Financial Friday
Jenson Hagen
Wow! I think Baghdad Bob morphed into Ben Bernanke, our Fed chairman. The housing market is really starting to unravel and his catch phrase "soft landing" is starting to look more like BBQ smoke and bathroom mirrors.
Let's cut the crap. Greenspan and Bernanke know good and well what they are doing. Understand this very important economic concept: if interest rates fall too low, there is a point where people stop saving and only consume.
As the tech bubble burst, Greenspan drove interest rates from 6.5% to 2% in a year and then further to 1%. At these low rates, people have no incentive to save because interest on savings accounts falls below the rate of inflation. It actually becomes financially counterproductive to save. So people spend and spend and spend some more. That's why we've seen a negative savings rate of late.
The Fed has been complicit in allowing consumption through debt. So you allow the average household to carry an $11,000 credit card balance. You encourage adjustable rate mortgages for sub-prime borrowers because banks have excess reserves and are willing to expand their customer base to high-risk borrowers. You also allow equity cash-out's and home equity lines of credit at unprecedented levels. This is not a sustainable recovery the Fed has masterminded!
Dr. Kurt Richebacker, a former central banker, points out that in 2005 our debt loads increased at a rate 10x faster than our incomes. The most important thing I learned in school: whatever grows faster than the economy will become the economy. We are creating an economy of debt and that puts us all at enormous risk.
Folks, you always need to save. Save until it hurts. Save!
Sep 22, '06
Great topic. I tell my adult children that debt is more dangerous than crack or meth. If you want to quit doing drugs, you can stop. But once you are in hock to your bank or credit card company, they own your soul for at least the next ten years of your life and there is nothing you can do about it. Thanks to the Republican bankrupcy "reform" bill, there is no way out for most people.
I hate thinking about this stuff. I think I have enough room left on my Visa credit card limit to take myself to dinner in the Pearl and have enough drinks to forget how much I owe.
Sep 22, '06
How foolish we are to spend and spend and run up credit deficits....We should be more like our fine government.
Sep 22, '06
Good points, but it goes much further than that.
There is no incentive to save money in America because the Feds decided that it'd be a spiffy idea to tax any interest you receive on saved money. After around 1984, it became pointless to open a savings account. You might do that and put a hundred dollars in. The bank might pay you 3%. The Feds come right in and tax it.
Of course, many banks today won't pay any interest until you reach a certain threshold - say $500 - and at that, will likely pay less than 3%. And the Feds will tax that. Thing is, they'll tax it every freaking year. So if you have $500 in an account that pays 2.5% interest and you fail to add to that amount over a period of a few years, the annual Fed tax means that you end up gaining no interest - in which case, you may as well stash the money under your mattress.
Prior to the rewriting of the tax code in the early 1980's, interest earned on savings was not touched until withdrawal. Until then, saving was a good idea, due to the compounding influence of interest that allowed savings to actually grow. The revisions to the tax code removed any incentive for Americans to save.
At the same time, the revised tax code eliminated the ability to deduct interest paid on credit cards, eliminated the ability to deduct taxes already paid at the gas pump, and eliminated many other deductions that actually helped the taxpayer.
In essense, the revised tax code told average Americans to stuff it.
Sep 22, '06
Maybe it is the CREDIT bubble that has burst?
On the other hand... we may be a nation of consumers, but real estate is inherently a finite, tangible, and long lived commodity. Sure we may build a few new houses, if the UGB's ever get zoning in place, but they aren't making any more land.
There are still plenty of people out there with equity and credit...the rates are still sensibly low. For the most part, anyone who's been in their home more than 3 years, without borrowing against their equity, is in a good position to make a move, and will have plenty of negotiating power, after selling their existing home for a reasonable profit.
Real estate is a trickle up market. It is when the cost of that starter home is out of reach of buyers with two full time jobs that eventually clogs up the pipeline. That happened here. Those starter prices are coming down and it is only a matter of time before buyers realize it's a great time to make a deal. The media has been thorough in sensationalizing the fact home appreciation rates are no longer 14% or more a year. Sellers are slow to learn that fact. (This is what happens when you wait to see how high the market will go....out and out greed can no longer be the force that drives your asking price.)
But the market also includes buyers. When the media finds a hot story in the realization buyers are well positioned to jump in, and air THAT... the market will start moving again. Real Estate is still a great place to "save" your money.
SIDEBAR: Stats show it is not unusual for the real estate market to slow as we get closer to an important election. Why? Fear of the unknown? Preoccupation with political issues? Nah...not likely...not with the odor of apathy so strong in the air. Darned if I know.
Sep 22, '06
Not to discredit the business smarts of previous posts, but there are several ways to save/invest that beats putting your money in a bank savings accounts; and that exceeds inflation by double. Saving should be more a part of citizenship. We, of course, can't rely on social security and I don't have a PERS job.
Sep 22, '06
Max is wrong about one thing: For folks with the conventional earned and unearned income sources, no matter what interest rate you save at, you always have a net positive income after taxes on interest earned.
Now the revised tax code did tell the average person to stuff it. But taxes on interest are not the reason otherwise intelligent people don't save. Many do live beyond their means, preferring to over-consume. But as a result of the economic war our dry-drunk torturer-in-chief is waging on the middle class and American values, too many barely make enough to meet the bills for the basics, much less have anything left to save.
lw -
there are several ways to save/invest that beats putting your money in a bank savings accounts.
In all honesty, care to share?
Self-directed 401Ks and the other retirement savings options available to working folks who can save up to even $10K-$20K year have not exactly largely been winners over the last 5 years.
And as those who think their house is a long-term investment could be in for a surprise in the coming decade as the long-term market balance shifts from a surplus of leveraged baby-boom buyers to a surplus of baby-boom sellers. (Unless of course we drive up demand by encouraging our kids - wed or unwed - to start popping out more kids themselves and invite in more immigrants, hardly two popular social policies in these longing-for-the-Dark-Ages times when theocracy, religous/culture wars, and torture were all the fashion.)
So any insights you can add here would be much appreciated by those of us in the same boat as you may be: Unable to depend on SSI, no defined-benefits pension, employer-sponsored 401Ks that have made little, and looking at the threat SSI will be privatized so the contributions of working folks can be looted by the financial industry.
12:08 a.m.
Sep 23, '06
lw,
You'd be pretty amazed at general personal finances. Although stocks, bonds and derivatives provide better investment options, investing is only a subset of saving. There is a much higher hurdle to investing. At this point, we can't get people to keep money in a savings account let alone transfer it to a brokerage house.
ERose,
Study Japan! They have less land than us, yet prices in Tokyo dropped 85% from their bubble peak after 1989. Homes prices are a product of the three "i's" only: Inventory, Income & Interest Rates. We are heading for a crash landing and between equity cash-outs and negative amortization, you'd be surprised by the shear volume of home owners with negative equity. And home prices haven't even started falling yet. When they do fall, many won't be able to sell their homes. The home price won't be enough to cover the loan. It's either hope you have a job or foreclose.
Sep 23, '06
Most brokerage accounts offer tax-free (municipal bond) money market and mutual funds. You pay no income taxes on savings if you invest in these types of "municipal" investments. There are at least two "all Oregon" muni-bond mutual funds with an acceptable track record.
Granted, muni-bonds yield less than taxable investments (3.0% to 5.1% ), but at least you get the pleasure of telling Uncle Sam to keep walking. They make the most sense for those in the top income tax bracket (many of whom buy individual bonds).
Caveat: if you live in a state with an income tax, you need to make certain the muni bonds were all issued within your "home" state or Puerto Rico. If you live in a state without an income tax, you can buy muni bonds from any U.S. State or Territory. Some are NOT exempt from AMT, so know before you invest.
The housing "crash" is unlikely to be a catalyst for a recession, as long as the price of gas hovers near $2/gallon. If national home values decline more than 15%, then all bets are off.
The national savings rate does look bad (in aggregate), but if you look at older age brackets it's not so bad. What's masked in the statistics are a large number of people who save nothing, and a smaller group that saves large amounts.
The statistic that scares me is the aggregate credit card debt: at double digit interest rates, it makes no economic sense to carry credit card debt.
Sep 23, '06
Where are you guys sticking your heads? If you want to save your money in a fairly liquid account, put it in internet savings accounts such as HSBC, ING, or Emigrant Bank. The rates on these accounts are 5% or higher (lower with ING). There is a very low or now account limit. These accounts are FDIC insured, much more liquid than CD's. You need an ordinary checking account at your regular bank, ie., Wells Fargo, US Bank, Wash Mutual, etc. and then link your checking account to one of these internet accounts. If you need the money, it may take 3 business days to transfer back to your ordinary checking account, but hey, that's easier than paying the penalties on a CD. Just keep some money in your regular bank account for emergencies.
It's sad to see people who regard their homes as an investment. It is a terrible investment. It generates no income, not a lot of write-offs except the mortgage interest write off - but you only get 15 or 28% of that back anyway. The bank's making money off of you regardless and you're paying it. And it's a horribly illiquid asset. Mutual funds dealing in real estate REIT's would be better.
Sep 23, '06
Karl:
For the past 30 years, the largest component of total net worth for the middle class has been their homes. Why? Because housing prices have outpriced inflation, and homeownership rates are much higher (at the lower end of "middle class") than are ownership rates of mutual funds/financial assets.
I agree that an owner occupied home is not an investment in the traditional sense (it pays no income, it costs money to maintain it, and it's taxed every year whether or not you sold it). That said, paying a mortgage is a "forced savings" program for many who aren't saving elsewhere.
If you're looking for taxable income, I'm confident there are credit unions paying 4% on savings, and WaMu is at 4.6% on 9 month CDs. If you uncertain whether or not you can tie it up for 9 months, that is not considered savings, it's considered emergency funds, or college funds, etc.
Plus, it makes no sense to invest in a 5% money market account when short term interest rates are expected to decline in the next year: money market yields adjust daily, and many of them were below 2% just two years ago.
If you're paying 35% to the feds, then a 3% tax free yield is actually 4.61% on a taxable equivalent basis. A 5% tax free yield is equivalent to 7.69% (and there aren't any 7.7% Bank CD's out there!) If you're wealthy, and you're not investing in muni-bonds, I am inclined to ask why not?
Sep 23, '06
Any appreciation in the cost of a house is offset by an increase in the cost of housing. Unless you are willing to move to a different, less expensive, house the only financial benefit is to your estate. Until then you just have a paper profit.
Your house is, however, a cheap way to borrow money. Interest rates are relatively low and mortgage interest is deductible. So a lot of people have made highly leveraged housing investments. They only invested $10,000 in that $200,000 home that a year later is worth $220,000. On paper, they got a %400 return on their investment. Of course, as someone above pointed out, leverage works both ways. If the price of that house declines 10% they are $10,000 in the hole.
The problem, as someone above identified it, is that many people are now highly leveraged in their home. If you just include the cost of paying a realtor to sell, you are already under water with anything less than 6% equity. If housing prices start to fall it looks like there are a lot of factors that will encourage them to fall further.
Obviously, people have to have someplace to live. So any evaluation of housing as an investment needs to consider the cost of renting an alternative, as well as other advantages or disadvantages that come with owning the place you live.
Sep 23, '06
Mister Tee consistently has no compunction in proving just how much he hates America:
Granted, muni-bonds yield less than taxable investments (3.0% to 5.1% ), but at least you get the pleasure of telling Uncle Sam to keep walking.
Since "Uncle Sam" is us in a representative democracy if we fulfill our responsibilities as citizens, what Mister Tee and his friends on the neo-fascist right (and "just know what I don't like" and that includes taxes and organizing around effective governing values "independents") are really saying is:
Granted, muni-bonds yield less than taxable investments (3.0% to 5.1% ), but at least you get the pleasure of telling your friends, your neighbors, the troops, and everyone of your fellow Americans to keep walking.
Now that is the kind of patriotism and love of country that made America great and strong.
Sep 23, '06
Ross: lots of people sell their big home and subsequently downsize when economic forces make that necessary. Some sell a million dollar property and move into a $300,000 condo. Others sell a $300,000 house and move into a $40,000 trailer. I know of a few that have moved from expensive homes into even nicer rental properties (or assisted living) that ostensibly cost more (in rent) than they would be paying on a 15 year mortgage. Why? Because they are spending down their equity, and they don't care to leave a house to their children when they die. For those who have nothing BUT their home (in addition to SSI), you can even get a "reverse mortgage" which effectively sells your house for an upfront payment (generally less than 70 cents on the dollar) and you continue to live there until your death. As advertized on TV by Robert Wagner.
Again, a house is not a traditional financial asset (not if you own just one), because everybody needs a place to live. That said, not everybody needs (or can afford) to continue living in their home until their death.
Ask1st:
Your ignorance is competing with the poverty of your ideology. I can't wait to see who wins.
Municipal bonds ("munis" for short) are the financing tool of choice for all city, county, regional, and state governments. Without munis, it would be impossible for them to spend more money than they take in taxes each year.
The below projects were all financed (in whole or in part) with munis:
The Rose Garden Arena Most sewer projects, including the Big Pipe sewer project New student housing, including PSU New school construction (all grades, including community colleges) Jail construction (Wapato) Library construction, maintenance, and operation budgets Fire engines and new fire houses across the state METRO, including the Port of Portland and PDX Co-generation plants in Eastern Oregon
The list goes on and on. There is not a single Oregon community big enough for a stoplight that has not benefitted from municipal bond financing.
Without this access to rich, (frequently) Republican, tax-dodging capital, many of the above projects would have been impossibly expensive, or still be sitting on the drawing boards.
Sep 23, '06
Mr. Hagen's recommendation "Folks, you always need to save. Save until it hurts. Save!" is right on target. The private defined-benefits pension system--never universal--is rapidly unravelling. Our dollar's exchange value will continue dropping, yet: Save, save, save. Our future national standard of living might well be less than now, as our oil reserves continue shrinking. Health care costs are unlikely to fall greatly, and other living expenses will rise. The time to prepare for old age is while one is young.
Sep 23, '06
AskQuestions-I have saved since I was eight. Luckily I had a mother who profoundly believed in the results. Then my father-in-law, a Seattle financial advisor continued the mantra, and expoused the "rule of six"-every six years your money will double with prudent saving. First, you can't think of saving in 5 years increments-there are always cycles. Investing/saving is a long term endeavor.
There is also diversity that is needed in saving. Maybe in the first 5 years of a persons saving life (and it should start early) when the savings total is small, diversity of investments will be limited; but as savings compound/double then diversify to ones comfort level.
You also must get in the habit of adding to your intitial saving dollars; it doesn't have to be methodical, but it helps tremendously if it at least occasionally when you have excess funds.
Saving also requires living within your means. One latte a week vs. seven can really be the beginning of a saving plan. Try applying the "rule of six" and you'll be surprised what you have in 30 years. Reputable mutual funds, stocks have always exceeded inflation by double and more if you look beyond five years.
Real estate is also advisable, and if you aren't comfortable with the headaches, consider reputable Reits. Use IRAs, SEP IRAs, etc. wisely and they can be even more productive if invested in the right instruments.
I am not a financial advisor, but I have experienced the "rule of six". And after a few decades, the "rule of six" can even be less years because you have assets that can capture higher returns when opportunities present themselves.
Sep 24, '06
LW,
Rule of six??? I've never heard of that rule. I think the rule is actually the "rule of 72". Divide 72 by your percentage yield per year and that will give you the number of years you need to double your money.
You mean that you've been able to average 12 percent a year for 6 years? That's pretty good compared to what the Dow/Nasdaq has been doing for the last few years. You should be a financial advisor.
I don't know people would recommend putting money in CD's these days. As I said earlier, there are banks that currently pay 5% plus on saving accounts. www.hsbc.com at 5.05% and www.emigrantdirect.com which currently has accounts at 5.15%. Fairly liquid accounts to park your cash.
Why even invest in munis??? There are stocks that are currently paying 10% on dividends. Courtesy of Job and Growth Tax Relief Reconciliation Act of 2003, stock dividends are taxed at 15%. Thus you would be getting an effective yield of 8.5%, if the stock isn't tanking.
Why is paying a mortgage a "forced savings"? The mortage interest deduction only gets you back what your tax rate is at most. It decreases the amount of interest you are paying to the bank, but you still are making the banks rich. Has anyone ever seen the real amortized amount of money one pays to the bank on a conventional 30 year mortgage? It's staggering. On a 30 year conventional loan, at let's say 6%, for a $100K mortgage, the interest alone is $115K. So maybe your home increased in price, but what is your true effective yield subtracting costs, ie. property taxes, the interest payment, etc.? I don't think it is really that good of an investment (historically, real estate appreciates at about 5% a year) unless you are in an insanely appreciating market and can flip and time the market well.
Sep 24, '06
Karl:
CD's will continue paying the same rate of interest (unless they "step-up" on a contractual schedule) while your money market rates fluctuate daily. When you buy a longer maturity, you lock in (at least) that rate of return, come what may. Rising inflation is your only real concern, especially if you distrust the CPI calculation.
If you believe there are more Fed Funds rate increases in the hopper, then money markets make great sense. If you believe the Fed may ease, then money market rates are going down, and you would be wise to consider extending the length of time your money is invested at a fixed rate of return.
Any stock that pays a 10% dividend carries substantially more risk than a AAA rated muni or a bank CD. I'm not suggesting that it's an either/or proposition: but you can't say a stock pays a 10% dividend without also noting it could decline 10% in value tomorrow. And decline further until (potentially) it goes to zero. As Ford investors recently learned, common stock dividends can be reduced or eliminated, which tends to push the stock price lower. Protecting your nest egg from a decline in principal value is (IMO) AT LEAST as important as yield.
Don't forget that State of Oregon personal income taxes apply to qualified dividends (15% Feds+9% State of Oregon = 24%). In some jurisdiction, city/county income taxes also apply to QDI. Also, be aware that most munis are not included in AMT calcualations, while qualified dividends are included.
By comparison, many sophisticated bond investors are sitting on bond portfolios with a taxable equivalent yield above 8% with no equity (and A-rated credit) risk.
We can agree that an owner occupied house with a mortgage is a lousy investment relative to the performance of stocks and bonds over the last 30 years. But if your house doubled in value, and you've lived in it at least two years, your capital gain is tax free. Granted you still need to live someplace, but it gives you the option of downsizing into something more affordable (having more equity).
Despite the ugly amortization tables on a 30 year fixed rate mortgage, it still functions as a "forced" savings account in that (if you don't pay in each month) you will be evicted. If the only benefit of "owning" vs. renting is a nicer house for the same amount of money, then it was a good lifestyle choice (not a good investment, in that it didn't pay income or capital gains). If you get any net appreciation in the resale value (above and beyond maintenance and improvement expenses), then the fact you were "forced" to maintain your status as owner (making monthly payments to the mortgage holder) makes home ownership a forced equity appreciation program, ir even a mandatory "monthly recurring" investment in real property. Savings Account may be a lousy descriptive term, but the point is you didn't get to spend the money on consumables or junk.
Sep 24, '06
Mister Tee - Most of us are well aware of what munis are. In the big picture of the flow of goods and services in our economy, munis can be seen as providing a flow of money from taxpayers and users of public assets to private investors for the privilege of borrowing their capital for public infrastructure construction purposes. That description alone explains why they represent a type of government perk for the more wealthy.
Of course, many of the advanced democracies find other ways to fund many of the public projects you describe in a way which shares the burdens and benefits more equitably across their local, state, and national economies, but we already know that isn't one of the social, or core American, values folks like you seem to espouse. My comment was about the perk of munis that appears to appeal most to folks like you that they offer pleasure of telling Uncle Sam (e.g. your friends, your neighbors, the troops, and everyone of your fellow Americans) to keep walking. One is led to wonder just how much of our society, including our local, state, and national assets to protect our safety and security, folks like you really would like to see financed by munis, or a state and federal equivalent, for ideological reasons?
One thing that may surprise you Mister Tee, is that I agree with you that housing is a lousy investement vehicle for those who have the discipline to save for the basic reasons Karl notes, and for the longer term demographic reasons you may have noted in my first comment about the looming demographic trends. Whether some regional or even local pockets of "irrational exuberance" will sustain greater rates of return in housing investments is something only time will tell.
LW - I am assuming you offer those general insights on personal financial planning for the general benefit of the readership. I'll just comment that many of us did learn lessons about work and saving and put them into practice, and live lifestyles of modest consumption. However, we recognize that even many who do those things sometimes experience bad financial breaks in life despite careful planning. The question I asked was an attempt to expose the superficiality of the statement by lw that:
there are several ways to save/invest that beats putting your money in a bank savings accounts
By intent or not, this makes it sound like younger working folks have many more options available to them than is the case at a time when housing and basic costs of living compared to average income have greatly increased compared to when the parents of the baby boom were getting started.
An interesting statistic I recently heard is that due to the failure of the baby boom to insure the cost of an education remained affordable for their own children, ours will be the first generation that is more educated than our children. If that is true, and I've been trying to find an authoritative source which confirms that if anyone knows one, that would say a lot about the kind of wisdom about investing for the future that we are (not) passing down to our kids.
Sep 24, '06
To summarize:
Did I miss anything?
Sep 24, '06
Did I miss anything?
Anybody have any idea what point Mister Tee is actually trying to make? Other than folks like him, unfortunately, don't seem to like their fellow Americans too very much?
As much as you dislike those of us who actually espouse core American values, there is one big difference between those of us who believe that we need to pull together as a society, and those on the destructive right who are out to atomize our society for whatever advantage they mistakenly believe they can achieve for themselves:
We really do want to make sure that your civil rights are protected from the radical right-wing that is out to destroy our country, that everyone you love and your friends and neighbors have access to quality and affordable health care, and that your children have the opportunity to receive a good education from pre-school to college. You see, we know that only by working for those things for the folks who want to tear apart our society can we be assured that the best interests of everyone in our society will actually be served.
Every good businessperson knows that his or her business will succeed only to the degree that they have customers who can afford to frequent their business. Even that famous socialist lefty Henry Ford had as his first business goal making sure that his own employees were economically situated such that they could buy his product. There aren't nearly enough boardrooms right now in which that is made a top business priority.
Sep 24, '06
Mister Tee,
I'm not talking about CD's that are yielding 5%, I'm talking about savings accounts that are yielding 5%. Why continually harp on CD's when I never mentioned them. For the general readership's benefit, I even put the URL's of the banks that are paying these yields.
Sep 24, '06
I liked this post because I think the low savings rates in America are appalling. I don't even view it as being a red/blue issue. It's something we should all be concerned about. American savings rates have been low compared to other countries for years though they they have been steadily trending towards zero. The importance of savings (and having a rainy day fund) should be pounded into the heads of the American people. There is too much borrowing and just plain consuming and our government (a Republican one, no less!) has set a horrible example. Of course, a President who was bailed out by family friends of every financial hole he ever dug for himself is probably not a qualified example for the rest of us to emulate - just as he's not an example when it comes to things like honesty.
Mister Tee mentioned Japan earlier and I have been living in Japan (via Milwaukie) for 11 years. It's true that Japan had a real estate bubble that burst and has only recently, after 17 years, bottomed out. It could happen in the US, too and I think it's an eventuality for which most Americans are woefully unprepared.
Unfortunately, in the US, in spite of our own recent experience with the Internet bubble, we still don't seem to have learned that there are no sure financial bets as evidenced by the explosion in housing prices over the past few years. I actually had a friend in Seattle inform me about a year ago that "house prices in Seattle won't [ever] go down". To me, that sounds like the kind of thinking that precedes a collapse in prices.
For those of you with the financial wherewithal, or even those who aspire to have it, it might be worthwhile to save your powder. Imagine the bargains that could be had if real estate prices declined by 50% or more... I look at the real estate prices in Portland and wonder who in Portland can actually afford to buy houses anymore. Maybe I've been away too long, but the prices seem to be more than the average person/family can handle - even if they made New York City-type salaries. Eventually housing prices have to fall back to earth enough so that normal people can purchase them.
Maybe I'm just out of touch now though. I'll confess to being very bearish on American finances and it pisses me off that our so-called "leaders" borrow and spend with reckless abandon. They have the luxury of letting someone else clean up their mess though. Unfortunately, that's not an option for most American people, so they need to save.
One last note while we're on the topic of saving/debt, etc. Did the readers of the blog realize that Senator Gordon Smith (R-OR, Rubberstamp) is the Chair of the Senate Finance Subcommittee on Long-Term Growth and Debt reduction? What a miserable failure he has been on Debt Reduction.
Sep 25, '06
Karl:
I'm not a CD investor; I'm willing to take risk.
My point in comparing CD's to money market accounts is that you can lock in a 5% (or better) yields on a CD for 3-5 years, and avoid the next rate cutting cycle.
The current economic growth cycle is getting a bit long in the tooth, despite record corporate profits. It is possible that we'll see a recession in the next 3 years. Why not have money locked in at 5% to avoid watching money market rates drop below 2%?
In short: money market rates go UP and DOWN, I believe the next move is likely lower.
Ask1st: if you believe that collectivist government is the only unifying force that can pull us all together, you're going to be disappointed. Government's don't create wealth, they just tax it.
The City of Portland is a fine example of progressive values at work:
Plenty of money for shiny trains, a Prius fleet, and "visioning" while the retail storefront vacancies increase, the homeless population grows, and drug dependency goes untreated. If the city "cares" about homelessness, how come they haven't built a homeless shelter? They just built a Cadillac Theater to complement their Cadillac Ballpark: why not a Cadillac homeless shelter?
If the city cares about drug treatment programs, why not increase funding to InAct instead of increasing funding to the 2% for Art program?
The city's Fire and Police Union members receive golden pensions and generous disability benefits, but the City of Portland has no funding mechanism in place (except to raise taxes on those who live here, most of whom will receive no pension at all). That's called an unfunded liability: think of it as our own little social security disaster in the making.
Y'all spend so much time and energy with the anti-Bush rantings and ravings, while City and County government is just as cynical and corrupt. The local politics are more likely to impact your standard of living more than the Federal Government. It would be naive to suggest they are looking out for the little guy just because they have a "D" next to their name.
Sep 25, '06
Mister Tee - Originally I thought you were just plain ideological in your comments in that you didn't seem to honestly address the substance of what several commentators have written. I'm reluctantly suspecting that because you react in such utterly predictable knee-jerk fashion, sometimes contrary and oblivious to what has actually been written, that you apparently are one of those natural born followers who can just respond with the words and concepts given to them rather than processing information and reacting on their own. And there is a big difference between being verbally skilled, and actually having good reasoning skills. The best followers, and those who are most dangerous when they throw in with mentally disturbed demagogues like our dry-drunk-in-chief, are those with above average verbal skills and below average reasoning skills.
As evidence of what I'm talking about, I'll bet some would already understand that I actually agree with him on one important point (and JUST THE POINT I am quoting here, before any commentator tries to mispresent it):
while City and County government is just as cynical and corrupt. The local politics are more likely to impact your standard of living more than the Federal Government. It would be naive to suggest they are looking out for the little guy just because they have a "D" next to their name.
The difference is that the folks of whom Mister Tee argues in support take this as license to plunder and pillage, while some of us believe our responsibility as citizens is to hold the cynical, corrupt, and just plain incompetent accountable regardless of the ideology they spout. And particularly if the cynical, corrupt, or just plain incompetent profess to be on our "side" of a political divide.
In my opinion, it is pretty clear that the Baby Boom (my generation) has turned out to be one of the most incompetent generations at this self-governing thing the republic has seen in a long, long time. That includes the contingent of just don't-be-mean-to-ME left-leaners and pseudo-progressives who have larger representation in NW corner of the country than in other regions, the neofascist longing-for-the-dark-ages right-wingers who have taken us down the road of war and impoverishment, and those who think claiming to be an "independent" is an affirmative statement of anything, much less a coherent set of governing values. The reasons are unclear, but the measureable results stand on their own, as Jensen has written to start this thread. And in my personal opinion, the baby-boom has done a piss-poor job of educating their kids to be more competent at self-governance.
November's election is going to be a watershed event in the history of our country. It is a hugely significant indicator of the failures of those who would presume to lead that, at least as of today, it is hard for those of us who just have access to just the publicly reported polling data to have any strong sense of what is going to happen.
Sep 25, '06
jenson,
Have you considered the implications of the cost of capital beyond the effect on a savings rate? For a finacial writer the effort seems highly sophomoric.
Sep 26, '06
Jenson,
I appreciate the attempt at creating a conservative fiscal outlook. It appears that you're being a bit flamboyant in your claims though. Much the same way as you warned everyone to "be afraid" a few months back when the Dow Jones was at $10,750. Today the Dow is at 11,600.
Now you say "At these low rates, people have no incentive to save because interest on savings accounts falls below the rate of inflation. It actually becomes counterproductive to save".
No Jenson. It means that the savings takes place in things other than a basic passbook savings account. The Vanguard Balanced fund, if invested five years ago, turned $10,000 into more than $13,000. This is a relatively conservative way to invest.
"You also allow equity cash-outs and home equity lines of credit at unprecedented levels..
Yes, it is allowed,. This is still a free country and the Federal Reserve does not control what we do with the equity in our homes. This is not a communist, centrally planned, economy without property rights. Yet.
The last paragraph is so dramatic in its conclusion that it isn't even worthy of a response. Well, maybe just one. If that's the most important thing you learned in school, you should ask for a refund.
6:20 p.m.
Sep 27, '06
Dan,
How did those durable good orders do today? You should be afraid of the stock market. If you choose to be the greater fool and ignore all the signs of a coming recession, you enable me to make even more money than otherwise.
Thank You!
Sep 27, '06
Record setting corporate profits, 10-30 year treasuries paying less than 4.8%, and the DJIA traded within 30 points of it's previous record high (at half the P/E ratio) today. Why wouldn't you want to own equity in America? We have record home ownership rates, the best education and health care facilities in the world, and low unemployment.
I'm not suggesting stocks will go parabolic to Dow 14,000 or SPX 1,650, but I am betting that either index will offer better total returns over the next decade than CDs or Treasuries.
This month's durable goods orders are less salient than Monica Lewinsky's perspective on peace in the middle east. You can't single out one data point in a series and then declare "that's where it all started to go downhill...when they didn't ask for Monica's opinion..."
If you disagree, then we need to get Monica on the next plane to Damascus: it's time for some old fashioned tete-a-tete.
I am curious how you're going to profit from the "coming recession". If you're shorting an index or buying gold, I would like to know your entry price.
Oct 3, '06
Oct 3, 2006 Expect Research news link is out
Expect Research
Oct 3, '06
Oct 3, 2006 forsaken craft news link is out
forsaken craft
Oct 3, '06
Some of Patrick's news link goes back for months
patrick
You want to here what Patrick's people has to say
<h2>Patrick</h2>