Advice for the Coming Reckoning

If you can keep your head when all about you Are losing theirs and blaming it on you, If you can trust yourself when all men doubt you, But make allowance for their doubting you; If you can wait and not be tired by waiting, Or being lied about, don’t deal in lies, Or being hated, don’t give way to hating, And yet don’t look too good, nor talk too wise:... If you can talk with crowds and keep your virtue, Or walk with Kings—nor lose the common touch, If neither foes nor loving friends can hurt you, If all men count with you, but none too much; If you can fill the unforgiving minute With sixty seconds’ worth of distance run, Yours is the Earth and everything that’s in it, And—which is more—you’ll be a Man, my son!
Rudyard Kipling (1865–1936), Rewards and Fairies (1910).

BLS OER, Lions and Tigers and Bears Oh My!

Wishing everyone a solemn Alban Arthan as we honor the souls of the trees we sacrifice then deify in our living rooms. Hang the revered kerm-oak, drink the blessed wassail. "Yule" feel so much better. The Norse had the right idea taking 12 days for Jole. Oh and all the recent religion adherents that have since renamed these Christmas, Christmas Trees, holly, sacramental wine and the 12 days of Christmas as if changing the name makes a difference; Merry Christmas.

Wishing everyone Prop 13 protection.

Wishing everyone a secret decoder ring to translate Fedspeak into reality.

Wishing I understood inflation formulas. OER (owners equivalent rent) questions are tricky. I am going to try but I probably have this wrong so don't trust it. The BLS in computing the CPI realized that using actual housing costs was going to give false inflation indications. This because housing content was changing. The sad part is that they decided for seriously poor political reasons to err in the opposite direction. Just like the morally indefensible way they do not count all taxes. Anyway, they calculate what the fair market rent would be for any particular house which turns out to be the mother of all lagging indicators. I've posted extensively on this elsewhere. Market rents are reflecting purchase costs in some instances (mine) 18 years ago. Just going over my year end tax avoidance notes this one place cost me out of pocket a whopping $1100 in 2005 before deductions. I don't charge $90/month but neither do I charge as if I bought last year and was paying a $1300/month mortgage while trying to recover the original transaction costs. Like I said, talk about your lagging indicators. This is why everyone on the ground sees so very much inflation and the BLS doesn't see it in the data. They are acting as if the were the 1960s with one car and a 1200 sq ft house with 2.5 kids who walk to their fine neighborhood school and mom stays at home. What this does mean, and everyone already hates me for this, is that OER will rise and continue to rise "stubbornly" for a great many years even as housing prices tank. Everyone loves it here when I say the bubble popped Oct 6th '05 and cheer my labelling the next few months "The Silent Spring" but I'm a shill for the forces of darkness when I predict rising rents for the exact same reasons. There's a lot of inflation and that will show up in rents. There's very high costs for an increasing portion of the rental owners that perforce will affect median rental charges. The equlibrium of falling house prices and rising rents are what partly drive my prediction of 5% per year declines in prices as rents rise to reestablish some congruence in OER and purchase pricing.

Anyway, We got the Druids covered and I need to add Joyous Saturnalia so the pagans are taken care of as well so all that remains is;

Happy Holy-days!

Wealth Winners (aka behaving rich)

People who believe in passive income are also known as -former- trust fund babies. Money and asset -management- is a -management- function. Do the -managers- you know work for free? Same thing, you have to pay yourself.

Wealth Winners:

Clip coupons. Earn $80-$100 per hour in your own home in front of the TV watching Suze Orman (sorry) and entertaining your cat with the detrius. Besides the $80-$100 being after tax, tax free money, by organizing your coupons the trip to the grocery store goes faster, smoother and is not as distracted by what they want to sell you as what you want to buy. You eat better too. Subsequent health benefits accrue. Tertiary, the forced planning/organization allows for less waste and taking advantage of sales, not only furthering savings but reducing dining expenses. How many times do you open the fridge at 6:15 only to say there's nothing good and then go out and blow $60 on dinner for two of angel hair pasta in a sundried tomato garden veggie and shrimp sauce? $8 worth of ingredients and a dozen dishes? You can whip this up in less time that it takes to find your cel phone and drive at $0.62 per mile to stand in line when you could instead be videotaping how your cat reacts to a piece of pasta on his back and filming it for the $10,000 prize on America's Funniest Animals. Oh and let's be clear here, you are not being propitious if you ever pay for deodorant, toothpaste or toothbrushes again.

Then there's that car you "deserve." Get over it. What is the true cost per mile? Most people can save lots of after tax, tax free money here but I'd ned to know the details before venturing an estimate.

Cable service? HBO & Showtime? Free money.

Regular lightbulbs? In the closets? What? are you crazy? We in SoCal pay some of the highest rates in the lower 48. Rite Aid occassionaly sells 4paks of 60w equivalent flourescents for a buck. ROI a month. Bag up the old bulbs and donate them to the Restore Store or Habitat. Laugh all the way to the bank, feel good about yourself, save the environment. What could be better? Well, screwingSoCalEdision but that ain't gonna happen. The energy you save increases their overhead ratios and they aren't gonna invest so you'll pay more and still have shortages in the future. Face it, we've done to utilities what we did to transit. Sad.

Nautical Frugality, Discard Rescue and Experienced Goods. Otherwise known as; Yard Sales, Dumpster Diving and Thrift Stores. Just last Wednesday I added to my polo shirt collection. Wed is 25% discount day at the rescue mission thrift store in Oxnard. I pick up 4 shirts, Large and Medium (manufacturers don't standardize their sizes) that I know will fit because these had already been washed at least a few times for $4.92. Top quality, preshrunk major labels.

Realtor Christmans Presents

Replacement rose colored glasses.
Realtime digital For Sale sign: $450k... $430k...
"The Money Pit" on DVD... er make that VHS.
Shredder.
Comfortable shoes.
Vaseline. [think about it]
Really thick paperbacks.
Housewarming gifts, say home heating oil.
Lots and lots of glycerine (makes bubbles last longer).
Botox to erase worry lines.
Hip wadders.
A new HP12c to replace the one that is obviously broken.
Tickets to the new TV show "Desperate Housesellers."
A -real- rolling doughnut.
"It's Only a Hobby" Tshirt.
Tap shoes.

Why Flip? Because it Pays

Let's try some numbers from another blog:

An investment house in Palm Springs. Purchase $475,000 in Jun '05. Tear out the kitchen, granite countertops, etc. Add a second sliding glass door to the pool. Minor landscaping, minor paint/patch. $75,000 improvements.

$550,000 total investment
$699,000 listed
- $40,000 commission, fees, opex
= $109,000 profit

What is wrong with this picture? First they didn't pay cash. For the sake of discussion let's assume 20% down 30yr fixed 6%. So for 6 months investment is not $550k but approx $210k. That's an amazing a 100% annualized return on your money.

But of course even this isn't true. Flippers don't put 20% down and take out 30yr fixed mortgages. And who-in-the-hell pays cash for $75,000 in home improvements? These things were all debt purchases so let's look at something closer to the real financing.

Bring $40k to the table in June. Finance interest/only or intro ARM $450k so the payments are $2300/month. A $75,000 HELOC would probably cost $3,000 to start so we are paying on $0 to start up to $78,000 by the 5th month. Call it $700 by he end. So, how much have we "invested" in the last six months?

$40,000 down plus the lost opportunity 6mos interest, $1,000
6mos taxes $2,300
6mos payments $13,800
HELOC repayments $2,300
Total+10% misc = $65,000 while carrying $528,000 in debt instruments.

Sales price to get out even? $640,000
At the $699,000 sales price $56,000 cleared on $67,000 invested in 6 months. A lot more than 100% returns. The theory of OPM strikes. OPM = other peoples' money.

Kalifornia Uber Alles

Random thoughts inspired by someone who claims to need to leave ca.

Koastal Kalifornia. Let's be clear. It is one of the very best places on the planet to live... except, it is expensive. Very, very expensive and even in the worst cases it will only crash to being very expensive.

Want to live in Koastal Kaliforina on the cheap? Easy, buy in 1965, '75, '85, '95 not 2005. Maybe buy in 2008? Sorry, won't know until 2010 or later.

I've never met the honest "never looked back" ex-californian. They've say they "made the right decision at the time," "done alright," all that but they can't get back in at the level they left.

There's a reason why California ends up with the majority of immigrants illegal and legal. Immigration is a huge social commitment, Kalifornia has been a good place to invest social capital.

Robert Kennedy was killed here. His assasination site has recently been razed for a new LAUSD High School. The title of this blog article is a song by the Dead Kennedys. Camera obscura my ass, we talkin' blogeria cultural obscura.

The Market Part of Housing Markets

In the last two weeks enough observations have come inm to confirm an ongoing gut wrenching price decline in the housing markets. I personally feel about $200k poorer but couldn't care less since I didn't care about the last $400k of increase. Anyway, what we are in now is best described as a freefall. We need to know what the market clearing price for housing may be. We won't know that number until houses start to sell again. I've called the next few months "the silent spring" because I don't think we'll see any sales.

Future History 2005-2012

Mortgage rates are low because of the velocity of money and the lack of risk premium built into the cost structure.

"Foreign investment" has always been around. If you were a rich capitalist pig Nouveau Riche ChiComm would you entrust your money to the mainland financial system? NFW. And balance of payments data are broken. No longer reliable. It isn't as bad as it seems.

What long term is gonna kill low interest rates is the necessity to inflate our way out of paying back all the SocSec money that isn't there but that's 8-10 years away.

In order of occurance:
1 Velocity of money slows down (M3 no longer reported, coincidence?)
2 MBSecs fall out of favor in the secondary markets.
3 Commodities pricing finally honestly shows up in the inflation data.
4 The Republicans (re)capitulate on taxes (again).
5 The Fed screws up one time too many.
6 The boomers start drawing down earlier than ever expected at the same time the extended lifespans of their parents so dearly bought both radicalize health care and push assetst onto the markets. Property and stocks, etc.

Welcome to a short history of 2005 through 2012.

CNU Charter Translated

The Congress for the New Urbanism advocates:

disproportionate government investment in central cities,

government restrictions on choice of home or neighborhood,

government mandated forced integration by race and income,

increased government protections of the environment by limiting choice and use of private property,

and the application of government policies to return to old city form and dominance.

Restore density in the old cities, increase density in the new suburbs and place prohibitions on any land use policies that result in either lower densities or investment outside the dense urban areas.

We recognize that intense limits on personal liberty and private property rights are necessary as physical solutions by themselves will not solve social and economic problems inherent in our prefered urban patterns, but neither can economic vitality, community stability, and environmental health be sustained without a coherent and supportive physical framework.

We advocate the restructuring of public policy and development practices to support the following principles: neighborhoods should be diverse in use and population; communities should be designed for the pedestrian and transit as well as the car; cities and towns should be shaped by physically defined and universally accessible public spaces and community institutions; urban places should be framed by architecture and landscape design that celebrate local history, climate, ecology, and building practice.

We seek to impose our extremeist and extreme minority views on the general population with force of government upon broad-based citizenry, composed of public and private sector leaders, community activists, and multidisciplinary professionals. We are committed to reestablishing the relationship between the art of building and the making of community, through citizen-based participatory planning and design. In short, we want to direct.

We dedicate ourselves to reclaiming our homes, blocks, streets, parks, neighborhoods, districts, towns, cities, regions, and environment.

Don't Do What I Do

Least affordable housing markets:

http://www.cbia.org/documents/public/05-0825%20HOI.pdf

Here's where my extended family lives:

Honolulu
Ventura
Naples, FL
Boston

Yep, all on the list.

Greedy Developers?

I honestly don't understand the claim of "greedy homebuilders." Irresponsible lenders and unscrupulous real estate sales sure but what about building homes in response to demand in a open market is so horrible? Criticize builders for shoddy workmanship where appropriate. Complain about sweetheart deals with municipalities as long as the municpalities get most of the blame. But greed? Where does greed come into the things homebuidlers do? Are we ready to call them wonderful giving sharing pillars of the community when they start next year selling at below cost just to stay in business? If not why not as we seem all too ready to excoriate them with the conditions reversed.

Homebuilders and the Bubble

[N.B. I have declared the housing bubble over as of Oct 6, 2005]

I can think of three industry factors that each are interesting and together tell a story. First go to http://insidercow.com/ and look up any/all the big builders Toll, KB, Lenar, etc. Their execs are bailing big time. On the plus side as a business not as a stock play they've learned some expensive lessons. Price depreciation and falling demand is not the disaster it used to be. They can cut 10% by accepting lower profits in exchange for continued sales volume. They can cut 10% even 20% by reducing the fluff they build into their homes, ugrades. They can tighten supply these days with far less exposure to sitting on unsold inventory. No quite build to order but a lot closer than in 1990. The builders have also gone vertical meaning they won't get as squeezed by lenders/financiers or undercut by realtors looking for the next sale.

For all the doom and gloom however remember anyone who bought a home for the purpose of living there anytime more than 2 years ago is still going to be looking at handsome short term appreciation even if prices fall 20%. People who didn't buy for the traditional purposes of living there and participating in the community are called "investors/speculators" and have every expectation of the possiblity of losses. "They bought their airplane tickets, they knew what they were getting into, I say let 'em crash."

"Limits" to Freedom?

The right to privacy isn't mentioned in the Constitution because the founding Fathers in their worst nightmares never imagined a government so pervasive that it would ever even get close to infringing upon the fundamental concept. The Constitution doesn't presume to define all human rights, only to describe the maximum extent to which some of those specific rights may be limited for the protection of rights in general.

These are not bubble bites

From:
http://money.cnn.com/2005/08/18/real_estate/buying_selling/overvalued_housing_markets/

"Most of the most overvalued markets, according to DeKaser, are in California and Florida. Number one is Santa Barbara, where home prices, at a median of $564,100, are 69 percent higher than they should be."

From:
http://money.cnn.com/best/bplive/snapshots/48478.html

Santa Barbara is one of the Best Places to Live 2005!

Anyone who claims the median Santa Barbara home should sell for only $340,000 is incompetent.

Bump, bump bump, another one bumps the bus

...And another one gone,
and another one gone,
Another one hits the bus.

Brian is sure going to be busy. Regardless it is too early to say just
how dangerous the Orange Crusher Line is going to be. First we need to
slow down to realistic speeds and thereby disavow the promised running
times. Then we'll need to spend a lot of money on safety improvements
thus disavowing the promised construction costs. Then we'll need to
further change signaling and auto control functions thereby increasing
congestion. Finally we'll need to use all these as the excuse for the
poor ridership and poor it is make no mistake. That's okay, all part of
the master plan. All these combined will be used to justify some very
expensive grade separations, a few crossing closures and conversion to
light rail. The camel has its' nose in the tent.

Maybe some transit fan is inclined to follow the lead of Houston and put
up a Wham Bam Tram Collision Counter on their website?

Top of the first inning BangerBus 2 hits 0 errors* 16 taken out 0
retired. RollingThunder 0 hits 2 errors 1 taken out 0 retired.

* Note: It will -almost always- be an error charged against
RollingThunder no matter who screws up.

Congestion Versus CAFE

An SOV hybrid and a two occupant gas guzzling SUV are both privledged classes. Why is that? It isn't enough to claim some vague greater public good. Demonstrating greater public good would give food share [http://www.foodshare.com/] trucks access to HOT/HOV lanes. Heck, can the Walmart trucks full of disaster relief goods use the reserved lanes?

We already have enough incentives/disincentives to mold behavior. Like the congeston charge, HOV lane access is double incentive/disincentive for certain specific actions.

Hey little girl, if you climb this pole I'll give you a quarter.

Megaopoli

I live in Ventura County near the city of Camarillo where we have some of the most
democratic growth controls in the nation. Note; I did not say strictest. I also live about 14 miles from
William Fulton, (Reluctant Metropolis) the author/city councillor who talks about cities like most
urbanists do but lives in the burbs like I do. Hmmm. Can't be that bad a
place eh? It's a very rich place. Personally I live on a golf course
surrounded by protected open space and protected agricultural land. I look
directly north as far as the California Condor Sanctuary and Topa Topa Mtns.
My driveway probably deserves it's own 3di designation but my cul-de-sac
street off of a tertiary road sees about 10 AADTs.

Topo: http://tinyurl.com/8yy7w

I for one paid attention to the Census trial balloon megapolitan/macropolitan "proposal."
For everyone else:
---------------
MASRC has recommended a Core-Based Statistical Area (CBSA)
Classification to replace the current MA classification. The cores
(i.e., the densely settled concentrations of population) for this
classification would be Census Bureau-defined urbanized areas and
smaller densely settled ''settlement clusters'' identified in
Census 2000. CBSAs would be defined around these cores. This CBSA
Classification has three types of areas based on the total
population of all cores in the CBSA: (1) Megapolitan Areas defined
around cores of at least 1,000,000 population; (2) Macropolitan
Areas defined around cores of 50,000 to 999,999 population; and (3)
Micropolitan Areas defined around cores of 10,000 to 49,999
population. The identification of Micropolitan Areas extends
concepts underlying the core-based approach to smaller population
centers previously included in a ''nonmetropolitan residual.''
---------------

The first time some previously independent region finds themselves annexed
to the "big bad place down the road" all hell is gonna break loose. Our
regional MPO is called SCAG. It roughly corresponds to megapolitian in
description. Attempts to acquire regional planning authority along with
their regional planning coordinating function has been met with reactions
from elected officials usually reserved for plague carriers. The joke
that went around was; "Q: What do you get when you combine Vent, LA,
San Berdo and Orange Counties? A: LA."

We don't do new communities anymore. We add to existing until the
become dysfunctional. Like the Valley. Adding TO, Moorpark and Simi
(and Malibu) to the Valley is that joke about the fat man averaging is
weight with a skinny neighbor.

Make no mistake. Megapols are a backdoor attempt at regional governance
specifically designed to be controlled by and oriented towards the core
OPAC.

Flat Tax -Not-

A 'flat tax" is: government expenditure (expenses plus obligations) divided by population. That would be about $5000 per person at the Federal level and in my case $3400 for California and $1600 locally or $50,000 for my nuclear family of 5. What you normally hear being called a flat tax is actually a "flat tax RATE" an entirely differnt animal. More important is rate of "what?" Income? What is income? Dollar denominated equivalent transactions? Is your paycheck one of those transactions? Is a corporate division a seperate entity so that shipping parts to the assembly plant becomes a transaction? What about having your trash hauled away? What about recycling then? Think about it. Is recovering some previous expense another transaction or is it a completed transaction? With the latter, if you refuse to recycle is the transaction completed or are you trying to transfer wealth to somebody else who eventually recycles your "waste."

What we really need is the first baby step. Consistent taxation of things, actions and efforts. Other countries call the things part of this a VAT. If VAT lived up to its' name it might work but consider an auto purchased for $20,000 taxed a 5% and sold to a second private party two years later for $15,000 . Is there a 25% VAT rebate? Or is there another VAT on the $15,000. Or is there a complex deterimination that the buyer cleared $1000 over value and owes another $50? Or the buyer underpaid? You get the idea.

Don't get me wrong, I'm all for blowing up the tax laws and starting over. No doubt the eventual outcme will be rational and more fair after a period of irrationality and intense unfairness but that's a different matter.

While we are at it what is this crap about property taxation based on book value? And which services should be funded through the property tax mechanism? The SCOTUS says not education. Sales taxes in Kalifornia increasingly support public safety. What about Community Colleges? Then there is the 500lb gorilla, Prop 13.

Prop 13 correctly protects people and businesses against arbitrary government distortions of the market. That's one point of government regulation in the first place isn't it?

I have no truck with the market aspects nor even the speculative portion of home buying decisions. I just think Prop 13 does a good job of capitating some of the non market risks with no external costs. I'm sure others feel otherwise and I'm only expressing an opinion among many. Perhaps we can go about this in reverse. I've got a 4 bed 2.5 bath SFR California ranch. How much should I be paying in taxes? California has 36.6 million people and spends/incurs $116 billion. That's a whopping $3400 per person. How much of that should come from property taxes? It isn't easy to answer in part
because of for instance what happens to the property tax that is sent off to Sacramento so that from there lots of money can be transferred from the high performing school districts to the worst school districts. You see in 1978 the same year as Prop 13 it was deemed illegal to spend different amounts locally as previously when California was 4th in the nation for school
performance. So now we spend different amounts locally as directed by the State as commanded by the Supremes and are now lowered to the 4th worst in terms of results.

Sorry, I got distracted. Were we talking about investments and government meddling?

How to Tell You are Effective

When people who disagree with you are reduced to replies like:

M Setty: "Cote is one lazy mu--r-fu-k-r."

W Lynch: hate filled thought controlling pathological Nazi role model

J Coviello: thick skulled, hypocrite with a closed mind; a joke, snide and devoid of content, unimportant, indescent, disrespectful, humorless, and full of shit

Land Use and Illegal Immigration

Afforbable housing for the worker class. This is the big "problem" where I live now. You cannot purchase a SFR for less than $500k that you would let your child live in. This months' (Sept '05) MEDIAN (not average): $635k.
http://www.dqnews.com/ZIPLAT.shtm {Ventura County at the bottom]

Supposedly this is going to mean our housekeepers and gardeners and even bookkeepers are going to be "lost" and we idle rich will be helpless. Quite the opposite. Instead we will buy Roombas, Rainbirds and Quicken thereby employing robotocists, Landscape Architects, electrical engineers and software programmers who can afford to live here. This IMHO is "A Good Thing."

What's this got to do with illegal immigration? A lot through a connection most people see in reverse. I'd much rather pay for a civil engineer, GIS coordinator, software vendor and robot crop picker machinery salesman each getting a living wage rather than tolerate the barely better than slave wage illegal immigration generating handpicking system we use now. The problem is we are subsidizing the slave worker market and taxing and regulating the technology fields mentioned above.