Here is your open thread for the weekend beginning Friday November 6th, 2009. You may post random links and off-topic discussions here. Also, if you have an idea or a topic you’d like to see covered in an article, please make it known.

Be sure to also check out the forums, and get your word in the user-driven discussions there!

0.00 avg. rating (0% score) - 0 votes

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market. Tim also hosts the weekly improv comedy sci-fi podcast Dispatches from the Multiverse.

1. 1
scotsman says:

“Government is the great fiction, through which everybody endeavors to live at the expense of everybody else.”
— Frederic Bastiat

2. 2
AMS says:

Since I clearly have nothing better to do, I thought about the distance traveled and cost of rent.

There has been much discussion that it’s cheaper to rent in some distant communities, but the cost of transportation, time, and so on go up.

On the cost side, we can start with a relatively high rental cost, like downtown Bellevue or Seattle. Let’s reduce the cost of rent down to zero once we are far enough away, impractically far away, like Montana, maybe. You’d need your own airfield, but the rent is free. If you lived downtown, your other costs are very low, but some fixed low level.

The question is where is the cost minimization point.

In other words, minimize total costs, which is rent+other cost.

Assume:
1. continuity (This makes the math nice)
2: that rent cost function is decreasing as you get further away
3. that other costs function is monotonic increasing as you get further away
4. that there is some fixed cost at the perfect location

Without loss of much generality, further assume that:
1. The rent decrease is linear with distance (This, of course, is not exactly true, but it’s probably close enough for a close approximation)

With this setup, the cost minimization point is quick to fall out:

It’s the point where the other costs are increasing at -1 times the rate the rental costs change. Since the rental costs are linear, we need only look at the absolute value of the first derivative with respect to distance. The cost minimization point is where these two values are equal. total cost(D)=(Rental costs(D)+other costs(D)), where D is distance. d\$/dD thus becomes d\$/dD(total costs) = d\$/dD((Rental costs+other costs) = d\$/dD(Rental costs)+d\$/dD(other costs)

Of course these costs change with energy costs–lower energy costs suggest that the minimization point of total costs is pushed further away from the center. Higher energy costs push the point toward the perfect location.

Now it’s time for bed.

3. 3
David Losh says:

RE: AMS @ 2

Yes, you have way too much time on your hands. Though it is a good premise, in my opnion, the cost of rent to house value is more to the point. Rental income aactually increase per cost of housing unit in more remote areas.

If I buy a house for \$40K in Centralia and rent it for \$300 per month the return is greater than \$300K and \$1400 per month for Shoreline.

4. 4
AMS says:

RE: David Losh @ 3 – This is not an analysis of where to buy the most profitable rentals, but rather, this is an analysis as to where you should buy to minimize your total costs.

As far as the return on investment, that depends on how fast the rent drops relative to how fast the purchase price drops, all other things being equal.

5. 5
David Losh says:

RE: scotsman @ 1

Warren Buffet’s purchase of Burlington Northern shows how backwards American business is. Warren is betting on coal as a major source of energy. The auto industry is still fooling around with the gas combustion engine. Maybe if they just tweak it a little bit no one will notice we are still selling model T’s with a plastic body and dash board. Wal Mart is selling carp out of a warehouse like a wholesale dealer would do in hard times.

There is no innovation in business. We need the government to provide jobs. We need the government to supply services because collectively, now globally, there is nothing new to do. We are a global economy of make work projects so everybody can stay busy. Don’t look behind the curtain, because there is nothing going on.

The only guy here who makes any sense is the software engineer. Global population has expanded beyond the resources of the planet. Governments encourage population so they can rah rah the national pride to create the illusion of an expanding economy. We are just trading dollars around amongst the wealthy who will do nothing.

I voted for Obama because he said he would talk to world leaders. He harped on Energy, Education, and Health Care. Those are what we need. If we leave it up the the business sector we will be burning coal like the 1880s. We will be looking for the dividends of the industrial revolution; it came, it went, and now we have a few billion more people to feed.

6. 6
AMS says:

RE: David Losh @ 5 – When I read, “The only guy here who makes any sense is the software engineer,” I’d love to agree. However, I’d be agreeing with someone who does not make sense. And even if I did agree, would it make sense to do so?

7. 7
David Losh says:

RE: AMS @ 4

Housing units have a value. Housing has a core value. You can go as far as you want, but you will still be paying rent, because there is no zero cost basis for a housing unit. Even aside from that there is a point where rents get to a base. You can pay \$400 a month in the middle of nowhere.

8. 8
AMS says:

RE: David Losh @ 7 – I could find a place for far less than \$400 per month if I am not restricted to a specific distance. In Detroit one can buy whole homes for \$500. I am confident I could find a home in an area where the rent is essentially free. How much is the rent for a shack in rural Alaska?

9. 9
David Losh says:

RE: AMS @ 8

You have hit on exactly a point about the value of Real Estate that is obscured by mom, dad, and the kid’s emotional involvement with a Real Estate purchase. A shack in rural Alaska will have a rental value based on some one owning the property and expecting a return on investment. That house in Detroit may cost \$500, but I have to own it, pay taxes, do the repairs, pay insurance, then fix it again when the crack heads are done with it. It’s my responsibility.

There is a cost basis to any property you own. There is also your time. Return on Investment will always be the driving force to owning property, to being the land lord, and should be even if it is a personal residence.

I made the statement on the Rain City Guide that I am one of the most hated men in Real Estate because it is all numbers. The numbers are the numbers and any one who tells you differently is lying to you. What will it sell for is set in stone. If you don’t know what’s going on in your market place then get out of the business.

10. 10
AMS says:

RE: David Losh @ 9 – We are talking rent here. I only point out that a \$500 home probably doesn’t rent for \$400 per month.

How much does it cost to rent the lowest cost shack in rural Alaska?

If you won’t give up that, then how about squatting in Florida?

11. 11
Fran Tarkenton says:

A post on the forum reminded me of this, and I don’t want to hijack his thread, so I’ll ask here.

Does anyone know how what privileges attorneys who are not brokers have with regard to acting in the role of a broker/agent? For example, can they get access to the MLS and electronic keys? If they can, can they then serve this role as agent, can they then claim the agent’s commission (this may cause a fee-arrangement problem in the Rules of Professional Conduct on the attorney-side of things; to simplify, let’s assume the attorney is representing himself in the transaction, which gets rid of the RPC issues)?

RCW 85.15.151(3) states that attorneys are exempt from broker licensing laws, but I’m unclear as to whether someone in good standing with the WSBA may then hold himself out to be a broker without doing anything further in terms of licensing, or if he may merely practice law as it applies to real estate but not, say, have MLS access.

12. 12
Matsayswhat says:

RE: scotsman @ 1
Global population has expanded beyond the resources of the planet. Governments encourage population so they can rah rah the national pride to create the illusion of an expanding economy. We are just trading dollars around amongst the wealthy who will do nothing.

That’s why we need to colonize space! I’m actually only half joking. :)

13. 13
The Tim says:

Does anyone know how what privileges attorneys who are not brokers have with regard to acting in the role of a broker/agent? For example, can they get access to the MLS and electronic keys?

From my understanding, attorneys cannot get access to the MLS and electronic keys unless they are also registered as a brokerage themselves. This is exactly the role that Washington Lawyers Realty is attempting to fill with their new agent services, provided by attorneys.

14. 14
patient says:

Today’s unemployment number: 10.2%. Will we add another .6% and reach the highest levels since comparable data has been available ( 1948 )?

15. 15

RE: Fran Tarkenton @ 11 – Lawyers can take the licensing exam if they want without taking the required course. I don’t think that’s a very good idea. The licensing course is sort of like a bar review course. It helps you pass. The new licensing law going into effect will require existing agents to eventually take a 30 hour course on real estate law. I’m not sure if I’ll be exempt from that. If not, I hope I can do it on-line.

I’m not 100% certain, but I think to share in the commission you’d have to be part of of the NWMLS, so even being a broker would not be sufficient. Clearly just being an agent wouldn’t be, because you need to be acting under a broker.

16. 16
Lurker says:

RE: David Losh @ 5

I was under the impression that most trains ran on diesel

17. 17

RE: Lurker @ 16 – He’s talking about transporting coal.

18. 18
AMS says:

RE: Lurker @ 16 – I don’t know how much BNSF transports in terms of coal. BNSF transports intermodal containers from the West Coast heading east.

I’d be interesting to get the breakdown of BNSF’s commodity transported by percentage of total revenue, and then we’d also have to consider the profitability, stability, and so on of the business. Coal is quite steady, as the consumption is approximately constant. Consumer goods, on the other hand, are not so steady, but may be very profitable.

19. 19
Trigger says:

RE: patient @ 14 – My thinking is that unemployment is going up because employers find that people in India can do same thing for less. Now we have a global market. My friend just returned from setting up his office in Shanghai and now got fired because a person in Shanghai can do his job. Especially in recession such things will be important.

That’s why building some stupid wall on Mexico border is not the way to go. But ramping up Mexico, having them adopt some sane laws so their businesses can thrive is a much smarter move.

20. 20
Trigger says:

I think 20-30 years from now it will not matter if you work out of Delhi, Shanghai or Seattle. Those will be all equivalent jobs. And when Africa stops killing its citizens and providing unstable environment for business – it will not even matter if you work from Nairobi. For Africa it maybe 50-60 years though. But India in 30 years time will probably be different.

21. 21
patient says:

RE: Trigger @ 19 – I think that’s a stretch Trigger. I think the main reason is lower demand for private sector products and lower tax revenue for states not outsourcing. I agree that outsourcing can make re-employment slower when businesses that have laid-off workers needs to hire again. Low cost alternatives will be evaluated for sure.

22. 22
Tyler says:

RE: AMS @ 18

The “cleanest” (lowest sulfur) coal in the country is mined in the northern part of the country, and BNSF owns the lines that service those mines. The idea being that even as the % of the total energy derived from coal goes down, the volume coming out of those mines will not go down; it will affect the eastern states much harder.

23. 23
Fran Tarkenton says:

Thanks, Tim and Kary. Where I’m at is, I know just enough to be dangerous to myself. I do practice law, and while I took real estate law courses in school (and the occasional CLE these days), my practice area is far away from that. I’ve lived in the MLS areas I’m interested in for my whole life, and don’t particularly need an agent to tell me houses on streets that I’ve been on hundreds of times. My ability to recognize build quality is not great, but my dad has this knowledge, and I can coerce him into helping me out.

So, my plan is to hire an attorney to do the paperwork, and consider it cheap insurance from preventing me from doing something dumb on that side of things. That leaves (simplified) getting access to viewings (I’d rather not deal with the hassle of getting a seller’s agent to do a showing) as well as laying claim to the buyer’s agent’s commission (it’d be nice if I could just say, “I’m an attorney representing myself, so I’ll be taking that commission.”). To that end, something like the guys Tim linked to may be well worth my money instead of figuring out how to do it all myself, just to use that knowledge only a few times in my life.

If there’s something especially horrible with my idea, I’d appreciate it if someone would point it out.

24. 24
softwarengineer says:

RE: scotsman @ 1

Yes Scotsman

Another slap in the face of the rich elite Democrat (Republican) platform(s) is John Kennedy:

“Ask not what your country can do for you, but what you can do for your country”

25. 25
softwarengineer says:

RE: patient @ 14

But Mainstream Media Ranted It Was Good We Only Lost 512K Jobs in October

What the Hades are they smoking?

26. 26
One Eyed Man says:

Capturing the 3% as a buyer can be difficult without having an agent who has a right to the commission split based upon the MLS agreement. If you offer a purchase price which is 3% less as the means to get your 3%, the selling office’s 3% goes to the listing agent and the seller has no incentive to give you a 3% break on the price unless the listing agent agrees to reduce the commission. You’re probably better off using someone like the guys Tim mentioned. I didn’t read all of their web page so I don’t know if they will show you any houses without charging something in addition to a flat rate. I’ve heard of another attorney with a brokers license and MLS membership who does everything on an hourly basis at his normal hourly rate of \$200 per hour. Another attorney friend told me his fees general come out to about 1% on average, but I don’t know if that included any time for just showing houses.

So are you an old time Viking fan or just a “scrambler.”

27. 27
AMS says:

BFF starts soon!

28. 28
Fran Tarkenton says:

Thanks. I don’t know that I’m old time; Fran retired shortly before I was born. However, I was a fan during the Herschel Walker trade and the Falcons game in ’98, so I’ve known my share of suffering that doesn’t involve Super Bowl losses.

29. 29
B&W NIkes says:

RE: David Losh @ 5 – How is the Sage betting on coal? Looks equally like real estate, transportation, and energy hedging to me.

30. 30
scotsman says:

RE: patient @ 14

Yes we can! And then some- 12-14% in my book.

31. 31
AMS says:

RE: Tyler @ 22 – Oh, yes, I have discussed the low sulfur fuel and how it’s caused towns in the east to go ghost. What happens to property values when governmental regulation suddenly shuts the mind down?

How much of BNSF business does coal represent?

32. 32
David Losh says:

The government, all governments, employ, by my rough guess, 30% of the world’s population. Innovation, like the internet, comes from the government. The government are the ones entrusted with new energy research and development because private industry is just skimming cream.

Without the government sending kids to war we would have massive unemployment. The military industrial complex is the guns, bombs, trucks, missiles, rockets, nuclear research, communications, National Security, Military Intelligence, the Space Program, men on the moon, satelites in space, do I really need to list all of the jobs the government supplies?

What gets me is that it was OK for Reagan to turn lose thousands of psyciatric patients from welfare while spending billions of the missile defense we never used. I’m grateful for the military spending, but it made us the best armed country on earth.

If we wanted to kill Osama bin Laden we could, we have the right to, Islamic Law is on our side. We go to where ever he is and kill him. We don’t need a whole lot of planning, we just go and kill him. He attacked the most powerful country on earth. Instead of just killing one guy we have thousands of troops, equipment, plans, generals, talk, talk, talk, and nothing is done, but propping up employment.

So, if the government is so bad why do we rely on it so much? Why is Warren Buffet exploiting our lack of initiative to drag us back to the coal age? Why can’t American business think of anything better to do than trade dollars around?

33. 33
laterite says:

RE: scotsman @ 30 – I read today that the “real” unemployment rate is now something along the lines of 17-18% when you factor in the “give-ups”.

34. 34
AMS says:

RE: AMS @ 31 – mine, not mind. Governmental regulation might shut the mind down too.

35. 35
AMS says:

RE: David Losh @ 32 – We have the best government that money can buy!

36. 36
AMS says:

RE: laterite @ 33 – U3 is the headline number. If you want a broader number, take a look at U4, U5 & U6.

37. 37
Tim says:

Wait, Fran Tarkenton played football? I always thought his claim to fame was ‘Real People’.

38. 38
Tim says:

or was it ‘That’s Incredible’

39. 39

RE: One Eyed Man @ 26 – Exactly on getting the 3% for yourself. When we were buying the only time we took the 3% off the table was when the seller was an agent and he had the authority to do the transaction without a commission.

Also, I’d add I do expert work for \$150 an hour, and I’d be happy to do that for a buyer as long as it wasn’t contingent on them actually buying a property. That’s the thing. Few buyers want to pay anything if they don’t end up buying something.

40. 40
B&W NIkes says:

RE: AMS @ 31 – The nation’s dominant railroads, Norfolk Southern, Burlington Northern Santa Fe Railway (BNSF), CSX Corp. and Union Pacific, rely on coal for 15-20% of their revenue.
http://www.nytimes.com/cwire/2009/09/16/16climatewire-big-coal-carriers-navigate-a-risky-climate-tr-5184.html

41. 41
AMS says:

RE: B&W NIkes @ 40 – Thank you.

42. 42

I’m not really sure where to post this, so I’ll post it here.

The new tax credit could get some downsizers to move in the next few months. Those over 60 who want to move out of a 2 story and into a rambler or condo.

43. 43
AMS says:

RE: Kary L. Krismer @ 42 – The dominoes don’t start at the top, however.

That said, there could be some feedback to start another set of dominoes cascading down.

44. 44
AMS says:

I’ve been discussing the generational differences. If this is any of this is correct, it does not sound promising for wonderful times ahead.

On Coast to Coast AM, Historian Howe will discuss the big shift of Generation Y.

“Then, Ian is joined by historian Neil Howe to discuss his latest research on the defining generations of our time, and why those born after 1981 have vastly different relationships with their families and the workplace than those born earlier.”

http://www.coasttocoastam.com/show/2009/11/07

http://www.fourthturning.com/

Amazon.com description of Howe’s latest book: “The Fourth Turning continues the project of mapping out the place of generations in history, a project begun in the authors’ earlier books Generations and 13th Gen. If millennial fever takes hold, The Fourth Turning may be only the first of an impending wave of pseudo-scholarly tracts prognosticating future (but imminent!) doom as we collectively close the books on this millennium. Those expecting a serious or dry tome might be put off by the authors’ taste for bulleted text and catchy phrasings, but can you blame these guys for wanting to make impending peril as exciting as possible? After all, they think we are headed toward “events on par with the Revolution, the Civil War, or World War II” in the next 20 years. Mixing solid understanding of present generational divisions, with some fairly broad generalizations, Strauss and Howe promise to move from history to prophecy.”

Also Amazon cites the Library Journal as saying, “After researching historical patterns, the authors (Generations: The History of America’s Future, Morrow, 1991) conclude that America is on the verge of crisis. They substantiate their hypothesis by identifying and tracing a repetitive, four-stage historical cycle that, throughout recorded time, started on a high note and ended in hardship. Narrator Michael Tilford’s polished, convincing voice and steady pacing lend an air of legitimacy to the authors’ assertions. A brief question-and-answer session between the narrator and the authors at program’s end provides an interactive quality that enhances the sometimes methodical drone of the historical analysis. Like other works of prophecy, The Fourth Turning should circulate well in public libraries.”

http://www.amazon.com/exec/obidos/ASIN/0767900464

45. 45
scotsman says:

Yeah! Free health care passed- it’s on to the senate! My free house can’t be far behind! And I want 2 months paid vacation too… Ah, make it 3, we’re going for.. BROKE.

46. 46
scotsman says:

RE: AMS @ 44

My wife started to read that on the recomendation of a friend, but gave up- it was too depressing. The book “Outliers” is another that deals in an indirect way with cycles in populations and technology. Interesting stuff.

47. 47
48. 48

I’m just curious what the people here think about the financial advice answered in the first question in the Times today:

49. 49

RE: AMS @ 44 – I don’t know about revolution in 20 years, but I don’t think it’s too far fetched to think there there could have been a revolution here if the economy had collapsed in 2009. Or perhaps elsewhere in the world since the effects were global. It’s not like things exactly turned out well after the depression of the 30s. And with there being several nuclear powers now, the impact could be even greater.

In that regard perhaps the spending by Obama and Congress is not only an interesting economic experiment, but perhaps and act of self-defense and/or insurance.

50. 50

Yeah! Free health care passed- it’s on to the senate! My free house can’t be far behind! And I want 2 months paid vacation too… Ah, make it 3, we’re going for.. BROKE.

Not quite the same thing. I haven’t even looked at summaries of what passed the house, but of all the ideas floated out there mandatory coverage is perhaps the best. It’s a bit counter-intuitive since insurance is the root cause of us spending so much on health care. But one of the biggest problems is uninsured people being treated, and the costs being passed on to everyone else. Think of it as the cost for uninsured/underinsured on your car, but much greater.

But that’s only one element. You could deal with that relatively simply by simply passing a law requiring mandatory insurance, like we have now for auto insurance. I’m not so sure the rest of it isn’t all smoke and mirrors.

51. 51
David Losh says:

You need to see more of the world. Things will be changing rapidly.

52. 52

RE: David Losh @ 51 – LOL. I warn of a possible nuclear holocaust in the event of economic collapse and you think that’s not sufficiently dire?

53. 53
David Losh says:

RE: scotsman @ 45

OK, I looked it up. Military is \$691 billion a year, but it’s OK because it’s only 4.6% of the GDP.

Now help me out on the math. Health Care, paid for by the citizen’s, because nothing is free, we already pay the highest premiums in the world for very carpy health care, is \$1 trillion over ten years without figuring in the tax savings Universal health care would provide, not to mention the increase in the GDP.

The way I’m looking at it is that if we reallocated \$691 billion dollars, which doesn’t count the Iraq Afghanistan quagmire, we could actually do something to help the economy rather than give gifts to “free” enterprise like health insurance companies.

Here’s another thing that confused me. If the \$691 billion is only 4.6% of the GDP what is the big fuss about with the deficit spending? It must be a pretty small amount of GDP also.

54. 54
David Losh says:

No nukes, the planet wouldn’t survive, it’s not a weapon any longer, it’s not a threat, and hasn’t been for years. There is no tactical use.

I should expand on that: nuclear weapons are an economic boost for all governments. The threat, the counter threat, the long term economic impacts of having something you can never use, the secrecy, security, no verification of functionality, just the assurance that they can never be used.

You need to factor in population growth over the past forty years. The same as we are not safe from disease we would have a global, genetic ripple effect from nuclear exposure.

55. 55

RE: David Losh @ 54 – I would disagree. India/Pakistan, N. and S. Korea, all places nukes could be used without the end of the world. I don’t see either dragging any of the big boys into the fight. But whatever, you don’t need to be nuclear to be a threat to your neighbors. Look how many people were killed in the Iraq/Iran war.

56. 56
AMS says:

RE: Kary L. Krismer @ 49 – The author was quite entertaining, and he is a Yale Historian and Economist. After listening to the program, one must place the term “revolution” within a given context. Howe claimed that the revolution will take place in an area where the former generations are the weakest.

One thing I did find very interesting, from an economics perspective, is Howe’s commentary on the recently passed health care. He suggested that this was essentially a transfer of wealth from those born starting in 1981 onward to the boomers. He suggested when the government requires health care insurance, those who are the healthiest subsidize the others. This is nothing new, but then Howe went on to suggest that those born 1981 and after are the healthiest based on a list of major 50 statistics that the Center for Disease Control keeps. He went further and suggested that 49/50 of the stats were favorable to the generation born starting in 1981. The one that was worse was obesity, and he suggested that obesity isn’t that bad.

In any event, I have been searching through some of the King County property records. I have seen a few too many deeds in lieu of foreclosure. My methodology does not produce scientific random sampling, so I don’t have any good way to put these in context. Also when I say too many deeds in lieu of foreclosure, such might be the best for the former owner, but we’re talking about minimizing losses rather than maximizing profits.

I am sure some of the failed flippers would want to try again, but I am going to guess, without surveying a random sample, that one or both of two things is present:

1. The failed flippers don’t have the capacity to buy more property.
2. The failed flippers have played with the fire enough, and don’t seek to get burned again.

I am guessing that it is going to be tough to find someone to have a flip business model, yet has plenty of cash after any failed flip. If the unsophisticated flipper had more cash, he’d likely continue to dump his money on the property, until we are down to zero capacity to buy more. I am sure some flippers do have exit strategies, and these flippers would have capacity even after a failed flip. That said, given the former construction environment, I’d bet these are not the norm.

That said, many of these flippers saw easy money. When undesirable results ensued, many are not going to be so quick to jump in. Similarly for all the landlords who were purchasing property with the no fail attitude.

There is little doubt that Vegas is down 50%+. I am not sure how much the \$8k first time home buyer credit has helped, as I have heard reports of a hot market, such as Jim the Realtor’s reports in Southern California. In any event, hopefully we can agree that the Vegas market is down ~50-60%.

What kind of housing market appreciation will it take to double, or better, the current prices?

Median asking price in April 2006: \$344,900
Median asking price November 2009: \$139,900

We need to go from \$140k to \$345k.

That’s a lot of \$8k and \$6.5k tax credits.

How long is long enough to suggest it will never happen?

57. 57
AMS says:

RE: Kary L. Krismer @ 52 – FWIW, Howe suggested that if a Nuke went off somewhere in the world, there would be a major, immediate shift in attitudes. Personal freedom would immediately go out the door.

58. 58
AMS says:

RE: David Losh @ 53 – From what I understand, this so-called health care plan does not solve the fundamental problem of billing, the cost of any procedure, and so on. It requires everyone to have health insurance, much like auto insurance. Just having auto insurance does not reduce the cost to repair the damaged vehicles. If everyone is required to have a given insurance, then the losses are spread over that larger pool of people.

59. 59

RE: AMS @ 57 – I would agree if it were a terrorist attack. But if it were “just” two countries at war I don’t think the effects on personal freedoms would be all that great, unless perhaps it’s a reaction to some economic event thereafter.

60. 60

RE: AMS @ 58 – I almost jumped on that too, but I think all he’s saying is it would no longer be a government expense, not that the expenses would be reduced.

As to your comment in 56 about wealth transfer, one of the ideas floated was a mandatory flat cost insurance, regardless of age, up to the point where medicare kicks in. That would make the cost much more attractive, but it would clearly be a wealth transfer thing from young to older (such as myself at 51).

61. 61
AMS says:

RE: David Losh @ 54 – The US uses nuclear based weapons, the so called depleted uranium. These are not high grade nuclear weapons. Also civilization survived the WWII use of nuclear weaponry.

http://www.fas.org/man/dod-101/sys/land/pgu-14.htm

62. 62
AMS says:

RE: Kary L. Krismer @ 60 – Howe went through all the taxation resulting in a basic transfer from young to old. FICA and Social Security is a part of that. Essentially the young don’t need the insurance, since they don’t have much in terms of expensive health care needs.

63. 63
AMS says:

RE: Kary L. Krismer @ 59 – Part of what is at issue is how would those born after 1981 react?

Also at age 51 you’re right at the end of the boomers. Born a little too early to be a Generation Xer, yet born late in the boomer generation.

64. 64

RE: AMS @ 62 – They need the insurance, they just aren’t that likely to actually have to use it because of their age. The young people without insurance are basically just gambling with other peoples’ money, since they will be treated in any event.

I really don’t understand their thought process. I paid for my own insurance starting at about age 31 (before that it was employer provided). I used a high deductible plan to keep the cost low, but I wasn’t about to be financially destroyed at the happenstance of a serious illness hitting.

65. 65
David Losh says:

We are a long ways from WWII in terms of population growth.

That is the key to everything. Billions of people pass along desease, come in contact with each other, races mix, the genetic pool strengthens, and is dilluted.

North Korea, Pakistan, and Iran, all nuclear threats, are under constant scrutiny at a cost of billions of dollars. Billions of dollars are spent preparing for a nuclear war each and every year. War costs a lot of money for little or no return on investment.

The health Insurance plan coming out of Congress has a very small price tag and there is a discussion about it. We spend a few hundred billion preparing for, or thinking about a nuclear war that can never happen and it’s just an accepted cost of freedom.

66. 66
AMS says:

RE: Kary L. Krismer @ 64 – “they just aren’t that likely to actually have to use it because of their age. ”

Let’s get this out of the way fast: If you are not likely to use insurance, then the cost-benefit is probably negative. Also those who are least likely to experience a loss ‘need’ insurance the least. In fact, those who ‘need’ it the least probably don’t need it.

67. 67
AMS says:

RE: David Losh @ 65 – “Billions of people pass along desease, come in contact with each other, races mix, the genetic pool strengthens, and is dilluted.”

1. You are no epidemiologist. Some diseases only live in urban environments, but others cannot survive the urban environment. The problem with the urban diseases is that often more people are affected.

2. There is no solid definition of “race.” There have been many people who have tried to carefully define race, but in each case there are problems. Nazi Germany had elaborate systems, where people were extinguished, yet they never put the system on firm foundation. In other words, Nazi Germany never was able to develop a sound definition of race.

68. 68

By AMS @ 66:

RE: Kary L. Krismer @ 64 – “they just arenâ��t that likely to actually have to use it because of their age. ”

Let’s get this out of the way fast: If you are not likely to use insurance, then the cost-benefit is probably negative. Also those who are least likely to experience a loss ‘need’ insurance the least. In fact, those who ‘need’ it the least probably don’t need it.

I usually agree with a lot of what you say, but not this. What you need to insure against the most is the lowest likelihood situations which have the highest possible losses. Health insurance is exactly that. Dental insurance, in contrast isn’t, because there you insure stuff very likely to occur (e.g. checkups) and the limits on the policies are such that they don’t really cover much. I’ve had health insurance policies with higher deductibles that the total amount many dental policies would pay.

Now if you’re just looking at expected return, of course it’s negative. It is with all insurance, otherwise the insurance wouldn’t be offered.

69. 69
AMS says:

RE: Kary L. Krismer @ 68 – I think you are placing this within the context of how boomers generally think: Health Insurance is very important. In fact, that’s generally been an attitude that boomers have held.

Health care is not a problem of insurance, nor is it solved by insurance, in my opinion. I have a friend who lives in Florida, but he had business in Oregon. He was feeling down, a case of the sniffles. He went to the local drug store for pseudoephedrine. He quickly discovered that in Oregon one must have a prescription to purchase such. In Washington it’s still over the counter, but there are limits to purchasing such, including showing identification.

A \$10 remedy suddenly becomes \$75. I understand the Smurfing problem…

The bigger question is how can we, as a society, support a heath care system that increases services provided for the same or less cost, or, alternatively, provides the same level of service at a lower total cost.

I understand that doctors are highly educated, and so on. I understand that a return on investment is expected. At the same time, the economic cost of an unhealthy population is high too.

Rather than all of these insurance complications, I’d like to see some minimum standard of health care. Break your arm? That’s covered. And so on. In addition we should, as a society, get a handle on how to avoid sickness and injury. And for those sicknesses and injuries that cannot be avoided, then why not invest in the future cost of treatment?

I still cannot get over the difference in the cost of some protected drugs versus generics. This antibiotic will cost you \$150 for 8 pills, but this other one, which you must take more often, longer, or whatever, costs less than \$10, but the \$150 one is ‘better’ for some marginal reason. \$140 better? Of course the individual wants the \$150 drug for the same cost, as insurance should cover both equally.

I don’t see any solution to this problem until there is a clear national standard of heath care.

70. 70

RE: AMS @ 69 – It’s actually a belief I hold about all insurance, and is pretty standard stuff if you take a college course on risk and insurance.

As to the sudafed issue, that’s not a health care issue as much as a war on drugs issue. But hey, what do you expect from a state where they can’t even pump their own gas? ;-)

On the generic drug issue, the reason for the large price discrepancy, as well as the high cost of medical procedures in general, is the existence of insurance. One costs \$10 and one \$150, but the consumer only pays \$5 for one and \$10 for the other, increasing the demand for the name brand stuff, and thus the price. Stated differently, I don’t believe they should be covered equally unless perhaps a difference could be shown for the particular illness, which is unlikely. That’s part of the problem of no one caring what anything costs because it doesn’t affect what they pay.

71. 71
AMS says:

RE: Kary L. Krismer @ 70 – On the issue of insurance, insurance is a transfer of risk. What if a person simply wants to accept the risk?

(I purchased an electronics item the other day, for about 20% of the cost of the item I could have purchased some extended insurance. I choose to accept the risk.)

72. 72

By AMS @ 71:

RE: Kary L. Krismer @ 70 – On the issue of insurance, insurance is a transfer of risk. What if a person simply wants to accept the risk?

They can’t. In the area of health insurance, they’ll be treated anyway. The only thing they’re accepting is the possibility of being sued and eventually filing bankruptcy. They aren’t accepting actually having to pay for the services that will be rendered, because they probably can’t pay. If there was a way for extremely wealthy people to post a 2 million dollar bond, that might be acceptable, but other than that, everyone at a minimum should have a high deductible policy (either 2.5k or 5k).

73. 73
David Losh says:

National health care is essential. The private health care system has been on life support since the 1980s AIDS epidemic. They keep raising rates and refusing treatments. The secondary emergency room system has become a primary care unit.

Your health insurance means absolutely nothing in today’s world of cancer. Cancer is kind of interesting in that nuclear fall out can increase the risk of cancers. No research for that, we are too busy looking for cold remedies and doing heart by pass surgery. Our health system is the most expensive in the world and treats the lowest number of people for disease.

Our military on the other hand looks to be spending more on nuclear weapon’s capability than on providing for it’s own citizen’s security, I’ll just make a blanket statement that hunger, poor water quality, lack of medical treatment kills more people globally than a group terrorist with AK47s.

As a matter of fact terrorists may have less global support if the most powerful country on earth could figure out how to feed people.

74. 74
Everett_Tom says:

Steve Tylers 2010 predictions are up ( with a healthy dose of “I was so right on my last predictions” included)

Forecast for 2010 housing market: slow decline

75. 75
AMS says:

RE: Kary L. Krismer @ 72 – What you are saying is that the system does not currently allow it. That’s not my question. I am not asking about what is currently happening, but rather I’m asking what if someone wants to accept the risk? If the system needs to be changed, maybe it should be changed to allow for more risk acceptance.

76. 76
AMS says:

RE: Everett_Tom @ 74 – Does the Herald actually pay for someone to say, “If you are a home seller, price your home realistically (i.e., lower than the competition) and it will sell.”

In other words, if you price your product cheap enough, it will sell right away?

Lessons from Craigslist: The quickest way to unload something of value is to post it in the free section and give it away. Somehow I doubt that maximizes seller satisfaction.

77. 77
Everett_Tom says:

By AMS @ 76:

RE:
Lessons from Craigslist: The quickest way to unload something of value is to post it in the free section and give it away. Somehow I doubt that maximizes seller satisfaction.

Seller satisfaction yes, but imagine the buyer satisfaction…

78. 78
softwarengineer says:

Hi Kary

Here’s the “F” Bond Fund Numbers through October:

Returns & Share Prices Current Monthly Returns

Rates of Return were updated on November 2, 2009.

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%

L Income L 2010 L 2020 L 2030 L 2040
October 2009 (0.26%) (0.38%) (1.39%) (1.81%) (2.15%)
Year-to-date 6.58% 7.69%
13.96% 16.13% 17.90%
12 Month 6.97% 7.74% 12.59% 13.95% 15.03%

You’ll note Bonds went up in October, while the S, I and L stock mutuals all had losses….the bonds made more than the “G” money markets too in Oct 2009.

I invest in bonds too, about 15% of my matching retirement.

79. 79
Scotsman says:

Bad idea going forward. It’s an expensive investment to make and will get thrashed the moment interests rates turn up. Either leave the cash in an FDIC insured account or buy very short term treasuries through Treasury Direct or a discount broker like Schwab. In a deflationary environment even cash under the mattress earns an effective rate equal to the rate of deflation.

80. 80
softwarengineer says:

Yes Kary:

I also hear the KSA prostate and mamogram tests have made both forms of cancer “go up”, quite a bit too. So….does testing for some types of cancer make cancer risk decrease or bad diagnostic of cancer increase????

LOL

81. 81

RE: softwarengineer @ 78 – I was thinking more of suitability. I’m not that familiar with International bond funds, but I assume they have exposure both to interest rates and international exchange rates. Does that sound at all like a suitable investment for a 72 year old? One that would be taking the money to invest from her “checking?”

Edit–I think Scotsman’s answer was more the type of thing I was looking for.

82. 82