Weekend Open Thread (2011-02-18)

Here is your open thread for the weekend beginning Friday February 18th, 2011. 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!

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About The Tim

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.

87 comments:

  1. 1

    What’s the Wisconsin Egypt Type Demonstration Against Union Elimination Got to do with Seattle Home Prices?

    Plenty, think about it. The State of Washington, King County and Seattle all have teachers, fireman, public workers represented by unions…..eliminate them and yes, we can butcher ax pensions and healthcare [BTW, I thought we were trying to bolster healthcare, not eliminate it…LOL] without layoffs. Will the rest of the country mimic Wisconsin if the Bill passes? When times get rough [they are] and the going gets hard, they’ll stick it to us in i.e., fraud property tax increases, etc. to keep their crumbling budgets partially intact [while the private sector tax base is reduced with no end].

    What will this do to RE prices…..what with interest rates already shooting up, gas up to $3.50/gal and now reduced public sector wages with no unions adding to the current household income deterioration….granny bar the door…..they’ll collapse FAR worse.

    http://news.yahoo.com/s/yblog_thelookout/20110217/ts_yblog_thelookout/why-the-wisconsin-labor-bill-is-a-big-deal

  2. 2
  3. 3

    RE: JC_98119 @ 2 – I’ve seen the local rags have articles that are extreme either direction. I don’t think they do anyone any favors.

    On the topic of the press, this country’s press is very centered in NYC and LA, and probably much of the rest of the country wonders what articles like this are about:

    http://today.msnbc.msn.com/id/41514131

    (5 properties you can get for under $450,000).

  4. 4
    Macro Investor says:

    Prepare to be fingerprinted if you buy over $100 worth of gold in WA state:

    “A bill proposed in the State of Washington (House Bill 1716), by representatives Asay, Hurst, Klippert, Pearson, and Miloscia, whose alleged purpose is to regulate secondhand gold dealers, seeks to capture “the name, date of birth, sex, height, weight, race, and address and telephone number of the person with whom the transaction is made” or said otherwise, of every purchaser of gold in the state of Washington. Furthermore, if passed, Bill 1716 will record “a complete description of the property pledged, bought, or consigned, including the brand name, serial number, model number or name, any initials or engraving, size, pattern, and color or stone or stones” and of course price. But the kicker: if a transaction is mode for an amount over $100, which means one tenth of an ounce of golds, also required will be a “signature, photo, and fingerprint of the person with whom the transaction is made.”

    http://www.zerohedge.com/article/prepare-give-all-private-data-any-gold-purchase-over-100

  5. 5

    RE: Macro Investor @ 4 – I haven’t seen that piece, so I won’t comment on it. That said, some of the legislation proposed by legislators is just completely nuts.

  6. 6

    By Kary L. Krismer @ 3:

    RE: JC_98119 @ 2 – I’ve seen the local rags have articles that are extreme either direction. I don’t think they do anyone any favors.

    On the topic of the press, this country’s press is very centered in NYC and LA, and probably much of the rest of the country wonders what articles like this are about:

    http://today.msnbc.msn.com/id/41514131

    (5 properties you can get for under $450,000).

    I don’t know how my former house made this list, but that Seattle house ( which is no longer an active listing) was mine from 1986-1998. It needed everything when we bought it, from a roof ( you could see the sky, and it didn’t have skylights) , to walls, to plumbing, to electricity, to a furnace. When we sold it, it still had a lot of work that needed to be done, and one gets tired of it. We received an unsolicited offer on it. It wasn’t for sale, but the kids were “out of the nest”, we didn’t need a house that big, and wanted more garden space. So we took the money, and ran to the wilds of Renton. Cool house, though. Glad I lived there, glad I owned it, and very glad I sold it.

  7. 7
    Macro Investor says:

    By Kary L. Krismer @ 5:

    RE: Macro Investor @ 4 – I haven’t seen that piece, so I won’t comment on it. That said, some of the legislation proposed by legislators is just completely nuts.

    So read it.

    I think this ties in directly with Software Engineer’s comment in position 1. The special interests, especially the bankers, know it’s the end of an era. They’ve leached off of society for 100+ years now. Now their suckers (that’s us) are tapped out. They’re going to raise taxes and do every crazy/crooked thing they can imagine to keep the status quo going.

    Clamping down on gold is an attempt to prevent a barter economy from growing. But the more they squeeze, the more productive people will opt out. It’s an iron rule — capital controls drive out capital. As taxes rise, watch businesses and jobs leave for more freedom to keep what they produce.

    Idaho isn’t very far away (possibly the least regulated state). In a global economy, Singapore isn’t very far either (almost zero corporate taxes). So much for good jobs and upper middle class house prices.

  8. 8
    Scotsman says:

    What does the Federal Government do best? Why, income redistribution, of course:

    http://media.hotair.com/wp/wp-content/uploads/2011/02/merline-chart1.jpg

    Taking from the rich, giving to the poor. And yet we still hear complaints of unfairness:

    http://media.hotair.com/wp/wp-content/uploads/2011/02/merline-chart2.jpg

  9. 9
    Betsy says:

    RE: Scotsman @ 8

    I’d be curious to see what 51-95% looks like in graph 2, overall it shows the rising gap in incomes over time very well. Mexico here we come!

  10. 10
    Pegasus says:

    By Ira Sacharoff @ 6:

    By Kary L. Krismer @ 3:

    RE: JC_98119 @ 2 – I’ve seen the local rags have articles that are extreme either direction. I don’t think they do anyone any favors.

    On the topic of the press, this country’s press is very centered in NYC and LA, and probably much of the rest of the country wonders what articles like this are about:

    http://today.msnbc.msn.com/id/41514131

    (5 properties you can get for under $450,000).

    I don’t know how my former house made this list, but that Seattle house ( which is no longer an active listing) was mine from 1986-1998. It needed everything when we bought it, from a roof ( you could see the sky, and it didn’t have skylights) , to walls, to plumbing, to electricity, to a furnace. When we sold it, it still had a lot of work that needed to be done, and one gets tired of it. We received an unsolicited offer on it. It wasn’t for sale, but the kids were “out of the nest”, we didn’t need a house that big, and wanted more garden space. So we took the money, and ran to the wilds of Renton. Cool house, though. Glad I lived there, glad I owned it, and very glad I sold it.

    I like It Ira. Well… most of it. Was it your idea to add the garage door to the kitchen?

  11. 11
    David Losh says:

    RE: Scotsman @ 8

    You have no idea what those charts are showing you; those show poverty, and an increasing poverty level.

    The wealthy have grown, the income has grown, the retention of wealth has grown, and that’s why taxes are owed.

    The lower end owes less tax because they are making less money.

  12. 12
    pfft says:

    By David Losh @ 11:

    RE: Scotsman @ 8

    You have no idea what those charts are showing you; those show poverty, and an increasing poverty level.

    The wealthy have grown, the income has grown, the retention of wealth has grown, and that’s why taxes are owed.

    The lower end owes less tax because they are making less money.

    if anything the wealth has been redistributed upwards.

  13. 13
    Scotsman says:

    RE: David Losh @ 11RE: Betsy @ 9

    What is shows is the federal government trying to recreate the middle class than has slowly diminished over the last few decades as better paying manufacturing jobs and the management that supervised them has gone overseas. What it shows is a lack of opportunity for those who have only time and labor to offer in exchange for dollars. Sure, the bankers and other wealthy rake it in, but the rest have fewer choices.

    It’s a strong negative to have such a small percentage of the population paying taxes while the rest ride for free- it breaks down the connection between people and their government. We no longer have a large group with common interests and concerns. Instead we get two separate groups where one tries to increasingly exist off the excess of the other. Historically that’s a good root cause for eventual rebellion. I think we’re already starting to see that.

  14. 14
    WestSeattleDave says:

    RE: Scotsman @ 8 – The point that the rich are paying more of/most of the income taxes is too often repeated. Too bad it’s not an accurate portrait of the actual situation. The primary reason the rich are paying more taxes is that they are making more money. The more accurate description is what their taxes are as a percentage of their income. And using that measure, they are paying less taxes.

    http://www.taxfoundation.org/news/show/250.html

    Scroll down to Table 8. (This table ONLY shows the income tax, and no other forms of federal taxation). It shows the average tax RATE (percentage of adjusted gross income paid in taxes) for major divisions of the income distribution. It shows that between 1987 and 2008, the average tax rate for ALL income levels declined, rich and poor alike (which I think is a far greater contributor to our current deficit than spending). When you look at the top 10% of the income distribution, you see that between 1987 and the early 90’s, tax rates declined, then began to climb throughout that decade (a result of the Clinton tax hikes on the wealthy). In 2001 the direction reversed (due to the Bush tax cuts of ’01 and ’03) and the wealthy again saw declining tax rates. So, to summarize; income taxes of the wealthy, as a dollar amount, have increased, while their income tax RATES have gone down, allowing them to keep more of their money.

    An example (however simplistic): Last year you made $100,000 dollars, and paid $20,000 in income taxes. This year you had an outstanding year and made $200,000, and paid $30,000 in income taxes.

    This year, did you pay more income taxes, or less, compared to last year?

    In truth, both answers are correct. You did indeed pay $10,000 more in tax (a 50% increase), which I believe is Scotsman’s contention. But you also made an additional $100K in income (a 100% increase). Last year you paid an effective tax RATE of 20%, and this year your effective rate was only 15%. This year, despite paying a higher dollar amount in taxes, you paid a lower tax rate on a big increase in income, and you effectively kept more of your increased income, which I would contend is a decrease in taxes.

    This is exactly what is going on at the top of the income scale today. The rich are paying more dollars, while enjoying lower rates and keeping more of their ever increasing income.

  15. 15
    WestSeattleDave says:

    RE: Scotsman @ 13 – Scotsman — fewer people are paying income tax because more people are poor. The median income in this country is around $50,000, below which few people owe income tax, and those who do don’t owe much. This is primarily a function of the progressive nature of the income tax, and not due to wholesale “free riding” by society. Society has chosen to redistribute income because the private sector has failed at the task.

  16. 16
    Cheap South says:

    RE: Macro Investor @ 7

    Singapore? They even sell t-shirts making fun of everything you can not do. I remember chewing gum being one of the “illegal activities” (actually is illegal to bring it into the country). It’s extremely small and expensive. Police officers check the gas gauge of all cars driving to Malaysia (short drive across a bridge) where gas is much cheaper, to make sure each car has at least 3/4 of a tank leaving the country. Real Estate is obscenely expensive and you “lease it” for 100 years. These are just little pieces of trivia I remember from many visits during the 90s. Last I heard, nothing has changed.

  17. 17
    karl says:

    Does anyone here know if there is a list published locally for “executive trustee services”(GMAC)’s pending trustee sales? They do not maintain a list on their website so I am guessing they have sub-contracted to another service.

    Thanks

  18. 18

    By Pegasus @ 10:

    By Ira Sacharoff @ 6:

    By Kary L. Krismer @ 3:

    RE: JC_98119 @ 2 – I’ve seen the local rags have articles that are extreme either direction. I don’t think they do anyone any favors.

    On the topic of the press, this country’s press is very centered in NYC and LA, and probably much of the rest of the country wonders what articles like this are about:

    http://today.msnbc.msn.com/id/41514131

    (5 properties you can get for under $450,000).

    I don’t know how my former house made this list, but that Seattle house ( which is no longer an active listing) was mine from 1986-1998. It needed everything when we bought it, from a roof ( you could see the sky, and it didn’t have skylights) , to walls, to plumbing, to electricity, to a furnace. When we sold it, it still had a lot of work that needed to be done, and one gets tired of it. We received an unsolicited offer on it. It wasn’t for sale, but the kids were “out of the nest”, we didn’t need a house that big, and wanted more garden space. So we took the money, and ran to the wilds of Renton. Cool house, though. Glad I lived there, glad I owned it, and very glad I sold it.

    I like It Ira. Well… most of it. Was it your idea to add the garage door to the kitchen?

    Nope, it was the guy we sold it to. Not sure I like that.

  19. 19
    Scotsman says:

    RE: WestSeattleDave @ 15RE: WestSeattleDave @ 14

    Valid points, but focusing on changing relative rates does nothing to change the fact that a very small minority are paying the vast majority of the taxes, and a good number are paying nothing. The later group increasingly looks to the government for their support. That is my concern- it sets up an expectation that can’t be sustained, dividing the society into givers and takers with the government- increasingly elected by the takers- serving as arbiter.

    I agree the tax system is screwed up. If one takes into account FICA (which has an upper income limit) and local/state sales taxes and income taxes the current system really isn’t that progressive. Lower income folks are hit particularly hard by FICA and sales taxes as a percentage of spent income- which is often all of their income. But everybody should have some skin in the game. Here’s what I’d like to see:

    A two tier system- 4% of the first $50,000 and 25% of everything over that. No FICA, no deductions, no double taxation of investment income up to the first $500,000 then 25% of everything over that.

    Limit the federal government to 20% of GDP.

    Let the states do what they want- people/businesses will move to the lower tax areas and spread opportunity out across the country.

    No more deductions from paychecks- make people write a separate check to the government every month or quarter just like business’ do. There’s a huge difference emotionally between giving up something you never really had and having to give up that which is in your hand. My guess is everyone would suddenly be much more interested in what government was doing with their money- and that would be a good thing.

  20. 20
    David Losh says:

    RE: Scotsman @ 19

    That all sounds fine, and a flat tax is what we should have. Unfortunately our government expenses pay the wealthy.

    This idea that people are getting a free ride is false. Our government gives away nothing to the poor.

    Our federal, and state, and local governments pay to protect business interests.

    Farm subsidies, protection of oil interests, protection of mandatory insurance, which the Republicans put into the single payer health care plan, and are now against, police force for the wealth that jail African Americans, because they are scary. Let’s see, what else, research and development, clinics that are testing grounds for pharmaceuticals, low income housing that is pooled into Real Estate trust funds, section 8 as a subsidy for slum lords, depleting surplus perishables to keep food prices higher, transportation so every one involved gets rich.

    I mean really, show me anything that the government does that is anything other than a gift of cash to private business.

    We are the worst excuse for a society, but we sure can generate a lot of wealthy white people.

  21. 21
    Scotsman says:

    RE: David Losh @ 20

    “I mean really, show me anything that the government does that is anything other than a gift of cash to private business.”

    We could start with social security where the average recipient’s “paid in’ reserves are exhausted after about 2.5 years, but the checks keep coming for decades, or Medicare/Medicaid, prescription drug benefits, you know, all the stuff that is currently setting up to bankrupt the government.

  22. 22
    Pegasus says:

    FDIC to seek $1B from former WaMu execs

    The Federal Deposit Insurance Corp. plans to file a civil suit against at least three former Washington Mutual executives, including former chief executive Kerry Killinger, seeking to collect more than $1 billion in damages, according to people familiar with the pending suit.
    Killinger, former president and chief operating officer Steve Rotella and David Schneider, former president of the failed bank’s home loan division, all recently received legal notices informing them of the pending litigation, these people say.
    The three executives were the highest-level officials in charge of WaMu’s mortgage operations. It’s unclear when or where the FDIC will file its suit.
    Killinger and Rotella and their attorneys could not immediately be reached for comment. JPMorgan Chase & Co. (NYSE: JPM) declined comment on behalf of Schneider, who continues to work in the New York-based company’s retail banking division. A spokesman for the FDIC also declined to comment.
    The amount of money the FDIC is seeking to collect from WaMu officers is huge, particularly because WaMu’s failure did not cost the federal agency’s deposit insurance fund any money.
    Sources speculate that the FDIC may use the lawsuit to make a claim against WaMu’s directors and officers insurance in the bank’s complex bankruptcy case.
    Last year, the FDIC said it had authorized lawsuits against about 50 former bank executives, trying to collect a total of $1 billion in losses. Last July, it filed a civil suit against four former executives of California-based IndyMac, seeking $300 million in damages. IndyMac failed in the summer of 2008 and cost the FDIC insurance fund about $12 billion.

    Read more: http://www.bizjournals.com/seattle/news/2011/02/18/fdic-to-seek-1b-from-former-wamu-execs.html

  23. 23
    WestSeattleDave says:

    RE: Scotsman @ 19 – Again — that a small minority are paying a vast majority of the taxes is entirely due to the fact that they are also making the vast majority of income. And I find it concerning that you characterize a majority of citizens in this country as “takers”. Half the households in this country make less than $50K/year. Half of those are poor and the other half don’t have much money. We suffer from significant income inequality in this country, for a number of reasons, and it is getting progressively worse. Until we reverse that trend, we will see the “takers” expanding in number and the “givers” shrinking. In an ideal world, the economy would distribute income more evenly than it currently does. But it does not, so government policy is trying to ameliorate the bad effects.

    At least we are in agreement that the tax system is screwed up. But I have not seen some of your suggestions before, but it looks like they would not raise as much revenue as the current system. By eliminating FICA taxes, you are essentially saying that Social Security will need to be funded out of general tax revenues, which are currently not up to the task. By levying a 4% tax on incomes below $50K, and removing deductions, you are effectively increasing taxes on the poor. But at least then the poor would no longer be takers.

  24. 24
    David Losh says:

    RE: Scotsman @ 21

    I pay that, we all pay that. Just because the government raided the funds for the protection of wealth doesn’t make any case what so ever.

  25. 25
    David Losh says:

    The problem we have today is the worship of Nobility. It’s an age old problem.

    You are correct the problem is resolved by blood shed. People will starve, so a very few can live useless lives, for only so long.

    We need to rid ourselves from the non contributing members of society. Those are the takers. The wealthy are the takers, the poor are the givers. The fact that our society is so screwed up it can’t make the distinction of who is actually feeding off of who shows that something has to be done.

    The Republicans in Wisconsin(?) are idiots who elected an idiot. Going after labor rather than cut protection of wealth was a poor choice. The workers who side against labor show how screwed up our perception is.

    The wealthy need to pay a fair share. They don’t, they haven’t for decades.

    Taxing the wealthy isn’t enough. The death tax was a small step in the right direction. Wealth, rather than business should be regulated. Allowing multi generational wealth is the same as a Mubarak or Qaddafi. They have only been in a position of power for a few decades. What about the people who collect the welfare of past accomplishments of a family for life times?

    Should we really be paying attention to a royal wedding? Should we really allow a second, or third generation of Gates, or Buffets? Heck no. Those two non performing leaches on society should be stopped, now, and not allowed to steal the productivity of future generations.

    Do we really need more Fruit of the Loom? How about saving 15% with Gieko(?)? Doesn’t Berkshire make sausage? Do we need another generation of sausage makers making financial windfalls?

    Gates, that stinking low life scum, is invading foreign countries. Do we need an entity that holds patents for more than ten years running foreign countries? No we don’t. He has done more damage in the past ten years than the Presidents. He needs to be stopped, and the government needs to protect us from him.

    The government needs to start regulating wealth. We need to open up thousands of blind trusts and actually see what, or where the damages is. The wealthy are destroying this country.

  26. 26
    Blake says:

    Something I wrote about a few weeks back:
    “Many Americans See Economy Improving, but Not for Them”
    http://www.nytimes.com/2011/02/19/business/economy/19charts.html?_r=1

    The last three charts here tell a sad story… the American consumer is scared and very pessimistic. This is very bad for any long term economic recovery.
    http://www.nytimes.com/imagepages/2011/02/18/business/20110219_CHARTS_graphic.html?ref=economy

  27. 27
    Blake says:

    Here’s an interview Professor Jeffrey Sachs gave on Bloomberg TV last Monday:
    Sachs Says Democrats, GOP Both `Unrealistic’ on Budget
    http://www.youtube.com/watch?v=bCPz2SzROFQ

    Watch the first 2 minutes at least… the whole thing (8 minutes) is really terrific. We should all be ashamed of our political “leaders” and the direction our country is going.

  28. 28
    Scotsman says:

    RE: Blake @ 26

    As a sort of hobby, and to help keep the garage clean, I sell a lot of stuff on Craigslist and Ebay. Most of it is boat parts, car parts, or sporting equipment. It has been completely dead, even at sharply reduced prices for all of this stuff. I thought it might pick up once the tax refunds started coming in, along with the Boeing bonuses paid last week. But there hasn’t been much of a lift at all. People just aren’t spending unless it’s on essentials. I own businesses dealing with auto repair and they are doing better than expected as folks fix up older cars to keep. But the purchases for fun are gone. The death of the home as your personal ATM has really hurt the marine markets as well as many sporting goods purchases.

  29. 29
    ChrisM says:

    http://www.latimes.com/business/la-fi-mozilo-20110219,0,2677739,full.story

    “Federal prosecutors have shelved a criminal investigation of Angelo R. Mozilo after determining that his actions in the mortgage meltdown — which led to $67.5-million settlement against him — did not amount to criminal wrongdoing.”

  30. 30

    By Scotsman @ 19:

    Lower income folks are hit particularly hard by FICA and sales taxes as a percentage of spent income- which is often all of their income.

    I’m not sure I have a hard time with the SS tax being regressive. Lower income people get most the benefit and it’s really designed for them. I wouldn’t even have a big problem with eliminating a lot of the SS benefits for the higher income/higher asset people.

  31. 31

    By David Losh @ 20:

    This idea that people are getting a free ride is false. Our government gives away nothing to the poor.

    That’s a bit extreme. What you’re focusing on is how any transaction has two side, and they benefit in different ways.

    I think you do have a good point though about Section 8. It really is a landlord subsidy, and it has driven up the price of houses.

  32. 32

    RE: ChrisM @ 29 – That’s a fairly good article, which discusses a few differences between civil SEC action and criminal matters, as well as the difficulty proving criminal matters.

    It also gives a good insight into the biased ignorant nutcases when it quotes Bruce Marks.

  33. 33
    Blurtman says:

    RE: David Losh @ 25 – Many wealthy pay to get their way. Many are also knowledgeable about manipulating the system, or hiring people who do, typically ex-Congressional staff members and Corngressmen. The very poor haven’t a clue.

    This country worships wealth and the wealthy. Fetishising wealth and the wealthy. Even to the point of voting to not raise taxes on the rich, in the hope, slim as it may be, that they may become wealthy, or the erroneous idea that they already are or are close.

    A lot of what Wall Street does is taking.

  34. 34
    Pegasus says:

    By Kary L. Krismer @ 32:

    RE: ChrisM @ 29 – That’s a fairly good article, which discusses a few differences between civil SEC action and criminal matters, as well as the difficulty proving criminal matters.

    It also gives a good insight into the biased ignorant nutcases when it quotes Bruce Marks.

    Kary, the rote auto-defender of the Kleptocracy weighs in again and again. There are no criminals if you won’t look. All is well in the Land of Oz.. Mozila ran a slush fund of below market rate mortgages for Congress and their aides called “Friends Of Angelo” to BRIBE Congress. Sure nothing criminal can ever happen in Kerry’s World when it comes to corporations, Congress and CEO’s. It’s OK to loot the public….it’s all legal to steal, commit fraud, engage in security fraud, insider trading, sell excrement mortgages as AAA paper, etc. etc.

  35. 35
    David Losh says:

    What do the poor actually get that doesn’t directly benefit the wealthy? They get nothing, and less than nothing since Reagan gutted any form of domestic program.

    I like Reagan, and admire the work he did greatly, but, our country was founded on every one, every one, all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.
    That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government.

    It should be clear that the wealthy pay taxes because they benefit from taxes. We have one small segment of the population that has the power, with protection from the our government, at the expense of those that labor for them.

    Corporations have become the new welfare state. The main bulk of the population, what used to be termed the middle class, are now Indentured servants. Just because we send them to school, to keep them out of the work force for as long as possible, giving them meaningless credentials, doesn’t elevate them to skilled labor.

    We have a make work state for the benefit of finance which has become our new nobility.

    The poor are systematically excluded from any benefit, and vilified if they dare to attempt any uprising. They have become nothing more than slave labor, who if they attempt to better themselves in any other than what is outlined by strict government enforced rules, and regulations, they are jailed, or cut off from any means of support.

    They are slaves, and you want them to pay taxes for the benefit of them being slaves.

  36. 36
    David Losh says:

    RE: Blurtman @ 33

    All wealthy have shown to be a grave problem. The fact the wealthy are silent shows a very, very deep disregard for the human condition.

  37. 37
    David Losh says:

    It is their duty, to throw off such government:

    But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security.

    http://www.ushistory.org/declaration/document/

  38. 38
    pfft says:

    By Scotsman @ 8:

    What does the Federal Government do best? Why, income redistribution, of course:

    http://media.hotair.com/wp/wp-content/uploads/2011/02/merline-chart1.jpg

    Taking from the rich, giving to the poor. And yet we still hear complaints of unfairness:

    http://media.hotair.com/wp/wp-content/uploads/2011/02/merline-chart2.jpg

    hold on people. that is just federal spending and federal income taxes paid. there are all sorts of taxes paid at the state and local level that those in lower incomes pay. also a lot(all?) of that is deducted for your federal taxes. the poor pay gas tax, sales tax, property taxes(even if it’s through rents) and a ton of other taxes.

    wages haven’t made gains in the last 10 years or so.

  39. 39
    pfft says:

    By Scotsman @ 21:

    RE: David Losh @ 20

    “I mean really, show me anything that the government does that is anything other than a gift of cash to private business.”

    We could start with social security where the average recipient’s “paid in’ reserves are exhausted after about 2.5 years, but the checks keep coming for decades, or Medicare/Medicaid, prescription drug benefits, you know, all the stuff that is currently setting up to bankrupt the government.

    according to you we were going to be bankrupt 2 months ago.

  40. 40
    Dirty Renter says:

    RE: Pegasus @ 22

    Great news.
    I’ve always thought it strange that the bloggers, writers & critics focused on BAC, GS et al. They were the survivors…the ones who underwrote their credit more stringently or had more of a capital cushion. I can only surmise the creepy dudes like Whalen & Denninger go after BAC & WFC because they are the only ones left? No sense beating a dead horse?
    Anyway, Billy Ray Valentine & Buffett are right – you punish a rich dude by making them poor. Would love to see Killinger, Caynes, Fuld, Mozilo, O’Neal, Perry, Prince and 100’s of other failed bankers, slapped with monumental judgments.

  41. 41
    Scotsman says:

    RE: Dirty Renter @ 40

    “the ones who underwrote their credit more stringently or had more of a capital cushion”

    Interesting take on reality. Maybe it’s because they are the ones who benefited mightily from the AIG bailouts and the insurance payout that made possible?

    Did you know that GS trades successfully 97% of the time? Are they really that good? Only a fool would think so- there’s more to this picture than meets the eye.

  42. 42
    David Losh says:

    RE: pfft @ 39

    I think your claim is that it was Scotsman who said we were going bankrupt two months ago.

  43. 43
    David Losh says:

    RE: pfft @ 39

    Oh wait, I didn’t read the comment, you are referring to Scotsman.

  44. 44
    Dirty Renter says:

    RE: Scotsman @ 41
    Did you know GS had already obtained cash collateral for their counterparty trades w/ AIG? They had ascertained they were dealing with buffoons(AIG).
    Do you make money on 97% of your Craig’s List schlepps(?)…I hope so.

  45. 45
    pfft says:

    By Scotsman @ 41:

    RE: Dirty Renter @ 40

    “the ones who underwrote their credit more stringently or had more of a capital cushion”

    Interesting take on reality. Maybe it’s because they are the ones who benefited mightily from the AIG bailouts and the insurance payout that made possible?

    Did you know that GS trades successfully 97% of the time? Are they really that good? Only a fool would think so- there’s more to this picture than meets the eye.

    isn’t that just simple bid-ask spread stuff? they don’t buy with a 97% rate. no way. maybe market making stuff but not trading.

  46. 46
    EconE says:

    By pfft @ 38:

    wages haven’t made gains in the last 10 years or so.

    You said wages were up.

  47. 47
    Scotsman says:

    RE: David Losh @ 43

    Yup, and I stand by my claim. The federal and many state governments are currently technically insolvent. Can bankruptcy be far behind? Based on what’s happening in WI we’ll be rioting in the streets everywhere soon. It’s all about the new civility. But I’m sure Obama will start showing some leadership soon.

  48. 48
    Jason Imani says:

    Hi Everyone,

    I’m a student (and former realtor), who’s writing a paper for my Econ class on real estate. I want to get people’s input on answering this question: “What is your forecast for the housing market in the short and the long run? Be concise in illustrating the rationale of your forecast.”

    Here’ my outline:

    I. Short-Term: moderate price declines will persist
    a. Rising Foreclosure Rates
    b. Shadow Inventory held by banks
    c. Economic recovery is slow, consumer sentiment is low
    d. Rising interest rates

    II. Long-Term: several uncertainties, but buy and hold (10+ years) maybe worth it depending on several factors
    a. Federal deficit rising
    i. Interest rates will rise
    ii. Interest payable as % of GDP increasing
    iii. Income taxes will rise to pay debt
    b. Polarization of Income Levels
    i. Income levels remain stagnant
    ii. Mortgage payments as a % of yearly income increasing
    c. Urbanization – population shift to metropolitan areas vs rural
    d. Possible closure of Fannie Mae & Freddie Mac

    Additional ideas:
    1. Is it a given that home prices will return to their pre-bubble appreciation rate? 4% annually?
    2. It’s a good buying opportunity right now, if you hold for long-term growth 10+ years.
    3. The value of a home is not entirely defined by its economic maximization value, but also intrinsic value to the individual.

    Any other thoughts? Do these seem accurate to you?

  49. 49
    pfft says:

    By EconE @ 46:

    By pfft @ 38:

    wages haven’t made gains in the last 10 years or so.

    You said wages were up.

    over the past year or so.

  50. 50

    RE: Scotsman @ 47 – I was never involved with Chapter 9’s (or Chapter 12’s), so I never knew thus until it was brought up in the press recently, but states cannot file a Chapter 9 bankruptcy. It needs to be a political subdivision of a state, such as a county or city. The state level politicians are either going to have to cut spending or raise taxes.

  51. 51
    EconE says:

    RE: Jason Imani @ 48

    sounds like you want us to do your work for you.

  52. 52
    Jason Imani says:

    RE: EconE @ 51

    Not at all…I’m just asking for feedback on my thoughts that I outlined. Is my reasoning sound? Maybe I’m overlooking something.

    Thanks

  53. 53
    Pegasus says:

    RE: Jason Imani @ 48 – I think you need to add the unemployment rate(the real rate) as a separate item which is predicted to slowly recover if ever in the next 5 to 10 years. People without jobs or working part time don’t normally get to buy homes and thus the percentage of the population who own homes is declining. Each year more jobs are lost to foreign competition and thus we may never see normal employment rates again. Nothing is being done to change this pattern of job loss overseas. That and the fact the economy is barely running only on printed money and borrowed money and borrowed time mean only tougher times down the road when we can’t pay the piper anymore.

  54. 54
    David Losh says:

    RE: Scotsman @ 47

    WI isn’t Obama, it’s Republican grand standing. If Obama is smart he will stay out of sight, and let the Republicans run wild. The spending cuts to domestic programs, and now this attack on organized labor is great for Democrats.

    We’re seeing a collapse forming globally by reintroducing the same failed Bush talking points.

  55. 55
    EconE says:

    RE: Jason Imani @ 52

    Seems as if you’ve already reached your own suppositions and conclusions many of which appear to be nothing more than NAR talking points.

    “If you buy and hold you’ll do just fine” Heard that all the way from 2005-2008

    “Intrinsic Value” You can paint your walls!

    “4% *appreciation* will return!”

    ‘nuf said.

  56. 56
    Jason Imani says:

    RE: Pegasus @ 53

    Good point…forgot about unemployment and it’s effects. Thank you!

  57. 57
    Scotsman says:

    RE: Kary L. Krismer @ 50

    That’s the current situation, but there is talk of legislation to allow states to declare bankruptcy. It’s seen as the only way to break the pension contracts that are a very large part of the problem. Ca and IL are the ones to watch.

  58. 58
    Scotsman says:

    RE: Jason Imani @ 48

    You need to factor in the new globalism. A significant number of foreign countries with substantially lower labor rates can now match us on most of the relevant technology. The result will be stagnant or declining wages in the U.S. for year, along with continued high unemployment until our population has adjusted earnings expectations to match those of the competition. Buy and hold may work, but the time frame needs to be longer than 10 years.

    Massive inflation is the one possible exception, but also unlikely. Despite what you may hear, we can’t have consistent inflation without wage increases, and we won’t have wage increases because of increasing globalism.

  59. 59
    Jason Imani says:

    RE: EconE @ 55

    Thank EconE…I appreciate you taking the time to reply. I’m not sure how you’re making the connection between the topic in my paper and NAR. My entire outline is about how there are long term threats to real estate. The additional ideas section I ended the 1st idea with question marks as a way to indicate maybe these are no longer the right assumptions. I forgot to put a question mark after #2. And #3 is more general, in essence I’m trying to say maybe one shouldn’t care about the value of your home as much, instead the personal satisfaction one could get from it (you pay a premium for it).

    In addition to what I’ve outlined, where do you see real estate going in the long run and why?

  60. 60
    EconE says:

    RE: Scotsman @ 58

    Wouldn’t stagflation fall under inflation without wage increases? It appears that in the future, people may need to spend more on food/clothing/healthcare which leaves them less to service debt (mortgages).

    Maybe there’s never been a better time to buy a farm/mine? Better buy your open pit mine soon or you’ll be priced out forever! ;^)

  61. 61
    Jason Imani says:

    RE: Scotsman @ 58

    So is the idea then that until the cost of markets equalize, meaning that until it costs as much to produce in China, India, etc. (mfg. costs + shipping + government fees) as it does in the US, then real estate markets (as well as everything else) will continue to depreciate in value? The timeline for that is obviously significantly longer than the 10+ year assumption.

  62. 62
    EconE says:

    RE: Jason Imani @ 59

    I see a long slow grind down for RE. Many many years. Globalization will continually push wages down in the U.S. and other western countries far before the rise to our level in SE Asia, India etc. Even high wage earners such as Doctors will feel it due to medical tourism.

    It’s a new world out there.

    Probably not a good time to try to sell Mercer Island high end pre-construction IMO.

  63. 63
    EconE says:

    RE: Jason Imani @ 61

    Long before you see production costs in India and China meet ours, if ever, those locales will be having their own issues with outsourcing to places like Vietnam, Bangladesh and Africa.

  64. 64
    Jason Imani says:

    RE: EconE @ 60

    The rising costs of everyday items is a good point. What do you think is a good measure of that? Consumer Price Index?

  65. 65
    Yaj says:

    West Seattle Dave and Pfft:

    It’s important to look at transfer payments when evaluating the progressivity of the current tax system. The folks who aren’t making enough to pay federal income tax are also often on the receiving end of everything from the EIC to food stamps to section 8 housing vouchers, etc – which mitigates the impact of consumption taxes on their households.

  66. 66
    EconE says:

    RE: Jason Imani @ 64

    Cost of goods in foreign countries.

  67. 67
    EconE says:

    By Scotsman @ 57:

    RE: Kary L. Krismer @ 50

    That’s the current situation, but there is talk of legislation to allow states to declare bankruptcy. It’s seen as the only way to break the pension contracts that are a very large part of the problem. Ca and IL are the ones to watch.

    I’m betting on a Federal bailout of the states. Either that or some sort of bubble will be blown in a sector that’s off our collective radars. Is there any way to find out what exactly CALPERS in holding in their investment portfolio?

  68. 68
    Jason Imani says:

    RE: EconE @ 62

    True…luckily I don’t have to worry about that anymore. :)

  69. 69
    Jason Imani says:

    RE: EconE @ 66

    This paper could quickly spiral out of control into a whole array on inter-related topics…How about trade deficit + CPI? That would cover everything we import plus everything that is produced locally.

  70. 70
    Scotsman says:

    RE: Jason Imani @ 69RE: Jason Imani @ 61

    I don’t think costs have to completely equalize, but the gap needs to close. Some economists have posited that eventually shipping costs between regions will be the largest variable in pricing equations as all else will have equalized. I think that’s a long time off. Political considerations are another important variable, especially as they relate to motivation/reward and general regulation. For example, even if our wage structure more closely matches India’s, their lack of environmental regulation still gives them a big cost advantage. And a capitalistic market structure is probably both more efficient and more rewarding for innovators.

    Housing prices come down to wages, financing, and future expectations regarding appreciation/depreciation/alternatives, etc. It’s a very large puzzle with lots of pieces. Trying to capture all of it in one paper will be a challenge. Narrowing the scope of your research will be critical to a successful outcome.

  71. 71
    Scotsman says:

    RE: EconE @ 67

    “what exactly CALPERS is holding ”

    I haven’t seen a complete breakdown, but the speculation is there’s still a bunch of mark-to-market BS. The main problem is most, if not all, of these funds were predicated or built on expectations of 8-10% annual returns from now to eternity. That’s not working out very well, to say the least, so all of the income/payout expectations are fantasy. And it’s not just CA, it’s pension plans all over the place. Another “BOOM” just waiting to happen.

  72. 72
    EconE says:

    RE: Jason Imani @ 69

    Just keep asking yourself the “what if” questions. Not the ones that potentially lead to gumdrops and ponies for everyone. They don’t call economics the “dismal science” for nothing.

  73. 73
    EconE says:

    RE: Scotsman @ 71

    I don’t think that they’ll allow a complete “BOOM” when it comes to pensions. I believe they’ve got a trump card up their sleeves.

  74. 74
    Jason Imani says:

    RE: Scotsman @ 70

    True…There’s quite a bit going on here! Thanks for the help!

  75. 75
    Jason Imani says:

    RE: EconE @ 72

    It’s clear that there’s a lot of issues at play besides real estate that effect one another. It’s difficult to encapsulate that into a single 10-page paper. I believe you’re right that economics can lead one to believe that the sky is always falling…especially in contrast to NAR’s POV that it’s always sunny. Your thought have been very helpful. Thank you.

  76. 76
    Scotsman says:

    RE: EconE @ 73

    There’s only three real choices- print new money and give it to the states, lower benefits, or increase taxes/contributions. I think QE3, starting in June/July, will be the last if it happens. There doesn’t seem to be as much appetite/acceptance for the FED’s continued “printing”. The tide has turned. Lower benefits and higher contributions, such as what we’re seeing in WI, will probably be the norm. That combination will be a drag on the recovery and still won’t completely solidify what is essentially a Ponzi scheme until such time as real 8-10% returns materialize- if ever.

  77. 77
    Fran Tarkenton says:

    RE: Kary L. Krismer @ 50 – My non-7/11/13 bankruptcy is rusty (I remembered chapter 9 as being farms). If a state can’t go through bankruptcy, what’s to stop it from merely defaulting on its debts? Is a creditor going to get a judgment for the sheriff to start seizing the state capital building?

  78. 78
    David Losh says:

    RE: Jason Imani @ 48

    Real Estate is housing units, and commercial. The commercial applications are the only thing you can make any calculations on. The intrinsict value is for those properties that are worth owning for a variety of reasons, great location, view, excellent condition, great architecture, or it is an estate.

    The price of property is what the market will bear for rents. Rents are artificially high right now because of a lack of rental units. Apartment building has been lagging for 10 years, or more, in favor of cheap housing units that were sold for premium prices. The town houses that have no value will eventually be foreclosed and become rentals. Apartment building is starting back up, and then there is this talk about shadow inventory which is meaningless.

    All properties are for sale for a price. As the willingness to pay premium prices diminishes so does the pricing of property. There are always golden triangles of value, intrinsic values that are immune, but for most of us we are on the margins of that.

    The talk about globalization is quickly going nowhere. The world is a dangerous place with unstable governments. China, and India scare the heck out of me. Those are countries where anything could happen. At least here in the United states we have some protections from our government. We have checks, and balances. Barring that we are an armed population.

    In my opinion we here in North America could make a combined treaty with Mexico, and Canada, and in turn become trading partners with South America. We would rule the world.

    So, your paper is about Real Estate? Well let’s take Union labor wages, by region, and 25% of the gross income as housing expense, and you have the price of property, and what it will rent for. You figure to purchase it would be 20% down, and at 10% interest, and the mortgage payment should match what the property will rent for.

  79. 79
    WestSeattleDave says:

    RE: Fran Tarkenton @ 77 – “If a state can’t go through bankruptcy, what’s to stop it from merely defaulting on its debts?”

    Because states can raise taxes. However much nobody likes it, it remains a viable route for states. It’s hard to plead poverty when you have the power to levy taxes. From that perspective, the current problems at the state level (and at the federal level, for that matter) are political more than economic. Basically, the states are saying that we’ve run up these big bills, but we don’t want to pay them, even though we can if we raise taxes. But nobody likes that. Better to talk of defaulting. There are some instances where the courts have forced states to fund certain programs, even going so far as telling them to raise taxes.

  80. 80
    David Losh says:

    RE: Scotsman @ 76

    The pensions won’t be paid, there was never any intention of paying pensions. A lot of private sector pension funds have dissolved, I think that’s the term. They dissolve by paying out what is in the fund.

    It means nothing.

    If you’re thinking, or implying that people were counting on that money for a retirement, well that’s just foolish. No one would think that any one was keeping money for them to be paid out until the day they die.

  81. 81
    Blurtman says:

    RE: Dirty Renter @ 44 – Yes, GS was in such great shape they needed to become a bank holding company to access the free tax payer money. I can’t remember the last time I drove by a GS ATM.

  82. 82
    Blurtman says:

    Woo Hoo, WAMU

    FDIC to seek $1B from former WaMu execs

    The Federal Deposit Insurance Corp. plans to file a civil suit against at least three former Washington Mutual executives, including former chief executive Kerry Killinger, seeking to collect more than $1 billion in damages, according to people familiar with the pending suit.
    …….
    WaMu’s mortgage division is the subject of a massive shareholder lawsuit and was also the subject of a congressional committee investigation last spring. The Permanent Subcommittee on Investigations, chaired by U.S. Sen. Carl Levin, D-Mich., unearthed hundreds of documents showing repeated fraud inside WaMu’s mortgage division and inaction by executives and regulators about the problems. Levin said the bank “polluted the financial system.”

    “WaMu and its affiliate, Long Beach Mortgage Company, used shoddy lending practices riddled with credit, compliance and operational deficiencies to make tens of thousands of high risk home loans that too often contained excessive risk, fraudulent information, or errors,” Levin said in his opening testimony.

    http://www.bizjournals.com/seattle/news/2011/02/18/fdic-to-seek-1b-from-former-wamu-execs.html

  83. 83

    By Fran Tarkenton @ 77:

    RE: Kary L. Krismer @ 50 – My non-7/11/13 bankruptcy is rusty (I remembered chapter 9 as being farms). If a state can’t go through bankruptcy, what’s to stop it from merely defaulting on its debts? Is a creditor going to get a judgment for the sheriff to start seizing the state capital building?

    If the sheriff hasn’t been paid, maybe they will! ;-)

    I think the bigger problem is ongoing operations. Employees, supplies, etc.

  84. 84
    Dirty Renter says:

    RE: Blurtman @ 81
    Not to mention the $10B PayDay loan from Buffett!
    Really, guys, it was not my intention to big up GS. I find them a bit smelly, and if I were a pension fund manager or CFO of a Fortune 500, they would be the last folks I would ring up for investment or M&A advice. They only look out for themselves. I was ticked when Synovus used them to sell Sea Island last year.

  85. 85
    Fran Tarkenton says:

    By WestSeattleDave @ 79:

    RE: Fran Tarkenton @ 77 – “If a state canâ��t go through bankruptcy, whatâ��s to stop it from merely defaulting on its debts?”

    Because states can raise taxes. However much nobody likes it, it remains a viable route for states. It’s hard to plead poverty when you have the power to levy taxes. From that perspective, the current problems at the state level (and at the federal level, for that matter) are political more than economic. Basically, the states are saying that we’ve run up these big bills, but we don’t want to pay them, even though we can if we raise taxes. But nobody likes that. Better to talk of defaulting. There are some instances where the courts have forced states to fund certain programs, even going so far as telling them to raise taxes.

    Your points sound like criticisms of bankruptcy in general. I’m not sure how what you say distinguishes the situation of a state from that of most individuals who are able to earn money through work and set their personal budget. Or from other non-federal gov’t entities (since the federal gov’t may also print currency) that are able to raise taxes.

  86. 86

    RE: Fran Tarkenton @ 85 – I don’t view the comments as being about bankruptcy generally at all. The difference between a state and an individual is a state can increase its income rather easily through taxation. An individual might not be able to get higher wages or a second job, etc.

  87. 87
    Jason Imani says:

    RE: David Losh @ 78

    Hi David,

    Sorry I didn’t notice your comment until now. You make a great point about the unknown being scary. And the connection between rents and affordability is a good point to make. I’m looking into some additional metrics along those lines.

    Thank you!

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