Something happened to all the MEW (Mortgage Equity Withdrawl). The usual snark is "Hummers and Harleys." There surely was a whole lot of that but there was also a lot of pergraniteel (Pergo flooring, granite countertops and stainless steel appliances). There was also a lot of tuition. College costs have been running more than double inflation for quite a long time. There was also a lot of legitimate home improvement, adding square feet to smaller homes, upgrading mechanicals, insulation, firesafe roofing, etc. Let's not to be too quick to condemn all that MEW as mere consumption. Still, now that it has come to a dead stop there is no way to "short" MIT, ND or USC. There are some companies that qualify. Think Harley-Davidson. A representatitive chart:
Big ticket consumer discretionary products are the leveraged financial products purchased on margin of the housing equity boom. We've already seen what happened to those financial products, selling for dimes and pennies on the dollar.
Expect the same for bikes, boats, etc. I'm personally thinking a nice low mileage SV650/850/1000 in the $2000-$3000 range. It won't be long before any number of 20 something construction workers are selling these to pay for the new baby after losing their medical in the slowdown. 
UPDATE: More fires in SoCal today. Nothing nearby, houses burning in Malibu. Details as they warrant.
40 comments:
There's a SV850?
Looked at the F800ST- low windscreen and center stand is "optional." Otherwise an interesting choice at a (for BMW) nice price point. Hope the quality is there as my last BMW bike required replacement of some things you wouldn't normally expect would need replacing. Apprently it was pretty common for late 90's bikes.
& Oh yeah, that would be FIRST!
Yeah Rob, there was virtually no additional space added onto homes in the Sacramento area. A good 90+% of the refinancing money went to pure consumption. For awhile, it seemed like everyone who had bought a house had a new car in the driveway within six months.
But more importantly, where does that salesperson work in the first pix?
Turd!
I wish those unemployed contractors I've been reading about would come here. I have been trying for 3 days now to get someone to come out and give me an estimate on a roof replacement.
Regarding the Hummers, I'm not so sure they are all MEW toys. I think we have a subprime auto loan crisis, with people making $8 hour getting loans for $30k and $40k vehicles. I don't work in the best part of town and I see people driving around who don't appear to actually work, yet they have brand-new polished pearl-colored Escalades with $2,000 rimz.
How about the RVs and fifth wheelers and trailers? People only see $389/mo while ignoring the fact that they will be paying for 10 years for something that they will most likely be sick of within a year.
sacre,
Sacto, Fresberg, BKfield all the Central Valley had the worst kinds of development. It will take decades to correct the mistakes that were made. We built products that aren't useful in places they aren't needed with poor quality and high prices. We are almost certain to regret those lost fields in coming years.
Sacto, Fresberg, BKfield all the Central Valley had the worst kinds of development. It will take decades to correct the mistakes that were made. We built products that aren't useful in places they aren't needed with poor quality and high prices. We are almost certain to regret those lost fields in coming years.
You sons of bitches.
The Central Valley will be taking fields out of production because of limited water anyway.
California has plenty of water. The water problem in agriculture is that cities are practicing very poor development policies that strain the system. When that happens the cities outbid the farmers or bribe them or kill them to get the water they want to subsidize their bad design decisions.
There is plenty of water? It seems whenever I read anything they talk about how during droughts there is not enough water storage. Lately my farming magazines are talking about the cutbacks in the central valley and how it is a bigger deal now that so many permanent crops are planted. In past droughts growers could plan accordingly and fallow the ground or put out low water use crops. With an investment in trees or vines they have no option but to irrigate. Fortunately here in Ventura Co we are a little insulated. But another dry winter and there will be cutbacks at the irrigation districts. I wonder how many gentlemen farmers will be allowed to draw water from city sources if they start cutting back public usage?
It is a complicated issue and I only know enough to put my foot in my mouth, but I am sure you have some well thought out insight as usual Rob.
@ All,
Do you think the cat is finally out of the bag instead of dead and bouncing?
Here is the Story
according to CNN
.
_____________________________
Snip:
In fact, Wall Street banks are sitting on rotting piles of highly suspect, thinly traded securities no one wants to touch. "Whenever the market turns against you, you take the biggest losses in illiquid securities," says Richard Bookstaber, former head of risk management at Salomon Bros. "Because there are so few buyers, you're forced to sell at a discount that is both huge and highly unpredictable."
What really spooks investors is the fog surrounding the future. One problem is that they can't trust management's estimates of future losses.
How about the RVs and fifth wheelers and trailers? People only see $389/mo while ignoring the fact that they will be paying for 10 years for something that they will most likely be sick of within a year.
_____________
@ LOU,
Or have to move into. That would be the lucky ones, imo.
People can write off, like mortgage interest, those payments on the RVs. There is nothing that guzzles gasoline that the government doesn't delightfully subsidize.
California has plenty of water. The water problem in agriculture is that cities are practicing very poor development policies that strain the system. When that happens the cities outbid the farmers or bribe them or kill them to get the water they want to subsidize their bad design decisions.
Holy Christ, Sons of Bitches!
w,
Lots of good questions and thanks for the compliment that i have something worthwhile to say on the subject. There all those stories of the Owens Valley a,nd books like Cadillac Desert and lots and lots of wannabe experts on the subject. The old saying goes "Whiskey is fer drinkin' Water's fer fightin' over."
We don't have enough water storage or even distribution to cover the "planned" growth in demand. That's the problem, they are trying to put the onus on the existing populace to pay for the future when density is increased and land uses divvied up for various urban agendas.
Ventura County is the northern and western most area of the MWD, Metropolitan Water district that stretches more than 300 miles to the south and east.
http://www.mwdh2o.com/mwdh2o/pages/memberag/member03.html
We have something like 180 local water agencies/coops/etc in the county. We aren't all the insulated as development and bad planning has caused some local specific problems like groundwater contamination and overdrafting and channelization of the recharge fields and surface runoff contamination. How it plays out however is beyond my powers of prediction.
So, say, you are a poor chap, and between you and the girl you make about thirty-five grand a year, how do you go about buying a house?
FMW,
There won't be a reckoning. The cat is in the bag. A few kittens will be thrown to the dawgs but nothing like what needs to happen. I'm trying to get my head around a notional value of traded instruments in excess of 10x gross world product. There's a lot of people with pieces of paper that say they have a claim on goods and labor that cannot possibly be redeemed. That would be a reckoning.
thirty-five grand a year, how do you go about buying a house?
Save 20% and take out a 30yr fixed rate mortgage of less than 30% of your gross pay and have a safety net of some sort in reserve; a few months pay in the bank, tappable relatives, etc.
That would be a reckoning.
@ Alpha Dawg,
or a run on wall street,if anything like that exists.
I think the CNN story was pretty brutal considering no one wants a panic.
Mozilo has his half a billion dollars. Countrywide is market capped at only $5.5 billion. In March it was worth $32 billion.
What would a Wall St collapse do? Gut retirement cushions which is what the US actually needs unfortunately. We basically need to renege on all the promises of the future. That means taxing the old, taxing assets again and not just income, inflation erosion, greater workplace participation at reduced compensation. You all know the list. People have to work harder and longer for less while losing ground to inflation and subpar investment returns. Sad but true. My dad told me this as a lad of 7 or 8 in the late 1960's so this isn't a surprise to me.
Regarding the blonde in the lingerie on the bike, I am pleased to announce that I located some fetish fishnets with Nietsche! Woohoo!
So, say, you are a poor chap, and between you and the girl you make about thirty-five grand a year, how do you go about buying a house?
There are many parts of the country where this is possible. Two people working at Walmart for $8/hr each can pull down $36k. A 30-year fixed at 7% for a new 3-bedroom starter in the Texas exurbs is about $600 p/i. Add in $2800 for property taxes. That's $10,000/yr. There won't be any vacations to Europe or new cars, but it's doable.
20%! ye gods! You know how much dough that is? I am facing the facts that we will never have that 20%, between health insurance and rent, we save a few hundred a month. No way we can make a twenty grand deposit. Renting for us, until our landlord can not afford the payments for the house, then we are out.
I wanted to let you know that after reading your blog for many, many months, I have been inspired by you Rob and the great comments written, to start my own blog.
I will try to follow the rule about writing daily or at least every other day.
Your top pic reminds me of the Chris Rock joke, the gist of is:
'parenting is difficult and demanding work, and most of the time it's damn hard to tell if your doing a good job; but, you have definitely failed as a parent if your son is in jail or your daughter wears clear heels at her place of employment.'
"Every real estate market in the area, in the state, and, pretty much, the country, is down. Our neighbors, Bullhead City and Lake Havasu City, are struggling as much if not more than we are.".
No one likes a wiseass, but "I told you so.".
Lou,
They absolutely will not admit it but those places are all SoCal equity flight. All of them. Every last street light and crooked politician. The wake up call the US is about to get may startle California but it will knock Vegas, et al right out of bed.
California is, basically, a desert. Why they grow the ridiculous crops that are grown here is a mystery. I saw onions -- a bog crop -- rolling around a desert highway the other day. Water saving efforts are paltry. Global warming will see the melting of the snowpack.
lost cause,
Onions are well suited to the dry conditions of the central valley. They do not dry out easily like lettuce. They are very sensitive to many diseases that are much worse under humid conditions so the dry weather reduces the need to spray them with fungicide. Also, they are cheap so the land rent and cost of water is more apropriate than growing them in a coastal wetland (bog) as you suggest! Onions are grown in the central valley, texas, colorado, idaho etc... all dry places. Onions also size better in high heat. In cool coastal conditions they will not bulb as well and take longer to dry down when mechanically cut, this longer moister time period in coastal climates gives fungus more time to infect the bulb and reduce storage life. Imagine growing your onions in Illinois, then they are drying in the field and you get thunderstorms and 10 inches of rain that week. Start up the disk.
As for the many fruit crops being grown in California it is because we have long dry summers so fruits can ripen without rainfall that causes diseases. Grapes for example get downy mildew very heavily and botrytis bunch rot. However, in California downy mildew is not observed and one spray at bunch closing will control most botrytis. Growing grapes East of the Rockies is difficult with the summer rainfall. Notice that citrus and grapes were brought from a dry Mediterrainean climate.
My local row growers will rotate a crop of standard yellow onions for their low impact on the soil. Many high value produce, Strawberries for instance are brutal on the soil.
Actually, two local row growers grow some onions for the Gill processing facility in Oxnard. One other grower has a few plantings every now and then but I notice they have put them out in Newhall recently. Probably, they normally grow the rest in the central valley or in Mexico. These crops are just filler for the summer and may fill in a niche on the calendar. Celery is the money crop for growers in this area and it is grown in the winter. Celery is descended from a water weed that grew in the Mediterrainean. It does well with lots of water so it is a good winter crop. However, only in a Mediterrainean climate that does not freeze (i.e. SoCal). For the summer it can be grown in places like Michigan much cheaper than here. Also, it is grown in wet areas like Florida. Celery is mentioned in Homer's Iliad and Odyssey as growing on plains in the Mediterrainean.
I am not trying to be a jerk Rob, but please understand that I do not agree that any one crop is more or less brutal on the soil. Soil is a medium. Managing the nutrient levels in it allows growers to grow any seasonally appropriate crop you want, back-to-back-to-back. I notice that berry growers can take a rough piece of ground and with their groundwork, water management and inputs turn it into a very friable piece of ground. You could grow a quick crop of lettuce or cilantro right behind them without any inputs except water.
w,
No offense, you know your stuff twice over. Yes, the onions are just filler crops. Even with the very high yields the cost of land here is too high to compete.
The only thing we disagree upon is what some crops can do to the soil. The reason you can follow on a berry crop with just about anything is because to grow berries you have to sterilize the soil until it is nothing but dirt and then nutrient the hell out of it. There's usually nothing left living and more than enough nutrients for a normal crop and usually even enough water saturation to make watering a nonissue for a while.
"Celery is the money crop for growers in this area and it is grown in the winter."
The mystery is why. The only people I know of who like celery are my grandparents, and they have passed away.
So who likes celery? Anyone? Be honest.
I hope you don't mind I share my viewpoint on this subject here as I find it very interesting and you will not see it discussed in the media.
Fumigants kill live tissue. Nematodes, plant residue, fungi and insects are controlled. Bacteria are so much smaller and simpler that they are not effected by most fumigants. Methyl Bromide is the one fumigant that will reduce bacteria for a few weeks but they quickly come back. Interestingly, there are a lot of companies selling snake oils that they claim will magically fill the soil with their "beneficial" bacteria or fungi. They play on the mistaken assumption that fumigated soil is a barren wasteland that will stay that way for a long time. However when you create a void in nature species will race to fill it up immediately. Organisms with a life cycle measured in days will fill their void up fast. Every time the wind blows, soil full of bacteria and fungi blows back into the fumigated soil surface.
During the 6-9 months that berries are in the ground their roots are spreading out throughout the bed making it more friable and increasing aeration. Bacteria and fungi are colonizing this root zone and competing for the nutrients, exudates and plant material. When the plants are disked the bacteria, fungi and some small soil insects rapidly decompose it. Soil bacteria need about 1 part nitrogen for every 10 parts carbon of plant material they break down. This is neat because the soil bacteria break down the plant and at the same time tie up the nitrogen in the soil which will be re-released when the bacteria population crashes after ther buffet ends. This re-released nitrogen will be as complex organic molecules such as amino acids. Through the process of breaking down the plant material complex organic molecules such as humic acid are made. Fumigation in no way affects these processes 6-9 months later.
Certainly, more nutrients are applied than the crop takes up. Nitrogen is the obvious problem due too its solubility and thus leachability. Management of this nutrient is under a lot of scrutiny and will continue to be improved as it has been through out the history of Ventura Co agriculture. There is a lot of great work being done by people at the state irrigation research centers giving growers concrete advice on how and when nitrogen is being taken up. Combining this knowledge with regulation will lead to more efficiency.
On a quick note, growing berries does not require fumigation. However, with the limited number of acres of good berry ground in SoCal growers need to grow on the same ground year after year. Lets say a growers plants come from the nursery and are carrying a lot of a certain fungus (this happens every few years). The grower manages to get through the season with limited losses but now these infected plants have been acting as little incubators of disease in the field. If the grower comes back next year and plants without fumigation the incidence of infection and loss will be much higher. Year after year this cycle would build on itself. Unfortunately, crop rotation is not always effective on many diseases as some fungal diseases will persist for decades and/or grow on many hosts. Fumigation is simply a way to hedge an investment.
"So who likes celery? Anyone? Be honest."
I use it several times a week in soup and a few other recipes.
Hey, I'm doing another dinner.
This time in old town Pasadena.
http://recomments.blogspot.com/2007/11/blogger-party-deux-december-8th.html
Rob Dawg, can you make it?
Got popcorn?
Neil
"So who likes celery? Anyone? Be honest."
Its good as a swivel stick in a Bloody Mary ! Alright, to cut through the tartness of buffalo wings !
More seriously, its great, sweated, in many a soup or stew base; sort of a gentler version of onions IMO. I use it whenever I go on a English cooking binge ( all jokes about English cuisine to unowhere; and if somebody mentions Nigella Lawson in fishnets...).
-K
Celery, along is part of the base used in Creole, Cajun and French cuisine.
Old:
thirty-five grand a year, how do you go about buying a house?
Short answer, you don't. Not in CA. It is still possible in the filler states, but the CA market is priced beyond reach for anyone under $50k (100k+ in the more expensive areas).
Rob -
The top pic has GOT to go. She is EXACTLY what you should do with equity...
Oh, you mean the bike. Didn't see the bike in the picture. Yeah, that's a silly thing to buy with equity. Back to the girl...
In ground zero areas most of the toys were sold(or repo'd) months ago. Even the stainless and granite are drying up a bit.
Left with little else, a new trend has developed;
http://inlandempire.craigslist.org/cas/488308830.html
Despite all this, I'm starting to think it's about time to start going long on some of these banks. WM is one example.
Anon,
Snigger. Yeah, advertising your breast size and mortgage payment to see which is larger. That's the trick.
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