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Old 01-18-2015, 11:02 AM
 
3,196 posts, read 1,820,974 times
Reputation: 8438

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Quote:
Originally Posted by mathjak107 View Post
I would disagree at this point . stock valuations are fine based on earnings. they are not cheap but right in line and after all that is why we own shares in a business.

if interest rates are taken into consideration the values are even better .
Please show how Amazon stock is valued on earnings. I just don't see it.
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Old 01-18-2015, 11:05 AM
 
71,946 posts, read 71,971,035 times
Reputation: 49506
I do not buy or even look at individual stocks , I don't buy them as investments. I look only at the broad market averages. the s&p 500 is fairly valued.

in fact If fourth-quarter earnings come in as forecast, the year-end P/E (price/earnings ratio) would rise to 17.6. That’s below the 19.1 average of the past quarter century,
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Old 01-20-2015, 12:16 AM
 
1,734 posts, read 1,953,209 times
Reputation: 3906
Quote:
Originally Posted by luv4horses View Post
All the news outlets are happy to report how low mortgage rates are running. 30-year below 3.66 and 15 year below 3%. Potential buyers are thrilled. Young people may be able to afford a house for the first time.

But are any other retirees bothered by this? For example, if I was 60 and planning to live another 30 yrs, would I loan the money to buy a house to someone at 3% interest? This is not a reasonable investment option, given all the risks of default and decay involved--is it? Likewise, these sorts of loans are related to my returns on my investments if you take the broad view. Does this mean that I should start to expect a major decline in the staying power of my retirement funds? Luckily these buyers will not keep their loans for the full 30-years, what with many homes being resold every 5 to 10 yrs, but are these low interest rates not hurting retirees? Please show me I am wrong (leaving politics out of the discussion).
Good question. IMHO the fundamentals of investing have become debased- deliberately, many would say - with the Fed's ZIRP (zero interest rate policy). The fundamental house purchase equation used to be "no more than three times income". With ZIRP, the real estate establishment can slide with the "howmuchamonth" argument, which most people are only too happy to swallow hook, line and sinker. So, on the average, since people can "afford" to borrow a minimum of twice as much and still have the same "howmuchamonth", houses miraculously doubled in price.

I've got pretty strong opinions about this housing racket. It's got nothing to do with political parties. It's got to do with the debasement of our country.

Who benefits from high prices? The people who make their livings from commissions and fees. Real estate salesmen, lawyers, title companies, and banks (who get new "assets" - loans - with which to counterbalance the nonperforming loans they STILL carry on their balance sheets). On the national level, the country would be insolvent if the Treasury had to redeem bonds at 7% interest. Pretty much the entire housing and banking industry would implode if interest rates reverted to anything that would make sense for savers. Of course, the sellers benefit as well, especially if they overpaid during the 2000-2008 runup to the crash. Pretty much, the entire racket is rigged against buyers, and most especially against the millennials - who are entering their household formation years with high student debt, eviscerated wages, and high health care costs. Unlike the people who are trying to unload their houses on them. No wonder the millennials are on a housing strike.

Who loses? The marks - err, buyers - who are grateful for low interest rates, since low interest rates enable them to borrow enough to "buy" a grossly inflated asset. These people do not understand that they will never, ever be able to rid themselves of that debt. Of course, the real estate machine will indignantly hiss and spit that the house that now goes for three times the price it did before 1998, almost twenty years ago, is "worth it" - despite the ravages of time, deferred maintenance, and structural decay.

I once met a used house salesman in the western part of the state who "priced" the houses she was selling strictly according to what she needed to fill the gap between what she wanted to live on for that year, and what she was actually making. I happened to get her on a year when she wanted a plastic surgery refresh, so the house I was interested in was priced accordingly. Another hapless citizen, at another time, was given a wishing price that seemed high for another house. Following the money, it emerged she had wrapped her previous car around a tree during ice season, and wanted to buy a new one for cash, since she did not like making lease payments. Wishing prices, in other words, are adjusted from the right hand side of the menu.

Any house, in any area of the country, can be built from scratch for $65/square foot or less, all in, including lot price and profit. Calculate the coats from the bill of materials, add in the cost of illegal alien labor (minimum wage) and $500 for four sets of plans from houseplans dot com.

The difference between $65/square ft and what you are willing to pay is vig. Does not add anything except to the builder's and realtor's pocket. Protect yourself by going to town hall, spending a day, and actually researching which comparable properties have sold, and at what price - you will never, ever get the truth from a used house salesman. Their livings depend on asymmetry of information.

For a depreciated house, the price should be lower than $65/sq ft. It stands to reason that anybody who bought a used (or new) house between 2000-2008 - the bubble inflation before the crash - overpaid wildly. They are now in a rush to sell before the next crash, living under the delusion that they are entitled to a profit.

Disregarding the sellers who are increasingly desperate to sell, who need cash with which to fund their retirements: the minute interest rates go up to 7% again, the wishing price of houses will be halved. The new underwriting rules are pretty firm on lending no more than 30% of gross income. So, wishing prices have to come down, since wages have been flat since 2000 on average. Of course, the "howmuchamonth" buyers still have the option to pay the difference in cash.

On January 29th, the agency lenders (Fannie, Freddie) - who immediately buy mortgages from the banks that lend so that the banks don't get stuck with the foreclosures - are rumored to circulate risk-based comps for every house that needs borrowed money to get the deal done. This means that used house salesmen will no longer be able to pull the "comps" out of their ears. I'm certain that the largest lobbying group in the country - the NAR - is shrieking at its bought-and-paid-for representatives at maximum volume to get this matter forgotten.

Once interest rates go up, the country becomes insolvent - it's pretty safe to bet that they'll not be permitted to increase.

We're headed into the next recession. The financial economics journals are speculating about deflationary indicators. "Buy now, or you'll be priced out forever!" rings somewhat hollow - but they're still using it, and people are still being snookered.

Them's my opinions, and I'm stickin' to 'em.
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Old 01-20-2015, 12:21 AM
 
1,734 posts, read 1,953,209 times
Reputation: 3906
Quote:
Originally Posted by jane_sm1th73 View Post

...
The new underwriting rules are pretty firm on lending no more than 30% of gross income.
...
***cough, cough***

That would be 3x income, not 30% of income.

***blush***
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Old 01-20-2015, 04:54 AM
 
29,837 posts, read 34,918,975 times
Reputation: 11752
The biggest problem with low interest rates could/will come down the road when folks with current low rates decline to move up or relocate because of higher future rates impacting the cost of doing so.
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Old 01-21-2015, 09:56 PM
 
12,825 posts, read 20,173,623 times
Reputation: 10910
Quote:
Originally Posted by jane_sm1th73 View Post
Good question. IMHO the fundamentals of investing have become debased- deliberately, many would say - with the Fed's ZIRP (zero interest rate policy). The fundamental house purchase equation used to be "no more than three times income". With ZIRP, the real estate establishment can slide with the "howmuchamonth" argument, which most people are only too happy to swallow hook, line and sinker. So, on the average, since people can "afford" to borrow a minimum of twice as much and still have the same "howmuchamonth", houses miraculously doubled in price.

I've got pretty strong opinions about this housing racket. It's got nothing to do with political parties. It's got to do with the debasement of our country.

Who benefits from high prices? The people who make their livings from commissions and fees. Real estate salesmen, lawyers, title companies, and banks (who get new "assets" - loans - with which to counterbalance the nonperforming loans they STILL carry on their balance sheets). On the national level, the country would be insolvent if the Treasury had to redeem bonds at 7% interest. Pretty much the entire housing and banking industry would implode if interest rates reverted to anything that would make sense for savers. Of course, the sellers benefit as well, especially if they overpaid during the 2000-2008 runup to the crash. Pretty much, the entire racket is rigged against buyers, and most especially against the millennials - who are entering their household formation years with high student debt, eviscerated wages, and high health care costs. Unlike the people who are trying to unload their houses on them. No wonder the millennials are on a housing strike.

Who loses? The marks - err, buyers - who are grateful for low interest rates, since low interest rates enable them to borrow enough to "buy" a grossly inflated asset. These people do not understand that they will never, ever be able to rid themselves of that debt. Of course, the real estate machine will indignantly hiss and spit that the house that now goes for three times the price it did before 1998, almost twenty years ago, is "worth it" - despite the ravages of time, deferred maintenance, and structural decay.

I once met a used house salesman in the western part of the state who "priced" the houses she was selling strictly according to what she needed to fill the gap between what she wanted to live on for that year, and what she was actually making. I happened to get her on a year when she wanted a plastic surgery refresh, so the house I was interested in was priced accordingly. Another hapless citizen, at another time, was given a wishing price that seemed high for another house. Following the money, it emerged she had wrapped her previous car around a tree during ice season, and wanted to buy a new one for cash, since she did not like making lease payments. Wishing prices, in other words, are adjusted from the right hand side of the menu.

Any house, in any area of the country, can be built from scratch for $65/square foot or less, all in, including lot price and profit. Calculate the coats from the bill of materials, add in the cost of illegal alien labor (minimum wage) and $500 for four sets of plans from houseplans dot com.

The difference between $65/square ft and what you are willing to pay is vig. Does not add anything except to the builder's and realtor's pocket. Protect yourself by going to town hall, spending a day, and actually researching which comparable properties have sold, and at what price - you will never, ever get the truth from a used house salesman. Their livings depend on asymmetry of information.

For a depreciated house, the price should be lower than $65/sq ft. It stands to reason that anybody who bought a used (or new) house between 2000-2008 - the bubble inflation before the crash - overpaid wildly. They are now in a rush to sell before the next crash, living under the delusion that they are entitled to a profit.

Disregarding the sellers who are increasingly desperate to sell, who need cash with which to fund their retirements: the minute interest rates go up to 7% again, the wishing price of houses will be halved. The new underwriting rules are pretty firm on lending no more than 30% of gross income. So, wishing prices have to come down, since wages have been flat since 2000 on average. Of course, the "howmuchamonth" buyers still have the option to pay the difference in cash.

On January 29th, the agency lenders (Fannie, Freddie) - who immediately buy mortgages from the banks that lend so that the banks don't get stuck with the foreclosures - are rumored to circulate risk-based comps for every house that needs borrowed money to get the deal done. This means that used house salesmen will no longer be able to pull the "comps" out of their ears. I'm certain that the largest lobbying group in the country - the NAR - is shrieking at its bought-and-paid-for representatives at maximum volume to get this matter forgotten.

Once interest rates go up, the country becomes insolvent - it's pretty safe to bet that they'll not be permitted to increase.

We're headed into the next recession. The financial economics journals are speculating about deflationary indicators. "Buy now, or you'll be priced out forever!" rings somewhat hollow - but they're still using it, and people are still being snookered.

Them's my opinions, and I'm stickin' to 'em.
Commodities are obviously already doing a swan dive. Next will be the over blown assets. Then, as if not already injured enough, wages. Pauperization is inevitable. The silver lining will be, relative to the macro losses of valuation, those stale piles of cash in people's remaining CDs will actually appreciate de facto in that their purchasing power will be increasing as costs crash.
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