[EconProf]

Run, don’t walk, away from those friendly Chase bankers.
The article you cited gives a good explanation of why: bonds have had a great run for three decades because of declining interest rates. With interest rates now near zero, this can’t continue. If rates merely stay at their current level those bond funds won’t have the stellar rate of return they’ve had recently. If rates creep up, those bond funds will quickly generate very negative returns.
In effect, closed end bond funds have doubled down on their bet that interest rates will continue to fall. They have done this by using leverage plus being close-ended, such that their market value can exceed or be less than their face value of their holdings upon liquidation.
Does this mean you are stuck with near-zero rate of return (actually negative, considering inflation) on your liquidity until you need it? Yes. Thank you, Ben Bernanke.
There is growing evidence we are in a giant bond bubble, much like the housing bubble of 2006. One site pushing that theme is PrudentBear.com.

[EconProf]

Every branch of Chase that I go into seems to be overstaffed. Personnel always trying to upsell me on something…everybody saying “Hi” when I walk in and “Have a good day” upon leaving. And the tellers always begin with “Welcome to Chase, how can I help you today?”, and some time during the transaction, “How is your day going?” Wish they would chop the payroll and use the money to give us better interest rates.

[EconProf]

Update: Had a pest control company treat today for the bed bugs. They sprayed all corners of carpets throughout apt, plus mattresses, etc. Tenant is being tolerant & putting up with a lot–I know I wouldn’t like some guy to be spraying blue liquid on my mattresses. But, as another poster pointed out, there is no proof as to how the bed bugs got here in the first place. That is my ultimate defense if this gets in front of a judge.
If this doesn’t work, I will probably negotiate some monetary settlement to have him leave, then throw out the (nearly new) carpets, & treat the apt. fully.

[EconProf]

I think Blackstone is going to make a lot of money, and deserves to. Buying foreclosures or short sales or fixers is traditionally an entrepreneurial mom and pop venture, done a few at a time. But this is inefficient because there is a big learning curve involved, as can be attested by anyone who has tried it. Blackstone has discovered that the process is subject to economies of scale for a big company that does hundreds or thousands of houses at once. They can study the market to know how much to pay, can bid cash to idiot lenders anxious to unload, can analyze the property’s needs and send in their tried and trusted workers to quickly execute, then market the property for sale or rent. With this mass production approach they add the most value with the least cost and downtime and extract the most profit. We may resent their success because they are capitalizing on the distressed housing market, but like sharks cleaning up carcasses in the ocean, their profit-seeking is improving neighborhoods and serving society. Adam Smith would approve!

[EconProf]

Here’s a tip: look thoroughly at their credit report and see how they spend their money. Beware of big debts for frivolous items, also any writoffs, municipal courts, debt collection agencies, etc.

[EconProf]

Having read up on bed bugs, I have decided to get very proactive. Called in the original pest control company to re-treat premises and possessions, and stressed they had to solve the problem. Part of their job is teaching the tenants their role in this–especially washing and drying at high temperature all bedding, clothing, etc. Their kids have sores from the bites, and I doubt they brought in the problem–it was the previous tenants–so they are the victims and this is more than just a legal problem. If necessary, I will pay them an agreed upon amount to leave, throw out all carpeting and nuke the place before the next tenant comes in.
To other Piggs: still want to try landlording?

[EconProf]

This looks like a pretty straightforward real estate cost vs. benefits question where you need to make estimates about the future. A lot of blanks need to be filled in based on future unknowns, as well as unknown unknowns. However, difficulty in making projections is no reason to not do your research and write down your estimates.
Your future benefits are presumably appreciation, cash flow, possible tax benefits, perhaps pride of ownership, and use of the condo.
Future costs are the hassle factor (including the value of your own time), annual costs of owning and maintaining, vacancy downtime and cleaning and prep to rerent (possibly by someone on site who would need compensation).
Be sure to learn about the local rental market: vacancy factors, seasonal fluctuations, location variables, pitfalls, etc. Start with Craigslist rentals and for-sale condos, then go to a local realty office that specializes in selling and renting condos. Remember that we all underestimate costs, vacancies, and tenant problems.
Write down all your future costs and benefits in great detail so that you can reread them in a few years and have a good laugh.

[EconProf]

When the government picks winners and losers instead of letting the free market sort it out, it usually gets it wrong. Solyndra, Volt, A123, etc. are only the more publicized examples–there are hundreds more.
Get ready for more of the same–we just voted to double-down on the past four years.

[EconProf]

This meaty article will prompt many pro and con contributions by Piggs. It is a healthy debate to have, since our fiscal future and our state’s economy depends upon it.
The question is whether state employees are overcompensated or not compared to similar private sector occupations. While many dueling statistics can be brought forth by both sides, I’d like to pose one question: What is the quit rate for public sector workers compared to similar private sector workers?
I’ve heard that the public sector workers almost never quit, suggesting that they know they have a good deal. But that’s only anecdotal. Any Piggs have any statistics?

[EconProf]

Scripps Ranch schools used to be top flight (my kids went there), but have slipped of late. Be especially wary of the high school. Maybe fellow Pigg SD Realtor can opine on it.

[EconProf]

It all boils down to inflationary expectations. Back then we were looking at a hyperbolic graph of inflation that showed every sign of turning into hyperinflation. Inflation in the 1950’s probably averaged 2%. In the 60’s it steadily rose from 1-2% in the early years to about 5% by the end of the decade. The 70’s saw a steady rise to 13.5% in 1980.
By all appearances the wheels were coming off the economy. Lenders had been burned so badly they adjusted their interest rates upward, assuming the climb in inflation would continue. Homeowners with fixed rate mortgages benefited throughout the 1970s, especially toward the end of the decade, as their values rose and monthly payments stayed constant. Gold hit $800.
It took newly appointed Fed Chairman Paul Volcker to end it all. He took the punch bowl away with a tight monetary policy that threw the economy into a deep recession that tamed inflation and lowered inflationary expectations of all parties.

[EconProf]

There is another way to place your bets on a rapidly rising inflation rate…some day. And it is a route available to most Piggs: Take out a 30-year fixed rate loan at today’s rates. Get it ASAP, and for as much house as you can afford. You will be in an appreciating asset while paying for it with increasingly worthless dollars.
The rule of 70 tells us how long it will take for principal to double when increased at a fixed percent each year, compounded. Thus, a 10% increase annually will double in seven years. (Plug in your own expected inflation rates here). Meanwhile, if your pay increases at the rate of inflation (a big if–could be more, could be less), then in seven years the pain of that monthly mortgage payment will be half of what it is today. Voila, house value doubled, monthly cost halved.
The downside: you will have to live with the guilt that you’ve impoverished that Chase or B of A or Wells Fargo bank that was foolish enough to make that loan. Expect many sleepness nights.

[EconProf]

Historically, rapid increases in the money supply and generally liberal fiscal policy combined with stimulative monetary policy has resulted in inflation. This inflation prompts higher interest rates, which causes the market prices of existing bonds (with their fixed interest rates) to fall.
We’ve now had many years of such monetary and fiscal stimulus and yet have low inflation and still-falling interest rates. Do the old rules no longer apply? Or do they just not apply yet, and will some day hit us with a vengence?
I’ve been wrong myself in predicting a return of inflation and rising interest rates, so am giving up on predictions.
The old rule about the time lag between a change in monetary policy and the resulting impact on the real economy–whether to tighter or looser–was about eighteen months. Well, that rule is certainly out the window.
It appears that other forces that affect inflation, interest rates, and expectations are overwhelming the stimulative effect of easy money: The deep recession, deleveraging, and especially the economic weakness of the rest of the world making the dollar look relatively safe.
For those of you who believe inflation will result eventually, shorting bonds is one way to put your money where your beliefs are.

[EconProf]

Not mentioned so far is the importance of the major the student takes as a determinant of their future occupational success. There is a huge difference in outcomes for humanities, ethnic studies, gender studies, social science majors vs. STEM (science, technology, engineering, math) and other more difficult majors.
Freshmen are rarely informed of this by the professors in these easier majors who need upper level students to maintain their employment. A little truth in advertising is needed…plus the parents need to step in to exert their influence–and pocketbook.

[EconProf]

In response to Itsdd:

Your last line contradicts some of your other numbers. And we’d love to have that 7% or 5% growth in US GDP that you show.
I also googled Mexico GNP and got a confusing array of results, so what should be easy–determining Mexico’s GNP growth rate over the years is not easy. Nominal or inflation-adjusted? Per capita or total? Adjusted for PPP (purchasing power parity) with US dollar or not?
But by the fairest measurement, and by the most sources, it has been running about twice ours in recent years, about 4% vs. 2%.

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