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CA renter
ParticipantI agree that many buyers are not cut out for foreclosures, but many were who were excluded from purchasing the best deals. That is what I have a problem with.
While I do not support an “ownership society” that is enabled by gimmicky mortgages, I do believe that it’s in society’s best interests to maximize home ownership by keeping speculators out of the market which enables more people to buy truly affordable homes.
And govt-backed loans have long been available for home improvements. We just need to educate the public more about these loans and how to go about getting the improvements done.
http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/title/ti_abou
But, as spdrun has stated, there’s lots of money to be made by keeping Jane and Joe Sixpack in the dark. Gotta keep those middlemen in business!
Participant[quote=FlyerInHi]There’s the art of reading fast by skipping unimportant stuff while still getting the whole story. That makes me feel guilty.
I want to learn to read fast reading every single world.[/quote]Better to really comprehend everything vs. reading quickly, IMO.
But if you really want to speed things up, one method some use is to place a blank strip of paper below the line you’re reading, then move the strip down the page as you read, letting the strip guide the pace. You can learn to read whole lines at a time after doing this for awhile, which can increase speed. The speed is largely determined by the difficulty of the text — easy fiction vs. new and/or complex academic theories, etc.
Personally, I’ve found that I read more slowly as I get older. Partly due to poorer eyesight, but also because I like to read some things over and over again, just to make sure I fully understand what was written and how it connects to other parts of the text and other related writings and ideas.
January 4, 2015 at 2:03 AM in reply to: What are you planning to do in terms of asset allocation for 2015? #781603Participant[quote=no_such_reality]I think we are suffering a bit from not updating our investing yardsticks We are essentially still using criteria and expectations from 100 years ago. Sure we’ve shifted from dividend stocks to growth stocks accepting lack of dividends but we haven’t shifted our thinking from investment dollars being expensive to being cheap. The shift from retirement funds to 401ks and the growth of the state government funds have flooded investable products with cash.
Many years ago I read an article by a person saying stocks should have PEs that make them look more like bonds. I thought they were nuts at the time but I’m beginning to wonder if the stock market is more like the housing market with money being both cheap and plentiful.
Even if the market pulls back 30%. How fast will it come roaring back 40%?
Cut QE out and the market slows until the first companies put in a decent earning announcement.
Keep in mind there are twelve million high net worth individuals holding $46 trillion. And CalPers has over $260 billion representing 1.7 million with cash inflows of $12 billion a year for a net drain of about $5 billion annually. So while CalPers is a gorilla, they’re a dot in the aggregate[/quote]
Exactly. Too much money concentrated into too few hands all looking for places to grow their money into more money, which means that price of investable assets are too high, relatively speaking.
Participant[quote=FlyerInHi]What about people who produce things on anticipation that there will be demand?[/quote]
Again, the distinction between speculators and investors, IMO, is that speculators do not produce anything, while investors expand productive capacity and/or improve productive efficiency. If you’re producing something in anticipation of demand, then you are a producer/productive investor (a net gain for the economy), not a speculator.
Participant[quote=SK in CV]
I guess, if you define speculator as anyone who buys property with the expectation that the value will go up, then you’re right. Speculators cornered the market. That would include those with intention of flipping, intermediate and long-term landlords and those acquiring property to occupy. So everyone who buys property is a speculator. Yep, they cornered the market.As an aside, debt holders, including agency debt-holders and guarantors, didn’t bundle distressed assets to do a favor for investors. It wasn’t an inside deal to funnel profits to special friends. It was the only efficient way for them to liquidate distressed inventory. Those buyers are the Marshalls, Home Goods and Big Lots of the real estate business. Is Big Lots an evil blight on the retail market?[/quote]
People who buy owner-occupied homes should not be buying because they expect prices to go up. They should be buying because they want to have a home of their own — where they can paint, add-on, and change things to their own liking. They also buy because they want to control their housing costs and, if done right, so they can have a paid-off house when they retire so that they can have a lower cost of living. Additionally, they will usually want to pass something along to their heirs. That is not speculation, it’s what housing is supposed to be used for.
And you and I disagree about the need to sell REOs to these investors. It would have been far better for the REO/debt holders to sell to the highest bidders. The GSEs and other agencies should have auctioned these properties off via a website where pre-qualified bidders (Joe and Jane Sixpack) could bid for these houses. It would have accomplished multiple objectives: more owner-occupied housing, more stable neighborhoods, and more affordable housing for those who plan to actually live in these homes.
Having worked with Big Lots before as a vendor, they are great when you want to quickly get rid of inventory, but there is no doubt that the seller is getting far less than they would if they were to sell on the open market. With housing, there are other objectives than just getting rid of inventory, and I would argue that an efficient auction setup would have accomplished what they wanted — yielding more to the sellers while also offering more affordable housing to the end users.
January 3, 2015 at 4:01 AM in reply to: What are you planning to do in terms of asset allocation for 2015? #781588ParticipantAgree with Jazzman. Time will tell. I’ve also been waiting for the next crash and am way too heavy in cash. Huge bummer. 🙁
The only good “investment” we’ve made in the past few years was buying our house in late 2011. Otherwise, it’s been mostly in cash and bonds that have been called or maturing too soon (wishing and hoping for another interest rate spike like we had in 2007).
Hope everyone thrives in 2015. Happy new year, Piggs!
ParticipantFunny dream. Have you ever met Brian in real life?
ParticipantJust want to add that you need to account for vacancies between tenants, and the need for new paint in between tenants, plus the possibility of needing new carpets, etc.
IMHO, it’s best to rent for slightly below market to a really strong tenant who will take good care of the place and stay long-term. Also, rents are often not raised much on these types of tenants, so if you do this, don’t expect rent increases every year. If/when you do raise the rent (perhaps every 2-5 years), expect it to be by small amounts. Otherwise, you might have much higher turnover which will often cost you a fair amount of money.
Participant[quote=njtosd][quote=CA renter][quote=harvey][quote=CA renter]
…….They are providing a service because they make it more convenient for people to obtain the goods they need and also make it easier for the farmers/producers to sell in large batches to a few buyers vs. having to sell onsie-twosie to every individual purchaser. That being said, some would argue that it’s better for everyone to simply buy at farmers’ markets, but most of us like the convenience of having a grocery store that is open more hours/days. Speculators don’t provide any similar benefits.[/quote]
I find this interesting, because, as I recall, this description is almost identical to the reason for the “corn exchanges” and similar markets that grew into the mercantile/stock exchanges.
There will always be speculation with respect to things that are limited – and no one is making any more land. Almost every new tract house is built on spec. Is this really what you are talking about?[/quote]
Creating a market infrastructure is different from speculation, though speculation is often better enabled because of this infrastructure. The exchanges are like grocery stores, and they charge a fee for service — providing buyers and sellers a centralized exchange, opening up the market to other buyers and sellers (genuine buyers/sellers as well as speculators).
That is different from speculation because speculators are not building and maintaining this infrastructure (though the fees they pay make the exchanges more profitable).
Participant[quote=SK in CV][quote=harvey][quote=CA renter]Speculators don’t provide any similar benefits.[/quote]
Then why does anybody transact with them?[/quote]
Taken together, these two comments are a perfect example of begging the question. The claim that speculators don’t provide any benefits in the real estate market is presumptive. They do provide a service. Real estate speculators both buy from a willing seller, and sell to a willing buyer. With very minor exceptions, real estate speculators have never controlled markets as, for instance, the Hunt brothers controlled the silver market 35 years ago. That doesn’t mean that they (speculators) have no effect on market prices. They do. Just as grocery stores and Costco have en effect on prices.[/quote]
The problem is that speculators often have an advantage over organic buyers and sellers. Take, for instance, the housing market when the bubble burst. Who had the best access to massive amounts of foreclosures? The speculators did. They even managed to limit the access to this inventory by requiring very high qualifications that very few individuals could meet in order to purchase REO inventory. There were many buyers (also speculators, to a large extent) who were fully qualified to purchase REOs from different sources, but were excluded because they didn’t have the right connections. At the tail end was Jane and Joe Sixpack’s access to affordable housing, always getting in and out AFTER the well-connected few have made their purchases and sales.
http://www.fhfa.gov/PolicyProgramsResearch/Policy/Pages/Real-Estate-Owned-%28REO%29.aspx
http://fhfaoig.gov/Content/Files/AUD-2013-012.pdf
Speculators have advantages that regular buyers and sellers don’t — business networks (cronyism), access to capital (also largely because of their connections), access to privileged information, etc. If they didn’t have these advantages they wouldn’t make up such a huge part of the market, and the FIRE sector wouldn’t be such a dominant player our economy.
Cash buyers in RE (not all, but most of them are speculators) — over half of the market:
————-Speculators make up the majority of traders in the stock markets as well as the commodities and forex markets (~80% speculation in FOREX, IIRC), to name a few.
http://www.washingtonsblog.com/2013/07/big-banks-busted-manipulating-aluminum-and-copper-prices.html
HFT is supposedly retreating, but they were trading between 60-70% of the stock market volume in recent years; and that’s just HFT.
———————–
To suggest that speculation doesn’t cause problems is like saying that concert ticket scalpers aren’t a problem. Nobody in their right mind would claim that. Both the sellers and the buyers are losing on almost every transaction in which a scalper is involved. Additionally, as with any market, the scalper/speculator is going to be most active on the buy side when they anticipate unusually high demand/restricted supply, which exacerbates pricing volatility. In markets where they can short, they move markets down when prices are already expected to go down, making the drops larger (and the rebound sharper/faster when they have to buy to close positions).
IMO, speculators might be buyers and sellers, but they do not provide any real benefits to society at large. Ever penny made by a speculator is lost to a buyer and/or a seller. That’s why I say speculation is zero-sum.
Participant[quote=harvey][quote=CA renter]Speculators don’t provide any similar benefits.[/quote]
Then why does anybody transact with them?[/quote]
In many cases, it’s because they largely control the market.
Participant[quote=harvey][quote=CA renter]It’s speculation if a person is buying (or selling) an existing asset in the anticipation of selling (or buying) at a higher (or lower) price.[/quote]
So the local grocery store is speculating with every can of beans on the shelf?[/quote]
We’ve discussed the grocery store issue before. They are providing a service because they make it more convenient for people to obtain the goods they need and also make it easier for the farmers/producers to sell in large batches to a few buyers vs. having to sell onsie-twosie to every individual purchaser. That being said, some would argue that it’s better for everyone to simply buy at farmers’ markets, but most of us like the convenience of having a grocery store that is open more hours/days. Speculators don’t provide any similar benefits.
Participant[quote=harvey]Speculate is a subjective term – when does investment become speculation? Nevertheless, I’ll allow it…
To speculate, one must buy something and sell it later (or the reverse.)
Every transaction has a counterparty. To buy something there must be a seller.
The seller wants something – to sell at a particular price. The buyer gives the seller what he/she wants. The seller’s wants are fulfilled by the buyer.
Simply buying something – for any purpose – fills the need of the seller. It creates value.
Value is also created when the “speculator” sells the asset to some other party.
The speculator, the party that sells to the speculator, and the party who buys from the speculator all transact at the price they agree upon. All three get what they want.
No zero sum. It’s win, win, win.[/quote]
This is how I define it:
It’s speculation if a person is buying (or selling) an existing asset in the anticipation of selling (or buying) at a higher (or lower) price. I also think of rent-seeking as speculation if the activity takes more from the economy than it provides and/or if it causes adverse effects for those who are the original providers or consumers of those goods.
It’s investing if a person is providing funds or other resources that create or expand productive capacity.
Participant[quote=FlyerInHi][quote=CA renter] Speculation is zero sum.[/quote]
There are other services involved in speculation. They need real estate and all the other stuff involved in living day to day.
Speculation can make markets more efficient. Same with underground black markets. They get goods to people who would otherwise go without.
Speculating with your own money is actually very healthy. Even speculating with other people’s money is fine if the people investing with you understand the risks. But speculating with money benefiting from Federal insurance is different.
There’s a good NYT piece:
Speculators tend to buy in anticipation of a supply shortage or increased demand. They sell in anticipation of a supply glut or decreased demand. IOW, they exacerbate booms and busts; if it goes on long enough, they create bubbles that can be absolutely devastating to an economy. They do not make markets more efficient because they are often behind price manipulation — whether intended or not. Speculation is zero sum.
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