03.02.2007 - Friday Open Thread
This is your open thread for Friday, March 2, 2007. You may post random links and off-topic discussions here.
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26 comments:
Not bubble-related:
Does anyone have a sense of how important soundproofing is to prospective condo buyers? Are concrete projects more desirable solely for the extra soundproofing that it provides? Is a woodframe project with extra 'soundproofing material' just as desirable? Do they even care?
As someone who currently rents in a typical woodframe condo building, I am really only interested in buying in a concrete building. I would place a huge huge premium on not being able to hear my neighbors, not having to step lightly, being able to have people over for cocktail parties and movies. Am I the only one?
This is how deterioration of the housing market / mortgage industry can effect the stock market and overall economy in seemingly unrelated ways. I never would have suspected that GM invested in mortgage securities.
GMAC Subprime Mortgages a Threat to GM
re: GM/GMAC,
This is, I think, in essence what has gone wrong with the American economy.
I bet Honda doesn't need to go to the craps table to subsidize it's manufacturing operation.
I suspect that this gambling mentality (which nowadays effects pretty much everyone) is what fuels these insane bubbles- real estate this time around.
I suppose that game is only sustainable as long as there are people who are willing to pay 2, 3, or more times the inflation-adjusted price of a home, compared to 30 or 40years ago.
Unlike gold or MS stock though, these investments need to be sold or rented. Now, I'm no economist, (not that it matters-they all disagree with each other anyway), but it seems to me that this fact would put a very real limit on the appreciation of housing as an investment.
These high risk loans which have been used to help fuel this game seem to me like a casino lending money to a player who hopes to be able to make up his losses- a likely lose-lose proposition. You can only build a house-of-cards so high before .....
crashcadia:
It's not just GMAC and Sears, look at the Washington State Workers Pension Fund. They're already 9 billion dollars in the hole and are desperately trying anything and everything to cover the losses from the last big stock market swoon back in 2000. Private equity funds, derivatives, real estate, it's all good!
Let's hope they know what they're doing, otherwise there's liable to be a lot of unhappy state employees storming the doors of the capital when they find out their pension money is gone.
greenthumb,
Oh, great.....
Tax hike!
btw, You'd think that the state, and it's pension fund managers would tend to seek out relatively conservative investments.
"round-n-round she goes, where she stops...nobody knows!" (Hey, it's only people's pension)
oops, I meant: greenthum
This is what I'm talking about when I say the American economy is fundamentally unhealthy.
Everything is based upon some form of gambling to really juice the returns. Because of this, I have to play the same game to protect myself against an implosion of the financial markets.
This is what bear markets are for: punishing stupid risks, eliminating bad debt, repricing assets to normal levels, flushing bad business models, and getting everyone back in the mode that you CAN lose money in stocks, real estate, bonds, nail salons, etc.
There is nothing like getting your ass kicked, from time to time, to keep your head in the right place. Failure has always been the best teacher. It still is.
"Success is relative, but failure is absolute."
Tom Selleck, as Thomas S. Magnum.
(I forgot the episode, but I think it is "Solo Flight.")
DJI closed 120 down today.
With the exception of the ABSOLUTE, ABJECT, HOPELESS STUPIDITY of Dell being up today, the market isn't making a case for 2/28 being an abboration.
Keep your eyes on the Yen vs US$. The housing market was the invitation, and that is the pale rider.
Even Seattle will get hit when that goes kablooie. Yes, Ardell and Shug, even Seattle...
You have to love what Warren Buffet says about the subject
Tougher Subprime Lending Standards Urged
2007 is going to be just like 2006... According to Ardell!
No, it's not an old post, its a new one in which she reaffirms her belief that this year will be just like the last, 15-25 percent appreciation!
Hold on tight!
http://tinyurl.com/259wvp
The link I posted earlier doesn't seem to work, so here is Warren Buffet's comment on the subprime lending market:
Subprime loans have attracted wide attention, and Thursday, Warren Buffett, chairman of Berkshire Hathaway, told shareholders in his annual letter that the slowdown in residential real-estate markets partly stems from weakened lending practices in recent years.
"The 'optional' contracts and 'teaser' rates that have been popular have allowed borrowers to make payments in the early years of their mortgages that fall far short of covering normal interest costs," he said. "But payments not made add to principal, and borrowers who can't afford normal monthly payments early on are hit later with above-normal monthly obligations."
"This is the Scarlett O'Hara scenario: 'I'll think about that tomorrow.' For many home owners, 'tomorrow' has now arrived."
Maybe it takes somone like Mr. Buffet to make the obvious believable to the math challenged.
Amen eleua!
"This is what bear markets are for: punishing stupid risks, eliminating bad debt, repricing assets to normal levels, flushing bad business models, and getting everyone back in the mode that you CAN lose money in stocks, real estate, bonds, nail salons, etc."
Yes, Indeed!
The old "law of the jungle" I would say. Hey, if people want to play Donald Trump.....
economically speaking, there is also a good bit of truth to the idea that there have to be "loosers" in order to have "winners".
I've never seen a game where everyone wins. And that's what this bubble was presented as. Defies logic doesn't it!
"A casual stroll through the lunatic asylum shows that faith does not prove anything.
Friedrich Nietzsche"
German philosopher (1844 - 1900)
I would submit that the reason our economy is so sick is precisely because we have tried to avoid recessions.
Recessions suck at the time, but they are absolutely essential for a sustained, healthy economy.
Because the politicians now have enough influence over the general economy, they manipulate it in order to avoid politically expensive recessions.
This is not counting how the government data is now so flawed, we have essentially defined away recessions and unemployment.
I don't like party politics on this blog, but I think I am one of the few Republicans here. It is an absolute embarassment when Junior goes on about how dynamic and wonderful our speculative economy is. He is an idiot. So is Hillary. She is right, but for the wrong reasons.
It is for this reason that I am against reelection for any Congressman or Senator. One term, and it's back to your district to eek out a living.
If I was a Rep from the WA-1, I would do my two years, and then head back to my district to fly slack-jawed cretins up and down the East Coast all month long. There are an abundance of people over here that are smarter than I am, and for me to think that I am indespensible to my district or the country is pretty arrogant.
America has many, LARGE problems to address in the next recession. Hunger helps to focus the mind.
End of political rant.
Recessions are like forest fires... necessary evil (and not THAT evil).
Recession > Depression
eleua,
I definitely agree, especially about "defining-away" recessions, unemployment, etc.
I also believe in the concept of "eb and flow", yet I would add that one mans' recession is often anothers boom-time.
re: politics, I think both major political parties have signed on to the idea that everything has to be "spun" for optimum gain.
What if a person acted like this! Probably would be seen as a serious a-hole.
Yes, serious term-limits are a good idea. Otherwise parties will continue to more and more resemble gangs.
I get so sick of this petty blame-game these people are playing out almost every day on the news!
I Think they all need a good kick in the ass, and to be told to "get on with the people's business"
yeah, I saw that David Lareah article, and I agree-pure comedy!
He's saying that the worst is over, unless you're one of the "other" people, in which case there will be more of the same.
He's even taken on some of the arguments of bubble proponents re: financing, and presents them like he's always believed them.
Trying to "have his cake, and eat it too" I guess.
Eleua-
Yeah, you can throw Larry Kudlow and Shawn Hannity into the "everything is great" camp. They both make good points from their respective disciplines but when asked about the economy they make me want to puke.
It is as if being negative/reaistic is unamerican. Politics aside, reality is reality. I personally am cheering for an all out depression. It would not be pleasant but it might teach our generation(I am 36) a little something about life. I think it would make everyone better people. I feel our country is bankrupt, literally and commen sensically.
Most people I talk to, normal people, have no flippin clue what risk they are taking. What's the saying? "Be fearful when others are greedy and be greedy when others are fearful". I am scared. Scared so much, we have paid off all our debt and have 25k in the bank. I wish it were more.
That 500 point drop in the Dow was not good. All the fundamentals are toast and we haven't seen anything yet. I will be amazed if we stay above 10k by years end.
macaca-
I fear you speak the truth. Unfortunately, I believe many of those variety of ARM holders across the country will join the ranks of renters again.
Hahahahahaha... hahahaha...
I call this one Hypothetical Grivetti (alias M.Rivett)
Actually a friend of mine found this for me on some REIC 'shill blog. Scroll down to RENT VS. BUYING... THAT IS THE QUESTION!
I interviewed with the Rhodester at one point, and The Tim posted that article here with commentary...
I'm sure this has already been covered here on the blog, but I'm frankly too lazy to peruse (hard to keep up these days), but what I find interesting for their 'comparison' is this...
A knowledgeable real estate professional might counsel Mr. Rivett why waiting 2-3 years is a dangerous way to go
wow! there is such a thing? Some objective counselor out there not out to make a buck off me? Where?
We'll use a $475,000 home as an example... if we assume a relatively modest and generally historic example of a 6% appreciation rate
Hahahaha... for starters, 475K is outta my price range and secondly "modest 6%"... Haha, this 'counselor' must be higher than Superman on qualudes... Well, according to Jan's numbers I'm looking at a "modest 0.8%"... I guess back in late '05 I was way way wrong!!!
The buyer is "saving" $1,000 a month, while the home is appreciating, on the average, more than $2,500 a month! This results in a net disadvantage of $54,000 over three years.
The crack fumes stung my eyes on this one.... weehoo 2500K a month! oh boy!! Property taxes you say? closing costs? Insurance, maintaince? All that's for sucks, I'm gonna get a slot that pours gold equity coins in my wall....
Wow, and to think I'll be stuffing that 1K a month under my mattress where it'll earn NO INTEREST or INVESTMENT RETURN! I sure am an idiot!
if we assume a 25% tax bracket, the buyer could save an additional $750 per month in taxable income. That lowers the effective principal and interest payments from $3,000 per month to approximately $2,250.
Wow! saweet! Assuming I put NO tax deferred money into my 401K at all!!! Why would I need to, my home is pure profit baby!! Diversifying is for sucks!
It's good time to buy... SAY IT LOUD!
SAY IT LOUD! KISS MY A**!!!
Confused,
I agree with your assessment of Kudlow and Hannity.
See my column about how the GOP sucks.
Grivetti, the guy's logic makes that house worth $2,573,734.25 by the time a 30 year would be paid off. Better buy it now and take the easy street to retirement!!!
Eleua,
I read your blog post, and agree wholeheartedly with the thesis. However, I wanted to point out that higher education (even advanced degrees in "hot" fields) will not guarantee a particular lifestyle in this country.
Case in point: with a PhD and post-doctoral experience, a molecular biologist can expect to make about $60,000-$80,000 if she takes a first job in industry. Not bad, but hardly worth the time and effort to obtain the degree (especially when one considers that these people are going to be amongst the most productive employees of any company that hires them). Furthermore, there is a serious downward pressure on wages at the moment -- most corporate research facilities are being eliminated or out-sourced.
I was "networking" the other night, and met a fellow who has a PhD and a JD. What he told me made my blood run cold: a new JD will make twice what a new PhD will make in industry! In other words, we've gone so far 'round the bend as a society, that you will make better money by erecting artificial barriers to intellectual capital, than you will by actually creating that same capital.
Until we deal with the parasites at the top of the corporate hierarchy, life will get harder and harder for the people who actually add value to the world. It doesn't matter if you make baseball bats or bioreactors -- if your hands get dirty, it's only a matter of time until your lifestyle is rendered unsustainable.
Does anyone have a sense of how important soundproofing is to prospective condo buyers?
It should rank high on your list, IMO. There are two "soundproofing" considerations you need to be aware of: Impact Insulation Class and then your standard party wall type of sound insulation.
The biggest complaints I hear as a condo board member all relate to "the herd of elephants living upstairs." Our building has an IIC 55 minimum requirement. Frankly, that is not enough, and the sounds of ordinary walking will drive you mad -- especially if you live below someone who maintains a different schedule than you. How mad? Mad enough to make people move out, or start lawsuits against individual units or the association.
Construction with a higher IIC does better at blocking impact sound, so seek it out or you will lose sleep over it.
Good points above, and not to stray too far of topic, but relating to the above posts…
I think it is interesting how the US economy has evolved into creating values versus creating products. As the dollar continues its slide, economists talk about how this will benefit the US exports. What do we export anymore? It’s mostly raw materials and waste scrap metal, etc.). The US has even become a net importer of agricultural products.
Otherwise we create wealth and value on paper (through m&a activity, etc.), when in actuality, nothing tangible is produced. And through the evolution of the market state (versus a nation state), most production of US-owned corporations is offshored. We used to make things to sell to one another through manufacturing; now we only do things for one another in a service-based economy.
For example, it sucks when the guy selling the health care insurance is making more than the doctor tending to the patient. Or the middle manager making ten times the rank-and-file employees producing the product.
I too am quite bearish on the future of the economy for the foreseeable future.
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