[jztz]

Anyone knows how to check the size of the mortgage that an owner owns on a property? Is that public record? Or only realtors have access? Thanks.

[jztz]

Total monthly cost to support a $1.3M house at 5% downpayment (30 year at 6.25%) is about $9,600/month. The owner, if they are in the highest tax bracket, can get about $3K in total tax deduction. Still, $9.6K is the gross cash cost assuming about 1.4% in total tax and HOA; about $300 in insurance and $200 in misc maintenance.

So what income is needed to support this? $240K ($20K/month) at the minimum? Basically, give 50% of your income to support this house. Two very good professional jobs will actually achieve that in San Diego, so maybe not everyone is doomed. What do you all think?

[jztz]

Here is a detailed analysis of the potential subprime loan foreclosures (lots of good data), and the potential loss to home equity owners is estimated to be about $156 billion.
http://www.responsiblelending.org/pdfs/CRL-foreclosure-rprt-1-8.pdf

The the authors probably didn’t do, it seems to me, is to estimate the impact of a downward spiral — foreclosure leads to lower price, then leads to more foreclosure. So I believe that it’ll be worse than the authors estimated. How fast will it happen? It seems that sub-prime loans enter problematic period fast, about a year. Then if refinancing is shutdown due to tighter lending, we’ll likely see real damage later this year and all of 2008.

As far as cost — the fortunate part is that they’re more dispersed among investors of securitized mortgages, plus a few direct actors like NEW. I don’t think that the cost of debt default will be a direct hit to taxpayers. But the cost of asset (housing) deflation to the economy is another matter.

[jztz]

Saw a segment on CNBC today, and it checked Jan weather for the south (down 10% or so) and northeast (up 9% or so); and indeed, in Jan there was more rain in the south; and it’s been unseasonably warm in Jan in the northeast.

But then we all know what happened in Feb — freezing all over the country. On the margin, weather probably plays a small role, especially when it gets extreme.

[jztz]

Went to Derby Hill, and the traffic seems to be heavy. Does anyone know how the current prices compared to previous releases? Are they still increasing slightly? We stopped by the place when they just opened, but I forgot prices back then. Didn’t stop by Carriage Run, too tired. They say that they have a waiting list of about 300 people. I remember the first time we stopped by it was 500 people.

[jztz]

Living within one’s means is what counts. Agree with PerryChase that immigrants seems to know this better. They’d have a 15-year mortgage while driving a 10 year old car, and simply skipped dinning out and latte. One can still live very comfortably without many of the small “luxuries” as referred here by people. Actually, these are luxuries are desirable only because people grow up having them and feel that they can’t live without. In reality, one can live with almost any reasonable income — your compromise may include share homes with roommates, driving a used car, etc, etc. It’s better live this way when you’re young, and hopefully not having to worry about money at all when you’re old. I think that most American middle class kids grow up having experienced too much material abundance that their expectations of necessity are skewed. They should have struggled a little more while they’re young.

[jztz]

US and Japan — I agree with JG that there are some meaningful differences between the US now and Japan 10 to 15 years ago. I’d also give two more differences:
a) income inequality is much less in Japan, and social welfare (healthcare) is stronger. Hence it’s easier for common folks to get by in a very slow economy. In fact, because of deflation, living standards didn’t go down much. Regardless of whether there is a recession and/or how severe it is, the lower half of the US population will be hurting – that’s my belief.
b) Workforce is much less mobile in Japan. That prolonged the downturn, BUT ALSO GAVE WORKERS LOTS OF TIME TO ADJUST (or not adjust for that matter). So the adjustment in the US will be quicker, and a lot more painful for those who’re impacted.

[jztz]

Does anyone know when they’d finish building the Derby Hill complex? How many more phases will they have? I asked once, and it seems that it won’t finish until sometimes in 2008 if I recall correctly. Thanks.

[jztz]

Panama – at our last cruise, a couple at our diner table was from San Diego and was about to retire to Panama. The gentleman spoke highly of it — mainly its favorable tax/investment policy to attract American retirees; and the place sounds nice. Said that they would be able to retire earlier if they retire in Panama.

Helsinki, Finland — The one time that I visited, everyone looked so serious!!! Can’t image to retire there. The supermarket reminded me of Chinese stores more than a decade ago.

China — the only problem is pollution. I revisited Huangzhou in May after 20 years, and I was again impressed by its beauty. Not a bad place to retire — only 1.5 hour from Shanghai. But hot and humid in summer.

Singapore — haven’t been there, but heard that it’s really hot and humid in summer, and summer is long there.

[jztz]

How much referral discount are they giving to realtors? Derby Hill is an area that I’d eventually be interested in once our lease ends around Spring 2008.

We stopped by IvyGate at 4S Ranch, and they have quite a few houses priced at $1.6M and above ($2.2m+ for model homes). Hard to image who’d buy them. They only gave about $1.5/sq floor allowance — for a $1.6m home? No landscaping allowance either. So a big yard is just a lot of more money and/or work. Crazy. But I’ve never bought a new house, so maybe that’s the norm.

[jztz]

Cost of rental = monthly rent x 12 – after tax interest income from downpayment
Cost of ownership = after-tax cost of all payments (mortgage, property tax, HOA fee, maintenance) + potential depreciation.

Cashman, it looks like you’re comparing month against potential depreciation only.

Of course, your decisions may involve more than these numbers. As others have said — congratulations. All your options are good, so having some difficulty making up your mind is a good problem to have.

[jztz]

SDNative, just read carefully, and do some math:

half of 1.2 trillion is 600 billion. To run the “public campaign” it talked about for 10 years, that means $60 billion a year. And it includes:

– double cancer research – it only costs about $5 billion.
The NIH spending on cancer research has been $4.83 and $4.79 in 2005 and 2006, and will go down slightly to $4.75 in 2007.
(either researchers get no raises, or they fire some of them!)
http://www.cancer.gov/cancertopics/factsheet/NCI/research-funding

– “a global immunization campaign to save millions of children’s lives”. Let’s assume 10M children, and it costs $200 each (money goes a long way in developing countries when it’s not used in war!), then that’s $2 billion. Let’s make it 2.5x to reach $5 billion.

– That leave $50 billion for “treatment for every American whose diabetes or heart disease is now going unmanaged”. Notice the key word “unmanaged” — likely those people who are not insured who are unfortunate to have diseases. I don’t have stats, but assume that on average treatment is $10K each to manage these conditions, you are talking about 5M people (US has about 45 million uninsured, so this works out to be that about 10% has heart and/or diabetes).

So if you keep doing it for 10 years; cancer research may yield cure to save millions of people’s lives; 10M children a year – that adds to be 100M children over a decade; and those 5M uninsured will for sure live better/longer and use emergency room less as their only healthcare… of course my numbers can be off, but whatever the real numbers work out to be, it’s still “an unprecedented public health campaign”.

So only if that 1.2 trillion is not spent someplace else! For the $1.2 trillion that’s spent (and will be spent), so far we had 3000+ US soldiers dead; tens of thousands maimed; and hundreds of thousands of Iraqis dead or wounded.

There seems to be an unwillingness to accept the article’s basic thesis – that $1.2 trillion can do an awful lot of good things to this country — so I suggest that you read the WSJ article about cognitive disonance – and read it carefully too!

[jztz]

Read this to understand why people here will NEVER agree even given the same facts… because they do not look at fact and then decide rationally the right emotional response; they have a certain mindset and emotional attachment to their mindset and they then inteprete data (or revise data) based on their pre-existing view…

December 4, 2006
DEJA VU
By CYNTHIA CROSSEN
‘Cognitive Dissonance’
December 4, 2006; Page B1

Leon Festinger, a social psychologist at Stanford University, was studying how and why rumors spread when he read about the aftermath of a severe earthquake that shook India in 1934. People who lived in a region of the country that had felt the shock but were spared death and destruction began circulating rumors that other terrible disasters were about to befall them — a cyclone, a flood, another earthquake or “unforeseeable calamities.”

Why, Mr. Festinger wondered, would rumors arise that provoked rather than allayed anxiety, especially among people who hadn’t suffered any immediate loss? And why were the rumors so widely accepted?

His conclusion derailed his analysis of rumors and put him on the track of a milestone in psychological theory: When feelings and facts are in opposition, people will find — or invent — a way to reconcile them. The people who had narrowly escaped the earthquake were scared, but their fear seemed largely unjustified. The rumors provided people with information that fit how they already felt, reducing what Mr. Festinger called their “cognitive dissonance.” His 1957 book on the subject was widely influential in many fields, and the theory is still studied and applied in advertising and market research, politics, education and health.

Why, for example, do people who know cigarettes are bad for their health continue to smoke? This is classic cognitive dissonance: They know one thing and feel another.

Mr. Festinger believed this incongruity is as uncomfortable to the human organism as hunger. One way or another, the anxiety must be assuaged. So the smoker builds a bridge — a rationalization — from feeling to fact: If he stopped smoking, he’d gain weight, which would also be unhealthy; some risks are worth taking to have a full life; the risks of smoking have been exaggerated. Indeed, in a 1954 survey asking people if they felt the link between lung cancer and cigarettes had been proven, 86% of heavy smokers thought it wasn’t proven, while only 55% of nonsmokers doubted the connection.

Cognitive dissonance also explains why many people read advertisements for products they have already bought. Almost inevitably, they have made a choice that involved compromises. The car they purchased gets great mileage, but isn’t stylish or powerful. After reading a loving description in a newspaper or magazine, they feel less conflicted about their decision — their dissonance has been reduced.

Because of cognitive dissonance, facts can be as malleable as clay. In 1951, the Princeton and Dartmouth football teams played a particularly competitive and rough game. A sample of students from each school were later shown the same film of the game and asked to note incidents of rough or illegal play. Dartmouth students saw mostly Princeton’s offenses; Princeton students saw mostly Dartmouth’s.

But where Mr. Festinger found the richest raw material for his theory was in a cult that developed in Chicago in 1954. A woman Mr. Festinger called Marion Keech claimed she was receiving messages from another planet, Clarion. The messages predicted that on a given date, a cataclysmic flood would engulf most of the continent. Those who joined Mrs. Keech’s sect would be picked up by flying saucers and evacuated from the planet.

A brief newspaper story about the cult came to the attention of Mr. Festinger. He was reminded of the followers of a New England farmer, William Miller, who predicted that the Second Advent of Christ would occur in 1843. Thousands of people who believed Miller’s prophecy prepared for the world to end. But 1843 passed without incident. Far from admitting that the prediction was wrong, the Millerites attempted to lessen their cognitive dissonance in two ways: They changed the date of the Second Advent to the following year and stepped up their campaign, trying to convince even more people that their belief was right.

Mr. Festinger and two colleagues infiltrated Mrs. Keech’s movement, acting as participants for three months. They watched as about two dozen well-educated, upper-middle-class people, “who led normal lives and filled responsible roles in society,” quit their jobs and threw away their possessions. Before the dates of the expected flood, the cult was mostly averse to publicity and had no interest in attracting other believers.

On the day before the flood, the group was told that at midnight a man would appear at Mrs. Keech’s house and take them to a flying saucer. But no knock came at her door, and the group struggled to find an explanation for why there would be no flying saucer or flood. At 4:45 a.m., the group said, a message arrived from God saying He had stayed the flood because of their strength.

What interested Mr. Festinger was not so much this face-saving explanation as what the cult members did in the following weeks. Rather than shunning public attention as they had before, they began zealously proselytizing. “There were almost no lengths to which these people would not go now to get publicity and to attract potential believers,” Mr. Festinger wrote. “If more converts could be found, then the dissonance between their belief and the knowledge that the prediction hadn’t been correct could be reduced.”

Write to Cynthia Crossen at [email protected]

[jztz]

Read this to appreciate the impact of the Iraqi war by numhers (go to http://www.nytimes.com directly if you want to follow some links). Bush said that he was a “decider” – one has to say that he decides w/o any gift of foresight (and he fire those who have). The country is left with what comes out of it…

January 17, 2007
Economix
What $1.2 Trillion Can Buy
By DAVID LEONHARDT
The human mind isn’t very well equipped to make sense of a figure like $1.2 trillion. We don’t deal with a trillion of anything in our daily lives, and so when we come across such a big number, it is hard to distinguish it from any other big number. Millions, billions, a trillion — they all start to sound the same.

The way to come to grips with $1.2 trillion is to forget about the number itself and think instead about what you could buy with the money. When you do that, a trillion stops sounding anything like millions or billions.

For starters, $1.2 trillion would pay for an unprecedented public health campaign — a doubling of cancer research funding, treatment for every American whose diabetes or heart disease is now going unmanaged and a global immunization campaign to save millions of children’s lives.

Combined, the cost of running those programs for a decade wouldn’t use up even half our money pot. So we could then turn to poverty and education, starting with universal preschool for every 3- and 4-year-old child across the country. The city of New Orleans could also receive a huge increase in reconstruction funds.

The final big chunk of the money could go to national security. The recommendations of the 9/11 Commission that have not been put in place — better baggage and cargo screening, stronger measures against nuclear proliferation — could be enacted. Financing for the war in Afghanistan could be increased to beat back the Taliban’s recent gains, and a peacekeeping force could put a stop to the genocide in Darfur.

All that would be one way to spend $1.2 trillion. Here would be another:

The war in Iraq.

In the days before the war almost five years ago, the Pentagon estimated that it would cost about $50 billion. Democratic staff members in Congress largely agreed. Lawrence Lindsey, a White House economic adviser, was a bit more realistic, predicting that the cost could go as high as $200 billion, but President Bush fired him in part for saying so.

These estimates probably would have turned out to be too optimistic even if the war had gone well. Throughout history, people have typically underestimated the cost of war, as William Nordhaus, a Yale economist, has pointed out.

But the deteriorating situation in Iraq has caused the initial predictions to be off the mark by a scale that is difficult to fathom. The operation itself — the helicopters, the tanks, the fuel needed to run them, the combat pay for enlisted troops, the salaries of reservists and contractors, the rebuilding of Iraq — is costing more than $300 million a day, estimates Scott Wallsten, an economist in Washington.

That translates into a couple of billion dollars a week and, over the full course of the war, an eventual total of $700 billion in direct spending.

The two best-known analyses of the war’s costs agree on this figure, but they diverge from there. Linda Bilmes, at the Kennedy School of Government at Harvard, and Joseph Stiglitz, a Nobel laureate and former Clinton administration adviser, put a total price tag of more than $2 trillion on the war. They include a number of indirect costs, like the economic stimulus that the war funds would have provided if they had been spent in this country.

Mr. Wallsten, who worked with Katrina Kosec, another economist, argues for a figure closer to $1 trillion in today’s dollars. My own estimate falls on the conservative side, largely because it focuses on the actual money that Americans would have been able to spend in the absence of a war. I didn’t even attempt to put a monetary value on the more than 3,000 American deaths in the war.

Besides the direct military spending, I’m including the gas tax that the war has effectively imposed on American families (to the benefit of oil-producing countries like Iran, Russia and Saudi Arabia). At the start of 2003, a barrel of oil was selling for $30. Since then, the average price has been about $50. Attributing even $5 of this difference to the conflict adds another $150 billion to the war’s price tag, Ms. Bilmes and Mr. Stiglitz say.

The war has also guaranteed some big future expenses. Replacing the hardware used in Iraq and otherwise getting the United States military back into its prewar fighting shape could cost $100 billion. And if this war’s veterans receive disability payments and medical care at the same rate as veterans of the first gulf war, their health costs will add up to $250 billion. If the disability rate matches Vietnam’s, the number climbs higher. Either way, Ms. Bilmes says, “It’s like a miniature Medicare.”

In economic terms, you can think of these medical costs as the difference between how productive the soldiers would have been as, say, computer programmers or firefighters and how productive they will be as wounded veterans. In human terms, you can think of soldiers like Jason Poole, a young corporal profiled in The New York Times last year. Before the war, he had planned to be a teacher. After being hit by a roadside bomb in 2004, he spent hundreds of hours learning to walk and talk again, and he now splits his time between a community college and a hospital in Northern California.

Whatever number you use for the war’s total cost, it will tower over costs that normally seem prohibitive. Right now, including everything, the war is costing about $200 billion a year.

Treating heart disease and diabetes, by contrast, would probably cost about $50 billion a year. The remaining 9/11 Commission recommendations — held up in Congress partly because of their cost — might cost somewhat less. Universal preschool would be $35 billion. In Afghanistan, $10 billion could make a real difference. At the National Cancer Institute, annual budget is about $6 billion.

“This war has skewed our thinking about resources,” said Mr. Wallsten, a senior fellow at the Progress and Freedom Foundation, a conservative-leaning research group. “In the context of the war, $20 billion is nothing.”

As it happens, $20 billion is not a bad ballpark estimate for the added cost of Mr. Bush’s planned surge in troops. By itself, of course, that price tag doesn’t mean the surge is a bad idea. If it offers the best chance to stabilize Iraq, then it may well be the right option.

But the standard shouldn’t simply be whether a surge is better than the most popular alternative — a far-less-expensive political strategy that includes getting tough with the Iraqi government. The standard should be whether the surge would be better than the political strategy plus whatever else might be accomplished with the $20 billion.

This time, it would be nice to have that discussion before the troops reach Iraq.

[email protected]

[jztz]

Wealth means satisfaction and independence.

Satisfaction — always get what I want, and I want not much more than what I need.

Independence — work because I’d like to, not because I have to.

If you feel that you have all the options in life open to you, limited not by financial resources, then you’re fairly wealthy.

[Author]

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