[livinincali]

This is in interesting case when you see how people reacted to it. The logic and facts clearly indicated that Zimmerman was not guilty of 2nd degree murder or manslaughter. On the other hand the media clearly built up an emotional response in the public which has led people to believe Zimmerman is guilty because of how they feel. We really don’t want a justice system that determines justice based on feelings.

[livinincali]

[quote=FlyerInHi]Livin, what s scenario do you see rates doing up enough that would cause home prices to crash back to the 2009/2010 bottom?[/quote]

I didn’t necessarily say prices would crash. A crash would be caused by a forced investor liquidation and/or a lending crisis which most seem to think are currently off the table. That may be true but I’m not sure the risk is as small of some here seem to think.

I said if the interest rate trend change is secular and rates tend to move up then prices would decline over time as I don’t expect income gains to make up for the interest rate changes. That’s what’s happened in Japan even though interest rates have remained low for a very long time. Japanese home prices and stock prices have been bouncing along the bottom for 15-20 years after their crash.

The scenario for rising rates is pretty simple. Just look at most of the countries in the Euro zone. Their interest have gone up not because of an improving economy and rising inflation expectations. It’s been the complete opposite. They are facing deleveraging and the rates are going up because people are fearful that they won’t get paid back.

I’ll say it again, most of us haven’t lived through a period of deleveraging so we don’t understand what it’s going to mean. We’ve gone 30+ years of increasing leverage in a declining rate environment. The average has been a 3.5%/year increase in nominal incomes and a 40-50 basis point decline in the interest rate. That environment has allowed people to expand debt at a rate of about 6.5-7% per year and still maintain the debt to income ratio. When that trend changes things are going to be different and assumptions that it worked like that before are going to be wrong in that environment.

[livinincali]

[quote=The-Shoveler]I respectfully disagree, If we calculated the CPI today the same way we did in 1970, inflation (CPI measurement) would be significantly higher. I think 15 is much closer to the real inflation rate,[/quote]

I guess you could use the big mac index. A big mac in 1970 was $0.45 today it’s about $3.50 so 1.60 in 1970 turns into about $12.50 today under that measure. Of course liability insurance, workers comp, and other restaurant costs have gone up faster than CPI measures of inflation too and McDonald’s has to make a profit.

Part of the problem is that we don’t see a lot of the hidden costs that come with employing somebody. While minimum wage might be $7.25/hour by the time you add in employer’s social security, medicare, worker’s comp, unemployement insurance, Obamacare penalties, and/or coverage the out of pocket to employ somebody is much higher than what they see on their paycheck. It probably cost close to $12/hr to employ somebody with today’s regulations.

[livinincali]

[quote=FlyerInHi]SK, good point on interest rates.

I have to admit that my understanding of the Fed was lacking but has much improved through reading. It’s their job to set interest rates as they have always done.

Therefore interest rates are neither artificial nor natural. In a fiat currency and a floating exchange rate environment, interest rates could be zero forever.

Mortgage rates may be historically low, but they are not artificially low.[/quote]

The fed primarily set the Federal Funds rate which is the overnight borrowing rate for big banks. They do not have the power to arbitrarily set us treasuries or MBS bonds rates although QE has been an attempt to bend the supply demand curve so that the price of those bonds goes up and the interest rates go down. The big bank business model is to borrow short and lend long and use the spread to pay their costs and make profits. You are somewhat limited in how low mortgage rates can go. 2-2.5% is probably as low as you could see a 30 year mortgage, although who knows what would happen if there was a severe supply constraint (nobody wanting to borrow anymore).

The biggest risk in my eyes is what really happens if we’ve hit the secular low in mortgage rates and are faced with a long term trend change where rates will generally rise rather than generally fall. We’ve had 30 years of down trend in rates and often we experienced severe economic problems when the rates have moved counter to that downward trend for any length of time. The logic in me says if we are faced with a world of generally rising rates all leveraged assets that are being purchased based on the carrying cost will fall in value over time. That would include houses, stocks, bonds, etc. because all assets experience some degree of leveraged speculation. Now we can obviously defy that logic for awhile and build a speculative bubble, but the math tends to win in the end.

If you haven’t lived in the world of rising rate and most of us haven’t then we might be in for a rude awakening when we take our previous experiences about how asset prices should function in our leveraged world and apply them to the future. In the 1930’s the debt bubble blew up and reset itself. We still haven’t seen that happen here yet. Japan hasn’t seen the debt bubble blow up but they have seen have 0 bound interest rates for a long time and asset prices in Japan have been flat at best. Why should we expect something different, although most of us probably need 5+% asset price inflation to make our retirement goals.

[livinincali]

[quote=The-Shoveler]Minimum wage really needs to be about $15.00 an hour now just to get back to where it was in the 70’s adjusted for inflation.
There is no inflation adjustment for minimum wage currently and this is a big problem no one wants to hear.

I predict there will be wage riots in the near future.[/quote]

Incorrect.

1970 minimum wage was 1.60 and cpi was 37.8. Today minimum wage is 7.25 and cpi is 232.94. Adjusted for cpi (the governments measure of inflation) 1970’s 1.60 would be worth $9.85 today. Of course the value of minimum wage vs inflation changes.

In 1989 minimum wage was 3.35 and cpi was
121 so 1989’s minimum wage is worth $6.44 today. On the other end of the spectrum the 1968 minimum wage of 1.60 is worth 10.93 today. The mid point of those extremes is 8.69 so that probably a reasonable level for today’s minimum wage.

The big problem between 1970 and today is our standard of living and the costs that go a long with that have gone up quite a bit. You didn’t have a cable bill, an internet bill, a cell phone bill, you cooked at home, and had one family car in 1970. Now we expect a lot more and wages haven’t keep up with those expectations. Maybe we need to reduce our expectations and live more within our means.

[livinincali]

If you want to just do some general market research to see what kind of space is available you can do a search on http://www.loopnet.com or http://www.showcase.com

[livinincali]

[quote=SK in CV]
That’s the thing that I really don’t understand about what’s happened in the market. They didn’t change course. Bernanke said the same thing he’s been saying for a year at least. Basically he’ll keep feeding the junkie until the methadone kicks in. It’s not the first time it’s happened, but I think this might be the biggest move after an FOMC meeting. As far as maintaining market stability, he’s really between a rock and a hard place. He farts and the market panics. He doesn’t fart, the market panics.[/quote]

I think the market is starting to figure out that the fed really isn’t in control as much as they’ve thought. For awhile people have been thinking that the fed is an insurance policy for being long. I think people are starting to open their eyes and see that economic conditions across the globe are deteriorating and that faith in the fed might not be able to save them.

I kind of expect faith in the fed to be similar to subprime is contained during the last bubble pop.

[livinincali]

[quote=The-Shoveler]OK I will take a stab at it knowing full well I am about to be flamed.

If they raise interest rates without wage inflation then the housing market will crash followed by state and city bankruptcies one after the other because their main source of revenue is property tax.

This will cause a lot of other economic issue etc…

A lot of people I think fail to put two and two together and think housing crash existed in some sort of vacuum.[/quote]

The fed isn’t going to raise interest rates. It’s going to be those that hold bonds, coming to the realization that they aren’t going to get paid, that’s going to raise the interest rates.

I think city bankruptcies are inevitable and declines housing are likely too, but I don’t know that it will be a crash. There’s too much debt in the system and I think it will be defaulted on rather then inflated away. I could be wrong but there’s so many people playing the lever up and bet on inflation game that I think they are going to end up being the losers.

The thesis has always been that the fed can create the right level of inflation and fix the debt problem. My bet is that they can’t and those people expecting them to be able to do so are wrong. Congress fiscal policy might be able to trigger hyper inflation but the fed cannot.

[livinincali]

I’m going to go with the popping of the bond bubble that most people say doesn’t exist. The result should be a deflationary depression because credit spends the same as money.

[livinincali]

[quote=bearishgurl]
livinincali, not only are you misinformed, you’re jumping the gun a little, don’t you think? kev isn’t even married yet and doesn’t have any kids. In any case, it will likely be at least six years before he has to think about schools.
[/quote]

Um.

[quote=kev374] How are the schools there?[/quote]

[livinincali]

They say a picture is worth a thousand words so here’s my point in a nice little chart. The problem of 2 different exponents growing at different rates. If this weren’t reality then we wouldn’t be having this discussion.

[livinincali]

[quote=CA renter]Presumably, you would have had some kind of data or proof that public sector salaries and benefits have had “exponential growth.” Just the same as your quote in this thread that “90% of public budgets are going to public employees,” you’re just making this stuff up.
[/quote]

I gave environment service data that supports exponential growth. 50% growth over 10 years is about 4% per year which while on the surface might be considered ok it’s more than tax revenues have grown over the same period. That’s my main point. Salaries and benefits for public sector employees cannot grow faster than tax revenues.

90% of salaries and benefits is probably more true of the school districts rather than all city/state departments. Any department where the bulk of expenses is based on services from labor will have that kind of ratio. WasteWater and Water won’t while something like public safety is probably close.

[quote=CA renter]
At least I have solid knowledge about the compensation packages for public employees at both state and local levels. They have been making concessions in pay and benefits for YEARS — and that’s nominal decreases.
[/quote]

You make this claim and yet provide no proof of this claim. You ask me to provide proof of my claims and I oblige. How do I know you’re not being disingenuous when you make this claim. I understand you might feel attacked or threatened but sometimes the facts are the facts.

[livinincali]

Schools in this area are below average. Tons of ESL students that close to the border which will tend to bring the numbers down. Based on your lack of knowledge about San Diego I’d recommend renting somewhere at least a year to get a feel for where you might want to be. Most of the IT work is around sorrento valley and rancho bernardo so you’d probably be better off with something a little closer to those job centers, 92126 or 92071 will have stuff in your price range with a shorter commute and better schools.

[livinincali]

[quote=CA renter] Most of the public employees that I know (and I know quite a few of them from multiple public agencies) have been taking pay and benefit cuts for YEARS. So, where are you getting the information that the **compensation per employee** is rising faster than population growth/productivity/inflation? And I want to see data that goes back decades, well before 2000, for the reasons stated in my post above (no cherry picking the top of the stock market when public employers were paying little to NOTHING toward their employees pension costs because the funds were OVER-funded).
[/quote]

So I went to the cities budget page to see if I could find the data. I did find it but it doesn’t go back decades. I went ahead and looked at environmental services as it’s a pretty large piece of the city and an area where we like to think privitazation and charging for trash pick up are solutions. So here’s what I found.

In 2003 the further the data goes back Environment services had 510.37 positions with a total personal budget of 32,827,675 or $64,321/employee. In 2013 that budget is 414 employees with a total personal budget of 38,178,388 or about $92,218/employee. That looks pretty close to an average of about 50% more per employee in the last 10 years. Pretty much lines up with exactly as I said. Now I’ll ask you to provide specific data about why I’m wrong. Something more than your stories about people you know. Here is a link to the data I used.

http://www.sandiego.gov/fm/annual/pdf/fy05/v2enviro.pdf

http://www.sandiego.gov/fm/annual/pdf/fy13/vol2/v2esd.pdf

[livinincali]

[quote=CA renter]
Once again, not all taxes come from GDP, and I am NOT talking about raising new taxes.[/quote]

If this is what you believe then it a pointless debate. Where do you think government get taxes from if they don’t come from the productive output of the citizens of this country? A tax is a claim to a portion of the goods and services somebody produces.

In general I don’t have a problem with changes to prop 13. I think it’s a generally unfair system, but I would rather a prop 13 change be balanced by reduced taxes somewhere else.

[Author]

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