From Business Insider:
Nouriel Roubini Just Identified A Ton Of Housing Markets That Look Like Bubbles To Him
Economist Nouriel Roubini is sounding a big warning about global housing bubbles.
In a new piece for Project Syndicate, he identifies at least 17:Now, five years later, signs of frothiness, if not outright bubbles, are reappearing in housing markets in Switzerland, Sweden, Norway, Finland, France, Germany, Canada, Australia, New Zealand, and, back for an encore, the UK (well, London). In emerging markets, bubbles are appearing in Hong Kong, Singapore, China, and Israel, and in major urban centers in Turkey, India, Indonesia, and Brazil.
Signs that home prices are entering bubble territory in these economies include fast-rising home prices, high and rising price-to-income ratios, and high levels of mortgage debt as a share of household debt. In most advanced economies, bubbles are being inflated by very low short- and long-term interest rates. Given anemic GDP growth, high unemployment, and low inflation, the wall of liquidity generated by conventional and unconventional monetary easing is driving up asset prices, starting with home prices.
Roubini notes that some countries are trying to contain these bubbles through policies like “lower loan-to-value ratios, stricter mortgage-underwriting standards, limits on second-home financing, higher counter-cyclical capital buffers for mortgage lending, higher permanent capital charges for mortgages, and restrictions on the use of pension funds for down payments on home purchases.”
…
For now, Roubini doesn’t see the bubble(s) bursting any time soon.…the global economy’s new housing bubbles may not be about to burst just yet, because the forces feeding them – especially easy money and the need to hedge against inflation – are still fully operative. Moreover, many banking systems have bigger capital buffers than in the past, enabling them to absorb losses from a correction in home prices; and, in most countries, households’ equity in their homes is greater than it was in the US subprime mortgage bubble.
From the Record:
N.J. home construction having best year since 2007
Builders are on track to start the largest number of New Jersey homes this year since 2007, signaling the revival of a market that was severely constricted after the recession and the 2008 financial crisis.
According to new census data on building permits, home construction is running about 37 percent ahead of last year’s pace. Through October, 20,051 housing units were started — already passing last year’s full-year total of just under 18,000.
The market’s momentum is being powered by multifamily construction, which has accounted for about 57 percent of the activity through October — a similar percentage to last year.
“Overall, it’s a positive report,” said Patrick O’Keefe, an economist with the accounting firm CohnReznick in Roseland. He expects more than 23,000 housing units to be started this year. “It’s going to be a very good year, relative to where we’ve been.”
This year’s construction pace is a dramatic rebound from the 13,000-unit average that prevailed from 2009 to 2011 — the lowest numbers since World War II.
From the LA Times:
Housing markets rebound faster when foreclosures proceed quickly
Why have many of the local housing markets that were hit hardest during the bust — especially in California — bounced back so vigorously and quickly, with prices close to or exceeding where they were in 2005 and 2006?
And why have many others along the East Coast and in the Midwest had a slower move toward recovery, with sluggish sales and gradual increases in values?
Though multiple economic factors are at work, appraisal industry experts believe that they have isolated a crucial and perhaps surprising answer: Real estate markets rebound much faster in areas where state law permits foreclosures to proceed quickly, moving homes with defaulted loans into new owners’ hands expeditiously, rather than allowing them to sit and deteriorate, tied up in court procedures for years. Prices of foreclosed homes in such areas typically are depressed and negatively affect values of neighboring properties, but they don’t remain so for lengthy periods because investors and other buyers swoop in and return them to residential use rapidly.
By contrast, in states where laws allow large numbers of homes in the process of foreclosure to remain in legal limbo, often empty and unsold, home-price recoveries are hindered because lenders are prevented from recovering and reselling the units to buyers who will fix them up and add value.
Pro Teck Valuation Services, a national appraisal firm in Waltham, Mass., recently completed research in 30 major metropolitan areas that dramatically illustrates the point. All the fastest-rebounding markets in October — those with strong sales, price increases and low inventories of unsold houses — were located in so-called nonjudicial states, where foreclosures can proceed without the intervention of courts.
All the worst-performing markets — where prices and sales have been less robust and there are excessive numbers of houses available but unsold — were located in judicial states, where post-default proceedings can stall foreclosure completions for two to three years or even more in some cases.
This is the last, great pump-and-dump before the collapse of civilization.
Prepare accordingly.
Something like 100 loans go delinquent, 10 get a Lis Pendens filed and assignment, then 1 property goes to auction (numbers pulled out of thin air for effect). The gross numbers of properties going REO, no matter what bank, just all the REO for a given town, just don’t seem to comprise any reasonable, believable percentage of total housing units.
Some percentage of loans entering foreclosure (NOD/NOI, LIS, etc) are in some stage of loan modification, trial, workout, mediation, etc.
What I don’t understand is how this impacts the overall foreclosure timelines and statistics. For example, I know of two properties that have received loan modifications, and are (possibly) current, however, you’d never know by looking at the legal records. I haven’t seen any kind of discharge of the lis pendens, don’t know if it’s because they are in a trial period, etc. I suspect that the prohibitions against dual tracking foreclosures have created situations where banks are simply “pausing” the foreclosure process during the workout process (what other reason could there be for dozens of adjournments on a sale by the lender?).
For the properties that do make it to the Sheriff’s docket, there are still a sizable number that are canceled by the lender or settled. Suspect that these are also the loan mods or potential cures, however these are much more visible.
3 – Got Whiskey?
Scathing rebuttal to those who want to repeal Biggert Waters – From the WSJ:
Flooding Taxpayers Again
Federal flood insurance is a classic example of powerful government aiding the powerful, encouraging the affluent to build mansions near the shore. Congress finally had the gumption to reform the program in 2012, but now the beachfront homeowner and housing lobbies are trying to reverse this progress.
National flood insurance is a 1960s-era program that had its finances blown sideways by Hurricane Katrina and again by Hurricane Sandy last year. The program is $24 billion in the red, with $350 million cash on hand and a $6.4 billion credit line—on $1.3 trillion of insurance in force. But thanks to the bipartisan Biggert-Waters reform signed by President Obama in July 2012, the federal insurer is slowly raising its rates to actuarially sound levels.
That’s been a shock to the affluent beachcombers who are accustomed to artificially cheap insurance. Businesses, vacation homes and homes with “repetitive” flood losses will see rates rise 25% a year until those “rates reflect true risk,” according to the Federal Emergency Management Agency (FEMA), which administers the federal insurance program. About 20% of the national insurer’s 5.5 million policyholders will be affected.
Cue the caterwauling from the 1% and their elected representatives. In June the House voted 281-146 to delay premium increases for a year, a turnaround from the 406-22 vote that passed Biggert-Waters only a year ago. California Democrat Maxine Waters is protesting that she didn’t know what was in the law that bears her name—which seems plausible to those who have followed her career. She’d like more Americans to build homes in flood zones and have poor Americans pick up the tab when insurance premiums don’t cover losses.
…
When Republicans hear such good sense from the Obama Administration, they ought to embrace it. They should not endorse another taxpayer subsidy for those who want to live next to the ocean while sticking others with the costs of their lifestyle.
For example, I know of two properties that have received loan modifications, and are (possibly) current, however, you’d never know by looking at the legal records.
How many more in a similar situation? How many more are two cycles away from a late payment?
7 – Everybody is 3 payments away from being out on the street.
For the properties that do make it to the Sheriff’s docket, there are still a sizable number that are canceled by the lender or settled. Suspect that these are also the loan mods or potential cures, however these are much more visible.
So, those underwater souls get to pay the crushing debt month after month without an option to sell. They can’t sell because they can’t absorb the massive hit. It’s 10 times worse than paying rent. When you rent, you can walk away. Here, if you walk away, the house goes into foreclosure and your credit is crippled.
Street Justice,
As of this typing, I have more than 3 payments stored away. Is there a status or designation assigned to people like me? :)
9 – That’s not entirely true. It would depend on the lease agreement. When I rented a garden apartment managed by a property management company, they told me I owed them the entire years rent and it was to be paid in monthly installments. If I terminated the lease early, I was still responsible for the rest of the year’s rent unless they found another tenant. If you did not pay, it would still damage your credit.
When you rent, you can walk away.
A lease is a contract, just like a mortgage. If you are renting from the owner and they’ve got a good lawyer, you’ll be responsible for payments until (at the minimum) the property is re-rented, and then the associated legal fees associated with finding you and taking you to court.
Suspect a judgement on a renter to pay 6 months of outstanding lease payments along with legal fees would bankrupt them just the same.
7 – Everybody is 3 payments away from being out on the street.
Is this something like 6 degrees of Kevin Bacon?
lease vs. rent vs. own… I get your point, you’re still liable. My point is that walking away from six digit debt is certain death.
If it gets to the point of going to court, tenancy judgements will remain on your credit report for 7 years, just like a foreclosure, and likely impact your credit score in a similar fashion.
I know you don’t want to hear it, but in the state of NJ, for someone who can’t make a housing payment, rent or mortgage, it’s probably better to be an owner than a renter, you can drag the foreclosure out significantly longer than a lease eviction, as it is much easier to game the system. It’s also a lot easier to screw over the faceless lender than the old lady that owns the house and lives two doors down, or her son Bruno who greets you at your car every morning asking where the f*ck the rent check is.
I agree, it’s bullshit and a major problem, but it just is what it is.
What a dumb article.
Business properties, repetitive flood properties and vacation/second homes for most part is not in the appeal of most BW arguements.
Also very very few flood insurance properties is actual beach front and folks really close to ocean are in dreaded V Zone anyhow.
I am against subsidized stuff. But one thing of BW I am totally against is primary homes with little or no history of flooding that are pre-flood maps sold after 7-2012 or had a policy in place after 7-1-2012 getting gigantic rate hikes.
For example pre-sandy I looked at a little bank of america bungalow in Island Park NY. I dont live there but it was cheap, short walk to train and elementary school on google so I thought I could easily make it a rental. BAC turned down my bid of 175K, took a bid of 180K but deal fell through then Sandy hit.
House is back on market now for 125k. House was built 1930 and never in history of house had a flood claim. It did get some water in Sandy. But it did not have flood insurance at time or eligible for a FEMA payout as it was empty.
So I figure I try to now pick it up for maybe 90K. Well after 10-1-2013 I need a elevation certificate and new policy goes to full rate on day one. I ask lady what are we talking about she is like a lot. I cant raise it or apply to funding to raise it as that was only for owners during Sandy.
So what will happen to little house. Some slumlord will buy it for like 75K. Realize it can never be sold as flood insurance is very high, not worth raising it. The plot is Non-conforming. Meaning it is a nice 30×100 plot big enough for Island Park but the house is too close to street and too close to neighbors already as building codes have changed. Plus a new house would need pilings, hurricane proof windows, soil samples. Modular homes are costing around 350K all in with demo and rebuilding. So someone will buy fix cheap, rent cheap to Mexicans and keep it dumpy. As without flood insurance never a reason to really fix it up.
What about neighbors on block with flood insurance? Well if half of block is dumpy. Your house is worthless.
My little shack I took a fema payout. One more flood I am out of the rate I have and into full risk rate. It is like 160K to raise house, and 350K to rebuild and home will be worthless without flood. Now that I have insurance. I guess take 100K flood check, do cheap 50K fix, drop flood and put it up as a cheap rental.
The whole flood thing is odd.
grim says:
December 2, 2013 at 7:32 am
Scathing rebuttal to those who want to repeal Biggert Waters – From the WSJ:
Sounds like an account from the first hand…..
grim says:
December 2, 2013 at 8:21 am
It’s also a lot easier to screw over the faceless lender than the old lady that owns the house and lives two doors down, or her son Bruno who greets you at your car every morning asking where the f*ck the rent check is.
I agree, it’s bullshit and a major problem, but it just is what it is.
My G-d….WTF is this?
http://www.bloomberg.com/news/2013-12-02/amazon-testing-octocopters-for-delivery-ceo-tells-60-minutes-.html
When my grandmother was still alive, and we all had Christmas Eve dinner there, it was something I heard my aunts and uncles say to each other. They had a big family, and each had jobs that put them in different social circles in different parts of the country…my uncle was always “between jobs”, my dad was in sales and solidly middle class…there were lawyers and people in the “financial industry”….each had varying levels of income. But, as they said, if any one of them stopped making the mortgage payment, or stopped paying their taxes due to a job loss or sickness…things would quickly be different….
13.grim says:
December 2, 2013 at 8:06 am
7 – Everybody is 3 payments away from being out on the street.
Is this something like 6 degrees of Kevin Bacon?
Funny part is usually folks with mortgages are richer than folks without.
Usually poor or old folks own their homes and cars outright as they cant afford loan payments.
It is a little backward.
grim says:
December 2, 2013 at 8:06 am
7 – Everybody is 3 payments away from being out on the street.
Is this something like 6 degrees of Kevin Bacon?
Everyone is one major medical diagnosis away from foreclosure or bankruptcy.
How about we discuss this one?
Everyone is one major medical diagnosis away from foreclosure or bankruptcy.
Oblammacare fixed that problem. We’re all covered now.
[4] grim – Don’t forget re-default and continued default. I think there is one problem with two manifestations. I think the problem is continued default with little to no action by the banks. The manifestation in declining mid-tier towns, where there is no price turnaround, is that the banks just can’t take back and flip the properties slow enough to not crash the market, so virtually nothing goes REO. I think the massively rising taxes in these areas is a “tell”, showing that there simply aren’t taxes being collected on a large number of properties so the only thing that can fill in the gap is a sharp rise for those still paying. In the upper tier towns, there are less problems to be swept under the rug, so sweep, sweep, sweep, cherry-pick some sweet REO and Voilà, the ‘Fly and the Brig are in false recovery.
Some percentage of loans entering foreclosure (NOD/NOI, LIS, etc) are in some stage of loan modification, trial, workout, mediation, etc.
The conspiracy theory about banks and where is all the REO is just bullspit! Not every lis pendens filing becomes an REO. Think of all the modifications, government intervention, short sales…there are a million reasons why the vast majority of these properties never make it to REO. Based upon past experience there will be a high volume of sheriff sales in our area for 4 to 5 years to come.
Before the bubble typical time from lis pendens to sheriff sale was 18 to 24 months.
#23 – property tax law is simple when it comes to collection. Miss your tax payment and the municipality auctions the right to collect the taxes. Municipality collects theirs, investor purchases rights of municipality and life goes on.
Another conspiracy theory put to rest.
Re: # 18 – Same old Amazon no profits and all hype.
30yr – Any news on the accelerated foreclosures for abandoned properties law? I haven’t seen anything, or any evidence this is even taking place, and in 4 days this will have been law for a full year.
IMHO – this points to NJ’s foreclosure backlog being by design.
Street [8];
Everybody is 3 payments away from being out on the street.
In theory, perhaps. In reality, I’ve seen deadbeats living in ‘their’ houses without paying a dime for 2-3 years and counting. It’s de facto middle-class public housing, forever on the installment plan.
The thing is with no equity to speak of in most of these properties, so banks don’t want to FK and take the REO on their books, or recognize the resulting losses. For myself, I’m probably worse off because I put real money down, so I’ve got some equity there — the bank might be motivated to FK on me should I go belly up. If they don’t, my choice will be to sell while I can for what I can, trying to salvage a few % of my equity; or just chalk up the loss, and squat for as long as I can, saving what I can for the day the Sheriff finally shows up.
30 year – All of these should be recorded, right? The properties I’m speaking of have LPF as the last recorded document. OK, maybe LPF is second to last, the assignment of the mortgage from MERS to a bank maybe the last…then…nothing. No more recorded documents, no transfer of title, the foreclosure status on Realtytrac, Trulia, Zillow goes back to “Not for sale.” In Massachusetts I see mortgage modification documents recorded. Are they recorded in NJ too?
Think of all the modifications, government intervention, short sales…there are a million reasons why the vast majority of these properties never make it to REO.
Regarding foreclosure assistance/modification in the local area, from the HUD:
http://portal.hud.gov/hudportal/documents/huddoc?id=HUDNYregspotlight.pdf
The Administration’s mortgage and neighborhood assistance programs —
the Home Affordable Modifi cation Program (HAMP), the Federal Housing
Administration (FHA) mortgage assistance programs, the Neighborhood
Stabilization Program (NSP), and the Hardest Hit Fund (HHF) program –
combined with assistance from the HOPE Now Alliance of mortgage servicers
and the National Mortgage Servicing Settlement have helped stabilize the New
York MSA housing market.
From the launch of the Administration’s assistance programs in April 2009
through the end of February 2013, nearly 231,600 homeowners received
mortgage assistance in the New York metropolitan area. More than 122,500
interventions were completed through the HAMP and FHA loss mitigation and
early delinquency intervention programs. An estimated additional 109,100
proprietary mortgage modifi cations have been made through HOPE Now
Alliance servicers. While some homeowners may have received help from
more than one program, the number of times assistance has been provided in
the New York MSA is more than 8 times the number of foreclosures completed
during this period (27,200). This relatively high ratio of mortgage assistance to
foreclosures in the New York MSA since April 2009 (8.5 to 1 compared to 2
to 1 for the nation) is likely related to a relatively stronger local economy and
lower unemployment rates over this time, making it easier to effect mortgage
assistance. Under the landmark National Mortgage Servicing Settlement,
over 19,000 New York homeowners had benefi tted from nearly $2 billion in
refi nancing, short sales and completed or trial loan modifi cations, including
principal reduction on fi rst and second lien mortgages provided as of December
31, 2012. In New Jersey, over 17,000 homeowners had benefi tted from more
than $1.5 billion in consumer relief.
re #17 – ” where the f*ck the rent check is.”
Co-woker who traded up back in 09 and then rented his condo instead of selling it now has a tenant that is now 3 months behind. Tenant also did not pay the water bill. Not much equity in the place and the rent does not generate any profit. Tenant also now has three dogs too. Place is probably going to need allot of work to get it liveable again once he get through eviction sometime next year and if the tenant files bankruptcy perhaps 2015? There is also a co-signer on a lease one of the parents. I told my coworker to sick his lawyer on that guy since you cannot get blood from a stone.
7- Fast eddie, everyone is a couple of paychecks away from losing everything. That’s how a capitalist economy is built. Our economy would crumble if everyone decided to just save everything for the sake of being able to afford a mortgage payment for 3 years, in lieu of a job loss.
It’s sad to say but being frugal does a lot of harm to our economy. It’s like the state of shopping now, everyone only buys it if it is on sale. Do you know what kind of damage this has done to the economy. You expect companies to be able to improve technology if they have to sell products at 50% off. 300 dollar tv’s are great for the consumer but in the end run, this frugality leads to less innovation and less room for raises.
It really is, imo, the reason why inflation has been in check over the last couple of years. Buying everything at a major discount puts deflationary pressure on everything, and combined with the fed printing money, we have had neither deflation or inflation due to the combination of these two factors.
Tell co-worker STOP paying Maint. Then tell condo association about deadbeat tenant and that you told tenant to directly pay condo association the rent check.
Condo association will notify tenant, then put a lien on his car and contents of apartments and units that are behind on the maint lose access to common areas. Tenant can’t park his car, use pool, tennis courts etc.
Then if you want go all Joan Rivers on the tenant. Meaning. Common areas include walkway to unit. Joan who is a Board President, waited till a deadbeat owner ran out for a errand and then would not let them back on property. If said tenant steps foot on common areas arrest tenant for trespassing.
Once your start the lien process, tenants start moving. Also do it on their paycheck. Call their bosses. And their bank accounts. Eviction is a long process. Tenants know how to play eviction game. Dont play their game. Make them play your game. Dont evict them. Let them hire a drone or something to fly them into their unit. But they cant step on common areas. And I bet your lease does not guaranttee them that right.
Capitalist economies are built on capital… which has everything to do with saving/investing for the future. So, basically the exact opposite of what you said.
Michael says:
December 2, 2013 at 10:14 am
7- Fast eddie, everyone is a couple of paychecks away from losing everything. That’s how a capitalist economy is built. Our economy would crumble if everyone decided to just save everything for the sake of being able to afford a mortgage payment for 3 years, in lieu of a job loss.
It’s sad to say but being frugal does a lot of harm to our economy. It’s like the state of shopping now, everyone only buys it if it is on sale. Do you know what kind of damage this has done to the economy. You expect companies to be able to improve technology if they have to sell products at 50% off. 300 dollar tv’s are great for the consumer but in the end run, this frugality leads to less innovation and less room for raises.
It really is, imo, the reason why inflation has been in check over the last couple of years. Buying everything at a major discount puts deflationary pressure on everything, and combined with the fed printing money, we have had neither deflation or inflation due to the combination of these two factors.
http://krugman.blogs.nytimes.com/2009/07/07/the-paradox-of-thrift-for-real/?_r=0
Every double income family I know has the other spouse pay check as a disposable income. Husband lost his job,everything still getting paid with the other income. Its a lost of disposable income not as advertised
“everyone is a couple of paychecks away from losing everything.”
Every double income family I know has the other spouse pay check as a disposable income.
This isn’t the norm for high cost areas, in many cases double incomes are absolutely essential for younger families getting established.
The paradox of thrift should be discarded from memory along with the broken window fallacy.
At least the latter has the word “fallacy” attached to it usually.
37 what you say is true for the beginners and upgraders. It was the same for the 15 years and above homeowners when they first bought their homes. After 15 years income have trippled. Mortgage is probably 1/5 of income,the rest is diposable for a 2 income family. All bets off if they refinanced and use the home as ATM
#37 grim
Her book should be mandatory reading for new couples.
http://www.youtube.com/watch?v=WYmfpMPkmbw
expat,
left you a message on yesterday’s topic.
34- YOU have a very simple minded approach to a capitalist economy. WE ARE NOT A DEVELOPING CAPITALIST ECONOMY. WE ARE A MATURE CAPITALIST ECONOMY. IN THEORY, THE ONLY WAY YOU CAN GENERATE WEALTH FOR THE MAJORITY IN A MATURE CAPITALIST ECONOMY IS FOR THE WEALTH AT THE TOP TO SPEND SO THAT THE MONEY CAN REACH OTHER HANDS.
So yes, being thrifty is not that great for the economy. Only buying products that are 50% off can do some harm to the economy by cutting the profit margin to the point where the profit margin is so thin that it only allows for giant corporations (the home depot equation). It also creates stagnant wages due to the thin profit line. Only people who get raises are the stock holders and top management. Honestly, cheap is not always a good thing.
Dual income is a walking stick for a blind man. It helps but not a cure.
Trouble is my cousins you are of the younger generation have entered a Catch 22 with their working spouses.
From 21 to 35 it was a great asset to have two incomes, while their friends were clipping coupons on living little starter homes and driving used cars they had the life.
But now from 35-45 the years you make the leap to upper management or you never do it is tough. My two male cousins split child care and kids activities with wife and days they work late, travel or take vacation must be organized. Plus with two incomes they are not as hungry.
I highly doubt any of my younger male cousins under 40 will every reach the income of my cousins over 50. I have a male over 40 cousins who are mufti-millionaires. One is worth several hundred million. Why stay at home wife. He graduated with an accounting degree, took international assignments wife and kids in tow, Africa, Middle East, Australia and made full Partner by 32 at EY, then with connections he made he started buying large tracts of commercial properties in the early 1990s and bought a ownership stake in Symbol Technologies and landed in England by the mid 90s after leaving EY.
Today kids dont have that drive. Working wives, rich parents. Too many bail outs and everyone gets a trophy soccer games
Several of my depression era uncles also became mulit millionaires. One owned a 500 person business. Another had 20,000 reports at one point at a fortune 500 company.
Sadly their grandkids did not amount to nearly as much. .
grim says:
December 2, 2013 at 11:52 am
Every double income family I know has the other spouse pay check as a disposable income.
This isn’t the norm for high cost areas, in many cases double incomes are absolutely essential for younger families getting established.
I have my house 13 years. First year we literally were dead broke no money, heck my wife was driving a station wagon bought at auction rebuild after two accidents. As the good car. Pizza coupons from the cheap pizza place and a library DVD was a date night.
Now my annual cost to support my house is just taxes and insurance as no mortgage. I grieved and won my RE taxes four times so that is pretty low. So I can pay the annual taxes and insurance on my house in one paycheck.
Honestly, that is about right for my crap house.
yome says:
December 2, 2013 at 12:05 pm
37 what you say is true for the beginners and upgraders. It was the same for the 15 years and above homeowners when they first bought their homes. After 15 years income have trippled. Mortgage is probably 1/5 of income,the rest is diposable for a 2 income family. All bets off if they refinanced and use the home as ATM
Hopefully anon (the flatulent one) is a couple of paychecks away from losing his internet access……
Michael says:
December 2, 2013 at 10:14 am
7- Fast eddie, everyone is a couple of paychecks away from losing everything. That’s how a capitalist economy is built. Our economy would crumble if everyone decided to just save everything for the sake of being able to afford a mortgage payment for 3 years, in lieu of a job loss.
What’s wrong with Krugman’s interpretation of the Paradox of Thrift that I posted in #35? He makes an awfully compelling argument for it being correct (in this situation).
If companies are sitting on record amounts of cash, unwilling to invest, and capital is also extremely cheap, with little demand for more. What will the benefit be of an additional dollar of marginal savings (and by direct relation investment) in this scenario? With declining demand for goods and services, what’s the driver for investment?
Not interested in arguing against the misuse of the Paradox by politicians looking for a way to justify increased government spending, that’s not what we’re talking about here.
Because companies are not hedge funds. We are not in business of just building up large sums of cash to invest in stocks, bonds and commodities. We want to put money to work in new businesses and diversify.
Companies are also constrained the new businesses must relate to current business. I cant just go opening a manufacturing, restaurants, or movie theater if I am a wall st firm.
grim says:
December 2, 2013 at 1:54 pm
What’s wrong with Krugman’s interpretation of the Paradox of Thrift that I posted in #35? He makes an awfully compelling argument for it being correct (in this situation).
If companies are sitting on record amounts of cash, unwilling to invest, and capital is also extremely cheap, with little demand for more. What will the benefit be of an additional dollar of marginal savings (and by direct relation investment) in this scenario? With declining demand for goods and services, what’s the driver for investment?
Not interested in arguing against the misuse of the Paradox by politicians looking for a way to justify increased government spending, that’s not what we’re talking about here.
When the Dow plummets from 16K to 6K, it will just be the beginning of the endtimes.
Dark days ahead.
Grim,
I remember you talking about installing a mini-split system (ductless) in your basement.
Did you finish it up and are you happy with it? Any input from you experience would be helpful. I’m looking at doing a renovation and need to upgrade the hvac and among the many options I’m looking at is potentially going with a whole house mini-split system (probably 2 multi-zone units).
Majestic Phase 2 in JC now slated to be ALL rental. Was given original go-ahead as all owner-occ building.
Looks like Silverman, the developer, knows the pool of suckers has dried up.
50 – Didn’t get to it yet, a number of other basement projects took precedent. It’ll probably get it installed in the spring at this rate.
I did add a heating zone for the basement off the boiler though, I did this so that I could buy a less expensive mini-split system. Systems that can do true heat pump heating in very cold weather are very expensive compared to the standard ones. Not sure that the heating aspect of this is important to you. I added a small Beacon Morris in-wall 12k BTU unit (really just a kickspace heater). The 12k BTUs works like a charm to heat the relatively open basement (I’m well insulated with little appreciable heat loss below grade).
Anyhow – I went with a LG system, looks very well made, small only 12k btu, but it should be plenty for down here.
47- Exactly!!!
“If companies are sitting on record amounts of cash, unwilling to invest, and capital is also extremely cheap, with little demand for more. What will the benefit be of an additional dollar of marginal savings (and by direct relation investment) in this scenario? With declining demand for goods and services, what’s the driver for investment?”
[46] chifi
“Hopefully anon (the flatulent one) is a couple of paychecks away from losing his internet access……”
Don’t hold your breath. He will just use his Bommaphone instead.
Nom,
Spygate II up in New England? ;)
I’m not dead yet.
http://www.pbs.org/newshour/bb/business/july-dec13/ilpensions_12-01.html
Yome,
I wonder what % of men in NY metro area have a spouse with a job that can support a housesold? My guess is 10% or less. Not everyone marries a fellow lawyer, doctor or banker. Lots of women have lower income jobs at colleges, local govt. or retail. I don’t know many people who have wives with jobs that could pull the whole freight.
44 JJ,
The world has changed a wee bit in 25 years. Perhaps it is not simply a drive issue. Your friend rode a major credit bubble to success. Competition from outsourcing as well as plethora of women conpeting in work force has made it much harder for men to succeed. I have MBA/ CPA Gen X friends who moved family to Singapore and back yet company won’t promote to director. He is late 30s with 3 kids in 1200 sq ft home. The company does not have to do a thing bc market is terrible. Where will he go?
[55] eddie
Everyone, and I mean everyone, says that Smith is full of it. That this story wouldn’t have any ghost of traction but for 2007. More holes in it than the Titanic, the biggest of which is the notion that a last place team was going to beat the Pats by changing some plays (which teams do and opposition anticipates). As it was, they played well and only were beat by 3 at the end. If we were in their heads, we should have demolished them.
25% of funding? I’d say that was optimistic.
http://www.cnbc.com/id/101239018
It’s fun to speculate but ATEOTD, the folks who can afford this can afford property anywhere for less, and those who stand to benefit can’t afford it anyway.
[57] bystander
You do now.
Technology Update (JJ Edition):
http://www.huffingtonpost.com/2013/11/12/robot-handjobs-vr-tenga_n_4261161.html
update
unmod I mean
Phoenix – Brian Bosworth? I lived a few houses away on the same side of the street. He was a couple years younger than me.
Nom,
I’m busting you. :) When I saw the story, I was thinking total tabloid nonsense. I’ll root for the Pats if they get to the dance. The Jints are out and G0d knows, I don’t want to see the Cowboys or Eagles take home the trophy.
You just need balls as large as medicine balls, a shaft as long as a pirates cannon, male model looks and men wanting to be you and women wanting to do you to get ahead. It is as easy as that.
Once on a business trip the plane was about to crash as propeller was loose. I quickly grabbed the stewardess opened the emergency door had her quickly blow me and then spit on the propeller. The high altitude and cold air combined with the weight of my mighty cum caused the propeller to reattach to plane and we landed safely. I was immediately showered with job offers from every major IB bank. That is how you do it.
Bystander says:
December 2, 2013 at 3:40 pm
44 JJ,
The world has changed a wee bit in 25 years. Perhaps it is not simply a drive issue. Your friend rode a major credit bubble to success. Competition from outsourcing as well as plethora of women conpeting in work force has made it much harder for men to succeed. I have MBA/ CPA Gen X friends who moved family to Singapore and back yet company won’t promote to director. He is late 30s with 3 kids in 1200 sq ft home. The company does not have to do a thing bc market is terrible. Where will he go?
JJ,
I wanted keys to success, not sucksess.
[66] Eddie,
Thanks but it isn’t happening. I can name six teams that are stronger and deeper than the Pats right now. The injuries and prosecutions have taken their toll and this team is getting it done on luck and attitude but thst only takes you so far. I’m thinking the Jedi Master is nearly out of tricks and wishes he had Welker and Woodhead back right now.
Nom,
So true. Like my deadbeat bro in law. Unemployed again. His linkedin page makes him look like Lee Iacoca II.
[67] JJ
“You just need balls as large as medicine balls, a shaft as long as a pirates cannon, male model looks and men wanting to be you and women wanting to do you to get ahead. It is as easy as that.”
I have to be Tom Brady?
[62] chifi
Danger Will Robinson, danger, danger!
57 bystander
a couple making 70k a year and bought a house in 1995 for 126k with a 5% Down mortgage with PMI and taxes was about $1200 a month. It was a struggle at first. Woman making 20 grand and the man making 50k. Less than 10 years later the guy is making 100k and the woman is making 50k. The mortgage dont go up infact they rfinance to a lower rate it became just above 500 a month. Property tax went from under 4k to under 6k in 10 years. PMI taken out home above 20 % percent value. Every extra income goes to savings. Disposable income. Today property tax I is above 7500. Do the math ,can the woman salary of 50k pay the mortgage ?
She will be taking home 3500 a month the mortgage and property tax is less than 1200 a month. They have tons of savings. I guess the guy will just think of staying home.
None of this talk will matter soon.
here is footage of grim’s childhood hero….
https://www.youtube.com/watch?v=Qim_2Lzzn4c
Oh the joys of home ownership!
Anybody have a round estimate of price per sq ft to remove ugly moulding and put in a “colonial” type of moulding and door casings? I am in the middle of painting my whole place and changing out the moulding and door casings etc. Just got an eye popper of a price from a contractor and I need a sanity check.
Note: If I had time I would do it, however I just spent the whole Thanksgiving vacation prepping for the painters and now I need to go back to work to earn to pay for my prized home including everything else…
My wife hates these Whitewood Rosette Blocks so we are going with something more traditional….
http://www.lowes.com/pd_123299-1487-EV915CWHW_4294715693__?productId=3383480&Ns=p_product_qty_sales_dollar|1&pl=1¤tURL=%3FNs%3Dp_product_qty_sales_dollar|1&facetInfo=
Grim,
The problems with “the paradox of thrift” are many.
1) GDP doesn’t equal economy
2) Keynesian equations are not long run, they are designed to be instantaneous.
3) they still don’t work, in part due to #1 and #2.
4) in the context he wrote this, Krugman was saying the equivalent of “stopping shooting up heroin is making me feel worse, not better”
5) See the Solow long-run growth model. Generally gives the opposite advice of Keynesians, but what political economists want to worry about the long run?
Government has been pushing for 110% of appropriate consumption levels via spending and monetary policy, repeatedly stimulating short runs while sacrificing long-run health and growth. Need to come up with the Paradox of eternal government micromanagement of the economy not working well. But it’s not a paradox. It’s common sense.
The paradox is that ostensibly sane people like us tolerate the assclowns who are willfully robbing us and selling our children into slavery.
Not interested in arguing against the misuse of the Paradox by politicians looking for a way to justify increased government spending, that’s not what we’re talking about here.
Grim the legitimate argument is that its the foreigners buying the bonds that ultimately fund this spending, and we aren’t ever paying it back. We might as well go for broke and ramp up the spending. Krugman’s problem is, he thinks it will lead to recovery. Ultimately, it leads to bankruptcy, but who cares.
For someone in their 50s who is a million in debt with no shot of paying it off, he might as well borrow another 2 million and have if the bank is willing to let him do it. The bankruptcy simply pushes the reset button he gets to start from scratch again. The USA is no different.
[41] Fabius,
I seem to recall that when Santorum said something remarkably similar a few years back, your kind went positively apoplectic.
Also, I find it ironic that despite the emphasis that the left puts on living wages and complete, enforced equality ( and the police state needed to enforce it), the left still promotes a tax system that punishes dual earner families.
Heya! I just wanted to ask if you ever have any
problems with hackers? My last blog (wordpress) was hacked and I
ended up losing months of hard work due to no data backup.
Do you have any solutions to protect against hackers?
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A third type of speculation we’d like to avoid is speculative bubbles, and this is probably what most people have in mind when they hear the term speculation. Speculative bubbles occur due to “bandwagon effects” where rumors or some other force causes prices to deviate from their underlying fundamental values in a self-feeding frenzy that drives prices upward in a bubble, or downward in a crash.