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October 2, 2017 at 10:38 PM in reply to: Commentary | Why full funding of pensions is a waste of money #808030October 2, 2017 at 6:31 PM in reply to: Commentary | Why full funding of pensions is a waste of money #808028
ucodegen
Participant[quote=phaster]
WRT the matter @ hand,… California public pension recipients and politicians blame the markets and wall street bankers to rally the faithful. The scapegoating strategy mostly works! By beating up on other institutions this keeps supporters (and the general public) from focusing too closely on fact that politicians and public employee union officials created the financial problem.FYI the same week the “pension” op-ed was in the paper, another math related story was in the news.
[quote]
Scripps Study (There’s A Chance Climate Change Can Wipe Out Humans By 2050)http://www.kpbs.org/news/2017/sep/15/scripps-study-theres-chance-climate-change-can-wip/
http://www.sandiegouniontribune.com/news/science/sd-me-scripps-climatechange-20170914-story.html
[/quote]This news story was on the back pages.
As I see things, the op-ed illustrates an entitlement mentality that politicians and public employee union officials have about pensions. The root cause being the DELUSION they have, which is the math will somehow work!
[/quote]
That is a strange ‘pivot’. The problem is that math is ACTUALLY showing the AGW people wrong, and I don’t see any math in your references… but the AGW proponents don’t want to see the math, so they keep shouting that there is a consensus. Science does not use consensus – but politicians do.Here is a little exercise WRT AGW. Build a table – MS eXcel helps. Down the left side – top 3 global warming gasses, downward strongest to weakest. Across the top, name of gas, chemical formula, atomic weight, relative global warming strength when compared to weakest of the 3, PPM on average (some of the gasses are highly variable) and finally weighted PPM using weakest gas as a basis. Fill in the table and take a look at the results.
The AGW proponents bring up that Roger Revelle showed that CO2 is a greenhouse gas, what they fail to mention is his warning about jumping to conclusions on CO2.
PS: I graduated from Revelle College, UCSD, I have met and talked with Roger Revelle a long time ago and I used to work at SIO a long time ago.
PPS: You can cheat and look the answers and numbers up when filling in the table.
September 22, 2017 at 7:53 PM in reply to: Commentary | Why full funding of pensions is a waste of money #807959Participant[quote=gzz]I agree with you about ending defined benefit. No new public employees should be added to it. 98% of the private sector has already done this.
I do not agree about 100% funding of pension obligations. It would be highly pro cyclical, as pension assets would appreciate without contributions in a boom, but require government cuts or tax increases in a recession.[/quote]
The problem with this statement is that a pension is working to satisfy a defined benefit. Whether or not you are fully funded, it will be highly cyclical. Not fully funding is like using leverage on an asset. The problem is that on a partially funded benefit system, it is much more sensitive to downturns (ie leverages on downturns). The ‘tax increase’ option is not present on a downturn when trying to handle the under funding.Lets take a look from another ‘angle’. That of one’s own retirement. If I have set aside more than enough to satisfy my retirement needs (ie pension requirements), would an economic downturn adversely affect me more, simply because I currently have all of my retirement funding requirements satisfied? No it will not. The full to over-funding of my retirement means that I can weather a downturn. If the combined contributions and growth in my retirement assets ends up meaning that I have fully funded my projected costs to 130%, that means I can weather a 20% drop in asset values without any difficulty. If you are funded to the point that most to all of the money you pull from retirement is only in the form of dividends from companies etc – a downturn on ‘asset value’ or capitalization is less of a concern. ie: min(4% asset, 50% yr growth) per year pull from retirement assets. It would be similar to how a pension handles the same situation. NOTE: the historical multi-year average S&P return has exceeded 10%. If I take a position of using only 4% of this and re-investing the remaining 6+%, I am well secured. Take it from a yet different angle – If I take a ‘FlyerInHi’ approach and have multiple rentals that cover my expected costs nearly twice over – how much of a problem would a real-estate downturn really mean? Particularly if I take the excess and continually re-invest in new rental units? I have no plan to liquidate the rentals because I have no need to and don’t need to take the capital loss. If a pension is sufficiently large and well managed, it may even be possible to make the pension self funded.
The real problems when fully funding a pension, is the politician’s desire to grab money – including money that is earmarked to continue funding the pension – for other purposes and growth in pension obligations (we have all this money so why don’t we allow all gov employees to fully vest to 80% of salary after first year of employment). It has nothing to do with downturns and has plenty to do with human political nature. It comes down to willpower.
September 20, 2017 at 10:57 PM in reply to: controlling buyer-agent’s commision when selling #807940ParticipantMy understanding is that the standard commission is 6%. Normally that is split up 3% to buyer and 3% to sellers agent when they are different people. As a seller, you generally can not specify what the buyer’s agent gets, and you probably don’t want to dis-incentivize the buyer’s agent. Just assume that the total will be at most 6%. Some buyer’s agents will charge less, just make sure that your seller’s agent does not try to absorb the remaining amount in that case. A friend of mine sold a house, the buyer’s agent had a commission of 2% not 3%. My friend’s seller agent convinced them to renegotiate the contract for the seller’s agent to get 4% at the last minute of the deal.
September 20, 2017 at 7:50 PM in reply to: Commentary | Why full funding of pensions is a waste of money #807939ParticipantWhere do I start on the issue of full-funding on pensions. It is irresponsible not to properly fund them. The lack of funding ends up building up over time till there is a sufficient deficit that it will actually reduce basic services like police, parks and libraries.
BTW: I have always held that all pension structures should be done away with and that they should be replaced with IRAs and 503s (with mandatory contribution levels and inability to completely cash out early). IRAs and 503s need to have the same bankruptcy and liability protection that pensions have. The reason why I feel this way is that I have seen too much mismanagement of pension assets and poor investment decisions on the part of pension managers. These decisions end up putting the pensioners at risk, either in the near term or some time in the future.
The author of the article makes severe errors in the following statements (quotes) and then the author tries to use them to justify their position:
Imagine you sign a lease to rent an apartment or 12 months at $1,000 a month. Your ultimate obligation is $12,000, but should the landlord refuse to rent to you if you can’t show you have $12,000 available at the outset of the lease (100 percent funding)? No, the landlord simply wants assurance you can pay your rent
each month.WRONG: When renting an apartment, either your credit score has to be good enough and have a reliable job with sufficient income or/and you have to prove you have sufficient funds to cover your lease payments for the period of the lease. I know because I don’t show up on most credit reports because I rarely carry debt. I have had to prove that I have sufficient funds in the past (which was no problem).
If you’re a homeowner, you probably have a 30-year mortgage. Your mortgage allows you to own your home without fully funding the purchase. If, for example, you have a $300,000 home with a $150,000 mortgage, it might be said that your homeownership is at a 50 percent funded ratio. That’s not reckless; it’s prudent use of debt.
WRONG: The mortgage is secured by the house – it is fully funded by the property as well as the down payment. If there is a default on the mortgage payments, the bank gets to take the house and liquidate to cover the mortgage (debt obligation). It becomes a big mess when mortgage companies forget this concept.
Simply WOW!! – and not in a good way. The foundation of his argument is complete sand.
There are two strong reasons not to move to 100 percent funding.
First, doing so would require significant, unnecessary expense to employees, employers and taxpayers.Wrong. What causes the significant and unnecessary expense are unfunded or incompletely funded mandates – including pensions. The institution then has to rely on deficit spending to cover the costs – and then carry the costs of borrowing the money on top of their current costs of their mandates. If the pension is fully funded, it is also bringing in money (it is not dead money, it is invested and getting a return). If you are borrowing money – you are paying someone else for its use and that costs gets added to the existing budget.
There are two strong reasons not to move to 100 percent funding.
Since public pensions can exist indefinitely at 70 percent or 80 percent funding, why not use those funds for more immediate needs?A true deficit spender… OY VEY!
Ok, so what happens on a 70% funded pension when there is an economic downturn? and the 70% funded becomes 50% funded? or less? Who is the institution to turn to, the public is already being burdened by the downturn and can’t afford further taxes.
Here is an interesting way to handle pensions:
http://money.cnn.com/2017/09/19/investing/norway-pension-fund-trillion-dollars/— part of the reason why I think everything should go to 401k(s), 503b(s) is because of nuts like this. Get the money out of their hands, out of the politicians hands and the hands of everyone else that don’t have a truly vested interest in the well being of the pensioner.
— sorry for the rant. When it comes to retirement funding, I tend to be a flaming militant advocate. One of the places I used to work had a pension, I was given the option of cashing out for a cost of about 12% of face value. The pension assets were going to be accruing at a rate of about 1.5% from the date the cash out option was given, to my retirement date. On the first year of cashing out, I already covered the 12% cash out cost. The remaining 1.5% gains have already been covered too. I still have more than 10 years left for growth.
Participant[quote=scaredyclassic]Mandarin?[/quote]
Humm – if going oranges;Clementine – if female (oh my darling, oh my darling.. – maybe before your time), or maybe not a good name.
Cutie?Tangerine
Tangelo
Cara Cara
Valencia – um, maybe not.
Navel (as in orange) – probably would be a problem if calling for him. What would the neighbors think.
Kumquat – mentioned by njtosd, I like some of the others mentioned. (Orange Julius, Crush – even William of Orange)
Tigger (phaster) is also a good one.[quote=scaredyclassic]No risk is acceptable? He lived 7.7 years with occasional jaunts outside for an hour or two, killed some rodents, feasted on gopher guts, smelled the brisk fall air.[/quote]
I tend to agree with your statements here.Life’s like a play: it’s not the length, but the excellence of the acting that matters – Lucius Annaeus Seneca
It is not the length of life, but the depth of life – Ralph Waldo Emerson
Quality of life gives reason to the life.
Participant[quote=scaredyclassic]was thinking octopus. its our 8th cat[/quote]
Was going to say Octopussy. I ran a ‘decency check’ on the word but miss-typed it as octapussy – result of TMI in one case. Also came across a guitar ‘fuzz box’ using the same name.Cool – as I was typing the above, Kansas’s Carry On Wayward Son came across the radio.. ☺
September 16, 2017 at 11:21 PM in reply to: What do you do with a snake when it takes a nap in your backyard #807907ParticipantDo you have a snake stick? Hook at midsection and lift. Snake sticks are pretty long – so don’t try it with a plain old stick.
Looks like a gopher snake – by pattern.
http://www.californiaherps.com/snakes/images/pccateniferch2.jpg
http://www.californiaherps.com/identification/snakesid/snakes.idOLD.html#blotched
I can’t see if there is a rattle on the tail – though it does look ‘kinked’.Try getting some ice from the fridge and put in pot filled with water. Swirl around until water is really cold. Pour where don’t want the snake to go (looks like he may be heading towards you, so in front and a little on him. Leave the other side warm, dry.)
This guy is largely stretched out.. so it can’t strike right now – though gopher’s are constrictors. It also looks like it may have recently eaten. The midsection of the snake is rather ‘thick’.
Participant[quote=gzz]I am not surprised the vegas conplex pencils out just fine. Prices still have a ways up to go.[/quote]
The first one does(Palm).. but I worry about the second (Elysian). I would need to have an idea on the current ‘actual’ rental rates. This project is so new that I don’t know to what degree they are discounting the rent to get people in. What they charge is so close to actual house financing that I wonder on their pricing and whether it will stand up over the long term, added to the ‘institutional’ look and very close freeway (front door location).I also wonder about the job situation (type of job more than count).
Participant[quote=FlyerInHi]Material consumer goods are cheaper. Services are more expensive.
Food is also cheaper.Rents are more because landlord can ask for more In popular areas. It feels like it’s due for a correction if/when a recession hits. However, I believe the top tier metros are strong because they are attracting population and I don’t see this trend reversing.
In Vegas, Blackstone bought 2/2 typical garden style apartment complex for $229k per unit, more than can you buy nicer condos. More than I paid for condos in San Diego. Crazy. But there’s a lot of money chasing real estate.
https://www.reviewjournal.com/business/buyers-pay-269m-for-4-las-vegas-apartment-complexes/%5B/quote%5DI decided to look at the issue from the opposite direction. What does the financing look like. I took the DiNapoli Capital Partners purchase and ran a rough approx. I assumed all $62mil financed at 4%. Total monthly nut is about $295,997 for 404 units for a per unit average financing cost of about $733. I went online to their online rental office and lowest rent is $1010/month. Approx $300/unit/month avg return on money not yours is not too bad ($121,200/month). Rents there are $1010/mo, $1016/mo, $1037/mo, $1250/mo, $1200/mo. If I assume 10% vacancy, the effective unit cost ends up being $813, still not too bad and it looks like you have more ‘headroom’ for contingencies. Noted that this is a very cursory assessment. NOTE: that this is the newer area of Las Vegas. NOTE: Financing all at 5%, bring monthly total to $332,829 – or $914/unit/month at 10% vacancy, $824/unit/mo if all occupied. This is a bit tighter. I do wonder what they put down, and how it was financed.
The Elysian West purchase is as follows. $508,447/month total financing at 4%, all amount financed. This comes out to $1091/unit/month at 100% occupancy. Rental ranges are; 1/1 at $1085 – $1947, 2/2 goes at $1348 – $1731, 3/2 goes at $1607 – $2050. As you noted, these prices start to move into the actual purchase price for housing. It is also very close to a major freeway. What is interesting is that this one looks like a ‘spec built’ apartment complex. I wonder if the builder is carrying some of the financing cost. I also wonder if the anticipated rents are really going to be seen. A July 2015 Google street view shows that area as empty, no apartment complex
On the other hand the aerial shot shows the complex, but it looks kind of ‘institutional’ and sparse compared to the ‘Palms’. You also have a nearby heavily traffic’d freeway.
Ok, just freaked myself out. I revisited the aerial map and it shows an empty field there, where I once saw an apartment complex… I suspect that the complex is so new to the point that Google’s map data is inconsistent between servers. Fiddling with ‘toggles’ shows that if you have 3D view on, you don’t see the complex. With 3D view off, you see the complex. I suspect that this complex was ‘spec’ built. It looks kind of ‘institutional’ compared to the ‘Palms’.
Used Google-Earth. Got the complex on imagery date; 5/13/2017 shows complete with more than 10% vacancy(parking lot survey), 9/2/2016 – fairly complete but mostly empty – south covered parking not complete, south units just finishing up, 3/15/2016 shows the complex still under construction, 3/22/2015 shows empty field and grading just starting. Google earth doe show a lot of construction in the area over the period 3/2014 – 3/2016.
Side note: If you set the time to about 8/10/2003 on Google earth, you can see the work that Las Vegas did on dealing with the flash flood control tunnels.
Participant[quote=svelte]Was that English you wrote?[/quote]
Yep – he wrote English – or maybe stockish/optionish.SPY is a S&P 500 ‘spider’. It is like an index fund – sort of. It trades as an ETF.
gzz is basically a little pessimistic about future upward movement of stock market, S&P 500 more specifically due to the potential events he has mentioned.
NOTE: It might be useful to do a combination of a small put on S&P 500 SPDR/index/ETF with a small call option on gold. It reduces a single event loss, while still covering for your ‘black swan’ event.
August 22, 2017 at 3:11 PM in reply to: Rural Urban Divide, Millennial Lifestyles & City of the Future #807724Participant[quote=millennial]Meanwhile, absorption in my neighborhood in SD is within days, or weeks. Also not sure how much a $50,000 house in SD would get you in 1983, but I guarantee the appreciation would make it a much better investment.[/quote] Maybe, if you could afford the monthly. $50k would not have bought you much in SD in 1983. 1983, Mira Mesa 3 bed 2 bath was about $130k. I was renting a house with a bunch of roomates – house sold in 1985 for $179k. The time to have bought was around 1980 or before. Prices for this home went down to $350k in 2009. They are now back up to approx $560k according to zillow. I suspect these houses will be very sensitive to interest rates.
August 20, 2017 at 11:23 PM in reply to: Rural Urban Divide, Millennial Lifestyles & City of the Future #807703Participant[quote=FlyerInHi]
That might be bad. Someone maybe stuck in a $150k house outside of Peoria.[/quote]That statement does not make any sense! $150K in a house one probably paid $50k for and owe nothing – vs $750k for a house that one serially refi’d to try to keep their head above water in the payments – and are effectively underwater.
With the first, the owner also probably have some money set aside. The second will be running on vapors – with nothing set aside. Now who really is ‘stuck’? The person who could decide to take a bit of a cut on selling a $150k house to get it moved on the market – or a person who is upside down and needs to get the bank to agree to a short sale in order to get it off their hands.
Earnings, costs, taxes etc are all relative. What isn’t is how far above water you are, or whether you are above water at all.
Participant[quote=plm]I’m getting the feeling I should have listened to everyone on this forum to run away. But if the wire clears, I don’t see how I can avoid renting to them.[/quote]
I’m out on this one… so many warnings. ‘flu’ brings up the demand transfer that I mentioned w/ acct and routing numbers. The only way to close it is to close the account. You will be responsible for any overdraft costs.
[quote=plm]Had no idea they were going to do a wire transfer instead of cash.[/quote]
Against better advice, you handed them your account number. What did you expect?
[quote=plm]So in my case, since I am receiving the wire transfer everything should be good. But I just have the feeling that I missed something. Maybe I’m just paranoid because they never seem to do what I ask for.[/quote]
Are you serious? Did you look at flu’s statements on demand drafts – they can effectively forge a check on your account using the info you provided.
I agree with flu, refuse the wire transfer and walk. I’ll add, close your account and transfer all funds into a new account with a new account number.
Directly @ plm, several people on this board actually rent out properties, some more than one. You are choosing to ignore their advice after requesting it. Your risk – I’m out.
Participant[quote=plm]Yes, totally agree with you Flu. I’m way too trusting and have too much compassion to treat the rental as a business. If it gets to be a problem, I will hire a property manager.
I’m not that trusting though. I will get the cash before I give them the keys.[/quote]
It is best to do this (property manager) before the whole thing starts, not to try to do it in the middle or end after the pooch has been screwed. -
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