Real Estate Market / Inflation / Recession / Depression (2008 Edition) (credit rating, work, payments)

[jazzlover]

I can't speak for Bob, but I'll try to answer your questions, NewAgeRedneck. Many people reading and/or posting on this forum do so because they are considering making a major change in their lifestyle. They are considering relocation, a change in living arrangements (rural to urban, urban to rural, smaller home to bigger home, bigger home to smaller home, etc.). They may also be looking at changing careers, as well. They come to these forums looking for discussion, advice, answers. Much of the time, their questions center on specifics--what is this town like, what jobs are there, what's the traffic like, etc. All of that is well and good, but there are much broader issues to consider now. How well is my "new" home going to fare in the years ahead? Is the lifestyle I want to live going to be affordable or sustainable for me? Is my employment in my new place going to be a stable, good job, or is it at risk of declining or disappearing? I think Bob and I are in agreement that a whole lot of very significant (and, yes, often disturbing) trends are going to lay waste to a lot of long-held assumptions about all of those things. I look at this thread as a springboard for thought and discussion about that. I suspect more than a few readers of this thread might at least take into consideration some of the points made here as they make very significant decisions about their personal futures. I think that is 'empowerment," at least in some sense.

As to "empowering" myself, I have endeavored to "re-adjust" my financial, work, and living/lifestyle situation to what I believe are going to be the new realities. As you can probably guess, it is based a good deal on personal conservation, financial conservatism, avoidance of debt (especially and absolutely for consumption purposes), and increasing self-reliance. I will freely admit that, for me, it is a work in progress. It is also a lifestyle decision that many might find unattractive--it can be summed up best as living BELOW one's means.

The most "empowering" part I see about it for myself is that, though I believe we are headed for tough times, I know that the people who are prepared for those realities will survive them--just as my parents survived the Great Depression and a World War.

Part of our current national weakness, from individuals clear up to our highest leadership, is that we tend to pillory as a "pessimist" anyone who points out some very obvious and harsh realities. I have said before that if all City-data is supposed to be is a pollyannish regurgitation of the Chamber of Commerce line and a discussion of the most minor trivialities of one of the most major and life-changing decisions that most people make--relocation--then it's pretty much a waste of time for those who post on it and for those who read it. I look at City-data much differently. I look at it as a resource for people to find out information and opinions--what the best and worst (and everything in between) of places are, and for discussion of what the long-term visions and prospects are for those places. I think this thread fits quite well in that discussion.

[multitrak]

Originally Posted by Bob from down south

And borrowing our future from Beijing or Abu-Dhabi maybe isn't a really solid alternative...

okay, here's some interesting facts (and hard data) about the fed debt...the british and brazilians have increased their purchases of US debt recently while the japanese have backed off somewhat and the chinese and opec are mostly flat (see table below). with a $9.2 trillion total federal debt at the end of 2007, then the japanese own only 6.2% of the that debt, followed by the chinese, british, brazilians, and opec owning, respectively, 4.4%, 3.3%, 1.4%, and 1.4%, and foreign ownership of the US debt all combined only comprises 25.6% of the total. these data ought to dispel the laughable myth that the chinese and "arabs" are taking over the country!

actually, for the US, the debt news is better than it appears. according to the numbers, ownership of the fed debt works out to US gov 45%, private sector americans 29% and foreign 26%. Of the $9.2 trillion that the government owes, $4.1 trillion is intragovernmental debt, or, what the government owes to itself. essentially, this is all bookkeeping, and operationally never a cause for worry. The remaining $5.1 trillion, however, is owed to the public. but when you look at that in terms of the debt to GDP ratio (where the current GDP is approximately $14.2 trillion), it comes in at a very manageable 36%, which is well below the post-World War II average of 43%. think of it when a banker asks for your debt/income ratio (an indicator of your ability to repay) when you go to borrow money, and you should get the picture. all this debt hysteria and fear mongering is basically a persistent but vocal minority screaming TEOTWAWKI, now going on for 4 decades (the players change, but the message is still the same), but not seeing their doomsday prophesies fulfilled...

MAJOR FOREIGN HOLDERS OF TREASURY SECURITIES
(in billions of dollars)
HOLDINGS 1/ AT END OF PERIOD

Dec Nov Oct Sep Aug Jul Jun May Apr Mar Feb Jan Dec
Country 2007 2007 2007 2007 2007 2007 2007 2007 2007 2007 2007 2007 2006
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------

Japan 571.2 580.9 591.7 581.9 585.8 610.6 612.9 615.0 614.6 611.4 616.4 627.2 622.9
China, Mainland 405.5 386.8 387.0 395.6 399.1 407.9 405.2 407.5 414.2 420.0 416.0 401.0 396.9
United Kingdom 2/ 299.7 315.6 295.5 265.0 242.9 209.6 192.1 169.5 135.4 147.9 121.6 104.0 92.6
Brazil 128.8 120.6 112.8 109.4 106.7 104.7 93.7 81.6 79.7 69.7 60.7 53.7 52.1
Oil Exporters 3/ 126.7 127.6 130.5 126.0 123.6 123.5 122.1 121.1 112.0 112.5 110.5 111.7 110.2
Carib Bnkng Ctrs 4/ 81.3 72.1 70.2 63.7 68.4 35.3 42.8 47.2 75.6 79.9 65.6 68.0 72.3
Luxembourg 76.3 75.0 70.0 65.0 63.8 64.2 62.6 62.2 61.8 61.8 59.8 59.4 60.0
Hong Kong 54.3 54.8 54.4 55.7 56.3 59.0 60.5 58.6 56.3 58.5 57.3 54.6 54.0
Taiwan 51.0 49.9 53.6 52.7 52.3 57.4 57.5 57.4 59.2 58.1 57.5 59.3 59.4
Korea 45.6 44.1 43.3 45.7 48.9 50.7 50.0 52.1 54.1 57.9 56.9 62.3 66.7
Germany 44.1 41.4 44.2 44.2 44.7 44.0 48.3 51.4 49.8 47.6 47.9 49.8 46.0
Mexico 37.2 34.8 33.2 32.7 32.9 37.6 36.6 35.5 35.5 35.3 35.0 36.6 34.9
Singapore 36.8 37.2 35.8 33.6 34.8 33.3 33.0 34.4 32.1 28.8 31.2 29.9 31.3
Switzerland 32.8 32.0 31.7 30.9 31.3 31.1 32.2 31.9 32.3 32.9 32.7 33.7 34.3
Thailand 24.6 24.7 20.0 21.8 20.1 19.7 17.8 18.7 16.8 17.8 16.8 16.6 16.9
Turkey 24.0 24.0 26.5 26.6 27.6 26.9 27.1 27.0 26.2 27.6 25.4 25.0 23.0
Canada 24.0 29.3 21.6 23.3 24.9 29.2 30.5 33.6 29.8 31.5 30.1 28.4 26.9
Netherlands 19.9 18.9 19.5 19.8 21.3 20.3 21.2 20.0 21.3 21.4 21.5 20.1 20.7
Poland 15.4 13.6 12.3 13.2 13.0 13.7 12.9 11.8 12.2 12.2 12.7 12.5 13.9
France 15.3 14.8 14.7 13.3 16.8 21.3 20.9 20.9 19.8 20.8 23.1 27.9 26.4
Ireland 14.9 13.7 13.2 12.5 13.0 11.8 12.0 12.0 8.5 11.7 12.5 12.3 11.6
Sweden 14.2 14.6 15.0 15.3 16.2 16.1 15.7 15.4 14.8 14.9 14.9 14.0 12.0
Italy 14.1 15.0 13.6 12.9 12.7 13.4 13.5 13.4 13.3 13.9 13.4 13.6 13.2
Russia 13.9 14.7 14.9 13.0 13.1 17.1 14.7 11.8 7.7 7.4 8.1 8.5 7.0
India 13.7 13.6 13.7 9.6 10.9 12.9 12.8 15.3 20.0 20.1 19.5 15.8 14.6
All Other 168.0 166.9 158.4 154.9 137.8 129.2 143.0 159.6 163.5 173.1 176.2 174.7 183.1
Grand Total 2353.4 2336.4 2297.2 2238.4 2218.9 2200.6 2191.5 2185.0 2166.7 2194.8 2143.3 2120.6 2103.1

Of which:
For. Official 1471.4 1449.4 1444.1 1438.0 1425.4 1451.3 1442.9 1448.2 1458.2 1465.8 1451.3 1448.7 1449.0
Treasury Bills 196.2 185.1 180.2 178.1 179.8 176.0 160.7 172.5 178.0 194.9 181.8 181.4 176.8
T-Bonds & Notes 1275.3 1264.3 1263.9 1259.9 1245.5 1275.2 1282.1 1275.7 1280.3 1270.9 1269.5 1267.3 1272.2

Department of the Treasury/Federal Reserve Board
February 15, 2008

1/ Estimated foreign holdings of U.S. Treasury marketable and non-marketable bills, bonds, and notes
reported under the Treasury International Capital (TIC) reporting system are based on annual
Surveys of Foreign Holdings of U.S. Securities and on monthly data.
2/ United Kingdom includes Channel Islands and Isle of Man.
3/ Oil exporters include Ecuador, Venezuela, Indonesia, Bahrain, Iran, Iraq, Kuwait, Oman, Qatar,
Saudi Arabia, the United Arab Emirates, Algeria, Gabon, Libya, and Nigeria.
4/ Caribbean Banking Centers include Bahamas, Bermuda, Cayman Islands, Netherlands Antilles and Panama.
Beginning with new series for June 2006, also includes British Virgin Islands.
above table from http://www.treas.gov/tic/mfh.txt

[Charles]

Originally Posted by multitrak

okay, here's some interesting facts
Italy 14.1 15.0 13.6 12.9 12.7 13.4 13.5 13.4 13.3 13.9 13.4 13.6 13.2

I think the numbers for Italy are actually

14.1 15.0 13.5 12.9 12.7 13.4 13.5 13.4 13.3 13.9 13.4 13.6 13.2

but otherwise all the other numbers look correct.

[Bob from down south]

Originally Posted by NewAgeRedneck

Bob & Jazz

I find no sense of personal empowerment from your writings, and I imagine that few if any readers of this thread have taken one single step in their personal lives to generate a greater sense of empowermnet in their own lives. Though I'm well aware that I could be totally wrong about this, I rather doubt that I am. If anyone has been truly empowered by reading this thread, please share the actions you have taken ( prompted from reading this thread ) that have generated your greater sense of empowerment. My point again is that over focusing on the doom and gloom just brings more doom and gloom into existence, and it does nothing to change the status quo for the better.

Jazzlover has already covered most of the bases quite well.

The gloomy discussion can be of benefit to those who possess the will and the capability to recognize the dangers and do something about their exposure.

For example, those approaching a pensionless retirement sitting comfortably in a portfolio heavy in stocks right now should be very concerned about their financial future, and my belief is staying invested that way with what's shaping up ahead of us is taking a risk of losses that they will not be able to recover from in their lifetimes. The buy-and-hold pundits were telling tech stock holders to stay put in early 2000, too, and the NASDAQ steadily dropped more than 85% with a recovery always just around the corner, leaving the buy-and-hold no-matter-what crowd wrecked. The NASDAQ is still more than 50% off its 1999 peak. Bad things can happen to good people...especially if they're asleep at the wheel or have succumbed to the latest popular mania.

And those who are moving, or considering a move, would be well advised to challenge the self-serving real estate industry mantra that "you're always better off owning"...that "now's the time to buy," and that "real estate only goes up." A truly empowered individual can look at the market and the pros and cons objectively and realize that there are clearly times when none of those things are true, and that renting and waiting, or even staying put or finding another place to live may be a better option right now.

And for those that will buy, does a propane-heated house in the Colorado Springs or Denver exurbs make sense given that propane is derived from petroleum and has nearly doubled in price this year? Does a 3/4 acre lush green yard make sense in Monument with the local water board predicting a supply shortage only 5 years out? Does 4,000 square feet of house for just two people located 25 miles from work make sense if oil might well reach $125 or $150 a barrel in just a few years?

And for those who "own" rapidly-depreciating highly-leveraged property, will staying in that house and riding the Titanic all the way to the bottom serve any other purpose than to leave you owing potentially hundreds of thousands of dollars on a house that was never really worth what you paid for it? Might not getting out now, even at a small loss, be a good idea?

If your doctor tells you that you have Diabetes, it's certainly gloomy news. You can tune that out, and head to the nearest Baskin Robins for a banana split, or you can accept that your living conditions have changed somewhat for the worse, and that changes are in order unless you want things to get much worse. Empowerment is the ability to make that change...by having the information you need on conditions and the potential outcomes of your choices. Empowerment is also the ability to not make that change, and to choose a status quo course straight into very troubled waters.

[Bob from down south]

Originally Posted by multitrak

okay, here's some interesting facts (and hard data) about the fed debt

The fed debt is a bit off the mark, given how depressed yields are right now.

I'm more concerned about the late-breaking trend of sovereign wealth funds and foreign national banks buying large parts of the financial industry as it staggers under the weight of its recent sins. Like Citigroup borrowing money from a mideast SWF at 14% rather than going to the regular discount window or sneaking surreptitiously in with a bid at the TAF auction. When Citi pays 14% to Abu Dhabi rather than 3.5% to the Fed, it strongly suggests to me they've already hocked all their worthy collateral and are out on the street with their tin cups praying for enough of a handout to get through the next quarterly report.

There was a total of something like $47 billion in strategic stakes bought by SWFs in 2007 alone.

[jazzlover]

Originally Posted by Bob from down south

The fed debt is a bit off the mark, given how depressed yields are right now.

I'm more concerned about the late-breaking trend of sovereign wealth funds and foreign national banks buying large parts of the financial industry as it staggers under the weight of its recent sins. Like Citigroup borrowing money from a mideast SWF at 14% rather than going to the regular discount window or sneaking surreptitiously in with a bid at the TAF auction. When Citi pays 14% to Abu Dhabi rather than 3.5% to the Fed, it strongly suggests to me they've already hocked all their worthy collateral and are out on the street with their tin cups praying for enough of a handout to get through the next quarterly report.

There was a total of something like $47 billion in strategic stakes bought by SWFs in 2007 alone.

There's also the matter of the statistics themselves. For example, most inflation statistics exclude food and fuel. From a statistician's standpoint, that makes some sense because those figures tend to be quite volatile from month-to-month and make analysis of trends difficult. However, as a practical matter, it makes the statistic itself somewhat (if not very) misleading. That's like saying these days, "Well, inflation isn't bad, IF you don't have to buy food or gasoline." All I have to do is look at my grocery bill from month-to-month to know that inflation is anything but tame right now.

There is also the "news spin." For example, last week everybody was making giddy reports about the increase in retail sales reported in January--purportedly to convince we masses that we aren't entering a recession. In this case, the increase in fuel prices WAS included in the statistic. If the fuel prices were removed from that statistic, retail sales would have actually shown a decrease in January. Of course, that little factoid was a footnote to the news reports, if it was even mentioned at all.

I have spent a lot of years analyzing data and statistics. Most of the time, people just accept whatever conclusion someone throws out there about the stats. They never bother to see how that data was gathered, what was included or excluded, or how sound the analysis that was made was in reaching a conclusion. They especially don't look at the inherent bias that may be present in whomever is presenting the stats. In the current case, I would suspect the Federal Reserve and a lot of other agencies are trying to make as positive as spin as possible on economic statistics.

And, of course, near and dear to some posters on this board, the realtors, developers, and their lackeys sure don't want people thinking that real estate and trophy homes might not be the shiny investment that they have been during the last 10 years or so of rampant speculation. They don't want people to know that the party's about over, all the booze is gone, and there's one hell of a hangover headed their way. What fun would that be?

[Bob from down south]

NewAgeRedneck--after reading the thread again, I wanted to make sure my replies aren't interpreted as attacks...in retrospect they are rather strongly worded.

I make my points forcefully because, during the tech wreck, I saw that train approaching, and didn't speak up loudly or persist when my family and friends dismissed the possibility of a hard crash. I knew what I was seeing then, as I do now, but I lacked the confidence to speak up. Net result in my inner circle...a 67 year old retiree who lost over 95% of his leveraged tech-heavy retirement savings and had to sell his home of over 40 years...the home his kids were born in...in a forced downsizing. Two friends who had to start their retirement savings almost from scorched earth. College plans scrapped. Three marriages destroyed. I still feel that if I had followed my instincts then and screamed bloody murder that I might have stopped some of that. And that inner circle of family and friends is getting quite the earful today.

What I see evolving today is far, far worse than the dot.com bubble. I don't want people to feel good, I want them nervous as a Christian Scientist having chest pains. People should open their eyes and question everything...we should have learned all too recently in the dot.com bubble, and from the history of the Florida land and stock market bubbles of the 1920s, that what you don't know when you follow a crowd up a hill and over a cliff really can hurt you.

[multitrak]

Originally Posted by Bob from down south

I'm more concerned about the late-breaking trend of sovereign wealth funds and foreign national banks buying large parts of the financial industry as it staggers under the weight of its recent sins. Like Citigroup borrowing money from a mideast SWF at 14% rather than going to the regular discount window or sneaking surreptitiously in with a bid at the TAF auction. When Citi pays 14% to Abu Dhabi rather than 3.5% to the Fed, it strongly suggests to me they've already hocked all their worthy collateral and are out on the street with their tin cups praying for enough of a handout to get through the next quarterly report.

There was a total of something like $47 billion in strategic stakes bought by SWFs in 2007 alone.

yep, good ole under the table junk financing...reminds me of a rockford files episode when rockford got involved with a fighter and his manager and found out that said manager sold 200% shares on the fighter. needless to say, someone's going to get screwed on payday...and it's usually rockford left holding an empty bag!

[multitrak]

Originally Posted by Bob from down south

I knew what I was seeing then, as I do now, but I lacked the confidence to speak up. Net result in my inner circle...a 67 year old retiree who lost over 95% of his leveraged tech-heavy retirement savings and had to sell his home of over 40 years...the home his kids were born in...in a forced downsizing. Two friends who had to start their retirement savings almost from scorched earth. College plans scrapped. Three marriages destroyed. I still feel that if I had followed my instincts then and screamed bloody murder that I might have stopped some of that. And that inner circle of family and friends is getting quite the earful today.

i've learned over the years that you can't "save" people from themselves, especially when they are financially and EMOTIONALLY invested in the manias, when the mob behavior exerts its strongest hold over people. it's similar to an addiction, when people do insane things to get that next fix...they only respond to reason when the mania has come and gone and they've hit rock bottom...

[sterlinggirl]

Advice given to me by well meaning people:

1999: The stock market is doing so well that it just has to keep going up
2005: Houses always go up in value
2008: Gold/silver are great for wealth protection