually adds another 20-30 Farenheit on the negative side.

Owneroccupier,

"the income distribution in NZ is like Peter Jackson and everybody else"

Hehe, even after King Kong?

Fair enough. I'll just have to gather together my frequent flier miles and go see it one day. :)

Thanks for sharing your knowledge and thoughts. You've definitely given me a lot to think over.

RE: NZ

Where is Gabby?

As bad as the income inequality/distribution is in NZ, it's even worse here. Scroll down to "Figure 14: Income Inequality (Gini Co-efficient)":

http://www.forfas.ie/ncc/reports/ncc_annual_05/ch02/ch02_01.html

@Peter P,

Gabby occasionally lurks, but has little time for contributing these days. I actually met her dad when visiting NZ --really nice guy, btw.

US is due for a big reset, perhaps starting as early as this Nov.

The income distribution issue worsens much more under Bush's terms. I would say the 90s boom benefitted most people one way or another, the housing bubble is a simple transfer of wealth leaving a big sector, and the most promising sector of our society, disenfranchised.

I really don't know who belong to that 30% that still gives Bush a thumb up.

FAB,

When SF and Marin homes start dropping by $100K + per year we are going to see people running for the doors…

If and when this happens, stop by my blog and email me to arrange for a delivery of your favorite indulgence. Especially if you share when your buy signal triggers that you described some months ago.

I'm counting on a 15%-25% nominal drop in south Marin. If it's anything close to 50% I'll be buying everyone rounds.

OO

I really don’t know who belong to that 30% that still gives Bush a thumb up.

Visit the plane of reality my in-laws inhabit if you want to observe, first hand, the lower-middle/working-poor who support Bush with unparalleled passion and vitriol.

Owneroccupier,

Glib answer.

Those promising people are most likely to already be alienated by Bush.

More glib answer.

CEO of corporate subsidy recipients, muslim extremist, and people who think they'll be raptured up soon.

Randy,

but why? What did Bush bring to them? Their living situation deteriorated precisely because of Bush's policy, how can you support someone who robs you of your future?

I understand perfectly why rich people vote for Bush, I have a hard time understanding why poor working class would vote for him, what for???

Owneroccupier,

Religion, hatred, and fear are great irrational motivator/opiate of the masses.

Yes. A.ka., "culture warriors", conservative one-issue voters (gays 'n guns 'n God), Bible-belters, etc.

For further research, see Thomas Frank's excellent "What's the Matter with Kansas? How Conservatives Won the Heart of America"

Short but very interesting news report

http://observer.guardian.co.uk/business/story/0,,1774162,00.html

They are talking about PPT, how US Govt may acytally like decline of US$ and a highly likely meltdown in stock markets.

astrid, I have two messages stuck in the pipeline, somehow cannot be published. Please delete either one of them if you happen to be able to retrieve them.

A different angle to the bearish view.

http://business.guardian.co.uk/story/0,,1774740,00.html

This fellow (Larry Elliott) says US housing market and US$ is in trouble. But says falling US$ means falling oil and commodity prices. Logic seems to be is US$ falls, exporting economies will slow down and demand for commodities will drop. This was also given as one of the reasons in many news stories today about the drop in commodity and gold prices.

Interestingly at the end he says, sell US$ and buy bonds ? Huh ? If US$ is going to devalue, why should I buy bonds ? Maybe he means UK bonds ??

OO-

Well, I voted for him and still support him. I think he's doing an excellent job all things considered, and will go down in history as one of the greats.

With respect to income inequaltiy, that has been increasing largely unabated since 1967. Anyone who claims that the current administration is responsible for this, or has worsened matters in any appreciable way, simply isn't aware of the facts. See the Census Bureau income inequality figures at:

http://www.census.gov/prod/2000pubs/p60-204.pdf

(these are through 1998, the data lag by quite a bit.)

Notice that the trend did not reverse at all during the Clinton and Carter administrations. The gap just kept on widening.

The trend toward increasing income inequality is not something that can be viewed along party lines. It has been happening for the last four decades.

Surfer-X
You took your pics off your blog!
I was gonna leave a comment!
Oh, well.
At least we know now that your outsides
aren't nearly as rough as your insides. ;)
Well, thanks for the glimpse, anyway.

OO,

Astrid put it more eloquently, but it's the big 3 G's that motivate voters in that region: God, Guns & Gays. If you think I'm kidding then let me take you on a tour of my hometown.

My father-in-law is a farmer. A grain farmer. He effectively loses money farming, only staying afloat with tax breaks and never ending gov't guaranteed loans. He's seen farm subsidies decrease for family farms while increasing for factory farms during the past 6 years. He's seen Dutch dairy farmers move in an drive out virtually all the local family dairy operations. This list goes on.

He still is a fervent supporter of Bush. He'll tell you with an air of nothing but pure innocent honesty that Bush is the only man to do something about foreigners taking advantage of America. He'll tell you about how Bush has helped to spare Toledo from being burned to the ground by sacrilegious Islamists. My mother-in-law will tell you that "Bush simply has a good soul", with a self-enlightened righteous smile on her face.

I seldom venture into the domain of politics, but I'll say here that this phenomenon is the failure of the Democrats much more than the triumph of the Republicans. If the Democrats cannot win over a working poor, family farming, screwed by big-everything, Wal-mart hating Midwestern farmer who thinks that unions were a good thing (and that they're waning today only because of unfair Japanese competition) then they just don't deserve to run anything more important than a minor league school board.

And just for the record, I am aggressively non-partisan; I'm an equal-opportunity critic.

FRIFY,

I like your reasoning, but warn you that the interjection of facts and logic into the conversation is hazardous. You may yet feel the wrath of a postmodernist deconstruction of your argument that will leave you drinking shots of Jameson alone in the dark.

Nothing can be done about this trend. Don’t even think about reversing the Bush tax cuts, that will only make things worse.

Huh? What is it about growing income inequality that's so inherently sacrosanct? Income inequality has always existed to varying degrees in every society and under every economic system yet invented by mankind, true --I'm not disputing this. But what makes the recent trend towards greater inequality so inevitable? Aren't governments, compensation schemes and taxes purely artificial human-created constructs that we can re-design and tinker with as we see fit (in theory anyway ;-) ) ?

And if there really is some kind of natural law that predestines all societies to invariably progress towards more inequality over time, then why should I even bother worrying about it? According to this (suspect) theory, then all the world's wealth will eventually end up in a single pair of hands, regardless of what we as a society do or I do as an individual, right?

Sounds a tad too fatalistic for me.

Owneroccupier,

I saw nothing to erase. Wordpress must have triggered an auto-delete.

@FRIFY,

Ok, got it --D'oh!
(in Emily Latella voice): Never mind...

Surfer,

you da man. Did anyone tell you that you actually look like John Travolta? Rock on.

astrid,

ok, what are the things that I should do to avoid triggering auto-delete?

I wish I knew! A couple of my comments had been scrubbed out.

ok, what are the things that I should do to avoid triggering auto-delete?

@OO,

Avoid the terms "always goes up", "new paradigm" and "permanently high plateau". Those'll get your comments deleted every time :mrgreen: