couple of things to worry about for renters

[Navydoc]

“It seems like 90% of the people who post here are renters waiting for prices to fall”

This may certainly be true, but don’t forget, there are many other reasons why people rent besides the pure economics of it. Sometimes I like to delude myself on what a genius I am for not buying in 2006 when we were transferred here. This was in fact an economic decision at the time as I knew I couldn’t stay more than 3 years. To be fair, I would have to admit that if I was sent to San Diego in 2006 I probably WOULD have bought, and would be crying, $100,000 in equity gone. Sometimes it’s just not the right time.

Interestingly, because of this blog and others like it, if I were transferred to San Diego now I absolutely would not buy. I just don’t think we’re going to see enough inflation in the next few years to justify anything close to these prices. I definitely wont see anything like the necessary pay increase to be able to justify them.

[NotCranky]

This topic is interesting to me because I quit selling RE when the combined median is where it is at currently.Couldn’t muster the “professional bias” to do that. So I am looking at the median and saying, I can sell with the current risk factors both positive and negative. I am sticking with the belief that the inflation thing is more nuanced. Call it professional bias if you want.I think history bears out the potential for inflation to be a mitgating factor. As I said ,not extreme but likely helpful. Besides that everyone I know makes more money than they did even in 2003,except me. I predict the same thing in 2015,except that I will be making more too. Things will be probably be a lot lower before I sell anything or even try very hard, but I am brushing up on things and taking myself off the shelf.Please excuse the self indulgence.

[NotCranky]

This topic is interesting to me because I quit selling RE when the combined median is where it is at currently.Couldn’t muster the “professional bias” to do that. So I am looking at the median and saying, I can sell with the current risk factors both positive and negative. I am sticking with the belief that the inflation thing is more nuanced. Call it professional bias if you want.I think history bears out the potential for inflation to be a mitgating factor. As I said ,not extreme but likely helpful. Besides that everyone I know makes more money than they did even in 2003,except me. I predict the same thing in 2015,except that I will be making more too. Things will be probably be a lot lower before I sell anything or even try very hard, but I am brushing up on things and taking myself off the shelf.Please excuse the self indulgence.

[NotCranky]

This topic is interesting to me because I quit selling RE when the combined median is where it is at currently.Couldn’t muster the “professional bias” to do that. So I am looking at the median and saying, I can sell with the current risk factors both positive and negative. I am sticking with the belief that the inflation thing is more nuanced. Call it professional bias if you want.I think history bears out the potential for inflation to be a mitgating factor. As I said ,not extreme but likely helpful. Besides that everyone I know makes more money than they did even in 2003,except me. I predict the same thing in 2015,except that I will be making more too. Things will be probably be a lot lower before I sell anything or even try very hard, but I am brushing up on things and taking myself off the shelf.Please excuse the self indulgence.

[NotCranky]

This topic is interesting to me because I quit selling RE when the combined median is where it is at currently.Couldn’t muster the “professional bias” to do that. So I am looking at the median and saying, I can sell with the current risk factors both positive and negative. I am sticking with the belief that the inflation thing is more nuanced. Call it professional bias if you want.I think history bears out the potential for inflation to be a mitgating factor. As I said ,not extreme but likely helpful. Besides that everyone I know makes more money than they did even in 2003,except me. I predict the same thing in 2015,except that I will be making more too. Things will be probably be a lot lower before I sell anything or even try very hard, but I am brushing up on things and taking myself off the shelf.Please excuse the self indulgence.

[NotCranky]

This topic is interesting to me because I quit selling RE when the combined median is where it is at currently.Couldn’t muster the “professional bias” to do that. So I am looking at the median and saying, I can sell with the current risk factors both positive and negative. I am sticking with the belief that the inflation thing is more nuanced. Call it professional bias if you want.I think history bears out the potential for inflation to be a mitgating factor. As I said ,not extreme but likely helpful. Besides that everyone I know makes more money than they did even in 2003,except me. I predict the same thing in 2015,except that I will be making more too. Things will be probably be a lot lower before I sell anything or even try very hard, but I am brushing up on things and taking myself off the shelf.Please excuse the self indulgence.

[barnaby33]

JWM, the inflation vs deflation argument is one we have over and over again, and will keep doing so. In my talk with Rich last week, he stuck to his guns on inflation and he had some good reasons for it.

I am still leaning towards deflation and have good reasons as well. Simply, “pushing on a string,” is not a realistic analogy. While its true that the FED cannot force banks to lend, which is the crux of the deflationary scenario, the FED has more tools that it has brought to bare. For one thing it could bypass the major banks and offer money at extremely low rates to EVERYONE. It could hand out Visa cards with 2000 dollar limits (which happened already to Katrina victims.)

Another interesting thing about the inflation vs deflation argument is where the money goes when its lent. If foreigners mostly invest in Tbills, then a sharp pullback in lending from them will hurt the govt directly and asset prices only indirectly. Whats the FED response to that? Drop rates like a rock and hope they can stimulate demand internally? Raise rates and hope to woo foreigners back? Thats based on the assumption that foreigners, meaning central banks, do mostly buy Tbills.

On the other hand MEW, seems to go more into consumption and financial assets like stocks. The cut-off of that is what makes me far more inclined to believe the deflation scenario. As you pointed out the confidence crisis or, “who’s hiding the sausage,” will chill lending. In this case the fed will have two choices, keep pretending or get congress to bail out the insolvent banks. I have no faith that they will be honest in the face of deflation.

At that point the FED would have to admit that we have a sh*tty asset crisis and let the markets work through them. I just don’t see that happening. So we come back to the original inflation deflation dilemma. Do you believe the FED has the ability to keep people borrowing? If so, you believe the inflation scenario, otherwise deflation should be your choice.

Josh

[barnaby33]

JWM, the inflation vs deflation argument is one we have over and over again, and will keep doing so. In my talk with Rich last week, he stuck to his guns on inflation and he had some good reasons for it.

I am still leaning towards deflation and have good reasons as well. Simply, “pushing on a string,” is not a realistic analogy. While its true that the FED cannot force banks to lend, which is the crux of the deflationary scenario, the FED has more tools that it has brought to bare. For one thing it could bypass the major banks and offer money at extremely low rates to EVERYONE. It could hand out Visa cards with 2000 dollar limits (which happened already to Katrina victims.)

Another interesting thing about the inflation vs deflation argument is where the money goes when its lent. If foreigners mostly invest in Tbills, then a sharp pullback in lending from them will hurt the govt directly and asset prices only indirectly. Whats the FED response to that? Drop rates like a rock and hope they can stimulate demand internally? Raise rates and hope to woo foreigners back? Thats based on the assumption that foreigners, meaning central banks, do mostly buy Tbills.

On the other hand MEW, seems to go more into consumption and financial assets like stocks. The cut-off of that is what makes me far more inclined to believe the deflation scenario. As you pointed out the confidence crisis or, “who’s hiding the sausage,” will chill lending. In this case the fed will have two choices, keep pretending or get congress to bail out the insolvent banks. I have no faith that they will be honest in the face of deflation.

At that point the FED would have to admit that we have a sh*tty asset crisis and let the markets work through them. I just don’t see that happening. So we come back to the original inflation deflation dilemma. Do you believe the FED has the ability to keep people borrowing? If so, you believe the inflation scenario, otherwise deflation should be your choice.

Josh

[barnaby33]

JWM, the inflation vs deflation argument is one we have over and over again, and will keep doing so. In my talk with Rich last week, he stuck to his guns on inflation and he had some good reasons for it.

I am still leaning towards deflation and have good reasons as well. Simply, “pushing on a string,” is not a realistic analogy. While its true that the FED cannot force banks to lend, which is the crux of the deflationary scenario, the FED has more tools that it has brought to bare. For one thing it could bypass the major banks and offer money at extremely low rates to EVERYONE. It could hand out Visa cards with 2000 dollar limits (which happened already to Katrina victims.)

Another interesting thing about the inflation vs deflation argument is where the money goes when its lent. If foreigners mostly invest in Tbills, then a sharp pullback in lending from them will hurt the govt directly and asset prices only indirectly. Whats the FED response to that? Drop rates like a rock and hope they can stimulate demand internally? Raise rates and hope to woo foreigners back? Thats based on the assumption that foreigners, meaning central banks, do mostly buy Tbills.

On the other hand MEW, seems to go more into consumption and financial assets like stocks. The cut-off of that is what makes me far more inclined to believe the deflation scenario. As you pointed out the confidence crisis or, “who’s hiding the sausage,” will chill lending. In this case the fed will have two choices, keep pretending or get congress to bail out the insolvent banks. I have no faith that they will be honest in the face of deflation.

At that point the FED would have to admit that we have a sh*tty asset crisis and let the markets work through them. I just don’t see that happening. So we come back to the original inflation deflation dilemma. Do you believe the FED has the ability to keep people borrowing? If so, you believe the inflation scenario, otherwise deflation should be your choice.

Josh

[barnaby33]

JWM, the inflation vs deflation argument is one we have over and over again, and will keep doing so. In my talk with Rich last week, he stuck to his guns on inflation and he had some good reasons for it.

I am still leaning towards deflation and have good reasons as well. Simply, “pushing on a string,” is not a realistic analogy. While its true that the FED cannot force banks to lend, which is the crux of the deflationary scenario, the FED has more tools that it has brought to bare. For one thing it could bypass the major banks and offer money at extremely low rates to EVERYONE. It could hand out Visa cards with 2000 dollar limits (which happened already to Katrina victims.)

Another interesting thing about the inflation vs deflation argument is where the money goes when its lent. If foreigners mostly invest in Tbills, then a sharp pullback in lending from them will hurt the govt directly and asset prices only indirectly. Whats the FED response to that? Drop rates like a rock and hope they can stimulate demand internally? Raise rates and hope to woo foreigners back? Thats based on the assumption that foreigners, meaning central banks, do mostly buy Tbills.

On the other hand MEW, seems to go more into consumption and financial assets like stocks. The cut-off of that is what makes me far more inclined to believe the deflation scenario. As you pointed out the confidence crisis or, “who’s hiding the sausage,” will chill lending. In this case the fed will have two choices, keep pretending or get congress to bail out the insolvent banks. I have no faith that they will be honest in the face of deflation.

At that point the FED would have to admit that we have a sh*tty asset crisis and let the markets work through them. I just don’t see that happening. So we come back to the original inflation deflation dilemma. Do you believe the FED has the ability to keep people borrowing? If so, you believe the inflation scenario, otherwise deflation should be your choice.

Josh

[barnaby33]

JWM, the inflation vs deflation argument is one we have over and over again, and will keep doing so. In my talk with Rich last week, he stuck to his guns on inflation and he had some good reasons for it.

I am still leaning towards deflation and have good reasons as well. Simply, “pushing on a string,” is not a realistic analogy. While its true that the FED cannot force banks to lend, which is the crux of the deflationary scenario, the FED has more tools that it has brought to bare. For one thing it could bypass the major banks and offer money at extremely low rates to EVERYONE. It could hand out Visa cards with 2000 dollar limits (which happened already to Katrina victims.)

Another interesting thing about the inflation vs deflation argument is where the money goes when its lent. If foreigners mostly invest in Tbills, then a sharp pullback in lending from them will hurt the govt directly and asset prices only indirectly. Whats the FED response to that? Drop rates like a rock and hope they can stimulate demand internally? Raise rates and hope to woo foreigners back? Thats based on the assumption that foreigners, meaning central banks, do mostly buy Tbills.

On the other hand MEW, seems to go more into consumption and financial assets like stocks. The cut-off of that is what makes me far more inclined to believe the deflation scenario. As you pointed out the confidence crisis or, “who’s hiding the sausage,” will chill lending. In this case the fed will have two choices, keep pretending or get congress to bail out the insolvent banks. I have no faith that they will be honest in the face of deflation.

At that point the FED would have to admit that we have a sh*tty asset crisis and let the markets work through them. I just don’t see that happening. So we come back to the original inflation deflation dilemma. Do you believe the FED has the ability to keep people borrowing? If so, you believe the inflation scenario, otherwise deflation should be your choice.

Josh

[RDeNiro]

OMFG, you really don’t get it do you??? One more time for the slow-witted ones here. THE HYPERINFLATION IN ASSETS HAS ALREADY HAPPENED!!!!!

I admit I am slow witted and a little ignorant. But I’m pretty logical. So maybe I’m missing part of the picture. Tell me where I’m wrong:

1)House prices increased because interest rates were too low, people thought houses would continue going up forever and global investors thought the debt they were buying was safe.
2)Interest rates were low because foreign funds were flowing into the US.
3)Now that the scheme is over, interest rates will rise.

I think I answered my own question. The fed will not be able to affect long term interest rates. Money will be expensive and short to come around and therefore deflation??

[RDeNiro]

OMFG, you really don’t get it do you??? One more time for the slow-witted ones here. THE HYPERINFLATION IN ASSETS HAS ALREADY HAPPENED!!!!!

I admit I am slow witted and a little ignorant. But I’m pretty logical. So maybe I’m missing part of the picture. Tell me where I’m wrong:

1)House prices increased because interest rates were too low, people thought houses would continue going up forever and global investors thought the debt they were buying was safe.
2)Interest rates were low because foreign funds were flowing into the US.
3)Now that the scheme is over, interest rates will rise.

I think I answered my own question. The fed will not be able to affect long term interest rates. Money will be expensive and short to come around and therefore deflation??

[RDeNiro]

OMFG, you really don’t get it do you??? One more time for the slow-witted ones here. THE HYPERINFLATION IN ASSETS HAS ALREADY HAPPENED!!!!!

I admit I am slow witted and a little ignorant. But I’m pretty logical. So maybe I’m missing part of the picture. Tell me where I’m wrong:

1)House prices increased because interest rates were too low, people thought houses would continue going up forever and global investors thought the debt they were buying was safe.
2)Interest rates were low because foreign funds were flowing into the US.
3)Now that the scheme is over, interest rates will rise.

I think I answered my own question. The fed will not be able to affect long term interest rates. Money will be expensive and short to come around and therefore deflation??

[RDeNiro]

OMFG, you really don’t get it do you??? One more time for the slow-witted ones here. THE HYPERINFLATION IN ASSETS HAS ALREADY HAPPENED!!!!!

I admit I am slow witted and a little ignorant. But I’m pretty logical. So maybe I’m missing part of the picture. Tell me where I’m wrong:

1)House prices increased because interest rates were too low, people thought houses would continue going up forever and global investors thought the debt they were buying was safe.
2)Interest rates were low because foreign funds were flowing into the US.
3)Now that the scheme is over, interest rates will rise.

I think I answered my own question. The fed will not be able to affect long term interest rates. Money will be expensive and short to come around and therefore deflation??

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