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larrywww

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Reply with quote  #1 

Everyone knows that Sean O'Toole is a smart guy----and  this is his economist---Madeleine Schnapp.

She was interviewed on Robert Wilson's radio program / podcast.

I went on the website since they are interviewing Bruce Norris today.

http://www.tomwilsonproperties.com/radio-show

1.  In her view, the government's policies on inflation have resulted in a theft of income, espeically from the younger generation and the middle class.  During 1980s we used a basket of commonly purchased goods to measure inflation.  Now, by contrast, inflation is under reported.  Greenspan started doing this decades ago to slow the growth of social security and veterans benefits that they felt was growing at an unacceptable rate so they adopted a much more conservative standard.  The official version right now says 2% inflation, but a random basket of 50 items had a 10% inflation. 
But even the 10% standard vastly underestimates what the millenials are experiencing due to increases of 100% or more since 1995 of (1) College tuition; (2) medical costs and (3) a 60% increase in housing costs during this time frame.  Baby boomers, who already have educations and homes aren't subject to these type of increases so the inflation number is very misleading.
Her fear is that wages are flat but other consumables are increasing in price--and that the middle class and especially millenials are being squeezed out since their wages are essentially flat.  And even seniors, who are in a better position than the millenials, aren't helped by the fact that interest rates have been artificially driven to the lowest rates in history---seniors who need to rely on interest in retirement aren't being helped by this policy.  The upper class who benefit from this economy own properties, stocks and other investments that are generally unavailable to millenials and many in the middle class.
2. But she sees no prospect of hyperinflation.  The US is the cleanest shirt in the dirty laundry since it is the world's reserve currency---and no prospect of losing that anytime soon.  There will always be demand for the world's reserve currency, in other words---in this way we are lucky.
3. House sales in bay area went down by 10% this year.  But she surveyed the houses within 5 miles of Google---and found that the average purchase price was 2.4 million dollars---and what does that get you?  In this case it was a 2 bedroom 1 bath house built in 194 on a smaller lot---nothing special.  The same survey found that within a 5 mile of Apple in Cupertino was a 1956 built house for 1.8 million.  The same survey in Seattle found that within 5 miles of Amazon the average cost was in the 800K range for a 2000+ built home.  (Which is why Amazon is relocating, apparently).  Bezos is very farsighted---he isnt going to be caught within the same trap as Apple and Google.
4. Reno is booming with double digit returns----because Tesla, Apple and Amazon shifted jobs there.
5. At what point do homeowners simply say---we're not paying these kind of housing costs and moving there?  Even the tertiary markets are inflated at this point so hard to see market going on forever.
6. What about the debt?  Japanese living standards are declining and they aren't having kids because it's too expensive.  Japan is over 200% of their debt whereas the US is closer to 100% and in the near term she thinks the debt is at a manageable level right now, but long term may be a problem.  But she doesn't think this is threat is the biggest one right now.

Ms. Schnapp takes Foreclosure radar data and makes report which she will post on the website.

You can view her reports---whether or not a subscriber of property radar---at www.propertyradar.blog.

rickencin

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Quote:
Originally Posted by larrywww

Now, by contrast, inflation is under reported.  Greenspan started doing this decades ago to slow the growth of social security and veterans benefits that they felt was growing at an unacceptable rate so they adopted a much more conservative standard.  The official version right now says 2% inflation, but a random basket of 50 items had a 10% inflation. 

But even the 10% standard vastly underestimates what the millenials are experiencing due to increases of 100% or more since 1995 of (1) College tuition; (2) medical costs and (3) a 60% increase in housing costs during this time frame.



Truth is whatever serves the political agenda (back in the day we used to laugh at the commies for thinking that.)  Republicans now act just like irresponsible Democrats and the Democrats don't like it one bit.

Be prepared to have 5 or 6 different careers in your life.  So far I've done engineer, real estate investor and financial (paper) investor.  Apparently I've got 2 or 3 more to go.  Forget about going to work for Chevrolet and retiring 45 years later.  

If you think automation is bad, wait until you see the effects of Artificial Intelligence.  In the best possible interpretation, automation is labor serving, not labor saving.  We will all have the opportunity to do cooler stuff.  What stops unemployed people from doing useful work?  Retired people do useful stuff all the time without getting paid.

Quote:
Originally Posted by larrywww

Japanese living standards are declining and they aren't having kids because it's too expensive. 


I never believed my history professors when they said capitalism had to expand or die.  There was no staying the same.  Maybe the Japanese are an example of failure to expand.  


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Rick
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Reply with quote  #3 
Rick, What is a "financial (paper) investor"?
rickencin

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I've been a Well's Fargo customer for years.  They have a separate brokerage division (same building) from the one that handles FDIC insured accounts.  The broker recommended various short term annuities to me.   Some have substantial minimum amounts.  Surrender fees are surprisingly large, so be sure you are in it for the term.  I've been making 3 to 10 basis points (.03% to .1%) on my FDIC insured CD's for about the last ten years.  I made 9.5% net on my Allianz S&P 500 indexed annuity last year (Sept. - Sept.).  To be clear that is 950 basis points. Nothing compared to bitcoin.   I can earn up to 11.25% a year minus a 1.25% fee.  I am covered for losses up to the same percentage, same fee.  Some type of options are involved.  Since last September the S&P 500 is up 5.6%.  I also own Lincoln and Compass annuities.  You never really know about an investment until you have paid the taxes on it.  I realize that real estate calls mortgage investments "paper", so I am sorry for any confusion.  Annuities are definitely not the "Toilets and Tenants" investments like my buy and hold real estate.  


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Rick
Paul

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Reply with quote  #5 
I've had a Jefferson National annuity for about 15  years. They were the first to offer one with no surrender fees, no sales fees and just a $20 monthly, flat fee. All mutual fund trades are commission free. I only trade junk bond funds because they trend really well, but the fund companies cracked down on shorter-term trading. I now use an adviser to make the trades because there are so many junk funds available to chose from, and I don't want to do it myself any longer. 

I recently closed my Wells savings account and took way too long to do that. I've also been a customer forever. I transferred savings to GS (Goldman). They now call the division Marcus by Goldman Sachs. Their rate is 1.3% and that's pretty decent right now.
rickencin

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Reply with quote  #6 
Thanks for the information.  Real Estate does compete with other investments and you don't want to put all your eggs in one basket.  Still the "there's nothing there, there" aspect of financial investments is still unsettling to me.  It's great to hear from someone who has had some success with it.
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larrywww

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Reply with quote  #7 
Here is another interview with Madeline Shnapp.

No, California is not in a bubble, since this would imply a market crash with a market selloff.

Instead she says there is a "market dislocation" supported by unwise governmental policies.

What she is saying is that we need to expand our vocabulary----don't always look for a crash---there are other, less serious outcomes.

The unwise policies include making new construction infeasible.  I think she was especially thinking about the Bay Area, which has one of the most problematic markets in California.

https://www.housingwire.com/articles/39795-propertyradar-no-california-is-not-in-a-housing-bubble



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