[powayseller]

How are their costs the same? Isn’t the cost of goods higher for the imported oil?

I read the article. It is somewhat different from the author of 1000 Barrels a Second, who says we are at a breaking point and need to readjust our oil use by conservation or alternative energy, or pay a lot more to make it worthwhile for oil companies to extract the harder-to-get oil.

[powayseller]

I think this time they are heavily debating. Bernanke hoped his tough talk on inflation would quell inflation expectations, just as his admittance of the social security problem is meant to wake us up to not rely on SS for retirement. It’s all about setting *expectations*. His tough talk did most of the job, but not all. Inflation is still creeping in, and despite the slowing economy, the Fed’s main job, their #1 goal, is PRICE STABILITY.

With that goal not lined up, one more raise.

The people who say the Fed is not tough on inflation are wrong. I think they are tough on inflation.

I should qualify: they are tough on inflation only when it shows up in the CPI, because that is the number that anchors people’s expectations and alters their behavior. So with the CPI going up, manufacturers are raising their prices, and with oil going up, they are passing along higher costs.

But one question: If the Fed shows they are tough on inflation, how can that possibly keep companies like lindismith’s from raising their prices and passing along higher energy costs? Do they think that higher prices will reduce consumer demand enough that energy prices will not feed through to higher consumer prices? How is that possible?

So I will go on the record as saying one more raise.

Schahrzad Berkland

[powayseller]

Funny… and I’d be austinrenter.

[powayseller]

I *love* your phrase: snapping out of the real estate echo chamber of myths.

Why are you not going to sell that condo? Do you think it can hold its value somewhat? If it’s not too intrusive, can you provide an insider’s view of the ARM situation – why you got it, how much it will go up, and what are your plans when it does?

[powayseller]

novice – good points. For growing kids, clothing is more of a need to replace outgrown clothes, but I could cut back some.

I once read a book about a couple w/ 2 kids that lives on less than $12k/year, in Iowa. The most important part is a low mortgage. Since mortgage is 1/3 or more of most people’s expenses. Their kids buy clothes at thrift stores and play free sports after school.

Any other tips on reducing expenses?

[powayseller]

batleft- What? “Unless prices decline significantly there is no bubble”. What kind of logic is that? It’s a factual statement. I don’t get your point.

[powayseller]

Rich -what is “monetizing mortgages”?

Davelj, we *have* reached equilibrium on the NASDAQ. Pull up the charts back to 1998. We’ve been back to 1998 pricing for several years now.

[powayseller]

Well, he doesn’t like his job – it’s boring. But he bills at $300/hr and works for himself, so it pays the bills. I have a relative who’s a mergers/acquistions attorney in San Diego, who also says the contract type of real estate work is boring.

[powayseller]

Rich has avoided the flak that I get, because he avoids making predictions. I love a good debate; I must have said that a dozen times. I look forward to your arguments. Perhaps you will show us something that will cause me to change my mind about the 35 – 50% drop? Just to clarify, I am saying in the next 5 years, a 35% drop in the median San Diego County housing prices (condo plus SFH plus attached homes) is certain, a 50% drop is possible.

[powayseller]

I had not thought of tying it to employment.

I have 2 predictions. The first is based on Rich’s charts showing median home price/per capita income cycles up and down between 7 and 9. We are at 14. Assuming wages keep growing at 3%, we need a 35% correction by 2011.

The second is a multiple of rents. What is the historic SFH rent/wage ratio? We need to return to that.

But with the exotic lending, we can easily overshoot, and get a 50% correction.

One factor against this housing market, is the national housing market decline. In the last 2 busts, did the national housing market go down? We have price drops nationwide, national builder stocks are down 48% from peak, overbuilding is nationwide, etc. This lending bubble, credit problems, stagnant wages, and people living off debt, and negative savings rate, is a national issue. We are going to feed off each other on the way down. No telling how bad it can be. Perhaps a depression?

My main question: what will the Fed do to turn this recession around? By Q1 07 it will be obvious we are in a recession, and the Fed will try to liquidate. More cash injection? Can consumers take on more debt? More cash will really fuel inflation.

Last time when we went to 1%, oil prices were low, inflation was low. If the Fed does that now,we will have hyperinflation and the dollar will really sink, right?

[powayseller]

bubble_contagion – how is the oil industry ramping up? Drilling new wells? Where? Buying the tools to extract oil from the oil sands? I think the era of cheap oil is over – there is a lot more oil, but it is getting more and more expensive to extract. The oil companies were not extracting it, because the cost of oil was too low for them to recover the cost. Last, what is your perspective on why the oil companies have record profits? Is it as my brother said, namely that they are now able to charge record amounts for their domestic (free) oil wells? So the profit increase is from the domestic portion of their reserves.

[powayseller]

Sample size was all San Diego city sales. Perhaps that is too small..

[powayseller]

A good friend of mine is a real estate attorney for a huge development company in Phoenix. When I saw my friend this summer, he said he was not worried about real estate – it will cool off a little until the fall, then pick back up again. His latest deal, which he just completed, was a retail center in Scottsdale. He was so busy on this project, I don’t think he realized the market came to a halt.

I e-mailed him after the vacation, because I did not want to ruin his vacation, and relayed info about the housing bubble, national economy, Phoenix bubble, etc. I told him that by next summer, nobody will be building any retail centers, or starting new residential developments, and I suggested he branch out into other areas of real estate law. Perhaps foreclosures, builder lawsuits, etc. I haven’t heard back from him… But so far, he is still very busy. Interesting…the slowdown has not affected him.

[powayseller]

The biggest early housing bear was John Talbott, former visiting scholar at the UCLA Anderson Forecast. He published a book in 2005, titled Sell Now. He probably started writing it in 2004 or early 2005, and he is advocating a recession almsot as bad as the Great Depression. He forecasts major bank collapses, massive unemployment. All this is fairly reasonable, too. It could happen.

I bet Dr. Roubini knew about the housing bubble too, as did the economist magazine.

Diego Mamani, why would a Fed member be allowed to promote their former industry? Or any industry for that matter? Shouldn’t they be independent? This Fed guy reminds me of our assessor, Smith.

[powayseller]

What is interesting, is that most segments show price declines, but a few are flat, and some are actually rising. When you parse the homes into different size segments, some are actually rising. For the realtors out there, can you help explain what this really means, or how to interpret numbers like that? Why is the price change so different among the various sizes?

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