patrick.net

I have no idea, really.

Too many variables.

You've got to divide the future into possible cases.

As things are set up now, 2020 is basically when everything blows up.

The front half of the baby boom will be 63-74 and hitting SSA retirement age.

So 2022 will be when the front half hits medicare, too.

This is going to be an immense wealth suck for us -- the baby boom had to put an extra 2.6T+ into the system 1986-2008 and they're going to want it back.

This means higher taxes on everyone else, and all taxes come out of rents (and home values).

Then there's "ObamaCare". If this survives the next 2 years the upper middle class will be partially subsidizing the lower quintiles' health care bills. More money getting pulled out of our wallets.

Then there's the national debt itself. Will it be $25T by 2020? Interest alone will be $750B/yr, and that's at 3%.

What about oil? $15 gas is entirely possible.

What new policies, changes in tax system, green energy industrial revolution can jumpstart the economy... ?

Avoiding my typical pie-in-the-sky stuff, I think the system is just going to come under increasing stress. We could pave the high desert in solar power arrays and save our bacon (it'd be a better investment than high speed rail) but if that's going to happen we'v got to start planning now.

But what might also happen is the money supply expanding such that prices get another 0, along with everyone's incomes. That would solve some problems, and of course make buying a house now a screaming deal.

Los Angeles Renter says

Which would mean we would have 30 years of ZERO housing appreciation from 1995-2025.

Yes, Back to the norm.

http://en.wikipedia.org/wiki/United_States_housing_bubble

Robert Shiller's plot of U.S. home prices, population, building costs, and bond yields, from Irrational Exuberance, 2nd ed. Shiller shows that inflation-adjusted U.S. home prices increased 0.4% per year from 1890–2004 and 0.7% per year from 1940–2004, whereas U.S. census data from 1940–2004 shows that the self-assessed value increased 2% per year.

SSA is in dire situation and the kind of debt we are in I don't think why anyone would think we would be on our feet very soon - What Troy said! http://news.yahoo.com/social-security-disability-verge-insolvency-090119318.html

actual prices will probably be double what they are today

toothfairy says

actual prices will probably be double what they are today

Hehe..Care to back it up by some data and how and why will it happen?

I don't think prices will go back up to recent bubble levels. Just like .com bubble, a lot of companies that were deemed worthless after the crash are still worthless and gone. And tulips haven't risen in price either if you know what I'm referring to.

Boomers are starting to retire, taxes are going to go up. Property taxes will most likely go up in CA. Funny enough, renters will probably feel better prices since a lot of boomers are starting to rent out their spare rooms because SS doesn't pay very much.

Wages aren't going up or will go up, unless you are too big to fail Washington insider. So live life conservatively. Don't take on more debt than you are comfortable with, if you can don't take any on at all.

bubblesitter says

toothfairy says

actual prices will probably be double what they are today

Hehe..Care to back it up by some data and how and why will it happen?

just a guess based it on the last housing crash that ended in 94. 10 years later in 2004 prices had more than doubled.

Los Angeles Renter says

What types of effect on our society would 30 years of zero housing appreciation have?

more affordable homes. less debt. more time to enjoy life. This is after the crushing fear and cannibal anarchy subsides. Plant potatoes. Your chubby neighbors are now food. Mmmm long pork! (watch "The Book of Eli")

bubblesitter says

SSA is in dire situation

SSA has $2.6T in assets, no debt, and dibs on the first 12.4% of the US's wage income. They could buy the 15 largest corporations in the US for cash if they wanted (and if they could sell their treasuries). The problem lies with .gov itself. Taxes are too low and wasteful spending (DOD cough) is too high.

toothfairy says

just a guess based it on the last housing crash that ended in 94. 10 years later in 2004 prices had more than doubled.

Yes if we get another dotcom boom things will turn around.

I wouldn't bank on that happening.

I did include in my above doom scenario the possibility of intentional inflation, like what happened 1999-2004 with the housing boom.

But the housing boom card has been played -- part of the reason prices rose so much 2002-2004 was interest rates falling from 8% to 5%. That was a massive drop, and in the bubble markets rates were even lower thanks to negative-am. Rates now can still go lower, but that's the Japan playbook, and their economy is still stuck in these low rates and no growth.

This is the chart Im looking at. The trend is pretty consistent. And if youre in California like me we tend to be above trend in price appreciation

shrekgrinch says

Just wait for Facebook to IPO for $100 billion or so.

Let's see, Facebook has about 1,700 times as many distinct viewers per month as Patrick.net, so Patrick.net should be worth $100B / 1,700 = $58.8 million!

Hmmm, something must be wrong in my calculations. No one has offered me even a measly million. In fact, no one has offered anything.

Or could it be that Facebook is not actually worth $100 billion?

Or could it be that Facebook is not actually worth $100 billion?

Blasphemy!

What I will be interested to see is how East Palo Alto might change in the next 5 years as a result of Facebook's move.

$58.8 million!

incorporate Pnet with 600,000 authorized and Issued shares.

Authorize Shared 600,000
Issued Shares 600,000
at Par Value 0.001
Total Equity $600.00

Sell to One Investor $100 /per Share
# of shares 10 shares
Pref. Class A $1,000 equity

Market Value $59,999,000

bmwman91 says

What I will be interested to see is how East Palo Alto might change in the next 5 years as a result of Facebook's move.

Any different than what was near by decades past. Ciscos first operations were in fact located on O'Brian Ave in East Palo Alto. Sun, Adobe, Ariba also near by

toothfairy says

The trend is pretty consistent

the trend is dead.

thomas.wong1986 says

Sell to One Investor $100 /per Shares
...
Market Value $59,999,000

Wow, I have to just sell ten shares at $100 to make Patrick.net worth $59.999M? I didn't quite get the thing about Pref. Class A shares though.

Sounds a lot like the old dot-con days! Still, I'd probably do it if I could.

East Menlo Park probably won't change much with Facebook there. Remember that they're moving into Sun's old buildings, and Sun was on top of the world at the time that was built. I don't see what's different about Facebook occupying the same space.

Sounds a lot like the old dot-con days!

nope.. shares to investors were based on more reasonable measures back in late 90s. 5-10 cents per share x majority ownership and control of the board.

The example above is what happened when Microsoft and others took a small equity in FB Zynga and Linkedin paying half a billion for a very small slice say 5%. Paying an inflated prices for 5% revalues the other 95%. This is what actual happened over the past 5-6 years.

Pref. Class A ... first round of VC round of funding...
b = 2nd c = 3 rd round... etc etc etc.

I'm terrified that inflation will mean that housing prices, and consumer prices in general, could double or triple in that period, if not worse.

I don't think housing will keep pace with inflation, if that's the question. Too many downsizing baby boomers and not enough Gen X/Y/Millennial wealth (it's all being taxed away) to fund big homes.

Bellingham Bob says

toothfairy says

The trend is pretty consistent

the trend is dead.

“Nessuna soluzione . . . nessun problema!„

let me guess...new paradigm?...this time its different? Thats what they said when prices were going up too.

Michinaga says

I'm terrified that inflation will mean that housing prices, and consumer prices in general, could double or triple in that period, if not worse.

Nada. House prices are based on healthy credit market. Healthy credit market happens 1)when there is underlying support of wages which is completely missing 2) or else days of NINJA loans return. Currently both are missing. Inflation in house prices is zero possibility in near future,even with rock bottom rates.

bubblesitter says

Inflation in house prices is zero possibility in near future,even with rock bottom rates.

You dont pay higher prices for homes anymore.. you pay to live near polution free air, better weather, better 4 year schools, better shopping centers, resturants, intellectually smarter nieghbors, and all the other marketing gimicks the REA can come up with. You also pay so prices never go down... bigger fool theory...

What will be the marketing gimicks in 2020-2025 ? I dont know.

toothfairy says

let me guess...new paradigm?

no -- failure of the new paradigm

http://research.stlouisfed.org/fred2/graph/?g=1K1

shrekgrinch says

Cornholio will soon start ripping into you for daring to piss all over the sacred cow known as ObamaCare.

No, I only comment when people say stupid or uninformed things (regardless of ideology or topic). I don't think anyone actually disagrees with Bob's statement -- it's at least partly true. Nothing sacred about it -- it's just annoying when people make ignorant strawman comments about anything or make false claims that are easily shown to be false to anyone with a modicum of intelligence.

In addition, there seem to be a large number of people who speak without knowing anything about Obamacare, as they do for many other topics, and these people largely focus quite transparently on talking points, rather than referring to specific aspects of the legislation. I seem to remember user saying "we don't know what's in ObamaCare" which was particularly unsophisticated because the law has been published for a quite a while now and this was a very old talking point.

The last point I'd make is that most people complaining about Obamacare didn't complain about the Republican Congress' plan back in the 90s that was almost exactly the same. I often wonder why that is.

shrekgrinch says

It's already happening. Just wait for Facebook to IPO for $100 billion or so.

Not sure about this. First of all, I don't think anyone thinks it's worth $100B. Even the Goldman valuation was reported as $50B, but is more like $38B if you do the math.

Second, Facebook does have a decent number of employees, maybe 2000 or so, but they're not all in the Bay Area -- unclear how many are.

Third, the dotcom boom-correlated Bay Area real estate boom happened when there were several companies with IPOs that were legit companies and many many multiples of crappy companies that had IPOs anyway (one of which currently is Groupon, although that's a Chicago company). So far the least impressive company to have an IPO is Pandora (based in Oakland, not Silicon Valley or SF), and that's partly because their business model isn't secure, but there haven't been a steady stream of low quality companies have IPOs pumping more and more cash into the local market, nor do there appear to be a stream of them on the horizon.

Fourth, the vast majority of Facebook stock will be held by co-founders, key executives, VC funds, and a few big institutional and other big stockholders, and not by employees. Obviously the early employees will have more, but many rank and file people won't have all that much.

None of this is really the same as back in the day -- we are seeing a limited number of high quality companies that are in the pipeline, such as Zynga, but not that many low quality companies.