[Escoguy]

If negative yields persist in Europe/Japan, this will continue.

Eventually it becomes a question of how much currency risk they are wiling to take.

As long as prime markets appreciate in line with global averages, the risk can be tolerable.

Would just get interesting if the US economy would actually decouple from global in any meaningful way. Hard to see that in next decade.

[Escoguy]

I have a tenant since 2018. Initially a one year lease.

Since inception, pays $3450 for a 4 BR, was at market at the time (with solar) but now significantly lags by $500 to $700 per month.

When I asked for a $25 increase, he pushed back saying in his experience house payments are fixed. He had not rented in decades.

He is an older gentleman (there is minimal wear on the house) and I am being patient, but that being said, I will start raising the rent by at least $50 per year to ensure the higher costs (property taxes/insurance/HOA) are covered.

I have another one close by which is somewhat nicer at $4500 a month for comparison.

Another one close by goes for $3900 without solar.

I do want to keep him because he has a lifetime guaranteed income from a major medical group in the area but rent can’t be fixed forever.

[Escoguy]

Masayako, May I call you Mas? Today I have reached 20% of your current level, oh wait, it is now Monday, so I am now at 22% of your current level.

By the end of the year, surely will be closer to 30-40% as things go.

These dilemmas of where to live have haunted me for 20 years. So I left San Diego in 2003, went to Moscow/Siberia/Azerbaijan (five other counties before that). Many of my neighbors in Moscow would ask the same question “so if money is no object, where would you live?” Even during my time in Kuwait, my business partner whose father advised the Emir on energy told me “Everyone has an escape plan.” Other stories of the Emir are also interesting, as I knew one of his pilots. The pilot would complain that he only got to fly the entourage to Ethiopia for the vacation but not to France or the US as the jet he flew was a mid-range. Still each vacation would cost millions, so at a certain level I understand your dilemma.

Back in Russia, I always told them France or Germany, maybe Spain. I lied because I didn’t want San Diego flooded with Russian billionaires. One of Putin’s deputies had a mistress who lived across the street, nice lady but faced the same dilemma just like you and the Emir. I’m sure she overheard her lover and Vladimir P discussing where they wanted to live. These pesky sanctions in so many countries. San Diego isn’t even an option until shell companies and 45.

I wanted San Diego to stay cheap so I could buy up more with my relatively modest means to ensure my true chance of becoming the Amateur North County Property Oligarch. I had seen what had happened to the Bentley dealership in Baku selling out for 5 years in one week. I didn’t want the same here.

Rarely did any of my associates really enjoy spending money once they got above $50M (it was always keeping up the Romanovs) so I would encourage you to relax or get a second or third mistress so you can have real adventure in your life and appreciate your family at the same time.
Otherwise you will die with too much money. The other day, my wife was listening to the story of Rasputin and I walked in where he discovered he was impotent and cried. You do not want to be a tragic figure with wealth who did not live his life.

So true to form, many will misrepresent the truth about living here or plant false narratives so you will be convinced of the happiness of lower taxes and larger houses with higher humidity and mosquitoes. But these are truly trivial matters for a man of the world such as yourself. I am glad you have chosen the correct forum to get life changing advice as there are few places such as this with a true high level of insight.

[Escoguy]

They had technical difficulty on Friday. Is scheduled for noon tomorrow.

[Escoguy]

We plan to watch today at 4 pm PST.

It’s a live performance.

[Escoguy]

We plan to watch today at 4 pm PST.

It’s a live performance.

[Escoguy]

I recently went a few days without checking and it was refreshing.

Ideally would get it to once a week or so.

Checking monthly would just be a matter of shifting psychology.

Starting to go back to the gym now.

I recall when I was 17 and in pretty good condition, “what good is it to have all this money if you aren’t in good physical condition?”

I’m in fair shape now but can certainly improve.

One’s physical and for that matter spiritual condition should be more paramount.

[Escoguy]

Happy Trails!

This week I rented out the newest purchase. 4BR for 4K/month.

Needless to say, strong demand and rented out in one day.

Made me really want to buy #9 but wife says no. Sad!

New arrivals are coming here from other parts of California and believe it or not Texas!

Will be releasing the second 4S property soon. Good interest there too. I think it had 500+ views in first 24 hours. Many of those viewing want to buy and will be happy a few have made this decision. Prices wouldn’t be up if there were a mass exodus. But who knows maybe Newsom will become the next Pharaoh and drive out people to another promised land. 🙂

[Escoguy]

Throwing out a random thought:

There may be those who sell some assets in the near future just to live it up some.

Being at home a year etc with minimal travel, some may come to the conclusion that life’s too short to be so focused on financial matters all the time.

It may even eventually be mildly inflationary if enough people do this and perhaps even good for the economy if funds come out of financial assets and into real activity even if it is superficial stuff like travel.

In the meantime, any level of stimulus will keep the game going for a while.

[Escoguy]

Any thoughts in North County inland are appreciated: 92127/92078/92027

Asking prices are ticking up steadily 30-50K over just a few months ago is not unusual for 4 BR SFH. What was 800-820K in Oct is now asking 850K.

Some larger inland are hitting the 1.2M mark as well if there is a pool and 3500+ sf.

I sometimes wonder if I’m dreaming all this.

Oh, well, sold some bitcoin to get part of the downpayment ready for the next one.
It’s almost not worth mentioning.

Did I hear about a 15K tax credit for first time buyers being discussed?

I can see pros and cons on that one.

[Escoguy]

When I was 17, I spent a year in Germany (1986) as an exchange student.
Took five months to learn the language and that’s really all I did.

I then picked a prestigious company E&Y (after college 1991) to do an internship at.
Basically earning enough to pay my rent and plane ticket.

But then I had a foreign language and “experience”.

It became much easier to find work, more ponds to fish in.
Because I learned pretty decent German, I was hired first by Price Waterhouse and then by the German Ministry of Privatization (Treuhandanstalt) to help restructure the former GDR economy. If I hadn’t done that internship, none of this would have happened.

A few years later, I was inspired to make language learning programs for Mandarin/Portuguese/French and Spanish. Taught myself to program and made 4 CD-roms which my publisher sold in 40 countries.
Didn’t get rich off of it, but learned many thing and it was a mark of pride to walk into a shop and point to something and say “I made that”.

Overtime, I spent 20 years in 8 foreign countries: Germany, Russia, Azerbaijan, Kuwait, Ukraine, Moldova, UK, Kyrgyzstan. Worked in telecoms/non-proliferation (bio-threat reduction), fast moving consumer goods, energy services, consulting.

I’d tell him go abroad, find a project which is really interesting but be open to new opportunities.

There are more companies than US: German/UK/Australian. etc.

These days learning some data manipulation techniques is also helpful. Start with spreadsheets. If he has good skills and is motivated, there are endless opportunities in the world.

[Escoguy]

Yes that is certainly a big part of it.

The psychology if knowing you are “charting your own course”. Thus my general caution with any enterprise about economic forces and motivations which we can only partially grasp.

Herd mentality or as my wife says “monkey see, monkey do” is a huge force.

But if we go back to Greenspans reaction to the 87 crash, lowering rates, smoothing the markets has been more and more a priority.

In some ways, it is surprising how long it too the real estate market to catch up to the financial markets (realizing the effect of govt support) via bond buying/quantitative easing/fiscal policy.

So much of the neoclassical book on economics has been put on the shelf. We’re all Keynesians now. Growing up, I never thought that would happen.

It annoys my 15 y.o. son when I talk too much about this.

Needless to say, not just talking my book but policy favors a portfolio of real estate/stocks maybe with a touch of gold. I don’t think I’d want more than 1-3% allocation to crypto but it is clearly on the upswing.

Main message is that cash is for short term needs but not really an asset to hold any more unless you are in the ultra high wealth. It’s just as good to have an asset to borrow against when needed with Helocs at 2.25%.

These policies have made our common fate more interwoven and we are more interconnected that we realize. I could go on. Getting vaccinated next week and look forward to more face to face engagements in the month after.

[Escoguy]

SD,

Thanks, #8 is in the pipeline. Locked today at 2.875% for 30 yr fixed. Was a nice touch with the new conforming limits as I only needed 20% down to get that rate as investment. Contracted back in August so solid equity pickup. It’s a bankruptcy so it takes some time. Too bad these are rare.

Close is scheduled for Feb 22nd. Just take things in stride and try to stay humble.

Recent one (not mine but same neighborhood) had 20 applicants in just a few days, so rental market is very strong.

Still a little stunned that #7 could sell for six figures more than a few months ago.

That being said, was about to make a weird prediction.

I’ve done some consulting work at Sempra/AMN over the years. One of my co-workers who was very anti real estate since 2014, was convinced prices were too high etc. So he put all his money in stocks and some in bitcoin. We do exchange trading ideas, I even picked up a modest amount of bitcoin.

Now that things have taken off for him, he is starting to revisit his premise on real estate. It can get old living in hotels even if it is “cheaper” so he’s finally coming around to potentially buying.

So that boring old asset class of real estate may end up getting an unexpected push here and there from other assets which have had a great run recently.

He is starting to see the value of asset preservation and has that luxury now that his assets are getting close to 1M.

Sure there are others like him out there.

[Escoguy]

I’ll try to assess a few takeaways:

1. Policymakers learned from the delayed response in the great recession (08-12)
2. Trillion dollar stimulus is no longer taboo (better too much than too little)
3. The ENTIRE interest rate curve can be controlled (not just short term rates) at least for the time being
4. There is a global backdrop of negative rates (this is actually because govt bonds were bid up too high in Europe) which keeps rates in the US lower than otherwise
5. The supply constraints on housing in markets like SD during the great recession were never lifted and there is a supply gap which has been growing for over a decade
6. Policymakers have failed to incentivize older households to downsize
7. Trump tax changes did not cripple Blue states housing markets
8. US is still a center right capitalist/rule of law country and never will be even remotely close to socialism in the classic sense (a few things here in there may trickle in)
9. There are only a few hundred world class companies with global reach: Apple/Google/Amazon/McDonalds (rising Tesla)
10. China’s internet and manufacturing prowess cannot be ignored (we are still in the game but need to pay attention)
11. Public health will see significant investment going forward (thank God for a functional pharmaceutical industry)
12. There are huge education gaps in the US
13. SD is a world class place to live and will continue to attract high brain power jobs/activity

So in a nutshell, yes prices are high but there are forces at work which only a few can fathom and are bigger than any of our own unique perspectives.

Going into 2020, I had six properties (SFHs), added one this year and another pending. Net gain on the two new ones is roughly 200K of unforeseen gains.

Stock portfolio which was down 400K in March is up 300K YTD.
Needless to say, there is much that needs to be fixed and we can’t tolerate incompetent govt from the right or left. But economically, we have seen a form of the Greenspan put on steroids during Covid. May we never need it again.

Can we ever get back to normal where interest rates are fully market driven, maybe in some years. But in the meantime, it reminds me of a conversation I had with a relative of mine who used to work at Treasury, in summary, the government wants the population to have confidence, with rising home values, so they borrow and spend (ideally even taking out equity to boost the economy).

Yes, there is a risk of a crash as at anytime but don’t look back too much (at past crisis), I think it is prudent to borrow as long as properties cash flow or come close. Keep most money in stocks. Plan on working longer even if you don’t need to. Enjoy life and give to those less fortunate. But keep in mind, your fathers recession/depression is likley not in cards anytime soon.

There may be negative consequences, but I don’t see us going full former USSR anytime soon (and I lived 15 year in 5 former soviet republics). So be vigilant, exchange investment ideas, don’t be afraid to put more skin in the game. And be damn grateful that things worked out as well as they did in-spite of everything.

And if you’re in a position to, get takeout as much as you can, tip generously, and try to be a friend. I do appreciate this forum.

[Escoguy]

Ok, so does anyone have good data on forbearance volumes in SD county?

I looked on Calculated risk and they had 2.7M nationwide.

On balance I’ve read that 95%+ of renters in SD are making payment on time.

I did talk to a lender who mentioned this as a reason for rates being higher than should be in addition to lending backlog.

One realtor also mentioned there could be more supply in the spring once the forbearance period ends, but for now I almost think that is wishful thinking.

Any real data would be helpful esp by zip.

This was good mortgage info on daily movements:

http://www.mortgagenewsdaily.com

I hope I’m not violating anything by putting a link, just seems like good info.

Cheers,

[Author]

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