My question is what happens if the system cannot rescue of all failed retirement plans of all the boomers?

Naturally in a period of deflation, those who rely on fixed annuity payments are happy, if the retirement payments are actually paid.

http://www.cnbc.com/id/33700371

Ok, let me stand by the whole ‘least costly’ idea, and having people live in homes is better than having them empty, but now I read that Fannie needs millions, oops, make that about 15 thousand million, i.e. 15 BILLION dollars.

When you are begging for billions, renting out all that property that cannot be sold, or if sold, at low prices, is attractive–get revenue now. It appears that Fannie Mae is the latest “accidental landlord.” Isn’t this how all those other “accidental landlords” begin?

“Fannie Mae (FNM/NYSE) reported a net loss of $18.9 billion in the third quarter of 2009, compared with a loss of $14.8 billion in the second quarter of 2009. … Third-quarter results were largely due to $22.0 billion of credit related expenses, reflecting the continued build of the company’s combined loss reserves and fair value losses associated with the increasing number of loans that were acquired from mortgage backed securities trusts in order to pursue loan modifications.
…
As a result, on November 4, 2009, the Acting Director of the Federal Housing Finance Agency (FHFA) submitted a request for $15.0 billion from Treasury on the company’s behalf.”

http://www.calculatedriskblog.com/2009/11/fannie-mae-189-billion-loss-requests.html

7 dead and 20 injured, one of the attackers is loose….

http://news.yahoo.com/s/ap/us_fort_hood_shooting

These units are already built, so I doubt it would be good use of resources to just raze the structures.

If Its Like President Johnson’s Great Society Low Income Rentals: We’re Shafted

The low income tennants totally destroyed the units in no time and the Great Society became the Great Cost Burden to remodel and rebuild continuously….I hate to say it, but it would be far cheaper to We the People to just bull doze the units and make parks out of the land.

In other words, renting the homes is the “least costly” alternative.

http://news.yahoo.com/s/ap/20091105/ap_on_bi_ge/us_foreclosures_rentals

I thought we were talking about debt and its potential future value, or net present value?

October NWMLS is out. For King County SFR the median is 377,500, down from 392,000 a year ago, and the volume is 1,758, up from 1,319 a year ago.

The mean is 453,xxx, down from 486,xxx.

Nice, that’s very close to my prediction for the year ( in the January 2008 prediciton post ) with 5% YoY decline for the median. Last years December median was $403k so 5% decline would be ~480k, though with the wild swings of the median it’s impossible to say if it will be close in December but never the less it’s looking good so far. I have 10% YoY for C/S which is much to early to guess the accuracy of.

Those who live below poverty levels, whatever that might mean, generally have little left in savings equation:

income less expenses = savings

Those with high levels of education generally have plenty left, or can live carelessly.

What we have is lower prices and no one is buying, and thus liquidity is going down.

As far as that excise tax, that’s not the only tax revenue that’s been falling. Income tax revenues, sales tax revenues, property tax revenues have begun falling, and so on.

There are plenty of people who have student loan debt where the education is not worth much.

And unfortunately they were (are?) running our banks! ;-)

On the topic of education, even if I had not had a four year accounting degree, I could have had a JD/MBA by simply attending one more year of graduate school. How much do you think can be learned in one year if you had no prior education background in business?

This year:

453k by 1,760 = ~$800M

Last year:

486k by 1,320 = ~$640M

Lower prices resulted in higher gross sales. This is a positive indicator, but the sales might have been pulled forward from the future based on free government money, specifically the first-time home buyer tax credit.

Also the increase in the number of sales probably has given a few agents some income that otherwise would have had none.

The mean is 453,xxx, down from 486,xxx.

What I hear you saying is that you have student loan debt which purchased a good education that has carried you through.

There are plenty of people who have student loan debt where the education is not worth much.

Also you were able to be ‘irresponsible’ without much abandon because of your education, which was financed through government sponsored loans.

This is very much like the housing crisis:

There were plenty of people who financed their homes, many with government sponsored debt, and the investment paid off, if they sold soon enough.

Then there were those who bought near the top, or, similarly purchased a poor quality education, with government sponsored debt. Clearly these investments do not pay off in the future.

For example, you have that you financed your education through debt, and I believe you are suggesting that the investment paid off.

Here is the situation:

Take two people who graduate from high school.

1. Enters the work force immediately.
2. Goes to college and earns a 4-year degree before entering the work force.

(I know there are many other possibilities, but I am taking these two situations for an example)

Clearly person 1 is earning far more than person 2 who is not earning. Person 1 gets plenty of immediate material gratification, but person 2 will eventually catch up, even on a net present value basis, if the investment pays off.

It looks something like this:

Income of Person 1 (years separated by commas):

$25k, $26k, $27k, $28k, $29k, $30k, $30k, … …

Income of Person 2:

-$25k, -$26k, -$27k, -$28k (these negative first four represent the financial cost of the education),
now the education starts to pay off, so the amount earned is more like $50k+

(Please note I didn’t look up any statistics to cite for these example, but I hope it is clear that for the education to pay off one must make a much larger amount in the future, which generally, based on history, is the case.)

The cost of the education, about $100k in my example, better pay off in the future.

As far as the debt, savings, and all that, I have long claimed that it’s quite simple:

Income less expenses = savings.

Essentially living on less than what’s earned.

One day, and I have a few of these projects, I will take a closer look at that student loan type debt. There is little doubt that someone with a college degree has a higher expected income than someone without one. Of course Gates is an outlier. That said, that extra income comes at a cost, both in terms of time and financial. Essentially I am asking the question of what is the present value of an education. This will vary with the interest rate charged on the student loans, and I only seek to measure the economic value. There are plenty of people who live a “happier life” with a college degree, but that is very difficult to measure the value. Ever see a non-engineer, and I use the term “engineer” very loosely, try to solve a basic physics problem? (In this case, the term “engineer” might include physicists, mathematicians, architects, and so on, but the point is that those without a basic understanding of math and physics, forces, and the like come up with some of the craziest ideas.)

How can I relate student loans to the present “economic crisis?”

Poor investment always nets a negative return. Have you ever spoken to someone who has graduated from one of those tertiary schools? Now I want to be very careful here, as much of the underlying issue is the student, but the tertiary schools specialize in picking up the most marginal of all students. I am not suggesting that this is a bad thing, as there will always be some dividing line between top and bottom, but rather I am only making observations as to the value of an education.

If you spend too much to get too little, in terms of education, then you will always have a negative return. The interest rates, blah, blah, blah, don’t really matter. I am concentrating on the cost versus value to the individual, on an economic basis.

What kind of investment do we have going on right now?

First time home buyer tax credit
Cash for clunkers (not right now, but in the recent past)
Extension of Unemployment benefits
Highway projects where there is little to no traffic (how about upgrading that Montana border crossing that averaged 2 cars per day?)
Bailouts, if I can use that term, galore
and so on.

These investments had better payout returns in the future, or our economy will be like the recent grad that gets a bill instead of a diploma.

RE: b @ 19 – It never ceases to amaze me how people treat pay like housing: It always goes up, never down. Many people simply do not plan for a rainy day.

I think the real problem is how people treat debt, not income. Almost like it’s free money and any future impact it has once the money is spent is not properly evaluated. I can admit that my wife and I for a long time lived the high life around the world not worrying about tomorrow confident that our fancy degrees in high demand fields would always get us through. What we never did however was taking on debt other than our student loans. Partly perhaps since we didn’t need to but mostly because we enjoyed the freedom that comes with being debt free. When we got kids it all changed, the responsibility of other peoples lives made us buildup reserves with continous savings in terms of 401ks, college funds etc. We are still debt free and can live a very comfortable life with many luxuries. Imo the key is to keep your debt to a minimum. We will eventuaully take on a mortgage but it will be a low factor relative to our incomes. If there is one lesson I will make sure my kids learn it’s to treat debt with outmost care. it’s a pity our government didn’t get the memo.

let’s not talk about my scores :-)

The point is sometimes we have to learn to “give up” and smile anyway….BTW, my old bowling alley, Cascades Lanes/Casino, went out of business and was remodeled and taken over by Hooters. Yes Hooters, LOL

Its good and bad, the venue is more pleasant to the eye and the food menu is more varied, but the bowling costs went up a bit and there’s more of the bar crowd out in the alleys now….not always the most congenial crowd at times, if you catch my drift. My friend and I had to watch our bowling balls or they disappearred….getting them back was not nice either.

I’m a business owner who also seconds you opinions about taking less, it’s better than nothing.

Many of the people I know, including my late mother, are horrified that my wife and I have a cleaning business. It pays some bills. Our contracting business is for shot, our Real Estate investments we dumped, and let’s not talk about my investments because even though they can maintain value, it’s no longer a money maker.

Most of the people I know are trying to make it all work out doing the same things they always have. In my opinion you do have to be flexible. There is a lot to be said for hanging in there, but we are in strange times. Nothing will be the same again, in my life time at least.

I am a business owner and as a business owner I too had to settle for less profit. Again this is not such a biggie. I try to hike. Enjoy scenery. Drive to Leavenworth or Winthrop. Hike around on Olympic Peninsula etc. And if not for taxes I would be enjoying better weather in CA. So that’s it. I try to focus on the good things that life can bring to me. And then I try to make the best decisions I can make. And I try to stay away from places like Omaha because I don’t like the plains.

That’s why I think SEA still has a lot of potential. People in general will prefer to live in SEA over almost any place in the US. Taxes will force people not to move to CA. Just that expectations of people all around will need to be reset. And if you look at people in Africa or Mexico – you will then come to a conclusion that whatever happens to you is really not a biggie.

How many huge pay cuts have you taken? How often have you gone from a high paying job to a low paying job without the bat of an eye? I notice your stories are about your friend, not yourself. It is very easy to tell other people they need to be flexible and work for much less than before if you don’t have to do it as well.

In the latest episode of “Entrepreneurs Northwest” T.A. McCann explains how Gist (his latest startup) provides a portal, and filtering mechanism, for all the data streams people have to deal with from their friends and acquaintances. Unlike his previous ventures, Gist has been well endowed with capital by investors, and has been able to take the time necessary to build a good product before taking it to the broader public. The real challenge will be to convince users there is enough value to pay for subscriptions when Gist begins monetizing their service later next year.

http://bit.ly/mWSNW

In the latest episode of “Tales from the job search trenches” John Polhill gives an insider’s perspective to the world of corporate recruiting. Amongst many other gems of wisdom, John explains that on-line job applications aren’t a complete waste of time, but you have to know how to game the system and prepare your resume to make it through screenings. He also gives guidance on the questions you need to ask before heading into an interview, and to be very wary when you are applying for a completely new position.

http://bit.ly/29Zgoj

In this episode of the Optimistic Bear round-table economics discussion Matt Stiles joins us as a guest, filling in for our regular participants who were unavailable last week. We talk about the paradox of a declining stock market at the same time that the economic news was so positive this week and the financial stresses that local governments are experiencing with pension obligations.

http://bit.ly/NlTjn

Most of the world is worse than us, but America’s out of water for the world’s bread basket food and out of infrastructure/money to stop GDP deterioration [excludes grandkid debt GDP, that's unsustainable and just set up for Wall Street short term profits anyway].

RE: Trigger @ 2 –
IMO, Its Unfixable Without Depopulation ASAP

So smile and get used to it getting worse and worse with more uncontrolled growth.

population at the world level or US population?

The suckers’ 2009 stock market rally appears to have bottomed out per the following C/S/I October 2009 stock deterioration data:

G Fund F Fund C Fund S Fund I Fund
October 2009 0.26% 0.51% (1.86%) (5.51%) (2.41%)
Year-to-date 2.46% 6.29% 17.23% 21.83% 24.27%
12 Month 3.02% 13.89% 9.98% 13.34% 24.80%

BTW: C= American stocks and S/I are international stocks.

So smile and get used to it getting worse and worse with more uncontrolled growth.

Like my friend who used to work for 120K and now works for 85K – he still feels like a privileged person. And he still lives in a place where you can spend a nice weekend. He comes from Omaha and is able to appreciate the upgrade that he got in life.

In Omaha, NE people have nothing to do over the weekend – there are just corn fields around them and flat plains and really cold weather that resembles the cold in Siberia. So although you have to be flexible in many instances it means that you have to give up sthg but not everything.

Feel groovy + beautiful despite crap circumstance…I think (not sure) this is yer intended point?
It is agreed.

I read through the entire article in almost agreement. The premise, in my opinion, is correct, investors, institutional investors, are leveraging dollars into risky ventures. Those commodity positions may seem like a smart bet to some one in the United States, but the higher priced commodity trading crushes other economies. This is another example of where the paper profits drive the economy, while real work still needs to be done.

Let’s talk about me and my business. My main company A Spring Cleaning is set up as a contracting company. I also have Rot Work, Seattle Deck, and Kill Mildew. All business models that just need some one to work. I forgot about Seattle House Painting. Then these companies compliment the Real Estate Investments that are out there.

I’m really busy blogging so I don’t have all the time in the world to devote to these business ventures. When I talk with people about helping me I get the deer in the head lights look. Well, yes, you would have to actually do something.

Same issue when the bubble was brewing with houses. It made sense to buy houses then because the mood was such that people wanted to buy like crazy – it was clear that flipping properties made sense.

Now we have a potential money bubble and this also is an opportunity. Banks will load up on cash like crazy.
http://www.ft.com/cms/s/0/9a5b3216-c70b-11de-bb6f-00144feab49a.html

So basically it is best to hike, hike some more, go to Cannon Beach, Hawaii and just relax and try to take advantage of the market. And always lock in profits.